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Supporting UK
Infrastructure
Renew Holdings plc
Annual Report and Accounts
Year ended 30 September 2015
STRATEGIC REPORT
Supporting UK
Infrastructure
Renew provides multidisciplinary Engineering
Services through its independently branded
businesses supporting essential UK infrastructure.
Energy – p24
Nuclear, traditional and renewable power
and gas infrastructure
Environmental – p26
Water infrastructure and land remediation
Infrastructure – p28
Rail and wireless telecoms delivery
infrastructure
Specialist Building – p31
High Quality Residential
Strategic Report
IFC Highlights
02 Renew at a glance
04 Investment case
06 Chairman’s statement
08 Chief Executive’s review
12 Financial review
14 Our markets
16 Our business model
18 Our strategy
20 Our KPIs
21 Risk management
22 Operational review
24 Energy
26 Environmental
28 Infrastructure
31 Specialist Building
32 Corporate social responsibility
Corporate Governance
36 Directors’ report
39 Directors’ remuneration report
43 Corporate governance
45 Statement of directors’ responsibilities
Accounts
46 Independent auditor’s report
47 Group income statement
48 Group statement of
comprehensive income
48 Group statement of changes in equity
49 Group balance sheet
50 Group cashflow statement
51 Notes to the accounts
75 Company balance sheet
76 Notes to the company accounts
83 Directors, officers and advisors
84 Shareholder information
85 Our subsidiary businesses
Keep up to date on our website:
www.renewholdings.com
4
4
Highlights
The Group has successfully grown its
Engineering Services business, with an increase
in revenue and operating profit in 2015.
n Record order book of £502m
n Engineering Services revenue up 15%
to £441m
n Adjusted EPS growth of 25% to 26p
STRATEGIC REPORT
Dividend per share
Net assets
7.0p
7.0
5.0
£25.0m
25.0
13.9
9.0
8.9
10.3
Adjusted operating
profit*
£20.4m
20.4
16.4
Adjusted earnings
per share*
26.0p
26.0
20.8
9.6
10.0
7.9
12.4
12.4
9.7
3.0
3.15
3.6
Financial highlights
Revenue
£520m
520
464
270
283
246
11 12 13 14 15
11 12 13 14 15
11 12 13 14 15
11 12 13 14 15
11 12 13 14 15
* Results are shown prior to exceptional items and amortisation charges and exclude the results of discontinued operations.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
01
STRATEGIC REPORT
Renew at a glance
Responding to our
clients’ requirements
Integrated Engineering Services
Specialist Building
With our range of integrated Engineering Services we are ideally positioned to access
essential maintenance and renewal spending programmes across our markets.
Our businesses
provide:
n operational support and asset care;
n critical planned and reactive maintenance and renewals; and
n civil, mechanical and electrical engineering.
Energy
Page 24
Environmental
Page 26
Infrastructure
Page 28
As a leading provider
of prestigious
private residential
refurbishment projects.
n specialist temporary
works design
and engineering.
Specialist
Building
Page 31
Key highlights
Key highlights
Key highlights
Key highlights
n We remain the largest
n Continued our long-standing
n Asset Management
mechanical, electrical and
instrumentation employer
on site at Sellafield
relationships with
Northumbrian Water, Wessex
Water and Welsh Water
n Awarded a new 4 year E,C&I
framework for Magnox
n Work carried out at a nuclear
waste fuel processing facility
at Springfields
n Awarded AMP6 Sewerage
Repairs and Maintenance
framework with
Northumbrian Water
n Revenue with the Environment
Agency has doubled following
the 2014 MEICA framework
northern region award
frameworks extended for
2 years with Network Rail
n Increased opportunities through
Network Rail’s Infrastructure
Project frameworks
n Further sea defence works
awarded with Network Rail
following work at Dawlish
n We completed a number of
residential refurbishment
projects for private clients
n £85m of new projects
secured during the
financial year
n Revenue fully secured
for 2015/16
Capabilities
Capabilities
Capabilities
Capabilities
n Maintenance and
decommissioning
of nuclear facilities
n Supporting the water industry
in maintaining and renewing
its networks
n Provision of “off-track”
renewal and maintenance
of Network Rail assets
n Maintenance of thermal and
renewable energy facilities
n Supporting flood risk
n Planned, reactive
management programmes
n Refurbishment of prestigious
private residences
n Major structural works above
and below ground
n Replacement of low and
n Providing land remediation
medium-pressure gas mains
solutions
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WWW.RENEWHOLDINGS.COM
and 24/7 emergency
maintenance services
n Multidisciplinary services to
the wireless telecoms network
infrastructure market
Large-scale
opportunities through
national infrastructure
spending programmes
We focus on a direct delivery model
through our strong, strategically
located brands, supporting
customers across the UK.
Our opportunities
n National rail network
n Medium and low-pressure gas pipelines
n Water network
n Traditional power stations
n Nuclear power stations
n Wireless telecoms network
STRATEGIC REPORT
£38bn
Network Rail spending
plans agreed until
March 2019 (CP5)
£2.3bn
Defra spending plans
on flood and coastal
defence improvements
300k
estimated hectares of
land could be contaminated,
providing an opportunity
to meet housing
requirements
£3bn
of expenditure by Nuclear
Decommissioning
Authority per annum
£3.2bn
investment programme
in AMP6
Our markets – p14
Sources – p15
Our 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. Our regional
knowledge and specialist expertise
provide key differentiators.
Learn more about our businesses:
www.renewholdings.com
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
03
STRATEGIC REPORT
Investment case
A strong platform
for growth
We continue to drive growth by developing long-term
relationships with clients responsible for the renewal
and maintenance of essential operational assets.
Working in the Energy, Environmental and Infrastructure
markets, our subsidiary businesses are aligned to respond
to the ongoing maintenance needs of our clients’ assets.
C o n s istent delivery
o f s t rategic targets
C a pit a l
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Driving
growth
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Delivery of
engineering servic
integrate
Ope r a t i n g i n m a i n ly
re g u l a t e d m a
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r
k
Long-term
relationships with
key clients
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Key growth drivers
Consistent delivery of strategic targets
The Group continues to deliver its strategic
targets which, since 2006, have focused
on expanding its engineering operations
organically and through acquisitions.
Continued growth
The Group continues to deliver organic growth
whilst looking to build on its strengths through
additional earnings enhancing acquisitions.
Operating in markets with high
barriers to entry
The markets in which we operate demand
a highly skilled workforce and a proven track
record of safe delivery.
Delivery of integrated engineering services
Our subsidiary businesses offer a range
of integrated multidisciplinary Engineering
Services solutions, delivering both time and
cost efficiencies.
Operating in mainly regulated markets
Our target markets are mainly regulated which
drives long-term programmes of spending on
asset renewal and maintenance.
Long-term relationships with key clients
Our range of services and responsiveness
position us as a key supplier to our clients
as we assist them in maintaining their assets
and providing continuity of service.
Growing operating margins
The Group has delivered continual operating
margin improvement, growing from 1% in 2006
to 3.9% in 2015.
Strong balance sheet
The Group’s net assets have grown from
£5m to £25m over the last 9 years.
Capital growth
The Group has grown its market capitalisation
more than eightfold since 30 September 2005
without recourse to new equity.
STRATEGIC REPORT
STRATEGIC REPORT
We grow our Engineering Services business through:
1
2
3
4
5
Our ability to respond
to the critical
requirements of key
operational assets,
enabling required
service levels to
be maintained.
Our ability to deliver
locally through our
branded subsidiary
businesses.
Investment in
the skills of our
multi-skilled,
directly employed
workforce.
The successful
integration of our
complementary
acquisitions.
Consideration of
further strategic
earnings enhancing
opportunities.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
05
STRATEGIC REPORT
Chairman’s statement
R J Harrison OBE
Strongly positioned
with record results
Highlights
n Record results for the year ended 30 September 2015
n The Engineering Services business has seen growth of 15%
across its Energy, Environmental and Infrastructure markets
n Engineering Services adjusted operating profit has seen
a 23% increase to £20.1m
Results
Record results for the year ended
30 September 2015 demonstrate that the
Group continues to progress as a leading
provider of engineering services, supporting
critical UK infrastructure.
Group revenue increased by 12% to £519.6m
(2014: £464.5m) with operating profit prior to
exceptional items and amortisation increasing
by 24% to £20.4m (2014: £16.4m). Earnings
per share on this basis increased by 25% to
26.03p (2014: 20.80p) with basic earnings
per share on continuing activities up 27%
to 21.34p (2014: 16.83p).
The Engineering Services business has seen
growth of 15% across its Energy, Environmental
and Infrastructure markets with revenue of
£440.5m (2014: £382.5m). When the effect of
acquisitions and non-recurring Rail revenue is
eliminated, the underlying organic growth in
Engineering Services is 22%.
Engineering Services now accounts for 85%
of Group revenue (2014: 82%). Engineering
Services operating profit was up 23% to
£20.1m (2014: £16.3m) with a margin of
4.6% (2014: 4.3%).
Specialist Building remains focused on the
High Quality Residential market in London
and the Home Counties. Revenue was £79.5m
(2014: £82.1m) with an operating profit of
£2.3m (2014: £2.2m) resulting in an improved
margin of 2.9% (2014: 2.6%).
Dividend
The Board is proposing a final dividend
of 4.75p per share, increasing the full year
dividend by 40% to 7.0p (2014: 5.0p).
The dividend will be paid on 1 March
2016 to shareholders on the register as
at 29 January 2016. The Board continues
to grow dividends progressively.
Order Book
The Group’s contracted order book at
30 September 2015 stood at £502m
(2014: £439m), a 14% increase, with the
Engineering Services order book up 11%
to £400m (2014: £361m). The order book
reflects our established position in attractive
markets with long-term visibility of revenue.
Cash
Cash generation has been good with a year-end
cash position of £10.7m (2014: £5.6m) giving
a net debt of £4.8m (2014: £16.1m). The Board
expects the Group to report a net cash position
by the end of the 2015/16 financial year.
People
We are pleased to report our commitment to
providing a safe working environment which has
seen the Group continue to record an Accident
Incidence Rate substantially lower than the
industry average. These results and the success
of the Group demonstrate the skills and
commitment of all our employees for which
the Board would like to extend its gratitude.
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STRATEGIC REPORT
“ Record results for the year demonstrate that the
Group continues to progress as a leading provider
of engineering services”.
Outlook
The Group enters the 2015/16 financial year
in a strong position.
The Board previously published targets for
2017 of Group revenue in excess of £500m,
Group operating profit margin prior to exceptional
items and amortisation of 4.5% and growth
in EPS on that basis of at least 40% from the
reported level of 20.8p in 2014. The Group
revenue target has been achieved with these
results. The Group has also delivered an 11%
improvement in Group operating margin to
3.9% and a 25% increase in EPS giving the
Board confidence that the Group is on track
to deliver on these strategic targets.
R J Harrison OBE
Chairman
24 November 2015
Strategy
In Specialist Building, the Group concentrates on
the High Quality Residential market in London
and the Home Counties. Our expertise is in
refurbishment of prestigious private residential
projects where we specialise in engineering
solutions for major structural alterations.
In Engineering Services, the Group continues
to develop its position as a leading provider of
engineering services to support critical UK assets
in the Energy, Environmental and Infrastructure
markets. The markets we operate in are mainly
governed by regulation. Our operations focus
on the long-term programmes of essential
maintenance spending in these markets, which
provide good visibility of future opportunities
and more sustainable earnings streams.
It remains the Board’s strategy to continue the
growth of its Engineering Services business, both
organically and through selective acquisitions.
Over the last nine years, Renew has completed
six major acquisitions without recourse to
shareholders for funding. Substantial, profitable
growth has been generated from this strategy
which, complemented by organic growth, has
enabled the Board to deliver a six fold increase
in market capitalisation since 2006. In recent
weeks, the Board has seen a number of good
quality, potential acquisitions across all market
sectors of our Engineering Services business
and we continue to pursue appropriate earnings
enhancing additions to the Group.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
07
STRATEGIC REPORT
Chief Executive’s review
B W May
Relationships built
on responsiveness
Highlights
n Continued progression as a leading provider of Engineering Services
n The Engineering Services order book has grown 11% to £400m
n Strengthened position in our mainly regulated markets, where
we undertake essential work
Renew delivers engineering support services
to the UK’s critical infrastructure assets. The
Group has strong, long-term relationships built
on responsiveness with a range of clients in
the Energy, Environmental and Infrastructure
markets. The Group operates in mainly regulated
markets which have high barriers to entry.
Integrated engineering services are delivered
through our strong, independently branded UK
subsidiary businesses which directly employ a
highly skilled workforce. Our operations support
the day-to-day running of key operational
assets including nuclear and traditional power
generation sites, water and gas pipes along
with the rail and wireless telecoms networks. The
Group also has a Specialist Building operation
focusing on the High Quality Residential market
in London and the Home Counties.
Engineering Services
Revenue in Engineering Services increased by
15% to £440.5m (2014: £382.5m) and accounted
for 85% (2014: 82%) of Group revenue and
90% (2014: 88%) of Group operating profit
prior to exceptional items, amortisation
and central activities. This generated an
improved margin of 4.6% (2014: 4.3%). The
Engineering Services order book has grown
11% to £400m (2014: £361m).
Energy
In Energy, the Group provides integrated
engineering support to assets in the nuclear,
traditional and renewable energy markets
and in the gas infrastructure market.
During the year, we were appointed by the UK’s
largest nuclear decommissioning company,
Magnox, as the sole provider on the £30m
Electrical, Controls & Instrumentation framework,
which runs to 2019, across 10 UK sites. The
Group now delivers multidisciplinary engineering
services at 15 nuclear licenced sites, where
we support operational plant associated with
long-term waste treatment and processing,
decommissioning and the clean-up of redundant
facilities. The Nuclear Decommissioning
Authority’s expenditure continues at approximately
£3bn per year, of which 67% is allocated to the
Sellafield site in Cumbria where the majority of
our work is undertaken. The Group has operated
at Sellafield for over 70 years and remains the
largest mechanical, electrical and instrumentation
employer on site.
As part of the high hazard risk reduction
programme at Sellafield, work on the
Evaporator D project has again grown
materially ahead of expectation. During the
year, the Group increased its resources to
complete critical milestones as the project
moves towards commissioning. This increased
scope is now expected to deliver up to £100m
of work over the duration of the project.
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WWW.RENEWHOLDINGS.COM
STRATEGIC REPORT
Engineering Services revenue
£441m
+15%
441
382
214
232
173
11
12
13
14
15
Engineering Services operating profit
£20.1m
+23%
20.1
16.3
10.6
9.6
7.5
11
12
13
14
15
Engineering Services
as % of Group revenue
85%
82
82
85
64
49
11
12
13
14
15
“ The Group has strong, long-term relationships built on
responsiveness with a range of clients in the Energy,
Environmental and Infrastructure markets.”
Work on the Multi Discipline Site Works (“MDSW”)
framework continues and our operations remain
focused on the largest scope of work, Production
Operations Support. The MDSW framework,
where we operate as one of three participants,
has been extended for two years to early 2017
and is advertised to deliver £70m annually.
Other framework extensions during the year
include the Bundling Spares, Site Remediation
& Decommissioning Project and Bulk Sludge
Retrievals Facility frameworks.
The Group also operates in the traditional and
renewable energy markets for clients including
E.ON, SSE, Scottish Water and Dwr Cymru
Welsh Water (“DCWW”) where work includes
long-term maintenance and asset renewal
services. Achievements in the year include
good progress on the hydroelectric scheme at
Tyn Y Waun Water Treatment Works for DCWW,
reappointment to the maintenance framework
at Deucheran Hill Wind Farm by E.ON and the
refurbishment of the Cuaich Aqueduct on the
Tummel hydroelectric scheme for SSE.
In the gas infrastructure market work continues
for National Grid and Southern Gas Networks on
the 30/30 Iron Mains Replacement programme
as well as on the London Medium Pressure
Strategic Gas Mains Replacement programme.
New frameworks for the delivery of these
programmes have been slow to gain momentum
and as a result this business has not performed
to our expectations, however the addressable
market is both substantial and visible with the
national programme for iron mains replacement
running to 2032 with an estimated value
of £1bn per annum.
Environmental
The Group provides operational support to
the water industry where the focus remains
on maintaining and renewing infrastructure
assets as well as the flood alleviation and
river and coastal defence programmes.
In the year, we continued our long-standing
relationships with our clients Northumbrian
Water, Wessex Water and Welsh Water.
Awards included Northumbrian Water’s AMP6
Sewerage Repairs and Maintenance Framework
where we operate as one of two suppliers;
the framework has an advertised value
of over £14m per annum to 2024.
Work for Wessex Water continued on the
Workstream framework during the year with
new awards including the AMP6 Minor Civils
framework. Major projects completed included
the Taunton Grid Scheme.
Revenue for the Environment Agency has
doubled in the year where our relationship was
extended with the award of a £10m MEICA
framework in 2014. This exclusive framework,
which runs to March 2018, covers flood and
water management sites throughout the
Northern region. The appointment follows
our success on the existing four Minor Works
frameworks which were extended for a further
two years.
In Land Remediation, we operate for National
Grid on a number of frameworks nationally.
Other frameworks include the Land Quality
Services framework with Magnox to remediate
the sites of former nuclear power generation
across the UK and a new Landfill Engineering
framework with Viridor for the North of England
and Scotland regions.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
09
STRATEGIC REPORT
Chief Executive’s review continued
B W May
“ Our operations support the day-to-day running of key
operational assets including nuclear and traditional power
generation sites, water and gas pipes along with the rail
and wireless telecoms networks.”
Infrastructure
The Group delivers nationally a wide range
of off-track asset renewal and maintenance
engineering services as well as providing a
24/7 emergency service to the rail network.
These services are provided through Infrastructure
Projects and Asset Management support for
Network Rail where we are a top four supplier.
Following the award in 2014 of a number of
infrastructure renewal frameworks for Network
Rail, which run to 2019, we have good visibility
of future workflow. During the year, works were
undertaken to enhance the Dawlish lower sea
wall following our successful operation in 2014
to reinstate the wall after severe storms.
Further to our work at Dawlish we have been
appointed to undertake another coastal line
protection scheme at Saltcoats in Scotland.
We are now established as the major structures
renewals & maintenance contractor in Scotland.
In Asset Management our frameworks have
been extended by two years to 2017. We carry
out infrastructure maintenance works to bridges,
viaducts, tunnels, culverts, embankments,
level crossings and line side structures. During
the year, we have delivered over 5,000 individual
schemes ranging from minor brickwork repairs to
major sea defence works and our responsiveness
was recognised at the National Rail Awards
where we were presented with “Maintenance
Team of the Year”.
In the wireless telecoms infrastructure delivery
market the Group works for the major cellular
network operators and original equipment
manufacturers. This market has seen major
corporate M&A activity during the year which
has caused volatility and a performance below
our expectations. The attraction of this market
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remains as demand for 4G mobile internet
access and communications is outstripping
current capacity, requiring additional
infrastructure, upgrading of existing networks
and decommissioning of redundant assets.
Summary
In Specialist Building, our business operates in
the consistently robust High Quality Residential
market and continues to improve its quality of
earnings with an emphasis on risk mitigation.
In Engineering Services, we have strengthened
our position in our chosen, mainly regulated
markets, undertaking essential work on critical
assets where funding is derived from clients’
operational expenditure budgets. Our key
markets’ characteristics combined with the
Group’s integrated engineering support services
model will continue to provide opportunities
for further profitable growth.
B W May
Chief Executive
24 November 2015
Specialist Building
In Specialist Building revenue of £79.5m
(2014: £82.1m) and an operating profit of
£2.3m (2014: £2.2m) generated an improved
margin of 2.9% (2014: 2.6%). Our Specialist
Building order book stands at £102m (2014: £78m).
In the High Quality Residential market in London
and the Home Counties our subsidiary, Walter Lilly,
is a market leading luxury brand. It focuses on
major structural engineering works including
extending properties below ground. In excess
of £85m of new projects has been secured
in the period.
Discontinued operation
On 31 October 2014, the Board reached
an agreement to sell Allenbuild Ltd to Places
for People Group Ltd (“PFP”) for a total
consideration of £2.75m payable in cash.
PFP paid the initial 50% of the consideration
on 31 October 2014 and will pay the balance
on 31 January 2016. Allenbuild Ltd 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 Ltd have been treated as a
discontinued business. During the transition
period, Renew retains the cost and benefit of
certain contracts. These were secured during
the recession and subsequently supply chain
prices have risen markedly resulting in post-tax
losses of £7.3m in the discontinued business.
STRATEGIC REPORT
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
11
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STRATEGIC REPORT
Financial review
Dividend growth of 40%
Highlights
n A final dividend of 4.75p (2014: 3.5p) per share bringing
the total for the year to 7.0p (2014: 5.0p)
n The Group’s profitability, together with further improved working
capital generation, has reduced net debt by £11.3m in the year
Results
Group revenue from continuing activities was
£519.6m (2014: £464.5m) with an operating
profit before tax from continuing activities of
£20.4m (2014: £16.4m) prior to exceptional
items and amortisation charges. A tax charge
of £3.6m (2014: £3.3m) resulted in a profit
after tax for the year of £16.1m (2014: £12.8m)
prior to exceptional items and amortisation
charges. The profit for the year from continuing
activities was £13.2m (2014: £10.3m). After
accounting for discontinued activities, the
profit for the year was £5.9m (2014: £5.2m).
Fair value adjustments
In accordance with IAS 36, the Board reviewed
the fair value of assets and liabilities of both
Clarke Telecom Ltd and Forefront Group Ltd
using information available up to 12 months
after the date of acquisition. Fair value was
calculated using Level 3 inputs as defined
by IFRS 13.
No fair value adjustments arose at Clarke
Telecom Ltd. At Forefront Group Ltd, the Board
concluded that the fair value of property,
plant and equipment was overstated at the
date of acquisition by £1.1m. Furthermore,
the depreciation policy has now been aligned
with that of the Group.
The Board also recognised two onerous
contracts which existed at the acquisition
date and has set aside a provision based
on projected cash flows to the forecast
conclusion date. The resulting fair value
adjustment amounted to £2.1m. Additionally,
certain debtors at the point of acquisition have
proved to be irrecoverable and a fair value
adjustment of £0.2m arose.
When deferred tax is calculated as a consequence
of these fair value adjustments, a total fair
value adjustment of £2.8m arises, resulting
in a corresponding increase to goodwill.
Cash
The Group’s profitability, together with further
improved working capital generation, has led
to our reporting a cash balance of £10.7m
(2014: £5.6m) at the year end. As a result, the
Group’s net debt position as at 30 September
2015 was £4.8m (2014: £16.1m). The Group
has complied with the covenants associated
with the term loans throughout the year.
Pension schemes
The IAS 19 valuation of the Lovell Pension
Scheme, which was closed to new members in
2000, has resulted in a substantial accounting
surplus of £12.4m (2014: £0.6m) 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 26% of the scheme’s
total liabilities.
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STRATEGIC REPORT
“ The Group’s profitability, together with further improved
working capital generation, has led to our reporting a cash
balance of £10.7m (2014: £5.6m) at the year end.”
Following the triennial valuation of the scheme
which was carried out as at 31 March 2015,
the scheme actuary has measured the deficit
in the scheme to be £12.1m, a material reduction
from the £24.1m deficit which was recorded
at the previous valuation. In accordance with
the scheme specific funding requirements of
the Pensions Act 2005, the Board has reached
an agreement with the Trustees of the scheme
on the level of future contributions of £4.3m
per annum. This recovery plan is projected
to eliminate the deficit under the Statutory
Funding Objective of the Pensions Act 2004
by 31 July 2018. The next triennial valuation
is due as at 31 March 2018.
The IAS 19 valuation of the Amco Pension
Scheme shows a deficit of £0.5m (2014: surplus
of £0.6m) 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
49% of the scheme’s total liabilities.
Following the triennial valuation of the scheme
which was carried out as at 31 December 2013,
the scheme actuary has measured the deficit
in the scheme to be £2.1m, compared to
the £2.5m deficit which was recorded at the
previous valuation. In accordance with the
scheme specific funding requirements of the
Pensions Act 2005, the Board has agreed the
level of future contributions with the Trustees
of the scheme at £0.3m per annum. This
recovery plan is projected to eliminate the
deficit under the Statutory Funding Objective
of the Pensions Act 2004 by 31 October 2020.
The next triennial valuation is due as at
31 December 2016.
Taxation
The UK tax charge on profit for the year is £2.9m
(2014: £2.7m). This represents an effective Group
tax rate of 18.3% (2014: 20.8%). Following the
sale of Allenbuild Ltd, 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 £37.5m (2014: £27.9m) enabling the
Board to recommend a final dividend of 4.75p
(2014: 3.5p) per share bringing the total for the
year to 7.0p (2014: 5.0p), an increase of 40%.
J Samuel
Group Finance Director
24 November 2015
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STRATEGIC REPORT
Our markets
Growth built on the continuing
requirement for asset care
Our clients are responsible for keeping many of the country’s key assets operational.
We provide integrated engineering services to help them achieve continuity of service.
Energy
Environmental
Nuclear
Water
n The Nuclear Decommissioning Authority (“NDA”) is
responsible for the clean-up and waste management
of the UK’s nuclear legacy. The NDA’s expenditure
continues at approximately £3bn per annum, over half
of which is allocated to the Sellafield site in Cumbria.1
n 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 is retired.2
Traditional and renewable power
and gas infrastructure
n As demand for energy increases, it is likely that the UK’s
existing traditional generating assets will continue to require
investment in long-term maintenance programmes.
n 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
n 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 30m of a building by 2032 or earlier.4
n 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, commenced in April 2015
and focuses on maximising the efficient use of existing
assets through integrated solutions.
n The UK government made a six-year commitment to invest
record levels in improving flood and coastal defences
to 2021.5
Land remediation
n The Homes and Communities Agency (“HCA”) is responsible
for the disposal of publicly owned land, including former
industrial land transferred from the previous Regional
Development Agencies.
n 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,
providing suitable housing stock across the UK and
stimulating strategic inward investment.6
n Strong position at Sellafield with an established long-term
n £3.2bn investment programme in AMP6 for Northumbrian
programme of decommissioning.
Water, Wessex Water and Welsh Water.
n Continued spending on existing power assets to plug the
n £2.3bn Defra spending plans on coastal and river
“energy gap”.
flood risk management.
n HSE 30/30 Gas Iron Mains Replacement Programme and
long-term frameworks operating for National Grid and SGN.
n Previous estimates suggest there could be around 300,000
hectares of land affected by contamination9 providing an
opportunity to meet housing requirements.
s
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Infrastructure
Specialist Building
Rail
n 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
Wireless telecoms
n Demand for mobile data could be as much as 45 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.
n As demand for service on the existing mobile network
infrastructure increases, substantial investment is required
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
High Quality Residential
n The High Quality Residential market in London and the
Home Counties remains strong with improved visibility.
We have particular specialist engineering expertise
in major structural alteration works both above and
below ground.
n This market requires knowledge and experience.
Our strong brand and excellent reputation has been
developed over many years.
Opportunities
n Revenue for 2015/16 fully secured.
n Specialist capabilities in robust market.
Sources
1 Nuclear Decommissioning Authority, Business Plan – financial year beginning
April 2015 to financial year ending March 2018 (March 2015).
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
n £38bn Network Rail spending plans agreed until March
programme 2013-2021.
2019 (CP5).
n Increasing wireless capacity to meet consumer demand
for mobile data, particularly 4G.
5. Department for Environment, Food and Rural Affairs, Reducing the risks of
flooding and coastal erosion: An investment plan (December 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, Mobile Data Strategy Statement (May 2014).
9. Environment Agency, Reporting the evidence. Dealing with contaminated land in
England and Wales (January 2009).
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
15
STRATEGIC REPORT
Our business model
Delivering value
to shareholders
We add value through the management and effective control of
our subsidiary businesses, delivering capital growth together with
a progressive dividend policy.
r
e
i n g v a lue to shareholders...
e li v
D
Development and delivery
of our growth strategy
Development of
long-term positions
in target markets
We improve
We maintain
We renew
Ensuring the
safe delivery of
our operations
Ensuring thorough
Ensuring the consistent
risk management
delivery of quality
...t
h
r
o
u
g
h our wholly owned s u b s i d i a
p a nies
m
o
y c
r
Underpinned by
Directly employed
workforce
Highly skilled with
local knowledge
Strong
relationships
Long-term positions
with our clients
Robust risk
management
Effective controls and
operational framework
Commitment to good
corporate governance
Group-level committees
provide control
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Ensuring the safe delivery of our operations
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.
Corporate social responsibility
– p32
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 and
is materially lower than the industry average.
Ensuring the consistent delivery of quality
A key factor in our success in our markets is the consistent delivery of quality. The type
of work the Group undertakes involves a high volume of low-cost tasks throughout
the UK’s infrastructure networks.
We are committed to ensuring we consistently deliver quality and our businesses focus
on maintaining and improving standards in logistics, training, technology, corporate
social responsibility and in the management of their 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.
Ensuring thorough risk management
Our subsidiary businesses are governed by a system of controls which include
overarching requirements to adhere to Group minimum standards monitored by internal
audit processes to ensure compliance. Internal controls include risk management,
control environment and activities, information and communication and the evaluation
of effectiveness to deliver robust commercial risk management.
Regular operational and financial reporting is supported by monthly management
meetings, attended by a Group Executive member, Executive Management Committee
meetings and monthly Main Board meetings.
Each subsidiary business is required to have a management system in place certified
to ISO:9001.
Operational review – p22
Risk management – p21
Development of long-term positions in target markets
We provide integrated engineering services concentrating on supporting the day-to-day
operational requirements of some of the country’s key infrastructure, where we fulfil a
high volume of low-cost tasks. Our work covers asset care and maintenance, both planned
and reactive, as well as emergency repair services under long-term framework agreements.
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 fuelled by our clients’ operational expenditure budgets.
Our markets – p14
Development and delivery of our growth strategy
We focus on developing our engineering services both organically and by acquisition
where we can broaden our service offering to existing and new clients. Organic growth
is achieved through the alignment of our operating subsidiaries with their clients’ day-
to-day service requirements on their key infrastructure assets. Our responsiveness
and ability to provide an integrated solution are differentiators in our markets.
The Group also continues to look for complementary acquisition opportunities where
businesses have strong relationships in regulated markets.
Our strategy and KPIs –
p18 and p20
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
17
STRATEGIC REPORT
Our strategy
Delivering our
growth strategy
Since 2006, it has been the Group’s strategy to expand its Engineering Services
activities both organically and through selective acquisitions.
It is the Group’s ambition to deliver Group revenue in excess of £500m, a Group
adjusted operating profit margin of 4.5%, and growth in pre-exceptional EPS
of at least 40% over the 2014 level of 20.8p by 2017.
Our strategic priorities
To be a key provider
of Engineering
Services in our
target markets
Focus on
asset support,
maintenance
and renewals
programmes with
non-discretionary
funding
Expand our direct
delivery model
through strong
local brands
Establish long-
term relationships
through
responsiveness
to clients’ needs
Continue to
deliver organic
growth combined
with selective
complementary
acquisitions
We improve
We maintain
We renew
Our strategic targets for 2017:
£500m Group revenue
4.5% Group adjusted operating profit
40% growth in adjusted EPS from 2014 base of 20.8p
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Our strategic priorities
STRATEGIC REPORT
Our strategic priorities
Our progress
Be a key provider of
Engineering Services in the
UK’s Energy, Environmental and
Infrastructure markets
n Developed long-term relationships in our
n Collaborative working and sharing best
markets, evidenced by increasing workloads
and framework extensions.
n Integrated the skills and capabilities
associated with the Group’s 2014
strategic acquisitions.
practice initiatives undertaken.
n Continued to develop our strategically
important client relationships.
n Developed the range of capabilities we
offer our clients using skills from across
the Group’s subsidiary businesses.
Focus on non-discretionary spend
in asset support, maintenance
and renewals programmes
n Worked closely with our clients to
undertake essential operational renewal
and maintenance tasks to support the UK’s
infrastructure assets.
n Assisted our clients in the day-to-day
operation of their assets, ensuring
long-term continuity of service.
Expand our direct delivery
model through our subsidiary
businesses’ strong local brands
n Developed as a partner of choice through
our responsive service.
n Continued to develop our subsidiary
businesses as strong recognised brands
within their markets.
n Invested in our directly employed,
highly skilled workforce.
n Built on our businesses’ reputations for
local knowledge and quality delivery.
Establish long-term relationships
through responsiveness to
clients’ needs
n Many of our clients have extended their
relationship with us during the year where
our ability to respond quickly proves
a differentiator.
n Continued to closely align our business to
reflect the requirements of our key clients.
n Ensured we continue to deliver a high
quality of service.
Continue to deliver organic
growth combined with
selective complementary
acquisitions
n Developed our ability to understand our
clients’ requirements in the short term, whilst
delivering their long-term objectives, helping
us to establish strong working relationships.
n The Group has seen underlying organic
growth in its Engineering Services business
of 22%.
n The Group continues to develop its position
as a leading provider of Engineering Services
in its target markets.
n It is the Board’s strategy to continue to
grow its Engineering Services business
by seeking out appropriate earnings-
enhancing acquisitions.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
19
STRATEGIC REPORT
Our KPIs
Consistently performing
above expectations
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 charts
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.
Key:
t
s
a
c
e
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o
F
e
c
n
a
m
r
o
f
r
e
p
l
a
u
t
c
A
Engineering Services revenue
as a percentage of Group revenue
Adjusted Engineering Services operating
profit as a percentage of revenue*
85%
82
82
85
85
85
4.6%
4.6
4.3
4.6
4.8
5.0
13
14
15
16
17
13
14
15
16
17
Cumulative reduction in accident incidence
rate since 2005
Adjusted Group operating profit as
a percentage of revenue*
92%
92
92
92
92
92
3.9%
4.5
4.2
3.9
3.5
3.5
13
14
15
16
17
13
14
15
16
17
* Results are shown prior to exceptional items and amortisation charges and exclude the
results of discontinued operations.
20
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Risk management
STRATEGIC REPORT
Principal risks and uncertainties
Principal risks and uncertainties
This Annual Report contains certain forward looking statements.
These statements are made by the Directors in good faith, based
on the information available to them up to the time of approval of
this report. Actual results may differ to those expressed in such
statements, depending on a variety of factors. These factors include
customer acceptance of the Group’s services, levels of demand in
the market, restrictions to market access, competitive pressure on
pricing or additional costs, failure to retain or recruit key personnel
and overall economic conditions.
Risk management
Board of Directors
Audit
Committee
Remuneration
Committee
Nominations
Committee
Risk
Mitigation and responsibility
n Contractual conditions which
exist at the time of contract
procurement. Should initial
estimates and judgments be
incorrect, the actual financial
outcomes may ultimately differ
from that which is indicated.
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. The Group also seeks to limit its risks by
specialising in certain markets where it has extensive experience and a particular skills base.
n Reliance on a relatively small
number of major customers.
If the Group was to lose its
position as a supplier to some
of these customers then its
financial position could
be materially affected.
n The Group could be required to
make substantial payments into
two closed final salary pension
schemes in accordance with the
requirements of the Pensions
Act 1995.
As the Group has moved progressively into Engineering Services markets it has fewer, larger
clients. Key clients are Network Rail, Sellafield Ltd, National Grid, Environment Agency, CTIL,
Northumbrian Water, Wessex Water and Welsh Water. Loss of any of the above could potentially
affect shareholder value. We mitigate this risk by maintaining strong relationships with our
clients and by being seen as responsive, innovative and proactive.
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 2015, these policies are equivalent to 30% of the combined
schemes’ liabilities.
n The impact of accidents on our
employees/public, consequential
impact on contract performance
and reputational damage.
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 working environments.
For more information on safety – p35
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
21
STRATEGIC REPORT
Operational review
Clear and focused
plan for growth
Highlights
n We remain focused on delivering integrated Engineering Services
in our chosen markets
n We support many of the UK’s critical infrastructure assets
n Our responsiveness to our clients’ requirements proves
a key differentiator
Renew remains focused on delivering its
integrated Engineering Services in the Energy,
Environmental and Infrastructure markets. We
work in rail, nuclear, water, wireless telecoms
and gas providing engineering services nationally
for high profile clients.
We concentrate on developing and extending
relationships with our key clients across the
business. Our range of Engineering Services
capabilities means we are able to offer an
integrated service adding value to our clients
in the form of cost savings and risk reduction.
We target opportunities in areas of
non-discretionary infrastructure spending in
the UK where markets are often characterised
by long-term spending programmes established
to care for key assets.
Our teams undertake a variety of essential
maintenance and renewal tasks, which
assist our clients in ensuring continuity of
service. Our day-to-day maintenance services
are typically undertaken through long-term
framework agreements.
The markets in which we operate have
high barriers to entry and require a highly
skilled and experienced workforce. Work is
undertaken by our strong local subsidiary
businesses where our market knowledge and
experience proves a differentiator.
Keeping critical infrastructure including the
rail network, our water and gas distribution
network and energy generation assets operational
is key to the UK and, as such, investment in asset
care and maintenance has good visibility, often
for many years.
P Scott
Engineering Services Director
24 November 2015
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STRATEGIC REPORT
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In this section
Energy – p24
Nuclear, traditional and renewable
power and gas infrastructure
Environmental – p26
Water infrastructure
and land remediation
Infrastructure – p28
Rail and wireless telecoms
delivery infrastructure
Specialist Building – p31
High Quality Residential
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
23
23
STRATEGIC REPORT
Operational review continued
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.
We provide engineering support for the
care and maintenance of operational plant
associated with waste treatment or
processing, decommissioning, demolition
and clean-up of redundant facilities.
We continue to differentiate ourselves
through the integration of generation,
grid and decommissioning services.
Capabilities
n Nuclear operational support and asset care.
n Critical planned and reactive maintenance
and renewals.
n Civil, mechanical and electrical
engineering services.
n Nuclear decommissioning.
n Specialist fabrication and manufacturing.
Our progress in 2015
n We are strongly positioned across the
Nuclear Decommissioning Authority’s
portfolio, on 15 nuclear licensed sites.
n We remain the largest mechanical, electrical
and instrumentation employer on site at
Sellafield, which is allocated over half the
NDA’s 2015/16 £3bn investment and where
we have operated for over 70 years.
n Appointed by Magnox as the sole provider
on the £30m Electrical, Controls and
Instrumentation framework, which runs
to 2019, across 10 UK sites.
n At Sellafield, work on the Evaporator D
project has again grown materially ahead
of expectation. This increased scope is now
expected to deliver up to £100m of work
over the duration of the project.
n Our position on the Multi Discipline Site
Works framework has been extended for a
further two years to early 2017. Operations
remain focused on the largest scope of work,
Production Operations Support.
n Successfully positioned on a new workstream
to deliver the long-term programme of works
associated with the Magnox Swarf Storage
Silo project at Sellafield.
n Other Sellafield based framework extensions
during the year include the Bundling Spares,
Site Remediation and Decommissioning
Project and Bulk Sludge Retrievals
Facility frameworks.
n Award of Sellafield’s Resident Engineer’s
safety award for ‘Outstanding Safety
Performance’ for a second year. We have
undertaken over 6 years and 5.5 million man
hours at Sellafield since a lost time accident.
n We carried out work at a major nuclear
waste fuel processing facility at Springfields
in addition to work on the reactor outage
at the Heysham Nuclear Power Station.
Traditional and renewable power 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.
Our directly employed service teams
provide long-term maintenance and asset
renewal support, assisting in the continued
operation of key infrastructure assets.
We work across the gas distribution network
replacing low and medium-pressure gas
mains. Our directly employed workforce
repairs, replaces and maintains over 150km
of gas mains per annum.
Our progress in 2015
n We operate at 5 of the UK’s traditional power
stations for clients E.ON, Eggborough Power
Limited and SSE.
n Good progress has been made on
hydroelectric schemes including at Tyn Y
Waun for Dwr Cymru Welsh Water.
n We have been reappointed to the
maintenance framework at Deucheran Hill
Wind Farm by E.ON.
n Appointed to undertake the refurbishment
of the Cuaich Aqueduct on the Tummel
hydroelectric scheme for SSE.
n Work continues for tRII0, a strategic partner of
National Grid, and Southern Gas Networks on
the 30/30 Iron Mains Replacement Programme
as well as on the London Medium Pressure
Strategic Gas Mains Replacement Programme.
n Additional frameworks with tRII0
cover specialist flow stopping, drilling
and maintenance.
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RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
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25
25
STRATEGIC REPORT
Operational review continued
Environmental
Water
The Group has extensive expertise in water infrastructure development and maintenance,
flood alleviation and river and coastal defences.
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 alleviation schemes.
Capabilities
n Operational support and asset care
to the water industry.
n Critical, planned and reactive maintenance.
n Maintaining strategic water mains
and main drainage.
n Clean and waste water
rehabilitation infrastructure.
n Flood alleviation and attenuation.
n Port, harbour and sea defences.
Our progress in 2015
n We continued our long-standing
relationships with Northumbrian Water,
Wessex Water and Welsh Water.
n Awarded Northumbrian Water’s £14m
per annum AMP6 Sewerage Repairs and
Maintenance framework where we operate
as one of two suppliers to 2024.
n Substantial volumes of work were
undertaken on the flood prevention
programmes for Northumbrian Water,
in addition to our continued involvement
in trunk mains cleaning.
n Work continues for Wessex Water on the
workstream framework, with new awards
including the AMP6 Minor Civils framework.
n Environment Agency revenue has doubled
in the year following the 2014 award
of the exclusive £10m MEICA framework
to March 2018 for the Northern region.
n Existing Minor Works frameworks with
the Environment Agency were extended
for a further two years.
n We established a position in emergency
reactive works for Welsh Water in addition to
the Pressurised Pipelines and the Major Civil
Engineering frameworks.
n Our expertise in moving structures was
enhanced with the completion of the Woolwich
Ferry Terminal link spans refurbishment
project for Transport for London.
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.
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 on site can provide a sustainable
and cost effective solution for our clients.
Capabilities
Our progress in 2015
n Operational support and asset care
in the land remediation market.
n We continue to operate for National Grid on
a number of frameworks nationally.
n Design of bespoke remediation and ground
n New Landfill Engineering framework
engineering solutions.
n Combining remediation strategies with
infrastructure delivery.
n Soil and groundwater remediation.
awarded with Viridor for the north of England
and Scotland.
n Other frameworks include 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.
n Work is currently underway on the SGN
8 year framework that will generate
opportunities across Scotland and the South
East of England until 2021.
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We partner on frameworks delivering improvements to the water infrastructure network
where work includes mains replacement, upgrades to the sewer network and storm water
alleviation schemes.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
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27
27
STRATEGIC REPORT
Operational review continued
Infrastructure
Rail
Our specialist skills and 24/7 emergency response services are delivered nationally by our
directly employed, multi-skilled local delivery teams.
Our business is structured to deliver
a high volume of small value tasks
across the rail network, including civil,
mechanical and electrical engineering
and maintenance services in this
regulated market.
Our strength lies in our flexibility and
ability to deliver a variety of integrated
and sustainable solutions for our
principal client, Network Rail.
Capabilities
n Off-track operational support and asset care.
n Critical planned, reactive and 24/7 emergency
maintenance and renewal services.
n Civil, mechanical and electrical engineering.
n Asset renewal and refurbishment.
n Tunnel and shaft refurbishment.
n Bridges, structures and earthworks.
n Moving structures.
Our progress in 2015
n The Group delivers asset renewal and
maintenance services nationwide through
Infrastructure Projects and Asset Management
support for Network Rail where we are a top
four infrastructure supplier.
n We continued to work on the infrastructure
renewal frameworks for Network Rail
awarded as part of CP5, which runs to 2019.
n Works were undertaken to strengthen
the Dawlish lower sea wall following our
successful operation in 2014 to reinstate
the wall after severe storms.
n Further to our work at Dawlish for Network
Rail we were also appointed to undertake
a similar coastal line protection scheme at
Saltcoats in Scotland.
n Our Network Rail Asset Management
frameworks have been extended by two
years to 2017. We carry out infrastructure
maintenance to bridges, viaducts, tunnels,
culverts, embankments, level crossings and
line side structures.
n Work on the Asset Management frameworks
has seen us deliver more than 5,000 individual
schemes, ranging from minor brickwork
repairs to major sea defence works.
n We continued to develop our relationship
with Network Rail and are now established
as the major structures, renewals and
maintenance contractor in Scotland.
n Our local delivery teams continue to provide
a 24 hour emergency response service for
Network Rail.
n Our work was recently recognised at the
2015 National Rail Awards where the LNW
Asset Management Team received the
“Maintenance Team of the Year” award.
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RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
29
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Operational review continued
Infrastructure
Wireless telecoms
We provide engineering services which encompass all
aspects of wireless telecoms infrastructure delivery.
Our progress in 2015
n As a leading provider of wireless
telecoms infrastructure services we remain
one of the top performing contractors
with our customers, including Cornerstone
Telecommunications Infrastructure Ltd and
Mobile Broadband Network Ltd, joint
ventures between the network operators
which support their UK asset portfolios
carrying the O2, 3, Vodafone and EE networks.
n Rising consumer demand has seen
an increasing requirement for additional
infrastructure, including the upgrade of
existing networks and the decommissioning
of redundant assets.
n We delivered over 40,000 individual tasks
for our network customers during 2015.
n Work continues on the 4G upgrade rollout
of low capacity sites.
n We continue to work as the sole approved
service provider on the Ericsson 4G overlay.
n Work continues to roll out 4G equipment
to network operators’ main sites in London.
We deliver wireless infrastructure
services for the UK’s cellular network
operators and major network equipment
manufacturers. Our services include site
acquisition and design, construction,
installation and site optimisation, site
maintenance and decommissioning.
The wireless telecoms infrastructure
delivery market has seen major
corporate M&A activity during the
year. The market remains attractive as
demand for 4G mobile internet access
and communications is outstripping the
current network capacity.
Capabilities
n Operational support and asset care in the
UK wireless telecoms market.
n Critical planned and reactive maintenance
and renewals.
n Civil, mechanical and electrical engineering.
n Wireless telecoms installations.
n Specialist indoor wireless coverage solutions.
n Temporary cellular network coverage for
special events.
n Provision of 2G, 3G, 4G and Wi-Fi technologies.
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Specialist Building
High Quality Residential
Recognised as a market-leading luxury provider of prestigious private residential
refurbishment projects in London and the Home Counties, we provide major structural
engineering works which include our specialist skills in extending properties below ground.
The High Quality Residential market
in London and the Home Counties
remains strong, with good visibility
of future opportunities.
Space restrictions in the South and the
complex nature of the work we undertake
means this market has high barriers
to entry with specialist engineering and
temporary works skills required.
In-house design and engineering
capabilities are able to provide
innovative solutions on projects
that require extensive underground
development. Other services include
design management, planning, traffic
management and logistics support as
well as expertise in specialist finishes.
Our progress in 2015
n We remain focused on the High Quality
Residential market in London and the
Home Counties. We are recognised as a
leading provider with expertise in fit out
and refurbishment of prestigious private
residential projects.
n Our specialist skills in providing extensive
underground developments saw us
undertake a range of schemes in the
year for private clients.
n We have secured in excess of £85m
of projects during the financial year.
n Revenue is fully secured for 2015/16.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
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STRATEGIC REPORT
Corporate social responsibility
Committed to our corporate responsibility
Our responsibility to our employees, the communities and environment 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
We recognise the importance of considering
and engaging with our local communities and
our businesses are involved in a wide range of
schemes to support these essential relationships.
Our community involvement goes beyond
commercial operations or minimum legal
requirements. Local community projects provide
an opportunity to assist communities using our
skills, time and financial support, ensuring our
work leaves a lasting positive impact.
Shepley Engineers assists various local
education, charity organisations and
fundraising events in Cumbria. Shepley also
integrates social awareness training into its
employee development programme, helping
teams develop an understanding of broader
community issues. Shepley provides expertise
and skilled labour alongside direct funding to
support the local community.
Working with School Sports Gloucestershire,
Britannia Construction provides after-school
sports sessions for 30 children a week. The
sessions are held at local schools and include
activities from dodgeball and handball to athletics
and tag rugby. The sessions, which are free to
attend, enable some children to get their first
experience of sports coaching. Britannia also
supports the Milestone School, a community
special school that provides around 300 children
with a wide range of specialist education.
Clarke Telecom supported local charity Family
Action through a number of events in the year,
including a Christmas present appeal, for
young carers in the local community . Family
Action is a leading provider of services to
disadvantaged and socially isolated families.
The team at Walter Lilly, as part of the
"All Out Africa: Build a Future" project, again
travelled to Swaziland, Africa, this time to assist
with the construction of a new Neighbourhood
Care Point centre. The centre, which is
now complete, provides local orphaned and
vulnerable children with food, education and
clothing. This is the second such visit the team
from Walter Lilly has made to Swaziland to
support similar community schemes.
The AMCO East Midlands Rail team, along
with other Network Rail Infrastructure
Projects framework partners, chose the
“Accessibility Derbyshire - Super Sunday”
charity as their fundraising challenge for
2015. AMCO arranged various events to help
raise £10,000 for the fun day, which was held
in September. The day provided a range of
adventurous activities, including skywalking,
canoeing and abseiling, alongside wheelchair
basketball and other sports for over 500 children
with additional needs and their families.
In June, a team from VHE successfully completed
the Yorkshire Classic Cycle Challenge in aid of
SportsAid, a charity for young children. VHE’s
team completed the challenging 58-mile route,
which included over 4,000ft of combined climbs,
along with 39 other teams in Yorkshire. Earlier
this year, a team from Lewis Civil Engineering
undertook a similar challenge, cycling 54 miles in
aid of Mencap where they raised over £5,000.
Seymour Civil Engineering continues to
support the Hartlepool and District Hospice
as a corporate partner. In the year, Seymour
sponsored two of the Hospice’s flagship
annual fundraisers: "It’s a Knockout", helping
with costs as well as planning and recruiting
teams. In addition, Seymour was official vest
sponsor for the Hospice’s Great North Run
team. The two events raised £35,000 and
followed previous fundraising events, including
Seymour’s charity ball, which generated over
£7,000 for patient care at the hospice.
Many other charities were supported during
the year by our businesses and their employees,
including Children in Need, Macmillan Cancer
Support, Cancer Research UK, British Heart
Foundation, Guide Dogs for the Blind, Royal
National Lifeboat Institution, Yorkshire Air
Ambulance, Bradford Toy Library and Resource
Centre and Ilkley Candlelighters.
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Environment and sustainability
We are committed to protecting and
supporting the environment through our
work. Understanding the environmental
impact of the schemes we undertake and our
day-to-day operations is a key consideration
for our businesses.
It is the Group’s policy to minimise the
environmental impact of our activities,
prevent pollution and continually improve
our environmental performance. We employ
systems and procedures that ensure
the Group’s compliance with all relevant
legislation relating to the environment.
Our commitment in action
The Group ensures the implementation of its
environmental policy through an integrated
Safety and Environmental Management System.
We are continually developing these systems,
alongside reporting and control procedures, to
ensure the highest standards of compliance.
These systems are accredited to the industry
standard ISO:14001.
Using a mixed programme of training
and awareness for both employees and
subcontractors, we encourage the adoption of
sound environmental understanding and practice.
We manage our supply chain to encourage
suppliers to minimise the use of materials, energy
or processes which may impact the environment.
Our businesses work to identify areas of
environmental impact and develop programmes
to reduce these effects. These include the
implementation of site-specific health, safety
and environmental plans. During 2015 we
focused on the reduction of carbon emissions
and the promotion of more sustainable
development by conserving energy, materials
and resources, minimising consumption, and
maximising efficiency through the effective
management of waste. Initiatives included
waste management plans on projects and the
promotion of recycling and reuse of materials.
Innovative working practices are employed
across our businesses, including employing
energy reduction technology and remediation
techniques. Schemes also include the
assessment of subcontractors, where
performance against environmental targets
is measured.
During the year Renew registered with the
Energy Saving Opportunity Scheme (“ESOS”)
which is designed to assist companies in
planning for long-term reduction in energy use.
We work with industry bodies, business
partners and other organisations to promote
environmental care, increase our knowledge
and share best practice within our business.
How we ensure compliance
Our businesses ensure effective
management of environmental
issues through:
n Control of relevant documentation.
n Management of environmental
supply chain.
n Inclusion of sustainability principles
in any design, procurement and
operational activities.
n Environmental performance
monitoring through audit and review.
n Provision of training opportunities for our
employees and those who work with us.
n The dissemination of information,
including legal requirements,
procedures, statistics, reference
material, relevant experience
and audit recommendations.
n Environmental incident investigation.
Our businesses are supported by their
health, safety and environmental advisors.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
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STRATEGIC REPORT
Corporate social responsibility continued
Employment and training
Our businesses understand the value of providing
the right training and employment opportunities.
Many schemes exist across the Group, which
include apprenticeships, scholarships, work
experience and management training programmes.
Our businesses also work in partnership with
schools and colleges to offer work opportunities
within their local communities.
Our employment and training
opportunities
Recognising the need for continued
investment in traditional electrical and
mechanical engineering skills, AMCO extended
their craft apprenticeship training programme
in the year. AMCO has also been involved
with Network Rail’s Infrastructure Projects
Alliance Team to inform school students about
new bridge installations on the rail network.
The event involved students from schools in
Loughborough working through the process of
planning and delivering a new railway bridge.
Shepley Engineers facilitates the progression
of school leavers into the industry by supporting
schools through work placements and job
experience opportunities. Apprentices and
trainees are mentored through their learning
experience with the business as part of their
placement. Shepley also participates in their
local Business Cluster, which co-ordinates
business engagement with education providers.
VHE continues its long tradition of providing
vocational training with the placement of
four students during 2015. The students will
be supported to develop practical knowledge
and on the job training during their year-long
involvement with VHE’s site teams.
Walter Lilly continues its 18-year programme
of sponsoring students from Loughborough
University in disciplines such as construction
management, quantity surveying and design
management. Walter Lilly also provides work
experience opportunities for Year 11 and 12
pupils from local schools.
Seymour continues to work alongside St. Hild’s
School, Hartlepool College and Construction
Skills supporting pupils and staff through their
placement scheme.
Britannia Construction, Clarke Telecom and
VHE employees are supported with ongoing
programmes of formal training to develop industry
skills in addition to specialist equipment training.
Awards
Royal Society for the Prevention of
Accidents (“RoSPA”)
Our businesses have been recognised at
the RoSPA annual Occupational Health
and Safety Awards. At this year’s awards,
Shepley Engineers received an ‘Order of
Distinction’, VHE was again awarded a
President’s Award, Britannia received a
sixth consecutive Gold Medal Award and
Lewis Civil Engineering received a Gold
Medal on its first award application.
Other awards
n AMCO Rail’s LNW Asset Management
team won ‘Maintenance Team of the Year
2015’ at the National Rail Awards.
n AMCO Rail were awarded the Brunel
Medal at the Institute of Civil Engineers
(“ICE”) South West annual awards for the
Dawlish sea wall emergency works.
n AMCO Rail were awarded Civil
Engineering Contractors Association
(“CECA”) 2014 Yorkshire & Humberside
‘Linda Grant’ Health & Safety Award for
the Standedge Tunnel Ventilation Shafts
Refurbishment scheme.
n The Belford Flood Alleviation Scheme,
carried out by AMCO Engineering and
VHE for the Environment Agency, won the
ICE North East 2015 Robert Stephenson
Award in the small project category.
n Shepley Engineers were awarded the
2015 Sellafield Resident Engineer’s
Safety Award for a second year.
n Seymour Civil Engineering’s Megstone
Avenue Flood Alleviation Scheme for
Northumbrian Water was commended at
the ICE North East Robert Stephenson
Civil Engineering Awards 2015 in the
small project category.
n VHE, as part of the team working on the
Shawfield Regeneration Project for Clyde
Gateway, received a Highly Commended
Award in the sustainability category at
the 2015 Ground Engineering Awards.
n Lewis Civil Engineering achieved Bronze
Accreditation at the Fleet Operator
Recognition Scheme (“FORS”) during
2015.
n Clarke Telecom won a British Safety
Council International Safety Award for
2015.
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Initiatives which help to identify where
improvements can be achieved include cross-
business inspections and audits, supplier
safety forums, monitoring of sites and annual
business safety awards.
Our businesses undertake a range of internal
educational programmes designed to reflect
the industries in which we operate; these
include safety workshops and campaigns
such as "You said, we did".
Working closely with our clients, we develop
a consistent approach to our safety
awareness programmes.
Many of our businesses continue to be
accredited and approved with various health
and safety schemes, including the Contractors
Health and Safety Assessment Scheme,
ConstructionOnline and Safecontractor.
Safety
It remains the Group’s priority to provide a safe
working environment for all its employees and
those who work with us.
Elsewhere we have undertaken 12 years at
Magnox sites in the UK and 16 years on E.ON
UK sites without a lost time accident.
Our businesses are committed to the continual
improvement of the Group’s safety profile.
A reduction in the number of accidents and
incidents is achieved through the use of safety
awareness campaigns, training opportunities
and workshops. The Renew Group is proud to
have recorded another year where our accident
incidence rate is materially lower than the
industry average.
Safety improvement programmes support the
development of our safe working culture and
encourage open discussion within the business.
The changing nature of the work the Group
undertakes, and an increase in smaller teams
working remotely, is reflected in the increasing
use of behavioural safety training during the year.
Safety is managed across Renew’s
subsidiary businesses by the Safety and
Environmental Management Group which
co-ordinates activities and liaises with our
team of locally based construction managers
and safety advisors.
The Group’s safety 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 6 years and 5.5 million
man hours of operations at the Sellafield
Site in Cumbria since a lost time accident.
Our safety achievement was recognised by
Sellafield with the Resident Engineer’s Safety
Award for the second year running recognising
“Outstanding Safety Performance”.
This Strategic Report was approved by the
Board on 24 November 2015 and is signed
on its behalf by:
B W May
Chief Executive
24 November 2015
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
35
CORPORATE GOVERNANCE
Directors’ report
The Directors present their report and the audited accounts for the year ended 30 September 2015.
Principal activities
For the year ended 30 September 2015 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 Group’s subsidiaries as at 30 September 2015 is listed in Note S to the Company’s financial statements.
Results and dividends
The Group profit for the year after accounting for discontinued operations was £5,905,000 (2014: £5,182,000). The Directors recommend
the payment of a final dividend on the Ordinary Shares of 4.75p (2014: 3.50p) giving a total for the year of 7.0p (2014: 5.0p).
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.
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 2015, £4,233,000 (2014: £3,868,000) of the Group’s net assets are
denominated in US dollars. 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 subcontractors 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.
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CORPORATE 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 the Company will retrain employees who become disabled, so that they can continue
their employment in another position. The Group engages, promotes and trains staff on the basis of their capabilities, qualifications
and experience, without discrimination, giving all employees an equal opportunity to progress.
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. Our 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 Health, Safety and Environmental (“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 to determine system
amendments 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 2015, 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 32 to 35.
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, 70, 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, 55, 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 Boohoo.com plc.
Roy Harrison OBE – Director, 68, 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 non-executive director of
Fox Marble Holdings plc. 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.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
37
CORPORATE GOVERNANCE
Directors’ report continued
Executive Directors
Brian May – Director, 64, 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. He is a non-executive director of RTC Group Plc.
Paul Scott – Director, 51, 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, 59, 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.
Roy Harrison OBE and David Forbes retire by rotation at the 2016 Annual General Meeting and will offer themselves for reappointment.
The Board recommends their reappointment as it considers that they continue to perform their roles well and bring considerable strategic,
financial 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 pages 41 and 42. No Director has any interest in any other Group company. Details of the Directors’ remuneration and service
contracts appear on pages 40 and 41.
Disclosable interests
As at 20 November 2015, the Company has been notified of the following disclosable interests in the voting rights of the Company:
Octopus Investments Nominees Limited
Hargreave Hale Limited
Investec Wealth & Investment Limited
Brewin Dolphin Limited
Number
of Ordinary
shares
9,574,560
7,597,364
3,773,606
2,800,783
Percentage
of issued
share capital
15.46%
12.27%
6.09%
4.52%
Share capital
As at the date of this report, the total number of shares in issue (being Ordinary shares of 10p each) is 61,917,948.
During the year, the Company has not bought back any of its own shares. 400,000 new Ordinary shares of 10p each were issued at 271.72p
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:
nn so far as each Director is aware, there is no relevant audit information of which the Group’s auditor is unaware; and
nn 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 Directors’ report on 24 November 2015.
By order of the Board
J Samuel FCA
Company Secretary
24 November 2015
Company number: 650447
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Directors’ remuneration report
CORPORATE GOVERNANCE
The Directors present the Directors’ remuneration report (the “Remuneration Report”) for the financial year ended 30 September 2015.
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 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. 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 Remuneration Report.
The Board consults with major shareholders when any significant change in the structure or scale of Directors’ remuneration is being considered
and will continue to do so. 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
– 17,740,557 (99.3 per cent)
Against
– 128,421 (0.7 per cent)
Total votes cast
– 17,868,978 (100 per cent)
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)
(b)
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;
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 packages 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 the
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:
nn basic salary and benefits;
nn annual bonus awards;
nn long-term equity incentive plans; and
nn 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 Directors and their immediate family.
The Company also has a permanent health insurance policy to provide cover for the Executive Directors.
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.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
39
CORPORATE GOVERNANCE
Directors’ remuneration report continued
Remuneration policy continued
Long-term equity incentive plans
The Remuneration Committee 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 is
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 per cent.
For TSR growth between 25 per cent and 100 per cent, 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 per cent growth, to 100 per cent vesting at 100 per cent growth. There is no vesting if TSR growth
is 25 per cent 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 Renew Holdings plc Executive Share Option Scheme (“ESOS”) and the Renew Holdings plc Savings Related Share Option Scheme were
approved at an EGM held on 11 March 2004. There are 41,956 options outstanding under the ESOS. The Remuneration Committee does not
currently intend to grant any further options under the Renew Holdings plc 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.
As set out above, it is the Group’s policy that the Executive Directors should be rewarded in the range of the median to upper quartile of the
remuneration paid to directors of comparable public companies. During the year a review was carried out which highlighted that the LTIP
individual participation limit, previously set at 100 per cent of basic salary, was below the equivalent limit of comparable public companies.
Accordingly, the Remuneration Committee is proposing that the individual participation limit is increased from 100 per cent to 150 per cent
of basic salary per financial year and is seeking the approval of shareholders at the forthcoming Annual General Meeting for this increase. It
is the current intention of the Remuneration Committee to make awards at 150 per cent of salary only in exceptional circumstances.
It is also intended to make certain changes to the rules of the LTIP scheme to provide extra flexibility in the mechanics of settling future LTIP awards. In
particular, it is proposed that the Remuneration Committee will be able to grant options over Ordinary Shares with an exercise price equal to their
nominal value (10p per share) in addition to the existing power to grant nil cost options. This will simplify the mechanics of settlement, reducing costs to
the Company and reducing financial risk to the participants. All LTIP options will continue to have the vesting criteria previously identified.
It is also proposed that the Company will have the ability, but not the obligation, of providing a cash alternative to participants equal to the net
benefit of their LTIP option. Again this proposal, whilst not changing the benefit to the participants, will simplify the settlement process, reducing
complexity and cost to the Company, reducing risk and complexity to the participant and reducing dilution to the shareholders, all whilst preserving
the overall economic effect of the LTIP award. A further resolution to make the necessary changes to the LTIP rules to achieve the flexibility of being
able to grant nominal value (10p per share) options and to provide a cash alternative will be proposed at the 2016 Annual General Meeting.
Remuneration for the year ended 30 September 2015
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 three years.
The service contracts of the Directors, who served during the year ended 30 September 2015, include the following terms:
Directors
R J Harrison
J Bishop
D M Forbes
B W May
P Scott
J Samuel
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
40
WWW.RENEWHOLDINGS.COM
CORPORATE GOVERNANCE
Directors’ remuneration
Information is provided below for Directors who served during the financial year and as at 30 September 2015:
Notes
Salary/fees
£000
Bonuses
£000
Executive Directors
B W May
P Scott
J Samuel
1,2,3,5,6
2,4,5,7
2,3,5,6
Non-executive Directors
R J Harrison
J Bishop
D M Forbes
Notes:
313
195
241
60
33
33
177
117
136
—
—
—
LTIP
£000
650
—
433
—
—
—
Pension
£000
Benefits
£000
Total emoluments
2015
£000
Total emoluments
2014
£000
—
47
—
—
—
—
73
13
56
—
—
—
1,213
372
866
2,451
60
33
33
677
62
522
1,261
58
31
31
2,577
1,381
1. The highest paid Director for 2015 and 2014 was B W May who received emoluments of £1,213,000 (2014: £677,000).
2. 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 2016.
3. Details of the LTIP options exercised during the year can be found below.
4. Pension cost includes 15 per cent Company pension contributions combined with employee pension contributions under a salary sacrifice arrangement
which are paid into a personal pension plan.
5. Benefits include car allowances and certain medical cover for the Director and his immediate family.
6. 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.
7. P Scott was appointed as a Director with effect from 1 July 2014 and so the emoluments shown above for 2014 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 on a straight line basis, with the maximum bonus of 100 per cent of salary being
paid if the performance exceeds the target by 30 per cent with no bonus being payable if performance is 50 per cent or more below target.
The Remuneration Committee makes 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 2015, 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 £19,600,000. The operating profit before exceptional items for the
Group, adjusted to remove distortions caused by acquisitions and disposals during the year, exceeded the set target by approximately 4 per cent.
Accordingly, under the terms of the scheme, the Executive Directors are entitled to receive an annual bonus equal to 56.6 per cent of salary.
Long-term equity incentive plans
The market price of the Company’s shares at 30 September 2015 was 324.875p and the range of market prices during the year was between
240.5p and 343.5p.
Information is provided below for Directors who served during the financial year and as at 30 September 2015:
Directors’ share options
Pursuant to the LTIP and the ESOS, the Board has granted options to the Executive Directors as set out in the following table.
The LTIP options are exercisable at a nominal cost but are only exercisable to the extent that certain performance criteria are achieved by the
Company over a three-year performance period.
The ESOS options, which have an exercise price of 286p per share, are solely used to allow beneficiaries to take advantage of the approved nature of
the ESOS for a limited proportion of the LTIP award. The same performance criteria apply to the ESOS options, which cannot be exercised until the
same date as the related LTIP options. To the extent that there is a gain arising on the ESOS options at the date of exercise, the option holder will
forfeit LTIP options to the same value immediately.
Number of Ordinary Shares under option
LTIP options
B W May
P Scott
J Samuel
Exercisable between
21 December 2015 &
20 December 2022
Exercisable between
3 January 2017 &
2 January 2024
Exercisable between
8 January 2018 &
7 January 2025
228,560
140,647
171,440
112,518
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
109,000
60,000
84,000
41
CORPORATE GOVERNANCE
Directors’ remuneration report continued
Directors’ remuneration continued
Directors’ share options continued
Number of Ordinary shares under option
ESOS options
B W May
P Scott
J Samuel
Exercisable between
8 January 2018 &
7 January 2025
10,489
10,489
10,489
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.
During the year, all of the options granted on 2 March 2012, amounting to 400,000 shares in aggregate, vested in accordance with their
vesting conditions. These options were subsequently exercised on 25 March 2015 and 240,000 shares were issued to B W May and 160,000
shares to J Samuel at 271.72p per share. This level of vesting reflects the substantial rise in share price and total shareholder return during
the vesting period.
Directors’ pension information
No Director has 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 per cent of their basic salary in lieu of pension contributions from the Company. The Company pays 15 per cent
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 2015 as follows:
R J Harrison OBE
J Bishop
D M Forbes
B W May
P Scott
J Samuel
Ordinary Shares of 10p each
30 September 2015
30 September 2014
150,000
11,890
20,000
584,193
5,000
240,548
150,000
10,000
20,000
584,193
—
240,548
Remuneration for the year ending 30 September 2016
Basic salary and benefits
The basic salaries of B W May, J Samuel and P Scott have increased by 3.0 per cent to £323,000, £248,000 and £213,000, respectively,
with effect from 1 October 2015. The level of increase is 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 2016 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 per cent of their basic salary if the Group
achieves 130 per cent of target operating profit. No bonus will be paid if the Group achieves 50 per cent or less of target operating profit.
Long-term equity incentive plan.
The Remuneration Committee has 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, or in circumstances where the rules are being amended at the company’s Annual General Meeting,
then shortly after that meeting. It is expected that this will continue in the absence of unforeseen circumstances and that the next award will
be announced shortly after the 2016 Annual General Meeting. If the resolutions proposed at the Annual General Meeting are approved by
shareholders, then awards will be limited in amount to 150 per cent of basic salary. The second tranche of options granted under the LTIP,
granted on 21 December 2012 as 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 24 November 2015 and signed on its behalf by:
D M Forbes
Chairman of the Remuneration Committee
24 November 2015
42
WWW.RENEWHOLDINGS.COM
Corporate 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 37 and 38. 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 R J 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 inductions 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 other than on one occasion when J Bishop was unable to attend.
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 Remuneration, Nominations and Audit 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.
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, reappointment or re-election
of Directors upon conclusion of a specified term or retirement by rotation.
The Audit Committee has held two 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. All fees paid to the auditor whether for audit or non-audit work are approved by the Audit Committee in advance.
The Audit Committee also reviews the Interim statement, the preliminary announcement, the Annual Report and Accounts and accounting policies.
The Board forms a General Purposes Committee from time to time as it deems necessary. This Committee comprises any two of the Executive
Directors as determined by the Board to consider individual business matters, which have been specifically delegated to it by the Board.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
43
CORPORATE GOVERNANCE
Corporate governance continued
Internal controls
Throughout the financial year ended 30 September 2015 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. 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 nine years and including 2015, the Group has carried out a programme
of internal audit conducted by the Group Commercial Director and by members of the various subsidiaries’ finance teams. This system of
peer review promotes best practice as well as ensuring that Group minimum requirements as to procedures and internal controls are being
complied with. The reports from these internal audits are made available both to the Board and to the external auditor.
Going concern
The Directors have reviewed the budgets and forecasts prepared by the Group and its trading subsidiaries and consider that at the time of approving
the financial statements, there is a reasonable expectation that the Company and the Group have adequate resources to continue in operational
existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements.
Directors’ remuneration
The Company’s policy on the remuneration of Executive Directors, and information relating to the Directors’ remuneration and their interests
in share options, is included in the Directors’ remuneration report.
Directors’ and officers’ indemnity
The Articles of Association provide that each Director or other officer or auditor of the Company shall be indemnified by the Company against
losses, costs and expenses he may sustain or incur in connection with the performance of his duties of office, to the fullest extent permitted by law.
Shareholder relationships
Members of the Board have dialogue with individual shareholders during the year. In addition to the Annual and Interim Report and Accounts,
the Chairman addresses shareholders at the AGM and invites questions to any members of the Board.
The AGM is normally attended by all Directors and provides an opportunity for communication with those shareholders attending. Notice of
the AGM is given to shareholders at least 21 days in advance and separate resolutions are proposed on each substantially separate issue.
Where resolutions at the AGM are dealt with by show of hands, the results of proxy votes for and against are still announced.
Financial and other information about the Group is available on the Company’s website: www.renewholdings.com, from which shareholders
can also access their shareholding details via a link to the website of Capita Asset Services.
Annual General Meeting
The AGM will be held on 27 January 2016, 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 24 November 2015.
By order of the Board
J Samuel
Company Secretary
24 November 2015
44
WWW.RENEWHOLDINGS.COM
CORPORATE 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 report, 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 International
Financial Reporting Standards (“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:
nn select suitable accounting policies and then apply them consistently;
nn make judgements and estimates that are reasonable and prudent;
nn for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;
nn 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
nn prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and the parent company
will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s
transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that
its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website.
Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
45
ACCOUNTS
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 2015 set out on pages 47 to 82. 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 45, 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 2015
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.
Mick Thompson (Senior Statutory Auditor)
For and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DW
24 November 2015
46
WWW.RENEWHOLDINGS.COM
Group income statement
for the year ended 30 September
Group revenue from
continuing activities
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance income
Finance costs
Other finance income/
(expense) – 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
ACCOUNTS
Total
2014
£000
464,474
(411,413)
53,061
(39,678)
13,383
182
(427)
(87)
13,051
(2,714)
Before
amortisation
of intangible
assets
2015
£000
519,645
(462,154)
57,491
(37,121)
20,370
27
(939)
189
19,647
(3,579)
Amortisation
of intangible
assets
(see Note 3)
2015
£000
—
—
—
(3,536)
(3,536)
—
—
—
(3,536)
636
Before
exceptional
items and
amortisation
of intangible
assets
2014
£000
Total
2015
£000
519,645
464,474
(462,154)
(411,413)
57,491
(40,657)
16,834
27
(939)
189
16,111
(2,943)
53,061
(36,623)
16,438
182
(427)
(87)
16,106
(3,325)
Exceptional
items and
amortisation
of intangible
assets
(see Note 3)
2014
£000
—
—
—
(3,055)
(3,055)
—
—
—
(3,055)
611
16,068
(2,900)
13,168
12,781
(2,444)
10,337
(7,263)
5,905
21.34p
21.06p
9.57p
9.44p
(5,155)
5,182
16.83p
16.59p
8.44p
8.32p
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
47
ACCOUNTS
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
2015
£000
5,905
8,880
(1,570)
7,310
304
304
2014
£000
5,182
1,068
(214)
854
1
1
13,519
6,037
Group statement of changes in equity
for the year ended 30 September
Called up
share
capital
£000
Share
Capital
Cumulative
Share based
premium redemption
translation
payments
account
reserve
adjustment
reserve
£000
£000
At 1 October 2013
6,140
5,893
3,896
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
£000
751
£000
390
(98)
1
Retained
earnings
£000
Total
equity
£000
(6,735)
10,335
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
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
40
1,047
35
304
5,905
5,905
(3,546)
(3,546)
1,087
35
304
8,880
8,880
(1,570)
(1,570)
At 30 September 2015
6,192
6,989
3,896
1,056
327
6,509
24,969
48
WWW.RENEWHOLDINGS.COM
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
Current tax assets
Cash and cash equivalents
Total assets
Non-current liabilities
Borrowings
Obligations under finance leases
Retirement benefit obligations
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Trade and other payables
Obligations under finance leases
Current tax liabilities
Provisions
Total liabilities
Net assets
Share capital
Share premium account
Capital redemption reserve
Cumulative translation adjustment
Share based payments reserve
Retained earnings
Total equity
* Details of the restated balance sheet are set out in Note 26.
Approved by the Board and signed on its behalf by:
R J Harrison OBE
Chairman
24 November 2015
ACCOUNTS
2014
(restated*)
£000
56,060
7,770
14,143
1,456
2,741
82,170
4,068
85,319
1,250
—
5,586
96,223
178,393
(15,500)
(3,575)
—
(1,056)
(1,232)
2015
£000
56,060
4,234
13,101
15,154
1,718
90,267
4,864
96,960
—
2,187
10,662
114,673
204,940
(9,300)
(2,514)
(599)
(3,537)
(1,232)
(17,182)
(21,363)
(6,200)
(6,200)
(153,612)
(133,130)
(2,609)
(2,764)
—
(368)
(162,789)
(179,971)
24,969
6,192
6,989
3,896
1,056
327
6,509
24,969
(694)
(368)
(143,156)
(164,519)
13,874
6,152
5,942
3,896
752
292
(3,160)
13,874
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
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
49
ACCOUNTS
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
Expense in respect of share option exercise
Increase in inventories
(Increase)/decrease in receivables
Increase in payables
Current and past service cost in respect of defined benefit pension scheme
Cash contribution to defined benefit pension schemes
Expense/(credit) 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
Disposal/(acquisition) of subsidiaries net of cash acquired
Net cash inflow/(outflow) from continuing investing activities
Net cash inflow/(outflow) from discontinued investing activities
Net cash inflow/(outflow) from investing activities
Financing activities
Dividends paid
Issue of Ordinary Shares
New loan
Loan repayments
Repayments of obligations under finance leases
Net cash (outflow)/inflow 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
2015
£000
13,168
3,536
3,927
(278)
1,087
(586)
(14,191)
18,741
248
(4,279)
35
(27)
750
(939)
(3,066)
2,943
21,069
(3,590)
17,479
27
530
(1,454)
1,135
238
162
400
(3,546)
—
—
(6,200)
(3,067)
(12,813)
8,494
(3,428)
5,066
5,586
10
10,662
2014
£000
10,337
2,231
2,893
(435)
—
(323)
1,324
9,630
59
(3,117)
(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
5,036
(4,797)
239
5,348
(1)
5,586
Bank balances and cash
10,662
5,586
50
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Notes to the accounts
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 cashflows 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
cashflows. 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 the 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 is allocated first to
goodwill, and then to remaining assets and liabilities on a 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.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
51
ACCOUNTS
Notes to the accounts continued
1 Accounting policies continued
(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 the Group has adequate cash resources to continue trading for the foreseeable future.
The consolidated financial statements have been prepared in accordance with IFRSs as adopted for use in the EU. The Group has applied all
accounting standards and interpretations issued by the IASB and International Financial Reporting Committee relevant to its operations and
which are effective in respect of these financial statements.
The following new or revised IFRSs 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
IFRS 10 “Consolidated Financial Statements”
IFRS 12 “Disclosure of Interests in Other Entities”
Annual Improvement to IFRSs: 2010–2012 cycle
Annual Improvement to IFRSs: 2011–2013 cycle
Annual Improvement to IFRSs: 2012–2014 cycle
IFRS 15 “Revenue from Contracts with Customers”
Applies to periods beginning after
January 2014
January 2014
February 2015
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 as defined in IFRS 10.
(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 resources
to segments and to 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 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 cashflows are likely to arise from these relationships and rights.
52
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ACCOUNTS
1 Accounting policies continued
(vii) Property, plant and equipment
Property, plant and equipment is 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:
Freehold land
– no depreciation charge
Freehold buildings
– fifty years
Plant, vehicles and equipment
– three to ten years
(viii) Impairments
Goodwill arising on acquisitions and other assets that have an indefinite useful life and are therefore not subject to amortisation is 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 cashflows 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
cashflows. 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 cashflow 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 disclosed as 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.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
53
ACCOUNTS
Notes to the accounts continued
1 Accounting policies continued
(xvii) Taxation
The tax charge is composed of current tax and deferred tax, calculated using tax rates that have been enacted or substantively enacted
by the balance sheet date. Current tax and deferred tax are charged or credited to the income statement, except when they relate to items
charged or credited directly to equity, in which case the relevant tax is also dealt with in equity.
Current tax is based on the profit for the year. Deferred tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax on such assets and liabilities is not recognised if the temporary difference arises from the initial recognition (other than in
a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends
to settle its current assets and liabilities on a net basis.
(xviii) Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are retranslated at the rate of exchange ruling at the balance sheet date. The income statements of overseas subsidiary undertakings
are translated at the average rate of exchange ruling throughout the financial year. The balance sheets of overseas subsidiary undertakings are
translated at the rate of exchange ruling at the balance sheet date. Exchange differences arising from this policy and arising on the retranslation
of the opening net assets are taken directly to reserves. All other exchange differences are taken to the income statement.
(xix) Financial instruments
Financial assets are divided into the following categories: trade receivables and financial assets at fair value. The Board assigns financial assets to
each category on initial recognition dependant on the purpose for which the asset was acquired. The categorisation of these assets is reconsidered
at each reporting date at which a choice of categorisation or accounting treatment is available. All financial assets are recognised whenever the
Group becomes party to the contractual provisions of the financial instrument. All such assets are initially recognised at fair value. Derecognition
of such assets occurs when the Group’s right to receive cashflows 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 cashflows 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 cashflows 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 cashflows 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.
54
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ACCOUNTS
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 35.0% (2014: 40.6%) 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.
On 31 October 2014, the Group entered into a contract to dispose of part of its Specialist Building segment. The results of that business
are shown as a discontinued operation.
(a) Business analysis
Revenue is analysed as follows:
Engineering Services
Specialist Building
Inter-segment revenue
Segment revenue
Central activities
Group revenue from continuing activities
Analysis of operating profit from continuing activities
2015
£000
440,502
79,492
(380)
519,614
31
2014
£000
382,467
82,112
(105)
464,474
—
519,645
464,474
Before
amortisation
of intangible
Amortisation
of intangible
assets
2015
£000
20,055
2,274
22,329
(1,959)
20,370
(723)
assets
2015
£000
(3,536)
—
(3,536)
—
(3,536)
—
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)
—
2015
£000
16,519
2,274
18,793
(1,959)
16,834
(723)
2014
£000
14,049
2,157
16,206
(2,823)
13,383
(332)
19,647
(3,536)
16,111
16,106
(3,055)
13,051
Engineering Services
Specialist Building
Segment operating profit
Central activities
Operating profit
Net financing expense
Profit on ordinary activities before
income tax
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
55
ACCOUNTS
Notes to the accounts continued
2 Segmental analysis continued
(a) Business analysis continued
Balance sheet analysis of business segments
Assets
£000
177,035
40,488
162,245
42,042
(216,870)
204,940
Capital
additions
£000
2,382
101
822
2
3,307
2015
Liabilities
£000
(146,282)
(78,107)
(122,643)
(49,809)
216,870
(179,971)
2015
Net assets
£000
30,753
(37,619)
39,602
(7,767)
—
24,969
Depreciation
Amortisation
£000
3,776
88
63
7
£000
3,536
—
—
—
3,934
3,536
Assets
£000
163,569
68,516
227,500
42,042
(323,234)
178,393
Capital
additions
£000
4,716
168
5
132
5,021
Engineering Services
Specialist Building
Central activities
Discontinued operations
Group eliminations
Group net assets
Other information
Engineering Services
Specialist Building
Central activities
Discontinued operations
(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
56
WWW.RENEWHOLDINGS.COM
2014 (restated)
Liabilities
£000
(132,996)
(94,459)
(217,641)
(42,657)
323,234
(164,519)
2014
Net assets
£000
30,573
(25,943)
9,859
(615)
—
13,874
Depreciation
Amortisation
£000
2,797
83
13
82
2,975
2015
£000
£000
2,231
—
—
—
2,231
2014
(restated)
£000
519,645
464,474
—
—
519,645
464,474
Assets
£000
90,267
Assets
£000
82,170
2015
£000
245
2,292
1,635
765
873
3,322
(297)
(278)
2014
£000
255
2,181
712
691
792
2,912
(362)
(435)
3 Operating profit continued
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 pensions advice
Exceptional items and amortisation of intangible assets
Acquisition costs
Total losses arising from exceptional items
Amortisation of intangible assets (see Note 9)
ACCOUNTS
2014
£000
38
217
8
263
2014
£000
824
824
2,231
3,055
2015
£000
34
211
22
267
2015
£000
—
—
3,536
3,536
The Board has determined that certain items in the income statement should be separately identified for better understanding
of the Group’s results.
In 2014 the Company acquired Forefront Group Ltd and Clarke Telecom Ltd and incurred £824,000 of costs associated with the acquisitions.
The Board has also separately identified the charge of £3,536,000 (2014: £2,231,000) 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.
Discontinued operation analysis
Revenue
Expenses
Profit on disposal
Loss before income tax
Income tax credit – benefit of tax losses
Income tax expense – deferred tax
Loss for the year from discontinued operations
2015
£000
31,947
(41,278)
1,250
(8,081)
818
—
(7,263)
2014
£000
49,992
(54,124)
—
(4,132)
—
(1,023)
(5,155)
On 31 October 2014, the Board reached an agreement to sell Allenbuild Ltd to Places for People Group Ltd (“PFP”) for a total consideration
of £2.75m payable in cash. PFP paid the initial 50% of the consideration on 31 October 2014 and will pay the balance on 31 January 2016.
The trading result for this business has therefore been included within the loss for the year from discontinued operations.
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
2015
£000
1,755
800
2,555
2014
£000
2,528
1,500
4,028
The provision of £1,755,000 (2014: £2,528,000) relates to settling final accounts and contractual issues on old contracts.
A further £800,000 (2014: £1,500,000) of costs have been recognised following the exceptional storm damage experienced in 2013.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
57
ACCOUNTS
Notes to the accounts continued
4 Finance income and costs
Finance income
Finance income of £27,000 (2014: £182,000) has been earned during the year on bank deposits.
Interest payable:
On bank loans and overdrafts
Other interest payable
Other finance income/(expense) - 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.
2015
£000
(559)
(380)
(939)
6,206
(6,017)
189
2015
Number
3,068
3,323
2,293
775
3,068
2014
£000
(232)
(195)
(427)
5,664
(5,751)
(87)
2014
Number
2,854
3,121
2,066
788
2,854
2015
£000
128,655
13,352
4,293
1,122
2014
£000
105,520
11,293
3,162
(98)
147,422
119,877
2015
£000
2,577
1,213
2014
£000
1,381
677
58
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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
ACCOUNTS
2015
£000
(2,360)
1,359
(1,001)
(760)
(1,182)
(1,942)
(2,943)
—
(2,943)
2014
£000
(2,265)
(227)
(2,492)
(594)
(651)
(1,245)
(3,737)
1,023
(2,714)
2015
£000
16,111
2014
£000
13,051
Profit multiplied by standard rate of corporation tax in the UK of 20.5% (2014: 22.0%)
(3,303)
(2,871)
Effects of:
Expenses not deductible for tax purposes
Timing differences not provided in deferred tax
Change in tax rate
Tax losses surrendered by discontinued operation
Deferred tax in respect of discontinued operation
Adjustments to tax charge in respect of previous periods
(194)
(779)
(26)
—
—
1,359
(2,943)
(1,341)
(158)
(45)
905
1,023
(227)
(2,714)
The Group has available further unused UK tax losses of £46m (2014: £42m) to carry forward against future taxable profits. The Group also has
unused USA tax losses of $18m (£11.8m) (2014: $17m (£10.5m)) 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 £10.4m (2014: £10.6m).
(c) Deferred tax asset
Defined benefit pension schemes
Accelerated capital allowances
Other timing differences
Future tax losses
(d) Deferred tax liabilities
Defined benefit pension schemes
Fair value adjustments
2015
£000
108
543
201
866
1,718
2015
£000
(2,728)
(809)
(3,537)
2014
£000
(148)
743
279
1,867
2,741
2014
£000
(143)
(913)
(1,056)
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
59
ACCOUNTS
Notes to the accounts continued
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
Reclassification of opening pension scheme asset as a liability
Reclassification of opening pension scheme liability as an asset
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
Reclassification of opening pension scheme asset as a liability
Reclassification of opening pension scheme liability as an asset
Defined benefit pension schemes – income statement
Defined benefit pension schemes – SOCI
At 30 September
7 Dividends
Interim (related to the year ended 30 September 2015)
Final (related to the year ended 30 September 2014)
Total dividend paid
Interim (related to the year ended 30 September 2015)
Final (related to the year ended 30 September 2014)
Total dividend paid
2015
£000
2,741
—
(988)
(290)
148
(143)
(85)
335
1,718
2015
£000
(1,056)
(693)
637
160
(148)
143
(675)
(1,905)
(3,537)
2014
£000
3,051
950
(403)
—
—
—
(554)
(303)
2,741
2014
£000
(938)
(613)
446
—
—
—
(40)
89
(1,056)
2015
Pence/share
2.25
2014
Pence/share
1.50
3.50
5.75
£000
1,393
2,153
3,546
2.50
4.00
£000
923
1,538
2,461
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 4.75p per Ordinary Share be paid in respect of the year ended 30 September 2015.
This will be accounted for in the 2015/16 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 operation
Basic earnings per share
Weighted average number of shares
Earnings
£000
16,068
(2,900)
13,168
(7,263)
5,905
2015
2014
EPS
Pence
26.03
(4.69)
21.34
(11.77)
9.57
61,718
DEPS
Pence
25.70
(4.64)
Earnings
£000
12,781
(2,444)
21.06
10,337
(11.62)
9.44
62,533
(5,155)
5,182
EPS
Pence
20.80
(3.97)
16.83
(8.39)
8.44
61,431
DEPS
Pence
20.51
(3.92)
16.59
(8.27)
8.32
62,313
The dilutive effect of share options is to increase the number of shares by 815,000 (2014: 882,000) and reduce basic earnings per share
by 0.13p (2014: 0.12p).
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9 Intangible assets
Cost:
At 1 October 2013
Additions
Hindsight adjustment (Note 26)
Reclassified as Assets held for resale
At 1 October 2014 and 30 September 2015
Impairment losses/amortisation:
At 1 October 2013
Charge for year
At 1 October 2014
Charge for year
At 30 September 2015
Carrying amount:
At 30 September 2015
At 30 September 2014
At 30 September 2013
The carrying amounts of goodwill by operating segment are as follows:
Britannia Construction Ltd
V.H.E. Construction plc
P.P.S. Electrical Ltd
Seymour (C.E.C.) Holdings Ltd and its subsidiary
West Cumberland Engineering Ltd and its subsidiary
Amco Group Holdings Ltd and its subsidiaries
Lewis Civil Engineering Ltd and its subsidiaries
Clarke Telecom Ltd
Forefront Group Ltd and its subsidiaries
ACCOUNTS
Contractual
rights and
customer
relationships
£000
6,281
6,042
—
—
12,323
2,322
2,231
4,553
3,536
8,089
4,234
7,770
3,959
2014
£000
1,253
1,796
227
4,017
207
18,168
6,556
11,143
12,693
56,060
Goodwill
£000
34,282
21,062
2,774
(1,250)
56,868
808
—
808
—
808
56,060
56,060
33,474
2015
£000
1,253
1,796
227
4,017
207
18,168
6,556
11,143
12,693
56,060
£1,250,000 of goodwill was reclassified as Assets held for resale in respect of the disposal of Allenbuild Ltd subsequent to 30 September 2014.
Clarke Telecom
Goodwill of £11,143,000 was acquired on the acquisition of Clarke Telecom Ltd and was reviewed for impairment one year after the acquisition
and then will be on an ongoing basis as required by IAS 36. No impairment was identified.
Forefront Group
Goodwill of £9,919,000 was acquired on the acquisition of Forefront Group Ltd and was reviewed for impairment one year after the acquisition
and then will be on an ongoing basis as required by IAS 36. No impairment was identified. Goodwill has increased by £2,774,000 as a result
of a fair value hindsight adjustment. Details are set out in Note 26.
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 five years.
In order to test goodwill for impairment the Group performs value in use calculations by preparing cashflow forecasts for each cash generating
unit (“CGU”) derived from the most recent financial budgets and strategic plans approved by management going forward three years, and
then extrapolates cashflows 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 CGU. The CGUs are deemed to be the subsidiaries to which the goodwill relates.
Management used growth rates deemed to be appropriate to each CGU after reviewing the particular market conditions related to the sector
in which the CGU operates. Growth rates of between 3% and 6% per annum have been used. The rate used to discount the forecast cashflows
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
Board does not consider that there is any material difference between the CGUs to require different discount rates to be used. The Board has
chosen the discount rate having taken into account the cost of funds to the Group and the risks associated with the markets in which the CGUs
operate. Other than changes to the discount rate, the key assumption which would impact the carrying value of goodwill is the margin generated
by each CGU. Whilst the sensitivities vary by CGU, for a material impairment to take place the discount rate would have to increase by 25% or
the assumed operating margins would have to decrease by 10% before any impact in any single CGU. Many of the CGUs are not as sensitive to
these changes. The CGUs which are most sensitive to these assumptions are Forefront Group Ltd and Clarke Telecom Ltd.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
61
ACCOUNTS
Notes to the accounts continued
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 2013
Additions
Disposals
Acquisition of subsidiaries
At 1 October 2014
Additions
Disposals
At 30 September 2015
Depreciation:
At 1 October 2013
Charge for year
Disposals
At 1 October 2014
Charge for year
Disposals
At 30 September 2015
Net book value:
At 30 September 2015
At 30 September 2014
At 30 September 2013
1,713
—
—
—
1,713
416
(110)
2,019
89
16
—
105
19
—
124
1,895
1,608
1,624
75
—
—
—
75
—
(75)
—
75
—
—
75
—
(75)
—
—
—
—
The net book value of assets held under finance leases at 30 September 2015 was £6,835,000 (2014: £7,376,000).
During the year £1,635,000 (2014: £712,000) of depreciation was charged against assets held under finance leases.
11 Inventories
Developments and undeveloped land
Raw materials
£1.5m (2014: £1.1m) of inventories are pledged as security for liabilities.
12 Trade and other receivables
Trade receivables
Amounts due from construction contract customers
Other receivables
Prepayments and accrued income
8,596
5,021
(3,888)
4,144
13,873
2,891
(4,089)
12,675
2,032
2,959
(3,653)
1,338
3,915
(3,784)
1,469
11,206
12,535
6,564
2015
£000
3,889
975
4,864
2015
£000
5
89,296
3,532
4,127
96,960
Total
£000
10,384
5,021
(3,888)
4,144
15,661
3,307
(4,274)
14,694
2,196
2,975
(3,653)
1,518
3,934
(3,859)
1,593
13,101
14,143
8,188
2014
£000
3,242
826
4,068
2014
£000
84
75,514
4,131
5,590
85,319
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Included in trade and other receivables are debtors with a carrying value of £2.4m (2014: £3.3m) 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. The Group believes that the amounts are still
recoverable since there is no objective evidence that these financial assets are impaired. The Group does not hold any collateral over these
balances. £1.4m (2014: £1.5m) of these balances relate to certified retentions.
The average age of these receivables is 349 days (2014: 255 days).
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12 Trade and other receivables continued
Ageing of past due but not impaired receivables:
30–180 days
181–365 days
Greater than one 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
ACCOUNTS
2015
£000
548
435
1,398
2,381
2015
£000
2014
£000
1,649
675
932
3,256
2014
£000
89,296
(3,524)
85,772
2,857,820
(2,772,048)
85,772
75,752
(3,499)
72,253
2,902,146
(2,829,893)
72,253
At 30 September 2015 retentions held by customers amounted to £9.1m (2014: £13.6m). Advances received from customers for contract work
amounted to £3.5m (2014: £3.5m).
Amounts due from construction contract customers which are past due at the reporting date amounted to £2.4m (2014: £3.3m).
This amount includes retention balances of £1.4m (2014: £1.5m). The Group does not hold any collateral over these balances or other trade
and other receivables.
Contract revenue recognised in the year amounted to £519.6m (2014: £464.5m).
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
2015
£000
10,655
7
10,662
2015
£000
3,524
38,364
3,844
13,962
93,918
2014
£000
5,570
16
5,586
2014
£000
3,499
36,840
4,114
9,643
79,034
153,612
133,130
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
63
ACCOUNTS
Notes to the accounts continued
16 Borrowings
Bank loans and overdrafts repayable:
Within one year
Within two to five years
2015
£000
6,200
9,300
15,500
2014
£000
6,200
15,500
21,700
The bank loans and overdrafts are secured by a fixed and floating charge over the Group’s assets.
17 Obligations under finance leases
Amounts payable under finance leases:
Within one year
Within two to five years
Less: future finance charges
Present value of lease obligations
Less: amount due for settlement within twelve months
Amount due for settlement after twelve months
Minimum lease payments
Present value of minimum
lease payments
2015
£000
2,807
2,708
5,515
(392)
5,123
2014
£000
2,994
3,874
6,868
(529)
6,339
2015
£000
2,609
2,514
5,123
—
5,123
(2,609)
2,514
2014
£000
2,764
3,575
6,339
—
6,339
(2,764)
3,575
It is the Group’s policy to lease certain of its plant, vehicles and equipment under finance leases. The average outstanding lease term is three years
(2014: three years). For the year ended 30 September 2015, the average effective borrowing rate was 3% (2014: 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 2014 and at 30 September 2015
Non-current liabilities
Current liabilities
At 1 October 2014 and at 30 September 2015
Property
obligations
£000
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.
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19 Other financial instruments continued
Interest rate profile of financial assets and liabilities
2015
Assets
Sterling
Euro
Dollar
Liabilities
Sterling
2014
Assets
Sterling
Dollar
Liabilities
Sterling
ACCOUNTS
Fixed rate
interest rate
%
—
—
—
3.0
Fixed rate
interest rate
%
—
—
3.0
Financial assets/(liabilities)
Fixed
rate
£000
—
—
—
—
Floating
rate
£000
9,039
1,312
304
10,655
Total
£000
9,039
1,312
304
10,655
(5,123)
(5,123)
(15,500)
(15,500)
(20,623)
(20,623)
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)
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 three years
(2014: three 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.
.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
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Notes to the accounts continued
19 Other financial instruments continued
Financial risks continued
c) Currency risk
The principal 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 2015 the unhedged portion of the inter-company
loan was $2,271,000 (2014: $1,771,000). The dollar closing exchange rate was $1.51: £1 (2014: $1.62: £1) resulting in a foreign exchange gain of
£80,000 (2014: £18,000) being credited 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
£304,000. The total equity statement would be impacted by £19,000 for each $0.01 movement in exchange rates.
During the year the Group acquired some euros as a result of a contract. The Group has retained these euros to meet certain contractual
obligations which are denominated in euros. The Group anticipates utilising these euros during the next financial year.
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 and two contracts denominated in euros.
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:
61,917,948 (2014: 61,517,948) Ordinary Shares of 10p each
2015
£000
2014
£000
6,192
6,152
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 400,000 Ordinary Shares were issued following the exercise of options under the Renew Holdings plc Long Term Incentive Plan.
Share options
Renew Holdings plc 2004 Executive Share Option Scheme
The Group operates a share option scheme, the Renew Holdings plc 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.
During the year, 41,956 approved options were issued under this scheme at an exercise price of 286p. These options are subject to the same
performance criteria as options issued under the long-term incentive plan described below.
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.
As at 30 September 2014, there were 1,053,165 options outstanding under the scheme. On 7 January 2015, options to subscribe for a further
293,000 Ordinary Shares were granted. On 2 March 2015, 400,000 options were exercised resulting in a balance of 946,165 options being outstanding
at 30 September 2015. The options are exercisable at a nominal cost three years after the date of grant subject to the achievement of certain
performance criteria. Details of the options are given in the Directors’ remuneration report. To the extent that there is a gain arising in respect
of the approved options noted above, the option holder will forfeit LTIP options to the same value.
Vesting of one half of the options is dependant on absolute growth in the Company’s Total Shareholder Return (‘TSR’), and the other half
is 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 the end of the performance period.
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20 Share capital continued
Share options continued
Renew Holdings plc Long Term Incentive Plan continued
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.
The comparator group TSR performance target measures the Company’s TSR over the three year performance period against the TSR of a group
of 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 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 1 October 2014
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 2015
Share
premium
account
£000
5,893
49
Capital
redemption
reserve
£000
3,896
Cumulative
translation
reserve
£000
751
Share based
payments
reserve
£000
390
(98)
1
5,942
3,896
752
292
1,047
35
304
6,989
3,896
1,056
327
Retained
earnings
£000
(6,735)
5,182
(2,461)
1,068
(214)
(3,160)
5,905
(3,546)
8,880
(1,570)
6,509
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 IAS 36, the Directors are not able to state this figure.
Capital redemption reserve
This reserve represents the combined impact of share buy-backs and cancellations 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 plc 2004 Executive Share Option Scheme
No options were exercised during the year (2014: 114,280). Under this scheme, the fair value of those options assessed at the date of grant
has been charged against the share based payments reserve. £Nil (2014: £259,000) has been credited to administrative expenses.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
67
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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.
£35,000 (2014: £161,000) has been charged to administrative expenses. There is no impact on net assets since an equivalent amount has been
credited to the share based payments reserve. 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 2015 were
as follows:
Date of grant
Awards outstanding at 30 September 2015
– Directors and employees
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
20 December 2012
3 January 2014
7 January 2015
Total
400,000
0.0p
87.0p
10 years
3 years
36%
3.6%
0.48%
30.0p
Land and
buildings
£000
2,091
5,825
3,059
10,975
253,165
0.0p
180.0p
10 years
3 years
32%
2.0%
1.03%
87.5p
Other
£000
899
2,096
—
2,995
293,000
0.0p
288.5p
10 years
3 years
31%
1.7%
0.63%
99.0p
Total
2015
£000
2,990
7,921
3,059
13,970
946,165
Total
2014
£000
3,653
8,860
12,850
25,363
With regard to the operating leases held by the Group as lessor, the Group recognised £297,000 (2014: £362,000) of rental income in the
income statement for 2015, 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
159
166
—
325
Other
£000
—
—
—
—
Total
2015
£000
159
166
—
325
Total
2014
£000
153
295
48
496
The Group had capital commitments at 30 September 2015 of £2,044,000 (2014: £nil).
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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 2015 shows a surplus of £15,154,000 based on the assumptions set out below. The Amco scheme
shows a deficit of £599,000 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 the surplus as, having reviewed the rules
of both schemes, they are of the view that the employer has an unconditional right to that surplus.
The following disclosures required by IAS 19 have been based on the most recent actuarial valuation as at 30 September 2015 carried out by
Lane Clark & Peacock LLP, Consulting Actuaries, in respect of the Lovell scheme and Capita Employee Benefits (Consulting) Limited 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
2015
2014
2013
4.0%
3.0%
3.7%
2.0%
3.0%
2.9%
3.0%
2.6%
3.7%
2.0%
3.0%
1.8%
4.0%
3.0%
3.9%
2.1%
3.1%
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%
The mortality tables adopted for the valuation of the Lovell scheme are the S2NA tables with future improvements in line with the Continuing
Mortality Investigations 2014 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
65 year old male pensioner is forecast to live for a further 23.0 years and the further life expectancy of a male aged 65 in 2035 is 24.7 years.
The mortality tables adopted for the valuation of the Amco scheme are the S1PA Mortality 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 65 year old male pensioner is forecast to live for a further 22.4 years and the further life expectancy of a male aged 65 in 2035 is 24.2 years.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
69
ACCOUNTS
Notes to the accounts continued
24 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
The assets in the Lovell scheme were:
Annuities
Diversified portfolio
Cash
Total
Value as at
30 September
2015
£000
43,216
121,985
402
165,603
Value as at
30 September
2014
£000
43,410
101,002
1,180
145,592
Allocation
26%
74%
—
100%
Value as at
30 September
2013
£000
43,136
84,631
(19)
127,748
Allocation
30%
69%
1%
100%
Allocation
34%
66%
—
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
Cash
Total
Value as at
30 September
2015
£000
6,940
6,341
984
14,265
Value as at
30 September
2014
£000
7,270
6,427
585
14,282
Allocation
49%
44%
7%
100%
Value as at
30 September
2013
£000
6,950
5,951
594
13,495
Allocation
51%
45%
4%
100%
Allocation
52%
44%
4%
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.
Scheme funding levels and actuarial valuations
Lovell Pension Scheme
The scheme actuary has recently completed the triennial valuation of the Lovell Pension Scheme as at 31 March 2015. The scheme shows a
deficit of £12.1m compared to £24.1m when measured as at 31 March 2012. The Company has agreed a revised recovery plan with the Trustees
which commits the Company to paying annual contributions of £4,260,000 which is expected to result in the elimination of this deficit by
31 July 2018. This recovery plan aims to eliminate the deficit under the Statutory Funding Objective of the Pensions Act 2004. The Company
may be required to make further contributions to achieve a buy-out of all pension liabilities and the Company has agreed to continue to make
such contributions under a secondary funding objective. The necessity and quantum of these contributions will be remeasured by the
scheme actuary at the next triennial valuation which is due at 31 March 2018.
For accounting purposes under IAS 19, actuaries use different assumptions than for the triennial valuation. The major difference relates
to assumptions concerning the future return on assets of the scheme which includes a number of return-seeking assets invested with
BlackRock Asset Management, described above as “Diversified portfolio”. The key sensitivity for the valuation of the scheme under IAS 19 is
the selection of the discount rate which is the major determinant in measuring scheme liabilities. A reduction of 0.1% in the discount rate
would increase scheme liabilities by £2.3m.
The scheme rules permit the return of any surplus funds to the company on the winding up of the scheme.
Amco Pension Scheme
The scheme actuary completed the triennial valuation of the Amco Pension Scheme as at 31 December 2013. The scheme shows a deficit of
£2.1m compared to £2.5m when measured as at 31 December 2010. The Company has agreed a revised recovery plan with the Trustees which
commits the Company to paying annual contributions of £385,000 which is expected to result in the elimination of this deficit by 31 October 2020.
This recovery plan aims to eliminate the deficit under the Statutory Funding Objective of the Pensions Act 2004. The Company may be
required to make further contributions to achieve a buy-out of all pension liabilities.
For accounting purposes under IAS 19, actuaries use different assumptions than for the triennial valuation. The major difference relates
to assumptions concerning the future return on assets of the scheme which includes a number of return-seeking assets invested with
BlackRock Asset Management, described above as “Diversified portfolio”. The key sensitivity for the valuation of the scheme under IAS 19 is
the selection of the discount rate which is the major determinant in measuring scheme liabilities. A reduction of 0.1% in the discount rate
would increase scheme liabilities by £0.2m.
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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
Present value of scheme obligations brought forward
Interest on scheme obligations
Current and past service costs
Benefits paid
Actuarial losses due to experience on benefit obligation
Actuarial losses due to changes in financial assumptions
Actuarial losses due to changes in demographic assumptions
Total fair value of scheme obligations carried forward
Surplus in the scheme
Deferred tax
Net surplus
Amount charged to operating profit:
Current and past service costs
Amount credited/(charged) 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
Movement in the net scheme surplus during the year:
Net scheme surplus/(deficit) brought forward
Current and past service costs
Employer contributions
Net pension interest
Actuarial gain
Net scheme surplus carried forward
ACCOUNTS
2015
£000
2014
£000
145,592
127,768
5,606
3,894
(7,634)
18,145
165,603
5,664
2,917
(7,105)
16,348
145,592
144,852
131,313
5,502
248
(7,634)
2,844
4,369
268
150,449
15,154
(2,728)
12,426
(248)
(248)
5,606
(5,502)
104
18,145
(7,481)
10,664
740
(248)
3,894
104
10,664
15,154
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
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
71
ACCOUNTS
Notes to the accounts continued
24 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
The following amounts at 30 September were measured in accordance with the requirements of IAS 19.
Amco Pension Scheme
Movements in scheme assets and 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
(Deficit)/surplus in the scheme
Deferred tax
Net (deficit)/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 (deficit)/surplus during the year:
Net scheme surplus brought forward
Employer contributions
Net pension interest
Actuarial loss
Net scheme (deficit)/surplus carried forward
2015
£000
2014
£000
14,282
13,495
600
385
(705)
(297)
550
200
(694)
731
14,265
14,282
13,566
12,533
515
(705)
1,488
14,864
(599)
108
(491)
600
(515)
85
(297)
(1,488)
(1,785)
716
385
85
(1,785)
(599)
550
(694)
1,177
13,566
716
(143)
573
550
(550)
—
731
(1,177)
(446)
962
200
—
(446)
716
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24 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
Lovell 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
Total amount recognised in the statement
of comprehensive income
As a percentage of the obligations at the end of the year
2015
£000
18,145
11.0%
—
—
10,664
7.1%
2014
£000
16,348
11.2%
—
—
1,514
1.0%
2013
£000
(1,168)
(0.9)%
—
—
(5,711)
(0.9)%
2012
£000
6,891
5.4%
—
—
(3,972)
(3.1)%
2011
£000
(10,685)
(9.0)%
1,349
1.1%
(5,151)
(4.3)%
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 of the scheme is accounted for as an unallocated
consolidation adjustment.
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
Total amount recognised in the statement
of comprehensive income
As a percentage of the obligations at the end of the year
2015
£000
(297)
(2.1)%
—
—
2014
£000
731
5.1%
—
—
(1,785)
(12.0)%
(446)
(3.3)%
2013
£000
(967)
(7.2)%
—
—
(1,059)
(8.4)%
2012
£000
1,346
9.3%
—
—
530
4.2%
2011
£000
(58)
(0.4)%
490
4.1%
(114)
(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 £4,336,000 (2014: £3,169,000) into these plans during the year. There are also £424,000 (2014: £467,000)
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: BW May, J Samuel, P Scott, RJ Harrison,
J Bishop and DM Forbes, whose total compensation amounted to £2,577,000 (2014: £1,381,000) which was represented by short-term
employment benefits and the benefit of share option exercises.
BW May was appointed a director of RTC Group Plc on 10 September 2015. In the period since his appointment to 30 September 2015 the Group
has purchased £173,000 from RTC Group Plc and at 30 September 2015 there was a balance due to RTC Group Plc of £207,000.
There were no other transactions with key management personnel in the year.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
73
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Notes to the accounts continued
26 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:
Book value
Adjustments
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
£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)
3,038
Fair value
as reported at
30 September
Fair value
as restated at
Hindsight
30 September
2014
£000
adjustments
£000
9,919
2,332
4,030
16,281
284
5,474
62
5,820
2,774
—
(1,140)
1,634
—
(238)
—
(238)
2015
£000
12,693
2,332
2,890
17,915
284
5,236
62
5,582
£000
9,919
2,332
—
12,251
—
—
—
—
12,251
22,101
1,396
23,497
—
(465)
(465)
—
(8)
—
(8)
(473)
11,778
(948)
(574)
(1,522)
(646)
(5,080)
(37)
(5,763)
(7,285)
14,816
—
693
693
—
(2,089)
—
(2,089)
(1,396)
—
(948)
119
(829)
(646)
(7,169)
(37)
(7,852)
(8,681)
14,816
Fair value adjustments arising from the acquisition
In accordance with IAS 36, the Board reviewed the fair value of assets and liabilities using information available up to twelve 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. Prior to the
acquisition, the directors of Forefront Group Ltd used a reducing balance depreciation policy. The consequence of this was that, in the
opinion of the Directors, the fair value of property, plant and equipment was overstated at the point of acquisition. As a result, the Directors
carried out a valuation of the property, plant and equipment in accordance with IAS 36. The impact of this was to reduce fixed assets,
increase deferred tax assets and goodwill. These adjustments required the restatement of the Group balance sheet as at 30 September 2014.
There was no impact on the Group profit for the year ended 30 September 2014. For the year ended 30 September 2015 the Group
depreciation charge reduced by £118,000.
Trade and other receivables
£238,000 of debtors at the date of acquisition have been provided against as they have proven to be irrecoverable. Deferred tax liabilities
have been adjusted accordingly.
Trade and other payables
Subsequent to the date of acquisition, two onerous contracts have been identified resulting in a fair value adjustment of £2.1m. A provision
against these contracts has been calculated based on projected cashflows from the date of acquisition until their forecast completion.
Deferred tax has been adjusted accordingly.
Goodwill impairment review
Goodwill of £12,693,000 arose on acquisition and was reviewed for impairment one year after the acquisition and then will be on an ongoing
basis as required by IAS 36.
74
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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
24 November 2015
ACCOUNTS
2015
£000
657
2014
£000
651
101,995
102,652
101,449
102,100
500
68,336
1,314
70,150
(108,640)
(38,490)
64,162
226
40,436
66
40,728
(83,104)
(42,376)
59,724
(9,300)
(15,500)
54,862
44,224
6,192
6,989
3,896
327
37,458
54,862
6,152
5,942
3,896
292
27,942
44,224
Note
E
F
G
H
I
J
L
M
M
M
M
N
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
75
ACCOUNTS
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, 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
Freehold buildings
– fifty years
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 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.
(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; and
c) 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. 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. 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 £13,062,000 (2014: £9,903,000).
The audit fee charged within the profit and loss account amounted to £34,000 (2014: £38,000).
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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
ACCOUNTS
2014
Number
27
27
£000
2,305
272
168
(98)
2,647
£000
1,381
677
2015
Number
27
27
£000
2,555
395
274
1,122
4,346
£000
2,577
1,213
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 2015)
Final (related to the year ended 30 September 2014)
Total dividend paid
Interim (related to the year ended 30 September 2015)
Final (related to the year ended 30 September 2014)
Total dividend paid
2015
Pence/share
2.25
2014
Pence/share
1.50
3.50
5.75
£000
1,393
2,153
3,546
2.50
4.00
£000
923
1,538
2,461
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 4.75p per Ordinary Share be paid in respect of the year ended 30 September 2015.
This will be accounted for in the 2015/16 financial year.
E Tangible fixed assets
Cost:
At 1 October 2014
Additions
Disposals
At 30 September 2015
Depreciation:
At 1 October 2014
Charge for year
Disposals
At 30 September 2015
Net book value:
At 30 September 2015
At 30 September 2014
Freehold land
Long leasehold
Plant, vehicles
and buildings
land and buildings
& equipment
£000
701
—
—
701
57
9
—
66
635
644
£000
£000
75
—
(75)
—
75
—
(75)
—
—
—
319
20
(270)
69
312
5
(270)
47
22
7
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
Total
£000
1,095
20
(345)
770
444
14
(345)
113
657
651
77
ACCOUNTS
Notes to the company accounts continued
F Investments
Shares at cost:
At 1 October 2014
Additions
Disposals
At 30 September 2015
Provisions:
At 1 October 2014
Released during the year
At 30 September 2015
Net book value:
At 30 September 2015
At 30 September 2014
Details of subsidiary undertakings are included in Note S.
The investment in subsidiaries is supported by their net asset values and their discounted expected future cashflows.
G Stock and work in progress
Undeveloped land
H Debtors
Due within one year:
Trade debtors
Due from subsidiary undertakings
Corporation tax
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
78
WWW.RENEWHOLDINGS.COM
2015
£000
500
2015
£000
4
61,326
3,778
259
413
2,556
68,336
2015
£000
70,091
885
520
25,278
139
11,727
108,640
2015
£000
9,300
70,091
9,300
79,391
Subsidiary
undertakings
£000
235,428
546
(18,926)
217,048
133,979
(18,926)
115,053
101,995
101,449
2014
£000
226
2014
£000
20
34,580
2,528
38
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
ACCOUNTS
K Derivatives and other financial instruments
Currency exposures
The principal 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 2015 the unhedged portion
of the inter-company loan was $2,271,000 (2014: $1,771,000).
During the year the Company acquired some euros from a subsidiary. The Company has retained these euros to meet certain contractual
obligations of a subsidiary which are denominated in euros. The Company anticipates utilising these euros during the next financial year.
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:
61,917,948 (2014: 61,517,948) Ordinary Shares of 10p each
2015
£000
2014
£000
6,192
6,152
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 400,000 Ordinary Shares were issued following the exercise of options under the Renew Holdings plc Long Term Incentive Plan.
Share options
Renew Holdings plc 2004 Executive Share Option Scheme
The Company operates a share option scheme, the Renew Holdings plc 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.
During the year, 41,956 approved options were issued under this scheme at an exercise price of 286p. These options are subject to the
same performance criteria as options issued under the long-term incentive plan described below.
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.
As at 30 September 2014, there were 1,053,165 options outstanding under the scheme. On 7 January 2015, options to subscribe for a
further 293,000 Ordinary Shares were granted. On 2 March 2015, 400,000 options were exercised resulting in a balance of 946,165 options
being outstanding at 30 September 2015. The options are exercisable at a nominal cost three years after the date of grant subject to the
achievement of certain performance criteria. Details of the options are given in the Directors’ remuneration report. To the extent that
there is a gain arising in respect of the approved options noted above, the option holder will forfeit LTIP options to the same value.
Vesting of one half of the options is dependant on absolute growth in the Company’s Total Shareholder Return (‘TSR’), and the other
half is 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 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.
The comparator group TSR performance target measures the Company’s TSR over the three year performance period against the TSR of a
group of companies selected by the Remuneration Committee. If the Company’s TSR performance falls below the median performance of
the comparator group then the options lapse forthwith. If the Company is ranked within the top decile of the comparator group the options
shall vest in full. If the Company’s TSR performance is ranked between the median position and the top decile of the comparator group
then the options shall vest on a straight line basis from nil, at or below the median position, to 100% at the top decile.
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
79
ACCOUNTS
Notes to the company accounts continued
M Reserves
At 1 October 2014
Transfer from profit and loss account for the year
Recognition of share based payments
New shares issued
Dividends paid
At 30 September 2015
Share
premium
account
£000
5,942
1,047
Capital
Share based
redemption
reserve
£000
3,896
payments
reserve
£000
292
35
327
Profit & loss
account
£000
27,942
13,062
(3,546)
37,458
6,989
3,896
Share based payments reserve
Renew Holdings plc 2004 Executive Share Option Scheme
No options were exercised during the year (2014: 114,280). Under this scheme, the fair value of those options assessed at the date of grant
has been charged against the share based payments reserve. £Nil (2014: £259,000) has been credited 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.
£35,000 (2014: £161,000) has been charged to administrative expenses. There is no impact on net assets since an equivalent amount has
been credited to the share based payments reserve. 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 2015 were
as follows:
20 December 2012
3 January 2014
7 January 2015
Total
400,000
0.0p
87.0p
10 years
3 years
36%
3.6%
0.48%
30.0p
0.43%
40.0p
253,165
0.0p
180.0p
10 years
3 years
32%
2.0%
1.03%
87.5p
0.48%
30.0p
293,000
0.0p
288.5p
10 years
3 years
31%
1.7%
0.63%
99.0p
1.03%
87.5p
2015
£000
13,062
(3,546)
1,087
35
44,224
54,862
946,165
2014
£000
9,903
(2,461)
61
(98)
36,819
44,224
Date of grant
Awards outstanding at 30 September 2015
– Directors and employees
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
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 2014
At 30 September 2015
80
WWW.RENEWHOLDINGS.COM
ACCOUNTS
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
Land and
buildings
£000
—
125
528
653
Other
£000
8
20
—
28
Total
2015
£000
8
145
528
681
Total
2014
£000
12
133
776
921
The Company had no capital commitments at 30 September 2015 (2014: £nil).
P Contingent liabilities
The Company has guaranteed performance bonds in respect of certain contracts and leasing arrangements in the normal course
of business of its subsidiary undertakings.
Under the terms of the Group’s banking agreement, security over the Company’s assets has been granted to the Group’s bankers.
The Company is a participant together with a number of subsidiary undertakings in the Group banking arrangements and as a result
has risks associated with the financial status and performance of the other companies within the Group.
Q Defined contribution pension scheme
The Company operates a number of defined contribution pension schemes and individual stakeholder pension plans for its employees.
The Company made contributions of £274,000 (2014: £168,000) into these plans during the year. There are also £22,000 (2014: £15,000) of
accruals relating to these plans.
R Related parties
The Company has a related party relationship with its key management personnel who are the Main Board Directors: BW May, J Samuel,
P Scott, RJ Harrison, J Bishop and DM Forbes, whose total compensation amounted to £2,577,000 (2014: £1,381,000) which was represented
by short-term employment benefits and the benefit of share option exercises.
There were no other transactions with key management personnel in the year.
S 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 subsidiary undertakings are listed below.
Incorporation &
principal place
Proportion of
Ordinary Shares
of business
held by the Company
Subsidiary undertakings
Amco Group Holdings Ltd
Britannia Group Ltd
Clarke Telecom Ltd
Ex AB (North West) Ltd
Ex AB (West Midlands) Ltd
Forefront Group Ltd
Inhoco 3520 Ltd
Lewis Civil Engineering Ltd
Renew Corporate Director Ltd
Renew Fleet Management Ltd
Renew Group Ltd
Renew Ltd
Renew Nominees Ltd
Renew Pension Trustee Company Ltd
Renew Property Developments Ltd
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
Owned by Renew Holdings plc
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
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
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
81
ACCOUNTS
Notes to the company accounts continued
Incorporation &
principal place
Proportion of
Ordinary Shares
of business
held by the Company
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
England and Wales
Owned by Renew Holdings plc
England and Wales
Owned by Renew Holdings plc
England and Wales
Owned by Renew Holdings plc
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
USA
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
50%
50%
28.9%
S Subsidiary undertakings continued
Subsidiary undertakings
Seymour (C.E.C.) Holdings Ltd
Shepley Engineers Ltd
V.H.E. Construction Plc
YJL Homes Ltd
VHE Land Projects Ltd
YJL Investments Ltd
YJL Ltd
YJL Pension Trustee Company Ltd
Lovell America, Inc
Amalgamated Construction (Scotland) Ltd
Amalgamated Construction Ltd
Amco Engineering Ltd
Amco Group Ltd
Amco Group Trustees Ltd
Amco Rail Engineering Ltd
Amco Rail Ltd
BPE Specialised Drillings Ltd
Britannia Construction Ltd
David Lewis Civil Engineering Ltd
Forefront Utilities Ltd
Geodur UK Ltd
‘Hire One’ Ltd
Knex Pipelines & Cables Ltd
Mothersill Engineering Ltd
P.P.S. Electrical Ltd
Renew Civil Engineering Ltd
Renew Construction Ltd
Renew Specialist Services Ltd
Seymour (Civil Engineering Contractors) Ltd
VHE (Civil Engineering) Ltd
VHE Equipment Services Ltd
VHE Technology Ltd
Walter Lilly & Co Ltd
West Cumberland Engineering Ltd
YJL Construction Ltd
YJL Infrastructure Ltd
YJL London Ltd
Allenbuild Ltd
Allenbuild (South East) Ltd
Inject-O-Matic Guarantee Ltd
82
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ACCOUNTS
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, officers and advisors
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 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
Financial PR
Walbrook PR Ltd
4 Lombard Street
London
EC3V 9HD
Nominated advisor and broker
Numis Securities Limited
London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
83
ACCOUNTS
Shareholder information
Annual General Meeting
27 January 2016
Results
Announcement of interim results – May 2016
Preliminary announcement of full year results – November 2016
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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 +44 (0)371 664 0381 (Calls are charged at the standard geographic rate
and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate). Lines are open between
09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales. 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 +44 (0)871 664 0300 (Calls cost 12p per minute plus your phone company’s access charge. Calls outside the United Kingdom will
be charged at the applicable international rate). Lines are open between 09:00 - 17:30, Monday to Friday excluding public holidays in
England and Wales. By email shareholderenquiries@capita.co.uk.
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STRATEGIC REPORT
STRATEGIC REPORT
Our subsidiary businesses
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
Amco
Whaley Road
Barugh
Barnsley
South Yorkshire
S75 1HT
Tel: 01226 243 413
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 320 150
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 449 200
RENEW HOLDINGS PLC ANNUAL REPORT AND ACCOUNTS 2015
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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