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DELIVERING
ENGINEERING
SERVICES
TO UK
INFRASTRUCTURE
Renew Holdings plc
Annual Report and Accounts 2013
Highlights Our performance in 2013
the groUp haS SUcceSSfUlly grown
itS engineering ServiceS bUSineSS
both organically anD by acqUiSition.
Operational highlights
Operational reviews:
Energy: page 16
Environmental: page 18
Infrastructure: page 20
Specialist Building: page 22
Engineering Services revenue up 9%, including organic growth of 6%, to £232.4m
(2012: £214.1m)
Engineering Services revenue now accounts for 70% of Group revenue (2012: 63%)
Group order book up 26% to £416m (2012: £331m) with Engineering Services order
book up 28% to £301m (2012: £235m)
Acquisition of Lewis Civil Engineering Limited for a cash consideration, including
costs, of £8.2m
Returned to a net cash position of £2.8m (2012: net debt £5.5m)
Final dividend increased by 19% to 2.5p (2012: 2.1p)
Financial highlights
Financial review: page 12
Comprehensive financial results:
from page 42
£335m
£11.2m
Revenue (£m)
-1%
Adjusted
operating profit* (£m)
+9%
357
337
335
290
11.2
10.3
7.8
4.5
2010
2011
2012
2013
2010
2011
2012
2013
14.8p
Adjusted earnings
per share* (p)
Dividend per share (p)
+7%
+14%
14.8
13.9
9.6
5.3
3.0
3.0
3.15
3.6p
3.6
2010
2011
2012
2013
2010
2011
2012
2013
* Adjusted results are shown prior to exceptional items and amortisation charges.
Further information and investor
updates can be found on our website
at www.renewholdings.com
About Renew
suppoRting the
uK’s infRastRuctuRe
thRough integRated
engineeRing seRvices.
Renew pRovides multidisciplinaRy
engineeRing seRvices thRough
its independently bRanded
businesses to maintain and
develop uK infRastRuctuRe
in the eneRgy, enviRonmental
and infRastRuctuRe maRKets.
Contents
Group overview
Review of operations
Corporate governance
Accounts
An overview of the Group,
including results statements
and strategy information.
A look at the Group’s target
markets and achievements in
these markets during the year.
This section outlines the Group’s
corporate governance procedures.
Group accounts for the year ended
30 September 2013.
26 Corporate social responsibility
42 Independent auditor’s report
IFC Highlights
02 Our business
04 Our strategy
16 Energy
18 Environmental
20 Infrastructure
05 Our business model
22 Specialist Building
06 Chairman’s statement
08 Chief Executive’s review
12 Financial review
30 Directors’ report
43 Group income statement
34 Directors’ remuneration report
44 Group statement of
37 Corporate governance
39 Statement of directors’
responsibilities
comprehensive income
44 Group statement of changes
in equity
45 Group balance sheet
46 Group cashflow statement
47 Notes to the accounts
67 Company balance sheet
68 Notes to the company accounts
75 Directors, officers and advisors
76 Shareholder information
Renew Holdings plc Annual Report and Accounts 2013
01
Our business: What we do at Renew
we impRove
we maintain
we Renew
ouR integRated multidisciplinaRy
engineeRing expeRtise suppoRts
the maintenance and Renewal
of uK infRastRuctuRe.
What we’re made of
The Group delivers multidisciplinary civil, mechanical and electrical engineering
services nationwide, concentrating on critical planned and reactive maintenance
and asset renewal programmes. Our integrated offering is a differentiator
in our target markets.
70%
ENGINEERING
SERvICES
30%
SpECIAlISt
BuIlDING
Energy
Environmental
Infrastructure
Specialist Building
Rail, highways, industrial
Off-track asset renewal
High quality residential,
new build affordable housing
and refurbishment
New build, fit out
planned and reactive
maintenance services
tunnel and shaft
refurbishment
and refurbishment
of prestigious private
residential projects
Innovative temporary works
design and engineering
solutions
Bridges, structures
and earthworks
New build affordable
housing units
Nuclear, renewables,
traditional
Nuclear operational
support and asset care
Nuclear dismantling
Nuclear decommissioning
Civil, mechanical and
electrical engineering
services
Critical planned and reactive
maintenance
Feasibility and solution
development
Mechanical/electrical
supply and installation
Design and design
management
Water, flood alleviation,
river and coastal defence,
land remediation
Main drainage, roads
and sewer maintenance
Flood alleviation and
attenuation
Clean and waste water
rehabilitation
Strategic mains maintenance
and utility infrastructure
port, harbour and sea defences
Soil and groundwater
remediation and associated
earthworks
Soil treatments including
biophysical treatments,
soil washing, solidification
and stabilisation
Development of remedial
strategies
Groundwater treatment
and management
Engineering Services brands
Specialist Building brands
02
Renew Holdings plc Annual Report and Accounts 2013
We provide multidisciplinary integrated Engineering Services nationwide.
The past six years have seen us move the balance of our operations progressively
into higher margin Engineering Services. This has transformed Renew into an
Engineering Services Group supporting UK infrastructure.
Integrated engineering
services nationwide
How our experience and capabilities
continue to support infrastructure
throughout the UK.
Services bridge
Client: Sellafield Ltd
Working for Sellafield ltd as part of
the programme of works with COGAp,
we designed, fabricated and installed
a critical service bridge. this project
involves some of the largest fabricated
structures the Group has undertaken.
the scheme is scheduled for
completion in 2015.
Flood alleviation scheme
Client: Northumbrian Water
this scheme was designed by
Northumbrian Water to reduce flooding
to 80 properties in the longbenton area
which was subject to sewer flooding. the
overall programme was reduced through
innovative working practices which
included stakeholder communications,
construction methods and materials,
programming and resource management.
Building and Civils Delivery Partnership
Client: Network Rail
Network Rail’s three year Building and
Civils Delivery partnership framework
delivers essential maintenance projects
across the rail network. As the only
contractor operating nationally on
this framework we undertake a large
number of projects including planned
maintenance work on stations, bridges,
tunnels and embankments as well
as reactive maintenance works
as they arise.
8
Individually branded uK
subsidiary businesses
2,294
Dedicated multi-skilled
employees throughout
the uK
Subsidiary location
Renew Holdings plc Annual Report and Accounts 2013
03
Our business: An established plan for growth
expanding ouR engineeRing
seRvices and developing long
teRm Relationships in ouR taRget
Regulated maRKets means we aRe
well positioned foR continued
futuRe gRowth.
Our
strategy
is to expand
our Engineering
Services across
stable regulated
markets
Our strategy
Since establishing our strategy in 2006 we have grown our Engineering Services
activities from 15% to 70% of revenue.
Expand
Identify
Deliver
Goal:
Expand our Engineering Services both
organically and by acquisition whilst
increasing Engineering Services
business operating margins to 5%.
Goal:
Focus on providing non-discretionary
engineering maintenance and renewal
services, establishing further
sustainable client relationships through
responsiveness.
Goal:
Engineering Services accounting
for at least 70% of Group revenue
with turnover of over £500m by 2016,
through a combination of acquisition
and organic growth.
Result:
Result:
Result:
Engineering Services operating margin
4.6% (2012: 4.5%)
Acquisition of lewis gives us access to
additional frameworks with Wessex and
Welsh Water
Engineering Services’ contribution
to ongoing Group revenue
70% (2012: 63%)
Our key performance indicators
The Directors have established a number of key performance indicators which
they use to measure and monitor the performance of the Group in a number
of different areas.
Engineering Services
operating margin %
4.6%
Engineering Services
turnover as % of
Group turnover
70%
Cumulative reduction
in accident incidence
rate %
92%
4.5%
4.6%
4.2%
3.3%
44%
50%
70%
63%
87%
92%
74%
77%
2010
2011
2012
2013
2010
2011
2012
2013
2010
2011
2012
2013
04
Renew Holdings plc Annual Report and Accounts 2013
Renew promotes a culture within all its subsidiaries based on:
ensuring the safety of all those involved in, and affected by, its activities;
ensuring the consistent quality delivery of its services;
the development of long term relationships through a proactive
non‑confrontational style; and
ensuring risk management of all its activities from initial contract selectivity
through to successful completion.
through effective controls and management of the operating subsidiaries,
we seek to deliver value to shareholders in the form of reliable capital
growth and a progressive dividend policy.
Our business model
The role of Renew is to set overall
standards and to promote synergies
and best practice, providing advice
to maximise the subsidiaries’ and
the Group’s potential. This structure
enables our subsidiaries to be more
competitive and efficient in their
individual marketplaces.
1
We target sustainable, regulated markets with strong
potential for growth
Energy
Growth through: investment in nuclear new build, government
energy targets, decommissioning and maintenance of existing
assets >Full review on page 16
Environmental
Growth through: water infrastructure development and
maintenance, increasing cost of dealing with contaminated
land >Full review on page 18
Infrastructure
Growth through: continued maintenance of the rail
network including enhancement and modernisation
>Full review on page 20
Specialist Building
Growth through: government commitments to affordable
housing and strong residential demand in london and
the South >Full review on page 22
2
Our markets exist in secure and predictable environments
Our Engineering Services focus on the non-discretionary refurbishment
and maintenance of essential operational assets critical to the uK economy.
Consequently, our Engineering Services activities have more predictable
work streams. In Specialist Building, our work concentrates on key markets
in the South where we have a strong position with particular expertise.
3
We generate revenue based on long-term client relationships
Many of our existing maintenance framework agreements are renewals or
extensions to previous agreements, building on our long-term relationships
with clients such as Network Rail, Northumbrian Water and Sellafield ltd.
Renew Holdings plc Annual Report and Accounts 2013
05
Chairman’s statement Roy Harrison OBE, Chairman
RecoRd Results foR the yeaR: the
gRoup has achieved RecoRd Results
foR the yeaR ended 30 septembeR
2013 ahead of maRKet expectations.
R J Harrison OBE Chairman
Summary
Engineering Services up
9% in revenue to £232.4m
(2012: £214.1m).
the Group’s contracted
order book at 30 September
2013 stood at £416m (2012:
£331m), a 26% increase, with
the Engineering Services
order book up 28% to
£301m (2012: £235m).
the Group has returned to
a net cash position of £2.8m
(2012: net debt £5.5m).
lewis Civil Engineering
acquired for £8.2m in cash.
Full year dividend increased
by 14%.
the Group’s contracted order book
at 30 September 2013 stood at £416m
(2012: £331m), a 26% increase, with
the Engineering Services order book
up 28% to £301m (2012: £235m).
Cash performance has been strong and
I am pleased to report that the Group has
returned to a year end net cash position
of £2.8m (2012: net debt £5.5m). this
improvement has come through a strong
working capital performance combined
with the benefit of the sale of land at
Rugby which has been recorded as
an exceptional item.
Much of the cash generated from the
Rugby sale was redeployed in acquiring
lewis Civil Engineering limited (“lewis”)
for a cash consideration including costs
of £8.2m. lewis, which is based near
Cardiff, specialises in the construction and
maintenance of infrastructure and assets
within the water industry. lewis has revenue
of approximately £25m per annum with an
operating profit margin of circa 5%. It is
a well respected brand in its region and
market with clients including Wessex Water
and Dŵr Cymru Welsh Water. It provides its
services through framework agreements
and employs 175 highly skilled personnel.
lewis’s financial performance is expected
to be both cash generative and accretive
to Renew’s Engineering Services operating
margin in the 2013/14 financial year.
Results
the Group’s record results for the year ended
30 September 2013 demonstrate its position
as a leading provider of multidisciplinary
Engineering Services supporting critical
uK infrastructure. the Engineering Services
business achieved strong growth in revenue,
operating profit and forward order book.
Group operating profit prior to exceptional
items and amortisation was up 9% to £11.2m
(2012: £10.3m) on Group pre-exceptional
revenue of £334.6m (2012: £337.4m).
Group operating margin improved to 3.4%
(2012: 3.0%). Earnings per share prior
to exceptional items and amortisation
increased by 7% to 14.81p (2012: 13.90p)
with basic earnings per share on
continuing activities increasing
by 25% to 14.85p (2012: 11.87p).
there have been a number of exceptional
items during the year. the net impact
of these items in the year is a profit
before taxation of £0.5m. An amortisation
charge of £0.5m has also been recognised
offsetting the exceptional profit. Full
details of these items are set out in
Note 3 of the financial statements.
the Engineering Services business
has progressed well with a 9% increase
in revenue to £232.4m (2012: £214.1m),
together with a 10% increase in operating
profit to £10.6m (2012: £9.6m). Operating
margin improved to 4.6% (2012: 4.5%).
the Specialist Building activity remained
focused on selective niche markets in the
South with operating margin improving to
2.0% (2012: 1.7%). As expected, operating
profit was maintained at £2.1m (2012: £2.1m)
on revenue of £102.5m (2012: £123.1m).
06
Renew Holdings plc Annual Report and Accounts 2013
The Group enters the 2013/14 financial year
in a strong position.
Engineering Services business operating
margins to 5% whilst maintaining Specialist
Building performance in line with that
currently being achieved. the Group’s
successful acquisition record combined
with these strong results and net cash
position, together with the record forward
order book indicate that Renew is well
placed to achieve these targets.
R J Harrison OBE
chairman
26 November 2013
Engineering Services
revenue (£m)
£232m
232
214
177
115
127
2009
2010
2011
2012
2013
Engineering Services
operating profit (£m)
£10.6m
10.6
9.6
7.4
4.0
4.2
2009
2010
2011
2012
2013
Engineering Services
% of Group revenue
70%
50
44
36
70
63
2009
2010
2011
2012
2013
Dividend
the Board is proposing a final dividend
of 2.50p per share, increasing the full year
dividend by 14% to 3.60p (2012: 3.15p).
the dividend will be paid on 3 March 2014
to shareholders on the register as at
31 January 2014. the Board intends to
continue to grow dividends progressively.
Outlook
the Group enters the 2013/14 financial year
in a strong position. In Specialist Building
the Group operates in two discrete market
sectors that have strong fundamentals
and in which we have particular experience
and expertise. In Engineering Services, the
Group is expanding its position as a leading
provider of engineering support services
in the uK’s Energy, Environmental and
Infrastructure markets. these markets
are mainly regulated and the critical assets
are maintained by programmes of essential
non-discretionary spending. the Group
continues to focus its activities on these
programmes which provide both good
visibility of future opportunities and
sustainable earnings streams.
It remains the Board’s strategy to
grow the business, both organically
and by selective acquisitions, developing
Renew’s position as a leading medium
sized engineering support services group.
the Board’s ambition is to grow Group
revenue to over £500m, an achievement
which continues to be likely to require
further acquisitions. the Board continues
to set challenging performance targets
and believes that over the next three
years the Group can increase its
Renew Holdings plc Annual Report and Accounts 2013
07
Chief Executive’s review Brian May, Chief Executive
B W May Chief Executive
Summary
Engineering Services
now accounts for 70%
of Group revenue.
Engineering Services
operating margin
improved to 4.6%.
Engineering Services
order book has grown in
all three market sectors.
ouR stRong oRdeR booK and pRoven
stRategy of deliveRing gRowth in
the gRoup’s engineeRing seRvices
business, both oRganically and
by acquisition, illustRates that
we aRe incReasingly well placed
in ouR taRget maRKets, pRoviding
confidence foR futuRe gRowth.
the Group has successfully grown
its Engineering Services business both
organically and by acquisition. this has
increased both revenue and operating
profit and strengthened its position as
a provider of multidisciplinary integrated
engineering support services to critical
uK infrastructure. Our Specialist Building
activities have increased operating
margin and remain focused on niche
sustainable markets in the South.
Engineering Services
Operating in the Energy, Environmental
and Infrastructure markets, Renew
undertakes essential asset support
providing maintenance and renewal
services through its directly employed
multidisciplinary workforce operating from
local, independently branded businesses.
Revenue in Engineering Services grew
by 9%, including organic growth of 6%,
to £232.4m (2012: £214.1m) and now
accounts for 70% of Group revenue
(2012: 63%) and 84% of Group operating
profit (2012: 82%). Operating margin
improved to 4.6% (2012: 4.5%).
the Engineering Services order book
has seen strong growth of 28% to £301m
(2012: £235m), securing 83% of 2014
budget revenue (2013: 66%). this growth
has been achieved in all market sectors
with Energy up 7% to £133m (2012: £124m),
Environmental up 79% to £59m (2012:
£33m) and Infrastructure up 40% to
£109m (2012: £78m).
the Group continues to deliver its strategy
of growing its Engineering Services business
both organically and through selective
earnings enhancing acquisitions. In the year
under review, the Group acquired lewis Civil
Engineering limited based near Cardiff.
lewis, which specialises in deep sewer and
water main pipelines, waste water treatment
and general water utility infrastructure
works, further strengthens the Group’s
position in the Water sector adding
two leading utility businesses as major
clients in the Environmental market.
Energy
the Group operates in the nuclear,
traditional and renewable power generation
sectors nationally providing planned and
reactive maintenance and asset renewal
support for a range of clients mainly through
long standing framework agreements.
the Group focuses its activity in the
nuclear sector with the majority of work
continuing to be undertaken across the
Nuclear Decommissioning Authority’s
(“NDA”) estate where we are active on
nine sites that command around 70%
of the NDA’s £3bn annual expenditure.
Work is concentrated at the Sellafield site
on which the Group has been operational
for over sixty years and where the Group
provides engineering support for the
care and maintenance of operational
plant associated with waste treatment or
processing, decommissioning, demolition
and clean-up of redundant facilities.
Sellafield continues to be allocated
55% of the NDA’s annual budget.
Our position as the leading provider
of mechanical and electrical services at
Sellafield and the integrated service offering
through our subsidiary businesses helped
the Group achieve a 16% increase in our
secured nuclear order book to £126m
(2012: £109m). During the year, the Group
became the first contractor to receive supply
chain accreditation for service provision
at the Sellafield site in recognition of our
performance to the highest quality nuclear
standards. Our continued attention to our
safety performance was also recognised
when we received the 2013 Sellafield
Resident Engineers Safety Award for
‘Outstanding Safety performance’.
Work at Sellafield continues to be
undertaken on the Multi Discipline Site
Works framework which was renewed
from 1 April 2013 and is valued at up to
08
Renew Holdings plc Annual Report and Accounts 2013
The Group’s priority remains the safety of
our employees and those working with us.
Our commitment to this can be seen in the
significant 92% reduction in our Accident
Incidence Rate over the last 8 years.
£280m over a four year period. As one of
the three participants on the framework,
we continue to be aligned with the largest
area of spend, delivering production
operations support work packages.
One of the major areas of work at Sellafield
is in high hazard risk reduction and includes
the Evaporator D scheme, currently the
uK’s largest nuclear programme. Revenues
on this project are now expected to exceed
£60m over its three year duration with
completion due in 2015. the £26m four
year Decommissioning and Bulk Sludge
Retrievals framework has also experienced
a substantial increase in scope during the
period. Work also continues on the £58m
four year Site Wide Asset Care framework.
We continue to support Sellafield’s
major projects programmes and are
the sole mechanical and electrical
supply chain partner on the fifteen
year £1.1bn Infrastructure Strategic
Alliance framework.
Elsewhere in the Energy market, the
Group provides long term engineering
support at five of the uK’s traditional
power generation sites through seven
framework agreements. the ongoing
maintenance and support of these
sites is critical in ensuring provision
of the uK’s future energy needs.
In renewables, we have increased our service
offering in the wind energy sector where
we were commissioned by E.On to carry out
a range of challenging repair works which
successfully brought a number of turbines
back on line on a remote site in Scotland.
We are also engaged to supply a range of
highly engineered components to one of
the uK’s largest offshore windfarms for
the same client. Hydro generation schemes
are also providing a number of opportunities
with projects for Scottish and Welsh Water
on track to commence in 2014 through
our frameworks with these clients.
Engineering Services performance
The development of our Engineering Services business has created a platform
of sustainable revenue generated from over 60 framework agreements with
major clients, most of which operate in regulated markets.
Engineering Services order book growth by market
Energy
Environmental
Infrastructure
↑ 7%
to £133m
↑79%
to £59m
↑40%
to £109m
2012: £124m
2012: £33m
2012: £78m
Engineering Services
order book (£m)
£301m
301
235
179
82
Engineering Services
operating margin (%)
4.6%
4.5
4.6
4.2
3.3
2010
2011
2012
2013
2010
2011
2012
2013
Renew Holdings plc Annual Report and Accounts 2013
09
Chief Executive’s review continued
The Group’s strong results
are a testament to the
skills and commitment
of all our employees.
The Board would like to
express its gratitude for
this ongoing effort which
is vital to the continued
success of the Group.
New Nuclear Power
HM Government’s ‘Strike price’ agreement
with EDF Energy announced in October 2013
represents a crucial milestone in the role of
new nuclear as part of the uK’s future energy
strategy. the final investment decision for
the proposed new station at Hinkley point
is anticipated by the summer of 2014. the
forecast costs of Hinkley point ‘C’ are circa
£16bn which is to be spent over a ten year
construction period. this initial project
as well as the anticipated increased
momentum at other proposed new uK
sites, which also have consents to develop,
will present opportunities for Renew. An
established and proven track record of
service delivery to the highest standards
within this highly regulated sector will be
a prerequisite to participation. the Group
has demonstrated its attainment of the
necessary standards over many years
and continues to be involved in supporting
proposals for elements of the requirements
at Hinkley point, including the manufacture
and supply of high integrity fabricated
steel components which will be required
early in the construction phase.
Environmental
the Group continues to provide operational
support and maintenance to the water
infrastructure, flood alleviation, river and
coastal defence, land remediation and
engineering renovation sectors where
much of the work is undertaken through
long term framework agreements with
repeat clients.
Our progress in the Water sector has been
enhanced by the acquisition of lewis Civil
Engineering limited (“lewis”). Our work for
Northumbrian Water, Wessex Water and
Welsh Water includes sewer maintenance,
clean and waste water rehabilitation,
strategic mains maintenance and general
utility infrastructure services under
the regulated AMp5 programme.
For Northumbrian Water, Seymour has
been appointed a preferred supplier to
deliver a number of accelerated flood
prevention schemes in addition to having
been awarded their third out of four trunk
Mains Cleaning projects and continuing
to provide maintenance support under
seven frameworks.
For Wessex Water, lewis is sole supplier on
the Networks 1 framework under their AMp5
investment programme. For Welsh Water,
lewis has positions on the pressurised
pipelines and Major Civil Engineering
projects frameworks. lewis also adds
a particular specialism to the Group with
their expertise in trenchless technology.
In land Remediation, work continues
for long standing client National Grid
under a number of established national
remediation framework agreements. the
National Contaminated land Remediation
Contractor’s framework delivered the
award of a major remediation scheme for
Blackpool Council. Recent project awards
for Scotia Gas Networks have led to a
five year framework appointment.
During the year, the Group has been
appointed to the Environment Agency’s
minor works frameworks across all of its
regions. the Group is the only contractor
to have achieved this nationwide position.
In the Engineering Renovation sector, the
Group has recently commenced work on a
£9m project at the palace of Westminster.
this contract is associated with the repair
and restoration of the cast iron roofs at
this World Heritage Site where the Group
has previously completed work on a similar
project on the Speaker’s Court section of
the roof. this award provides continuity with
a long established client in a market sector
where the Group has renowned expertise
and a proven delivery record. previously, the
10
Renew Holdings plc Annual Report and Accounts 2013
The Group continues to deliver its strategy
of growing its Engineering Services business
both organically and through selective earnings
enhancing acquisitions.
Group has carried out all of the restoration
work on both the undercroft and roof during
the redevelopment of St pancras Station,
together with work on many of the country’s
principal glasshouse structures including
Kibble palace and Wentworth House.
Our increased activity in Rail is reflected
in a 36% uplift in our forward order book to
£101m (2012: £74m). the recently announced
funding plan for Network Rail over the next
five years provides excellent visibility of
future work opportunities in the Rail sector.
spend of £700m per annum for the next
three years. Over £50m of awards have
been contracted during the year including
further projects for peabody, One Housing
Group and Notting Hill Housing securing 76%
of the business’ 2013/14 budget revenue.
Infrastructure
the Group operates mainly in the Rail
sector delivering off-track asset renewal
and refurbishment as well as a wide range
of planned and reactive maintenance
services critical to keeping the rail
network operational.
For our largest client, Network Rail,
we remain the sole provider of engineering
maintenance services nationally which we
deliver under both the Building and Civils
Delivery partnership (“BCDp”) and Asset
Management (“AM”) frameworks. In addition
to ongoing engineering support our local
delivery teams respond nationally across
the rail network providing 24 hour
emergency services.
We have seen a substantial increase
in activity during the year across our
entire work portfolio. this increase is
attributable to the responsiveness of
our local teams which are aligned closely
with the operational structure of Network
Rail. During the year, we have carried out
approximately 4,000 separate instructions
in AM and been awarded almost 100
projects in BCDp.
the Group’s specialist skills in tunnel
and shaft refurbishment provide a
differentiator in this market and were
further enhanced in the year with the
formation of our National tunnel Delivery
team. We have recently been awarded
the £12m Holme tunnel project which
has now started on site, together with
further works to reline the crown of
Whiteball tunnel.
Specialist Building
Specialist Building activity remains
focused on the High Quality Residential
and New Build Affordable Housing markets
in the South. Specialist Building showed
an increased operating margin of 2.0%
(2012: 1.7%) through maintaining an
operating profit of £2.1m (2012: £2.1m)
on revenue of £102.5m (2012: £123.1m).
Our Specialist Building order book has
grown by 20% to £115m (2012: £96m)
and although we anticipate delivering
growth in revenue during 2013/14, our
focus in this segment will remain on
delivering a consistent level of operating
profit. the Group has specific expertise
in these niche markets as well as many
years’ experience which combined with our
strong relationships provides a sustainable
environment for future opportunities.
In the High Quality Residential market in
london and the Home Counties we remain
a leading quality provider. Our extensive
experience and expertise in innovative
temporary works engineering solutions
when carrying out complex structural
remodelling and extending properties
below ground provides a key differentiator.
Over £60m of new opportunities have been
secured in this strong market which has
good visibility of future opportunities and
the business has all of its budget revenue
for 2013/14 already contracted.
the demand for New Build Affordable
Housing remains high and the Group has
established relationships with many of
the leading Housing Associations in the
South providing access to an advertised
People
the Group’s priority remains the safety of
our employees and those working with us.
Our commitment to this can be seen in the
significant 92% reduction in our Accident
Incidence Rate over the last eight years.
the Group has a number of safety related
initiatives in place and is particularly
focused on ensuring that all incidents,
not only those which result in reportable
accidents, are recorded and analysed to
ensure all possible lessons are learned.
the Group’s strong results are a testament
to the skills and commitment of all our
employees. the Board would like to express
its gratitude for this ongoing effort which is
vital to the continued success of the Group.
Summary
Renew provides essential engineering
maintenance, refurbishment and renewal
services to support the uK’s critical assets
in regulated markets underpinned by
sustainable revenue.
Our strong order book and proven
strategy of delivering growth in the
Group’s Engineering Services business,
both organically and by acquisition,
illustrates that we are increasingly well
placed in our target markets, providing
confidence for future growth.
B W May
chief executive
26 November 2013
Renew Holdings plc Annual Report and Accounts 2013
11
Financial review John Samuel, Group Finance Director
afteR tax, exceptional items and
amoRtisation, the pRofit foR the
yeaR fRom continuing opeRations
was £8.9m.
Summary
the Group recorded
profit before tax of £10.7m
(2012: £10.0m) prior to
exceptional items and
amortisation charges.
the Group’s outstanding term
loan has been reduced to
£2.5m (2012: £7.5m).
the rate of corporation
tax payable in each of the
next few years is expected
to remain below the
headline rate.
Results
Group revenue from ongoing operations
was £334.6m (2012: £337.4m) with a profit
before tax of £10.7m (2012: £10.0m) prior
to exceptional items and amortisation
charges and the loss from the discontinued
operation. A tax charge of £1.8m (2012:
£1.7m) resulted in a profit after tax for
the year of £8.9m (2012: £8.3m) prior
to exceptional items and amortisation
charges and the loss from the discontinued
operation. After tax, exceptional items
and amortisation, the profit for the year
from continuing operations was £8.9m
(2012: £7.1m).
Exceptional items
A number of exceptional items have been
recognised during the year, the most notable
of which was the realisation of land at Rugby
which recorded exceptional revenue of
£14.4m and a gain of £9.2m.
In the uSA, the Group has three remaining
property assets where delays due to
economic conditions have led to detailed
planning and zoning agreements expiring.
Outline permissions remain, however
forthcoming changes to state and county
regulations will require new applications to
be made with the expectation of reductions
in allowable building density. the Board
commissioned an independent review
of the Group’s uS property assets and
decided to write down the carrying value
of two of these assets in the light of these
new requirements and current market
conditions by $8m (£4.9m).
In relation to the running down of certain
regional non-specialist building activities,
revenue of £1m and losses of £2.8m were
recorded together with £0.3m of redundancy
costs. these losses are due primarily to
the insolvency of certain subcontractors.
A charge of £0.5m has been made following
costs arising from exceptional storm
damage on a Specialist Building contract.
Costs incurred with the acquisition
of lewis Civil Engineering limited
amounted to £0.2m.
In total, exceptional items amounted
to revenue of £15.4m and a gain of
£0.5m. Additionally, £0.5m (2012: £0.5m)
of amortisation charges relating to the Amco
acquisition were incurred. Amortisation
charges relating to the lewis acquisition
will commence from 1 October 2013.
Discontinued operation
In 2012, the Board decided to close the
business of C&A pumps ltd. It had become
increasingly difficult for this small business
to trade profitably following changes to
Water industry framework arrangements
in AMp5. C&A was accounted for as a
discontinued operation in the year to
30 September 2012 and in 2013 a further
loss of £0.3m has been recorded due to
writing off work in progress and debtors
which have proven to be irrecoverable.
Cash
In 2011, the Group arranged a £15m
three year term loan to fund the acquisition
of Amco, also using £7.2m of its own cash
resources. During the year, £5.0m of
repayments have been made reducing
the loan balance to £2.5m at the year end.
the cash inflow of £9.2m from the sale of
the Rugby land was largely deployed in the
£8.2m cost of acquiring lewis. together with
improved working capital, this cash inflow
has led to our reporting a cash balance of
£5.3m (2012: £2.0m) at the year end. As a
result, the Group’s net cash position as at
30 September 2013 was £2.8m (2012: net
debt of £5.5m). the Group has complied
with the covenants associated with this
loan throughout the year.
12
Renew Holdings plc Annual Report and Accounts 2013
The distributable profits of Renew Holdings plc
stood at £20.5m (2012: £11.2m) enabling the Board
to recommend a final dividend of 2.5p (2012: 2.1p)
per share bringing the total for the year to 3.6p
(2012: 3.15p), an increase of 14.3%.
Distributable profits
the distributable profits of Renew
Holdings plc stood at £20.5m (2012:
£11.2m) enabling the Board to recommend
a final dividend of 2.5p (2012: 2.1p) per
share bringing the total for the year to
3.6p (2012: 3.15p), an increase of 14.3%.
J Samuel
group finance director
26 November 2013
Pension schemes
the IAS 19 valuation of the lovell pension
Scheme, which was closed to new members
in 2000, has resulted in an increase in the
accounting deficit to £2.8m (2012: £0.4m)
after accounting for deferred taxation.
In 2011, the Board, in conjunction with the
trustees of the lovell Scheme, completed
a buy-in of part of the pensioner liabilities
of the scheme. this measure, which was
completed without any further cash
contribution to the scheme by the Group,
has reduced the risks associated with those
liabilities and, at the year end, the annuities
purchased represented 33% of the scheme’s
total liabilities. In accordance with the
scheme specific funding requirements of
the pensions Act 2005 and, following the
triennial valuation of the scheme which was
carried out as at 31 March 2012, the Board
has an agreement with the trustees of the
scheme on the level of future contributions
which are currently approximately £3.2m per
annum inclusive of costs. the next triennial
valuation is due as at 31 March 2015.
the IAS 19 valuation of the Amco pension
Scheme shows a surplus of £0.8m (2012:
£1.4m) after accounting for deferred
taxation. In 2013, the Board, in conjunction
with the trustees of the Amco Scheme,
completed a buy-in of part of the pensioner
liabilities of the scheme. this measure,
which was completed without any further
cash contribution to the scheme by the
Group, has reduced the risks associated
with those liabilities and, at the year end, the
annuities purchased represented 55% of the
scheme’s total liabilities. In accordance with
the scheme specific funding requirements
of the pensions Act 2005 and, following the
triennial valuation of the scheme which
was carried out as at 31 December 2010,
the Board has an agreement with the
trustees of the scheme on the level of
future contributions which are currently
£0.3m per annum inclusive of costs. the
next triennial valuation will be carried
out as at 31 December 2013.
Due to the impact of actuarial losses
measured in these schemes in the year,
most of which relates to adopting actuarial
assumptions which assume increased
life expectancy of scheme members,
£5.5m (2012: £2.6m), net of deferred tax,
has been charged to the statement of
comprehensive income, reducing the
Group’s net assets accordingly.
Taxation
A deferred tax asset included in non-current
assets of £3.1m (2012: £2.9m) is carried in
the balance sheet, which principally relates
to the likely future utilisation of tax losses.
A deferred tax liability related to the Amco
defined benefit pension scheme of £0.2m
(2012: £0.4m) is shown in non-current
liabilities. the remaining deferred tax liability
of £0.8m (2012: £0.6m) relates to fair value
adjustments arising on acquisitions.
the uK tax charge on profits for the year
is £0.8m (2012: £0.3m). the deferred tax
charge of £1.0m (2012: £1.2m) is
attributable primarily to the defined
benefit pension schemes. the total tax
charge for the year of £1.8m (2012: £1.3m)
represents an effective Group tax rate of
17% (2012: 16%). Only the £0.8m current
year charge is payable in cash. the Group
has material tax losses to carry forward
and the rate of corporation tax payable in
each of the next few years is expected to
remain below the headline rate.
Renew Holdings plc Annual Report and Accounts 2013
13
Review of operations
14
Renew Holdings plc Annual Report and Accounts 2013
Review of
opeRations
this section looKs at the gRoup’s
taRget maRKets and highlights ouR
achievements duRing the yeaR.
in engineeRing seRvices, the
gRoup deliveRs multidisciplinaRy
civil, mechanical and electRical
engineeRing seRvices nationwide,
concentRating on cRitical planned
and Reactive maintenance and
asset Renewal pRogRammes.
ouR integRated offeRing pRoves a
diffeRentiatoR in ouR thRee taRget
maRKets of eneRgy, enviRonmental
and infRastRuctuRe.
In this section
16 Energy
18 Environmental
20
Infrastructure
22 Specialist Building
Renew Holdings plc Annual Report and Accounts 2013
15
Review of operations: Energy
ENERGy
Renew, with its Range of
integRated engineeRing seRvices,
is ideally positioned to access
essential maintenance and
Renewal spending acRoss
the eneRgy maRKet.
Expertise
Nuclear
Nuclear operational support
and asset care
Nuclear dismantling
Nuclear decommissioning
Renewables
Civil, mechanical and electrical
engineering services
Critical planned and reactive
maintenance
Feasibility and solution
development
Traditional
Mechanical/electrical supply
and installation
Design and design management
How we target the Energy market
The Group operates in the nuclear, traditional and renewable power generation
sectors nationally providing planned and reactive maintenance and asset renewal
support for a range of clients mainly through long standing framework agreements.
Opportunity
Decommissioning and clean-up
operations remain a large part of the
uK nuclear market. We are engaged on
9 nuclear licenced sites that command
around 70% of the NDA’s £3bn 2013/14
planned expenditure with 55% of total
expenditure allocated to Sellafield.1
Significant investment is planned in
nuclear new build in the uK as most
of the existing fleet of nuclear power
stations are set to retire by 2023.
Renew targets the ongoing
investment in the renewable energy
market required to help meet the
energy targets set by the European
union. Generation necessary to meet
these targets is likely to be delivered
from technologies including biomass,
hydro and wind.
traditional fuels will continue to play
an important role in the uK’s future
energy provision.
Opportunities remain in the
maintenance of existing generation
assets and in the capital investment
required to meet emission control
and environmental improvements.
How we respond to our
Energy opportunities
In nuclear our operations focus on
high hazard risk reduction, providing
engineering support on the care and
maintenance of operational plant
associated with waste treatment
or processing, decommissioning,
demolition and clean-up of redundant
facilities. Our directly employed
multi-skilled operatives undertake all
aspects of mechanical and electrical
project support, outage management
and working in line processes.
the Group is also a supplier of
high integrity fabrications to
the nuclear industry.
In the renewables market the
Group is experienced in providing
design and procurement as well
as asset care and maintenance.
Our expertise in the newer forms of
renewable energy includes specialist
capabilities in biomass materials
handling, hydroelectric development
and the fabrication of components
for the wind energy sector.
At many of the traditional uK
power generation plants we provide
engineering services where our
capabilities include mechanical and
electrical as well as civil engineering
services delivered in partnership
with our clients mainly through
embedded support teams.
16
Renew Holdings plc Annual Report and Accounts 2013
Our work in Energy
At Sellafield, where we have been
active for over 60 years, we remain
the principal provider of mechanical
and electrical services.
Working as one of three preferred
strategic partners on the Multi Discipline
Site Works 2 framework to deliver work
packages worth a potential £280 million
over four years at Sellafield.
Expansion of service provision on
Evaporator D, the uK’s largest current
nuclear project, will provide over £60m
of work through to completion in 2015.
Frameworks at Sellafield include the
£26m 4 year Bulk Sludge Retrievals
Framework and as sole M&E partner
on the £58m 4 year Site Wide Asset
Care framework.
We continue to support the ongoing major
project programmes at the Sellafield
site including as sole mechanical and
electrical supply chain partner on the 15
year £1.1bn Infrastructure Strategic
Alliance framework.
Awarded supply chain accreditation
for service provision at the Sellafield
site in recognition of our performance
to the highest quality standards and
the 2013 Sellafield Resident Engineers
Safety Award for ‘Outstanding Safety
performance’.
Over 4 years and 4 million man hours of
operations since a lost time Accident
at Sellafield.
We continue to work on the
decommissioning and demolition
contract at Springfields for
Westinghouse.
Continue to develop our position
supporting proposals within the
nuclear new build market including
the manufacture and supply of high
integrity fabricated steel components
required early in the construction phase.
Continue to differentiate ourselves
by integrating our generation, grid
and decommissioning skills.
Continue to provide long term
engineering support at 5 of the uK’s
traditional power generation sites
through 7 framework agreements.
Increased service offering in the
wind energy sector including the
supply of a range of highly engineered
components to one of the uK’s
largest offshore wind farms.
Increasing opportunities in biomass
and hydro generation with schemes
for Scottish and Welsh Water expected
to commence in 2014.
Sources
1 Nuclear Decommissioning Authority, Business plan
2012 – 2015.
Renew Holdings plc Annual Report and Accounts 2013
17
Review of operations: Environmental
ENvIRONMENtAl
we deliveR sustainable solutions
in ouR enviRonmental maRKets
utilising integRated engineeRing
seRvices capabilities fRom acRoss
the Renew gRoup.
How we target the Environmental market
Renew continues to deliver a range of multidisciplinary engineering services providing
operational support and maintenance in water infrastructure development and
maintenance, flood alleviation, river and coastal defence, land remediation and
engineering renovation sectors where much of the work is undertaken through
long term framework agreements with repeat clients.
Expertise
Water
Main drainage, roads and
sewer maintenance
Flood alleviation and attenuation
Clean and waste water rehabilitation
Strategic mains maintenance and
utility infrastructure
port, harbour and sea defences
Opportunity
the uK water industry continues to
spend on infrastructure development
and operational maintenance. 2013
has seen major programmes of work
in sewer maintenance, clean and
waste water rehabilitation, strategic
mains maintenance and general
utility infrastructure services under
the regulated AMp5 programme.2
the removal of the landfill tax
exemptions for waste soils arising
from historically contaminated land
means the cost of disposing of any
actively contaminated soils continues
to rise increasing the importance on
retaining, remediating and reusing
excavated materials on site.3
Land Remediation
Soil and groundwater remediation
and associated earthworks
Soil treatments including biophysical
treatments, soil washing, solidification
and stabilisation
Development of remedial strategies
Groundwater treatment and
management
Site surveys and the assessment
of potential risk
How we respond to our
Environmental opportunities
the Group has extensive expertise
in water infrastructure development
and maintenance, flood alleviation,
river and coastal defences and land
reclamation. A large portion of work in
this sector is procured under long term
framework agreements, many of these
with repeat clients. the Group has
developed specialist capabilities in
trunk mains cleaning using innovative
and specialist techniques to clean
large sections of the underground
water pipe network.
Renew is a leading provider
of sustainable land remediation
services nationwide. In-house
capabilities include soil washing,
biophysical treatment, solidification
and stabilisation, enhanced
segregation and geotechnical
improvements. Our ability to recover
up to 100% of soils and excavated
materials, including manufacturing
high value aggregates, on site can
provide a sustainable and cost
effective solution for our clients.
18
Renew Holdings plc Annual Report and Accounts 2013
Working for Northumbrian Water,
Wessex Water and Welsh Water delivering
sewer maintenance, clean and waste
water rehabilitation and strategic
mains maintenance and general
utility infrastructure services under
the regulated AMp5 programme.
We have extended our 16 year
relationship with National Grid
working on a number of remediation
frameworks nationally.
Working under the Environment
Agency’s National Contaminated land
Remediation Contractors Framework,
which runs to 2016, led to us delivering a
major remediation scheme for Blackpool
County Council.
Recent project awards for Scotia
Gas Networks have led to a five year
framework appointment.
We are the only contractor to have
secured a position on the Environment
Agency’s minor works frameworks
across all of its regions.
Ongoing work for the Environment
Agency delivered through 7 minor works
and river maintenance frameworks.
Continue to develop strong
relationships with clients responsible
for delivering infrastructure renewal
and enhancement programmes.
Our work in Environmental
Strengthened our capabilities with the
acquisition of lewis Civil Engineering
limited which undertakes construction
and maintenance of infrastructure and
assets in the water sector. lewis gives
us access to additional frameworks
with Wessex and Welsh Water.
Appointed as preferred supplier
to deliver a number of accelerated
flood prevention schemes for
Northumbrian Water.
Awarded third out of four trunk Mains
Cleaning projects delivering cleaning
and general maintenance services
to the trunk mains network.
We have positions on 7 non-discretionary
maintenance frameworks with
Northumbrian Water where we
are seeing increasing workload for
services including sewer maintenance
and strategic water mains maintenance.
Sources
2 OFWAt, Future water and sewerage charges
2010-15: Final determinations.
3 Department for Environment, Food and Rural
Affairs, Environmental protection Act 1990: part 2A,
Contaminated land Statutory Guidance (April 2012).
Renew Holdings plc Annual Report and Accounts 2013
19
Review of operations: Infrastructure
INFRAStRuCtuRE
we deliveR integRated and
sustainable solutions acRoss
the Rail netwoRK foR a Range
of clients including netwoRK Rail,
wheRe ouR seRvice is enhanced by
ouR maRKet leading expeRtise in
tunnel RefuRbishments and ouR
24/7 emeRgency call-out pRovision.
How we target the Infrastructure market
The Group provides a range of civil, mechanical and electrical engineering and
maintenance services nationally operating mainly in the Rail sector delivering
off-track asset renewal and refurbishment as well as a wide range of planned and
reactive maintenance services critical to keeping the rail network operational.
Expertise
Rail
Off track asset renewal
and refurbishment
planned and reactive
maintenance services
tunnel and shaft refurbishment
Bridges, structures and earthworks
Opportunity
As part of the uK’s transport strategy,
current investment in the rail network
is the largest since the victorian
era to ensure that future transport
challenges are met. Network Rail
undertakes a programme of renewals
and enhancements on the rail network
which has planned expenditure from
committed funding over the long term.
4,000
instructions on our Asset
Management frameworks
10We currently deliver works along
all 10 major Network Rail routes
How we respond to our
Infrastructure opportunities
Our work in rail is underpinned
by framework agreements and is
focused on essential maintenance
and renewal works including
off-track civil engineering works,
tunnel and shaft refurbishment and
enhancement, structural renewal
and maintenance, refurbishment
and build of lineside structures,
renewal and maintenance of
mechanical and electrical
installations and delivery of
a wide range of planned and
reactive maintenance and
asset management services.
We deliver integrated and sustainable
solutions across the rail network for
a range of clients including Network
Rail, where our service is enhanced
by our directly employed, skilled
workforce and our market leading
expertise in tunnel refurbishment.
Our engineering service currently
delivers works along all 10 major
Network Rail routes.
20
Renew Holdings plc Annual Report and Accounts 2013
Our 15 national
rail depots
Barnsley
Birmingham
Braintree
Crawley
Ferryhill
Fort William
Glasgow
Hilton
Inverness
Irvine
Manchester
Nottingham
perth
pontyclun
Welshpool
Our work in Rail
A record year for our work in Rail
with a substantial increase in activity
across the entire work portfolio for
Network Rail.
Our excellent record for safe and
effective delivery has been maintained.
Increasing opportunities with Network
Rail as a result of our close alignment
with their operational structure.
We remain the sole provider of
engineering maintenance services
nationally to Network Rail, delivered
under both the Building & Civils
Delivery partnership and Asset
Management frameworks.
Existing Asset Management
frameworks with Network Rail
renewed for up to 5 years and
extended by a new framework
appointment in Scotland.
We provide ongoing engineering
support through local delivery teams
responding nationally across the
rail network providing 24 hour
emergency services.
Our specialist skills in tunnel and shaft
refurbishment have been enhanced
with the formation of a National tunnel
Delivery team; recent awards include
the £12m Holme tunnel project which
has now started on site.
Awarded a second phase of works
at Whiteball tunnel to reline the crown.
Renew Holdings plc Annual Report and Accounts 2013
21
Review of operations: Specialist Building
SpECIAlISt
BuIlDING
in specialist building ouR woRK
taRgets sustainable maRKets in
the south that have good visibility
of eaRnings. in these maRKets,
ouR activities concentRate on
oppoRtunities wheRe the gRoup
has expeRtise and expeRience.
How we target the Specialist Building market
Our Specialist Building operations are focused on High Quality Residential
and New Build Affordable Housing in the South of England.
Expertise
Opportunity
High Quality Residential
New build, fit out and refurbishment of
prestigious private residential projects
Innovative temporary works design
and engineering solutions
the High Quality Residential market
in london remains strong. Space
restrictions in the South and the
complex nature of developments
mean this market has high barriers
to entry with specialist engineering
and temporary works skills required.
New Build Affordable Housing
New build affordable housing units
Working with many of the larger
Housing Associations in the South
the need for new build affordable
remains high and the Group has
established relationships with
many of the leading Housing
Associations in the South.
How we respond to
our Specialist Building
opportunities
We are recognised as a leading
quality provider with expertise in
new build, fit out and refurbishment of
prestigious private residential projects
in and around london. Our particular
skills in listed and historical buildings
and challenging structural works
provide a differentiator in this market.
Our in-house specialist temporary
works design and engineering
capabilities are able to provide
innovative solutions when extending
properties below ground. Our services
include design management, planning,
traffic management and logistics
support as well as expertise in
specialist finishes.
the Group has extensive expertise
in delivering new build affordable
housing schemes in the south where
most of the work is undertaken
for repeat clients in this market.
We deliver new build contracts for
Housing Association clients under
a number of framework agreements,
accessing a £700m annual spend.
22
Renew Holdings plc Annual Report and Accounts 2013
Our work in Specialist Building
Secured in excess of £60m of
High Quality Residential projects.
Continuing to assist our clients and
their teams in achieving statutory
consents for complex structural
engineering projects.
Over £50m of New Build Affordable
Housing awards during the year
including further projects for
peabody, One Housing Group
and Notting Hill Housing.
Continuing to work for some of the
largest Housing Associations in the
South East including a new framework
secured with Catalyst Housing and a
negotiated first project.
Continuing to develop our relationship
with Notting Hill Housing trust where
we are ranked as ‘Best Contractor’
with two further awards.
We have framework agreements with
leading Housing Associations including
london & Quadrant, Notting Hill Home
Ownership, Hyde Housing Association
and One Housing Group.
Our particular skills
in listed and historical
buildings and challenging
structural works provide
a differentiator in this
market.
Renew Holdings plc Annual Report and Accounts 2013
23
Corporate governance
24
Renew Holdings plc Annual Report and Accounts 2013
coRpoRate
goveRnance
this section details the
gRoup’s coRpoRate goveRnance
pRoceduRes including coRpoRate
social Responsibility and the
diRectoRs’ RepoRts.
In this section
26 Corporate social responsibility
30 Directors’ report
34
Directors’ remuneration report
37 Corporate governance
39
Statement of directors’ responsibilities
Renew Holdings plc Annual Report and Accounts 2013
25
Corporate social responsibility
the gRoup is committed to
its social and enviRonmental
Responsibilities, ensuRing ouR
activities leave a lasting positive
impact on the communities in
which we opeRate.
Our commitments
Renew’s corporate social responsibility in 2013
We strive to ensure our activities are carried out with sensitivity, limiting their
impact whilst seeking to maximise the benefits of our work, beyond compliance
with minimum legal requirements. Our responsibility to our employees, the
communities in which we operate as well as our clients, consultants and supply chain
is an integral part of any work we undertake.
Awards
>page 26
Safety
>page 28
Environment and
sustainability
>page 28
Employment and training
>page 29
Community engagement
and charitable giving
>page 29
Awards
Among other awards, Renew was recognised by RoSPA and the Considerate
Constructors Scheme in 2013.
The Royal Society for the
Prevention of Accidents
(“RoSPA”)
the 2013 RoSpA Occupational Health and
Safety Awards saw many of our businesses
recognised for their safe working
practices. Shepley Engineers received
an “Order of Distinction” for achieving 17
gold awards, recognising 17 consecutive
years of safe working in the challenging
nuclear environment.
ppS Electrical and vHE both received
their second president’s Awards in
recognition of their 10th and 11th
respective Gold awards. Britannia
achieved a Gold award for the fourth
consecutive year.
26
Renew Holdings plc Annual Report and Accounts 2013
Shepley Engineers
RoSPA ‘Order
of Distinction’ award
2013 Sellafield Resident
Engineers Contractors
Safety Award
VHE
RoSPA President’s Award
Walter Lilly
Silver Medal at the CIOB
Construction Manager of the
Year Awards 2012
Considerate Constructors
"Performance Beyond
Compliance" certificates
Allenbuild
Considerate Constructors
"Performance Beyond
Compliance" certificates
Britannia
RoSPA Gold Award fourth
in four years
Considerate Constructors
"Performance Beyond
Compliance" certificates
PPS Electrical
RoSPA President’s Award
Seymour
“Highly Commended Award”
in the Infrastructure category
at the RICS Renaissance
Awards 2013.
Commendation at the CECA
(North East) “Project of the
Year 2012” awards
Considerate Constructors
Scheme
All our sites register with the Considerate
Constructors Scheme which concentrates
on assessing how sites consider the general
public, its workforce and the environment
whilst carrying out its operations.
During the year Walter Lilly, Allenbuild
and Britannia all received a number of
“Performance Beyond Compliance”
certificates under the scheme.
Other awards
Seymour received a “Highly Commended
Award” in the Infrastructure category at
the prestigious Royal Institute of Chartered
Surveyors ("RICS") Renaissance Awards
2013 for the Longbenton Flood Alleviation
Scheme in Newcastle for Northumbrian
Water. Seymour also received a
Commendation Award at the Civil
Engineering Contractors Association
(North East) ("CECA") “Project of the
Year 2012” for the Longbenton scheme.
Shepley Engineers was recognised with
the award of a “2013 Resident Engineers
Contractors Safety Award” for continually
delivering an excellent health and safety
performance at the Sellafield nuclear site
in Cumbria.
Walter Lilly received a silver medal at the
Chartered Institute of Building ("CIOB")
Construction Manager of the Year 2012
Awards in the New Build & Refurbishment
£17-£23m category for works to a residence
in Regent’s Park, London. Walter Lilly were
also highly commended in the Premier
Guarantee ‘Refurb/conversion development
of the year’ awards for works to form
apartments in Knightsbridge, London.
Renew Holdings plc Annual Report and Accounts 2013
27
Corporate social responsibility continued
Cumulative reduction in Group
Accident Incidence Rate
Safety
92%
over last 8 years
4 years
since a lost time Accident
at Sellafield
The Group’s priority remains the safe working of its employees and those who work with us.
We continue to implement initiatives to
support our safety culture and ensure
safety remains at the forefront of our
working practices. Examples include
promotion of the behavioural safety
programme in the workplace alongside
our robust systems and management.
A variety of Group safety initiatives are
undertaken including cross business
safety audits, tool box talks and warning
card systems. Each of our businesses
also implements safety schemes which
reflect the environment in which they
operate. Walter lilly and Amco also
present annual safety awards designed
to raise awareness of new initiatives
across the businesses. Walter lilly also runs
an occupational health scheme where
posters and other literature help raise
awareness.
Whilst our aim is always to strive to
achieve no accidents, we further improved
our safety performance in the year alongside
the continued development of a responsible
safety culture. 2013 saw a record reduction
in the Group’s Accident Incidence Rate
which is now at its lowest ever figure,
an improvement of 92% over the last
eight years.
A number of our businesses continue
to be accredited and approved with
various health and safety schemes
including the Contractors Health and
Safety Assessment Scheme or CHAS,
Constructionline and SAFEContractor.
Our businesses' initiatives reflect the
unique characteristics and challenges
of the markets in which they operate,
with the Renew Safety and Environmental
Management Group coordinating safety
activities across the Group. One of the
most challenging areas of work is in the
nuclear environment where the Group,
through its subsidiary Shepley Engineers,
has undertaken over 4 million man hours
of operations and it is now more than
4 years since a lost time event at Sellafield.
Elsewhere AMCO Engineering has achieved
10 years without a lost time Accident
on Magnox nuclear sites as well as
achieving a similar milestone of fourteen
years without a lost time Accident on
E ON uK sites, which cover a diverse
blend of coal, gas, wind and CHp
generation stations.
Sustainable
solutions are
integral to the
design process
and can help
towards achieving
environmental
objectives.
Environment and sustainability
Commitment to the environment includes accreditation for all our subsidiary
businesses to the ISO 14001 standard demonstrating their commitment to
closely monitoring the impact of their operations on the environment.
Consideration of the environment and
the impact of any work we undertake
begins in the planning stages of our work.
Schemes designed to encourage our
employees and subcontractors to adopt
sound environmental understanding and
practices use a mixture of training and
awareness programmes. One example
is Amco’s established ‘carbon strategy’
which looks to reduce emissions both
on site and in the office through initiatives
such as the hire, lease and procurement
of more efficient plant, equipment and
motor vehicles, and through the use
of energy from renewable sources
in their offices.
Our ability to deliver sustainable
schemes on site benefits from the
Group’s specialist skills including land
remediation techniques which were
recognised when vHE, as part of a
team alongside National Grid, won the
Constructing Excellence 2012 Cl:AIRE
Award for the Best use of the Waste Code
of practice. the Cl:AIRE Award was
presented for the uK’s first multiple site
“Hub and Cluster” project where
contaminated waste from four separate
former gas manufacturing stations in the
North West was remediated at a single
‘Hub’ site.
28
Renew Holdings plc Annual Report and Accounts 2013
Amco
Graduate Training Programme
approved by the Institute
of Civil Engineering
Bespoke Supervisor
Development Programme
Allenbuild
Mentor and trainee
programme “Achieve
with Allenbuild”
Shepley
Craft Apprenticeship training
programme supporting
over 50 trainees
Walter Lilly and Seymour
Training providers to the
Engineering Construction
Industry Training Board
delivering supervisory
management training and
development programme
Many of our
businesses
participate
in fundraising
events for
their chosen
charities.
Employment and training
An integral part of developing our business is providing a range of training and
employment opportunities through our subsidiary businesses in the form of
apprenticeship schemes, scholarships and work experience in partnership
with the local communities in which we operate.
Allenbuild has seen further success through
its mentor and trainee programme “Achieve
with Allenbuild”, which provides placements,
trainee positions and employment.
Walter Lilly and Seymour are training
providers to the Engineering Construction
Industry Training Board delivering their
Supervisory Management Training and
Development programme. Other examples
include Amco’s ongoing Graduate Training
Programme approved by the Institute of
Civil Engineering which was introduced
last year and has a number of trainees
registered as well as a bespoke supervisor
development programme.
Shepley Engineers continues to invest
significantly in its craft apprenticeship
training programme which supports
over 50 trainees. Amco Engineering also
invests in craft apprenticeship schemes
to ensure that the traditional electrical
and mechanical engineering skills base
is maintained for the future.
Community engagement and charitable giving
Ensuring our work leaves a positive impact on the communities in which we operate
is a key part of our operations on site.
Consideration of those affected by
our works is paramount and clear
communication as well as work to engage
the local community is undertaken where
possible. Recent recognition of such
work included an award for Seymour at
Northumbrian Water’s “Going the Extra
Mile Awards” in the Customer
Focus category. The awards scheme
recognises excellence in delivery by
organisations, teams or individuals that
have gone the extra mile.
Britannia continues to support The
Milestone School in Gloucester as one
of its nominated charities with a variety
of initiatives including earlier this year
when work was undertaken to construct
a new outdoor soft surface learning area
which was integrated into their existing
Sensory Garden. Britannia also supports
Gear Projects, a charity which helps
homeless and vulnerable people
in the Gloucester area.
Many of our businesses participate in
fundraising events for their chosen charities.
For the third year running employees at
Walter Lilly took part in the Cyclothon UK
event at Brands Hatch where they
achieved a silver award. The event is a 12
hour endurance challenge raising money for
a variety of charitable causes. Seymour
supports its local hospice and lifeboat
station with employees undertaking a
range of fundraising activities in the year.
Shepley Engineers continues to support
the Calvert Trust on a range of projects,
the Lake District charity provides outdoor
activity adventure holidays for all ages
and abilities.
Amco took part in Breast Cancer
Campaign’s “Wear it Pink” day and
Shepley Engineers works with West
Cumbria’s “Hospice at Home” as well as
pledging support to other local Cumbrian
causes in the year. Many other charities,
both national and local, were supported
throughout the year including the British
Heart Foundation, The Guide Dogs, The
Royal National Lifeboat Institution, the
Yorkshire Air Ambulance, the Bradford
Toy Library and Ilkley Candlelighters.
Renew Holdings plc Annual Report and Accounts 2013
29
Directors’ report
The Directors present their report and the audited accounts for the year ended 30 September 2013.
Principal activities
For the year ended 30 September 2013 the principal activity of the Group was as contractors in Engineering Services and Specialist
Building. The main activities are carried out in the United Kingdom with some development activities in the USA. More details of these
activities, the year’s trading and future developments are contained in the Chairman’s Statement, the Chief Executive’s Review, the
Review of Operations and the Financial Review. A list of the principal operating subsidiaries of the Group as at 30 September 2013
appears on page 74.
Results and dividends
The Group profit for the year was £8,597,000 (2012: £4,741,000). The Directors recommend the payment of a final dividend on the
Ordinary Shares of 2.50p (2012: 2.10p) giving a total for the year of 3.60p (2012: 3.15p).
Business review
Information that fulfils the business review requirements applicable to the Group can be found in this report, the Chief Executive’s
Review and the Review of Operations and is incorporated into this report by cross reference.
Key performance indicators
The Directors have established a number of key performance indicators which they use to measure and monitor the performance of
the Group in a number of different areas. These measures are set out in the tables below. The Engineering Services segment targets
have been established as part of the Board’s drive to grow both revenue and profitability in that segment of the business. The safety
record improvement target is set annually and achievement of this target is an essential component of the bonus scheme for each
Director and senior manager within the Group.
2016
2015
2014
2013
2012
2011
Engineering Services revenue as a percentage
of Group revenue
Target – not less than
Actual performance
Engineering Services operating profit as
a percentage of revenue
Target – not less than
Actual performance
Reduction in accident
incidence rate
Cumulative target since 2005
Cumulative actual performance since 2005
70%
70%
70%
70%
70%
64%
50%
5.0%
4.6%
4.5%
4.2%
76%
69%
63%
57%
92%
52%
87%
47%
77%
30
Renew Holdings plc Annual Report and Accounts 2013
Principal risks and uncertainties
This Annual Report contains certain forward looking statements. These statements are made by the Directors in good faith, based
on the information available to them up to the time of approval of this report. Actual results may differ to those expressed in such
statements, depending on a variety of factors. These factors include customer acceptance of the Group’s services, levels of demand
in the market, restrictions to market access, competitive pressure on pricing or additional costs, failure to retain or recruit key
personnel and overall economic conditions.
A risk inherent in the contracting industry occurs in the nature, timing and contractual conditions which exist at the time of contract
procurement. To mitigate these risks, the Group has a system of pre-contract and pre-tender risk assessment whereby senior
management, including the Executive Directors where appropriate, review and advise on specific issues arising in the contract
procurement process. The Group also seeks to limit its risks by specialising in certain markets where it has extensive experience
and a particular skills base.
The Group has two closed final salary pension schemes, details of which are disclosed in Note 24. Should the actuarial deficit
relating to one or both of these schemes materially deteriorate then the Group could be required to make substantial payments
into the schemes in accordance with the requirements of the Pensions Act 1995. The Group has taken steps to mitigate this risk by
working with the schemes’ Trustees to develop liability matching investment strategies. These have included both schemes entering
into annuity policies which match the liabilities in respect of certain of the schemes’ beneficiaries. At 30 September 2013, these
policies are equivalent to 35% of the combined scheme liabilities.
Derivatives and other financial instruments
The Group’s principal financial instruments comprise bank loans, cash and short-term deposits and obligations under finance
leases. The main purpose of these financial instruments is to provide finance for the Group’s operations. The Group has various
other financial instruments such as trade receivables and trade payables that arise directly from its operations. It is, and has been
throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken. The main risks
arising from the Group’s financial instruments are interest rate risk, liquidity risk, credit risk and foreign currency risk.
Interest rate risk
Interest bearing assets comprise cash and bank deposits and earn interest at floating rates. The Group’s bank loan and overdraft
facility bear interest at floating rates.
Liquidity risk
The Group’s policy is to ensure availability of operating funds by maintaining an appropriate cash balance in both current and
deposit accounts and, when necessary, to establish appropriate levels of borrowing facilities to provide short-term flexibility.
Foreign currency risk
As a result of the investment in operations in the United States, movements in the US dollar/sterling exchange rate could materially
affect the Group’s and the Company’s balance sheet. As at 30 September 2013, £4,325,000 (2012: £9,506,000) of the Group’s net
assets are denominated in foreign currency. The Group does not use derivative financial instruments in its management of foreign
currency risk.
Credit risk
The Group’s principal financial assets are bank balances, cash, amounts recoverable on contracts and trade receivables,
which represent the Group’s maximum exposure to credit risk in relation to financial assets.
The Group’s credit risk is primarily attributable to its amounts recoverable on contracts and trade receivables.
Credit risk is managed by monitoring the aggregate amount and duration of exposure to any one customer depending upon their
credit rating. The amounts presented in the balance sheet are net of allowances for doubtful debts, estimated by the Group’s
management based on prior experience and their assessment of the current economic environment.
Payment of creditors
The Group recognises the importance of good relationships with its suppliers and sub-contractors and has established
the following payment policy:
(a) agree payment terms in advance of any commitment being entered into;
(b) ensure suppliers are made aware of these terms by inclusion of the terms of payment on the order or contract; and
(c) ensure that payments are made in accordance with the terms of the contract or order providing that the presented
documentation is complete and accurate.
The Group’s average creditor days during the year were 35 days (2012: 42 days).
Donations
Charitable donations made by the Group during the year amounted to £49,243 (2012: £34,606).
The Group made no political donations during the year (2012: £nil).
Renew Holdings plc Annual Report and Accounts 2013
31
Directors’ report continued
Employees
The Directors recognise the need for communication with employees at every level. All employees have access to a copy of the
Annual Report and Accounts which, together with staff briefings, internal notice-board statements and newsletters, keeps them
informed of the Group’s progress. The Group produces a quarterly in-house publication, Renews, which provides information to
its employees about the activities and performance of the Group.
The Group continues to be committed to the health, safety and welfare of its employees and to observe the terms of the Health
and Safety at Work Act 1974, and all other relevant regulatory and legislative requirements.
It is the policy of the Group that there shall be no discrimination or less favourable treatment of employees, workers or job applicants
in respect of race, colour, ethnic or national origins, religious beliefs, sex, sexual orientation, disability, political beliefs, age or marital
status. Full consideration will be given to suitable applications for employment from disabled persons, where they have the necessary
abilities and skills for that position, and wherever possible to re-train employees who become disabled, so that they can continue
their employment in another position. Renew and its subsidiaries engage, promote and train staff on the basis of their capabilities,
qualifications and experience, without discrimination, giving all employees an equal opportunity to progress within the Group.
Health and safety management
B W May continues as the designated Board Director of Health and Safety with Group responsibility for safety and environmental
management. Health, safety and environmental management issues and reports are reviewed at every Group Board meeting
with the Head of Department in attendance when necessary.
The Executive Management Committee, chaired by the Chief Executive, discusses and progresses policy, legislative changes,
best practice, training needs, inspections, audits (internal and external), performance measurement and statistical information.
All topics are discussed with a specific focus on improvement.
Control at business level remains with subsidiary Managing Directors who are required to appoint a Director who is responsible for
safety and environmental matters. Health, safety and environmental issues are discussed as the first agenda item at monthly Board
meetings. Each business safety and environmental meeting encourages open communication between all employees and is a key part
of the Group’s efforts to gather and disseminate good practice for inclusion in business-based management systems. Minimum safety
and environmental standards are contained within bespoke business Safety and Environmental Management Systems. This system
is based on Group activities and provides specific standards, procedures, information, forms and advice which accommodate changes
in legislation expected during the coming financial year. Management advice is provided by the Group Health, Safety and Environmental
Department consisting of the Group Health, Safety and Environmental Director, an administrator and regional Group Safety and
Environmental Advisors.
Certain Group companies employ their own specialist advisors who liaise directly with the Group HSE Director on common issues.
The Group maintains its membership with the Royal Society for the Prevention of Accidents and locally based construction safety groups.
All safety and environmental department personnel hold membership with the Institution of Occupational Safety and Health. Attendance
on the five day Construction Industry Training Board Site Safety Management Training Scheme continues to be a requirement for all
construction management personnel, with a two day refresher required every five years. A one day Directors and Senior Managers course
is available internally and is used to introduce new systems and detail changes to construction legislation. Short duration ‘tool box talks’
and ‘safety briefings’ are used to enhance the knowledge and competence of supervisory management.
Group policy requires each business to report and record all injuries, diseases and dangerous occurrences, regardless of severity.
An incident database is maintained to collate this information and provide statistical data allowing performance to be measured
and determine system amendment and future training requirements. A system of Safety and Environmental Alerts ensures lessons
learnt and changes to working practices are rapidly transmitted to our workforce, businesses and their contractors. The Accident
Incidence Rate (“AIR”) for the year ended 30 September 2013, measured on the standard base line of 100,000 persons at work,
is a key area where the Group measures its performance.
Corporate social responsibility and the environment
The Group’s Corporate Social Responsibility Report, which includes its report on the environment, is on pages 26 to 29.
Directors
The Directors of the Company who served throughout the year and their brief biographical details are set out below.
Non-executive Directors
John Bishop - Director, 68, was appointed to the Board as a non-executive Director in October 2006. He is a Chartered Accountant
with over 20 years’ PLC experience at main board level. Before retiring in 2005, John spent twelve years at Morgan Sindall Plc as
Development Director and latterly as Finance Director.
David Forbes – Director, 53, was appointed to the Board as a non-executive Director in June 2011. He qualified as a Chartered Accountant
in 1984 and has over 20 years’ experience in corporate advisory services with N M Rothschild & Son Limited. He is a non-executive
director of Vertu Motors plc.
Roy Harrison OBE - Director, 66, was appointed to the Board as a non-executive Director in November 2003. Subsequently, he was
appointed Executive Chairman in March 2004, reverting to non-executive Chairman with effect from 1 October 2005. He is a former
chief executive of the Tarmac Group, a former director of BSS Group PLC and has a number of investing director positions in private
construction materials companies. He is governor and chairman of a number of City Academies and a non-executive director of
Fox Marble Holdings plc.
32
Renew Holdings plc Annual Report and Accounts 2013
Executive Directors
Brian May - Director, 62, was appointed to the Board as Chief Executive Officer in June 2005. He is a Chartered Civil Engineer.
He progressed his career in Tarmac, subsequently holding a number of senior positions in Mowlem plc before becoming
Chief Executive of Laing Construction plc and more latterly HBG Construction Ltd.
John Samuel - Director, 57, joined the Board in May 2006 as Group Finance Director. He was previously Group Finance Director at
Filtronic plc from 1991 until 2004 and subsequently Chief Financial Officer of Zetex plc from July 2004 until February 2006. He qualified
as a Chartered Accountant in 1981 with Deloitte, Haskins and Sells before serving as a partner with Baker Tilly from 1987 until 1991.
An organogram with the Directors’ areas of responsibility can be found on the Company’s website: www.renewholdings.com.
John Samuel retires by rotation at the 2014 Annual General Meeting (“AGM”) and will offer himself for reappointment. The Board
recommends his reappointment as it considers that he continues to perform his role well.
The Articles of Association provide that each Director shall be indemnified by the Company against losses, costs and expenses he
may sustain or incur in connection with the performance of his duties of office, to the fullest extent permitted by law. The Company
has purchased and maintained throughout the year directors’ and officers’ liability insurance in respect of its Directors.
Directors’ interests
The beneficial interests of the Directors (and their immediate family members) in the shares of the Company and options for shares
are set out on page 36. No Director has any interest in any other Group company. Details of the Directors’ remuneration and service
contracts appear on page 35.
Disclosable interests
As at the date of this report, the Company has been notified of the following disclosable interests in the voting rights of the Company:
Octopus Investments Nominees Limited
Hargreave Hale Limited
Brewin Dolphin Limited
Number
of ordinary
shares
9,574,560
9,208,481
2,800,783
Percentage
of issued
share capital
15.59%
15.00%
4.56%
Share capital
As at the date of this report, the total number of shares in issue (being ordinary shares of 10p each) is 61,403,668.
During the year, the Company has not bought back any of its own shares. 1,504,741 new ordinary shares of 10p each were issued
at par during the year to satisfy the exercise of share options.
Disclosure of information to the auditor
The Directors who held office at the date of approval of this Directors’ Report confirm the following:
• so far as each Director is aware, there is no relevant audit information of which the Group’s Auditor is unaware, and
• each Director has taken all the steps that he ought to have taken as a director in order to make himself aware of any relevant
audit information and to establish that the Group’s Auditor is aware of that information.
Auditor
Resolutions will be proposed at the forthcoming AGM to appoint KPMG LLP (in place of KPMG Audit Plc) as Auditor to the Group
and to authorise the Directors to determine their remuneration.
Approval
The Board approved the Report of the Directors on 26 November 2013.
By Order of the Board
J Samuel FCA
Company Secretary
26 November 2013
Company number 650447
Renew Holdings plc Annual Report and Accounts 2013
33
Directors’ remuneration report
The Directors present the Directors’ Remuneration Report (the “Remuneration Report”) for the financial year ended 30 September 2013.
As an AIM listed company, Renew is not required to prepare the Report in accordance with the Directors’ Remuneration Report
Regulations 2002 or the recently enacted Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013 (together “the Regulations”). However, the Directors recognise the importance and support the principles of
the Regulations and would normally seek to follow them to the extent considered relevant for an AIM listed company. However the
Regulations are new and market practice as to the extent to which AIM companies will follow these Regulations has not yet evolved.
There are improved disclosures in the report presented below and the Remuneration Committee will continue to monitor market
practice to ensure that, in future, this report will include disclosures at least as good as market practice for AIM companies.
The Auditor is not required to report to the shareholders on the Directors’ Remuneration Report.
Remuneration Committee
On his appointment as a Director on 1 June 2011, D M Forbes assumed the Chairmanship of the Remuneration Committee which
also comprises R J Harrison and J Bishop. The Committee held four meetings during the financial year to discuss remuneration
arrangements.
The Remuneration Committee’s terms of reference include:
(a)
to determine and agree with the Board the framework and policy for the remuneration packages, including bonuses, incentive
payments and share options or share awards, of the Executive Directors and members of the Executive Management;
(b)
to review and approve the design of all share incentive plans and performance related pay schemes for approval by the Board
and shareholders as applicable;
(c) to determine targets and awards made under share incentive plans and performance related pay schemes;
(d)
to determine the policy for, and scope of, pension arrangements for each Executive Director and other senior executives; and
(e)
to ensure contractual terms and payments made on termination are fair to the individual and the Company and that failure
is not rewarded.
Non-executive Directors do not have any personal interest in the matters to be decided by the Committee other than as shareholders,
nor any potential conflicts of interest arising from cross-directorships and no day-to-day involvement in the running of the Company.
The Executive Directors and other senior personnel may be invited to attend meetings when appropriate to provide advice. However,
no Director is present or takes part in discussions concerning his own remuneration.
Remuneration policy
The Company’s remuneration policy is that the remuneration package of the Executive Directors should be sufficiently competitive
to attract, retain and motivate Directors to achieve the Company’s objectives, without making excessive payments. The remuneration
and employment terms of the Executive Directors are determined by the Committee by comparison with salaries paid and terms agreed
with Directors in similar companies in the same sector and of a similar size and after a review of the performance of the individual.
It is the aim of the Committee to reward Executive Directors competitively and on the broad principle that they should be in the range
of median to upper quartile of remuneration paid to senior management of comparable public companies. For guidance, the Committee
refers to published survey data. The Board determines the terms and conditions of non-executive Directors.
There are four main elements to the remuneration packages of the Executive Directors and other senior executives:
• basic salary, including benefits;
• annual bonus awards;
• equity incentive plans; and
• pension arrangements.
Basic salary
Basic salaries are reviewed annually by the Remuneration Committee, and adjusted where the Committee believes that adjustments
are appropriate to reflect performance, changed responsibilities and/or market conditions.
Other benefits for Executive Directors include car allowances and certain medical cover for the Director and immediate family.
The Company also has a permanent health insurance policy to provide cover for the Executive Directors.
Annual bonus awards
The Company provides a bonus incentive scheme for Directors and senior executives of the operating companies, linked to the
performance of the business for which they are responsible. All performance criteria are subject to approval by the Remuneration
Committee before payment is made. At the beginning of each year, the Remuneration Committee sets targets for operating profit
before exceptional items for the Group. If the Group meets those targets then the executive directors receive an annual bonus equal
to 50 per cent of their salary. The level of over and under performance causes the level of annual bonus to vary with the maximum
bonus of 100 percent of salary being paid if the performance exceeds the target by 30 per cent. The Remuneration Committee make
such adjustments to the target and or results to remove distortions such as acquisitions, disposals and other items as they believe
are justified.
Equity incentive plans
The Remuneration Committee has ceased to use the Renew Holdings plc 2004 Executive Share Option Scheme (“ESOS”) and implemented
a new long term incentive plan (“LTIP”) which was approved at an Extraordinary General Meeting (“EGM”) held on 25 January 2012.
The LTIP has been designed so as to comply with ABI guidelines in all material respects. The Remuneration Committee does not intend
to grant any further options under the ESOS which has been terminated save in respect of options previously granted under it.
34
Renew Holdings plc Annual Report and Accounts 2013
The performance criteria to be achieved by the Company in respect of the LTIP are as follows:
Vesting of one half of the options is dependent on absolute growth in the Company’s Total Shareholder Return (‘TSR’), and the other
half dependent on the Company’s TSR performance as compared to the TSR achieved by other companies in a comparator group
of companies selected by the Remuneration Committee. All TSR calculations are based on the average of the opening and closing
share price over a 30 day period prior to the commencement and end of the performance period.
The absolute TSR growth target requires the Company’s TSR over the three year performance period to have grown by more than
25%. For TSR growth between 25% and 100%, the half of the option which is subject to the absolute TSR growth target vests on a
straight-line basis from nil vesting at 25% growth, to 100% vesting at 100% growth. There is no vesting if TSR growth is 25% or less.
In the event of a material correction of any accounts of the Company used to assess satisfaction of any performance conditions, or in the
event of a participant’s gross misconduct, options may be reduced, adjusted or cancelled as determined by the Remuneration Committee.
To the extent that options have already been exercised, the Remuneration Committee may (having considered all the circumstances)
require the participant to return any shares received, or the amounts of any proceeds of the sale of such shares (net of tax).
There are 400,000 options outstanding under the LTIP which may be exercised between 2 March 2015 and 1 March 2022 and a further
400,000 options which may be exercised between 21 December 2015 and 20 December 2022.
The ESOS was approved at an EGM held on 11 March 2004. There are 114,280 options outstanding under the scheme all of which
have now vested and may be exercised between now and 6 June 2016.
The Renew Savings Related Share Option Scheme was also approved at the EGM on 11 March 2004. There are no options outstanding
under this scheme. The Company’s policy to grant options or awards under the above schemes is at the Remuneration Committee’s
discretion as and when considered appropriate.
Pension arrangements
The Group has established individual stakeholder plans for each employee who elects to join into which the Group makes contributions;
B W May and J Samuel receive a sum equivalent to 10% of their basic salary in lieu of pension contributions from the Company.
Following the adoption of new Articles of Association at the AGM on 28 January 2009, the restriction on the retirement age of the
Executive Directors was removed.
Service contracts and letters of appointment
The Company’s policy is for all of the Directors to have twelve month rolling service contracts that provide for a twelve month notice
period. The fees of non-executive Directors are determined by the full Board within the limits set out in the Articles of Association.
The non-executive Directors are not eligible for bonuses, pension benefits, share options or other benefits. The Directors are
indemnified to the full extent permitted by statute under the Articles of Association.
The service contracts of the Directors, who served during the year ended 30 September 2013, include the following terms:
Directors
R J Harrison
J Bishop
D M Forbes
B W May
J Samuel
Executive/Non-executive
Date of contract
Unexpired term
Notice period (months)
Non-executive
1 February 2009
Rolling one year
Non-executive
1 September 2008
Rolling one year
Non-executive
1 June 2011
Rolling one year
Executive
Executive
20 June 2005
Rolling one year
17 May 2006
Rolling one year
12
12
12
12
12
Directors’ remuneration
Information is provided below for Directors who served during the financial year and as at 30 September 2013:
Executive Directors
B W May
J Samuel
Non-executive Directors
R J Harrison
J Bishop
D M Forbes
Total emoluments
Total emoluments
Notes
1,2,3,4
1,2,3,4
Salary/fees
£000
295
227
57
31
31
Bonuses
£000
Benefits
£000
204
169
—
—
—
57
43
—
—
—
2013
£000
556
439
995
57
31
31
2012
£000
510
393
903
56
30
30
1,114
1,019
Notes:
1. The highest paid Director for 2013 and 2012 was B W May who received emoluments of £556,000 (2012: £510,000).
2. Benefits include car allowances and certain medical cover for the Director and immediate family.
3. B W May and J Samuel received payments in lieu of Company pension contributions, which are paid through payroll and taxed
as salary and are included in Benefits above.
4. Bonuses were earned by B W May and J Samuel during the current financial year and will be paid in the year ending 30 September 2014.
Renew Holdings plc Annual Report and Accounts 2013
35
Directors’ remuneration report continued
Equity incentive plans
Directors’ share options under the ESOS
Options have been granted to B W May and J Samuel under the ESOS as set out in the table below. The market price of the
Company’s shares at 30 September 2013 was 146p and the range of market prices during the year was between 76.5p and 146p.
Information is provided below for Directors who served during the financial year and as at 30 September 2013:
B W May
J Samuel
Date of award
Exercise price (£)
Earliest exercise date
Expiry of exercise period
2006 Award
30 September 2013
1 October 2012
Cumulative total
57,140
57,140
1,384,338
810,148
57,140
57,140
7 June 2006
0.525
7 June 2009
7 June 2016
Directors’ share options under the LTIP
Pursuant to the LTIP, the Board has granted the following options to the Executive Directors which are exercisable at a nominal
cost subject to the achievement of performance criteria as follows:
B W May 240,000 J Samuel 160,000 Exercisable between 2 March 2015 and 1 March 2022
B W May 228,560 J Samuel 171,440 Exercisable between 21 December 2015 and 20 December 2022.
Performance criteria for the vesting of the share options under both the ESOS and the LTIP are set out in Note 20 to the financial statements.
Directors’ share interests
Those Directors serving at the end of the year and their immediate families had interests in the share capital of the Company at 30
September 2013 as follows:
R J Harrison
J Bishop
D M Forbes
B W May
J Samuel
Ordinary Shares of £0.10 each
30 September 2013
30 September 2012
150,000
10,000
20,000
844,193
240,548
150,000
10,000
20,000
505,000
50,000
Directors’ pension information
No Director had pension entitlements under the Company’s defined benefit pension scheme.
Approval
The Directors’ Remuneration Report was approved by the Board on 26 November 2013 and signed on its behalf by:
D M Forbes
Chairman of the Remuneration Committee
26 November 2013
36
Renew Holdings plc Annual Report and Accounts 2013
Corporate governance
R J Harrison OBE
Non-executive Chairman
John Bishop
Non-executive Director
David Forbes
Non-executive Director
As an AIM listed company, Renew is not required to follow the provisions of the UK Corporate Governance Code (“the Code”), as set out in
the Financial Services Authority’s Listing Rules. The Directors, however, recognise the importance of, and accordingly support, the principles
of good corporate governance as contained within the Code. The Directors normally seek to follow the Code to the extent considered relevant
for an AIM listed company but are unable to achieve compliance with the Code in a number of areas this year, primarily because of
the lack of independent non-executive Directors. These matters are explained in further detail in the sections below.
The Board of Directors
The Board currently comprises the Chief Executive Officer, the non-executive Chairman, one Executive Director and two independent
non-executive Directors. Brief biographies of the Directors are given on pages 32 and 33. The Company is not compliant with the
requirement of the Code that more than half of the Board should be comprised of independent non-executive Directors because,
although the Board believes that he acts as an independent director, Mr Harrison is not regarded as such by the Code due to the period
in 2004/2005 when he acted as Executive Chairman.
The composition of the Board is reviewed regularly. Appropriate training, briefings and induction are available to all Directors on
appointment and subsequently as necessary, taking into account existing qualifications and experience. New Directors are subject
to election by shareholders at the first AGM after their appointment.
The Board met formally ten times in the year with all Directors in attendance. Committee meetings dealing with the daily business
of the Company were held as necessary. The Board receives written and oral reports from the Executive Directors ensuring matters
are considered fully and enabling Directors to discharge their duties properly. There is a formal schedule of matters reserved for the
Board’s decision ensuring the maintenance of control over strategic, financial and operational matters. In addition, procedures are
in place for the Directors to seek independent professional advice, if necessary, at the Company’s expense.
Board committees
The Board operates with a number of Board Committees. J Bishop, the senior independent non-executive Director, acts as Chairman
of the Audit Committee and D M Forbes, an independent non-executive Director, acts as Chairman of the Remuneration Committee.
The Nominations Committee is chaired by R J Harrison.
The Board delegates clearly defined powers to its Audit, Remuneration and Nominations Committees. Each of the Board’s
Committees has carefully drafted terms of reference.
The Remuneration Committee, which comprises all of the non-executive Directors, determines and agrees with the Board the
framework and policy of executive remuneration packages, including bonuses, incentive payments, share options or awards and
pension arrangements. Further information concerning the Remuneration Committee is set out in the Directors’ Remuneration
Report on pages 34 to 36.
The Nominations Committee, which comprises the entire Board, monitors the composition of the Board and recommends the
appointment of new Directors. The Nominations Committee, with all Directors present, has held two meetings during the year
to discuss nomination matters.
The Nominations Committee terms of reference include:
(a)
to review the structure, size and composition of the Board;
(b)
to consider succession planning for Directors and senior executives;
(c)
to identify and nominate, for approval by the Board, suitable candidates to fill Board vacancies; and
(d)
to make recommendations to the Board on the contents of letters of appointment, Directors’ duties, re-appointment
or re-election of Directors upon conclusion of a specified term or retirement by rotation.
The Audit Committee has held three meetings to consider Audit Committee business. The Audit Committee consists of all three
non-executive Directors. The Executive Directors are invited to attend Audit Committee meetings but at least two meetings are held
each year with the external Auditor at which the Executive Directors are not present. The Audit Committee considers the adequacy and
effectiveness of the risk management and control systems of the Group, and reports the results to the Board. It reviews the scope and
results of the external audit, its cost effectiveness and the objectivity of the Auditor. The Audit Committee monitors the non-audit work
performed by the Auditor to help ensure that the independence of the Auditor is maintained. The Audit Committee also reviews the
interim statement, the preliminary announcement and accounting policies.
The Board forms a General Purposes Committee from time it time as it deems necessary. This Committee comprises the
two Executive Directors and considers individual business matters, which have been specifically delegated to it by the Board.
Renew Holdings plc Annual Report and Accounts 2013
37
Corporate governance continued
Internal controls
Throughout the financial year ended 30 September 2013 and up to the date of approval of the Annual Report and Accounts, the
Group has fully complied with the relevant provisions of the Code and the Turnbull guidance. The Directors acknowledge that they
have overall responsibility for the Group’s system of internal control and for reviewing and monitoring its effectiveness. The system
of internal control is designed to manage and mitigate, rather than eliminate, the risks to which the Group is exposed and therefore
provides a reasonable, but not absolute, assurance against a company failing to meet its business objectives or against material
misstatement or loss. Consequently, the Board confirms that there is an ongoing process for identifying, evaluating and managing
significant risks faced by the Group and that it is regularly reviewed by the Board.
The Group operates a risk management process, which is embedded in normal management and governance processes. There is a system
of self-examination of risk areas and controls by subsidiaries and departments within the Group. Where significant risks are identified, the
probability of those risks occurring, their potential impact and the plans for managing and mitigating each of those risks is reported. The
Group operates a series of controls which include the annual strategic planning and budgeting process, short-term cash monitoring achieved
by means of weekly forecasts which are compared against budget and previous forecasts, clearly defined capital investment guidelines and
levels of authority and a clear organisational structure within which individuals’ responsibilities are identified and monitored. These results
and processes are monitored, updated, reviewed and considered by the Board. The Group has established a series of minimum standards
in a number of financial and operational areas with which each business within the Group must comply. Group management monitors and
reviews compliance with these requirements on a periodic basis. Due to the size and nature of the Group, the Board does not consider that
a separate internal audit function is necessary. For the last six years and including 2013, the Group has carried out a programme of internal
audit conducted by the Group Commercial Director and by members of the various subsidiaries’ finance teams. This system of peer review
promotes best practice as well as ensuring that Group minimum requirements as to procedures and internal controls are being complied
with. The reports from these internal audits are made available both to the Board and to the external Auditor.
Going concern
The Directors have reviewed the budgets and forecasts prepared by the Group and its trading subsidiaries and consider that at
the time of approving the financial statements, there is a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern
basis in preparing the financial statements.
Directors’ remuneration
The Company’s policy on the remuneration of Executive Directors, and information relating to the Directors’ remuneration and their
interests in share options, is included in the Directors’ Remuneration Report.
Directors’ and officers’ indemnity
The Articles of Association provide that each Director or other officer or Auditor of the Company shall be indemnified by the
Company against losses, costs and expenses he may sustain or incur in connection with the performance of his duties of office,
to the fullest extent permitted by law.
Shareholder relationships
Members of the Board have dialogue with individual shareholders during the year. In addition to the Annual and Interim Report
and Accounts, the Chairman addresses shareholders at the AGM and invites questions to any members of the Board.
The AGM is normally attended by all Directors and provides an opportunity for communication with those shareholders attending.
Notice of the AGM is given to shareholders at least 21 days in advance and separate resolutions are proposed on each substantially
separate issue. Where resolutions at the AGM are dealt with by show of hands, the results of proxy votes for and against are
still announced.
Financial and other information about the Group is available on the Company’s website: www.renewholdings.com, from which
shareholders can also access their shareholding details via a link to the website of Capita Asset Services.
Annual General Meeting
The AGM will be held on 29 January 2014, the Notice for which accompanies this Report and Accounts. The Notice contains special
business relating to the renewal of the Board’s power to allot equity shares together with other special resolutions proposing
amendments to service requirements and resolution amendments to bring the Articles of Association into line with modern
practice. Brief details of the purpose and effect of the proposed resolutions are enclosed with the Notice of AGM.
Shareholders should complete the proxy form accompanying this document in accordance with the notes contained in the Notice of AGM.
Approval
The Board approved the Corporate Governance Report on 26 November 2013.
By Order of the Board
John Samuel
Company Secretary
26 November 2013
38
Renew Holdings plc Annual Report and Accounts 2013
Statement of directors’ responsibilities in respect of the Annual Report and financial statements
The Directors are responsible for preparing the Annual Report and the Group and parent company financial statements
in accordance with applicable law and regulations.
Company law requires the Directors to prepare Group and parent company financial statements for each financial year. As required
by the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with
IFRSs as adopted by the EU and applicable law and have elected to prepare the parent company financial statements in accordance
with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice).
Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and parent company and of their profit or loss for that period. In preparing each of the Group
and parent company financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable and prudent;
• for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
• for the parent company financial statements, state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the financial statements; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent
company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to
ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the
Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
Renew Holdings plc Annual Report and Accounts 2013
39
Accounts
40
Renew Holdings plc Annual Report and Accounts 2013
accounTs
This secTion deTails The
Group’s accounTs for The
year ended 30 sepTember 2013.
In this section
42 Independent auditor’s report
43 Group income statement
44 Group statement of comprehensive income
44 Group statement of changes in equity
45 Group balance sheet
46 Group cashflow statement
47 Notes to the accounts
67 Company balance sheet
68 Notes to the company accounts
75 Directors, officers and advisors
76 Shareholder information
Renew Holdings plc Annual Report and Accounts 2013
41
Independent auditor’s report to the members of Renew holdings plc
We have audited the financial statements of Renew Holdings plc for the year ended 30 September 2013 set out on pages 43 to 74.
The financial reporting framework that has been applied in the preparation of the group financial statements is applicable law and
International Financial Reporting Standards (IFRSs) as adopted by the EU. The financial reporting framework that has been applied
in the preparation of the parent company financial statements is applicable law and UK Accounting Standards (UK Generally Accepted
Accounting Practice).
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to
state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s members, as a body, for our audit work, for this report, or
for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 39, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit,
and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing
(UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website
at www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
•
the financial statements give a true and fair view of the state of the group’s and of the parent company’s affairs as at 30 September 2013
and of the group’s profit for the year then ended;
• the group financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;
• the parent company financial statements have been properly prepared in accordance with UK Generally Accepted Accounting Practice;
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared
is consistent with the financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit have not been
received from branches not visited by us; or
• the parent company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
Robert Iain Moffatt (Senior Statutory Auditor)
For and on behalf of KPMG Audit Plc, Statutory Auditor
Chartered Accountants
1 The Embankment
Neville Street
Leeds
LS1 4DW
26 November 2013
42
Renew Holdings plc Annual Report and Accounts 2013
Group income statement for the year ended 30 September
Before
exceptional
items and
amortisation
of intangible
assets
2013
£000
Exceptional
items and
amortisation
of intangible
assets
(see Note 3)
2013
£000
Note
Before
exceptional
items and
amortisation
of intangible
assets
2012
£000
Total
2013
£000
334,649
15,412
350,061
337,423
(296,232)
(14,408)
(310,640)
(301,040)
39,421
(28,153)
11,268
25
(362)
36,383
(26,115)
10,268
45
(518)
(232)
246
38,417
(27,185)
11,232
25
(362)
(232)
10,663
(1,778)
8,885
1,004
(968)
36
—
—
—
36
(9)
27
Group revenue from
continuing activities
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance income
Finance costs
Other finance (expense)/
income - defined benefit
pension schemes
Profit before income
tax
Income tax expense
Profit for the year from
continuing activities
Loss for the year from
discontinued operation
Profit for the year
attributable to equity
holders of the parent
company
Basic earnings per
share from continuing
activities
Diluted earnings per
share from continuing
activities
Basic earnings per
share
Diluted earnings per
share
2
3
4
4
4
6
3
8
8
8
8
Exceptional
items and
amortisation
of intangible
assets
(see Note 3)
2012
£000
—
—
—
(1,620)
(1,620)
—
—
—
Total
2012
£000
337,423
(301,040)
36,383
(27,735)
8,648
45
(518)
246
8,421
(1,308)
10,699
(1,787)
10,041
(1,713)
(1,620)
405
8,912
8,328
(1,215)
7,113
(315)
(2,372)
8,597
14.85p
14.70p
14.33p
14.18p
4,741
11.87p
11.38p
7.91p
7.59p
Renew Holdings plc Annual Report and Accounts 2013
43
Group statement of comprehensive income for the year ended 30 September
Profit for the year attributable to equity holders of the parent company
Items that will not be reclassified to profit or loss:
Movement in actuarial valuation of the defined benefit pension schemes
Movement on deferred tax relating to the defined benefit pension schemes
Total items that will not be reclassified to profit or loss
Items that are or may be reclassified subsequently to profit or loss:
Exchange movement in reserves
Total items that are or may be reclassified subsequently to profit or loss
Total comprehensive income for the year attributable to
equity holders of the parent company
Note
24
2013
£000
8,597
(6,895)
1,429
(5,466)
(24)
(24)
2012
£000
4,741
(3,442)
847
(2,595)
(407)
(407)
3,107
1,739
Group statement of changes in equity for the year ended 30 September
Called up
Share
Capital
Cumulative
Share based
share
capital
£000
premium redemption
translation
payments
account
reserve
adjustment
reserve
£000
£000
£000
At 1 October 2011
5,990
5,893
3,896
1,182
Transfer from income statement for the year
Dividends paid
Recognition of share based payments
Exchange differences
Actuarial losses recognised in pension schemes
Movement on deferred tax relating to the pension schemes
(407)
£000
283
6
Retained
earnings
£000
(8,268)
4,741
Total
equity
£000
8,976
4,741
(1,827)
(1,827)
6
(407)
(3,442)
(3,442)
847
847
8,894
8,597
At 1 October 2012
5,990
5,893
3,896
775
289
(7,949)
Transfer from income statement for the year
8,597
Dividends paid
New shares issued
Recognition of share based payments
Exchange differences
Actuarial losses recognised in pension schemes
Movement on deferred tax relating to the pension schemes
150
101
(24)
(1,917)
(1,917)
150
101
(24)
(6,895)
(6,895)
1,429
1,429
At 30 September 2013
6,140
5,893
3,896
751
390
(6,735)
10,335
44
Renew Holdings plc Annual Report and Accounts 2013
Group balance sheet at 30 September
Non-current assets
Intangible assets – goodwill
– other
Property, plant and equipment
Retirement benefit assets
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Non-current liabilities
Borrowings
Obligations under finance leases
Retirement benefit obligations
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Trade and other payables
Obligations under finance leases
Current tax liabilities
Provisions
Total liabilities
Net assets
Share capital
Share premium account
Capital redemption reserve
Cumulative translation adjustment
Share based payments reserve
Retained earnings
Total equity
Approved by the Board and signed on its behalf by:
R J Harrison OBE
Chairman
26 November 2013
Note
2013
£000
2012
£000
9
9
10
24
6
11
12
14
16
17
24
6
18
16
15
17
18
20
21
21
21
21
21
33,060
26,918
3,959
8,680
962
3,051
2,250
4,690
1,820
2,929
49,712
38,607
3,195
75,868
1,007
5,348
85,418
9,109
73,958
834
2,040
85,941
135,130
124,548
—
(1,984)
(3,545)
(1,036)
(628)
(7,193)
(2,500)
(676)
(569)
(1,039)
(566)
(5,350)
(2,500)
(5,000)
(112,329)
(104,302)
(1,509)
(1,160)
(104)
(570)
(266)
(166)
(117,602)
(110,304)
(124,795)
(115,654)
10,335
6,140
5,893
3,896
751
390
(6,735)
10,335
8,894
5,990
5,893
3,896
775
289
(7,949)
8,894
Renew Holdings plc Annual Report and Accounts 2013
45
Group cashflow statement for the year ended 30 September
Profit for the year from continuing operating activities
Amortisation of intangible assets
Depreciation
Profit on sale of property, plant and equipment
Decrease/(increase) in inventories
Decrease in receivables
Increase/(decrease) in payables
Current service cost in respect of defined benefit pension scheme
Cash contribution to defined benefit pension schemes
Expense in respect of share options
Finance income
Finance expenses
Interest paid
Income taxes paid
Income tax expense
Net cash inflow from continuing operating activities
Net cash outflow from discontinued operating activities
Net cash inflow from operating activities
Investing activities
Interest received
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Acquisition of subsidiaries net of cash acquired
Net cash outflow from continuing investing activities
Net cash inflow from discontinued investing activities
Net cash (outflow)/inflow from investing activities
Financing activities
Dividends paid
Issue of Ordinary Shares
Loan repayments
Repayments of obligations under finance leases
Net cash outflow from continuing financing activities
Net cash outflow from discontinued financing activities
Net cash outflow from financing activities
Net increase/(decrease) in continuing cash and cash equivalents
Net decrease in discontinued cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
2013
£000
8,912
500
1,288
(110)
6,466
2,093
1,936
53
(3,346)
101
(25)
594
(362)
(429)
1,787
19,458
(220)
19,238
25
1,854
(705)
(9,384)
(8,210)
—
(8,210)
(1,917)
150
(5,000)
(958)
(7,725)
—
(7,725)
3,523
(220)
3,303
2,040
5
5,348
2012
£000
7,113
500
905
(17)
(501)
10,081
(10,969)
54
(3,477)
6
(291)
518
(518)
(333)
1,308
4,379
(794)
3,585
45
191
(270)
—
(34)
36
2
(1,827)
—
(5,000)
(396)
(7,223)
—
(7,223)
(2,878)
(758)
(3,636)
5,688
(12)
2,040
Bank balances and cash
5,348
2,040
46
Renew Holdings plc Annual Report and Accounts 2013
Notes to the accounts
1 Accounting policies
Presentation of consolidated financial statements
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards
(“IFRSs”) as adopted by the EU (“adopted IFRSs”). The financial statements are presented in sterling since this is the currency
in which the majority of the Group’s transactions are denominated.
Accounting estimates and judgements
In the preparation of these financial statements the Board has made certain judgements and estimates which impact the
measurement of various assets and liabilities in the Group balance sheet, the value of transactions recorded in the Group income
statement and the movements in equity as shown in the Group statement of changes in equity. The actual financial outcomes may
ultimately differ from that which is indicated by these judgements and estimates. Estimates and judgements are reviewed by
management and the Board on an ongoing basis and changes which may arise in them are reflected in the financial statements
for the period in which such changes are made.
The Board has determined that the following areas are those in which estimates and judgements have been made and where
material impacts could arise in the financial statements were such estimates and judgements to be varied.
a) Accounting for construction contracts in accordance with IAS 11 “Construction Contracts”
IAS 11 requires management to estimate the total expected costs on a contract and the stage of contract completion in order to
determine both the revenue and profit to be recognised in an accounting period. The Group has control and review procedures in
place to monitor, and evaluate regularly, the estimates being made to ensure that they are consistent and appropriate. This includes
reviewing the independent certification of the value of work done, the progress of work against contracted timescales and the costs
incurred against plan.
b) Impairment of goodwill in accordance with IAS 36 “Impairment of Assets”
In accordance with IAS 36, goodwill is tested annually for impairment by comparing the carrying value of goodwill with the
recoverable amount which is determined by an estimation of the value in use of the related cash generating unit to which the
goodwill is attributed. The calculation of the value in use requires estimates to be made of the future cash flows of the cash
generating unit and the timescale over which they will arise. Estimated growth rates and discount factors are also used in the
calculation to estimate the net present value of the cash flows. More information is given in Note 9 to these financial statements.
c) Accounting for the defined benefit pension schemes in accordance with IAS 19 “Employee benefits”
The independent actuaries calculate the Group’s liability in respect of the defined benefit schemes. The actuaries make assumptions as
to discount rates, salary escalations, expected returns on scheme assets, future pension increases, mortality rates applicable to members
and future rates of inflation. These assumptions are made under the Board’s direction. The Board determines the appropriateness of these
assumptions by benchmarking them against those used by other schemes and by taking advice from the independent actuaries. If the actual
experience of the schemes is different from the assumptions used then the pension liability may differ from that shown in these financial
statements. More information is given in Note 24 to these financial statements.
d) Accounting for provisions in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”
The Group makes provisions where the Board determines that liabilities exist but where judgements have to be made as to the
quantification of such liabilities. A provision has been made for onerous lease contracts in respect of property leases where the
Board has determined that the expected economic benefits to be derived from the leases are less than the unavoidable cost
of meeting the Group’s obligations under the lease contract. This arises where the Group is the head lessee for a property lease
contract where the property is not used by the Group and where the Group has not been able to sublet the property or has only
been able to do so on terms which are less favourable than those of the head lease.
e) Accounting for deferred taxation in accordance with IAS 12 “Income Taxes”
The Group provides for deferred taxation using the balance sheet liability method. Deferred tax assets are recognised in respect
of tax losses where the Directors believe that it is probable that future profits will be relieved by the benefit of tax losses brought
forward. The Board considers the likely utilisation of such losses by reviewing budgets and medium term plans for each taxable
entity within the Group. If the actual profits earned by the Group’s taxable entities is different from the budgets and forecasts
used then the value of such deferred tax assets may differ from that shown in these financial statements.
(i) basis of accounting and preparation
The accounts have been prepared on the going concern basis and in accordance with applicable accounting standards under the
historical cost convention. In determining that the going concern basis is appropriate the Directors have reviewed budgets, including
cashflow forecasts, and concluded that Group has adequate cash resources to continue trading for the foreseeable future.
The consolidated financial statements have been prepared in accordance with IFRSs as adopted for use in the EU. The Group
has applied all accounting standards and interpretations issued by the IASB and International Financial Reporting Committee
relevant to its operations and which are effective in respect of these financial statements.
(ii) basis of consolidation
The Group accounts consolidate the accounts of the Company and its subsidiary undertakings. The results and net assets
of undertakings acquired are included in the Group income statement and balance sheet using the acquisition method of
accounting. The results of undertakings acquired/disposed of are included from the date the Group obtains/loses control.
(iii) Revenue
Revenue, which excludes intra-group revenue and Value Added Tax, comprises:
- value of work executed during the year on construction contracts based on monthly valuations; and
- sales of developments and land which are recorded upon legal completion.
Renew Holdings plc Annual Report and Accounts 2013
47
Notes to the accounts continued
Notes to the accounts continued
1 Accounting policies continued
(iv) Construction contracts
Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive
payments to the extent that it is probable that they will result in revenue and can be measured reliably. Contract revenue and
expenses are recognised in accordance with the stage of completion of the contract. The stage of completion is determined
by surveys of work performed. Contract costs incurred that relate to future activities are deferred and recognised as amounts
recoverable on contracts. When it is probable that the total contract costs will exceed contract revenue, the expected loss
is recognised as an expense immediately. To the extent that progress billings exceed costs incurred plus recognised profits
(less recognised losses) they are recognised as amounts due to construction contract customers.
(v) Segment reporting
The operating segments are based on the components that the Board, the Group’s principal decision-making body (the Chief
Operating Decision Maker (“CODM”)), monitors in making decisions about operating matters. Such components are identified on
the basis of information that is provided internally in the form of monthly management account reporting, budgets and forecasts
to formulate allocation of resource to segments and assess performance. Revenue from reportable segments is measured on a
basis consistent with the income statement. Revenue is principally generated from within the UK, the Group’s country of domicile.
Segment results show the contribution directly attributable to each segment in arriving at the Group’s operating profit. Segment
assets and liabilities comprise those assets and liabilities directly attributable to each segment. Group eliminations represent
such consolidation adjustments that are necessary to determine the Group’s assets and liabilities.
(vi) Intangible assets
a) Goodwill arising on consolidation represents the excess of the cost of acquisition over the Group’s interest in the fair value of
the identifiable assets, liabilities and contingent liabilities of a subsidiary, associate or jointly-controlled entity at the date of
acquisition. Goodwill is recognised as an asset and is tested for impairment annually, or on such other occasions that events
or changes in circumstances indicate that it might be impaired.
On disposal of a subsidiary undertaking, the attributable amount of unamortised goodwill which has not been subject
to impairment is included in the determination of the profit or loss on disposal.
b) Other intangible assets are stated at cost less accumulated amortisation and impairment losses. The cost of other intangible assets is
amortised over their expected useful lives. These intangibles relate to customer relationships and contractual rights and are amortised
over the period over which the Board has determined that future cash flows are likely to arise from these relationships and rights.
(vii) Property, plant and equipment
Property, plant and equipment are recorded at cost less provision for impairment if required. Depreciation is provided on all
property, plant and equipment, other than freehold land. Provision is made at rates calculated to write off the cost of each asset,
less estimated residual value, evenly over its expected useful life as follows:
Group occupied property
Freehold land and buildings
- no depreciation charge
Long leasehold land and buildings
- shorter of fifty years and period of lease
Plant, vehicles & equipment
- three to ten years
(viii) Impairments
Goodwill arising on acquisitions and other assets that have an indefinite useful life and are therefore not subject to amortisation,
are reviewed at least annually for impairment. Other intangible assets and property, plant and equipment are reviewed for impairment
whenever there is any indication that the carrying amount of the asset may not be recoverable. If the recoverable amount of any asset
is less than its carrying amount, a loss on impairment is recognised. Recoverable amount is the higher of the fair value of the asset less
any costs which would be incurred in selling the asset and its value in use. Value in use is assessed by discounting the estimated future
cash flows that the asset is expected to generate. For this purpose, assets are grouped into cash generating units which represent the
lowest level for which there are separately identifiable cash flows. Impairment losses in respect of goodwill are not reversed in future
accounting periods. Reversals of other impairment losses are recognised in income when they arise.
(ix) Inventories
Inventories comprise developments, land held for development and raw materials and are stated at the lower of cost and net realisable
value. Cost includes appropriate attributable overheads and excludes interest. Where necessary, provision is made for obsolete
slow moving and defective inventories.
(x) Trade receivables
Trade receivables do not carry any interest and are initially recognised at their fair value and then at amortised cost.
(xi) Trade payables
Trade payables on normal terms are not interest bearing and are initially recognised at their fair value and then at amortised cost.
(xii) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand, including bank deposits with original
maturities of less than three months, net of bank overdrafts. Bank overdrafts are included within borrowings within current
liabilities in the balance sheet.
(xiii) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event and where
it is probable that an outflow will be required to settle that obligation and where the amount can be reliably estimated.
48
Renew Holdings plc Annual Report and Accounts 2013
1 Accounting policies continued
(xiv) Leasing commitments
Assets held under finance leases, where substantially all the benefits and risks of ownership of an asset have been transferred to
the Group, are capitalised and are depreciated in accordance with the depreciation policy for the relevant class of asset or the lease
term if shorter. The interest element of the rental obligation is charged to the income statement and represents a constant proportion
of the balance of capital repayments outstanding. Rentals under operating leases are charged to the income statement on a
straight-line basis over the term of the lease.
(xv) Defined benefit pension schemes
Pension scheme assets are measured using market values. Pension scheme liabilities are measured using the projected unit
actuarial method and are discounted at the current rate of return on a high quality corporate bond of equivalent term and currency
to the liability. Any increase in the present value of liabilities within the Group’s defined benefit schemes expected to arise from
employee service in the period is charged to operating profit. The expected return on the schemes’ assets and the increase during
the period in the present value of the schemes’ liabilities arising from the passage of time are included in other finance income.
Actuarial gains and losses are recognised in the Group statement of comprehensive income. Pension scheme surpluses, to the
extent they are considered recoverable, or deficits are recognised in full and presented on the face of the Group balance sheet.
(xvi) Defined contribution pension plans
Contributions to defined contribution pension plans are charged to the income statement as incurred.
(xvii) Taxation
The tax charge is composed of current tax and deferred tax, calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date. Current tax and deferred tax are charged or credited to the income statement, except when
they relate to items charged or credited directly to equity, in which case the relevant tax is also dealt with in equity.
Current tax is based on the profit for the year. Deferred tax is provided in full, using the liability method, on temporary differences
arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax on such assets and liabilities is not recognised if the temporary difference arises from the initial recognition (other than in
a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which
the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group
intends to settle its current assets and liabilities on a net basis.
(xviii) Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. The income statements of
overseas subsidiary undertakings are translated at the average rate of exchange ruling throughout the financial year. The balance sheets
of overseas subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet date. Exchange differences arising
from this policy and arising on the retranslation of the opening net assets are taken directly to reserves. All other exchange differences
are taken to the income statement.
(xix) Financial instruments
Financial assets are divided into the following categories: trade receivables and financial assets at fair value. The Board assigns financial
assets to each category on initial recognition dependant on the purpose for which the asset was acquired. The categorisation of these
assets is reconsidered at each reporting date at which a choice of categorisation or accounting treatment is available. All financial assets
are recognised whenever the Group becomes party to the contractual provisions of the financial instrument. All such assets are initially
recognised at fair value. Derecognition of such assets occurs when the Group’s right to receive cash flows from the asset ceases or the
rights and rewards of ownership have been transferred. All such assets are reviewed for impairment at least annually. Interest and other
cash flows which arise from holding a financial asset is recognised in the income statement in accordance with IAS39. Financial assets
at fair value include assets classified as held for trading, and changes in fair value are recognised through the income statement.
Trade receivables are non-derivative financial assets with expected receipts which are not quoted in an active market and they arise when
the Group provides goods or services. A financial asset is assessed at each reporting date to determine whether there is any objective
evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have
had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at
amortised cost is calculated as the difference between its carrying value amount, and the present value of the estimated cash flows
discounted at the original effective interest rate. All impairment losses are recognised in the income statement. Financial liabilities
are recognised when the Group becomes a party to the contractual provisions of the financial instrument. All interest related charges
are recognised as an expense in the income statement. Bank loans and hire purchase liabilities are entered into to provide financing
for the Group’s operations and are recognised as funds are received. Financial liabilities are measured at amortised cost.
(xx) Share based payments
IFRS 2 “Share Based Payment” requires a fair value to be established for any equity settled share based payments. Fair value has been
independently measured using either a Black Scholes or a Monte Carlo valuation model as was deemed appropriate by the Directors
for the relevant options’ conditions. The fair value determined at the grant date of the equity settled share based payments is expensed
on a straight-line basis over the vesting period based on the Directors’ estimate of shares that will eventually vest.
(xxi) Earnings per share
The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the
profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding
in the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average
number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise share options granted
to employees.
Renew Holdings plc Annual Report and Accounts 2013
49
Notes to the accounts continued
1 Accounting policies continued
(xxii) Rental income
Rental income from property is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives
granted are recognised as an integral part of the total rental income, over the term of the lease.
(xxiii) Finance income and expense
Finance income comprises interest income on funds invested and gains on hedging instruments that are recognised in income or
expense. Interest income is recognised as it accrues in income or expense, using the effective interest method. Finance expenses
comprise interest expense on borrowings, unwinding of the discount on provisions and losses on hedging instruments that are
recognised in income or expense. All borrowing costs are recognised in income or expense using the effective interest method.
2 Segmental analysis
The Chief Operating Decision Maker (“CODM”) is responsible for the overall resource allocation and performance assessment of the
Group. The Board approves major capital expenditure and its authority is required prior to the Group entering into any development
projects. The Board assesses the performance of the Group and its progress against the strategic plan through monitoring of key
performance indicators. The Board also determines key financing decisions such as raising equity, all loan or bank borrowing
arrangements and the granting of security over the Group’s assets. As such the Group considers that the Board is the CODM.
Operating segments have been identified based on the internal reporting information provided to the CODM. From such information
Engineering Services and Specialist Building have been determined to represent operating segments. Following the identification
of the operating segments the Group has assessed the similarity of the characteristics of the operating segments. Given the different
performance targets and markets operated within each operating segment it is not appropriate to aggregate the operating segments
for reporting purposes and therefore both of the identified operating segments are disclosed as reportable segments. The information
received by the CODM shows results both pre and post exceptional items. The Group had one customer within the Engineering Services
sector which represented 31.1% (2012: 21.4%) of Group revenue. No other customer represented more than 10% of the Group’s revenue.
These segments are:
Engineering Services, which comprises the Group’s engineering activities which are characterised by the use of the Group’s skilled
engineering workforce, supplemented by specialist subcontractors where appropriate, in a range of civil, mechanical and electrical
engineering applications and;
Specialist Building, which comprises the Group’s building activities which are characterised by the use of a supply chain of subcontractors
to carry out building works under the control of the Group as principal contractor and;
Central activities, which include the sale of land for development, the leasing and sub-leasing of some UK properties and the
provision of central services to the operating subsidiaries.
(a) business analysis
Revenue is analysed as follows:
Engineering Services
Specialist Building
Inter segment revenue
Segment revenue
Central activities
Group revenue before exceptional items
Exceptional revenue
Group revenue from continuing activities
Analysis of operating profit from continuing activities
Before
exceptional
items and
amortisation
of intangible
Exceptional
items and
amortisation
of intangible
assets
2013
£000
10,646
2,083
12,729
(1,497)
11,232
(569)
10,663
assets
2013
£000
(500)
(3,539)
(4,039)
4,075
36
—
36
Before
exceptional
items and
amortisation
of intangible
assets
2012
£000
9,639
2,134
11,773
(1,505)
10,268
(227)
Total
2013
£000
10,146
(1,456)
8,690
2,578
11,268
(569)
10,699
10,041
Engineering Services
Specialist Building
Segment operating profit
Central activities
Operating profit
Net financing expense
Profit on ordinary activities
before income tax
2013
£000
232,371
102,521
(246)
334,646
3
334,649
15,412
350,061
Exceptional
items and
amortisation
of intangible
assets
2012
£000
(986)
(634)
(1,620)
—
(1,620)
—
(1,620)
2012
£000
214,102
123,070
(179)
336,993
430
337,423
—
337,423
Total
2012
£000
8,653
1,500
10,153
(1,505)
8,648
(227)
8,421
50
Renew Holdings plc Annual Report and Accounts 2013
2 Segmental analysis continued
(a) business analysis continued
Balance sheet analysis of business segments
Engineering Services
Specialist Building
Central activities
Discontinued operation
Group eliminations
Group net assets
Other information
Engineering Services
Specialist Building
Central activities
Discontinued operation
Assets
£000
140,967
115,303
172,525
28
(293,693)
135,130
Capital
additions
£000
1,318
84
4
—
1,406
2013
Liabilities
£000
(86,560)
(135,736)
(195,128)
(1,064)
293,693
(124,795)
Net assets
£000
54,407
(20,433)
(22,603)
(1,036)
—
10,335
Assets
£000
116,600
106,061
189,352
686
(288,151)
124,548
2012
Liabilities
£000
(76,749)
(123,577)
(202,130)
(1,349)
288,151
(115,654)
Net assets
£000
39,851
(17,516)
(12,778)
(663)
—
8,894
2013
2012
Depreciation
Amortisation
Depreciation
Amortisation
£000
1,138
138
12
—
1,288
£000
500
—
—
—
500
Capital
additions
£000
1,147
102
4
6
£000
710
183
12
183
1,259
1,088
2013
£000
£000
500
—
—
—
500
2012
£000
(b) Geographical analysis
Revenue is analysed as follows:
UK
USA
Group revenue from continuing activities
Non-current asset analysis of geographical segments
UK
3 Operating profit
Operating profit is arrived at after charging/(crediting):
Auditor’s remuneration - audit services
Depreciation of owned assets
Depreciation of assets held under finance leases
Operating lease rentals - plant and machinery
Operating lease rentals - motor vehicles
Operating lease rentals - other
Rental income
Profit on sale of property, plant and equipment
During the year, the following services were provided by the Group auditor:
Fees payable to the Company’s auditor for the audit of the financial statements
Fees payable to the Company’s auditor and its associates for other services:
Audit of the financial statements of the Company’s subsidiaries pursuant to legislation
Other services related to tax advice
350,061
337,423
—
—
350,061
337,423
Assets
£000
49,712
Assets
£000
38,607
2013
£000
200
738
550
834
574
3,467
(1,006)
(110)
2013
£000
51
149
14
214
2012
£000
208
695
210
976
868
3,146
(1,183)
(17)
2012
£000
54
154
29
237
Renew Holdings plc Annual Report and Accounts 2013
51
Notes to the accounts continued
3 Operating profit continued
Exceptional items and amortisation of intangible assets
Redundancy and restructuring costs
Provision against amounts recoverable on old building contracts
Costs related to exceptional storm damage on a building contract
Lewis acquisition costs
Profit arising from sale of land
Write down of land stock in the USA
Total (gains)/losses arising from exceptional items
Amortisation of intangible assets (see Note 9)
2013
£000
272
2,767
500
196
(9,190)
4,919
(536)
500
(36)
2012
£000
1,120
—
—
—
—
—
1,120
500
1,620
The Board has determined that certain charges to the income statement should be separately identified for better understanding
of the Group’s results.
During the year the Group has incurred £272,000 (2012: £1,120,000) of exceptional redundancy and restructuring costs in closing
a regional non-specialist building office. Additionally revenue of £1,028,000 was recorded and provisions amounting to £2,767,000
have been made against old building contracts in previously closed regional non-specialist building offices, primarily resulting
from the insolvency of certain subcontractors which arose in the year.
A Specialist Building subsidiary has recognised a charge in respect of costs arising from exceptional storm damage resulting
in a charge of £500,000.
On 9 August 2013 the Company acquired Lewis Civil Engineering Ltd and incurred £196,000 of costs associated with the acquisition.
On 21 August 2013 the Company sold 71 acres of land near Rugby for a gross sum of £14,384,000 resulting in a profit of £9,190,000.
As a result of changes to detailed planning and zoning agreements in respect of land owned by the Group in the USA, the Board
has written down the carrying value of these assets by £4,919,000.
The Board has also separately identified the charge of £500,000 (2012: £500,000) for the amortisation of the fair value ascribed to certain
intangible assets, other than goodwill, arising from the acquisition of Amco Group Holdings Ltd. Further details are given in Note 9.
Discontinued operation analysis
Revenue
Expenses
Write off of goodwill and fair value adjustment
Loss before income tax
Income tax expense - deferred tax
Loss for the year from discontinued operation
The discontinued operation, C&A Pumps Ltd, was sold on 14 November 2012 for a nominal consideration.
4 Finance income and costs
Finance income
Finance income of £25,000 (2012: £45,000) has been earned during the year on bank deposits.
Interest payable:
On bank loans and overdrafts
Other interest payable
Other finance (expense)/income - defined benefit pension schemes
Expected return on scheme assets
Interest on scheme liabilities
Further information on the defined benefit pension schemes is set out in Note 24 to the accounts.
2013
£000
(364)
92
—
(272)
(43)
(315)
2013
£000
(282)
(80)
(362)
5,805
(6,037)
(232)
2012
£000
1,816
(3,216)
(904)
(2,304)
(68)
(2,372)
2012
£000
(484)
(34)
(518)
6,834
(6,588)
246
52
Renew Holdings plc Annual Report and Accounts 2013
5 Employee numbers and remuneration
The average monthly number of employees, including Executive Directors, employed
in continuing activities during the year was:
At 30 September:
Production
Administrative
Cost of staff, including Executive Directors, during the year amounted to:
Wages and salaries
Social security costs
Other pension costs
Share based payments
Directors’ emoluments
Aggregate emoluments
Highest paid Director: aggregate emoluments
Details of individual Directors’ emoluments can be found in the Directors’ Remuneration Report.
6 Income tax expense
(a) Analysis of expense in year
Current tax:
UK corporation tax on profits of the year
Adjustments in respect of previous periods
Total current tax
Deferred tax - defined benefit pension schemes
Deferred tax - other timing differences
Total deferred tax from continuing activities
Income tax expense
Deferred tax in respect of discontinued operation
Income tax expense in respect of continuing activities
(b) Factors affecting income tax expense for the year
Profit before income tax
2013
Number
2,006
2,294
1,328
678
2,006
2013
£000
82,658
8,589
2,933
101
94,281
2013
£000
1,114
556
2013
£000
(858)
10
(848)
(612)
(370)
(982)
(1,830)
43
(1,787)
2013
£000
10,699
2012
Number
1,890
1,889
1,212
678
1,890
2012
£000
77,141
7,910
2,835
6
87,892
2012
£000
1,019
510
2012
£000
(266)
86
(180)
(893)
(302)
(1,195)
(1,375)
67
(1,308)
2012
£000
8,421
Profit multiplied by standard rate of corporation tax in the UK of 23.5% (2012:25%)
(2,514)
(2,105)
Effects of:
Expenses not deductible for tax purposes
Timing differences not provided in deferred tax
Change in tax rate
Net credit in respect of tax losses
Tax losses surrendered by discontinued operation
Deferred tax in respect of discontinued operation
Adjustments to tax charge in respect of previous years
(116)
217
(94)
527
140
43
10
(198)
304
(96)
286
348
67
86
(1,787)
(1,308)
Renew Holdings plc Annual Report and Accounts 2013
53
Notes to the accounts continued
6 Income tax expense continued
(b) Factors affecting income tax expense for the year continued
The Group has available further unused UK tax losses of £48m (2012: £61m) to carry forward against future taxable profits. The Group
also has unused USA tax losses of $16m (£10.2m) (2012: $16m (£9.9m)) to carry forward against future taxable profits in the USA.
A substantial element of these losses relates to activities which are not forecast to generate the level of profits needed to utilise
these losses. A deferred tax asset has been provided to the extent considered reasonable by the Directors, where recovery is expected
to be recognisable within the foreseeable future. The unrecognised deferred tax asset in respect of these losses amounts to £11.6m
(2012: £16.3m).
(c) Deferred tax asset
Defined benefit pension scheme
Accelerated capital allowances
Other timing differences
Future tax losses
(d) Deferred tax liabilities
Defined benefit pension scheme
Fair value adjustments
(e) Reconciliation of deferred tax asset
As at 1 October
Acquisition of Amco Group Holdings Ltd
Acquisition of Lewis Civil Engineering Ltd
Origination of timing differences
Change of deferred tax rate
Defined benefit pension scheme - income statement
Defined benefit pension scheme - SOCI
At 30 September
(f) Reconciliation of deferred tax liability
As at 1 October
Arising on fair value adjustments
Change of deferred tax rate
Defined benefit pension scheme - income statement
Defined benefit pension scheme - SOCI
At 30 September
7 Dividends
Interim (related to the year ended 30 September 2013)
Final (related to the year ended 30 September 2012)
Total dividend paid
Interim (related to the year ended 30 September 2013)
Final (related to the year ended 30 September 2012)
Total dividend paid
2013
£000
709
441
122
1,779
3,051
2013
£000
(192)
(844)
2012
£000
137
551
136
2,105
2,929
2012
£000
(437)
(602)
(1,036)
(1,039)
2013
£000
2,929
—
113
(105)
(481)
(549)
1,144
3,051
2013
£000
(1,039)
(341)
92
40
212
2012
£000
3,329
(250)
—
(43)
(179)
(880)
952
2,929
2012
£000
(1,091)
149
58
(50)
(105)
(1,036)
(1,039)
2013
Pence/share
1.10
2012
Pence/share
1.05
2.10
3.20
£000
658
1,259
1,917
2.00
3.05
£000
628
1,199
1,827
Dividends are recorded only when authorised and are shown as a movement in equity rather than as a charge in the income
statement. The Directors are proposing that a final dividend of 2.50p per Ordinary Share be paid in respect of the year ended
30 September 2013. This will be accounted for in the 2013/14 financial year.
54
Renew Holdings plc Annual Report and Accounts 2013
8 Earnings per share
Earnings before exceptional
items and amortisation charges
Earnings before exceptional
items and amortisation charges
Basic earnings per share
- continuing activities
Loss for the year from
discontinued operation
Basic earnings per share
Weighted average number
of shares
2013
2012
Earnings
£000
8,885
27
8,912
(315)
8,597
EPS
Pence
14.81
0.04
14.85
(0.52)
14.33
DEPS
Pence
14.66
0.04
14.70
(0.52)
14.18
Earnings
£000
8,328
(1,215)
7,113
(2,372)
4,741
EPS
Pence
13.90
(2.03)
11.87
(3.96)
7.91
DEPS
Pence
13.33
(1.95)
11.38
(3.79)
7.59
59,998
60,624
59,899
62,493
The dilutive effect of share options is to increase the number of shares by 626,000 (2012: 2,594,000) and reduce basic earnings per share
by 0.15p (2012: 0.32p).
9 Intangible assets
Cost:
At 1 October 2011
Additions
At 1 October 2012
Additions
At 30 September 2013
Impairment losses/amortisation:
At 1 October 2011
Charge for year
At 1 October 2012
Charge for year
At 30 September 2013
Carrying amount:
At 30 September 2013
At 30 September 2012
At 1 October 2011
The carrying amounts of goodwill by operating segment are as follows:
Specialist Building
Specialist Engineering
Contractual
rights and
customer
relationships
£000
4,072
—
4,072
2,209
6,281
1,322
500
1,822
500
2,322
3,959
2,250
2,750
2012
£000
2,503
24,415
26,918
Goodwill
£000
27,726
—
27,726
6,142
33,868
—
808
808
—
808
33,060
26,918
27,726
2013
£000
2,503
30,557
33,060
Goodwill of £6,142,000 was acquired on the acquisition of Lewis Civil Engineering Ltd (“Lewis”) and will be reviewed for impairment
one year after the acquisition and then on an ongoing basis as required by IFRS 3.
Amortisation charges in respect of intangible assets with a finite life are recorded within administrative expenses in the income
statement. The amortisation policy is disclosed in the accounting policies and approximates to a period of six years.
Amortisation charges in respect of intangible assets arising from the acquisition of Lewis will commence from 1 October 2013.
In order to test goodwill for impairment the Group performs value in use calculations by preparing cash flow forecasts for each cash
generating unit derived from the most recent financial budgets and strategic plans approved by management going forward three
years, and then extrapolates cash flows based on conservative estimated growth rates which do not exceed GDP growth in the longer
term according to management’s view of longer term prospects for each cash generating unit. The cash generating units are deemed to
be the subsidiaries to which the goodwill relates. Management used growth rates deemed to be appropriate to each cash generating
unit after reviewing the particular market conditions related to the sector in which the cash generating unit operates. The growth
rate of 3% per annum has been used. The rate used to discount the forecast cash flows is 8% as the Board considers the rate appropriate
in the current financial market as an approximation to the cost of funds to the Group. The calculation shows that there is substantial
headroom, and the impairment calculations are not particularly sensitive to changes in the discount rate applied.
Renew Holdings plc Annual Report and Accounts 2013
55
Notes to the accounts continued
10 Property, plant and equipment
Cost:
At 1 October 2011
Additions
Disposals
At 1 October 2012
Additions
Asset reclassification
Disposals
Acquisition of subsidiary
At 30 September 2013
Depreciation:
At 1 October 2011
Charge for year
Disposals
At 1 October 2012
Charge for year
Disposals
At 30 September 2013
Net book value:
At 30 September 2013
At 30 September 2012
At 30 September 2011
Freehold
Long leasehold
Plant, vehicles
land and buildings
land and buildings
& equipment
£000
£000
£000
1,826
—
—
1,826
8
(187)
(1,613)
1,679
1,713
56
19
—
75
14
—
89
1,624
1,751
1,770
75
—
—
75
—
—
—
—
75
75
—
—
75
—
—
75
—
—
—
5,455
1,259
(1,703)
5,011
1,398
187
(1,445)
3,937
9,088
2,420
1,069
(1,417)
2,072
1,274
(1,314)
2,032
7,056
2,939
3,035
Total
£000
7,356
1,259
(1,703)
6,912
1,406
—
(3,058)
5,616
10,876
2,551
1,088
(1,417)
2,222
1,288
(1,314)
2,196
8,680
4,690
4,805
The net book value of assets under finance leases at 30 September 2013 was £3,947,000 (2012: £1,429,000) of which £2,275,000
relates to Lewis Civil Engineering Ltd and its subsidiaries.
During the year £550,000 (2012: £210,000) of depreciation was charged against assets held under finance leases.
11 Inventories
Developments and undeveloped land
Raw materials
£0.2m (2012: £1.1m) of inventories are pledged as security for liabilities.
12 Trade and other receivables
Trade receivables
Amounts due from construction contract customers
Other receivables
Prepayments and accrued income
2013
£000
3,057
138
3,195
2013
£000
110
69,652
4,638
1,468
75,868
2012
£000
8,999
110
9,109
2012
£000
262
67,942
4,278
1,476
73,958
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Included in trade and other receivables are debtors with a carrying value of £2.8m (2012: £2.5m) which are past due at the reporting
date for which the Group has not provided as there has not been a significant change in credit quality and the Group believes that
the amounts are still considered recoverable since there is no objective evidence that these financial assets are impaired. The
Group does not hold any collateral over these balances. The average age of these receivables is 328 days (2012: 350 days).
Ageing of past due but not impaired receivables:
30–180 days
180–365 days
Greater than 1 year
56
Renew Holdings plc Annual Report and Accounts 2013
2013
£000
705
748
1,386
2,839
2012
£000
574
448
1,498
2,520
13 Construction contracts
Contracts in progress at balance sheet date:
Amounts due from construction contract customers included in trade and other receivables
Amounts due to construction contract customers included in trade and other payables
Contract costs incurred plus recognised profits less recognised losses to date
Less: progress billings
2013
£000
69,652
(4,831)
64,821
2012
£000
67,942
(1,936)
66,006
2,649,406
3,367,214
(2,584,585)
(3,301,208)
64,821
66,006
At 30 September 2013 retentions held by customers amounted to £11.6m (2012: £15.3m). Advances received from customers for contract
work amounted to £4.8m (2012: £1.9m).
Amounts due from construction contract customers which are past due at the reporting date amounted to £2.8m (2012: £2.5m).
This amount includes retention balances of £2.1m (2012: £2.0m). The Group does not hold any collateral over these balances or other
trade and other receivables.
Contract revenue recognised in the year amounted to £335.9m (2012: £337.0m).
14 Cash and cash equivalents
Cash at bank
Cash in hand
15 Trade and other payables
Amounts due to construction contract customers
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
16 Borrowings
Bank loans and overdrafts repayable:
Within one year
Within two to five years
2013
£000
5,339
9
5,348
2013
£000
4,831
28,959
4,093
7,127
67,319
112,329
2013
£000
2,500
—
2,500
2012
£000
2,036
4
2,040
2012
£000
1,936
35,052
2,500
6,026
58,788
104,302
2012
£000
5,000
2,500
7,500
The bank loans and overdrafts are secured by a fixed and floating charge over the Group’s assets.
17 Obligations under finance leases
Amounts payable under finance leases:
Within one year
Within two to five years
Less: future finance charges
Present value of lease obligations
Less: amount due for settlement within twelve months
Amount due for settlement after twelve months
Minimum lease payments
Present value of minimum
lease payments
2013
£000
1,633
2,147
3,780
(287)
3,493
2012
£000
598
700
1,298
(52)
1,246
2013
£000
1,509
1,984
3,493
—
3,493
(1,509)
1,984
2012
£000
570
676
1,246
—
1,246
(570)
676
It is the Group’s policy to lease certain of its plant, vehicles and equipment under finance leases. The average outstanding lease
term is 3 years (2012: 3 years). For the year ended 30 September 2013, the average effective borrowing rate was 3% (2012: 3%).
Interest rates are fixed at the contract date. All leases are on a fixed repayment basis and no arrangement has been entered
into for contingent rental payments.
All lease obligations are denominated in sterling. The fair value of the Group’s lease obligations approximates to their carrying
amount. The Group’s obligations under finance leases are secured on the asset to which the lease relates.
Renew Holdings plc Annual Report and Accounts 2013
57
Notes to the accounts continued
18 Provisions
At 1 October 2012
Provision utilised during the year
Amount provided during the year
At 30 September 2013
Non-current liabilities
Current liabilities
At 30 September 2013
Property
obligations
£000
732
(254)
254
732
628
104
732
Property obligations represent commitments on leases for properties which the Group does not occupy where the Group does not
expect to receive income sufficient to cover the full commitment. The provision represents outflows which are expected to occur
over the next five years.
19 Other financial instruments
The Group’s principal financial instruments comprise bank loans, cash and short-term deposits and obligations under finance
leases. The main purpose of these financial instruments is to provide finance for the Group’s operations. The Group has various
other financial instruments such as trade receivables and trade payables that arise directly from its operations.
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken.
The disclosures below provide information about the contractual terms of the Group’s interest bearing deposits, loans and borrowings.
Interest rate profile of financial assets and liabilities
2013
Assets
Sterling
Dollar
Liabilities
Sterling
2012
Assets
Sterling
Dollar
Liabilities
Sterling
Fixed rate
interest rate
%
—
—
3.0
%
—
—
3.0
Financial assets/(liabilities)
Fixed
rate
£000
—
—
—
(3,493)
(3,493)
Floating
rate
£000
5,127
212
5,339
(2,500)
(2,500)
Total
£000
5,127
212
5,339
(5,993)
(5,993)
£000
£000
£000
—
—
—
(1,246)
(1,246)
1,667
369
2,036
(7,500)
(7,500)
1,667
369
2,036
(8,746)
(8,746)
The interest bearing assets accrue interest at prevailing market rates. Generally the Group holds deposits which are repayable on demand.
The sterling interest bearing liabilities accrue interest at a rate which is linked to the lender’s base rate or LIBOR.
The maturity of the fixed rate financial liabilities is disclosed in Note 17. The fixed rate liabilities have a weighted average period of 3 years
(2012: 3 years).
Fair value of financial assets and liabilities
There are no material differences between fair value and the book value of the Group’s financial assets and liabilities.
Financial risks
The Group has exposure to a number of financial risks through the conduct of its operations. Risk management is governed by the
Group’s operational policies, guidelines and authorisation procedures which are outlined in the Corporate Governance statement.
The key financial risks resulting from financial instruments are credit, liquidity, currency and market risk.
58
Renew Holdings plc Annual Report and Accounts 2013
19 Other financial instruments continued
Financial risks continued
a) Credit risk
Credit risk is the risk of loss if a customer fails to meet its financial obligations and results primarily from the Group’s trade and
other receivables. The degree to which the Group is exposed to this risk depends on the individual financial situation of each specific
customer. The Group does not have any risk from a concentration of trade or other receivables in any customer or group of customers.
The Group assesses the credit worthiness of every customer prior to entering into any contract and requires appropriate evidence of
financial capability on a case by case basis. The Group reviews trade and other receivables for impairment on a regular basis and
information relating to the ageing of receivables is provided in Note 12.
b) Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Board is responsible for
ensuring that the Group has sufficient liquidity to meet its financial liabilities as they fall due and does so by monitoring cashflow
forecasts and budgets. The Board has considered the cashflow forecasts for the next twelve months which show that the Group
expects to operate within its working capital facilities throughout the year.
The Board aims to maintain a strong capital base so as to ensure investor and market confidence and to sustain the future of the
business. The capital structure of the Group consists of equity attributable to equity holders of the Company as disclosed in Note 20
and reserves as disclosed in Note 21. The Group arranges loans and short term overdraft facilities and hire purchase facilities as the
Board deems necessary. The Group does not have any derivative or non-derivative financial liabilities other than those disclosed in
Notes 15 to 17 and the retirement benefit obligations disclosed in Note 24. An analysis of the maturity profile for finance lease
liabilities is given in Note 17.
c) Currency risk
The only exposure of the Group to currency risk (i.e. exposure to gains or losses on foreign exchange which would be recognised in the
income statement) is in respect of the unhedged portion of an inter-company loan. At 30 September 2013 the unhedged portion of the
inter-company loan was $771,000 (2012: $270,000). The dollar closing exchange rate was $1.62: £1 (2012: $1.61: £1) resulting in a foreign
exchange loss of £23,000 (2012: £12,000) being charged to finance costs. Consequently, to the extent that the inter-company loan is not
fully hedged, the income statement may be impacted by exchange rate movements. Exchange rate movement on translation of Lovell
America, Inc.’s net assets are charged to the cumulative translation adjustment within total equity. The exchange loss arising on the
translation of Lovell America Inc.’s net assets was £24,000. The total equity statement would be impacted by £63,000 for each $0.01
movement in exchange rates.
All functional currencies of the Group operations are denominated in sterling, with the exception of the US operations whose
functional currency is the US dollar.
d) Market risk
Market risk is the risk that changes in market prices will affect the Group’s income or the carrying amount of its holding of financial
instruments. The principal risk relates to interest rates where the Group’s risk is limited to the rates applying to its interest bearing
short-term deposits and its bank loan. A reduction in market interest rates could lead to a reduction in the Group’s interest income
and a reduction in its interest costs. Consequently a 1% decrease in market interest rates would reduce annual finance costs by
£10,000 for every £1m of outstanding loan.
The Group’s hire purchase financial liabilities are all at fixed rates of interest.
20 Share capital
Allotted, called up and fully paid:
61,403,668 (2012: 59,898,927) Ordinary Shares of 10p each
2013
£000
2012
£000
6,140
5,990
The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the Company.
During the year 1,504,741 Ordinary Shares were issued at par value following the exercise of options under the Unapproved element
of the Renew Holdings plc Executive Share Option Scheme (2012: Nil).
Share options
Renew Holdings 2004 Executive Share Option Scheme
The Group operates a share option scheme, the Renew Holdings 2004 Executive Share Option Scheme. The scheme has both an
Approved and Unapproved element. The difference between the two elements is that the Approved scheme has the advantage
of certain HMRC approved tax benefits.
Both elements have the same general terms and conditions. Options issued under the scheme must be held for three years before
they can vest and become exercisable. They must be exercised within ten years from the date of grant.
All options granted under the Unapproved element have vested and have been exercised.
Vesting of options is dependant on the achievement of certain performance criteria which are established by the Remuneration
Committee at the point of grant. 114,280 of the options granted under the Approved element in the 2006 financial year have vested.
These are the only remaining options outstanding under the scheme.
The scheme does not permit retesting of performance conditions and if the performance criteria are not achieved then the options
will lapse.
The number of options in issue and their exercise price is given in Note 21.
Renew Holdings plc Annual Report and Accounts 2013
59
Notes to the accounts continued
20 Share capital continued
Share options continued
Renew Holdings plc Long Term Incentive Plan
At the Annual General Meeting held on 25 January 2012 the shareholders approved a new long term incentive plan (“LTIP”) which
replaced the Renew Holdings plc 2004 Executive Share Option Scheme as the Directors believed that the LTIP was a more effective
method of aligning executive and shareholder interests.
On 2 March 2012, the Company granted options to subscribe for 400,000 Ordinary Shares pursuant to the LTIP. On 20 December 2012
options to subscribe for a further 400,000 Ordinary Shares were granted.
The options are exercisable at a nominal cost from 2 March 2015 in respect of those granted on 2 March 2012 and from 20 December 2015
in respect of those granted on 20 December 2012, subject to the achievement of certain performance criteria.
Vesting of one half of the options is dependant on absolute growth in the Company’s Total Shareholder Return (‘TSR’), and the other
half is dependant on the Company’s TSR performance as compared to the TSR achieved by other companies in a comparator group
of twelve companies selected by the Remuneration Committee. All TSR calculations are based on the average of the opening and
closing share price over a thirty day period prior to the commencement and the end of the performance period.
The absolute TSR growth target requires the Company’s TSR over the three year performance period to grow by more than 25%. For
TSR growth between 25% and 100%, the half of the option which is subject to the absolute TSR growth target vests on a straight-line
basis from nil vesting at 25% growth, to 100% vesting at 100% growth. There will be no vesting if TSR growth is 25% or less.
The comparator group TSR performance target measures the Company’s TSR over the three year performance period against the TSR
of a group of twelve companies selected by the Remuneration Committee. If the Company’s TSR performance falls below the median
performance of the comparator group then the options lapse forthwith. If the Company is ranked within the top decile of the comparator
group the options shall vest in full. If the Company’s TSR performance is ranked between the median position and the top decile of the
comparator group then the options shall vest on a straight line basis from nil, at or below the median position, to 100% at the top decile.
Share based
payments
reserve
£000
283
6
289
101
Retained
earnings
£000
(8,268)
4,741
(1,827)
(3,442)
847
(7,949)
8,597
(1,917)
(6,895)
1,429
(6,735)
21 Reserves
At 1 October 2011
Transfer from income statement for the year
Dividends paid
Recognition of share based payments
Exchange differences
Actuarial loss recognised in pension schemes
Movement on deferred tax relating to the
pension schemes
Share
premium
account
£000
5,893
Capital
redemption
reserve
£000
3,896
Cumulative
translation
reserve
£000
1,182
(407)
At 1 October 2012
5,893
3,896
775
Transfer from income statement for the year
Dividends paid
Recognition of share based payments
Exchange differences
Actuarial loss recognised in pension schemes
Movement on deferred tax relating to the
pension schemes
At 30 September 2013
(24)
5,893
3,896
751
390
There is no available analysis of goodwill written off against reserves in respect of subsidiaries that were acquired prior to 1989
and therefore, in accordance with the guidance of IFRS 3, the Directors are not able to state this figure.
Capital redemption reserve
This reserve represents the combined impact of share buy-backs in previous years.
Cumulative translation reserve
This reserve represents the foreign exchange movement on translating the opening net assets of Lovell America Inc.
Share based payments reserve
Renew Holdings 2004 Executive Share Option Scheme
IFRS 2 “Share Based Payment” requires a fair value to be established for any equity settled share based payments. Fair value has been
independently measured by Baker Tilly, Chartered Accountants, using a Black-Scholes valuation model. The fair value determined at
the grant date of the equity settled share based payments is expensed on a straight-line basis over the vesting period, based on the
Board’s estimate of shares that will eventually vest.
Nil has been charged (2012: £30,000 credited) to administrative expenses.
1,504,741 options were exercised during the year (2012: Nil). The value per option represents the fair value of the option less the
consideration payable.
The expected volatility is based on historical volatility of the share price since the Company listed on AIM in 2001.
The risk free rate of return has been derived from the Bank of England’s yield curve taking the spot rate for a maturity of 36 months.
This period has been selected as being the minimum period over which the options could remain extant.
60
Renew Holdings plc Annual Report and Accounts 2013
21 Reserves continued
Options granted under the Renew Holdings 2004 Executive Share Option Scheme over the Company’s Ordinary Shares
at 30 September 2013 were as follows:
Date of grant
Awards outstanding at 30 September 2013
- Directors
Exercise price and price at date of grant
Maximum option life
Assumed option life for purposes of valuation
Expected volatility
Dividend yield
Risk free interest rate
Value per option
7 June 2006
114,280
52.5p
10 years
3 years
47%
1.0%
4.67%
20.5p
The outstanding options have vested in full but have not yet been exercised.
Renew Holdings plc Long Term Incentive Plan
Fair value has been independently measured by PricewaterhouseCoopers LLP using a Monte Carlo model methodology. The fair
value determined at the grant date of the equity settled share based payments is expensed on a straight-line basis over the vesting
period, based on the Board’s estimate of shares that will eventually vest.
£101,000 has been charged (2012: £36,000) to administrative expenses. There is no impact on net assets since an equivalent amount
has been credited to the share based payments reserve. No options were exercised during the year. The value per option represents
the fair value of the option less the consideration payable.
The expected volatility has been calculated based on weekly historical volatility of the Company’s share price over the three years prior to the
date of grant. The risk free rate of return has been based on the yields available on three year UK government bonds as at the date of grant.
Options granted under the Renew Holdings plc Long Term Incentive Plan over the Company’s Ordinary Shares at 30 September 2013
were as follows:
Date of grant
Awards outstanding at 30 September 2013
- Directors
Exercise price
Price at date of grant
Maximum option life
Assumed option life for purposes of valuation
Expected volatility
Dividend yield
Risk free interest rate
Value per option
22 Capital and leasing commitments
Commitments under non-cancellable operating leases:
Under one year
Two to five years
Five or more years
2 March 2012
20 December 2012
Total
400,000
400,000
800,000
0.0p
75.0p
10 years
3 years
46%
4.0%
0.43%
40.0p
Other
£000
1,046
1,188
—
2,234
0.0p
87.0p
10 years
3 years
36%
3.6%
0.48%
30.0p
Total
2013
£000
2,762
6,204
15,795
24,761
—
—
—
—
—
—
—
—
Total
2012
£000
3,418
6,974
16,790
27,182
Land and
buildings
£000
1,716
5,016
15,795
22,527
With regard to the operating leases held by the Group as lessor, the Group recognised £1,006,000 (2012: £1,183,000) of rental income
in the income statement for 2013, relating to sub-letting of surplus premises.
The future minimum sub-lease receipts expected to be received under non-cancellable operating leases are as follows:
Receivables under non-cancellable operating leases:
Under one year
Two to five years
Five or more years
Land and
buildings
£000
195
400
95
690
Other
£000
—
—
—
—
Total
2013
£000
195
400
95
690
Total
2012
£000
1,009
596
143
1,748
The Group had capital commitments at 30 September 2013 of £229,000 (2012: £24,000).
Renew Holdings plc Annual Report and Accounts 2013
61
Notes to the accounts continued
23 Contingent liabilities
Under the terms of the Group’s banking agreement, security over the Group’s assets has been granted to the Group’s bankers.
24 Employee benefits: Retirement benefit obligations
Defined benefit pension schemes
The Group operates two defined benefit pension schemes, the Lovell Pension Scheme and the Amco Pension Scheme. Both schemes
have been closed to new members and to further benefits accrual for several years.
IAS 19 “Employee benefits”
The Directors have adopted the accounting required by IAS 19 with effect from the transition date. The Directors have discussed the
assumptions used in determining the actuarial valuations set out below with independent pensions advisors and have determined
that they are appropriate. The Lovell scheme’s valuation at 30 September 2013 shows a deficit of £3,545,000 based on the assumptions
set out below. The Amco scheme shows a surplus of £962,000 based on the assumptions used in its valuation which are similar to
those used for the Lovell scheme except where the Directors, in consultation with the scheme’s advisors, consider it appropriate to
vary them due to the different characteristics of the Amco scheme and its membership profile. The Directors have determined that
it is appropriate to recognise this surplus as, having reviewed the rules of the Amco scheme, they are of the view that the employer,
Amalgamated Construction Ltd, has an unconditional right to that surplus.
The following disclosures required by IAS 19 have been based on the most recent actuarial valuation as at 30 September 2013
carried out by Lane Clark & Peacock LLP, Consulting Actuaries, in respect of the Lovell scheme and Capita Employee Benefits
(Consulting) Ltd in respect of the Amco scheme using the following assumptions:
Lovell Pension Scheme
Rate of increase in salaries
LPI increases to pensions in payment
Discount rate
Inflation assumption (CPI)
Inflation assumption (RPI)
Increases in deferred pensions
Amco Pension Scheme
Rate of increase in salaries
LPI increases to pensions in payment
Discount rate
Inflation assumption (CPI)
Inflation assumption (RPI)
Increases in deferred pensions
As at
As at
As at
30 September
30 September
30 September
2013
2012
2011
4.0%
3.1%
4.5%
2.2%
3.2%
2.2%
3.2%
2.7%
4.5%
2.2%
3.2%
2.2%
4.0%
2.7%
4.4%
2.0%
2.7%
2.7%
4.0%
2.7%
4.4%
2.0%
2.7%
2.7%
4.0%
3.2%
5.2%
2.5%
3.2%
3.1%
4.1%
3.2%
5.2%
2.5%
3.2%
3.2%
The mortality tables adopted for the valuation of the Lovell scheme are the S1NA tables with future improvements in line with the
Continuing Mortality Investigations 2010 model with long term improvement rates of 1% per annum for both males and females.
The Directors believe that this analysis provides a more reliable estimate of the mortality characteristics of the scheme’s membership.
Under these assumptions, a 60 year old male pensioner is forecast to live for a further 26.6 years and the life expectancy of a male
aged 60 in 2033 is 28.2 years.
The mortality tables adopted for the valuation of the Amco scheme are the S1PA Mortality tables based on the mortality
experience of pension scheme members with projected longevity improvements and with an additional allowance for future
longevity improvements known as the long cohort adjustment. The Directors believe that this analysis provides a more reliable
estimate of the mortality characteristics of the scheme’s membership. Under these assumptions, a 65 year old male pensioner
is forecast to live for a further 23.7 years and the life expectancy of a male aged 65 in 2033 is 25.8 years.
The assets in the Lovell scheme and the expected rates of return were:
Annuities
Diversified portfolio
Bonds
Cash
Total
Value as at
30 September
Value as at
30 September
Value as at
30 September
2013
Expected rate
2012
Expected rate
2011
Expected rate
£000
43,136
84,631
—
(19)
127,748
of return
4.5%
4.5%
—
0.5%
£000
44,797
83,187
—
(158)
127,826
of return
5.1%
4.6%
—
0.5%
£000
44,556
72,549
—
1,248
118,353
of return
4.3%
6.2%
—
0.5%
During 2011, the Trustees of the Lovell scheme, in consultation with the Directors, used scheme assets to purchase annuities which
match certain pension liabilities in a transaction known as a “buy in”. This asset provides protection against falls in gilt yields and
risks in the performance of other asset classes.
62
Renew Holdings plc Annual Report and Accounts 2013
24 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee benefits” continued
The assets in the Amco scheme and the expected rates of return were:
Annuities
Diversified portfolio
Gilts
Bonds
Cash
Total
Value as at
30 September
2013
£000
6,950
5,951
—
—
594
13,495
Expected rate
of return
4.5%
4.5%
—
—
0.5%
Value as at
30 September
2012
£000
—
6,358
3,556
4,195
406
14,515
Expected rate
of return
—
6.5%
2.2%
4.0%
0.5%
Value as at
30 September
2011
£000
—
6,262
3,000
3,392
391
13,045
Expected rate
of return
—
7.5%
2.9%
5.2%
0.5%
During 2013, the Trustees of the Amco scheme, in consultation with the Directors, used scheme assets to purchase annuities which
match certain pension liabilities in a transaction known as a “buy in”. This asset provides protection against falls in gilt yields and
risks in the performance of other asset classes.
The following amounts at 30 September were measured in accordance with the requirements of IAS 19.
Lovell Pension Scheme
Movements in scheme assets and liabilities
Total fair value of scheme assets brought forward
Expected return on scheme assets
Employer contributions
Benefits paid
Actuarial (loss)/gain on scheme assets
Total fair value of scheme assets carried forward
Present value of scheme obligations brought forward
Interest costs
Current service costs
Benefits paid
Actuarial increase in scheme obligations
Total fair value of scheme obligations carried forward
Deficit in the scheme
Deferred tax
Net deficit
Amount charged to operating profit:
Current service cost
Amount (charged)/credited to other financial income:
Expected return on scheme assets
Interest on scheme liabilities
Amounts recognised in the statement of comprehensive income:
Actual less expected return on scheme assets
Effect of change in assumptions on scheme liabilities
Actuarial loss
Movement in the net scheme deficit during the year:
Net scheme deficit brought forward
Current service cost
Cash contribution
Other finance (costs)/income
Actuarial loss
Net scheme deficit carried forward
2013
£000
2012
£000
127,826
118,353
5,262
3,145
(7,172)
(1,293)
6,229
3,330
(6,977)
6,891
127,768
127,826
128,395
118,472
5,494
53
(7,172)
4,543
131,313
(3,545)
709
(2,836)
(53)
(53)
5,262
(5,494)
(232)
(1,293)
(4,543)
(5,836)
(569)
(53)
3,145
(232)
(5,836)
(3,545)
5,983
54
(6,977)
10,863
128,395
(569)
137
(432)
(54)
(54)
6,229
(5,983)
246
6,891
(10,863)
(3,972)
(119)
(54)
3,330
246
(3,972)
(569)
Renew Holdings plc Annual Report and Accounts 2013
63
Notes to the accounts continued
24 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee benefits” continued
The following amounts at 30 September were measured in accordance with the requirements of IAS 19.
Amco Pension Scheme
Movements in scheme assets and liabilities
Total fair value of scheme assets brought forward
Expected return on scheme assets
Employer contributions
Benefits paid
Actuarial (loss)/gain on scheme assets
Total fair value of scheme assets carried forward
Present value of scheme obligations brought forward
Interest costs
Benefits paid
Actuarial increase in scheme obligations
Total fair value of scheme obligations carried forward
Surplus in the scheme
Deferred tax
Net surplus
Amount credited to other financial income:
Expected return on scheme assets
Interest on scheme liabilities
Amounts recognised in the statement of comprehensive income:
Actual less expected return on scheme assets
Effect of change in assumptions on scheme liabilities
Actuarial (loss)/gain
Movement in the net scheme surplus during the year:
Net scheme surplus brought forward
Cash contribution
Actuarial (loss)/gain
Net scheme surplus carried forward
2013
£000
2012
£000
14,515
13,045
543
201
(797)
(967)
13,495
605
201
(682)
1,346
14,515
12,695
11,956
543
(797)
92
605
(682)
816
12,533
12,695
962
(192)
770
543
(543)
—
(967)
(92)
(1,059)
1,820
201
(1,059)
962
1,820
(437)
1,383
605
(605)
—
1,346
(816)
530
1,089
201
530
1,820
64
Renew Holdings plc Annual Report and Accounts 2013
24 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee benefits” continued
Lovell Pension Scheme
Difference between the expected and actual
return on scheme assets
£(1,293,000)
£6,891,000
£(10,685,000)
£13,114,000
£8,548,000
As a percentage of the assets at the end of the year
(1.0%)
5.4%
(9.0%)
10.4%
7.70%
2013
2012
2011
2010
2009
Experience gains on scheme liabilities
As a percentage of the liabilities at the end
of the year
Total amount recognised in the statement
of comprehensive income
As a percentage of the liabilities at the end
of the year
—
—
—
—
£1,349,000
£2,100,000
1.1%
1.7%
—
—
£(5,836,000)
£(3,972,000)
£(5,151,000)
£1,164,000
£(2,895,000)
(4.4%)
(3.1%)
(4.3%)
0.9%
(2.6)%
The Lovell scheme has been in operation for many years and, after taking advice from the Group’s pensions advisors, the Directors
have determined that it is not possible to allocate the assets and liabilities of the scheme between the various Group companies.
As permitted by IAS 19, the Group has taken advantage of the multi-employer exemption and the deficit of the scheme is accounted
for as an unallocated consolidation adjustment.
Amco Pension Scheme
Difference between the expected and actual return on scheme assets
As a percentage of the assets at the end of the year
Experience gains on scheme liabilities
As a percentage of the liabilities at the end of the year
Total amount recognised in the statement of comprehensive income
As a percentage of the liabilities at the end of the year
2013
£(967,000)
(7.2)%
—
—
£(1,059,000)
(8.4)%
2012
£1,346,000
9.3%
—
—
£530,000
4.2%
2011
£(58,000)
(0.4)%
£490,000
4.1%
£(114,000)
(1.0)%
The Amco scheme’s sole employer is the Company’s wholly owned subsidiary, Amalgamated Construction Ltd.
Defined contribution pension scheme
The Group operates a number of defined contribution pension schemes and individual stakeholder pension plans for its employees.
The Group made contributions of £2,933,000 (2012: £2,835,000) into these plans during the year. There are also £117,000
(2012: £123,000) of accruals relating to these plans.
25 Related parties
The Group has a related party relationship with its key management personnel who are the Main Board Directors: B W May, J Samuel,
R J Harrison, J Bishop and D M Forbes, whose total compensation amounted to £1,114,000 all of which was represented by
short-term employment benefits.
There were no other transactions with key management personnel in the year.
Renew Holdings plc Annual Report and Accounts 2013
65
Notes to the accounts continued
26 Acquisition of subsidiary undertaking
On 9 August 2013, the Company acquired the whole of the issued share capital of Lewis Civil Engineering Ltd (“Lewis”) for
a consideration of £10.9m, of which £8.0m was paid in cash and £2.9m in deferred consideration. Immediately following the
acquisition, the deferred consideration was satisfied by transferring non-cash assets to the value of £2.9m to the vendors.
The value of the assets and liabilities of Lewis at the date of acquisition were:
Book value
Adjustments
Non-current assets
Intangible assets - goodwill
Intangible assets - other
Property, plant and equipment
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Non-current liabilities
Obligations under finance leases
Deferred tax liabilities
Current liabilities
Borrowings
Trade and other payables
Obligations under finance leases
Current tax liabilities
Total liabilities
Net assets
£000
260
—
5,616
113
5,989
591
4,063
1,703
6,357
12,346
(1,511)
—
(1,511)
(188)
(6,105)
(992)
(300)
(7,585)
(9,096)
£000
5,882
2,209
—
—
8,091
—
—
—
—
Fair value
£000
6,142
2,209
5,616
113
14,080
591
4,063
1,703
6,357
8,091
20,437
—
(442)
(442)
—
—
—
—
—
(442)
(1,511)
(442)
(1,953)
(188)
(6,105)
(992)
(300)
(7,585)
(9,538)
3,250
7,649
10,899
Fair value adjustments arising from the acquisition
In accordance with IFRS3, the Board will review the fair value of assets and liabilities using information available up to 12 months
after the date of acquisition.
Goodwill impairment review
The Board has reviewed the goodwill arising on acquisition for impairment as required by IFRS3. No such impairment was identified.
The current year end of Lewis is 31 July and this will be changed to 30 September in due course to bring it into line with that of the Group.
If the acquisition of Lewis had occurred on 1 October 2012, Group revenue would have been approximately £358m and profit for
the year ended 30 September 2013 would have been approximately £9m.
66
Renew Holdings plc Annual Report and Accounts 2013
Company balance sheet at 30 September
Fixed assets
Tangible assets
Investments
Current assets
Stocks and work in progress
Debtors: due within one year
Creditors: amounts falling due in less than one year
Net current liabilities
Total assets less current liabilities
Creditors: amounts falling due after more than one year
Net assets
Capital and reserves
Share capital
Share premium account
Capital redemption reserve
Share based payments reserve
Profit and loss account
Equity shareholders’ funds
Approved by the Board and signed on its behalf by:
R J Harrison OBE
Chairman
26 November 2013
Note
E
F
G
H
I
J
L
M
M
M
M
N
2013
£000
659
69,560
70,219
91
27,228
27,319
(60,719)
(33,400)
36,819
2012
£000
668
79,191
79,859
1,213
20,878
22,091
(72,191)
(50,100)
29,759
-
(2,500)
36,819
27,259
6,140
5,893
3,896
390
20,500
36,819
5,990
5,893
3,896
289
11,191
27,259
Renew Holdings plc Annual Report and Accounts 2013
67
Notes to the company accounts
A Accounting policies
(i) basis of accounting
The accounts have been prepared on the going concern basis and in accordance with UK applicable accounting standards under the
historical cost convention. In determining that the going concern basis is appropriate the Directors have reviewed budgets, including
cashflow forecasts, and concluded that Company has adequate cash resources to continue trading for the foreseeable future.
A summary of the more important Company accounting policies, which have been applied consistently, is set out below:
(ii) Investments in subsidiaries
Investments in subsidiaries are recorded at cost less provision for impairment.
(iii) Tangible fixed assets
Tangible fixed assets are recorded at cost or valuation for certain properties, less provision for impairment if required. Depreciation
is provided on all tangible fixed assets, other than freehold land. Provision is made at rates calculated to write off the cost of each
asset, less estimated residual value, evenly over its expected useful life as follows:
Freehold land and buildings – no depreciation charge
Long leasehold land
and buildings
– shorter of fifty years and
– period of lease
Plant, vehicles & equipment – three to ten years
(iv) Leasing commitments
Rentals under operating leases are charged to the profit and loss account on a straight-line basis over the term of the lease.
(v) Share based payments
FRS 20 “Share Based Payments” requires a fair value to be established for any equity settled share based payments. Fair value
has been independently measured using either a Black Scholes or a Monte Carlo valuation model as was deemed appropriate by the
Directors for the relevant options’ conditions. The fair value determined at the grant date of the equity settled share based payments
is expensed on a straight-line basis over the vesting period based on the Directors’ estimate of shares that will eventually vest.
(vi) Deferred taxation
The payment of taxation is deferred or accelerated because of timing differences between the treatment of certain items for
accounting and taxation purposes. Full provision for deferred taxation is made under the liability method, without discounting,
on timing differences that have arisen, but not reversed by the balance sheet date, unless such provision is not permitted by
FRS 19 “Deferred Tax”.
Deferred tax assets are recognised to the extent it is considered more likely than not that they will be recovered. In accordance
with FRS 19 deferred tax is not provided for on:
a) revaluation gains on land and buildings, unless there is a binding agreement to sell them at the balance sheet date:
b) gains on the sale of non-monetary assets, if the taxable gain will probably be rolled over;
c) fair value adjustment gains to fixed assets and stock to uplift prices to those ruling when an acquisition is made; and
d) extra tax payable if the overseas retained profits of subsidiaries, joint ventures or associates are remitted in the future.
Deferred tax assets are recognised for taxable losses relating to trading to the extent that those losses are expected
to be recoverable within the foreseeable future.
(vii) Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the
transaction is covered by a forward exchange contract. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance sheet date or, if appropriate, at the forward contract rate. Exchange
differences are taken to the profit and loss account.
(viii) Defined benefit pension scheme
The Company has adopted the requirements of FRS 17 “Retirement Benefits”. The Directors have determined that it is not possible
to allocate the assets and liabilities of the scheme between the various Group companies. Accordingly the scheme is not accounted
for in the Company’s balance sheet. However, any increase in the present value of liabilities within the defined benefit scheme
expected to arise from employee service in the period is charged to operating profit in respect of the Company’s employees.
(ix) Defined contribution pension plans
Contributions to defined contribution pension plans are charged to the profit and loss account as incurred.
(x) Dividends
Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately
authorised and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed
in the notes to the financial statements.
(xi) Stocks and work in progress
Stocks comprise land held for development and are stated at the lower of cost and net realisable value. Cost includes appropriate
attributable overheads and excludes interest. Where necessary, provision is made for obsolete, slow moving and defective stocks.
68
Renew Holdings plc Annual Report and Accounts 2013
B Profit and loss account
As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account. The profit
after taxation for the financial year dealt with in the accounts of the Company was £11,226,000 (2012: £1,402,000).
The audit fee charged within the profit and loss account amounted to £51,000 (2012: £54,000).
C Employee numbers and remuneration
The average monthly number of employees, all of whom were administrative staff
including Executive Directors, employed in continuing activities during the year was:
At 30 September:
Cost of staff, including Executive Directors, during the year amounted to:
Wages and salaries
Social security costs
Other pension costs
Share based payments
Directors’ emoluments
Aggregate emoluments
Highest paid Director: aggregate emoluments
2013
Number
26
26
£000
1,940
254
194
101
2,489
£000
1,114
556
2012
Number
31
30
£000
2,376
285
131
6
2,798
£000
1,019
510
Details of individual Directors’ emoluments and pension contributions can be found in the Directors’ Remuneration Report.
D Dividends
Interim (related to the year ended 30 September 2013)
Final (related to the year ended 30 September 2012)
Total dividend paid
Interim (related to the year ended 30 September 2013)
Final (related to the year ended 30 September 2012)
Total dividend paid
Dividends are recorded only when authorised and are shown as a movement in equity rather than as a charge in the profit and
loss account. The Directors are proposing that a final dividend of 2.50p per Ordinary Share be paid in respect of the year ended
30 September 2013. This will be accounted for in the 2013/14 financial year.
E Tangible fixed assets
Cost:
At 1 October 2012
Additions
At 30 September 2013
Depreciation:
At 1 October 2012
Charge for year
At 30 September 2013
Net book value:
At 30 September 2013
At 30 September 2012
Freehold land
Long leasehold
Plant, vehicles
and buildings
land and buildings
& equipment
£000
701
—
701
37
10
47
654
664
£000
75
—
75
75
—
75
—
—
£000
311
3
314
307
2
309
5
4
2013
Pence/share
1.10
2012
Pence/share
1.05
2.10
3.20
£000
658
1,259
1,917
2.00
3.05
£000
658
1,199
1,857
Total
£000
1,087
3
1,090
419
12
431
659
668
Renew Holdings plc Annual Report and Accounts 2013
69
Notes to the company accounts continued
F Investments
Shares at cost:
At 1 October 2012
Additions
Disposals
At 30 September 2013
Provisions:
At 1 October 2012
Provided during the year
At 30 September 2013
Net book value:
At 30 September 2013
At 30 September 2012
Subsidiary
undertakings
£000
215,070
10,899
(22,430)
203,539
135,879
(1,900)
133,979
69,560
79,191
On 9 August 2013, the Company acquired the whole of the issued share capital of Lewis Civil Engineering Ltd for a consideration
of £10.9m.
During the year Britannia Construction Ltd and Walter Lilly & Co Ltd were transferred to a subsidiary undertaking at net book value.
During the year the Company reorganised its investments in subsidiary undertakings resulting in a net loss of £1,032,000.
Details of the principal subsidiary undertakings are included in Note R.
The investment in subsidiaries is supported by their net asset values and their discounted expected future cash flows.
G Stock and work in progress
Undeveloped land
H Debtors
Due within one year:
Trade debtors
Due from subsidiary undertakings
Other debtors
Deferred tax
Prepayments and accrued income
I Creditors: amounts falling due within one year
Bank loans and overdrafts
Trade creditors
Other taxation and social security
Due to subsidiary undertakings
Other creditors
Accruals and deferred income
J Creditors falling due after more than one year
Bank loan
Bank loans and overdrafts repayable:
Within one year
Within two to five years
70
Renew Holdings plc Annual Report and Accounts 2013
2013
£000
91
2013
£000
42
25,660
981
24
521
2012
£000
1,213
2012
£000
194
19,561
412
18
693
27,228
20,878
2013
£000
24,290
519
1,450
28,806
546
5,108
60,719
2013
£000
—
24,290
—
24,290
2012
£000
22,641
921
546
40,302
602
7,179
72,191
2012
£000
2,500
22,641
2,500
25,141
K Derivatives and other financial instruments
Currency exposures
The only exposure of the Company to currency risk (i.e. exposure to gains or losses on foreign exchange which would be recognised
in the profit and loss account) is in respect of the unhedged portion of an inter-company loan. At 30 September 2013 the unhedged
portion of the inter-company loan was $771,000 (2012: $270,000).
The Company’s operations are denominated in sterling.
Fair value of financial assets and liabilities
There are no material differences between fair value and the book value of the Company’s financial assets and liabilities.
L Share capital
Allotted, called up and fully paid:
61,403,668 (2012: 59,898,927) Ordinary Shares of 10p each
2013
£000
2012
£000
6,140
5,990
The holders of Ordinary Shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share
at meetings of the Company.
During the year 1,504,741 Ordinary Shares were issued at par value following the exercise of options under the Unapproved
element of the Renew Holdings plc Executive Share Option Scheme (2012: Nil).
Share options
Renew Holdings 2004 Executive Share Option Scheme
The Company operates a share option scheme, the Renew Holdings 2004 Executive Share Option Scheme. The scheme has both
an Approved and Unapproved element. The difference between the two elements is that the Approved scheme has the advantage
of certain HMRC approved tax benefits.
Both elements have the same general terms and conditions. Options issued under the scheme must be held for three years before
they can vest and become exercisable. They must be exercised within ten years from the date of grant.
All options granted under the Unapproved element have vested and have been exercised.
Vesting of options is dependant on the achievement of certain performance criteria which are established by the Remuneration
Committee at the point of grant. 114,280 of the options granted under the Approved element in the 2006 financial year have vested.
These are the only remaining options outstanding under the scheme.
The scheme does not permit retesting of performance conditions and if the performance criteria are not achieved then the options
will lapse.
The number of options in issue and their exercise price is given in Note M.
Renew Holdings plc Long Term Incentive Plan
At the Annual General Meeting held on 25 January 2012 the shareholders approved a new long term incentive plan (“LTIP”) which
replaced the Renew Holdings plc 2004 Executive Share Option Scheme as the Directors believed that the LTIP was a more effective
method of aligning executive and shareholder interests.
On 2 March 2012, the Company granted options to subscribe for 400,000 Ordinary Shares pursuant to the LTIP. On 20 December 2012
options to subscribe for a further 400,000 Ordinary Shares were granted.
The options are exercisable at a nominal cost from 2 March 2015 in respect of those granted on 2 March 2012 and from 20 December 2015
in respect of those granted on 20 December 2012, subject to the achievement of certain performance criteria.
Vesting of one half of the options is dependant on absolute growth in the Company’s Total Shareholder Return (‘TSR’), and the other
half is dependant on the Company’s TSR performance as compared to the TSR achieved by other companies in a comparator group
of twelve companies selected by the Remuneration Committee. All TSR calculations are based on the average of the opening and
closing share price over a thirty day period prior to the commencement and the end of the performance period.
The absolute TSR growth target requires the Company’s TSR over the three year performance period to grow by more than 25%. For
TSR growth between 25% and 100%, the half of the option which is subject to the absolute TSR growth target vests on a straight-line
basis from nil vesting at 25% growth, to 100% vesting at 100% growth. There will be no vesting if TSR growth is 25% or less.
The comparator group TSR performance target measures the Company’s TSR over the three year performance period against
the TSR of a group of twelve companies selected by the Remuneration Committee. If the Company’s TSR performance falls below the
median performance of the comparator group then the options lapse forthwith. If the Company is ranked within the top decile
of the comparator group the options shall vest in full. If the Company’s TSR performance is ranked between the median position
and the top decile of the comparator group then the options shall vest on a straight line basis from nil, at or below the median
position, to 100% at the top decile.
Renew Holdings plc Annual Report and Accounts 2013
71
Notes to the company accounts continued
M Reserves
At 1 October 2012
Transfer from profit and loss account for the year
Recognition of share based payments
Dividends paid
At 30 September 2013
Capital
Share based
Share
premium
account
£000
5,893
redemption
reserve
£000
3,896
payments
reserve
£000
289
101
390
Profit & loss
account
£000
11,191
11,226
(1,917)
20,500
5,893
3,896
Share based payments reserve
FRS 20 “Share Based Payment” requires a fair value to be established for any equity settled share based payments. Fair value
has been independently measured by Baker Tilly, Chartered Accountants, using a Black-Scholes valuation model. The fair value
determined at the grant date of the equity settled share based payments is expensed on a straight-line basis over the vesting
period, based on the Board’s estimate of shares that will eventually vest.
Nil has been charged (2012: £30,000 credited) to administrative expenses.
1,504,741 options were exercised during the year (2012: Nil). The value per option represents the fair value of the option less
the consideration payable.
The expected volatility is based on historical volatility of the share price since the Company listed on AIM in 2001.
The risk free rate of return has been derived from the Bank of England’s yield curve taking the spot rate for a maturity of 36 months.
This period has been selected as being the minimum period over which the options could remain extant.
Options granted under the Renew Holdings 2004 Executive Share Option Scheme over the Company’s Ordinary Shares at 30 September 2013
were as follows:
Date of grant
Awards outstanding at 30 September 2013
- Directors
Exercise price and price at date of grant
Maximum option life
Assumed option life for purposes of valuation
Expected volatility
Dividend yield
Risk free interest rate
Value per option
7 June 2006
114,280
52.5p
10 years
3 years
47%
1.0%
4.67%
20.5p
The outstanding options have vested in full but have not yet been exercised.
Renew Holdings plc Long Term Incentive Plan
Fair value has been independently measured by PricewaterhouseCoopers LLP using a Monte Carlo model methodology.
The fair value determined at the grant date of the equity settled share based payments is expensed on a straight-line basis over
the vesting period, based on the Board’s estimate of shares that will eventually vest.
£101,000 has been charged (2012: £36,000) to administrative expenses. There is no impact on net assets since an equivalent amount
has been credited to the share based payments reserve. No options were exercised during the year. The value per option represents
the fair value of the option less the consideration payable.
The expected volatility has been calculated based on weekly historical volatility of the Company’s share price over the three years
prior to the date of grant. The risk free rate of return has been based on the yields available on three year UK government bonds
as at the date of grant.
72
Renew Holdings plc Annual Report and Accounts 2013
M Reserves continued
Options granted under the Renew Holdings plc Long Term Incentive Plan over the Company’s Ordinary shares at 30 September 2013
were as follows:
Date of grant
Awards outstanding at 30 September 2013
- Directors
Exercise price
Price at date of grant
Maximum option life
Assumed option life for purposes of valuation
Expected volatility
Dividend yield
Risk free interest rate
Value per option
N Reconciliation of movements in equity shareholders’ funds
Profit for the year
Dividends paid
Issue of Ordinary Shares
Recognition of share based payments
At 1 October 2012
At 30 September 2013
O Capital and leasing commitments
Annual commitments under non-cancellable
operating leases expiring in:
Under one year
Two to five years
Five or more years
2 March 2012
20 December 2012
Total
400,000
400,000
800,000
0.0p
75.0p
10 years
3 years
46%
4.0%
0.43%
40.0p
Land and
buildings
£000
210
125
741
1,076
Other
£000
—
20
—
20
0.0p
87.0p
10 years
3 years
36%
3.6%
0.48%
30.0p
2013
£000
11,226
(1,917)
150
101
27,259
36,819
Total
2013
£000
210
145
741
1,096
—
—
—
—
—
—
—
—
2012
£000
1,402
(1,827)
—
6
27,678
27,259
Total
2012
£000
968
359
741
2,068
The Company had no capital commitments at 30 September 2013 (2012: £nil).
P Contingent liabilities
The Company has guaranteed performance bonds in respect of certain contracts and leasing arrangements in the normal course
of business of its subsidiary undertakings.
Under the terms of the Group’s banking agreement, security over the Company’s assets has been granted to the Group’s bankers.
The Company is a participant together with a number of subsidiary undertakings in the Group banking arrangements and
as a result has risks associated with the financial status and performance of the other companies within the Group.
Q Defined contribution pension scheme
The Company operates a number of defined contribution pension schemes and individual stakeholder pension plans for its employees.
The Company made contributions of £194,000 (2012: £131,000) into these plans during the year. There are also £10,000
(2012: £10,000) of accruals relating to these plans.
Renew Holdings plc Annual Report and Accounts 2013
73
Notes to the company accounts continued
R Principal subsidiary undertakings
Renew Holdings plc acts as the holding company of the Group. The principal activity of the Group during the year was as contractors
in Engineering Services and Specialist Building.
The principal subsidiary undertakings are shown below.
Subsidiary undertakings
Allenbuild Ltd
Britannia Construction Ltd
Walter Lilly & Co Ltd
Seymour (Civil Engineering Contractors) Ltd
Amalgamated Construction Ltd
V.H.E. Construction Plc
Shepley Engineers Ltd
Lewis Civil Engineering Ltd
Lovell America, Inc
Incorporation &
principal place
Proportion of
Ordinary Shares
of business
held by the Company
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
Owned by Renew Holdings plc
England and Wales
Owned by Renew Holdings plc
England and Wales
Owned by Renew Holdings plc
England and Wales
Owned by Renew Holdings plc
USA
100%
100%
100%
100%
100%
100%
100%
100%
100%
S Related parties
The Company has a related party relationship with its key management personnel who are the Main Board Directors: B W May,
J Samuel, R J Harrison, J Bishop and D M Forbes, whose total compensation amounted to £1,114,000 all of which was represented
by short-term employment benefits.
There were no other transactions with key management personnel in the year.
74
Renew Holdings plc Annual Report and Accounts 2013
Company Secretary
J Samuel FCA
Company number
650447
Registered address
Yew Trees
Main Street North
Aberford
West Yorkshire
LS25 3AA
Website address
www.renewholdings.com
Directors, officers and advisors
Directors
R J Harrison OBE
B W May
J Samuel FCA
J Bishop FCA
D M Forbes
(Non-executive Chairman)
(Chief Executive)
(Group Finance Director)
(Independent Non-executive)
(Independent Non-executive)
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Auditor
KPMG Audit Plc
1 The Embankment
Neville Street
Leeds
LS1 4DW
Financial PR
Walbrook PR Ltd
4 Lombard Street
London
EC3V 9HD
Nominated advisor and broker
Numis Securities Limited
London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
Renew Holdings plc Annual Report and Accounts 2013
75
Shareholder information
Shareholder information
Annual General Meeting
29 January 2014
Results
Announcement of interim results – May 2014
Preliminary announcement of full year results – November 2014
Dividend re-investment plan
For any shareholders who wish to re-invest dividend payments in the Company, a facility is provided by Capita Asset Services, a
trading name of Capita IRG Trustees Ltd. Under this facility, cash dividends are used to purchase additional shares. Any shareholder
requiring further information should contact Capita on 0871 664 0381 (calls cost 10p per minute plus any network extras from within
the UK; lines are open from 9am to 5.30pm Monday to Friday). If calling from overseas +44(0)208 639 3402. Fax 0208 639 1023.
Email shareholderenquiries@capita.co.uk or visit www.capitaassetservices.com.
Boiler room fraud
In recent years many companies have become aware that their shareholders have received unsolicited phone calls or correspondence
concerning investment matters. These are typically from overseas based “brokers” who target UK shareholders, offering to sell them
what turn out to be worthless or high risk shares in US or UK investments. These operations are commonly known as “boiler rooms”.
Shareholders are advised to be wary of any unsolicited advice, offers to buy shares at a discount or offers of free company reports.
If you receive any unsolicited investment advice:
• Check that they are properly authorised by the FCA by visiting www.fca.org.uk/register/
• Report the matter to the FCA by calling 0800 111 6768
If you deal with an unauthorised firm, you will not be eligible to receive payment under the Financial Services Compensation Scheme.
The FCA can be contacted by completing an online form at www.fca.org.uk/scams. More detailed information on this or similar
activity can be found on the FCA website www.fca.org.uk.
76
Renew Holdings plc Annual Report and Accounts 2013
Walter Lilly
Waddon House
283 Stafford Road
Croydon
Surrey
CR0 4NN
Tel: 020 8730 6200
Allenbuild (South East)
Unecol House
819 London Road
North Cheam
Surrey
SM3 9BN
Tel: 020 8335 4800
Amco
Whaley Road
Barugh
Barnsley
South Yorkshire
S75 1HT
Tel: 01226 243413
Shepley Engineers
Robinson House
Westlakes Science Park
Moor Row
Cumbria
CA24 3HY
Tel: 01946 599 022
Seymour
30–34 Navigation Point
Hartlepool
TS24 0UQ
Tel: 01429 223 521
VHE
Whaley Road
Barugh
Barnsley
South Yorkshire
S75 1HT
Tel: 01226 320150
Britannia
Britannia House
Staverton Technology Park
Cheltenham
Gloucestershire
GL51 6TQ
Tel: 01452 859 880
Lewis Civil Engineering
Mwyndy Cross Industries
Cardiff Road
Pontyclun
Rhondda Cynon Taff
CF72 8PN
Tel: 01443 449200
Renew Holdings plc
Yew Trees
Main Street North
Aberford
Leeds
LS25 3AA
tel: 0113 281 4200
fax: 0113 281 4210
web: www.renewholdings.com
Company Number: 650447
Registered in England & Wales
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