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Supporting UK
Infrastructure
Renew Holdings plc
Annual Report and Accounts
Year ended 30 September 2014
Supporting UK Infrastructure
Renew provides multidisciplinary Engineering Services through its
independently branded businesses to support essential UK infrastructure.
Energy
Nuclear, traditional,
renewable and gas
infrastructure
> page 24
Environmental
Water and land remediation
> page 28
Infrastructure
Rail and wireless telecoms
> page 32
Specialist Building
High quality residential
> page 36
Strategic Report
01 Highlights
02 Renew’s structure
04 Renew’s operations
06 Markets
08 Business model
10 Strategy
12 Investment case
14 Chairman's statement
16 Chief Executive's review
20 Financial review
22 Operational review
24 Energy
28 Environmental
32 Infrastructure
36 Specialist Building
Corporate Governance
39 Corporate social responsibility
42 Directors’ report
45 Directors’ remuneration report
49 Corporate governance
51
Statement of directors’
responsibilities
Accounts
52 Independent auditor’s report
53 Group income statement
54 Group statement of
comprehensive income
54 Group statement of changes in equity
55 Group balance sheet
56 Group cashflow statement
57 Notes to the accounts
79 Company balance sheet
80 Notes to the company accounts
86 Directors, officers and advisors
87 Shareholder information
88 Our subsidiary businesses
Strategic Report
Highlights
We improve
We maintain
We renew
The Group has successfully grown its Engineering
Services business both organically and by acquisition.
Financial highlights
Revenue* £m
£464m
Adjusted operating profit* £m
£16.4m
464
16.4
246
201
270
283
9.6
10.0
7.9
4.0
2010
2011
2012
2013 2014
2010
2011
2012
2013 2014
Adjusted earnings per share* p
Dividend per share p
20.8p
5.0p
20.8
5.0
3.0
3.0
3.15
3.6
12.4
12.4
9.7
4.5
2010
2011
2012
2013 2014
2010
2011
2012
2013 2014
Operational highlights
> Successful integration of Lewis Civil
Engineering Limited
> Acquisition of Clarke Telecom Limited
> Acquisition of Forefront Group Limited
Read more about our operations
Business model
> page 8
Strategy
> page 10
Net assets £m
£13.9m
13.2
13.9
9.0
8.9
10.3
2010
2011
2012
2013 2014
* Results are shown prior to exceptional items and amortisation
charges and after accounting for discontinued operations.
Annual Report and Accounts 2014 01
Renew Holdings plc
Strategic Report Renew’s structure
Strong independently branded
subsidiary businesses
Renew’s Board structure
Renew Holdings plc
Non-executive Chairman
Roy Harrison OBE
Chairman of the Board
Independent
Non-executive
Director
John Bishop
Chief Executive
Brian May
Independent
Non-executive
Director
David Forbes
Group Finance
Director and
Company Secretary
John Samuel FCA
Group Engineering
Services Director
Paul Scott
Board of Directors
> page 43
Governance
> page 49
02
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report
Renew’s organisational structure
Renew Holdings plc
Energy
Environmental
Infrastructure
Specialist
Building
Renew’s subsidiary businesses
Our independently branded subsidiary businesses, supported
by the strength of the Renew Holdings group, deliver Engineering
Services aligned to our clients' local needs, where regional
knowledge and specialist expertise provide a differentiator.
Operational review
> page 22
Chief Executive’s review
> page 16
Annual Report and Accounts 2014 03
Renew Holdings plc
Strategic Report Renew’s operations
Integrated Engineering Services
With our range of integrated Engineering Services we are
ideally positioned to access essential maintenance and
renewal spending programmes across our markets.
10
2
Individually branded
UK subsidiary
businesses
Acquisitions in
the year
3,121
Directly employed,
multi-skilled
employees
£464m
Group revenue
04
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Renew Holdings plc
Engineering Services
Our subsidiaries operate across the Energy, Environmental
and Infrastructure markets.
Energy
Environmental
Infrastructure
Our multidisciplinary engineering services businesses provide:
- Operational support and asset care
- Critical planned and reactive maintenance and renewals
- Civil, mechanical and electrical engineering
> Nuclear decommissioning
> Maintaining strategic water mains
> Off-track asset renewal
> Supporting traditional and
renewable energy facilities
> Gas distribution network asset
maintenance, replacement
and installation
> Specialist flow stopping, drilling
and internal inspection
and main drainage
and maintenance
> Clean and waste water
rehabilitation infrastructure
> Flood alleviation and attenuation
> Tunnel and shaft refurbishment
> Bridges, structures
and earthworks
> Port, harbour and sea defences
> Moving structures
> Soil and groundwater remediation
> Wireless telecoms installations
Annual Report and Accounts 2014 05
Renew Holdings plc
Strategic Report Markets
Well positioned for future growth
We operate in mainly regulated markets where long-term spending plans
and committed funding provide good visibility of future opportunities.
Energy
Environmental
Infrastructure
Nuclear
Water
Rail
The Nuclear Decommissioning Authority
("NDA") is responsible for the cleanup and
waste management of the UK’s nuclear
legacy. With 17 sites nationally, the NDA’s
total planned expenditure for 2014/15 is
around £3bn. Over half of this is allocated
to Sellafield where work continues to
focus on high risk and high hazard
reduction operations.1
An estimated investment of around £60bn
is expected in new nuclear power stations
in the UK by 2030 as most of the existing
fleet of nuclear power stations are retired.2
UK water companies, regulated
by the Water Services Regulation
Authority ("Ofwat"), undertake large
scale investment programmes to
maintain and renew their water
and sewerage infrastructure assets.
Work on Asset Management Programme
6, the next five year regulatory period in
the water industry, is due to commence
in April 2015 and will focus on
maximising the efficient use of existing
assets through integrated solutions.
The UK government has made an
unprecedented six year commitment
to invest record levels in improving
flood defences up to 2021.5
Demand for rail services is anticipated
to grow by more than 30% over the
next decade.
To meet this challenge Network Rail
is investing around £38bn over the
next five years to 2019 (CP5) on running,
maintaining and improving Britain’s
railway which includes some 30,000
bridge, tunnel and embankment assets.7
Traditional and renewable
Land remediation
Wireless telecoms
As demand for energy increases, it is
likely that the life of some of the UK’s
existing traditional generating assets will
be extended, requiring investment in
long-term maintenance programmes.
The Homes and Communities Agency
("HCA") is responsible for the disposal
of publicly owned land, including former
industrial land transferred from the
former Regional Development Agencies.
The HCA Corporate Plan 2014–2018
includes specific targets in relation to
the use of such legacy sites and funding
arrangements to achieve economic
growth, and to provide suitable and
sufficient housing stock across the UK and
to stimulate strategic inward investment.6
Demand for renewable energy is expected
to increase following the government's
commitment to deliver 15% of the UK’s
energy consumption from renewable
sources by 2020.3
As part of ongoing improvements to the
gas network, the UK is currently
undertaking a number of essential gas
network asset replacement programmes.
Following concerns over iron gas mains
safety, the Health and Safety Executive
has implemented the national Iron Mains
Risk Reduction Programme to replace gas
mains within 30 metres of a building by
2032 or earlier.4
06
Renew Holdings plc
Annual Report and Accounts 2014
Research undertaken for the market
regulator, Ofcom, estimates that demand
for mobile data could be as much as
80 times higher than today by 2030 as
the market continues to expand, with
growth largely driven by the increasing use
of mobile devices and internet services.
As demand for service on the
existing mobile network infrastructure
increases, substantial investment is
expected to add new infrastructure,
upgrade existing networks and
decommission redundant assets.
Ofcom set a 2017 deadline for network
operators to provide comprehensive 2G,
3G and 4G coverage across the country.8
Strategic Report Expanding our range
of Engineering Services
Making progress
in new markets
As part of the Group’s strategy of
expanding its range of capabilities into new
infrastructure markets, Renew made two
complementary acquisitions in the year
in Clarke Telecom and Forefront Group,
giving the Group a position in the wireless
telecoms and gas infrastructure markets.
Who are Clarke Telecom and Forefront Group?
Clarke Telecom, based in Manchester, is a leading supplier of specialist
wireless telecoms infrastructure services, undertaking all aspects of
delivery including acquisition, planning and design through to deployment
and optimisation. Network roll-outs are managed by utilising highly skilled
in-house resources. Working for the network operators, the majority of
work is undertaken through framework agreements.
Forefront Group, based in the South East, is a leading supplier to the gas
infrastructure market where it provides gas mains installation, repair,
maintenance and replacement services through framework agreements.
Working on the long-term gas network asset replacement programmes
gives excellent visibility of opportunities and strong growth prospects.
Why has Renew chosen to expand its Engineering Services
into the wireless telecoms and gas infrastructure markets
through the recent acquisitions?
Renew’s acquisition strategy has seen the Group consider a range of markets
which benefit from good visibility of ongoing spending on UK infrastructure.
Suitable business opportunities must have strong relationships in these
markets where the skill sets are complementary to those that exist within the
rest of the Group. Clarke Telecom and Forefront Group are leading suppliers in
their markets, delivering engineering services to maintain and renew critical UK
infrastructure assets, and operating in regulated markets which benefit from
ongoing programmes of funding and which have high barriers to entry.
Does this change the Group’s ongoing acquisition strategy?
It remains the Group’s ongoing strategy to continue to develop its range
of Engineering Services, identifying acquisitions that either expand the
Group’s current market position or enable its entry into new markets,
which will add to operating margins and enhance earnings per share.
Annual Report and Accounts 2014 07
Renew Holdings plc
Specialist Building
High quality residential
The high quality residential market
in London and the Home Counties
remains strong with improved visibility.
We have particular specialist engineering
expertise in carrying out major structural
alteration works.
This market requires knowledge and
experience. Walter Lilly has a strong brand
and an excellent reputation developed over
many years in this market.
1 Nuclear Decommissioning Authority, Business Plan
– financial year beginning April 2014 to financial
year ending March 2017 (April 2014).
2 HM Government, Industrial strategy: government
and industry in partnership, The UK’s Nuclear
Future (2013).
3 Department of Energy & Climate Change, UK
Renewable Energy Roadmap (July 2011).
4 Health and Safety Executive, Enforcement Policy
for the iron mains risk reduction programme
2013–2021.
5 Environment, Food and Rural Affairs Committee,
Winter floods 2013–14: Government response to
the Committee’s First Report of Session 2014–15
(October 2014).
6 Homes and Communities Agency, Corporate Plan
2014–18 (July 2014).
7 Network Rail Limited, Annual report and accounts
2014 (June 2014).
8 Ofcom, Consumer experiences of mobile phone calls
(August 2014).
Operational review
> page 22
Strategic Report Business model
Delivering value to shareholders
Through effective controls and management of our operating
subsidiaries, we seek to deliver value to shareholders in the
form of reliable capital growth and a progressive dividend
policy. Growth is delivered through both organic and
acquisitive strategies.
The role of Renew
Read more about
the development
and delivery of our
growth strategy
> See overleaf
Development
and delivery of
growth strategy
> See page 10
Development of long-
term positions in our
target regulated
markets
Ensuring thorough
risk management
Ensuring the safe
delivery of our
operations
Ensuring the
consistent delivery
of quality
Our wholly owned subsidiary businesses provide
specific Engineering Services within targeted markets.
Each of our businesses operates autonomously, supported
by Renew in areas where setting overall standards and sharing
best practice such as health and safety, human resources and
information technology allows our subsidiaries to benefit from
Group experience whilst maintaining their discrete approach
to individual markets.
08
Renew Holdings plc
Annual Report and Accounts 2014
Individually our businesses build on their strong recognised
brands whilst collective, collaborative working provides
additional opportunities in expanding the range of services
we offer to our clients.
Strategic Report
Our business model in action
Ensuring the safe delivery
of our operations
Ensuring the consistent
delivery of quality
Safety remains the Group’s priority. Our safe operations are
managed and delivered locally by our subsidiary businesses
alongside their safety advisors who have specific knowledge
in the individual environments.
Our subsidiary businesses work in challenging environments,
attention to delivering services safely ensures the continued
improvement in our accident incidence rate which has improved
by over 90% in the last nine years.
The work we undertake has seen a shift in nature with an increase
in small teams working remotely. This change has driven our focus
on behavioural safety training in addition to our continuing safety
initiatives to ensure the well being of our employees, suppliers
and those who work with us.
More about our safe operations can be found in our Corporate
Social Responsibility report.
Our subsidiary businesses are leading suppliers in their
markets. A key factor in our success in these markets is the
consistent quality delivery of our services. The type of work the
Group undertakes involves a high volume of small value tasks
usually on large scale infrastructure networks.
Ensuring continuity of delivery takes many approaches and
requires a commitment across our businesses in areas such as
logistics, training, investment in technology, corporate social
responsibility and in the management of our supply chain.
We strive to continue to develop and improve our business
processes with key initiatives such as our aftercare service
programmes and supply chain workshops.
Corporate social responsibility report
> page 39
Operational review
> page 22
Ensuring thorough
risk management
Development of long-term
positions in our target
regulated markets
Our subsidiary businesses are governed by a system of controls
which include overarching requirements to adhere to Group
minimum standards using internal audit processes to monitor
compliance.
Our system of internal controls is based on the key principles
of risk assessment, control environment and activities,
information and communication and monitoring and
evaluation of effectiveness which delivers robust
commercial risk management.
Each subsidiary business is required to have a management
system in place. Renew’s Group minimum requirements
outline the processes to be maintained within the business
management system. Individual business management
systems are certified to ISO:9001.
Regular operational and financial reporting is supported by
monthly management meetings attended by a Group Executive
member, regular Executive Management Committee meetings
and monthly main Board meetings.
Across our markets we provide multidisciplinary engineering
services concentrating on operational support, asset care
and maintenance. Undertaking a high volume of small tasks,
we are often working on long-term framework agreements
where we provide ongoing support to our clients over
many years.
The work we undertake involves supporting the day-to-day
operations, maintenance and emergency care requirements
of some of the UK’s essential assets including the rail network,
nuclear and traditional power stations, water and gas pipe
networks and wireless telecoms network infrastructure.
Our clients engage our services, often on a long-term basis,
where our work enables them to maintain continuity of
service to their customers. Our responsive integrated
engineering services and consistent delivery mean that we
work on some of the largest frameworks designed to deliver
asset care and maintenance services from our clients'
operational expenditure budgets.
Principal risks and uncertainties
> page 11
Markets
> page 6
Annual Report and Accounts 2014 09
Renew Holdings plc
Strategic Report Strategy
Development and delivery
of our growth strategy
Our strategic targets
Target by 2010
33% Engineering
Services revenue
Target by 2012
50% Engineering
Services revenue
2% Group operating profit
Target by 2014
Target by 2017
70% Engineering Services revenue
£500m Group revenue
3% Group operating profit
4.5% Group operating profit
2007
2009
2011
2017
2006
2009
2011
2014
15% Engineering
Services revenue
36% Engineering
Services revenue
52% Engineering Services revenue
82% Engineering Services revenue
2.2% Group operating profit
3.5% Group operating profit
Achieved 1 year early
Achieved 1 year early
Achieved on target
Where we were
Where we are
Where we are going
Since 2006, it has been the Group’s
strategy to expand its Engineering
Services activities both organically
and by acquisition.
It has been the Group’s ambition to develop
its Engineering Services businesses to
account for over 70% of Group revenue
with turnover exceeding £500m.
In 2014, Group revenue was £464m and
Engineering Services accounted for 82%
of this total.
The Group has strong positions in its
target markets through a mixture of
organic and acquisitive growth.
The Group continues to focus on developing
its Engineering Services through:
> organic growth, broadening our
service offering to existing and
new clients;
> customer relationships built
on responsiveness; and
> acquisitive growth through
identifying businesses with strong
relationships in regulated markets.
10
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report How we measure our progress
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.
2017
2016
2015
2014
2013
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
85%
84%
83%
70%
82%
70%
82%
5%
5%
5%
4.3%
4.6%
63%
92%
57%
92%
3.5%
3.5%
Cumulative target since 2005
82%
76%
69%
Cumulative actual performance since 2005
Group operating profit as a percentage
of revenue
Target – not less than
Actual performance
How we measure our risk
Principal risks and uncertainties
4.5%
4.2%
4%
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. In contracting, management
is required 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. Should such estimates and judgements be
incorrect, then the Group’s results could be materially different
from those reported. 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 derives much of its business from a relatively
small number of major customers such as Network Rail,
Northumbrian Water, Wessex Water, Welsh Water, National
Grid, Sellafield Ltd and the Environment Agency. Were the
Group to lose its position as a supplier to some or all of these
customers then the Group’s financial position could be
materially and adversely affected.
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 2014, these policies are equivalent to 32%
of the combined scheme liabilities.
Annual Report and Accounts 2014 11
Renew Holdings plc
Strategic Report
Investment case
A strong platform for growth
Growth is delivered through the development of long-term relationships with clients responsible for the renewal and
maintenance of essential operational assets in Energy, Environmental and Infrastructure markets.
Our local businesses are aligned to respond to the ongoing maintenance needs of our clients' operational assets undertaking
work mainly through framework agreements.
Reasons to invest in Renew
Consistent delivery of
strategic targets
Continued organic and
acquisitive growth
Operating in markets with
high barriers to entry
Since 2006 the Group has delivered
on its strategic targets including Group
operating profit and Engineering
Services as a percentage of overall
Group revenue.
The Group has consistently delivered
organic growth in its existing businesses
and has further expanded its operations
with two more acquisitions in the period.
The markets in which we operate
demand a highly skilled workforce and a
proven track record of safe delivery.
Delivery of integrated
engineering services
Operating in mainly
regulated markets
Long-term relationships
with key clients
Our subsidiary businesses offer a
range of integrated multidisciplinary
Engineering Services solutions delivering
both time and cost efficiencies.
Our target markets are mainly
regulated which drives long-term
programmes of spending on asset
renewal and maintenance.
Our range of services and responsiveness
to our clients' needs positions us as
a key supplier. Our work enables our
clients to maintain continuity of service.
Growing operating margins
Strong balance sheet
Capital growth
Since 2006 our Group operating margins
have more than trebled from 1% to 3.5%
as our strategy of moving to Engineering
Services has been fulfilled.
The Group's net assets have grown by
161% since 2006.
The Group has grown its market
capitalisation over eight fold since
30 September 2005 without recourse
to new equity.
12
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report How Renew grows its Engineering Services operations:
We achieve organic growth through:
We achieve acquisitive growth through:
> our strategy of responsiveness;
> our ability to deliver locally through our
branded businesses;
> investing in the skills of our multi-skilled directly
employed workforce and employees; and
> our alignment with local managers of key operational
assets, responding to critical task requirements and
enabling required service levels to be maintained.
> the acquisition of Clarke Telecom, giving the Group a
position in the wireless telecoms infrastructure market;
> the acquisition of Forefront Group, giving the Group
a position in the gas infrastructure market; and
> consideration of complementary earnings
enhancing opportunities.
Annual Report and Accounts 2014 13
Renew Holdings plc
Strategic Report Chairman’s statement
A strong year for Renew
Results
Record results for the year ended
30 September 2014 demonstrate
the Group’s continued progress as a
leading multidisciplinary Engineering
Services provider, supporting critical
UK infrastructure.
Group revenue and operating profit, prior
to exceptional items, amortisation and
discontinued operations were both up
64% to £464.5m (2013: £282.7m) and
£16.4m (2013: £10.0m) respectively.
Group operating margin was maintained
at 3.5% (2013: 3.5%). Earnings per share
prior to exceptional items, amortisation
and discontinued operations increased
by 68% to 20.80p (2013: 12.38p) with
basic earnings per share on continuing
activities of 16.83p (2013: 16.62p).
The Engineering Services business
has seen growth across all its markets of
Energy, Environmental and Infrastructure
with revenue up 65% to £382.5m (2013:
£232.4m). Engineering Services accounts
for 82% of Group revenue.
The largest area of growth was in our
Rail business which experienced high
levels of demand for emergency repair
works following last winter’s extreme
weather conditions alongside a Network
Rail “enhanced spend” programme which
together added £64.7m of non-recurring
revenue. Our position with Network Rail
has been recently strengthened following
our appointment to seven Control Period
5 Infrastructure Projects frameworks
with an advertised value of £450m over
the next five years.
Engineering Services operating profit
has seen a 54% increase to £16.3m
(2013: £10.6m) with an operating margin
of 4.3% (2013: 4.6%). Margin reduced
slightly as much of the additional
non-recurring Rail revenue referred to
above was undertaken on a cost
reimbursable basis with a lower margin.
When the effect of the non-recurring Rail
activity and acquisitions is excluded from
our results, Engineering Services
delivered 18% growth in revenue and 22%
growth in operating profit.
Specialist Building is predominantly
focused on the High Quality Residential
market in London and the Home Counties.
Revenue increased by 62% to £82.1m
(2013: £50.6m) and operating profit by
69% to £2.2m (2013: £1.3m), delivering
an operating margin of 2.6% (2013: 2.5%).
These results exclude those of Allenbuild
Limited which has been treated as a
discontinued business following its sale
subsequent to the year end.
Dividend
The Board is proposing a final dividend
of 3.50p per share, increasing the full year
dividend by 39% to 5.0p (2013: 3.60p).
The dividend will be paid on 2 March 2015
to shareholders on the register as at
30 January 2015. The Board continues
to grow dividends progressively.
Order Book
The Group's contracted order book
at 30 September 2014 stood at £439m
(2013: £364m), a 21% increase, with the
Engineering Services order book up 20%
to £361m (2013: £301m).
Acquisitions
During the year, the Group made two
complementary acquisitions in Clarke
Telecom Limited, a market leader in
wireless telecoms infrastructure delivery,
for £17.1m and Forefront Group Ltd,
a leading provider in the gas infrastructure
market, for £14.8m. These strategically
R J Harrison OBE
Chairman
Summary
> Record results for the year ended
30 September 2014.
> The Engineering Services business
has seen growth across all its
markets of Energy, Environmental
and Infrastructure.
> Engineering Services operating
profit has seen a 54% increase
to £16.3m.
14
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Engineering Services revenue £m
£382m
382
214
232
173
127
2010
2011
2012
2013 2014
Engineering Services operating profit £m
£16.3m
16.3
10.6
9.6
7.5
4.2
2010
2011
2012
2013 2014
Engineering Services % of Group revenue
82%
64
44
49
82
82
2010
2011
2012
2013 2014
important acquisitions will be accretive to
Renew’s Engineering Services operating
margin as we progress towards our target
of 5% within this business segment, a key
objective for the next financial year.
Our expertise is in the fit out and
refurbishment of prestigious private
residential projects, specialising in
developing engineering solutions for
major structural alterations.
Disposal
Subsequent to the year end, the Group
announced the disposal of Allenbuild
Limited, the new build affordable housing
part of the Group’s Specialist Building
business, to Places for People Group
Limited ("PFP") for a total consideration
of £2.75m payable in cash. PFP has
acquired 50% of the issued share capital
for £1.375m and will assume 100%
ownership of Allenbuild after ten
outstanding contracts, for which the
Group retains the benefit, reach practical
completion which is expected to be in
about twelve months' time.
Cash
£24m of term loans were taken out to
finance the Group’s acquisitions. At the
year end, net debt was £16.1m (2013: net
cash £2.8m), which represents only 0.85
times 2014 EBITDA.
People
The Group prides itself on providing a
safe and rewarding working environment
for its highly skilled directly employed
work force. Our results and ongoing
success are a testament to the skills,
hard work and commitment of all of the
Group’s employees and the Board would
like to take this opportunity to express
its gratitude.
Outlook
The Group enters the 2014/15 financial
year in a strong position. In Specialist
Building, the Group concentrates on
the High Quality Residential market
in London and the Home Counties.
In Engineering Services, the Group has
made excellent progress in expanding
its position as a leading provider of
engineering support services in the UK's
Energy, Environmental and Infrastructure
markets with strong organic growth
coupled with two acquisitions into new
markets. We operate in markets mainly
governed by regulation that undertake
long term programmes of essential
non-discretionary spending to maintain
critical infrastructure assets. The Group
continues to focus its activities on
these programmes which deliver good
visibility of future opportunities, margin
enhancement potential and sustainable
earnings streams.
It remains the Board's strategy to
continue to grow its Engineering
Services business, both organically
and through selective acquisitions.
The Board's ambition is to grow Group
revenue to over £500m delivering a
Group operating margin of over 4.5%
within the next three years.
The excellent organic and acquisitive
growth achieved in the year along with its
record order book gives the Board every
confidence that the Group will continue
to deliver on its strategic targets.
R J Harrison OBE
Chairman
25 November 2014
Annual Report and Accounts 2014 15
Renew Holdings plc
Strategic Report Chief Executive’s review
Developing as a leading provider
Renew has continued to enhance its market
position as a provider of multidisciplinary
Engineering Services, successfully
growing its Engineering Services both
organically and by acquisition. Delivering
long term maintenance and renewal
services across the Energy, Environmental
and Infrastructure markets, our highly
skilled, directly employed workforce
operates on the UK’s essential infrastructure
assets. Our offering is differentiated
by the promotion of our independently
branded subsidiary businesses which
are aligned to the needs of their clients.
In Specialist Building, our activity is now
primarily focused on the High Quality
Residential market in London and the
Home Counties, which continues to see
strong demand and in which we have
many years of experience and an
excellent reputation as a leading brand.
Engineering Services
Revenue in Engineering Services
increased by 65% to £382.5m (2013:
£232.4m) and accounts for 82% of Group
revenue (2013: 82%) and 88% of Group
operating profit before exceptional
items and amortisation prior to central
activities (2013: 89%), generating an
operating margin of 4.3% (2013: 4.6%).
The Engineering Services order book has
grown 20% to £361m (2013: £301m).
During the year, the Group acquired
two Engineering Services businesses
which are leading brands in their
respective markets. Clarke Telecom
Limited (“Clarke”), a wireless telecoms
infrastructure delivery business based
in Manchester, which provides specialist
services for the cellular market, was
acquired in April. Forefront Group
Limited (“Forefront”), which is based
near London, operates across the gas
network replacing strategic low and
medium pressure mains, was acquired
in August. Clients include National Grid
and Southern Gas Networks.
These acquisitions establish the Group’s
position in additional and complementary
engineering markets. Strong organic
growth has been achieved through our
service responsiveness and development
of key relationships.
Energy
The Group operates nationally in the
nuclear, traditional, renewable energy
and gas infrastructure markets.
In Nuclear, we operate across the Nuclear
Decommissioning Authority’s estate
where we are engaged on 9 sites that
command around 80% of the £3bn annual
expenditure. Over half of this spend is
allocated to Sellafield, where we have
operated for over 70 years and remain
the largest mechanical, electrical and
instrumentation employer on site. Our
work concentrates on the support and
care of operational plant associated
with waste treatment or processing,
decommissioning and clean up of
redundant facilities.
Safety achievements at Sellafield
include over 5 million man hours
worked since a Lost Time Event and
the award of Sellafield’s 2014 Resident
Engineers Safety Award for ‘Outstanding
Safety Performance’.
Work at the site has increased
substantially during the year resulting
in a 33% increase in our provision of
resources at the site. Our operations
include work on the Multi Discipline Site
Works framework where we are aligned
with the largest scope of work at the site,
production operations support.
As part of the high hazard risk reduction
operations at Sellafield, our service
provision has again increased on the
Evaporator Delta project which is now
expected to provide over £80m of work
through to its completion in 2015.
A number of frameworks have also seen
B W May
Chief Executive
Summary
> Renew has continued to
enhance its market position as
a provider of multidisciplinary
Engineering Services.
> During the year, the Group
acquired two Engineering
Services businesses which
are leading brands in their
respective markets.
> The Engineering Services order
book has grown 20% to £361m.
16
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report an increase in scope including the £26m
Bulk Sludge Retrievals framework and
the Decommissioning framework where
we are involved with some of the oldest
facilities on site.
The Infrastructure enhancement
programme at Sellafield continues
with the Site Wide Asset Care framework
where we operate as sole mechanical
and electrical partner. We also continue
to support the future Major Projects
Programme at Sellafield where we have
further developed our position as a key
strategic partner on the £1.1bn
Infrastructure Strategic Alliance
framework.
The acquisition of Forefront extends our
range of services into the specialist
gas infrastructure market. Forefront
operates for National Grid and Southern
Gas Networks on the 30/30 iron mains
replacement programme through
frameworks and also on the London
medium pressure strategic gas mains
replacement programme. Forefront has
frameworks for specialist flow stopping,
drilling and maintenance. Although
Forefront also has been part of the Group
for only a few months, opportunities for
collaborative working with other parts of
the Group have already been identified
and are being progressed.
Our work at Sellafield was recognised with
the award of a supply chain accreditation
for the second year running, demonstrating
our ability to deliver to the highest quality
standards in the nuclear industry.
Environmental
The Group operates in the water
infrastructure, flood alleviation, river and
coastal defence and land remediation
markets providing operational support
and maintenance services.
In Water, we continue to develop our
long standing relationships with our
largest clients Northumbrian Water,
Wessex Water and Welsh Water where
we deliver works under the regulated
AMP 5 programme. We operate on a
number of frameworks for Northumbrian
Water including the Major Waste Water,
Clean Water, Maintenance and Trunk
Mains Cleaning frameworks. We were
selected as one of two preferred
partners to deliver the accelerated flood
alleviation workstreams that have seen
substantial investment in the period.
We also undertake planned and
reactive maintenance, sewer lining
and infrastructure upgrades under
their Minor Works framework.
Elsewhere, at Springfields where we
have operated for 15 years, work has
commenced for Westinghouse on a
waste processing facility, following
the recent successful completion of a
large decommissioning and demolition
project at the site. We have also been
recently appointed to support reactor
outage works at the Heysham nuclear
power station. We remain committed to
developing our position as a specialist
contractor, continuing to support
proposals within the nuclear new build
market where we have initially focused
on the manufacture and supply of high
integrity fabricated components.
Our service teams deliver long term
maintenance and asset renewal services
at five of the UK’s traditional power
stations as well as progressing a number
of opportunities in the renewable energy
market including hydro schemes for
Welsh Water.
Annual Report and Accounts 2014 17
Renew Holdings plc
Strategic Report Chief Executive’s review continued
Engineering Services continued
Environmental continued
We have maintained ‘Best Performing
Contractor’ status with both Wessex
Water and Welsh Water in the period.
Wessex Water frameworks include
Workstream Partner and Minor Civils
frameworks. For Welsh Water we work
on the Pressurised Pipelines framework,
which has recently been extended for
two years, and also the Major Civil
Engineering Projects frameworks.
We have developed our relationship with
the Environment Agency with the award
of the £10m MEICA framework for the
Northern region. This exclusive framework
covers over 600 flood control and water
management sites throughout the region
and will run for 4 years to March 2018.
In Land Remediation our long term
relationship with National Grid continues
as we undertake work on established
remediation frameworks nationally. We
have recently been awarded the Land
Quality Services framework with Magnox
for the design and construction of land
remediation services on decommissioned
nuclear power generation sites across the
UK. Work is currently underway on the
Scotia Gas Networks 8 year framework
that will generate opportunities across
Scotland and the South East of England
until 2021.
Infrastructure
In the Rail sector, Renew provides off-track
asset renewal and maintenance services
nationally as well as a 24/7 emergency
services to the rail network.
During 2014, AMCO Rail has responded
to the challenges posed by the effects of
last winter’s severe weather and additional
works provided by the Government’s Fiscal
Stimulus into the rail network. This has
provided almost £65m of non-recurring
revenue in the year in addition to
underlying organic growth of 17%.
AMCO Rail is increasingly recognised by
Network Rail for its responsiveness to
short term, low cost critical tasks and
this is demonstrated by 5,000 individual
remits carried out during the year on the
Asset Management frameworks across
the network. AMCO Rail is now one of the
top 10 suppliers to Network Rail.
Our success in responding to and
managing this additional workload has
been recognised by Network Rail appointing
AMCO Rail to seven Infrastructure Projects
frameworks for Control Period 5, with an
advertised value of £450m over the next
five years.
Key projects carried out in the year
included the reinstatement of the Dawlish
Sea Wall, which was completed ahead of
schedule enabling services to resume to
Cornwall. Our specialist skills in tunnel
and shaft maintenance and refurbishment
saw us successfully complete major
schemes at Holme Tunnel and Whiteball
Tunnel, both of which were on time and
within budget.
The acquisition of Clarke takes the Group
into a new market. As a leading provider of
wireless telecoms infrastructure services,
Clarke’s clients include all of the major
wireless network operators and original
equipment manufacturers. Integration
with the Group has progressed well since
acquisition and Clarke’s order book has
grown by over 10% since acquisition.
Specialist Building
Specialist Building results have been
restated following the reclassification
of Allenbuild Ltd as a discontinued
business details of which are set
out below.
18
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Summary
Our Specialist Building business has
demonstrated its ability to deliver
consistent profits and is well positioned
with a strong order book.
In Engineering Services, our range of
capabilities and responsiveness to our
clients’ needs sees us operate on some
of the largest programmes of work
to maintain key infrastructure assets
in the UK.
We are strongly positioned in sustainable
markets which are mainly regulated and
which benefit from long term spending
programmes. This will continue to provide
opportunities for further profitable growth.
B W May
Chief Executive
25 November 2014
Specialist Building continued
An operating profit of £2.2m (2013: £1.3m)
was generated from revenue of £82.1m
(2013: £50.6m), giving a margin of 2.6%
(2013: 2.5%). Our Specialist Building order
book stands at £78.1m (2013: £62.5m).
In the High Quality Residential market in
London and the Home Counties, we have
over 50 years of experience and specialist
engineering expertise in carrying out
major structural alteration works
including extensions below the ground.
During the year, we completed projects
for private clients at Wimbledon Village
and on the Wentworth Estate, Surrey.
Work is currently under way to demolish
and reconstruct a substantial country
home in Burnham Beeches and on a
Grade II listed residence in London’s
Belgravia district.
Subsequent to the year end, we announced
the sale of Allenbuild Ltd, our subsidiary
business which focused on the new build
affordable housing market, to Places
for People Group Limited (“PFP”). PFP
has acquired 50% of the issued share
capital for £1.375m and will assume
100% ownership of Allenbuild after ten
outstanding contracts, for which the
Group retains the benefit, reach practical
completion which is expected to be in
about twelve months' time. PFP will have
the benefit of four new contracts and any
further work which is now procured.
People
Our commitment to the safety of our
employees and those who work with us
remains a priority for everyone at Renew.
The changing nature of our operations
into smaller, high volume tasks has
seen an increase in behavioural safety
training, alongside a wide range of safety
initiatives, undertaken over the year.
We are pleased to report a cumulative
reduction in our Accident Incidence Rate
of more than 90% over the last 9 years.
Annual Report and Accounts 2014 19
Renew Holdings plc
Strategic Report Financial review
Dividend growth of 39%
Summary
> A final dividend of 3.5p (2013: 2.5p)
per share brings the total for the
year to 5.0p (2013: 3.6p).
> Subsequent to the year end, the
Board reached an agreement to
sell Allenbuild Limited.
Results
Group revenue from continuing
activities was £464.5m (2013: £282.7m)
with an operating profit before tax from
continuing activities of £16.4m (2013:
£10.0m) prior to exceptional items and
amortisation charges and the loss from
the discontinued operation. A tax charge
of £3.3m (2013: £2.3m) resulted in a
profit after tax for the year of £12.8m
(2013: £7.4m) 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
activities was £10.3m (2013: £10.0m).
Restatement of 2013 results
As a result of both the adoption of IAS 19
(2011) and the treatment of Allenbuild
Limited as a discontinued business in
accordance with IFRS 5, there has been
a restatement of the 2013 results.
Discontinued operation
Subsequent to the year end, the Board
reached an agreement to sell Allenbuild
Limited to Places for People Group
Limited (“PFP”) for a total consideration
of £2.75m payable in cash. PFP acquired
50% of the equity on 31 October 2014 for
£1.375m and will acquire the balance of
the shares when ten outstanding partly
completed contracts reach practical
completion. This is expected to be in
about a year’s time. During the joint
ownership period, Renew will retain
the benefit of those contracts and
PFP will enjoy the benefit of new work
procured. Allenbuild Limited is a business
focused on the new build affordable
housing market and as such was not
core to the Group’s strategy to develop
its Engineering Services business. In
accordance with IFRS 5, the results of
Allenbuild Limited have been treated
as a discontinued business resulting
in the restatement of the 2013 Income
Statement and its disclosure in “Assets
held for Resale” on the Consolidated
Balance Sheet.
Exceptional items
Exceptional items recognised during the
year comprise £0.8m of costs incurred
in relation to the acquisitions of Clarke
Telecom Limited and Forefront Group
Limited. Additionally, £2.2m (2013: £0.5m)
of amortisation charges relating to the
intangible assets arising from the Amco,
Clarke, Lewis and Forefront acquisitions
were incurred.
Acquisitions
During the year, the Group completed the
acquisitions of Clarke Telecom Limited
and Forefront Group Limited for a combined
consideration of £32.9m inclusive of costs,
payable in cash. These acquisitions were
funded by a £24m term loan which is
repayable in equal quarterly instalments
of £1.55m, the last instalment of which is
due to be paid on 31 March 2018. £8.9m
of the Group’s own cash resources were
also deployed in these transactions.
In March 2014, the final instalment on
the Group’s previous term loan which
had been used to acquire Amalgamated
Construction Limited was repaid.
The Group’s profitability together
with further improved working capital
generation, has led to our reporting a
cash balance of £5.6m (2013: £5.3m) at
the year end. As a result, the Group’s net
debt position as at 30 September 2014
was £16.1m (2013: net cash of £2.8m).
The Group has complied with the
covenants associated with the term
loans throughout the year.
20
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Pension schemes
The IAS 19 valuation of the Lovell Pension
Scheme, which was closed to new members
in 2000, has resulted in a small accounting
surplus of £0.6m (2013: deficit of £2.8m)
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 represent
30% 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 £2.9m
per annum. The next triennial valuation is
due as at 31 March 2015.
The IAS 19 valuation of the Amco
Pension Scheme shows a surplus of
£0.6m (2013: £0.8m) 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 represent 51% 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
£0.2m per annum. The next triennial
valuation, which will be measured as
at 31 December 2013, is currently being
carried out by the scheme actuary.
As a result of the adoption of IAS 19 (2011),
approximately £0.4m of costs are now
charged to Administrative expenses
in the Income Statement. These were
previously treated as a contribution to the
pension scheme and accounted for in the
Statement of Comprehensive Income.
Taxation
The UK tax charge on profit for the year is
£3.7m (2013: £3.3m). The deferred tax charge
of £1.2m (2013: £1.2m) is wholly offset by
deferred tax attributable to the discontinued
business resulting in a tax charge on
continuing activities of £2.7m (2013: £3.1m).
This represents an effective Group tax rate
of 20.8% (2013: 23.6%). Following the sale
of Allenbuild Limited, the Group’s available
tax losses have been reduced although, due
mainly to the tax deductibility of pension
scheme contributions which are not charged
to the Income Statement, the rate of
corporation tax payable in each of the next
few years is expected to remain below the
headline rate.
Distributable profits
The distributable profits of Renew Holdings
plc stood at £27.9m (2013: £20.5m) enabling
the Board to recommend a final dividend
of 3.5p (2013: 2.5p) per share bringing
the total for the year to 5.0p (2013: 3.6p),
an increase of 39%.
J Samuel
Group Finance Director
25 November 2014
Annual Report and Accounts 2014 21
Renew Holdings plc
Strategic Report Operational review
This section looks at the
Group’s target markets and
highlights our achievements
during the year.
In this section
24 Energy
28 Environmental
32
Infrastructure
36 Specialist Building
22
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Paul Scott
Engineering Services Director
Renew concentrates on delivering Engineering Services in the
Energy, Environmental and Infrastructure markets. Our work
in areas such as rail, nuclear, water, telecoms and gas sees us
operating nationally for high profile clients where our service
teams undertake a wide range of essential maintenance and
renewal tasks, ensuring continuity of service of some of the UK’s
critical infrastructure assets.
The markets in which we operate provide the Group with good
visibility of future opportunities. The work we undertake is often
delivered through long-term framework agreements. Our position
on these frameworks, a large number of which extend over many
years, is established through our responsiveness to clients’
needs and a safe and consistent service delivery. 2014 has seen
a number of these key frameworks renewed.
We focus on our key relationships and extending our Engineering
Services capabilities to increase our opportunities in areas of
non-discretionary Infrastructure spending in the UK. We have
seen good progress in our strategy of developing Engineering
Services through 2014, where we have extended our range of
services with two complementary acquisitions in Clarke Telecom
and Forefront Group. Development of our collaborative solutions
remains a key strategic target for the coming year.
This Operational Review looks at our achievements in 2014 and
outlines our objectives for the coming year which, alongside the
Group’s strategy, gives the Group a strong platform for growth
over the medium and long term.
P Scott
Engineering Services Director
25 November 2014
Annual Report and Accounts 2014 23
Renew Holdings plc
Strategic Report Operational review – Energy
Nuclear
We deliver a range of integrated Engineering Services
to the nuclear industry. Our work concentrates on
high hazard risk reduction operations, supporting the
maintenance and decommissioning of operational plant.
Expertise
Opportunity
> Nuclear operational support and asset care
> Critical planned and reactive maintenance and renewals
> Civil, mechanical and electrical engineering services
> Nuclear decommissioning
> Specialist fabrication and manufacturing
The Nuclear Decommissioning Authority (“NDA”) is
responsible for the cleanup and waste management of the
UK’s nuclear legacy. With 17 sites nationally, the NDA’s total
planned expenditure for 2014/15 is around £3bn. Over half
of this is allocated to Sellafield where work continues to
focus on high risk and high hazard reduction operations.1
An estimated investment of around £60bn is expected in
new nuclear power stations in the UK by 2030 as most of the
existing fleet of nuclear power stations are retired.2
How we respond
Our progress in the UK nuclear market
Our operations principally focus on the ongoing programmes
of high hazard risk reduction, engineering support on the care
and maintenance of operational plant associated with waste
treatment or processing, decommissioning, demolition and
cleanup of redundant facilities where our engineering services
are delivered by our directly employed multi-skilled
operatives. We continue to differentiate ourselves through the
integration of generation, grid and decommissioning services.
> We are strongly positioned across the NDA portfolio, on 9
nuclear licensed sites, that command around 80% of the
total site expenditure.
> We remain the largest mechanical, electrical and
instrumentation employer on site at Sellafield where we
have operated for over 70 years. During the year we
increased our resources at the site, where we operate on
9 frameworks, by 33%.
> We have seen increasing workload as 1 of 3 preferred
strategic partners on the Multi Discipline Site Works
framework at Sellafield where we undertake work
packages potentially worth £280m over 4 years. We are
aligned with the largest scope of work at the site,
production operations support.
> At Sellafield our service provision has again increased
on the Evaporator Delta project which is now expected
to provide over £80m of work through to its completion
in 2015.
1,2 See page 7 for footnotes.
24
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Our progress in the UK nuclear market
> Framework activity at Sellafield includes work on the £26m
Bulk Sludge Retrievals framework recently extended by
1 year to 2015 and the Decommissioning framework where
we are involved with some of the oldest facilities on site.
> As part of the Infrastructure enhancement programme at
Sellafield we undertake work on the Site Wide Asset Care
framework as sole mechanical and electrical partner.
> We continue to support the future Major Projects Programme
at Sellafield where we have further developed our position
as a key strategic partner on the £1.1bn Infrastructure
Strategic Alliance framework.
> We have undertaken 5 million man hours since a Lost Time
Event at Sellafield where our safety achievements include
the award of the 2014 Resident Engineers Safety Award
for “Outstanding Safety Performance”.
> For the second year running we have been awarded
Sellafield’s Supply Chain accreditation demonstrating
our ability to deliver the highest quality standards in the
nuclear industry consistently.
> We continue to progress development of our position
as a specialist contractor supporting proposals within
the nuclear new build market where we have initially
focused on the manufacture and supply of high integrity
fabricated components.
> Elsewhere in nuclear, at Springfields, work is underway
for Westinghouse on a waste processing facility project
which follows the recent successful completion of a large
decommissioning and demolition project at the site where
we have operated for 15 years.
> We were recently appointed to support reactor outage
works at the Heysham nuclear power station.
> We currently operate on 5 of the 10 Magnox nuclear sites
on an Electrical, Control and Instrumentation framework.
> Successfully completed projects in the year include the
electrical overlay scheme at Dungeness ‘A’ power station
for Magnox Ltd.
Annual Report and Accounts 2014 25
Renew Holdings plc
Strategic Report Operational review – Energy continued
Traditional, renewable
and gas infrastructure
We provide long-term maintenance and asset renewal
support at many of the UK's traditional power generation
plants through established framework agreements.
Expertise
Opportunity
> Operational support and asset care in the traditional
and renewable energy markets
> Critical planned and reactive maintenance and renewals
> Civil, mechanical and electrical engineering
> Gas distribution network asset maintenance,
replacement and installation
> Specialist flow stopping, drilling and internal inspection
As demand for energy increases, it is likely that the life of some
of the UK’s existing traditional generation assets will be extended,
requiring investment in long-term maintenance programmes.
Demand for renewable energy is expected to increase
following the government's commitment to deliver 15% of the
UK’s energy consumption from renewable sources by 2020.3
As part of ongoing improvements to the gas network, the UK
is currently undertaking a number of essential gas network
asset replacement programmes. Following concerns over
iron gas mains safety, the Health and Safety Executive
has implemented the national Iron Mains Risk Reduction
Programme to replace gas mains within 30 metres of a
building by 2032 or earlier.4
How we respond
Operating at the UK’s traditional power plants, our directly
employed service teams provide long-term maintenance
and asset renewal support. Our integrated mechanical,
electrical and civil engineering solutions assist in the
continued operation of these key infrastructure assets.
We work for clients across the gas distribution network
replacing low and medium pressure and other complex
strategically important gas mains. Clients include tRIIO,
a strategic partner of National Grid, and Southern Gas
Networks. Operating as one of the major service providers
in the south of England our directly employed 350 strong
workforce repairs, replaces and maintains over 150km of
gas mains per annum.
3,4 See page 7 for footnotes.
26
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Our progress in traditional, renewable and gas infrastructure markets in the UK
> We operate at 5 of the UK’s traditional power stations for
clients E.ON, Eggborough Power Limited and SSE where
our service teams deliver long-term maintenance and
asset renewal services.
> We currently undertake 150km of gas main replacement
per year across Southern Gas Network and National Grid's
distribution networks as part of the 30/30 iron mains
replacement programme.
> Our operations in both the on and offshore wind energy
> Appointed on stage 1 of a 15 year strategic replacement
market continue to progress including projects for offshore
repairs and a recently secured manufacturing opportunity.
programme of large diameter medium pressure gas mains
in central London.
> We continue to support the development of hydro schemes
> Additional frameworks with tRIIO cover specialist flow
for a number of clients including Welsh Water.
stopping, drilling and maintenance.
> We successfully extended our range of services into the
specialist gas infrastructure market with the acquisition
of Forefront Group.
> We also undertake emergency leakage repairs for National Grid.
Annual Report and Accounts 2014 27
Renew Holdings plc
Strategic Report Operational review – Environmental
Water
The Group has extensive expertise in water infrastructure
development and maintenance, flood alleviation and river
and coastal defences where a large portion of work is
procured under long-term framework agreements, many
of these with repeat clients.
Expertise
Opportunity
> Operational support and asset care to the water industry
> Critical planned and reactive maintenance and renewals
> Civil, mechanical and electrical engineering
> Maintaining strategic water mains and main drainage
> Clean and waste water rehabilitation infrastructure
> Flood alleviation and attenuation
> Port, harbour and sea defences
UK water companies, regulated by the Water Services
Regulation Authority (“Ofwat”), undertake large
scale investment programmes to maintain and renew their
water and sewerage infrastructure assets. Work on Asset
Management Programme 6, the next 5 year regulatory
period in the water industry, is due to commence in April
2015 and will focus on maximising the efficient use of
existing assets through integrated solutions.
The UK government has made an unprecedented six year
commitment to invest record levels in improving
flood defences up to 2021.5
How we respond
As a multidisciplinary service provider we undertake a wide
range of water infrastructure development work mainly
under long-term framework agreements, many of these with
repeat clients in the North East, Wales and the South West.
We partner on frameworks delivering improvements to the
water infrastructure network where our work includes
mains replacement, upgrades to the sewer network and
storm water retention schemes.
The Group has specialist capabilities in innovative trunk
mains cleaning of the underground water pipe network.
Work is carried out by our highly trained directly employed
workforce utilising our extensive specialised plant fleet.
5 See page 7 for footnotes.
28
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Our progress in the UK water market
> We continue to develop long standing relationships
with Northumbrian Water, Wessex Water and Welsh Water,
for which we deliver works under the regulated
AMP 5 programme.
> We operate on a number of frameworks for Northumbrian
Water including the AMP 5 Major Waste Water framework and
Clean Water frameworks as well as on non-discretionary
Maintenance and Trunk Mains Cleaning frameworks.
> During the year we were selected as one of two preferred
partners by Northumbrian Water to deliver the
accelerated flood prevention work streams which have
seen substantial investment in the period.
> Work continues on the Framework 4 Minor Works
framework which sees us undertake planned and reactive
maintenance, sewer lining and infrastructure upgrades for
Northumbrian Water.
> Innovation on Northumbrian Water’s Trunk Mains Cleaning
frameworks including ice pigging techniques has delivered
time and cost efficiencies.
> Work continues to develop our position on Northumbrian
Water’s AMP 6 programme of works, having worked on all
previous AMP programmes.
> The integration of Lewis Civil Engineering, acquired in
2013, has been very successful and extends our range
and capabilities in the water market.
> Lewis also adds a particular specialism to the Group with
their expertise in trenchless technology.
> We have maintained “Best Performing Contractor” status
with both Wessex Water and Welsh Water in the period.
> Successfully completed projects include a major project
at Taunton for Wessex Water.
> Wessex Water frameworks include Workstream Partner
and Minor Civils.
> Frameworks for Welsh Water include the Pressurised
Pipelines framework, recently extended for two years,
and the Major Civil Engineering Projects frameworks.
> We have developed our relationship with the Environment
Agency with the successful award of the £10m MEICA
framework for the northern region. This exclusive framework
covers over 600 flood control and water management sites
throughout the region and will run for 4 years to March 2018.
Annual Report and Accounts 2014 29
Renew Holdings plc
Strategic Report Operational review – Environmental continued
Land remediation
Renew is a leading provider of sustainable land remediation
services nationwide with over 30 years’ expertise in specialist
soil and groundwater remediation and associated earthworks.
Expertise
Opportunity
> Operational support and asset care in the land
remediation market
> Critical planned and reactive maintenance and renewals
The Homes and Communities Agency (“HCA”) is responsible
for the disposal of publicly owned land, including former
industrial land transferred from the former Regional
Development Agencies.
> Civil, mechanical and electrical engineering
> Soil and groundwater remediation
The HCA Corporate Plan 2014–2018 includes specific
targets in relation to the use of such legacy sites and
funding arrangements to achieve economic growth, and
to provide suitable and sufficient housing stock across
the UK and to stimulate strategic inward investment.6
How we respond
We are a leading provider of sustainable land remediation
services nationwide, developing and deploying a range of site
based remediation techniques. We work to remove costs
associated with the redevelopment of previously used land.
Our land remediation services concentrate on the enabling and
infrastructure works to allow the HCA targets to be achieved. Our
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.
6 See page 7 for footnotes.
30
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Our progress in the UK land remediation market
> Successful projects in the period include the delivery of
a second major Commonwealth Games scheme for Clyde
Gateway at Shawfields throughout 2013/14 involving the
in situ treatment of contaminated ground water.
> We have been awarded the Land Quality Services
framework with Magnox for the design and construction
of land remediation services on decommissioned nuclear
power generation sites across the UK.
> We continue to develop our opportunities in Scotland.
During 2014 we opened an office in Cumbernauld to
further develop our presence in this region.
> Our long-term relationship with National Grid continues
as we undertake work on a number of established
remediation frameworks nationally.
> Project awards in the period include schemes at Barnsley
> Work is currently underway on the Scotia Gas Networks
and Preston under the National Grid’s Gasholder
Dismantling and Infilling framework which provides
opportunities to 2016.
8 year framework that will generate opportunities across
Scotland and the South East of England until 2021.
> A number of collaborative projects between Group
businesses were undertaken in the year including scour
protection schemes.
Annual Report and Accounts 2014 31
Renew Holdings plc
Strategic Report Operational review – Infrastructure
Rail
Our specialist skills combined with our 24/7 emergency
response services are undertaken nationally by our
directly employed multi-skilled local delivery teams.
Expertise
Opportunity
> Off-track operational support and asset care
> Critical planned, reactive and 24/7 emergency
maintenance and renewal services
> Civil, mechanical and electrical engineering
> Asset renewal and refurbishment
> Tunnel and shaft refurbishment
> Bridges, structures and earthworks
> Moving structures
Demand for rail services is anticipated to grow by more
than 30% over the next decade.
To meet this challenge Network Rail are investing around
£38bn over the next five years to 2019 (CP5) on running,
maintaining and improving Britain’s railway which includes
some 30,000 bridge, tunnel and embankment assets.7
How we respond
As part of this long-term programme of works, our business
is closely aligned to deliver a high volume of small value
tasks across the rail network including civil, mechanical
and electrical engineering and maintenance services
nationally in this regulated market.
Our strength lies in our flexibility and ability to deliver a
variety of integrated and sustainable solutions for our
clients who include Network Rail, train operating companies
and major contractors within the rail industry.
Our specialist skills combined with our 24/7 emergency
response services are undertaken by our directly employed
multi-skilled local delivery teams.
7 See page 7 for footnotes.
32
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Our progress in the UK rail market
> We have seen another record year for our work in Rail with
a substantial increase in activity across the entire work
portfolio with Network Rail.
> We secured a position on Network Rail’s Infrastructure
Projects frameworks under CP5 for the Central, North East
and Scotland regions which will see us deliver an extensive
portfolio of renewals, maintenance and enhancements, with
an advertised value of £450m, over the next 5 years.
> We continue to align our business with our largest client
Network Rail’s operational structure, resulting in
increased opportunities.
> Workload increased on our national Asset Management
frameworks for Network Rail during 2014 where we undertook
approximately 5,000 individual remits over the period.
> We undertook work on the Building and Civils Delivery
Partnership for Network Rail across all 4 Infrastructure
Projects delivery regions.
> As part of Control Period 4 we secured a large portion
of the investment on the Economic Stimulus Programme,
a government initiative to stimulate the economy in
various regions.
> Working nationally across the rail network our local delivery
teams continue to provide a 24 hour emergency response
service for Network Rail which has seen substantial demand
in the period including emergency works at Dawlish in Devon
where storms caused extensive damage to the track and
surrounding infrastructure.
> Our specialist skills in tunnel and shaft maintenance
and refurbishment saw us successfully complete major
schemes at Holme Tunnel and Whiteball Tunnel for
Network Rail.
Annual Report and Accounts 2014 33
Renew Holdings plc
Strategic Report Operational review – Infrastructure continued
Wireless telecoms
We provide Engineering Services encompassing all
aspects of wireless telecoms infrastructure delivery
including site acquisition and design, construction,
installation and site optimisation as well as site
maintenance and decommissioning.
Expertise
Opportunity
> Operational support and asset care in the UK wireless
telecoms market
> Critical planned and reactive maintenance and renewals
> Civil, mechanical and electrical engineering
> Wireless telecoms installations
> Specialist indoor wireless coverage solutions
> Special events temporary cellular network coverage
> Provision of 2G, 3G, 4G and Wi-Fi technologies
Research undertaken for the market regulator, Ofcom,
estimates that demand for mobile data could be as much as
80 times higher than today by 2030 as the market continues
to expand, with growth largely driven by the increasing use
of mobile devices and internet services.
As demand for service on the existing mobile network
infrastructure increases, substantial investment
is expected to add new infrastructure, upgrade existing
networks and decommission redundant assets.
Ofcom set a 2017 deadline for network operators
to provide comprehensive 2G, 3G and 4G coverage
across the country.8
How we respond
We provide specialist wireless infrastructure services for
the UK’s cellular network operators and major network
equipment manufacturers where our work includes the
acquisition, design and construction of sites, the
installation and commissioning of the equipment and
connection to the networks. We undertake all aspects of
site maintenance and decommissioning with the majority of
work contracted through framework agreements.
8 See page 7 for footnotes
34
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Our progress in the UK wireless telecoms market
> The acquisition of Clarke Telecom expands our range of
services into the wireless telecoms infrastructure market.
> We work on the EE network where we continue with the 2G
and 4G upgrade rollout of low capacity sites.
> As a leading provider of wireless telecoms infrastructure
> Work continues on the roll-out of Ericsson 4G equipment
services we remain one of the top performing contractors with
all of our customers such as Cornerstone Telecommunications
Infrastructure Ltd and Mobile Broadband Network Limited,
joint ventures between the network operators which see them
consolidate their UK asset portfolios carrying the O2, 3,
Vodafone and EE networks.
to network operators' main sites in London.
> We are sole supplier for 4G overlay for Ericsson as the only
approved service provider.
Annual Report and Accounts 2014 35
Renew Holdings plc
Strategic Report Operational review – Specialist Building
High quality residential
Recognised as a leading quality provider in the fit-out and
refurbishment of prestigious private residential projects
in and around London with specialist skills in developing
engineering solutions to both extend properties below
ground and to carry out major structural alterations.
Expertise
How we respond
> Refurbishment of prestigious private residences
> Specialist temporary works design and engineering
> Major structural works both above and below the ground
Opportunity
The high quality residential market in London and the Home
Counties remains strong with improved visibility. We have
particular specialist engineering expertise in carrying out
major structural alteration works.
This market requires knowledge and experience. Walter Lilly
has a strong brand and an excellent reputation developed
over many years in this market.
We focus on the high quality residential market in London
and the Home Counties. We are recognised as a leading
quality provider with expertise in 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 and
carrying out major structural alterations. Our other
services include design management, planning, traffic
management and logistics support as well as expertise
in specialist finishes.
Our progress in the UK high quality residential market
> Completed projects include a 4 storey extension project in
Wimbledon Village and a £9m project on the Wentworth
Estate, Surrey both for private clients.
> A £6m residential fit out project for a private client
was also completed at the Manresa Road Development
in Chelsea.
> Work is under way on a £6.7m project to demolish and
reconstruct a substantial country home in Burnham
Beeches and on an £8.2m Grade II listed residence in
London’s Belgravia district to consolidate two apartments.
> We have secured in excess of £60m of projects for the
2014/15 period.
36
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Annual Report and Accounts 2014 37
Renew Holdings plc
Strategic Report Board approval
This Strategic Report was approved by the Board on 25 November 2014 and is signed on its behalf by:
B W May
Chief Executive
25 November 2014
38
Renew Holdings plc
Annual Report and Accounts 2014
Strategic Report Corporate Governance
Corporate social responsibility
Committed to our social and
environmental responsibilities
We balance our operations with consideration
for our environment and the communities in
which we operate.
Renew’s corporate social responsibility in 2014
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 integral to the work we undertake.
Community engagement and charitable giving
Our businesses recognise the importance
of becoming valued members of the
communities in which they operate and
our teams work hard to engage with local
communities and build relationships. The
impact of our work on the local community
is carefully considered in a project's design
and planning stages with consultation and
communication undertaken as necessary.
Many of our sites use channels such as
notice boards and newsletters to keep local
people informed.
Getting involved in the community extends
beyond that of our commercial operations.
During the year our businesses have been
involved with many schemes, volunteering
both time and resources as well as financial
assistance to various community projects.
At VHE, the Shawfields project team in
Scotland helped a local school by installing
foundation pads for a new school cabin. VHE
also sponsored Hoyland Magpies under-11
football team in the year.
Clarke Telecom has sponsored a number of
local sports groups who provide activities
and learning opportunities within the
community as well sponsoring kit for the
AFC Oldham Ladies 2013–14 season.
Further afield, a number of graduates and
trainees from Walter Lilly took part in the
“All Out Africa: Build a Future” project
where volunteers travel to Swaziland,
South Africa, to help rural communities
undertake building projects.
Shepley Engineers supports a range of
community schemes in Cumbria as well as
volunteering apprentices to work on projects
for the Calvert Trust. Also supporting the
Calvert Trust, Seymour completed the 2014
“Kielder Quest”, an annual corporate
fundraiser where the team competed in a
series of physical and mental challenges
against other organisations from the region.
Britannia Construction signed up to the
Armed Forces Corporate Covenant where
businesses show their support for the
armed forces community. Volunteers from
Seymour's Trunk Mains Cleaning team as
part of Northumbrian Water’s “Just an hour”
initiative, worked on a scheme to assist in
the cleanup of Sugley Dene in Newcastle
upon Tyne.
Many of our businesses undertook
fundraising work for their chosen charities
during the year. At Walter Lilly, staff and
consultants participated in a Cyclothon
event raising money for the Butterfly Tree
Children’s Charity and the Rugby Football
Union Injured Players Foundation. At VHE
employees raised money for a number
of charities including the Macmillan
Charitable Trust.
Shepley Engineers supported the
Cumbria Community Foundation that
raises money to help improve the quality
of life for disadvantaged people in the
local community. Britannia Construction
supported the Milestone School in
Gloucester, a community special school
that provides for children with special
educational needs, as well as GEAR Projects,
a charity helping homeless people in the
Gloucester area.
As corporate partner to the Hartlepool
and District Hospice, Seymour organised
a number of fundraising events including
a charity ball and a gruelling 2 day, 153 mile
coast to coast cycle ride from Cumbria to
Hartlepool. Clarke Telecom supported
Children In Need, raising money through
cake bakes and “Pudsey Email Bingo” as well
as supporting Dr Kershaw’s Hospice, a local
charity that provides a specialist care facility
for adults with life limiting illnesses. At AMCO,
site teams raised money for various charities
throughout the year including Help for
Heroes. Lewis participates in the "Wessex
for West Africa" initiative, a scheme designed
to raise money for WaterAid.
Other charities supported across the
Group in the year include the British
Heart Foundation, Guide Dogs, Royal
National Lifeboat Institution, Yorkshire
Air Ambulance, Bradford Toy Library and
Resource Centre and Ilkley Candlelighters.
39
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance Corporate social responsibility continued
Corporate social responsibility continued
Safety
Our commitment to improving the safety
performance of our operations continued
throughout 2014 and remains a key focus
for the Group. Ensuring the safe working
practices of our employees, subcontractors
and those who work with us underpins the
work we undertake and 2014 saw us
consolidate a nine year improvement in our
accident incidence rate to over 90%.
Safety is managed across Renew by the
Safety and Environmental Management
Group which co-ordinates activities and
liaises with our team of locally based safety
advisors. Working as part of an overall safety
team our advisors are encouraged to share
specialist knowledge and best practice
from their individual, often unique, working
environments. One of the most challenging
areas the Group operates in is the nuclear
environment. We have completed over
5 million man hours of operations at the
Sellafield Site in Cumbria since a lost time
accident. Safety achievements were
recognised by Sellafield with the award of
the 2014 Resident Engineers Safety Award
for “Outstanding Safety Performance” to our
subsidiary, Shepley Engineers. Elsewhere
we have undertaken 11 years at Magnox
sites in the UK and 15 years on E.ON UK sites
without a lost time accident.
The ongoing work to improve our safety
performance includes various initiatives
which reflect the specialist environments
in which our businesses operate. The
changing nature of our activities, with an
increase in smaller teams often working
remotely, has been recognised by an
increased emphasis on behavioural safety
training during the year. Schemes are
designed to support the development
of our safety culture and encourage
open discussion within the business,
helping to identify where improvements
can be achieved.
Examples of our safety initiatives include
the continual monitoring of sites through
cross business inspections and audits.
Our businesses undertake safety
workshops and campaigns such as our
safety whiteboard and “You said, we did”
schemes. Working closely with our client,
our rail business has adopted Network Rail’s
“life saving rules” campaign as part of its
safety culture. We implement ongoing
programmes of safety and awareness
training for employees and personnel
who work alongside us. A number of our
subsidiaries also present safety awards
annually within their businesses to ensure
safety remains the top of everyone’s agenda.
It is important our subcontractors are
engaged with our safety objectives and
we work closely with them to align our
safety cultures. Initiatives include our
supplier safety forums which have been
ongoing during 2014.
Many of our businesses continued to
be accredited and approved with various
health and safety schemes including the
Contractors Health and Safety Assessment
Scheme, ConstructionOnline and
SAFEContractor.
92%
Cumulative reduction in
accident incidence rate
over the last 9 years
5 years
since a lost time
accident at Sellafield
Environment and sustainability
We are committed to considering
the environment in which we operate.
We develop and apply systems of
environmental management as an
integral part of our operational practice
alongside management reporting and
control procedures. We work with
industry bodies, business partners
and other organisations to promote
environmental care, increase our
knowledge and disseminate best
practice within our businesses.
Our business’ environmental management
systems provide a framework for establishing
and reviewing objectives, monitoring and
communicating our requirements as well
as monitoring our environmental impact
and are regularly assessed across all
levels of our business. Environmental
impacts such as the disposal of waste
to landfill and the release of carbon
emissions are measured and managed.
Innovative working practices such as the
use of “emissions buster” technology to
reduce the use of generators and fuel on
site with the automatic charging of battery
packs to deliver power to site systems at
night, produce efficiencies as well as
quieter nights for local residents.
Schemes designed to encourage our
employees and subcontractors to adopt
sound environmental understanding and
practices use a mixed programme of
training and awareness which aims to instil
behavioural change. Internally within our
business, examples include initiatives to
reduce emissions through the hire, lease
and procurement of more efficient plant,
equipment and motor vehicles, and through
the use of energy from renewable sources
within our offices. Externally, schemes
include the assessment of subcontractors
where performance against environmental
targets are measured. All our businesses
systems are accredited to ISO:14001.
“ We develop and apply
systems of environmental
management as an integral
part of our operational
practice alongside
management reporting
and control procedures.”
40
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance “ Many of our businesses
demonstrate sustainable
working practices
employing local people
on their projects.”
Employment and training
Our businesses provide a range of
training and employment opportunities
including occupational and professional
apprenticeships, scholarships, work
experience and management training
programmes in partnership with the local
communities in which they operate.
VHE offers employment to a number
of geo-environmental and quantity
surveying students during their placement
year as well as apprenticeships.
Recognising the need for investment
in traditional electrical and mechanical
engineering skills, Shepley Engineers
and AMCO continue to extend their craft
apprenticeship training programmes.
Walter Lilly remains committed to
encouraging young people into the
industry and has now been successfully
sponsoring students from Loughborough
University for over 15 years; disciplines
include design management,
construction management and quantity
surveying. Walter Lilly also provides work
experience opportunities for year 11 and
12 pupils from three local schools in the
Croydon area.
Britannia Construction undertakes civil
engineering apprenticeships, offering
formal training to develop industry skills
and experience.
Seymour continues as part of a
memorandum of understanding between
St. Hild’s School, Hartlepool College of
Further Education and Construction
Skills that supports pupils and staff
through placement and promotes
civil engineering. Seymour has also
seen 9 engineers successfully complete
the Institute of Civil Engineering
Technician qualification.
At VHE and Clarke Telecom, employees
undertake ongoing programmes of
training including specialist equipment
training relevant to their site experience.
Awards
Royal Society for the Prevention of Accidents (“RoSPA”)
> VHE awarded a RoSPA President's Award for the third year
running following twelve consecutive Gold awards.
> PPS Electrical Ltd awarded a President’s award
in recognition of achieving 14 Gold awards.
> Shepley Engineers awarded a RoSPA sector commendation.
> West Cumberland Engineering awarded a second RoSPA
Gold award.
> Britannia Construction awarded a Gold Medal in recognition
of achieving 5 consecutive Gold awards.
Other awards
> A team which included Seymour and a number of
Northumbrian Water suppliers, took the top award at the
Institute of Civil Engineers’ North East Robert Stephenson
Awards in the Under £4m category for a project at Barkers
Haugh sewage treatment works in Durham.
> PPS Electrical Ltd was awarded the 2014 Sellafield Resident
Engineers Safety award for “outstanding safety performance”
at the Sellafield site in Cumbria.
> Clarke Telecom has won a prestigious British Safety Council
International Safety Award for 2014. This award is given to
organisations in recognition of their proven commitment to
workplace health and safety.
> Lewis Civil Engineering was presented with a Highly
Commended Award for Best Innovative Idea at the Dwr
Cymru Welsh Water Occupational Health and Safety
Conference 2014.
> AMCO’s Holme Tunnel project won the “Civil Engineering
Achievement of the Year” award at this year’s prestigious
National Rail Awards.
> Seymour won the customer focus category at Northumbrian
Water’s “Going the Extra Mile” Awards 2014 for the Benfieldside
Road Flood Protection Scheme in Consett.
> AMCO was awarded Network Rail's Star Lite award for a
pumping station project in Sudbrook. The award recognises
high levels of health, safety and environmental risk control.
41
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance Directors’ report
The Directors present their report and the audited accounts for the year ended 30 September 2014.
Principal activities
For the year ended 30 September 2014 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
Strategic Report and the Financial Review. A list of the principal operating subsidiaries of the Group as at 30 September 2014 is listed
in Note R to the Company’s financial statements.
Results and dividends
The Group profit for the year after accounting for discontinued operations was £5,182,000 (2013: £8,472,000). The Directors
recommend the payment of a final dividend on the Ordinary Shares of 3.5p (2013: 2.50p) giving a total for the year of 5.0p
(2013: 3.60p).
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 Strategic Report and is incorporated into this report by cross reference.
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 2014, £3,868,000 (2013: £4,325,000) 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.
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.
42
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance Employees continued
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 2014, 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 39 to 41.
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, 69, 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, 54, 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
non-executive Chairman of entu (UK) plc and a non-executive director of Vertu Motors plc and Boohoo.com plc.
Roy Harrison OBE – Director, 67, 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.
43
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance Directors’ report continued
Executive Directors
Brian May – Director, 63, 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.
Paul Scott – Director, 50, was appointed to the Board as Engineering Services Director on 21 July 2014. Paul has been with the Group
for sixteen years, serving as Managing Director of Shepley Engineers Limited for seven years before taking up his current position in
July 2013 prior to joining the Board.
John Samuel – Director, 58, 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.
Brian May 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. Additionally, Paul Scott, who was
appointed as a Director with effect from 1 July 2014, seeks reappointment at the first AGM since his appointment. The Board
recommends the reappointment of Paul Scott and considers that he brings considerable operational and management
experience to the Group’s business.
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 48. No Director has any interest in any other Group company. Details of the Directors’ remuneration and service
contracts appear on pages 46 and 47.
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
Investec Wealth & Investment Limited
Number
of ordinary
shares
9,574,560
7,265,370
2,800,783
2,503,296
Percentage
of issued
share capital
15.56%
11.81%
4.55%
4.07%
Share capital
As at the date of this report, the total number of shares in issue (being ordinary shares of 10p each) is 61,517,948.
During the year, the Company has not bought back any of its own shares. 114,280 new ordinary shares of 10p each were issued at
52.5p 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 reappoint KPMG LLP as Auditor to the Group and to authorise the Directors
to determine their remuneration.
Approval
The Board approved the Report of the Directors on 25 November 2014.
By Order of the Board
J Samuel FCA
Company Secretary
25 November 2014
Company number 650447
44
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance Directors’ remuneration report
The Directors present the Directors’ Remuneration Report (the “Remuneration Report”) for the financial year ended 30 September 2014.
As an AIM listed company, Renew is not required to prepare this Remuneration 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 seek to follow them to the extent considered relevant for an AIM listed company. There are improved and extended
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.
The Board consults with major shareholders when any significant change in the structure or scale of directors’ remuneration is
being considered. No material matters have been raised by shareholders relating to directors’ remuneration during the year.
At the last general meeting, votes on the advisory resolution relating to the Remuneration Report were cast as follows.
In favour
– 4,885,504 (99.7%)
Against
– 16,618 (0.3%)
Total votes cast – 4,902,122 (100%)
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 those 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 and benefits;
>> annual bonus awards;
>> long-term equity incentive plans; and
>> pension arrangements.
Basic salary and benefits
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.
45
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance Directors’ remuneration report continued
Remuneration policy continued
Annual bonus awards
It is the Company’s policy to provide a bonus incentive scheme for Directors and senior executives of the operating companies,
linked directly to the performance of the businesses for which they are responsible. In the case of Executive Directors, these relate
to the performance of the Group as a whole. All performance criteria are subject to approval by the Remuneration Committee at the
beginning of a year and all payments are made only when approved by the Remuneration Committee.
Details of the Annual Bonus Scheme for the year under review and the following year are set out below.
Long-term 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 and to align a material
part of a Director’s remuneration more closely with shareholders.
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).
The ESOS and the Renew Savings Related Share Option Scheme were approved at an EGM held on 11 March 2004. There are no
options outstanding under either scheme. The Remuneration Committee does not currently intend to grant any further options
under the ESOS or the Renew Savings Related Share Option 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.
Remuneration for the year ending 30 September 2014
Service contracts and letters of appointment
The Company’s policy is for all of the Executive 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. All non-executive Directors are subject
to re-election every 3 years.
The service contracts of the Directors, who served during the year ended 30 September 2014, include the following terms:
Executive/Non-executive
Date of contract
Unexpired term
Notice period (months)
Non-executive
1 February 2009
Rolling one month
Non-executive
1 September 2008
Rolling one month
Non-executive
1 June 2011
Rolling one month
Executive
Executive
Executive
20 June 2005
Rolling one year
1 July 2014
Rolling one year
17 May 2006
Rolling one year
1
1
1
12
12
12
Directors
R J Harrison
J Bishop
D M Forbes
B W May
P Scott
J Samuel
46
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance Directors’ remuneration
Information is provided below for Directors who served during the financial year and as at 30 September 2014:
Executive Directors
B W May
P Scott
J Samuel
Notes
1,2,3,4
2,3,4,5
2,3,4
Non-executive Directors
R J Harrison
J Bishop
D M Forbes
Notes:
Total emoluments
Total emoluments
Salary/fees
£000
303
33
233
58
31
31
Bonuses
£000
Benefits
£000
Pension
£000
303
19
233
—
—
—
71
2
56
—
—
—
—
8
—
—
—
—
2014
£000
677
62
522
1,261
58
31
31
2013
£000
556
—
439
995
57
31
31
1,383
1,114
1. The highest paid Director for 2014 and 2013 was B W May who received emoluments of £677,000 (2013: £556,000).
2. Benefits include car allowances and certain medical cover for the Director and immediate family.
3. B W May and J Samuel received payments amounting to 15 per cent of their basic salary, in lieu of Company pension
contributions. These were paid through payroll and taxed as salary and are included in Benefits above. The Company pays
15% of P Scott’s basic salary into his personal pension plan.
4. Bonuses were earned by B W May, P Scott and J Samuel during the current financial year and will be paid in the year ending
30 September 2015. P Scott was not a participant in the Executive Directors’ bonus incentive scheme for the year ended
30 September 2014 and the bonus shown above is related to his former position as Managing Director of one of the Group’s
operating subsidiaries.
5. P Scott was appointed as a director with effect from 1 July 2014 and so emoluments shown above represent the three month
period ended 30 September 2014.
Annual bonus awards
The Company provides a bonus incentive scheme for Executive Directors linked to the performance of the Group.
At the beginning of each year, the Remuneration Committee agrees 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 and disposals during the year and other items as they believe are necessary.
At the beginning of the year ended 30 September 2014, the Remuneration Committee agreed a target for operating profit
before exceptional items for the Group based on the structure of the Group on that date of £12,600,000. The operating profit before
exceptional items for the Group, adjusted to remove distortions caused by acquisitions and disposals during the year, exceeded the
set targets by in excess of 30 per cent. Accordingly, under the terms of the scheme, the Executive Directors are entitled to receive
an annual bonus equal to the maximum bonus of 100 per cent of salary.
Long-term equity incentive plans
The market price of the Company’s shares at 30 September 2014 was 301.5p and the range of market prices during the year was
between 136.5p and 303.5p.
Information is provided below for Directors who served during the financial year and as at 30 September 2014:
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
J Samuel
Exercisable between
2 March 2015 &
1 March 2022
Exercisable between
21 December 2015 &
20 December 2022
Exercisable between
3 January 2017 &
2 January 2024
240,000
160,000
228,560
171,440
140,647
112,518
Performance criteria for the vesting of the share options under the LTIP are set out in the Remuneration Policy above and in Note 20
to the accounts.
No options granted under the LTIP vested during the year.
47
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance Directors’ remuneration report continued
Directors’ pension information
No Director had pension entitlements under the Company’s defined benefit pension scheme 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 15% of their basic salary in lieu of pension contributions from the Company. The Company
pays 15% of P Scott’s basic salary into his personal pension scheme.
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.
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 2014 as follows:
R J Harrison
J Bishop
D M Forbes
B W May
P Scott
J Samuel
Ordinary Shares of £0.10 each
30 September 2014
30 September 2013
150,000
10,000
20,000
844,193
—
150,000
10,000
20,000
844,193
—
240,548
240,548
Remuneration for the year ending 30th September, 2015
Basic salary and benefits
The basic salaries of B W May, J Samuel and P Scott have increased by 3.5 per cent to £313,000, £241,000 and £207,000 respectively
with effect from 1 October 2014. The level of increase in very closely aligned to the average annual pay award across the Group
as a whole excluding rises for promotions or other changes in responsibility.
There have been no material changes in the benefits which the Directors are entitled to receive.
Annual bonus awards
The annual bonus scheme for the year ending 30 September 2015 has been agreed. The structure of the scheme is similar to the
scheme for the previous year as set out above, in all material respects (except for the targets). Executive Directors will therefore be
entitled to receive a bonus of 50 per cent of their basic salary if the Group achieves target operating profit and a maximum of 100
percent of their basic salary if the Group achieves 130 per cent of target operating profit.
Long-term equity incentive plan.
The Remuneration Committee have made annual awards under the LTIP since it was set up in 2012. Each award has been made shortly
after the publication of the Company’s annual results. It is expected that this will continue in the absence of unforeseen circumstances
and that the next award will be announced shortly. Awards are limited in amount to 100 per cent of a Directors basic salary, unless the
Remuneration Committee believe there are exceptional reasons that justify exceeding that limit. The first tranche of options granted
under the LTIP, detailed above, will vest during the coming year subject to the performance criteria contained therein.
Approval
The Directors’ Remuneration Report was approved by the Board on 25 November 2014 and signed on its behalf by:
D M Forbes
Chairman of the Remuneration Committee
25 November 2014
48
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance 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, two Executive Directors and two
independent non-executive Directors. Brief biographies of the Directors are given on pages 43 and 44. 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.
Although the Board believes that Mr Harrison acts as an independent director, he 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 page 45.
The Nominations Committee, which comprises R J Harrison, J Bishop, D M Forbes and B W May, 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 any two of the
Executive Directors as determined by the Board as appropriate and considers individual business matters, which have been
specifically delegated to it by the Board.
49
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance Corporate governance continued
Internal controls
Throughout the financial year ended 30 September 2014 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, other than as disclosed above. 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 seven years and
including 2014, 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 Registrars plc.
Annual General Meeting
The AGM will be held on 28 January 2015, 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. 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 25 November 2014.
By Order of the Board
J Samuel
Company Secretary
25 November 2014
50
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance Statement of directors’ responsibilities
in respect of the Strategic Report, the Annual Report and financial statements
The Directors are responsible for preparing the Strategic Review, 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.
51
Renew Holdings plcAnnual Report and Accounts 2014Corporate Governance 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 2014 set out on pages 53 to 85.
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 51, 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 2014
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 Strategic Report and 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.
Iain Moffatt (Senior Statutory Auditor)
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 The Embankment
Neville Street
Leeds
LS1 4DW
25 November 2014
52
Renew Holdings plcAnnual Report and Accounts 2014Accounts Group income statement
for the year ended 30 September
Before
exceptional
items and
amortisation
of intangible
assets
2014
£000
464,474
(411,413)
53,061
(36,623)
16,438
182
(427)
(87)
Exceptional
items and
amortisation
of intangible
assets
(see Note 3)
2014
£000
—
—
—
(3,055)
(3,055)
—
—
—
Before
exceptional
items and
amortisation
of intangible
assets
2013
£000
Exceptional
items and
amortisation
of intangible
assets
(see Note 3)
2013
£000
Total
2014
£000
464,474
282,749
(411,413)
(247,427)
53,061
(39,678)
13,383
182
(427)
35,322
(25,286)
10,036
25
(362)
(87)
43
15,412
(11,141)
4,271
(968)
3,303
—
—
—
Total
2013
(restated *)
£000
298,161
(258,568)
39,593
(26,254)
13,339
25
(362)
43
16,106
(3,325)
(3,055)
611
13,051
(2,714)
9,742
(2,315)
3,303
(760)
13,045
(3,075)
12,781
(2,444)
10,337
7,427
2,543
9,970
(5,155)
(1,498)
5,182
16.83p
16.59p
8.44p
8.32p
8,472
16.62p
16.45p
14.12p
13.98p
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 operations
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
Note
2
3
4
4
4
6
3
8
8
8
8
* The prior year income statement has been restated following the reclassification of a discontinued business (see Note 3), and the impact of IAS 19
(2011) on administrative expenses and other finance income (see Note 2).
53
Renew Holdings plcAnnual Report and Accounts 2014Accounts 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
2014
£000
5,182
1,068
(214)
854
1
1
2013
£000
8,472
(6,770)
1,429
(5,341)
(24)
(24)
6,037
3,107
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
At 1 October 2012
5,990
5,893
3,896
Transfer from income statement for the year
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
£000
775
£000
289
101
(24)
Retained
earnings
£000
(7,949)
8,472
Total
equity
£000
8,894
8,472
(1,917)
(1,917)
150
101
(24)
(6,770)
(6,770)
1,429
1,429
At 30 September 2013
6,140
5,893
3,896
751
390
(6,735)
10,335
Transfer from income statement for the year
Dividends paid
New shares issued
Recognition of share based payments
Exchange differences
Actuarial gain recognised in pension schemes
Movement on deferred tax relating to the pension schemes
12
49
(98)
1
5,182
5,182
(2,461)
(2,461)
61
(98)
1
1,068
1,068
(214)
(214)
At 30 September 2014
6,152
5,942
3,896
752
292
(3,160)
13,874
54
Renew Holdings plcAnnual Report and Accounts 2014Accounts
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
Assets held for resale
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
* Details of the restated balance sheet are set out in Note 28.
Approved by the Board and signed on its behalf by:
R J Harrison OBE
Chairman
25 November 2014
Note
9
9
10
24
6
11
12
9
14
16
17
24
6
18
16
15
17
18
20
21
21
21
21
21
2014
£000
53,286
7,770
15,283
1,456
2,741
80,536
4,068
85,557
1,250
5,586
96,461
2013
(restated*)
£000
33,474
3,959
8,188
962
3,051
49,634
3,195
75,868
—
5,348
84,411
176,997
134,045
(15,500)
(3,575)
—
(1,749)
(1,232)
(22,056)
—
(1,984)
(3,545)
(938)
(628)
(7,095)
(6,200)
(2,500)
(131,041)
(112,349)
(2,764)
(1,509)
(694)
(368)
(153)
(104)
(141,067)
(116,615)
(163,123)
(123,710)
13,874
10,335
6,152
5,942
3,896
752
292
(3,160)
13,874
6,140
5,893
3,896
751
390
(6,735)
10,335
55
Renew Holdings plcAnnual Report and Accounts 2014Accounts
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
(Increase)/decrease in inventories
Decrease in receivables
Increase in payables
Current service cost in respect of defined benefit pension scheme
Cash contribution to defined benefit pension schemes
(Credit)/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 outflow from discontinued investing activities
Net cash outflow from investing activities
Financing activities
Dividends paid
Issue of Ordinary Shares
New loan
Loan repayments
Repayments of obligations under finance leases
Net cash inflow/(outflow) from continuing financing activities
Net cash outflow from discontinued financing activities
Net cash inflow/(outflow) from financing activities
Net increase in continuing cash and cash equivalents
Net decrease in discontinued cash and cash equivalents
Net increase 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
Bank balances and cash
2014
£000
10,337
2,231
2,893
(435)
(323)
1,324
9,630
59
2013
(restated*)
£000
9,970
500
1,218
(110)
6,466
2,490
4,308
53
(3,117)
(2,946)
(98)
(182)
514
(427)
(1,926)
2,714
23,194
(4,691)
18,503
182
647
(1,559)
(32,132)
(32,862)
(106)
(32,968)
(2,461)
61
24,000
(4,800)
(2,096)
14,704
—
14,704
5,036
(4,797)
239
5,348
(1)
5,586
5,586
101
(25)
319
(362)
(429)
3,075
24,628
(5,390)
19,238
25
1,854
(649)
(9,384)
(8,154)
(56)
(8,210)
(1,917)
150
—
(5,000)
(958)
(7,725)
—
(7,725)
8,749
(5,446)
3,303
2,040
5
5,348
5,348
* The prior year cash flow statement has been restated following the reclassification of a discontinued business (see Note 3), and the impact of IAS 19
(2011) on administrative expenses and other finance income (see Note 2).
56
Renew Holdings plcAnnual Report and Accounts 2014Accounts 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 are different from the budgets and forecasts
used then the value of such deferred tax assets may differ from that shown in these financial statements.
f) Accounting for discontinued operations in accordance with IFRS 5 “Non-current assets held for sale and discontinued operations”
A non-current asset or a group of assets containing a non-current asset (a disposal group) is classified as held for sale if its carrying
amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and sale is
highly probable within one year. On initial classification as held for sale, non-current assets and disposal groups are measured at
the lower of previous carrying amount and fair value less costs to sell with any adjustments taken to profit or loss. The same applies
to gains and losses on subsequent re-measurement although gains are not recognised in excess of any cumulative impairment loss.
Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis,
except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment
property, which continue to be measured in accordance with the Group’s accounting policies. Intangible assets and property, plant
and equipment once classified as held for sale or distribution are not amortised or depreciated. In accordance with IFRS 5, the
above policy is effective from the start of the accounting period in which the operation meets the criteria to be classified as held
for sale. A discontinued operation is a component of the Group’s business that represents a separate major line of business or
geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to
resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as
held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income statement is restated
as if the operation has been discontinued from the start of the comparative period.
(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.
57
Renew Holdings plcAnnual Report and Accounts 2014Accounts Notes to the accounts continued
1 Accounting policies continued
(i) Basis of accounting and preparation continued
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.
As a result of IAS 19 (2011), the Group has changed its accounting policy with respect to the basis for determining the income or
expense related to the net pension asset/liability. Under IAS 19 (2011) the Group determines net expense (or income) for the period
on the net pension liability or asset by applying the discount rate used to measure the defined benefit obligation at the beginning of
the annual period to the net pension liability or asset taking into account any changes in the net pension liability or asset during the
period as a result of contributions and benefit payments. Previously, the Group determined interest income on plan assets based on
their long term rate of return.
The following new or revised International Financial Reporting Standards and IFRIC interpretations will be adopted, where
applicable, for the purpose of preparing future financial statements. The Group does not anticipate that the adoption of these
new or revised standards and interpretations will have a material impact on its financial position or results from operations.
International Financial Reporting Standards
IAS 2 – Separate Financial Statements
Annual Improvements to IFRS – 2012–14 cycle
IFRS 9 – Financial Instruments
Applies to periods beginning after
January 2016
January 2016
January 2018
(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.
(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
– no depreciation charge
Long leasehold land and buildings
– shorter of fifty years and period of lease
Plant, vehicles and equipment
– three to ten years
58
Renew Holdings plcAnnual Report and Accounts 2014Accounts
1 Accounting policies continued
(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.
(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.
59
Renew Holdings plcAnnual Report and Accounts 2014Accounts Notes to the accounts continued
1 Accounting policies continued
(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 are recognised in the income statement in accordance with IAS 39. 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 a Monte Carlo 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 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.
(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 40.6% (2013: 31.1%) 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.
Subsequent to the year end the Group has entered into a contract to dispose of part of its Specialist Building segment. The results
of that business are shown as a discontinued operation. Comparative figures have been restated accordingly.
Prior year costs for central activities have been increased by £400,000 as a result of the impact of IAS 19 (2011). These costs were
formerly dealt with in the statement of comprehensive income.
60
Renew Holdings plcAnnual Report and Accounts 2014Accounts 2 Segmental analysis continued
(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
assets
2014
£000
16,280
2,157
18,437
(1,999)
16,438
(332)
Exceptional
items and
amortisation
of intangible
assets
2014
£000
(2,231)
—
(2,231)
(824)
(3,055)
—
Before
exceptional
items and
amortisation
of intangible
assets
2013
£000
10,646
1,287
11,933
(1,897)
10,036
(294)
2014
£000
14,049
2,157
16,206
(2,823)
13,383
(332)
16,106
(3,055)
13,051
9,742
Engineering Services
Specialist Building
Segment operating profit
Central activities
Operating profit
Net financing expense
Profit on ordinary activities
before income tax
2014
£000
382,467
82,112
(105)
464,474
—
464,474
—
464,474
Exceptional
items and
amortisation
of intangible
assets
2013
£000
(500)
(272)
(772)
4,075
3,303
—
3,303
Balance sheet analysis of business segments
Engineering Services
Specialist Building
Central activities
Discontinued operations
Group eliminations
Group net assets
Other information
Engineering Services
Specialist Building
Central activities
Discontinued operations
Assets
£000
161,480
68,516
227,500
42,042
(322,541)
176,997
Capital
additions
£000
4,716
168
5
132
5,021
2014
Liabilities
£000
(130,907)
(94,459)
(217,641)
(42,657)
322,541
(163,123)
Net assets
£000
30,573
(25,943)
9,859
(615)
—
13,874
Assets
£000
139,882
69,117
172,525
46,214
(293,693)
134,045
2013 (restated)
Liabilities
£000
(85,475)
(95,067)
(195,128)
(41,733)
293,693
(123,710)
2014
2013 (restated)
Depreciation
Amortisation
£000
2,797
83
13
82
£000
2,231
—
—
—
Capital
additions
£000
1,318
84
4
—
£000
1,138
68
12
70
2,975
2,231
1,406
1,288
Depreciation
Amortisation
2013
(restated)
£000
232,371
50,621
(246)
282,746
3
282,749
15,412
298,161
2013
(restated)
£000
10,146
1,015
11,161
2,178
13,339
(294)
13,045
Net assets
£000
54,407
(25,950)
(22,603)
4,481
—
10,335
£000
500
—
—
—
500
61
Renew Holdings plcAnnual Report and Accounts 2014Accounts Notes to the accounts continued
2 Segmental analysis continued
(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 and banking advice
Exceptional items and amortisation of intangible assets
Acquisition costs
Redundancy and restructuring costs
Profit arising from sale of land
Write down of land stock in the USA
Total losses/(gains) arising from exceptional items
Amortisation of intangible assets (see Note 9)
2014
£000
464,474
—
2013
(restated*)
£000
298,161
—
464,474
298,161
Assets
£000
80,536
Assets
£000
49,634
2014
£000
255
2,181
712
691
792
2,912
(362)
(435)
2014
£000
38
217
8
263
2014
£000
824
—
—
—
824
2,231
3,055
2013
£000
200
668
550
831
497
3,297
(1,006)
(110)
2013
£000
51
149
14
214
2013
£000
196
272
(9,190)
4,919
(3,803)
500
(3,303)
The Board has determined that certain items in the income statement should be separately identified for better understanding
of the Group’s results.
During the year the Company acquired Forefront Group Ltd and Clarke Telecom Ltd and incurred £824,000 of costs associated with
the acquisitions. In 2013 £196,000 of costs were incurred on the acquisition of Lewis Civil Engineering Ltd.
In 2013 the Group incurred £272,000 of exceptional redundancy and restructuring costs in respect of a regional non-specialist building office.
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.
In 2013, as a result of changes to detailed planning and zoning agreements in respect of land owned by the Group in the USA, the
Board wrote down the carrying value of these assets by £4,919,000.
The Board has also separately identified the charge of £2,231,000 (2013: £500,000) for the amortisation of the fair value ascribed to
certain intangible assets, other than goodwill, arising from the acquisitions of Amco Group Holdings Ltd, Lewis Civil Engineering Ltd,
Clarke Telecom Ltd and Forefront Group Ltd. Further details are given in Note 9.
62
Renew Holdings plcAnnual Report and Accounts 2014Accounts 3 Operating profit continued
Discontinued operations analysis
Revenue
Expenses
Loss before income tax
Income tax expense – deferred tax
Loss for the year from discontinued operations
2014
£000
49,992
(54,124)
(4,132)
(1,023)
(5,155)
2013
£000
51,536
(54,279)
(2,743)
1,245
(1,498)
On 31 October 2014, Places for People Group Limited (“PFP”) acquired 50% of the ordinary share capital of Allenbuild Ltd, a Specialist Building
subsidiary. Following the practical completion of a number of partly completed contracts, the benefit of which will accrue to the Group, PFP will
acquire the remaining 50%. This is expected to be in approximately 12 months’ time. The trading result for this business has therefore been
included within the loss for the year from discontinued operations and the comparative figures have been reclassified accordingly.
Discontinued expenses include the following exceptional items:
Provision against amounts recoverable on old Building contracts
Costs related to exceptional storm damage on a Building contract
2014
£000
2,528
1,500
4,028
2013
£000
2,767
500
3,267
The provision of £2,528,000 relates to settling final accounts and contractual issues on old contracts.
A further £1,500,000 of costs have been recognised following the exceptional storm damage experienced in 2013.
4 Finance income and costs
Finance income
Finance income of £182,000 (2013: £25,000) 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
Interest on scheme assets
Interest on scheme obligations
Net pension interest
Further information on the defined benefit pension schemes is set out in Note 24 to the accounts.
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.
2014
£000
(232)
(195)
(427)
5,664
(5,751)
(87)
2014
Number
2,706
3,121
1,952
754
2,706
2014
£000
98,518
10,490
2,669
(98)
111,579
2014
£000
1,383
677
2013
£000
(282)
(80)
(362)
6,080
(6,037)
43
2013
Number
1,869
2,149
1,220
649
1,869
2013
£000
76,079
7,838
2,454
101
86,472
2013
£000
1,114
556
63
Renew Holdings plcAnnual Report and Accounts 2014Accounts Notes to the accounts continued
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
Income tax expense
Deferred tax in respect of discontinued operations
Income tax expense in respect of continuing activities
(b) Factors affecting income tax expense for the year
Profit before income tax
2014
£000
(2,265)
(227)
(2,492)
(594)
(651)
(1,245)
(3,737)
1,023
(2,714)
2013
£000
(2,146)
10
(2,136)
(612)
(540)
(1,152)
(3,288)
213
(3,075)
2014
£000
13,051
2013
£000
13,045
Profit multiplied by standard rate of corporation tax in the UK of 22.0% (2013:23.5%)
(2,871)
(3,066)
Effects of:
Expenses not deductible for tax purposes
Timing differences not provided in deferred tax
Change in tax rate
Net charge in respect of tax losses
Tax losses surrendered by discontinued operations
Deferred tax in respect of discontinued operations
Adjustments to tax charge in respect of previous periods
(1,341)
(158)
(45)
—
905
1,023
(227)
(2,714)
(116)
217
(94)
(379)
140
213
10
(3,075)
The Group has available further unused UK tax losses of £42m (2013: £48m) to carry forward against future taxable profits.
The Group also has unused USA tax losses of $17m (£10.5m) (2013: $16m (£10.2m)) 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 £10.6m (2013: £11.6m).
2014
£000
(148)
743
279
1,867
2,741
2014
£000
(143)
(1,606)
(1,749)
2013
£000
709
441
122
1,779
3,051
2013
£000
(192)
(746)
(938)
(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
64
Renew Holdings plcAnnual Report and Accounts 2014Accounts 2014
£000
3,051
950
(403)
—
(554)
(303)
2,741
2014
£000
(938)
(1,306)
446
—
(40)
89
(1,749)
2013
£000
2,929
113
(105)
(481)
(549)
1,144
3,051
2013
£000
(1,039)
—
(243)
99
(40)
285
(938)
2014
Pence/share
1.50
2013
Pence/share
1.10
2.50
4.00
£000
923
1,538
2,461
2.10
3.20
£000
658
1,259
1,917
DEPS
Pence
12.25
4.20
16.45
(2.47)
13.98
6 Income tax expense continued
(e) Reconciliation of deferred tax asset
As at 1 October
Acquisition of Forefront Group and Clarke Telecom
Origination of timing differences
Change of deferred tax rate
Defined benefit pension schemes – income statement
Defined benefit pension schemes – SOCI
At 30 September
(f) Reconciliation of deferred tax liability
As at 1 October
Acquisition of Forefront Group and Clarke Telecom
Arising on fair value adjustments
Change of deferred tax rate
Defined benefit pension schemes – income statement
Defined benefit pension schemes – SOCI
At 30 September
7 Dividends
Interim (related to the year ended 30 September 2014)
Final (related to the year ended 30 September 2013)
Total dividend paid
Interim (related to the year ended 30 September 2014)
Final (related to the year ended 30 September 2013)
Total dividend paid
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 3.50p per Ordinary Share be paid in respect of the year ended
30 September 2014. This will be accounted for in the 2014/15 financial year.
8 Earnings per share
Earnings before exceptional items
and amortisation
Exceptional items and
amortisation
Basic earnings per share –
continuing activities
Loss for the year from
discontinued operations
Basic earnings per share
Weighted average number
of shares
2014
2013 (restated)
Earnings
£000
12,781
(2,444)
10,337
(5,155)
5,182
EPS
Pence
20.80
(3.97)
16.83
(8.39)
8.44
DEPS
Pence
20.51
(3.92)
16.59
(8.27)
8.32
Earnings
£000
7,427
2,543
9,970
(1,498)
8,472
EPS
Pence
12.38
4.24
16.62
(2.50)
14.12
61,431
62,313
59,998
60,624
The dilutive effect of share options is to increase the number of shares by 882,000 (2013: 626,000) and reduce basic earnings per share by
0.12p (2013: 0.14p).
65
Renew Holdings plcAnnual Report and Accounts 2014Accounts Notes to the accounts continued
9 Intangible assets
Cost:
At 1 October 2012
Additions
Hindsight adjustment (Note 28)
At 1 October 2013
Additions
Reclassified as Assets held for resale
At 30 September 2014
Impairment losses/amortisation:
At 1 October 2012
Charge for year
At 1 October 2013
Charge for year
At 30 September 2014
Carrying amount:
At 30 September 2014
At 30 September 2013
At 30 September 2012
The carrying amounts of goodwill by operating segment are as follows:
Specialist Building
Specialist Engineering
Contractual
rights and
customer
relationships
£000
4,072
2,209
—
6,281
6,042
—
12,323
1,822
500
2,322
2,231
4,553
7,770
3,959
2,250
2013
£000
2,503
30,971
33,474
Goodwill
£000
27,726
6,142
414
34,282
21,062
(1,250)
54,094
808
—
808
—
808
53,286
33,474
26,918
2014
£000
1,253
52,033
53,286
£1,250,000 of goodwill has been reclassified as Assets held for resale in respect of the disposal of Allenbuild Ltd subsequent to the
balance sheet date.
Goodwill of £6,142,000 was acquired on the acquisition of Lewis Civil Engineering Ltd and was reviewed for impairment one year
after the acquisition and then will be on an ongoing basis as required by IFRS 3. No impairment was identified. Goodwill has
increased by £414,000 as a result of a fair value hindsight adjustment. Details are set out in Note 28.
Clarke Telecom
Goodwill of £11,143,000 was acquired on the acquisition of Clarke Telecom Ltd and will be reviewed for impairment one year after
the acquisition and then on an ongoing basis as required by IFRS 3. Details are set out in Note 26.
Forefront Group
Goodwill of £9,919,000 was acquired on the acquisition of Forefront Group Ltd and will be reviewed for impairment one year after
the acquisition and then on an ongoing basis as required by IFRS 3. Details are set out in Note 27.
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 5 years.
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 3 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. Growth rates
of between 3% and 6% per annum have 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.
66
Renew Holdings plcAnnual Report and Accounts 2014Accounts 10 Property, plant and equipment
Freehold
Long leasehold
Plant, vehicles
land and buildings
land and buildings
and equipment
£000
£000
£000
Cost:
At 1 October 2012
Additions
Asset reclassification
Disposals
Acquisition of subsidiary
At 1 October 2013
Additions
Disposals
Acquisition of subsidiary
At 30 September 2014
Depreciation:
At 1 October 2012
Charge for year
Disposals
At 1 October 2013
Charge for year
Disposals
At 30 September 2014
Net book value:
At 30 September 2014
At 30 September 2013
At 30 September 2012
1,826
8
(187)
(1,613)
1,679
1,713
—
—
—
1,713
75
14
—
89
16
—
105
1,608
1,624
1,751
75
—
—
—
—
75
—
—
—
75
75
—
—
75
—
—
75
—
—
—
5,011
1,398
187
(1,445)
3,445
8,596
5,021
(3,888)
5,284
15,013
2,072
1,274
(1,314)
2,032
2,959
(3,653)
1,338
13,675
6,564
2,939
The net book value of assets under finance leases at 30 September 2014 was £7,376,000 (2013: £3,947,000).
During the year £712,000 (2013: £550,000) of depreciation was charged against assets held under finance leases.
11 Inventories
Developments and undeveloped land
Raw materials
£1.1m (2013: £0.2m) 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
2014
£000
3,242
826
4,068
2014
£000
84
75,752
4,131
5,590
85,557
Total
£000
6,912
1,406
—
(3,058)
5,124
10,384
5,021
(3,888)
5,284
16,801
2,222
1,288
(1,314)
2,196
2,975
(3,653)
1,518
15,283
8,188
4,690
2013
£000
3,057
138
3,195
2013
£000
110
69,652
4,638
1,468
75,868
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 £3.3m (2013: £2.8m) 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 255 days (2013: 328 days).
67
Renew Holdings plcAnnual Report and Accounts 2014Accounts Notes to the accounts continued
12 Trade and other receivables continued
Ageing of past due but not impaired receivables:
30–180 days
180–365 days
Greater than 1 year
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
2014
£000
1,649
675
932
3,256
2014
£000
75,752
(3,499)
72,253
2013
£000
705
748
1,386
2,839
2013
£000
69,652
(4,831)
64,821
2,902,146
2,649,406
(2,829,893)
(2,584,585)
72,253
64,821
At 30 September 2014 retentions held by customers amounted to £13.6m (2013: £11.6m). Advances received from customers for contract
work amounted to £3.5m (2013: £4.8m).
Amounts due from construction contract customers which are past due at the reporting date amounted to £3.3m (2013: £2.8m).
This amount includes retention balances of £1.5m (2013: £2.1m). The Group does not hold any collateral over these balances or other
trade and other receivables.
Contract revenue recognised in the year amounted to £464.5m (2013: £282.7m).
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
The bank loans and overdrafts are secured by a fixed and floating charge over the Group’s assets.
2014
£000
5,570
16
5,586
2014
£000
3,499
36,840
4,114
9,643
76,945
131,041
2014
£000
6,200
15,500
21,700
2013
£000
5,339
9
5,348
2013
£000
4,831
28,979
4,093
7,127
67,319
112,349
2013
£000
2,500
—
2,500
68
Renew Holdings plcAnnual Report and Accounts 2014Accounts 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
2014
£000
2,994
3,874
6,868
(529)
6,339
2013
£000
1,633
2,147
3,780
(287)
3,493
2014
£000
2,764
3,575
6,339
—
6,339
(2,764)
3,575
2013
£000
1,509
1,984
3,493
—
3,493
(1,509)
1,984
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 (2013: 3 years). For the year ended 30 September 2014, the average effective borrowing rate was 3% (2013: 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.
18 Provisions
At 1 October 2013
Amount provided during the year
At 30 September 2014
Non-current liabilities
Current liabilities
At 30 September 2014
Property
obligations
£000
732
868
1,600
1,232
368
1,600
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
2014
Assets
Sterling
Dollar
Liabilities
Sterling
2013
Assets
Sterling
Dollar
Liabilities
Sterling
Fixed rate
interest rate
%
—
—
3.0
Financial assets/(liabilities)
Fixed
rate
£000
—
—
—
Floating
rate
£000
5,488
82
5,570
Total
£000
5,488
82
5,570
(6,339)
(6,339)
(21,700)
(21,700)
(28,039)
(28,039)
%
£000
£000
£000
—
—
3.0
—
—
—
(3,493)
(3,493)
5,127
212
5,339
(2,500)
(2,500)
5,127
212
5,339
(5,993)
(5,993)
69
Renew Holdings plcAnnual Report and Accounts 2014Accounts Notes to the accounts continued
19 Other financial instruments continued
Interest rate profile of financial assets and liabilities continued
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
(2013: 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.
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 2014 the unhedged portion
of the inter-company loan was $1,771,000 (2013: $771,000). The dollar closing exchange rate was $1.62: £1 (2013: $1.62: £1) resulting
in a foreign exchange gain of £18,000 (2013: loss £23,000) 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 gain arising on the translation of Lovell America Inc’s net assets was £1,000. The total equity statement would
be impacted by £58,000 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:
61,517,948 (2013: 61,403,668) Ordinary Shares of 10p each
2014
£000
2013
£000
6,152
6,140
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 114,280 Ordinary Shares were issued following the exercise of options under the Approved element of the Renew
Holdings plc Executive Share Option Scheme.
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.
70
Renew Holdings plcAnnual Report and Accounts 2014Accounts 20 Share capital continued
Share options continued
Renew Holdings 2004 Executive Share Option Scheme continued
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 this scheme have vested and have been exercised.
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. On 3 January 2014, options to subscribe for a further 253,165
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, from 20 December 2015 in
respect of those granted on 20 December 2012, and from 3 January 2017 in respect of those granted on 3 January 2014 subject to the
achievement of certain performance criteria.
Vesting of one half of the options is dependent on absolute growth in the Company’s Total Shareholder Return (‘TSR’), and the other
half is dependent on the Company’s TSR performance as compared to the TSR achieved by other companies in a comparator group
of nine 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 nine 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.
21 Reserves
At 1 October 2012
Transfer from income statement for the year
Dividends paid
Recognition of share based payments
Exchange differences
Actuarial loss recognised in pension scheme
Movement on deferred tax relating
to the pension scheme
At 1 October 2013
Transfer from income statement for the year
Dividends paid
Recognition of share based payments
New shares issued
Exchange differences
Actuarial gain recognised in pension scheme
Movement on deferred tax relating
to the pension scheme
At 30 September 2014
Share
premium
account
£000
5,893
Capital
redemption
reserve
£000
3,896
Cumulative
translation
reserve
£000
775
(24)
Share based
payments
reserve
£000
289
101
5,893
3,896
751
390
49
(98)
1
5,942
3,896
752
292
Retained
earnings
£000
(7,949)
8,597
(1,917)
(6,895)
1,429
(6,735)
5,182
(2,461)
1,068
(214)
(3,160)
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
114,280 options were exercised during the year (2013: 1,504,741).
Following the exercise of all outstanding options under this scheme, the fair value of those options as assessed at the date of grant has
been charged against the share payments reserve. £259,000 has been credited (2013: Nil) to administrative expenses.
71
Renew Holdings plcAnnual Report and Accounts 2014Accounts
Notes to the accounts continued
21 Reserves continued
Share based payments reserve continued
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.
£161,000 has been charged (2013: £101,000) 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 2014
were as follows:
Date of grant
Awards outstanding at 30 September 2014
– 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
3 January 2014
Total
400,000
400,000
253,165
1,053,165
0.0p
75.0p
10 years
3 years
46%
4.0%
0.43%
40.0p
Land and
buildings
£000
2,610
7,659
12,850
23,119
0.0p
87.0p
10 years
3 years
36%
3.6%
0.48%
30.0p
Other
£000
1,043
1,201
—
2,244
0.0p
180.0p
10 years
3 years
32%
2.0%
1.03%
87.5p
Total
2014
£000
3,653
8,860
12,850
25,363
—
—
—
—
—
—
—
—
Total
2013
£000
2,570
5,701
15,795
24,066
With regard to the operating leases held by the Group as lessor, the Group recognised £362,000 (2013: £1,006,000) of rental income
in the income statement for 2014, 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
153
295
48
496
Other
£000
—
—
—
—
Total
2014
£000
153
295
48
496
Total
2013
£000
195
400
95
690
The Group had no capital commitments at 30 September 2014 (2013: £229,000).
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 many 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 2014 shows a surplus of £740,000 based on the assumptions set
out below. The Amco scheme shows a surplus of £716,000 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 these surpluses as, having reviewed the rules of both schemes, they are of the view that the employer
has an unconditional right to them.
72
Renew Holdings plcAnnual Report and Accounts 2014Accounts 24 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
The following disclosures required by IAS 19 have been based on the most recent actuarial valuation as at 30 September 2014
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
2014
2013
2012
4.0%
3.0%
3.9%
3.1%
2.1%
3.1%
3.3%
2.7%
3.9%
2.3%
3.3%
2.3%
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%
3.2%
5.2%
2.5%
3.2%
3.1%
4.0%
2.7%
4.4%
2.0%
2.7%
2.7%
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 2013 model with long term improvement rates of 1.25% 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 27.7 years and the life expectancy of a male aged
60 in 2033 is 29.9 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
21.6 years and the life expectancy of a male aged 65 in 2034 is 23.4 years.
The assets in the Lovell scheme were:
Annuities
Diversified portfolio
Cash
Total
Value as at
30 September
2014
£000
43,410
101,002
1,180
145,592
Value as at
30 September
2013
£000
43,136
84,631
(19)
127,748
Current
allocation
30%
69%
1%
100%
Value as at
30 September
2012
£000
44,797
83,187
(158)
127,826
Current
allocation
34%
66%
—
100%
Current
allocation
35%
65%
—
100%
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.
The assets in the Amco scheme were:
Annuities
Diversified portfolio
Gilts
Bonds
Cash
Total
Value as at
30 September
Value as at
30 September
Value as at
30 September
2014
£000
7,270
6,427
—
—
585
14,282
Current
allocation
51%
45%
—
—
4%
100%
2013
£000
6,950
5,951
—
—
594
Current
allocation
52%
44%
—
—
4%
2012
£000
—
6,358
3,556
4,195
406
13,495
100%
14,515
Current
allocation
—
44%
24%
29%
3%
100%
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.
73
Renew Holdings plcAnnual Report and Accounts 2014Accounts 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.
Lovell Pension Scheme
Movements in scheme assets and obligations
Total fair value of scheme assets brought forward
Interest on scheme assets
Employer contributions
Benefits paid
Actual return on scheme assets less interest on scheme assets
Total fair value of scheme assets carried forward
2014
£000
2013
£000
127,768
127,826
5,664
2,917
(7,105)
16,348
145,592
5,537
2,745
(7,172)
(1,168)
127,768
Present value of scheme obligations brought forward
131,313
128,395
Interest on scheme obligations
Current service costs
Benefits paid
Actuarial gains due to experience on benefit obligation
Actuarial losses/(gains) due to changes in financial assumptions
Actuarial losses due to changes in demographic assumptions
Total fair value of scheme obligations carried forward
Surplus/(deficit) in the scheme
Deferred tax
Net surplus/(deficit)
Amount charged to operating profit:
Current service cost
Amount (charged)/credited to other financial income:
Interest on scheme assets
Interest on scheme obligations
Net pension interest
Amounts recognised in the statement of comprehensive income:
Actual return on scheme assets less interest on scheme assets
Actuarial losses due to changes in assumptions on scheme obligations
Actuarial gain/(loss)
Movement in the net scheme surplus/(deficit) during the year:
Net scheme deficit brought forward
Current service cost
Cash contribution
Other finance (costs)/income
Actuarial gain/(loss)
Net scheme surplus/(deficit) carried forward
5,751
59
(7,105)
—
11,041
3,793
144,852
740
(148)
592
(59)
(59)
5,664
(5,751)
(87)
16,348
(14,834)
1,514
(3,545)
(59)
2,917
(87)
1,514
740
5,494
53
(7,172)
(80)
(502)
5,125
131,313
(3,545)
709
(2,836)
(53)
(53)
5,537
(5,494)
43
(1,168)
(4,543)
(5,711)
(569)
(53)
2,745
43
(5,711)
(3,545)
74
Renew Holdings plcAnnual Report and Accounts 2014Accounts 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 obligations
Total fair value of scheme assets brought forward
Expected return on scheme assets
Employer contributions
Benefits paid
Actual return on scheme assets less interest on plan assets
Total fair value of scheme assets carried forward
Present value of scheme obligations brought forward
Interest on scheme obligations
Benefits paid
Actuarial losses due to changes in financial and demographic assumptions
Total fair value of scheme obligations carried forward
Surplus in the scheme
Deferred tax
Net surplus
Amount credited to other financial income:
Interest on scheme assets
Interest on scheme obligations
Net pension interest
Amounts recognised in the statement of comprehensive income:
Actual return on scheme assets less interest on scheme assets
Actuarial losses due to changes in assumptions on scheme obligations
Actuarial loss
Movement in the net scheme surplus during the year:
Net scheme surplus brought forward
Cash contribution
Actuarial loss
Net scheme surplus carried forward
Lovell Pension Scheme
2014
£000
2013
£000
13,495
14,515
550
200
(694)
731
543
201
(797)
(967)
14,282
13,495
12,533
12,695
550
(694)
1,177
13,566
716
(143)
573
550
(550)
—
731
(1,177)
(446)
962
200
(446)
716
543
(797)
92
12,533
962
(192)
770
543
(543)
—
(967)
(92)
(1,059)
1,820
201
(1,059)
962
Actual return on scheme assets less interest
on scheme assets
As a percentage of the assets at the end of the year
Experience gains on scheme obligations
As a percentage of the obligations at the end
of the year
Total amount recognised in the statement
of comprehensive income
As a percentage of the obligations at the end
of the year
2014
2013
2012
2011
2010
£16,348,000
£(1,168,000)
11.2%
(0.9)%
£6,891,000
5.4%
£(10,685,000)
(9.0)%
£13,114,000
10.4%
—
—
—
—
—
—
£1,349,000
£2,100,000
1.1%
1.7%
£1,514,000
£(5,711,000)
£(3,972,000)
£(5,151,000)
£1,164,000
1.0%
(0.9)%
(3.1)%
(4.3)%
0.9%
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 surplus/(deficit) of the scheme is
accounted for as an unallocated consolidation adjustment.
75
Renew Holdings plcAnnual Report and Accounts 2014Accounts Notes to the accounts continued
24 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
Amco Pension Scheme
Actual return on scheme assets less interest on scheme assets
As a percentage of the assets at the end of the year
Experience gains on scheme obligations
As a percentage of the obligations at the end of the year
2014
£731,000
5.1%
—
—
2013
£(967,000)
(7.2)%
—
—
2012
£1,346,000
9.3%
—
—
2011
£(58,000)
(0.4)%
£490,000
4.1%
Total amount recognised in the statement of comprehensive income
£(446,000)
£(1,059,000)
£530,000
£(114,000)
As a percentage of the obligations at the end of the year
3.3%
(8.4)%
4.2%
(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 £2,669,000 (2013: £2,454,000) into these plans during the year. There are also £152,000
(2013: £117,000) 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,
P Scott, R J Harrison, J Bishop and D M Forbes, whose total compensation amounted to £1,383,000 all of which was represented
by short-term employment benefits.
There were no other transactions with key management personnel in the year.
26 Acquisition of subsidiary undertaking – Clarke Telecom Ltd
On 29 April 2014, the Company acquired the whole of the issued share capital of Clarke Telecom Ltd (“Clarke”) for a consideration
of £17.1m, all of which was paid in cash. The acquisition was funded from the Group’s cash resources and a four year loan of £12m
provided by HSBC Bank plc.
The value of the assets and liabilities of Clarke at the date of acquisition were:
Non-current assets
Intangible assets – goodwill
– 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
Current liabilities
Trade and other payables
Obligations under finance leases
Current tax liability
Total liabilities
Net assets
Book value
Adjustments
£000
£000
Fair value
£000
1,294
—
1,254
1,074
3,622
253
9,371
383
10,007
13,629
(407)
(407)
(7,625)
(257)
(151)
(8,033)
(8,440)
9,849
3,710
—
(504)
13,055
—
—
—
—
13,055
—
—
(1,191)
—
—
(1,191)
(1,191)
11,143
3,710
1,254
570
16,677
253
9,371
383
10,007
26,684
(407)
(407)
(8,816)
(257)
(151)
(9,224)
(9,631)
5,189
11,864
17,053
Goodwill of £11,143,000 arises on acquisition and will be reviewed for impairment one year after the acquisition as permitted by IFRS
3. The goodwill is attributable to the expertise and workforce of the acquired business. Other intangible assets, provisionally valued
at £3,710,000, representing customer relationships and contractual rights, were also acquired and will be amortised over their
useful economic life in accordance with IFRS 3. Deferred tax has been provided on this amount. Amortisation of this intangible asset
commenced from May 2014.
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board will review the fair value of assets and liabilities using information available up to 12 months
after the date of acquisition. Fair value has been calculated using Level 3 inputs as defined by IFRS 13.
76
Renew Holdings plcAnnual Report and Accounts 2014Accounts
26 Acquisition of subsidiary undertaking – Clarke Telecom Ltd continued
Fair value adjustments arising from the acquisition continued
Trade and other payables
Subsequent to the date of acquisition, two loss making contracts have been identified resulting in a fair value adjustment of £1.0m.
Contract losses have been calculated based on projected cash flows from the date of acquisition until forecast contract completion
date. Accruals have been adjusted by £0.2m to ensure that holiday pay is consistent with IAS 19 Employee Benefits, and bonus
accruals are aligned with Group accounting policies. Deferred tax assets have been adjusted accordingly.
Goodwill impairment review
The Board has reviewed the goodwill arising on acquisition for impairment as required by IFRS 3. No such impairment was identified.
If the acquisition of Clarke had occurred on 1 October 2013, Group revenue would have been approximately £482m and profit from
continuing activities for the year ended 30 September 2014 would have been approximately £12m.
27 Acquisition of subsidiary undertaking – Forefront Group Ltd
On 1 August 2014, the Company acquired the whole of the issued share capital of Forefront Group Ltd (“Forefront”) for a consideration
of £14.8m, all of which was paid in cash. The acquisition was funded from the Group’s cash resources and a four year loan of £12m
provided by HSBC Bank plc.
The value of the assets and liabilities of Forefront at the date of acquisition were:
Non-current assets
Intangible assets – goodwill
– other
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Current tax asset
Total assets
Non-current liabilities
Obligations under finance leases
Deferred tax liabilities
Current liabilities
Bank overdraft
Trade and other payables
Obligations under finance leases
Total liabilities
Net assets
Book value
Adjustments
£000
—
—
4,030
4,030
284
5,474
62
5,820
9,850
(948)
(109)
(1,057)
(646)
(5,072)
(37)
(5,755)
(6,812)
£000
9,919
2,332
—
12,251
—
—
—
—
12,251
—
(465)
(465)
—
(8)
—
(8)
(473)
Fair value
£000
9,919
2,332
4,030
16,281
284
5,474
62
5,820
22,101
(948)
(574)
(1,522)
(646)
(5,080)
(37)
(5,763)
(7,285)
3,038
11,778
14,816
Goodwill of £9,919,000 arises on acquisition and will be reviewed for impairment one year after the acquisition as permitted by IFRS 3.
The goodwill is attributable to the expertise and workforce of the acquired business. Other intangible assets, provisionally valued
at £2,332,000, representing customer relationships and contractual rights, were also acquired and will be amortised over their
useful economic life in accordance with IFRS 3. Deferred tax has been provided on this amount. Amortisation of this intangible asset
commenced from August 2014.
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board will review the fair value of assets and liabilities using information available up to 12 months
after the date of acquisition. Fair value has been calculated using Level 3 inputs as defined by IFRS 13.
Trade and other payables
Accruals have been adjusted to ensure that holiday pay is consistent with IAS 19 Employee Benefits. Deferred tax has been
adjusted accordingly.
Goodwill impairment review
The Board has reviewed the goodwill arising on acquisition for impairment as required by IFRS 3. No such impairment was identified.
If the acquisition of Forefront had occurred on 1 October 2013, Group revenue would have been approximately £486m and profit for
the year from continuing activities ended 30 September 2014 would have been approximately £11m.
77
Renew Holdings plcAnnual Report and Accounts 2014Accounts
Notes to the accounts continued
28 Acquisition of subsidiary undertaking – Lewis Civil Engineering Ltd
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:
Fair value
as reported at
30 September
Fair value
as restated at
Hindsight
30 September
Book value
Adjustments
2013
£000
adjustments
£000
Non-current assets
Intangible assets – goodwill
– 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
—
—
—
—
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)
2013
£000
6,556
2,209
5,124
113
14,002
591
4,063
1,703
6,357
20,359
(1,511)
(344)
(1,855)
(188)
(6,125)
(992)
(300)
(7,605)
(9,460)
10,899
414
—
(492)
—
(78)
—
—
—
—
(78)
—
98
98
—
(20)
—
—
(20)
78
—
3,250
7,649
10,899
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board reviewed the fair value of assets and liabilities using information available up to 12 months
after the date of acquisition. Fair value has been calculated using Level 3 inputs as defined by IFRS 13.
Property, plant and equipment
The Directors reviewed the depreciation policy for property, plant and equipment which is now aligned with the Group policy. The impact
was to reduce net assets, increase deferred tax assets and goodwill. These adjustments required the restatement of the Group balance
sheet as at 30 September 2013. There was no impact on the Group profit for the years ending 30 September 2013 or 2014.
Goodwill impairment review
The Board also reviewed the goodwill arising on acquisition for impairment as required by IFRS 3. No such impairment was identified.
Goodwill of £6,142,000 was acquired on the acquisition of Lewis Civil Engineering Ltd (“Lewis”) and was reviewed for impairment one
year after the acquisition and then will be on an ongoing basis as required by IFRS 3. As a result of the fair value adjustment above,
goodwill increased by £414,000.
78
Renew Holdings plcAnnual Report and Accounts 2014Accounts
Company balance sheet
at 30 September
Fixed assets
Tangible assets
Investments
Current assets
Stocks and work in progress
Debtors: due within one year
Cash at bank
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
25 November 2014
Note
E
F
G
H
I
J
L
M
M
M
M
N
2014
£000
651
101,449
102,100
226
40,436
66
40,728
(83,104)
(42,376)
59,724
2013
£000
659
69,560
70,219
91
27,228
—
27,319
(60,719)
(33,400)
36,819
(15,500)
—
44,224
36,819
6,152
5,942
3,896
292
27,942
44,224
6,140
5,893
3,896
390
20,500
36,819
79
Renew Holdings plcAnnual Report and Accounts 2014Accounts 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 the 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
– no depreciation charge
Long leasehold land
and buildings
– shorter of fifty years and
period of lease
Plant, vehicles and 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.
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 £9,903,000 (2013: £11,226,000).
The audit fee charged within the profit and loss account amounted to £38,000 (2013: £51,000).
80
Renew Holdings plcAnnual Report and Accounts 2014Accounts 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
2014
Number
27
27
£000
2,305
272
168
(98)
2,647
£000
1,383
677
2013
Number
26
26
£000
1,940
254
194
101
2,489
£000
1,114
556
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 2014)
Final (related to the year ended 30 September 2013)
Total dividend paid
Interim (related to the year ended 30 September 2014)
Final (related to the year ended 30 September 2013)
Total dividend paid
2014
Pence/share
1.50
2013
Pence/share
1.10
2.50
4.00
£000
923
1,538
2,461
2.10
3.20
£000
658
1,259
1,917
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 3.50p per Ordinary Share be paid in respect of the year ended
30 September 2014. This will be accounted for in the 2014/15 financial year.
E Tangible fixed assets
Cost:
At 1 October 2013
Additions
At 30 September 2014
Depreciation:
At 1 October 2013
Charge for year
At 30 September 2014
Net book value:
At 30 September 2014
At 30 September 2013
Freehold land
Long leasehold
Plant, vehicles
and buildings
land and buildings
& equipment
£000
701
—
701
47
10
57
644
654
£000
75
—
75
75
—
75
—
—
£000
314
5
319
309
3
312
7
5
Total
£000
1,090
5
1,095
431
13
444
651
659
81
Renew Holdings plcAnnual Report and Accounts 2014Accounts
Notes to the company accounts continued
F Investments
Shares at cost:
At 1 October 2013
Additions
At 30 September 2014
Provisions:
At 1 October 2013 and 30 September 2014
Net book value:
At 30 September 2014
At 30 September 2013
Subsidiary
undertakings
£000
203,539
31,889
235,428
133,979
101,449
69,560
On 29 April 2014, the Company acquired the whole of the issued share capital of Clarke Telecom Ltd for a consideration of £17.1m.
On 1 August 2014, the Company acquired the whole of the issued share capital of Forefront Group Ltd for a consideration of £14.8m.
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
82
2014
£000
226
2014
£000
20
34,580
2,566
420
2,850
40,436
2014
£000
42,021
353
673
30,712
149
9,196
83,104
2014
£000
15,500
42,021
15,500
57,521
2013
£000
91
2013
£000
42
25,660
981
24
521
27,228
2013
£000
24,290
519
1,450
28,806
546
5,108
60,719
2013
£000
—
24,290
—
24,290
Renew Holdings plcAnnual Report and Accounts 2014Accounts 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 2014 the unhedged
portion of the inter-company loan was $1,771,000 (2013: $771,000).
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:
61,517,948 (2013: 61,403,668) Ordinary Shares of 10p each
2014
£000
2013
£000
6,152
6,140
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 114,280 Ordinary Shares were issued following the exercise of options under the Approved element of the Renew
Holdings plc Executive Share Option Scheme.
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 this scheme have vested and have been exercised.
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. On 3 January 2014, options to subscribe for a further
253,165 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 dependent on absolute growth in the Company’s Total Shareholder Return (‘TSR’), and the other
half is dependent on the Company’s TSR performance as compared to the TSR achieved by other companies in a comparator group
of nine 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 nine 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.
83
Renew Holdings plcAnnual Report and Accounts 2014Accounts Notes to the company accounts continued
M Reserves
At 1 October 2013
Transfer from profit and loss account for the year
Recognition of share based payments
New shares issued
Dividends paid
At 30 September 2014
Share based payments reserve
Renew Holdings 2004 Executive Share Option Scheme
114,280 options were exercised during the year (2013: 1,504,741).
Share
premium
account
£000
5,893
49
Capital
Share based
redemption
reserve
£000
3,896
payments
reserve
£000
390
(98)
5,942
3,896
292
Profit & loss
account
£000
20,500
9,903
(2,461)
27,942
Following the exercise of all outstanding options under this scheme, the fair value of those options as assessed at the date of grant
has been charged against the share payments reserve. £259,000 has been credited (2013: Nil) to administrative expenses.
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.
£161,000 has been charged (2013: £101,000) 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 2014
were as follows:
Date of grant
Awards outstanding at 30 September 2014
– 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 2013
At 30 September 2014
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
3 January 2014
Total
400,000
400,000
253,165
1,053,165
0.0p
75.0p
10 years
3 years
46%
4.0%
0.43%
40.0p
0.0p
87.0p
10 years
3 years
36%
3.6%
0.48%
30.0p
Land and
buildings
£000
—
125
776
901
Other
£000
12
8
—
20
0.0p
180.0p
10 years
3 years
32%
2.0%
1.03%
87.5p
2014
£000
9,903
(2,461)
61
(98)
36,819
44,224
Total
2014
£000
12
133
776
921
2013
£000
11,226
(1,917)
150
101
27,259
36,819
Total
2013
£000
210
145
741
1,096
The Company had no capital commitments at 30 September 2014 (2013: £nil).
84
Renew Holdings plcAnnual Report and Accounts 2014Accounts
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 £168,000 (2013: £194,000) into these plans during the year. There are also £15,000
(2013: £10,000) of accruals relating to these plans.
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
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
Clarke Telecom Ltd
Forefront Group 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
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
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%
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, P Scott, R J Harrison, J Bishop and D M Forbes, whose total compensation amounted to £1,383,000 all of which was
represented by short-term employment benefits.
There were no other transactions with key management personnel in the year.
85
Renew Holdings plcAnnual Report and Accounts 2014Accounts Directors, officers and advisors
Company Secretary
J Samuel FCA
Company number
650447
Registered address
Yew Trees
Main Street North
Aberford
Leeds
LS25 3AA
Website address
www.renewholdings.com
Directors
R J Harrison OBE
B W May
J Samuel FCA
P Scott
J Bishop FCA
D M Forbes
(Non-executive Chairman)
(Chief Executive)
(Group Finance Director)
(Group Engineering Services Director)
(Independent Non-executive)
(Independent Non-executive)
Registrars
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
Auditor
KPMG LLP
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
86
Renew Holdings plcAnnual Report and Accounts 2014Accounts
Shareholder information
Shareholder information
Annual General Meeting
28 January 2015
Results
Announcement of interim results – May 2015
Preliminary announcement of full year results – November 2015
Share Portal
The Share Portal is a secure online site where you can manage your shareholding quickly and easily. To register for the Share Portal
just visit www.capitashareportal.com.
Dividend re-investment plan
Capita’s Dividend Re-investment Plan offers a convenient way for shareholders to build up their shareholding by using dividend
money to purchase additional shares. For more information please call 0871 664 0381 (calls to this number cost 10p per minute plus
network extras) or if calling from overseas +44 20 8639 3402. Lines are open 9.00am to 5.30pm, Monday to Friday, excluding public
holidays. Alternatively, you can email shares@capita.co.uk or log on to www.capitashareportal.com.
Donate your shares to charity
If you have only a small number of shares which are uneconomical to sell you may wish to donate them to charity free of charge
through ShareGift (Registered Charity 10528686). Find out more at www.sharegift.org.uk or by telephoning 020 7930 3737.
Share fraud warning
Share fraud includes scams where investors are called out of the blue and offered shares that often turn out to be worthless or
non-existent, or an inflated price for shares they own. These calls typically come from fraudsters operating in ‘boiler rooms’ that are
mostly based abroad. If you are offered unsolicited investment advice you should:
>> Check the Financial Services Register at http://www.fca.org.uk to ensure they are authorised.
>> Call the FCA Consumer Helpline on 0800 111 6768 or use the share fraud reporting form at http://www.fca.org.uk/scams.
If you use an unauthorised firm you will not have access to the Financial Ombudsman Service or Financial Services Compensation
Scheme (FSCS).
Capita’s Customer Support Centre
By phone UK – 0871 664 0300 (UK calls cost 10p per minute plus network extras). From overseas - +44 20 8639 3399.
Lines are open 9.00am to 5.30pm, Monday to Friday, excluding public holidays.
By email shareholderenquiries@capita.co.uk
87
Renew Holdings plcAnnual Report and Accounts 2014Accounts
Walter Lilly
Knollys House
17 Addiscombe Road
Croydon
Surrey
CR0 6SR
Tel: 020 8730 6200
Clarke Telecom
Unit E
Madison Place
Northampton Road
Manchester
M40 5AG
Tel: 0161 785 4500
Forefront
30 Stephenson Road
Leigh on Sea
Essex
SS9 5LY
Tel: 01702 507 440
Accounts
Our subsidiary businesses
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 Civil Engineering
30–35 Navigation Point
Hartlepool
TS24 0UQ
Tel: 01429 233 521
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
88
Renew Holdings plcAnnual Report and Accounts 2014 Discover more online
www.renewholdings.com
Keep up to date with our corporate website.
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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