SUPPORTING UK
INFRASTRUCTURE
ANNUAL REPORT AND ACCOUNTS
YEAR ENDED 30 SEPTEMBER 2016
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STRATEGIC REPORT
SUPPORTING UK INFRASTRUCTURE
SUPPORTING KEY
INFRASTRUCTURE ASSETS
Renew provides multidisciplinary engineering services
through its independently branded subsidiary
businesses supporting essential UK infrastructure.
FINANCIAL HIGHLIGHTS
n Record results for the year ended
30 September 2016
n Operating margin up 8% to 4.2%
n Adjusted EPS growth of 5% to 27.4p
Revenue
£526M
520
464
270
283
Adjusted operating
profit*
£22.0M
Adjusted earnings
per share*
27.4P
20.4
16.4
26.0
20.8
Dividend per share
Operating margin
8.0P
7.0
5.0
4.2%
3.5
3.5
3.5
3.9
9.6
10.0
12.4
12.4
3.6
3.2
12
13
14 15 16
12
13
14 15 16
12
13
14 15 16
12
13
14 15 16
12
13
14 15 16
* Results are shown prior to exceptional items and amortisation charges and exclude the results of discontinued operations.
52622.027.48.04.2 Our focus
We develop opportunities in
large-scale national infrastructure
spending programmes. We focus
on a direct delivery model through
our strong, strategically located
brands, supporting customers
across the UK.
Integrated Engineering Services
With our range of integrated engineering services we are
ideally positioned to access essential maintenance and renewal
spending programmes across our mainly regulated markets.
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.
Our brands
1
Strategic Report
IFC Highlights
2 Chairman’s statement
4 Chief Executive’s review
8 Financial review
10 Investment case
11 Strategy
12 Business model
13 Markets
14 KPIs
15 Risk management
16 Operational review
16 Energy
18 Environmental
20 Infrastructure
22 Specialist Building
24 Corporate social responsibility
Corporate Governance
26 Corporate governance
28 Directors’ report
31 Directors’ remuneration report
35 Statement of Directors’
responsibilities
Financial Statements
36 Independent auditor’s report
37 Group income statement
38 Group statement of
comprehensive income
38 Group statement of changes
in equity
39 Group balance sheet
40 Group cashflow statement
41 Notes to the accounts
63 Company balance sheet
64 Company statement
of comprehensive income
64 Company statement
of changes in equity
65 Notes to the company accounts
75 Directors, officers and advisors
76 Shareholder information
IBC Our subsidiary businesses
FIND OUT MORE ABOUT US
www.renewholdings.com
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 2
CHAIRMAN’S STATEMENT
R J HARRISON OBE
ESTABLISHED AND
PROVEN STRATEGY
BUSINESS MODEL
Page 12
OPERATIONAL REVIEW
Page 16
STRATEGIC REPORT 3
Results
Record results for the year ended
30 September 2016 show that the Group
continues to develop its position as a
leading provider of engineering services
in the Energy, Environmental and
Infrastructure markets where it supports
critical UK infrastructure assets.
Group revenue increased to £525.7m
(2015: £519.6m) with operating profit
prior to amortisation increasing by 8%
to £22.0m (2015: £20.4m), a margin of
4.2% (2015: 3.9%). Earnings per share
on this basis increased by 5% to 27.43p
(2015: 26.03p) with basic earnings per
share on continuing activities up 10%
to 23.53p (2015: 21.34p).
The Engineering Services business
revenue reduced slightly to £436.2m
(2015: £440.5m) as a result of
non‑recurring Rail revenue in the prior
year. When this is taken into account,
the underlying organic growth in
Engineering Services was 3%.
Engineering Services accounted for
83% of Group revenue (2015: 85%).
Engineering Services operating profit
prior to amortisation increased 7% to
£21.5m (2015: £20.1m) delivering an
improved margin of 4.9% (2015: 4.6%).
Our Specialist Building operations remain
focused on the High Quality Residential
market in London and the Home Counties.
Revenue was £90.5m (2015: £79.5m)
with an operating profit of £2.3m
(2015: £2.3m).
Dividend
The Board is proposing a final dividend of
5.35p per share, increasing the full year
dividend by 14% to 8.0p (2015: 7.0p). The
dividend will be paid on 28 February 2017
to shareholders on the register as at
27 January 2017. The Board continues
to grow dividends progressively.
Order Book
The Group’s order book at 30 September
2016 increased by 3% to £516m (2015:
£502m), with the Engineering Services
order book up 5% to £421m (2015: £400m).
The order book reflects our established
position in markets which benefit
from non‑discretionary long‑term
spending programmes.
on the long‑term programmes of essential
maintenance spending in these markets,
which provide good visibility of future
opportunities and more sustainable
earnings streams.
Cash
Cash generation has been good and the
Group has recorded a net cash position
of £4.8m (2015: net debt £4.8m).
People
It remains our priority to provide a safe
working environment for our employees
and those who work with us. The Group
has recorded an Accident Incidence
Rate substantially lower than the
industry average.
The Board would like to thank all its
employees for their hard work and
commitment in delivering the continued
success of the Group.
Board Changes
As previously reported, Brian May retired
as Chief Executive on 30 September 2016
and has been succeeded by Paul Scott.
The Board would like to thank Brian for
his outstanding leadership of Renew over
the last eleven years, during which he
transformed the Group from a loss‑making
building contractor into a leading business
in Engineering Services and delivered
an increase in market capitalisation from
£17m to £229m without recourse to
equity financing.
Strategy
In Specialist Building, the Group continues
to focus on the High Quality Residential
market in London and the Home Counties
where we specialise in major engineering
structural works.
In Engineering Services the Group
continues to play a key role in the support
and maintenance of some of the country’s
key infrastructure assets. Working in the
Energy, Environmental and Infrastructure
markets, which are mainly governed by
regulation, our operations remain focused
It remains the Board’s strategy to deliver
the sustained and profitable expansion
of its Engineering Services business
through organic and acquisitive growth.
We continue to pursue appropriate
earnings enhancing acquisitions across
all market sectors of our Engineering
Services business. After the year end,
the Group acquired Giffen Holdings
Limited, a £20m specialist mechanical,
electrical and power services provider
within the railway environment. This
acquisition broadens our service offering
to Network Rail and creates opportunities
for the Group in both the London
Underground and Train Operating
Company markets.
Outlook
The Group is well positioned for the
2016/17 financial year.
In 2014, the Group published 2017 targets
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 has achieved
its revenue target already and these
results demonstrate substantial progress
towards achieving the other targets.
Our established and proven strategy,
together with the strong order book
gives the Board confidence in our
future financial performance.
R J Harrison OBE
Chairman
22 November 2016
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 4
CHIEF EXECUTIVE’S REVIEW
P SCOTT
FURTHER OPPORTUNITIES
FOR SUSTAINABLE GROWTH
Our specialist skills combined with
responsive delivery across a range of
infrastructure markets see the Group
support clients responsible for managing
some of the UK’s key infrastructure assets.”
INVESTMENT CASE
Page 10
STRATEGY
Page 11
STRATEGIC REPORT 5
Renew is a leading multidisciplinary
engineering services provider. Our
independently branded subsidiary
businesses support the day‑to‑day
operations of many of the UK’s critical
infrastructure assets in the Energy,
Environmental and Infrastructure
markets. The markets in which we
operate are mainly regulated with high
barriers to entry and benefit from
long‑term programmes of investment
in renewals and enhancements.
We work on a diverse range of assets
including nuclear and traditional power
generation sites, water and gas
infrastructure and the rail and wireless
telecoms networks. Our highly skilled
directly employed workforce delivers
large volumes of maintenance and
renewals tasks in addition to providing
emergency reactive works to some of
the country’s key assets.
Our Specialist Building business focuses
on the High Quality Residential market
in London and the Home Counties.
Engineering Services
Engineering Services revenue was £436.2m
(2015: £440.5m) and accounted for
83% (2015: 85%) of Group revenue and
90% (2015: 90%) of Group operating
profit prior to amortisation and central
activities. This generated an increased
margin of 4.9% (2015: 4.6%). Excluding
the effect of non‑recurring revenue in
2015, underlying organic growth was 3%.
The Engineering Services order book
grew 5% to £421m (2015: £400m).
Our operations focus on delivering
essential maintenance tasks in mainly
regulated markets. We do not anticipate
an impact to our business following the
UK’s announcement of its intention to
withdraw from the European Union.
Energy
Renew provides engineering support to
assets in the nuclear, fossil, renewable
energy and gas infrastructure markets.
In the Nuclear market we are engaged at
fourteen of the Nuclear Decommissioning
Authority’s (“NDA”) seventeen nuclear
licensed sites across the UK. The NDA’s
latest estimate of the costs to clean up
these sites over a programme lasting
around 120 years is £70bn. Sellafield,
where we have operated since 1945, will
command approximately 73% of this
expenditure which is currently committed
at an annual rate of circa £2bn per annum.
As the largest mechanical, electrical and
instrumentation employer at Sellafield,
with positions on some of the longest
running frameworks, we deliver critical
asset care and maintenance of operational
plant as well as redundant facilities. Our
services are associated with the waste
treatment, reprocessing, decommissioning,
demolition and clean‑up operations.
The acquisition of Nuclear
Decontamination Services Limited in
February enabled the expansion of our
integrated engineering capabilities at
Sellafield and other UK nuclear licenced
sites. Most notably at Sellafield was our
appointment to all three lots of the
Decommissioning Delivery Partnership
Framework as well as a lead appointment
to the Retrievals and Decommissioning
Programme. These ten year arrangements
are integral to Sellafield’s long‑term
clean up mission, with an estimated
value of £500m over the term.
Also at Sellafield, work continues on the
Multi Discipline Site Works Framework,
which now has an expanded scope to
support the long‑term Magnox Swarf
Storage Silo Programme. Other
frameworks at the site include the Bulk
Sludge Retrieval Programme, the Bundling
Spares Framework and the recently
awarded ten year Tanks and Vessels
Framework. We also remain positioned to
maximise opportunities within the future
major projects programmes at Sellafield.
Our commitment to safety in the high
hazard nuclear environment is reflected
in our achievement of more than seven
years of operations since a reportable
lost‑time accident at Sellafield. Shepley
Engineers Limited and subsidiary PPS
Electrical Limited were both recognised
for their safety achievements at the site
with “Outstanding Safety Performance”
awards from Sellafield Limited.
Work continues on the second year of
a four year, £30m Electrical, Controls and
Instrumentation framework for Magnox.
Working as sole provider across ten UK
sites, support operations are associated
with long‑term waste treatment and
processing, decommissioning, and
clean‑up of redundant facilities. We also
maintain our longstanding relationship
with Westinghouse at Springfields where
we deliver a range of asset support
services as well as decommissioning
operations through a new
framework agreement.
We continue to develop our position
within the emerging nuclear new build
programmes at Hinkley, Wylfa and
Moorside, where we have initially focused
on the potential supply of high integrity
fabrications as well as mechanical and
electrical installation support to specialist
equipment vendors.
Long‑term renewal and maintenance
services on assets in the traditional and
renewable energy markets are
undertaken for clients including SSE,
E.ON and Dŵr Cymru Welsh Water
(“Welsh Water”) and for a number of
independent power station operators.
In gas, our addressable market remains
the 30/30 Iron Mains Replacement
Programme and the London Medium
Pressure Strategic Gas Mains Replacement
Programme which run to 2032. We
estimate these programmes to have
an approximate expenditure of £1bn
per annum. As reported in the interim
statement, our focus is on the large
diameter medium pressure market,
which offers better margin opportunity.
Revenue flow from medium pressure
frameworks has continued to be slow
and as a result this business has continued
to perform below our expectations.
Good progress has been made in
repositioning the balance of our
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 6
CHIEF EXECUTIVE’S REVIEW CONTINUED
P SCOTT
Energy continued
activities by reducing the amount
of low pressure, small diameter work
leading to a much improved trading
performance in the final quarter. This
trend will be enhanced following our
recent appointment to a new medium
pressure major works framework with
Southern Gas Networks valued at
£45m over the next five years.
Environmental
We support our water clients including
Northumbrian Water, Wessex Water
and Welsh Water in delivering asset
renewal and maintenance programmes,
flood alleviation and river and coastal
defence schemes across their
infrastructure networks.
Working for Northumbrian Water we
are positioned as one of two suppliers
on the five year, £14m per annum, AMP6
Sewerage Repairs and Maintenance
Framework. In addition, we undertook a
range of water related maintenance tasks
for Northumbrian Water in the period.
Our relationship with Wessex Water has
been strengthened in the period with
our appointment to the AMP6 Civils
and EMI Delivery Partners Framework
estimated at £350m to 2020 as well
as to the Minor Civils Framework over
the same period.
For Welsh Water we operate on the
Pressurised Pipelines Framework as well
as on both the Major and Minor Civils
frameworks. Our responsive performance
on the Emergency Reactive Framework
has positioned us as a key supplier. We
are also engaged via the AMP6 Strategic
Partners in this region with good visibility
of schemes to be delivered through to the
end of the current programme in 2020.
For the Environment Agency work included
the maintenance and renewal of over 600
flood control and water management
sites throughout the North of England
region as part of the exclusive £12m
MEICA framework, where we are in the
second year of a four year programme.
Our MEICA works for the Environment
Agency were further enhanced in the
year with an appointment to the MEICA
Project Framework in the South East
region. Works were also undertaken
nationally as part of four minor works
frameworks. Our emergency response
following bad weather over winter led
to larger schemes in York and across
the North West.
In Land Remediation we work for National
Grid on a number of frameworks
associated with the remediation of former
gasworks sites as well as for Magnox on
the Land Quality Services Framework.
We continue to work for Viridor in the
North of England and Scotland. Work on
an £11m scheme at Sighthill for Glasgow
City Council is ongoing. Recently
completed schemes include the North
Gawber Colliery reclamation project
for Harworth Estates.
At the Palace of Westminster, work on
the second of four cast iron roof repair
projects is progressing well. Work also
commenced on the four year Courtyards
Conservation Framework at this World
Heritage Site.
Infrastructure
As a major provider of engineering
services to Network Rail, as well as
working for Train Operating Companies,
we carry out off‑track planned, reactive
and emergency asset maintenance and
renewal works across the rail network.
For our largest client Network Rail,
who are investing around £38bn in the
current control period, we operate as sole
supplier on seven rail Infrastructure
Projects frameworks. Works include
the refurbishment and repair of a wide
range of rail assets nationally including
bridges, viaducts, culverts and specialist
tunnel and shaft refurbishments. Schemes
undertaken include the second phase
of extensive repairs to the Central Tunnel
in Liverpool and at the Severn Tunnel.
In addition to larger infrastructure schemes
we delivered in excess of 5,000 individual
infrastructure maintenance tasks through
six Asset Management frameworks helping
to maintain the smooth running of the
rail network. AMCO Rail’s commitment
to delivering innovative working practices
was recognised for a third year at the
National Rail Awards in the “Innovation
of the Year” category.
We continue to develop our position
with Network Rail in Scotland as the
major structures renewals and sole civils
maintenance contractor and during the
year completed schemes at Saltcoats
and at the Wamphray Culvert.
Our locally based delivery teams
provide a 24/7 national emergency
response service which has seen us
undertake work at Lamington Viaduct
on the West Coast Main Line to repair
extensive damage between Carlisle
and Glasgow. In the period, our rail
teams carried out emergency repair
works at more than thirty sites.
New infrastructure awards include the
three year, £15m Historic Railways Estate
Works framework for Highways England.
This maintains the historic assets
associated with former railways.
Additionally, we secured a five year
framework for the provision of minor
works services across the Greater
Anglia franchise routes for Abellio.
of £7m. Giffen’s complementary skills will
allow Amco Rail to offer an expanded
range of services across the rail network
as well as creating opportunities for the
Group to provide services to London
Underground. We are excited about the
opportunities that this acquisition will bring.
In wireless telecoms we provide
engineering support to the UK’s
cellular network operators and original
equipment manufacturers. The market
continues to be driven by consumer
demand for faster, more capable mobile
connectivity and the installation and
expansion of 4G services continues
to provide the majority of our work.
Specialist Building
Specialist Building revenue was £90.5m
(2015: £79.5m) with an operating profit
of £2.3m (2015: £2.3m). Our Specialist
Building order book stood at £95m
(2015: £102m).
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.
Discontinued Operation
A further assessment of contracts within
the discontinued Allenbuild Ltd business
(discontinued from 31 October 2014)
has resulted in a pre‑tax loss of £4.0m.
All contracts have now been completed
on site.
Summary
In Specialist Building, the Group
continues to focus on delivering stable
earnings through risk management and
contract selectivity.
In Engineering Services, the Group’s
established strategy can be summarised
as follows:
n focus on infrastructure markets
with secure, long‑term funding
n exposure to operational expenditure
budgets rather than capital expenditure
through an emphasis on renewal and
maintenance operations
n deploying our directly employed
workforce creating long‑term
relationships through responsiveness
to clients’ needs
The continued successful delivery
of this strategy enables the Board to
be confident of sustainable growth.
In October 2016, we were pleased
to complete the acquisition of Giffen
Holdings Limited for a total consideration
Paul Scott
Chief Executive
22 November 2016
STRATEGIC REPORT 7
Our operations support the day-to-day
running of key operational assets including
nuclear and traditional power generation
sites, water and gas infrastructure along with
the rail and wireless telecoms networks.”
Engineering Services
revenue
£436M
441
382
214
232
Engineering Services
operating profit
£21.5M
20.1
16.3
10.6
9.6
Engineering Services
as % of Group revenue
83%
82
82
85
64
12
13
14 15 16
12
13
14 15 16
12
13
14 15 16
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 201643621.583 8
FINANCIAL REVIEW
DIVIDEND GROWTH
OF 14%
The Group’s profitability, together
with further improved working capital
generation, has led to our reporting
a net cash balance of £4.8m
(2015: net debt £4.8m) at the year end.”
INVESTMENT CASE
Page 10
STRATEGY
Page 11
STRATEGIC REPORT
9
Results
Group revenue from continuing
activities was £525.7m (2015: £519.6m)
with an operating profit before tax
from continuing activities prior to
amortisation of £22.0m (2015: £20.4m).
A tax charge of £5.3m (2015: £3.6m)
resulted in a profit after tax prior to
amortisation and related deferred
taxation for the year of £17.1m (2015:
£16.1m). The profit for the year from
continuing activities was £14.6m
(2015: £13.2m). After accounting for
discontinued activities, the profit for
the year was £10.6m (2015: £5.9m).
Cash
The Group’s profitability together
with further working capital generation
has resulted in a cash balance of
£14.1m (2015: £10.7m) at the year end.
Consequently, the Group’s net cash
position as at 30 September 2016
was £4.8m (2015: net debt £4.8m).
The Group has complied with the
covenants associated with the
term loans throughout the year.
Pension schemes
At 30 September 2015, the IAS 19
valuation of the Lovell Pension Scheme,
which was closed to new members
in 2000, resulted in a substantial
accounting surplus of £12.4m after
accounting for deferred taxation. Due
to the extreme reduction in the yield
on gilts since last year, the accounting
surplus has reduced to £6.3m. This
actuarial reduction is accounted for
through the Group Statement of
Comprehensive Income.
During the year, the Board, in
conjunction with the Trustees of the
Lovell Scheme, completed a further
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 total of annuities
purchased represent 53% of the
scheme’s total liabilities. Only 26%
of liabilities were annuitised as at
30 September 2015. The benefit
of a buy‑ in is to protect the annuitised
pensions from market related volatilities
which could increase liabilities. The
value of the annuity matches that
of the associated liability.
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
£1.7m (2015: £0.5m) 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
50% of the scheme’s total liabilities.
In the triennial valuation of the
scheme which was carried out as at
31 December 2013, the scheme actuary
measured the deficit in the scheme at
£2.1m. 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 tax charge on profit for the year
is £4.7m (2015: £2.9m). The charge
has been impacted by £0.8m of tax
deductions which have been allocated
to discontinued operations although
Renew Holdings plc will receive the
benefit of these deductions. The rate
of taxation in these accounts is 24.4%
but falls to 20.4% when adjusted to
eliminate the above item. The Board
expects the Group’s future rate of
taxation to approximate to the headline
rate of corporate tax in effect for the
relevant accounting period. As a result
of 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.
Acquisitions
During the year, the Group made a small
acquisition, Nuclear Decontamination
Services Limited (“NDS”), which
expanded the Group’s service offering
in the nuclear market. The acquisition
cost was £0.2m. On acquisition, the
business and employees of NDS were
transferred to another Group company.
Subsequent to the year end, the Group
acquired Giffen Holdings Limited
(“Giffen”), a mechanical, electrical
and power services business within the
railway environment. The acquisition
cost was £7m in total. Giffen, which
had revenue of approximately £22m
and an operating profit of £0.7m in
the year ended 30 September 2016,
enhances the Group’s capabilities
in the Infrastructure market. Both
acquisitions were funded from the
Group’s own cash resources. Giffen’s
results for the eleven months ending
30 September 2017 will be consolidated
into the Group’s results for the next
financial year.
Distributable profits
The distributable profits of Renew
Holdings plc are £47.1m (2015: £49.9m).
The Board is recommending a final
dividend of 5.35p (2015: 4.75p) per
share bringing the total for the year to
8.0p (2015: 7.0p), an increase of 14%.
J Samuel
Group Finance Director
22 November 2016
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 10
INVESTMENT CASE
DRIVING GROWTH
IN OUR BUSINESS
Our subsidiary businesses operate in mainly regulated
markets providing a range of integrated engineering
support services. We develop long-term relationships
with our clients through the delivery of asset care and
maintenance as well as an emergency response provision.
Our key growth drivers
Consistently delivering our
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 sustainable growth
The Group continues to deliver
organic growth whilst looking
to build on its strengths
through additional
earnings‑enhancing acquisitions.
Working 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.
Integrated engineering
support services
Our subsidiary businesses offer a
range of integrated multidisciplinary
engineering services solutions,
across the Energy, Environmental
and Infrastructure markets.
Mainly regulated
markets provide visibility
Our target markets are mainly
regulated, which drives long‑term
visible programmes of spending on
asset renewal and maintenance.
Developing long-term
relationships
Our range of services and
responsiveness positions us as a key
supplier to our clients as we assist
them in maintaining their assets and
providing continuity of service.
Further growing operating
margins
The Group has delivered continual
operating margin improvement,
growing from 1% in 2006 to
4.2% in 2016.
Cash generation
The Group has consistently
generated cash from operations and
its positive working capital
characteristics have enabled it to
maximise shareholder return.
Capital growth
The Group has grown its market
capitalisation more than nine fold
since 30 September 2005, without
recourse to new equity.
STRATEGIC REPORT STRATEGY
11
ESTABLISHED
GROWTH STRATEGY
We remain committed to our long-term strategy of expanding
our Engineering Services activities both organically and through
selective acquisitions.
Our established and proven strategy, together with the
strong order book, gives the Board confidence in our
future financial performance.
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 2017 strategic targets:
£500m Group revenue
4.5% Group adjusted operating profit
40% growth in adjusted EPS from
2014 base of 20.8p
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 12
BUSINESS MODEL
DELIVERING VALUE
THROUGH OUR BUSINESS
Through the effective management and control of our subsidiary
businesses, we deliver shareholder value through capital growth
and a progressive dividend policy.
Safe delivery of our services is paramount
Safety remains the Group’s priority. Our safe operations are
managed by our subsidiary businesses alongside their safety
advisors, who have specific knowledge in the individual
environments. Safety advisors share knowledge and best
practice, assisting our businesses in maintaining our high
safety standards.
Attention to delivering services safely ensures that our accident
incident rate remains materially lower than the industry average.
Corporate social responsibility – p24
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 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.
Operational review – p16
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.
Risk management – p15
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.
Markets – p13
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.
Strategy – p11
KPIs – p14
STRATEGIC REPORT MARKETS
13
OPERATING IN MAINLY
REGULATED MARKETS
Our clients are responsible for keeping many of the UK’s key assets
operational, which requires long-term programmes of asset care.
Energy
Environmental
Nuclear
n The Nuclear Decommissioning Authority is responsible for
Water
n UK water companies, regulated by Ofwat, undertake
17 nuclear licensed sites across the UK and estimates that the
cost of cleaning up these sites over a programme lasting
around 120 years will be £70bn. Sellafield will command
approximately 73% of this expenditure, which is currently
committed at an annual rate of circa £2bn per annum.
long‑term investment programmes. In the current five year
investment period (AMP6) we estimate our clients,
Northumbrian Water, Wessex Water and Dŵr Cymru Welsh
Water, will spend around £3.2bn on maintaining their water
infrastructure assets.
n Estimated investment of £60bn in new UK nuclear power
n The UK government has committed to invest a record £2.3bn
stations by 2030.
in coastal and river flood risk management to 2021.
Traditional, renewable and gas
n As energy demand increases, it is likely that the UK’s existing
traditional generating assets will require investment in
long‑term maintenance programmes.
Land remediation
n The Environment Agency estimates that in England and
Wales approximately 300,000 hectares of land could
potentially be affected by historical contamination.
n As part of ongoing improvements to the gas network, the UK
is undertaking a number of essential asset replacement
programmes, including the 30/30 Iron Mains Replacement
Programme and the London Medium Pressure Strategic Gas
Mains Replacement Programme which run to 2032.
Infrastructure
Specialist Building
Rail
n Network Rail is investing around £38bn to 2019 on running,
maintaining and improving Britain’s railway.
Wireless telecoms
n As consumer demand for mobile data, particularly 4G,
increases, investment in existing and new wireless infrastructure
is required as well as decommissioning of redundant assets.
High Quality Residential
n The High Quality Residential market in London and the
Home Counties remains strong. We have particular
specialist engineering expertise in major structural
alteration works both above and below ground.
1. Nuclear Decommissioning Authority, Nuclear Provision – explaining the cost
of cleaning up Britain’s nuclear legacy (February 2015).
2. HM Government, Industrial Strategy: government and industry in partnership.
The UK’s Nuclear Future (2013).
3. Network Rail Limited, Annual report and accounts 2014 (June 2014).
4. Department for Environment, Food and Rural Affairs, Reducing the risks
of flooding and coastal erosion: An investment plan (December 2014).
5. Environment Agency, Reporting the evidence. Dealing with contaminated
land in England and Wales (January 2009).
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 14
KPIs
MEASURING PERFORMANCE
Key performance indicators
The Group has certain key performance indicators
("KPIs") which are used to measure and monitor its
performance 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 Board has set financial targets for the
year ending 30 September 2017 and these are described on page 11.
Adjusted Engineering Services operating
profit as a percentage of revenue*
4.9%
4.9
5.0
4.6
4.3
14 15 16 17
Adjusted Group operating profit
as a percentage of revenue*
Key:
4.2%
4.5
4.2
3.9
3.5
14 15 16 17
E
C
N
A
M
R
O
F
R
E
P
L
A
U
T
C
A
T
E
G
R
A
T
* Results are shown prior to exceptional items and amortisation charges
and exclude the results of discontinued operations.
STRATEGIC REPORT
RISK MANAGEMENT
15
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.
FOR MORE INFORMATION
ON SAFETY
P25
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
Mitigation and responsibility
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.
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.
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.
The impact of accidents
on our employees and the
consequential impact on
contract performance and
reputational damage.
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.
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 2016, these policies are equivalent to 54%
of the combined schemes’ liabilities.
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.
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 16
OPERATIONAL REVIEW
ENERGY
Energy
Key highlights
n We remain the largest mechanical, electrical
& instrumentation employer at Sellafield.
n We acquired Nuclear Decontamination
Services Limited in February expanding our
range of services.
n Appointed to all three lots of the ten year
Decommissioning Delivery Partnership
Framework at Sellafield.
14 SITES
£30M
Engaged at 14 of the
Nuclear Decommissioning
Authority’s 17 nuclear
licensed sites across the UK
Working nationally for
Magnox, we operate as
sole provider on a £30m
EC&I framework
YEAR 2032
In gas, we undertake work on the 30/30 Iron Mains
Replacement Programme, which runs to 2032
Nuclear
We deliver multidisciplinary engineering
services to the nuclear industry.
Our work concentrates on high hazard risk reduction
operations, supporting the maintenance and
decommissioning of operational plant as well as
redundant facilities. Our services are associated with
waste treatment, reprocessing, decommissioning,
demolition and clean‑up operations.
Our integration of generation, grid and decommissioning
services provides a differentiator in this market.
Capabilities
n Operational support
and asset care
n Critical planned and
reactive maintenance
and renewals
n Civil, mechanical and
electrical engineering
n Nuclear decommissioning
and decontamination
n Specialist fabrication
and manufacturing
Traditional, renewable and
gas infrastructure
We provide long‑term maintenance and asset
renewal support at many of the UK’s traditional
power generation plants.
Capabilities
n Operational support
and asset care
n Critical planned and
reactive maintenance
and renewals
n Civil, mechanical and
electrical engineering
n Gas distribution network
asset maintenance,
replacement and
installation
n Specialist flow stopping,
drilling and internal
inspection
STRATEGIC REPORT 17
7 YEARS
of operations since a
reportable lost-time accident
at Sellafield
Progress
We remain the largest mechanical,
electrical and instrumentation employer
at Sellafield, where we have operated
since 1945.
We remain positioned to maximise
opportunities within the future major
projects programmes at Sellafield.
Appointed to all three lots of the
Decommissioning Delivery Partnership
Framework as well as a lead appointment
to the Retrievals and Decommissioning
Programme at Sellafield. These ten year
arrangements are integral to the long‑term
clean up mission at the site, with an
estimated value of £500m over the term.
At Sellafield, work continues on the Multi
Discipline Site Works Framework, which
now has an expanded scope to support
the long‑term Magnox Swarf Storage
Silo Programme.
Other Sellafield frameworks include the
Bulk Sludge Retrieval Programme, the
Bundling Spares Framework and the
recently awarded ten year Tanks and
Vessels Framework.
Progress
We continue to undertake long‑term asset
renewal and maintenance services for
clients including SSE, E.ON and Dŵr
Cymru Welsh Water and for a number
of independent power station operators.
Our directly employed service teams
work across the gas distribution network
replacing low and medium pressure
gas mains.
Shepley Engineers Limited and subsidiary
PPS Electrical Limited were both
recognised for their safety achievements
with "Outstanding Safety Performance"
awards from Sellafield Limited.
Work continues on the second year of
a four year £30m Electrical, Controls &
Instrumentation Framework for Magnox
as sole provider across 10 UK sites.
We deliver a range of asset support
services as well as decommissioning
operations through a new framework
for Westinghouse at Springfields.
Our focus is on the large diameter medium
pressure market, which offers better
margin opportunity.
Recent appointment to a new medium
pressure major works framework with
Southern Gas Networks valued at £45m
over the next five years.
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 18
OPERATIONAL REVIEW CONTINUED
ENVIRONMENTAL
Environmental
Key highlights
n Second year of exclusive £10m Mechanical,
Electrical, Instrumentation, Controls and
Automation ("MEICA") framework for the
Environment Agency in the northern region.
n Appointed to the AMP6 Civils and Electrical,
Mechanical and Instrumentation Delivery
Partner Framework for Wessex Water.
n Key supplier for Welsh Water on the
Emergency Reactive Framework.
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
n Critical planned and
reactive maintenance
and renewals
n Civil, mechanical and
electrical engineering
n Emergency works
including flood risk
management programmes
n Maintaining strategic
water mains and
mains drainage
n Clean and waste
water rehabilitation
infrastructure
n Port, harbour and
sea defences
Land remediation
We have over 30 years’ expertise in providing
specialist soil and groundwater remediation and
associated earthworks nationwide.
Our in‑house capabilities include soil washing, biophysical
treatment and geotechnical improvements. We can add
value through our ability to recover up to 100% of soils and
excavated materials on site.
Capabilities
n Soil and groundwater
remediation
n Soil washing, biophysical
treatment, solidification
and stabilisation,
enhanced segregation
and geotechnical
improvements
n Design of bespoke
remediation and ground
engineering solutions
n Combining remediation
strategies with
infrastructure delivery
STRATEGIC REPORT 19
Progress
We support our water clients including Northumbrian
Water, Wessex Water and Dŵr Cymru Welsh Water in
delivering asset renewal and maintenance programmes,
flood alleviation and river and coastal defence schemes.
Working for Northumbrian Water as one of two suppliers
on the five year, £14m per annum, AMP6 Sewerage Repairs
and Maintenance Framework as well as on a range of water
related maintenance tasks.
Appointed to the AMP6 Civils and EMI Delivery Partners
Framework for Wessex Water estimated at £350m to
2020 as well as to the Minor Civils Framework over the
same period.
Working for Welsh Water we operate on the Pressurised
Pipelines Framework as well as on both the Major and
Minor Civils Frameworks.
Our responsive performance on the Emergency Reactive
Framework has positioned us as a key supplier for Welsh
Water. We are also engaged via the AMP6 Strategic Partners
in this region with good visibility of schemes to be delivered
through to the end of the current programme in 2020.
For the Environment Agency, work included the
maintenance and renewal of over 600 flood control and
water management sites throughout the North of England
region as part of the exclusive £12m MEICA framework,
where we are in the second year of a four year programme.
Our MEICA works for the Environment Agency were
further enhanced with an appointment to the MEICA
Project Framework in the South East region.
Works were undertaken nationally as part of four minor
works frameworks for the Environment Agency. Our
emergency response following bad weather over winter
led to larger schemes in York and across the North West.
Progress
We work for National Grid on a number of
frameworks associated with the
remediation of former gasworks sites as
well as for Magnox on the Land Quality
Services Framework.
Work on an £11m scheme at Sighthill for
Glasgow City Council is ongoing. In the year
completed schemes included the North
Gawber Colliery reclamation project for
Harworth Estates.
30 YEARS'+
experience in specialist soil
and groundwater remediation
We continue to work for Viridor on a
Landfill Engineering Framework in the
North of England and Scotland.
At the Palace of Westminster, work on the
second of four cast iron roof repair
projects is progressing well. Work also
commenced on the four year Courtyards
Conservation Framework at this World
Heritage Site.
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 20
OPERATIONAL REVIEW CONTINUED
INFRASTRUCTURE
Infrastructure
Key highlights
n We are a major provider of engineering
services to Network Rail as well as working
for train operating companies.
n We are sole supplier on seven Rail
Infrastructure Projects frameworks as well as
working on six Asset Management frameworks
for Network Rail.
n Appointed to new frameworks for Highways
England and Abellio.
Rail
As a major provider of engineering services to
Network Rail as well as working for train operating
companies, our directly employed, multi‑skilled
local delivery teams carry out off‑track planned,
reactive and emergency asset maintenance and
renewal works across the rail network.
We undertake a high volume of small value mechanical
and electrical engineering and maintenance services
tasks supporting a wide range of rail infrastructure assets.
Capabilities
n Off‑track operational
support and asset care
n Critical planned and
reactive maintenance
and renewals
n Civil, mechanical and
electrical engineering
services
n 24/7 emergency provision
n Asset renewal
and refurbishment
n Tunnel and shaft
refurbishment
n Moving structures
Wireless telecoms
In wireless telecoms we provide engineering
support to the UK’s cellular network operators
and major original equipment manufacturers.
Our services include all aspects of wireless telecoms
infrastructure delivery including site acquisition and
design, construction, installation and site optimisation
as well as site maintenance and decommissioning.
Capabilities
n Operational support and
asset care
n Critical planned and
reactive maintenance
and renewals
n Civil, mechanical and
electrical engineering
n Wireless telecoms
installations
n Radio network planning,
including the installation
of specialist indoor and
outdoor coverage solutions
n Provision of 2G, 3G, 4G
and Wi‑Fi technologies
STRATEGIC REPORT 21
Progress
For our largest client Network Rail we
operate as sole supplier on seven Rail
Infrastructure Projects frameworks for the
refurbishment and repair of a wide range
of rail assets nationally.
Schemes undertaken include the
second phase of extensive repairs to
the Central Tunnel in Liverpool and at
the Severn Tunnel.
Also for Network Rail we work on six Asset
Management frameworks, helping to maintain
the smooth running of the rail network.
AMCO Rail’s commitment to delivering
innovative working practices was recognised
for a third year at the National Rail Awards in
the "Innovation of the Year" category.
Progress
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.
We continue to assist the wireless
telecoms operators in the provision of
new infrastructure, the upgrade of
existing networks and decommissioning
of redundant assets.
We continue to work for Network Rail as
the major structures renewals and sole
civils maintenance contractor in Scotland
where during the year we completed
schemes at Saltcoats and at the
Wamphray Culvert.
24/7
emergency response
provision across the
rail network
5,000+
individual infrastructure
maintenance tasks
undertaken for Network Rail
Our locally based delivery teams continue
to provide a 24/7 national emergency
response service which has included
works at Lamington Viaduct on the
West Coast Main Line to repair extensive
damage between Carlisle and Glasgow.
Our rail teams carried out emergency works
at more than 30 sites for Network Rail.
New infrastructure awards include the
three year £15m Historic Railways Estate
Works Framework for Highways England to
maintain historic assets associated with
former railways. We also secured a five year
framework for the provision of minor works
services across the Greater Anglia franchise
routes for Abellio.
The installation and expansion of 4G
services continues to provide the majority
of our work as the market is driven by
consumer demand for faster, more capable
mobile connectivity.
We delivered over 40,000 individual tasks
for our network customers during 2016.
We continue to work on the 4G expansion
programmes across the UK.
4G
expansion continues
to provide the majority
of our workload
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 22
OPERATIONAL REVIEW CONTINUED
SPECIALIST BUILDING
Specialist Building
High Quality Residential
Our subsidiary, Walter Lilly, is recognised as a
market‑leading luxury provider of prestigious
private residential refurbishment projects in
London and the Home Counties. The schemes
we undertake often require extensive structural
engineering works to extend properties
below ground.
Space restrictions in the South and the complex
nature of the work we undertake means that 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.
Capabilities
n Luxury provider of
prestigious private
residential refurbishments
n Specialist in extensive
structural engineering
works required to extend
properties below ground
Progress
Our operations remain focused on the High Quality
Residential market in London and the Home Counties.
Our specialist skills in providing extensive underground
developments proves a differentiator in this market.
In the year we undertook a range of schemes for
private clients.
2017 revenue fully secured.
STRATEGIC REPORT 23
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 24
CORPORATE SOCIAL RESPONSIBILITY
OUR CORPORATE
RESPONSIBILITY
Our responsibility to our employees, the communities
and environment in which we operate, as well as to our
clients, consultants and supply chain is integral to the
work we undertake.
Community engagement and
charitable giving
We recognise the importance of
engaging with our local communities
and our subsidiary businesses are
involved in a wide range of schemes.
Local community projects provide an
opportunity to assist communities
using our skills, time and financial
support, helping to ensure our work
leaves a lasting positive impact.
Shepley Engineers assists many
charities through fundraising events
in Cumbria. Shepley also undertakes a
social awareness training programme,
to help develop an understanding of
broader community issues as well as
providing their time and expertise
alongside direct funding in support
of their local community.
Britannia continued its support for
Action for M.E. and Macmillan Cancer
Support during the year, as well as
undertaking a range of fundraising
activities which included participation
in the Great Bristol 10K event.
AMCO Rail sponsored the 13th hour of
the St Vincent’s Christmas Sing‑a‑thon,
all money raised went directly towards
supporting families and individuals
struggling in poverty across Leeds
during the Christmas period. AMCO
also designed and installed a sensory
garden to provide outdoor facilities for
disabled children in support of the
"Life for a Kid" charity.
Lewis Civil Engineering was proud to
be the main event sponsor for a Great
Gatsby themed race night in support of
WaterAid, an event hosted by Wessex,
Bristol and Bournemouth Water. Lewis
also undertook the Mencap Cycle
Challenge 2015, raising over £5,000.
VHE continued its long association
with Bluebell Wood Children’s Hospice,
raising money throughout the year
with a number of fundraising events,
and Seymour Civil Engineering
continued its support of the Hartlepool
and District Hospice as a corporate
partner sponsoring its annual "It’s a
Knockout" event.
Clarke Telecom took part in a dragon
boat race raising money in support
of St Catherine’s Hospice, Crawley as
well as regular fundraising activities
throughout the year for the Lennox
Children’s Cancer Fund.
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,
Make A Wish, Save the Children,
Yorkshire Air Ambulance, Bradford
Toy Library and Resource Centre
and Ilkley Candlelighters.
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.
We employ systems and procedures
that ensure the Group’s compliance
with all relevant legislation relating
to the environment.
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 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 2016
we continued to focus on the reduction
of carbon emissions and the promotion
of more sustainable development
by conserving energy, materials
and resources.
STRATEGIC REPORT 25
Employment and training
Our businesses work in partnership
with schools and colleges to offer work
opportunities including apprenticeships,
scholarships and work experience within
their local communities. We recognise
the need for continued investment in
traditional engineering skills.
Shepley Engineers provides work
and job experience opportunities and
currently has over 30 apprenticeships
covering pipe fitting, welding, plating,
erectors and electrical disciplines.
Shepley participates in its local business
cluster, which co‑ordinates business
engagement with education providers.
Shepley and Walter Lilly are part of
the 5% Club, an industry‑led initiative
focused on driving momentum into the
recruitment of apprentices, graduates
and sponsored students. Walter Lilly
continues its 19 year programme of
sponsoring students from Loughborough
University in disciplines such as
construction management, quantity
surveying and design management.
VHE provides vocational training and,
during 2016, students from Barnsley
College joined the business to undertake
placements. Seymour continues
to work alongside St. Hild’s School,
Hartlepool College and Construction
Skills supporting pupils and staff
through their placement scheme.
Seymour spent a day with 80 students
at High Tunstall College in Hartlepool
giving them an insight into civil
engineering. Seymour also visited
schools with mascot "Ivor Goodsite"
to highlight the dangers of playing
on construction sites as well as
showing them how great
it is to work in construction!
Britannia has continued its civil
engineering operative apprenticeship
scheme in partnership with Gloucester
College, and has now employed a civil
engineering technician apprentice on
a level 4 course with Bath College.
AMCO extended its craft apprenticeship
training programme in the year and
elsewhere our businesses supported
their employees through a range of
long‑term programmes of formal
training helping to develop industry skills.
Safety
It remains the Group’s priority to provide
a safe working environment for all its
employees. 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.
One of the most challenging areas
the Group operates in is the nuclear
environment. At the Sellafield site in
Cumbria, we have completed over seven
years of operations since a lost‑time
accident. Our safety achievement was
recognised at the site with Shepley
Engineers and subsidiary PPS Electrical
awarded “Outstanding Safety
Performance” by Sellafield Limited.
The changing nature of the work the
Group undertakes, with an increase
in smaller teams working remotely,
is reflected in the increasing use of
behavioural safety training during
the year.
Initiatives which help to identify where
improvements can be made include
cross‑business safety checks, safety
conferences, supplier safety forums
and annual business safety awards.
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.
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. Renew is pleased to have
recorded another year where our
accident incident rate is materially
lower than the industry average.
This Strategic Report was approved by the Board on 22 November 2016 and is signed on its behalf by:
P Scott
Chief Executive
22 November 2016
STRATEGIC REPORTRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 26
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 page 29. 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 induction
are available to all Directors on
appointment and subsequently as
necessary, taking into account existing
qualifications and experience. New
Directors are subject to election by
shareholders at the first AGM after
their appointment.
The Board met formally nine 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 P Scott, monitors
the composition of the Board and
recommends the appointment of new
Directors. The Nominations Committee,
with all Directors present, has held
three meetings during the year to
discuss nomination matters.
The Nominations Committee terms
of reference include:
(a) to review the structure, size and
composition of the Board;
(b) to consider succession planning for
Directors and senior executives;
(c) to identify and nominate,
for approval by the Board,
suitable candidates to fill Board
vacancies; and
(d) to make recommendations to the
Board on the contents of letters
of appointment, Directors’ duties,
re-appointment or re-election
of Directors upon conclusion of
a specified term or retirement
by rotation.
The Audit Committee has held 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.
CORPORATE GOVERNANCE 27
Annual General Meeting
The AGM will be held on 25 January
2017, 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 22 November 2016.
By Order of the Board
J Samuel
Company Secretary
22 November 2016
Internal controls
Throughout the financial year ended
30 September 2016 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 2016, 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.
CORPORATE GOVERNANCERENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 28
The Directors present their report and
the audited accounts for the year
ended 30 September 2016.
Principal activities
For the year ended 30 September 2016
the principal activity of the Group
continued to be 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 2016
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 £10,612,000 (2015: £5,905,000).
The Directors recommend the payment
of a final dividend on the Ordinary
Shares of 5.35p (2015: 4.75p) giving a
total for the year of 8.0p (2015: 7.0p).
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.
DIRECTORS’ REPORT
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 2016
£4,363,000 (2015: £4,233,000) 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.
The sterling value has increased due to
the strengthening of the dollar against
sterling compared to 2015.
Credit risk
The Group’s principal financial assets
are bank balances, cash, amounts
recoverable on contracts and trade
receivables, which represent the
Group’s maximum exposure to credit
risk in relation to financial assets.
The Group’s credit risk is primarily
attributable to its amounts recoverable
on contracts and trade receivables.
Credit risk is managed by monitoring
the aggregate amount and duration
of exposure to any one customer
depending upon their credit rating.
The amounts presented in the
balance sheet are net of allowances
for doubtful debts, estimated by the
Group’s management based on prior
experience and their assessment of
the current economic environment.
Payment of creditors
The Group recognises the importance
of good relationships with its suppliers
and sub-contractors and has established
the following payment policy:
(a) agree payment terms in advance
of any commitment being
entered into;
(b) ensure suppliers are made aware
of these terms by inclusion of the
terms of payment on the order
or contract; and
(c) ensure that payments are made
in accordance with the terms of
the contract or order providing
that the presented documentation
is complete and accurate.
Employees
The Directors recognise the need for
communication with employees at every
level. All employees have access to a
copy of the Annual Report and Accounts
which, together with staff briefings,
internal notice-board statements and
newsletters, keeps them informed of the
Group’s progress. The Group produces
an in-house publication, Renews, which
provides information to its employees
about the activities and performance
of the Group.
The Group continues to be committed
to the health, safety and welfare of its
employees and to observe the terms of
the Health and Safety at Work Act 1974,
and all other relevant regulatory and
legislative requirements.
It is the policy of the Group that there
shall be no discrimination or less
favourable treatment of employees,
workers or job applicants in respect of
race, colour, ethnic or national origins,
religious beliefs, sex, sexual orientation,
disability, political beliefs, age or marital
status. Full consideration will be given
to suitable applications for employment
from disabled persons, where they
have the necessary abilities and skills
for that position, and wherever possible
to re-train employees who become
disabled, so that they can continue their
employment in another position. 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 was the designated Board
Director of Health and Safety with
Group responsibility for safety and
environmental management throughout
the year until his retirement on
30 September 2016 when he was
succeeded by P Scott. 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.
CORPORATE GOVERNANCE 29
as Managing Director of Shepley
Engineers Limited, the Group’s nuclear
services business prior to assuming the
Group-wide Engineering Services role.
Andries Liebenberg – Director 48,
was appointed to the Board on
31 March 2016. Andries is the Managing
Director of Renew’s largest business,
Amalgamated Construction Limited
(“Amco”) and has been with the
Group over nine years. Andries is
also a director of the Civil Engineering
Contractors Association (Yorkshire &
Humberside) Limited.
John Samuel – Director, 60, was
appointed to 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 and
served as a partner with Baker Tilly
from 1987 until 1991. John is a
director and trustee of Yorkshire
Air Ambulance Limited.
John Bishop and John Samuel
retire by rotation at the 2017 Annual
General Meeting (“AGM”) and offer
themselves for reappointment.
Additionally, Andries Liebenberg,
who was appointed during the year,
will offer himself 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
33 and 34. No Director has any interest
in any other Group company. Details of
the Directors’ remuneration and service
contracts appear on pages 32 to 34.
Health and safety management
continued
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 Director.
Certain Group companies employ
their own specialist advisors who liaise
directly with the Group HSE Director
on common issues. The Group
maintains its membership with the
Royal Society for the Prevention of
Accidents and locally based
construction safety groups. All safety
and environmental department
personnel hold membership with the
Institution of Occupational Safety and
Health. Attendance on the five day
Construction Industry Training Board
Site Safety Management Training
Scheme continues to be a requirement
for all construction management
personnel, with a two day refresher
required every five years. A one day
Directors and Senior Managers course
is available internally and is used to
introduce new systems and detail
changes to construction legislation.
Short duration ‘tool box talks’ and
‘safety briefings’ are used to enhance
the knowledge and competence of
supervisory management.
Group policy requires each business to
report and record all injuries, diseases
and dangerous occurrences, regardless
of severity. An incident database is
maintained to collate this information
and provide statistical data allowing
performance to be measured and
determine system 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 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 24 to 25.
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, 71, 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, 56,
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 and Addo Food
Group Limited.
Roy Harrison OBE – Director, 69,
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 and Domotec Holdings
Limited. 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.
Executive Directors
Brian May – Director, 65 was appointed
to the Board as Chief Executive Officer
in June 2005 and served in that
role until his retirement on
30 September 2016.
Paul Scott – Director, 52, was
appointed to the Board as Engineering
Services Director on 21 July 2014 and
succeeded Brian May as Chief Executive
on 1 October 2016. Paul has been with
the Group for seventeen years, serving
CORPORATE GOVERNANCERENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 30
DIRECTORS’ REPORT CONTINUED
Disclosable interests
As at 18 November 2016, 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
Miton Group PLC
Brewin Dolphin Limited
Share capital
As at the date of this report, the
total number of shares in issue
(being ordinary shares of 10p each)
is 62,317,948. 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 385p
during the year to satisfy the exercise
of share options.
Number
Percentage
of ordinary
of issued
shares
9,325,751
8,746,548
3,773,606
2,922,658
2,800,783
share capital
14.96%
14.04%
6.06%
4.69%
4.49%
Disclosure of information
to the auditor
The Directors who held office at the
date of approval of this Directors’
Report confirm the following: so far
as each Director is aware, there is no
relevant audit information of which the
Group’s Auditor is unaware; and each
Director has taken all the steps that
he ought to have taken as a director
in order to make himself aware of
any relevant audit information and
to establish that the Group’s Auditor
is aware of that information.
Auditor
Resolutions will be proposed at
the forthcoming AGM to reappoint
KPMG LLP as Auditor to the Group
and to authorise the Directors to
determine their remuneration.
Approval
The Board approved the Report of the
Directors on 22 November 2016.
By Order of the Board
J Samuel FCA
Company Secretary
22 November 2016
Company number 650447
CORPORATE GOVERNANCE DIRECTORS’ REMUNERATION REPORT
31
The Directors present the Directors’
remuneration report (the “Remuneration
Report”) for the financial year ended
30 September 2016.
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 Directors’
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.
B W May retired as Chief Executive
Officer of the Group on 30 September
2016 and resigned as a Director of
the Company on that date. He was
succeeded by P Scott, previously
Engineering Services Director,
with effect from 1 October 2016.
A Liebenberg was appointed to the
Board on 31 March 2016.
At the last general meeting, votes
on the advisory resolution relating to
the Remuneration Report were cast
as follows.
In favour
– 6,697,526 (99.1 per cent)
Against
– 63,988 (0.9 per cent)
Total votes – 6,761,514 (100 per cent)
cast
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 three meetings
during the financial year to discuss
remuneration arrangements.
The Remuneration Committee’s terms
of reference include:
(a) to determine and agree with the
Board the framework and policy
for the remuneration packages,
including bonuses, incentive
payments and share options or
share awards of the Executive
Directors and members of the
Executive Management;
(b) to review and approve the design
of all share incentive plans and
performance related pay schemes
for approval by the Board and
shareholders as applicable;
(c) to determine targets and awards
made under share incentive
plans and performance related
pay schemes;
(d) to determine the policy for, and
scope of, pension arrangements for
each Executive Director and other
senior executives; and
(e) to ensure contractual terms and
payments made on termination
are fair to the individual and
the Company and that failure
is not rewarded.
Non-executive Directors do not have
any personal interest in the matters
to be decided by the Committee other
than as shareholders, nor any potential
conflicts of interest arising from
cross-directorships and no day-to-day
involvement in the running of the
Company. The Executive Directors and
other senior personnel may be invited
to attend meetings when appropriate
to provide advice. However, no Director
is present or takes part in discussions
concerning his own remuneration.
Remuneration policy
The Company’s remuneration policy
is that the remuneration 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 to, and
terms agreed with, directors in similar
companies in the same sector and of
a similar size and after a review of
the performance of the individual.
It is the aim of the Committee to reward
Executive Directors competitively and on
the broad principle that they should be in
the range of median to upper quartile of
remuneration paid to senior management
of comparable public companies. For
guidance, the Committee refers to
published survey data. The Board
determines the terms and conditions
of non-executive Directors.
There are four main elements to
the remuneration packages of the
Executive Directors and other
senior executives:
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.
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 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.
CORPORATE GOVERNANCERENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 32
DIRECTORS’ REMUNERATION REPORT CONTINUED
Remuneration policy continued
Long-term equity incentive plans continued
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.
The Remuneration Committee is empowered to grant a maximum number of LTIP options over 10p Ordinary Shares equivalent
in value to 150 per cent of basic salary per financial year. The options may be granted with an exercise price equal to their
nominal value or as nil cost options. The Company also has the ability, but not the obligation, to provide a cash alternative
to participants equal to the net benefit of their LTIP option. This simplifies the settlement process, reducing complexity
and cost to both the Company and the participant and reducing dilution to the shareholders, all whilst preserving the
overall economic effect of the LTIP award.
Remuneration for the year ending 30 September 2016
Service contracts and letters of appointment
The Company’s policy is for all of the Executive Directors to have twelve month rolling service contracts that provide
for a twelve month notice period.
The fees of non-executive Directors are determined by the full Board within the limits set out in the Articles of Association.
The non executive Directors are not eligible for bonuses, pension benefits, share options or other benefits. The Directors are
indemnified to the full extent permitted by statute under the Articles of Association. All non-executive Directors are subject
to re-election every 3 years.
The service contracts of the Directors, who served during the year ended 30 September 2016 and were in post on that date,
include the following terms:
Directors
R J Harrison
J Bishop
D M Forbes
P Scott
A Liebenberg
J Samuel
Executive/Non-executive
Non-executive
Date of contract
Unexpired term
1 February 2009 Rolling one month
Notice period (months)
1
Non-executive 1 September 2008 Rolling one month
Non-executive
1 June 2011 Rolling one month
Executive
Executive
Executive
1 July 2014
Rolling one year
31 March 2016
Rolling one year
17 May 2006
Rolling one year
1
1
12
12
12
Directors’ remuneration
Information is provided below for Directors who served during the financial year and as at 30 September 2016:
Total emoluments
Total emoluments
Salary/fees
Bonuses
Notes
£000
£000
Executive Directors
B W May
P Scott
A Liebenberg
J Samuel
1,2,3,4,5
2,4,5
2,4,5,6
2,3,4,5
Non-executive Directors
R J Harrison
J Bishop
D M Forbes
323
200
99
248
62
34
34
174
117
90
137
-
-
-
LTIP
£000
905
-
-
679
-
-
-
Pension
Benefits
£000
£000
-
32
-
-
-
-
-
74
25
24
57
-
-
-
2016
£000
1,476
374
213
1,121
3,184
62
34
34
2015
£000
1,213
372
-
866
2,451
60
33
33
3,314
2,577
CORPORATE GOVERNANCE 33
Directors’ remuneration continued
Notes:
1. The highest paid Director for 2016 and 2015 was B W May who received emoluments of £1,476,000 (2015: £1,213,000).
2. Bonuses were earned by B W May, P Scott, A Liebenberg and J Samuel during the current financial year and will be paid in the year ending
30 September 2017.
3. Details of the LTIP options exercised during the year can be found below.
4. Benefits include car allowances and certain medical cover for the Director and immediate family.
5. B W May, P Scott, A Liebenberg 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. Prior to 1 June 2016, pension contributions
for P Scott were paid at the same rate into a personal pension plan and those emoluments are separately disclosed above.
6. A Liebenberg was appointed as a Director with effect from 31 March 2016 and so the emoluments shown above represent the six month
period ended 30 September 2016. All of A Liebenberg’s emoluments were borne by a subsidiary undertaking.
Annual bonus awards
The Company provides a bonus incentive scheme for Executive Directors (other than A Liebenberg) 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 2016, 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 £21,300,000. 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 3 per cent. Accordingly, under the terms of the scheme, the Executive
Directors are entitled to receive an annual bonus equal to 55.1 per cent of salary.
A Liebenberg’s annual bonus arrangements were set at the beginning of the financial year prior to him joining the Board.
Targets were set in relation to the business unit over which he has direct responsibility.
Long-term equity incentive plans
The market price of the Company’s shares at 30 September 2016 was 366p and the range of market prices during the year
was between 299.25p and 410p.
Information is provided below for Directors who served during the financial year and as at 30 September 2016:
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 used solely to enable 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 (See below)
P Scott
A Liebenberg
J Samuel
ESOS Options
B W May (See below)
P Scott
A Liebenberg
J Samuel
Exercisable between
Exercisable between
Exercisable between
03 Jan 2017 & 2 Jan 2021
08 Jan 2018 & 7 Jan 2022
28 Jan 2019 & 27 Jan 2023
140,648
112,518
34,667
67,700
58,000
80,000
72,667
60,000
40,000
84,000
10,489
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 21 to the Accounts.
CORPORATE GOVERNANCERENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 34
DIRECTORS’ REMUNERATION REPORT CONTINUED
Directors’ share options continued
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 15 January 2016 and 228,560 shares were issued to
B W May and 171,440 shares to J Samuel at 385p per share prior to dealing costs. This level of vesting reflects the substantial rise
in earnings per share, share price and total shareholder return during the vesting period. In addition, and in accordance with the
rules of the LTIP, payments of £30k and £22k were made to B W May and J Samuel respectively representing dividends accrued
during the vesting period on the shares vested as detailed above.
Following the retirement of B W May, the number of his outstanding options has been prorated to reflect the reduced vesting
period, in accordance with the rules of the LTIP. They remain subject to performance criteria. All of B W May’s options must be
exercised by 31 January 2018.
Directors’ pension information
No Director has pension entitlements under the Group’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, P Scott, A Liebenberg and J Samuel receive a sum equivalent to 15 per cent of their basic salary in lieu of pension
contributions from the Company.
Following the adoption of new Articles of Association at the AGM on 28 January 2009, the restriction on the retirement age
of the Executive Directors was removed.
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 2016 as follows:
R J Harrison OBE
J Bishop
D M Forbes
B W May
P Scott
A Liebenberg
J Samuel
Ordinary Shares of 10p each
30 September
30 September
2016
150,000
11,890
20,000
584,193
5,000
-
2015
150,000
11,890
20,000
584,193
5,000
-
240,548
240,548
Remuneration for the year ending 30 September 2017
Basic salary and benefits
The basic salaries of P Scott, A Liebenberg and J Samuel have increased by 29% to £275,000, by 2% to £204,000 and by
2% to £253,190 respectively with effect from 1 October 2016. The level of increase for P Scott reflects his increased level of
responsibility following his appointment as Chief Executive. The increases for A Liebenberg and J Samuel are 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 2017 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 have made annual awards under the LTIP since it was set up in 2012. Each award has been made
shortly after the publication of the Company’s annual results, or in circumstances where the rules are being amended at the
company’s AGM, then shortly after that meeting. It is expected that the next award will be announced shortly after the publication
of the Company’s annual results. Awards are limited in amount to 150 per cent of basic salary. The third tranche of options
granted under the LTIP, granted on 3 January 2014 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 22 November 2016 and signed on its behalf by:
D M Forbes
Chairman of the Remuneration Committee
22 November 2016
CORPORATE GOVERNANCE STATEMENT OF DIRECTORS’ RESPONSIBILITIES
IN RESPECT OF THE STRATEGIC REPORT, THE ANNUAL REPORT
AND FINANCIAL STATEMENTS
35
The Directors are responsible for
preparing the Strategic Review, the
Annual Report and the Group and
parent company financial statements
in accordance with applicable law
and regulations.
Company law requires the Directors to
prepare Group and parent company
financial statements for each financial
year. As required by the AIM Rules of
the London Stock Exchange they are
required to prepare the Group
financial statements in accordance
with 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), including FRS 102 ‘The Financial
Reporting Standard’ applicable in the UK
and Republic of Ireland.
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.
CORPORATE GOVERNANCERENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 36
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 2016 set out on pages 37
to 74. The financial reporting framework that has been applied in the preparation of the group financial statements is applicable
law and International Financial Reporting Standards (IFRSs) as adopted by the EU. The financial reporting framework that has
been applied in the preparation of the parent company financial statements is applicable law and UK Accounting Standards
(UK Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable in the UK and
Republic of Ireland.
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 35, 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 2016 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 4DA
22 November 2016
FINANCIAL STATEMENTS GROUP INCOME STATEMENT
FOR THE YEAR ENDED 30 SEPTEMBER
Before
Amortisation
amortisation
of intangible
of intangible
assets
2016
£000
assets
(see Note 3)
2016
£000
Before
Amortisation
amortisation
of intangible
assets
2015
£000
of intangible
assets
(see Note 3)
2015
£000
Total
2016
£000
Note
525,737
(469,180)
56,557
(34,603)
21,954
373
(624)
625
22,328
(5,268)
-
-
-
(2,954)
(2,954)
-
-
-
(2,954)
532
525,737
519,645
(469,180)
(462,154)
56,557
(37,557)
19,000
373
(624)
625
19,374
(4,736)
57,491
(37,121)
20,370
27
(939)
189
19,647
(3,579)
-
-
-
(3,536)
(3,536)
-
-
-
(3,536)
636
37
Total
2015
£000
519,645
(462,154)
57,491
(40,657)
16,834
27
(939)
189
16,111
(2,943)
17,060
(2,422)
14,638
16,068
(2,900)
13,168
(4,026)
(7,263)
10,612
23.53p
23.33p
17.06p
16.91p
5,905
21.34p
21.06p
9.57p
9.44p
Group revenue from
continuing activities
Cost of sales
Gross profit
Administrative expenses
Operating profit
Finance income
Finance costs
Other finance income
- defined benefit
pension schemes
Profit before income tax
Income tax expense
Profit for the year from
continuing activities
Loss for the year from
discontinued operation
Profit for the year
attributable to equity
holders of the parent
company
Basic earnings per
share from continuing
activities
Diluted earnings per
share from continuing
activities
Basic earnings per share
Diluted earnings
per share
2
3
5
5
5
7
4
9
9
9
9
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 38
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
25
2016
£000
10,612
(14,229)
2,561
(11,668)
291
291
2015
£000
5,905
8,880
(1,570)
7,310
304
304
(765)
13,519
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER
Called up
Share
Capital
Cumulative
Share
based
share
premium redemption
translation
payments
Retained
capital
£000
account
reserve
adjustment
reserve
earnings
£000
£000
£000
At 1 October 2014
6,152
5,942
3,896
Transfer from income statement for the year
Dividends paid
New shares issued
Recognition of share based payments
Exchange differences
Actuarial movement recognised in pension schemes
Movement on deferred tax relating to the pension schemes
40
1,047
£000
752
£000
292
35
304
Total
equity
£000
(3,160)
13,874
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
Transfer from income statement for the year
Dividends paid
New shares issued
Recognition of share based payments
Exchange differences
Actuarial movement recognised in pension schemes
Movement on deferred tax relating to the pension schemes
40
1,492
244
291
10,612
10,612
(4,611)
(4,611)
1,532
244
291
(14,229)
(14,229)
2,561
2,561
At 30 September 2016
6,232
8,481
3,896
1,347
571
842
21,369
FINANCIAL STATEMENTS
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
Assets held for resale
Trade and other receivables
Current tax assets
Cash and cash equivalents
Total assets
Non-current liabilities
Borrowings
Obligations under finance leases
Retirement benefit obligations
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Trade and other payables
Obligations under finance leases
Current tax liabilities
Provisions
Total liabilities
Net assets
Share capital
Share premium account
Capital redemption reserve
Cumulative translation adjustment
Share based payments reserve
Retained earnings
Total equity
Approved by the Board and signed on its behalf by:
R J Harrison OBE
Chairman
22 November 2016
39
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)
2016
£000
56,259
1,280
13,673
7,704
1,581
80,497
5,362
1,500
93,520
-
14,084
114,466
194,963
(3,100)
(3,030)
(2,110)
(1,664)
(312)
(10,216)
(17,182)
(6,200)
(6,200)
(153,472)
(153,612)
(2,623)
(2,609)
(863)
(220)
(163,378)
(173,594)
21,369
6,232
8,481
3,896
1,347
571
842
-
(368)
(162,789)
(179,971)
24,969
6,192
6,989
3,896
1,056
327
6,509
21,369
24,969
Note
10
10
11
25
7
12
13
15
17
18
25
7
19
17
16
18
19
21
22
22
22
22
22
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 40
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
Decrease/(increase) in inventories
Increase 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 in respect of share options
Finance income
Finance (other income)/expense
Interest paid
Income taxes paid
Income tax expense
Net cash inflow from continuing operating activities
Net cash outflow from discontinued operating activities
Net cash inflow from operating activities
Investing activities
Interest received
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
(Acquisition)/disposal of subsidiaries net of cash acquired
Net cash (outflow)/inflow from continuing investing activities
Net cash inflow from discontinued investing activities
Net cash (outflow)/inflow from investing activities
Financing activities
Dividends paid
Loan repayments
Repayments of obligations under finance leases
Net cash outflow from financing activities
Net increase in continuing cash and cash equivalents
Net decrease in discontinued cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Bank balances and cash
2016
£000
14,638
2,954
4,036
(569)
1,532
60
(63)
2,609
47
(4,701)
244
(373)
(1)
(624)
(863)
4,736
23,662
(6,109)
17,553
373
1,020
(1,304)
(208)
(119)
-
(119)
(4,611)
(6,200)
(3,225)
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)
(14,036)
(12,813)
9,507
(6,109)
3,398
10,662
24
14,084
8,494
(3,428)
5,066
5,586
10
10,662
14,084
10,662
FINANCIAL STATEMENTS NOTES TO THE ACCOUNTS
41
1 Accounting policies
Presentation of consolidated financial statements
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards
(“IFRSs”) as adopted by the EU (“adopted IFRSs”). The financial statements are presented in sterling since this is the currency
in which the majority of the Group’s transactions are denominated.
Accounting estimates and judgements
In the preparation of these financial statements the Board has made certain judgements and estimates which impact the
measurement of various assets and liabilities in the Group balance sheet, the value of transactions recorded in the Group
income statement and the movements in equity as shown in the Group statement of changes in equity. The actual financial
outcomes may ultimately differ from that which is indicated by these judgements and estimates. Estimates and judgements are
reviewed by management and the Board on an ongoing basis and changes which may arise in them are reflected in the financial
statements for the period in which such changes are made.
The Board has determined that the following areas are those in which estimates and judgements have been made and where
material impacts could arise in the financial statements were such estimates and judgements to be varied.
a) Accounting for construction contracts in accordance with IAS 11 “Construction Contracts”
IAS 11 requires management to estimate the total expected costs on a contract and the stage of contract completion in order to
determine both the revenue and profit to be recognised in an accounting period. The Group has control and review procedures
in place to monitor, and evaluate regularly, the estimates being made to ensure that they are consistent and appropriate. This
includes reviewing the independent certification of the value of work done, the progress of work against contracted timescales
and the costs incurred against plan.
b) Impairment of goodwill in accordance with IAS 36 “Impairment of Assets”
In accordance with IAS 36, goodwill is tested annually for impairment by comparing the carrying value of goodwill with the
recoverable amount which is determined by an estimation of the value in use of the related cash generating unit to which the
goodwill is attributed. The calculation of the value in use requires estimates to be made of the future cash flows of the cash
generating unit and the timescale over which they will arise. Estimated growth rates and discount factors are also used in the
calculation to estimate the net present value of the cash flows. More information is given in Note 10 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 25 to these
financial statements.
d) Accounting for provisions in accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets”
The Group makes provisions where the Board determines that liabilities exist but where judgements have to be made as to the
quantification of such liabilities. A provision has been made for onerous lease contracts in respect of property leases where the
Board has determined that the expected economic benefits to be derived from the leases are less than the unavoidable cost of
meeting the Group’s obligations under the lease contract. This arises where the Group is the head lessee for a property lease
contract where the property is not used by the Group and where the Group has not been able to sublet the property or has
only been able to do so on terms which are less favourable than those of the head lease.
e) Accounting for deferred taxation in accordance with IAS 12 “Income Taxes”
The Group provides for deferred taxation using the balance sheet liability method. Deferred tax assets are recognised in
respect of tax losses where the Directors believe that it is probable that future profits will be relieved by the benefit of tax losses
brought forward. The Board considers the likely utilisation of such losses by reviewing budgets and medium term plans for each
taxable entity within the Group. If the actual profits earned by the Group’s taxable entities are different from the budgets and
forecasts used then the value of such deferred tax assets may differ from that shown in these financial statements.
f) Accounting for discontinued operations in accordance with IFRS 5 “Non-current assets held for sale and
discontinued operations”
A non-current asset or a group of assets containing a non-current asset (a disposal group) is classified as held for sale if its
carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale
and sale is highly probable within one year.
On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous carrying
amount and fair value less costs to sell with any adjustments taken to profit or loss. The same applies to gains and losses on
subsequent re-measurement although gains are not recognised in excess of any cumulative impairment loss. Any impairment
loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that
no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets and investment property, which
continue to be measured in accordance with the Group’s accounting policies. Intangible assets and property, plant and
equipment once classified as held for sale or distribution are not amortised or depreciated.
In accordance with IFRS 5, the above policy is effective from the start of the accounting period in which the operation meets
the criteria to be classified as held for sale.
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 42
NOTES TO THE ACCOUNTS CONTINUED
1 Accounting policies continued
f) Accounting for discontinued operations in accordance with IFRS 5 “Non-current assets held for sale and
discontinued operations” continued
A discontinued operation is a component of the Group’s business that represents a separate major line of business or
geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view
to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be
classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative income
statement is restated as if the operation has been discontinued from the start of the comparative period.
(i) Basis of accounting and preparation
The accounts have been prepared on the going concern basis and in accordance with applicable accounting standards under
the historical cost convention. In determining that the going concern basis is appropriate the Directors have reviewed budgets,
including cashflow forecasts, and concluded that 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 the International Financial Reporting
Committee relevant to its operations and which are effective in respect of these financial statements.
The following new or revised International Financial Reporting Standards and IFRIC interpretations will be adopted, where
applicable, for the purpose of preparing future financial statements. The Group does not anticipate that the adoption of these
new or revised standards and interpretations will have a material impact on its financial position or results from operations.
International Financial Reporting Standards
Applies to periods beginning after
Recognition of Deferred Tax Assets for Unrealised Losses - Amendments to IAS 12
Disclosure Initiative - Amendments to IAS 7
IFRS 15 Revenue from Contracts with customers
IFRS 16 Leases
January 2017
January 2017
January 2018
January 2019
(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), 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 cash flows are likely to arise from these
relationships and rights.
FINANCIAL STATEMENTS
43
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 has an indefinite useful life and is 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 cash flows that the asset is expected to generate. For this purpose, assets are grouped into cash generating units
which represent the lowest level for which there are separately identifiable cash flows. Impairment losses in respect of goodwill
are not reversed in future accounting periods. Reversals of other impairment losses are recognised in income when they arise.
(ix) Inventories
Inventories comprise developments, land held for development and raw materials and are stated at the lower of cost and net
realisable value. Cost includes appropriate attributable overheads and excludes interest. Where necessary, provision is made
for obsolete slow moving and defective inventories.
(x) Trade receivables
Trade receivables do not carry any interest and are initially recognised at their fair value and then at amortised cost.
(xi) Trade payables
Trade payables on normal terms are not interest bearing and are initially recognised at their fair value and then at amortised cost.
(xii) Cash and cash equivalents
Cash and cash equivalents in the cash flow statement comprise cash at bank and in hand, including bank deposits with original
maturities of less than three months, net of bank overdrafts. Bank overdrafts are included within borrowings within current
liabilities in the balance sheet.
(xiii) Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of a past event and where
it is probable that an outflow will be required to settle that obligation and where the amount can be reliably estimated.
(xiv) Leasing commitments
Assets held under finance leases, where substantially all the benefits and risks of ownership of an asset have been transferred
to the Group, are capitalised and are depreciated in accordance with the depreciation policy for the relevant class of asset.
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 movements are recognised in the Group statement of comprehensive income. Pension scheme surpluses, to the extent
they are considered recoverable, or deficits are recognised in full and presented on the face of the Group balance sheet.
(xvi) Defined contribution pension plans
Contributions to defined contribution pension plans are charged to the income statement as incurred.
(xvii) Taxation
The tax charge is composed of current tax and deferred tax, calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date. Current tax and deferred tax are charged or credited to the income statement, except when
they relate to items charged or credited directly to equity, in which case the relevant tax is also dealt with in equity.
Current tax is based on the profit for the year. Deferred tax is provided in full, using the liability method, on temporary
differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax on such assets and liabilities is not recognised if the temporary difference arises from the initial recognition
(other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit
nor the accounting profit.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which
the temporary differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority
and the Group intends to settle its current assets and liabilities on a net basis.
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 44
NOTES TO THE ACCOUNTS CONTINUED
1 Accounting policies continued
(xviii) Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. The income
statements of overseas subsidiary undertakings are translated at the average rate of exchange ruling throughout the financial
year. The balance sheets of overseas subsidiary undertakings are translated at the rate of exchange ruling at the balance sheet
date. Exchange differences arising from this policy and arising on the retranslation of the opening net assets are taken directly
to reserves. All other exchange differences are taken to the income statement.
(xix) Financial instruments
Financial assets are divided into the following categories: trade receivables and financial assets at fair value. The Board assigns
financial assets to each category on initial recognition dependant on the purpose for which the asset was acquired. The categorisation
of these assets is reconsidered at each reporting date at which a choice of categorisation or accounting treatment is available.
All financial assets are recognised whenever the Group becomes party to the contractual provisions of the financial instrument.
All such assets are initially recognised at fair value. Derecognition of such assets occurs when the Group’s right to receive cash
flows from the asset ceases or the rights and rewards of ownership have been transferred. All such assets are reviewed for impairment
at least annually. Interest and other cash flows which arise from holding a financial asset are recognised in the income statement
in accordance with IAS39. Financial assets at fair value include assets classified as held for trading, and changes in fair value are
recognised through the income statement. Trade receivables are non-derivative financial assets with expected receipts which are
not quoted in an active market and they arise when the Group provides goods or services. A financial asset is assessed at each
reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be
impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows
of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between
its carrying value amount, and the present value of the estimated cash flows discounted at the original effective interest rate.
All impairment losses are recognised in the income statement. Financial liabilities are recognised when the Group becomes a
party to the contractual provisions of the financial instrument. All interest related charges are recognised as an expense in the
income statement. Bank loans and hire purchase liabilities are entered into to provide financing for the Group’s operations
and are recognised as funds are received. Financial liabilities are measured at amortised cost.
(xx) Share based payments
IFRS 2 “Share Based Payment” requires a fair value to be established for any equity settled share based payments. Fair value
has been independently measured using 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 expense
comprises interest expense on borrowings, unwinding of the discount on provisions and losses on hedging instruments that are
recognised in income or expense. All borrowing costs are recognised in income or expense using the effective interest method.
2 Segmental analysis
The Chief Operating Decision Maker (“CODM”) is responsible for the overall resource allocation and performance assessment of
the Group. The Board approves major capital expenditure and 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 38.2% (2015: 35.0%) of Group revenue. No other customer represented
more than 10% of the Group’s revenue.
FINANCIAL STATEMENTS 45
2 Segmental analysis continued
The 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
2016
£000
436,213
90,503
(983)
525,733
4
525,737
2015
£000
440,502
79,492
(380)
519,614
31
519,645
Before
amortisation
Amortisation
of intangible
of intangible
Before
amortisation
of intangible
Amortisation
of intangible
assets
2016
£000
21,541
2,334
23,875
(1,921)
21,954
374
assets
2016
£000
(2,954)
-
(2,954)
-
(2,954)
-
2016
£000
18,587
2,334
20,921
(1,921)
19,000
374
assets
2015
£000
20,055
2,274
22,329
(1,959)
20,370
(723)
assets
2015
£000
(3,536)
-
(3,536)
-
(3,536)
-
2015
£000
16,519
2,274
18,793
(1,959)
16,834
(723)
22,328
(2,954)
19,374
19,647
(3,536)
16,111
Engineering Services
Specialist Building
Segment operating profit
Central activities
Operating profit
Net financing income/(expense)
Profit on ordinary activities before
income tax
Balance sheet analysis of business segments
Engineering Services
Specialist Building
Central activities
Discontinued operation
Group eliminations
Group net assets
Other information
Engineering Services
Specialist Building
Central activities
Discontinued operation
(b) Geographical analysis
Assets
£000
176,484
62,107
143,565
32,790
(219,983)
194,963
2016
Liabilities
Net assets
£000
(151,171)
(71,527)
(126,925)
(43,954)
219,983
(173,594)
£000
25,313
(9,420)
16,640
(11,164)
-
21,369
2016
Capital
additions
Depreciation
Amortisation
£000
4,867
188
4
-
5,059
£000
3,905
113
18
-
4,036
£000
2,954
-
-
-
2,954
Assets
£000
177,035
75,405
127,328
42,042
(216,870)
204,940
Capital
additions
£000
2,382
101
822
2
3,307
2015
Liabilities
£000
(146,282)
(82,954)
(117,796)
(49,809)
216,870
(179,971)
2015
Net assets
£000
30,753
(7,549)
9,532
(7,767)
-
24,969
Depreciation
Amortisation
£000
3,776
88
63
7
£000
3,536
-
-
-
3,934
3,536
The whole of the Group’s revenue for both financial years is derived from continuing activities in the UK.
All of the Group’s non-current assets are deployed in the UK.
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 46
3 Operating profit
NOTES TO THE ACCOUNTS CONTINUED
Operating profit is arrived at after charging/(crediting)
Auditor’s remuneration - audit services
Depreciation of owned assets
Depreciation of assets held under finance leases
Operating lease rentals - plant and machinery
Operating lease rentals - motor vehicles
Operating lease rentals - other
Rental income
Profit on sale of property, plant and equipment
During the year, the following services were provided by the Group auditor:
Fees payable to the Company’s auditor for the audit of the financial statements
Fees payable to the Company’s auditor and its associates for other services:
Audit of the financial statements of the Company’s subsidiaries pursuant to legislation
Other services related to consultancy, tax and pensions advice
Amortisation of intangible assets
Amortisation of intangible assets (see Note 10)
2016
£000
255
1,614
2,422
993
983
2,769
(281)
(569)
2016
£000
31
224
125
380
2016
£000
2,954
2,954
2015
£000
245
2,292
1,635
765
873
3,322
(297)
(278)
2015
£000
34
211
22
267
2015
£000
3,536
3,536
The Board has separately identified the charge of £2,954,000 (2015: £3,536,000) 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 10.
4 Discontinued operation analysis
Revenue
Expenses
Profit on disposal
Loss before income tax
Income tax credit - benefit of tax losses
Income tax (charge)/credit - adjustment in respect of previous period
Loss for the year from discontinued operation
2016
£000
7,500
(11,493)
-
(3,993)
785
(818)
(4,026)
2015
£000
31,947
(41,278)
1,250
(8,081)
-
818
(7,263)
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 the balance on
31 January 2016. The trading result for this business represents the loss for the year from the discontinued operation.
FINANCIAL STATEMENTS 47
5 Finance income and costs
Finance income
Finance income of £373,000 (2015: £27,000) has been earned during the year on bank deposits and translation of loans
denominated in foreign currencies.
2016
£000
(384)
(240)
(624)
6,577
(5,952)
625
2016
Number
2,969
3,073
2,112
857
2,969
2016
£000
130,643
13,257
4,611
1,776
2015
£000
(559)
(380)
(939)
6,206
(6,017)
189
2015
Number
3,068
3,323
2,293
775
3,068
2015
£000
128,655
13,352
4,293
1,122
150,287
147,422
2016
£000
3,314
1,476
2015
£000
2,577
1,213
Total
Total
emoluments
emoluments
Finance costs
On bank loans and overdrafts
Other interest payable
Other finance income - defined benefit pension schemes
Interest on scheme assets
Interest on scheme obligations
Net pension interest
Further information on the defined benefit pension schemes is set out in Note 25 to the accounts.
6 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
Salary/fees
£000
Bonuses
£000
Executive Directors
B W May
P Scott
A Liebenberg
J Samuel
Non-executive Directors
R J Harrison
J Bishop
D M Forbes
323
200
99
248
62
34
34
174
117
90
137
-
-
-
LTIP
£000
905
-
-
679
-
-
-
Pension
£000
Benefits
£000
-
32
-
-
-
-
-
74
25
24
57
-
-
-
2016
£000
1,476
374
213
1,121
3,184
62
34
34
2015
£000
1,213
372
-
866
2,451
60
33
33
3,314
2,577
Further details concerning individual Directors’ emoluments can be found in the Directors’ Remuneration Report.
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 48
NOTES TO THE ACCOUNTS CONTINUED
7 Income tax expense
(a) Analysis of expense in year
Current tax:
UK corporation tax on profits of the year
Adjustments in respect of previous period
Total current tax
Deferred tax - defined benefit pension schemes
Deferred tax - other timing differences
Total deferred tax
Income tax expense in respect of continuing activities
(b) Factors affecting income tax expense for the year
Profit before income tax
Profit multiplied by standard rate of corporation tax in the UK of 20.0% (2015: 20.5%)
Effects of:
Expenses not deductible for tax purposes
Timing differences not provided in deferred tax
Change in tax rate
Adjustment in respect of tax losses
Adjustments in respect of previous period
2016
£000
(3,742)
(171)
(3,913)
(949)
126
(823)
(4,736)
2016
£000
19,374
(3,875)
(1,225)
651
58
(174)
(171)
(4,736)
2015
£000
(2,360)
1,359
(1,001)
(760)
(1,182)
(1,942)
(2,943)
2015
£000
16,111
(3,303)
(194)
(779)
(26)
-
1,359
(2,943)
The Group has available further unused UK tax losses of £39m (2015: £46m) to carry forward against future taxable profits.
The Group also has unused USA tax losses of $18m (£14.2m) (2015: $18m (£11.8m)) 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 £9.9m (2015: £10.4m).
(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
2016
£000
380
547
113
541
2015
£000
108
543
201
866
1,581
1,718
2016
£000
(1,387)
(277)
(1,664)
2015
£000
(2,728)
(809)
(3,537)
FINANCIAL STATEMENTS 7 Income tax expense continued
(e) Reconciliation of deferred tax asset
As at 1 October
Origination of timing differences
Change of deferred tax rate
Reclassification of opening pension scheme asset as 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 liability
Reclassification of opening pension scheme liability as an asset
Defined benefit pension schemes - income statement
Defined benefit pension schemes - SOCI
At 30 September
8 Dividends
Interim (related to the year ended 30 September 2016)
Final (related to the year ended 30 September 2015)
Total dividend paid
Interim (related to the year ended 30 September 2016)
Final (related to the year ended 30 September 2015)
Total dividend paid
49
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)
2016
£000
1,718
(409)
-
-
-
(72)
344
1,581
2016
£000
(3,537)
-
532
-
-
-
(882)
2,223
(1,664)
2016
Pence/share
2.65
2015
Pence/share
2.25
4.75
7.40
£000
1,651
2,960
4,611
3.50
5.75
£000
1,393
2,153
3,546
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 5.35p per Ordinary Share be paid in respect of the year ended
30 September 2016. This will be accounted for in the 2016/17 financial year.
9 Earnings per share
Earnings before amortisation
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
17,060
(2,422)
2016
EPS
Pence
27.43
(3.90)
DEPS
Pence
27.19
(3.86)
Earnings
£000
16,068
(2,900)
14,638
23.53
23.33
13,168
(4,026)
10,612
(6.47)
17.06
62,201
(6.42)
16.91
62,739
(7,263)
5,905
2015
EPS
Pence
26.03
(4.69)
21.34
(11.77)
9.57
61,718
DEPS
Pence
25.70
(4.64)
21.06
(11.62)
9.44
62,533
The dilutive effect of share options is to increase the number of shares by 538,000 (2015: 815,000) and reduce basic
earnings per share by 0.15p (2015: 0.13p).
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 50
10 Intangible assets
NOTES TO THE ACCOUNTS CONTINUED
Cost:
At 1 October 2014 and 1 October 2015
Additions
At 30 September 2016
Impairment losses/amortisation:
At 1 October 2014
Charge for year
At 1 October 2015
Charge for year
At 30 September 2016
Carrying amount:
At 30 September 2016
At 30 September 2015
At 30 September 2014
Contractual
rights and
customer
Goodwill
relationships
£000
£000
56,868
199
57,067
808
-
808
-
808
56,259
56,060
56,060
12,323
-
12,323
4,553
3,536
8,089
2,954
11,043
1,280
4,234
7,770
The carrying amounts of goodwill classified as groups of cash generating units (“CGUs”) and reported by operating segment
are as follows:
Engineering Services
Specialist Building
2016
£000
55,006
1,253
56,259
2015
£000
54,807
1,253
56,060
On 1 February 2016, the Group acquired the whole of the issued share capital of Nuclear Decontamination Services Ltd
for a consideration of £224,000 of which £199,000 represented goodwill. In accordance with IFRS 3, this will be reviewed
for impairment one year after the acquisition date.
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 cash flow forecasts for each
cash generating unit derived from the most recent financial budgets and strategic plans approved by management going forward
three years, and then extrapolates cash flows based on conservative estimated growth rates which do not exceed GDP growth
in the longer term according to management’s view of longer term prospects for each 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 each CGU operates. Growth rates of between 3% and 5% per annum
have been used. The rate used to discount the forecast cash flows is 8%. The Board considers the rate appropriate as, based
on publicly available information, it represents the rate that a market participant would require for these assets. The Board
does not consider that there is any material difference between the markets of 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 according
to CGU, for a material impairment to take place the discount rate would have to increase by 10% or the assumed operating
margins would have to decrease by 10% before any impact on any single CGU. The only CGU which is sensitive to these
assumptions is Forefront Group Ltd.
FINANCIAL STATEMENTS 11 Property, plant and equipment
Cost:
At 1 October 2014
Additions
Disposals
At 1 October 2015
Additions
Disposals
At 30 September 2016
Depreciation:
At 1 October 2014
Charge for year
Disposals
At 1 October 2015
Charge for year
Disposals
At 30 September 2016
Net book value:
At 30 September 2016
At 30 September 2015
At 30 September 2014
Freehold
Long leasehold
Plant, vehicles
land and buildings
land and buildings
and equipment
£000
£000
£000
1,713
416
(110)
2,019
-
-
2,019
105
19
-
124
37
-
161
1,858
1,895
1,608
75
-
(75)
-
-
-
-
75
-
(75)
-
-
-
-
-
-
-
13,873
2,891
(4,089)
12,675
5,059
(4,352)
13,382
1,338
3,915
(3,784)
1,469
3,999
(3,901)
1,567
11,815
11,206
12,535
The net book value of assets under finance leases at 30 September 2016 was £6,094,000 (2015: £6,835,000).
During the year £2,422,000 (2015: £1,635,000) of depreciation was charged against assets held under finance leases.
12 Inventories
Developments and undeveloped land
Raw materials
£1.4m (2015: £1.5m) of inventories are pledged as security for liabilities.
13 Trade and other receivables
Trade receivables
Amounts due from construction contract customers
Other receivables
Prepayments and accrued income
2016
£000
4,551
811
5,362
2016
£000
12
87,444
4,394
1,670
93,520
51
Total
£000
15,661
3,307
(4,274)
14,694
5,059
(4,352)
15,401
1,518
3,934
(3,859)
1,593
4,036
(3,901)
1,728
13,673
13,101
14,143
2015
£000
3,889
975
4,864
2015
£000
5
89,296
3,532
4,127
96,960
The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.
Included in trade and other receivables are debtors with a carrying value of £3.5m (2015: £2.4m) which are past due at the
reporting date for which the Group has not provided as there has not been a significant change in credit quality and the
Group believes that the amounts are still considered recoverable since there is no objective evidence that these financial
assets are impaired. The Group does not hold any collateral over these balances. £1.5m (2015: £1.4m) of these balances
relate to certified retentions.
The average age of these receivables is 298 days (2015: 349 days).
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 52
NOTES TO THE ACCOUNTS CONTINUED
13 Trade and other receivables continued
Ageing of past due but not impaired receivables:
30-180 days
180 - 365 days
Greater than 1 year
14 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
2016
£000
1,339
639
1,491
3,469
2016
£000
87,444
(5,883)
81,561
2015
£000
548
435
1,398
2,381
2015
£000
89,296
(3,524)
85,772
3,064,423
2,857,820
(2,982,862)
(2,772,048)
81,561
85,772
At 30 September 2016 retentions held by customers amounted to £10.5m (2015: £9.1m). Advances received from customers for
contract work amounted to £5.9m (2015: £3.5m).
Amounts due from construction contract customers which are past due at the reporting date amounted to £3.5m (2015: £2.4m).
This amount includes retention balances of £1.5m (2015: £1.4m). The Group does not hold any collateral over these balances or
other trade and other receivables.
Contract revenue recognised in the year amounted to £525.7m (2015: £519.7m).
15 Cash and cash equivalents
Cash at bank
Cash in hand
16 Trade and other payables
Amounts due to construction contract customers
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
2016
£000
14,075
9
14,084
2016
£000
5,883
39,117
8,468
5,012
94,992
153,472
2015
£000
10,655
7
10,662
2015
£000
3,524
38,364
11,161
6,645
93,918
153,612
FINANCIAL STATEMENTS 17 Borrowings
Bank loans repayable:
Within one year
Within two to five years
53
2015
£000
6,200
9,300
15,500
2016
£000
6,200
3,100
9,300
The bank loans are secured by a fixed and floating charge over the Group’s UK assets.
18 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
lease payments
Present value of minimum
2016
£000
2,784
3,258
6,042
(389)
5,653
2015
£000
2,807
2,708
5,515
(392)
5,123
2016
£000
2,623
3,030
5,653
-
5,653
(2,623)
3,030
2015
£000
2,609
2,514
5,123
-
5,123
(2,609)
2,514
It is the Group’s policy to lease certain of its plant, vehicles and equipment under finance leases. The average outstanding lease
term is 3 years (2015: 3 years). For the year ended 30 September 2016, the average effective borrowing rate was 3% (2015: 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.
19 Provisions
At 1 October 2015
Provision released during the year
At 30 September 2016
Non-current liabilities
Current liabilities
At 30 September 2016
Property
obligations
£000
1,600
(1,068)
532
312
220
532
Property obligations represent commitments on leases for properties which the Group does not occupy and where the Group
does not expect to receive income sufficient to cover the full commitment. The provision represents outflows which are
expected to occur to the end of the lease commitment.
20 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.
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 54
NOTES TO THE ACCOUNTS CONTINUED
20 Other financial instruments continued
Interest rate profile of financial assets and liabilities
2016
Assets
Sterling
Euro
Dollar
Liabilities
Sterling
2015
Assets
Sterling
Euro
Dollar
Liabilities
Sterling
Fixed rate
interest rate
%
-
-
-
3.0
Fixed rate
interest rate
%
-
-
-
3.0
Financial assets/(liabilities)
Fixed
rate
£000
Floating
rate
£000
Total
£000
-
-
-
-
14,011
14,011
29
35
29
35
14,075
14,075
(5,653)
(5,653)
(9,300)
(9,300)
(14,953)
(14,953)
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)
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 18. The fixed rate liabilities have a weighted average period
of 3 years (2015: 3 years).
Fair value of financial assets and liabilities
There are no material differences between fair value and the book value of the Group’s financial assets and liabilities.
Financial risks
The Group has exposure to a number of financial risks through the conduct of its operations. Risk management is governed
by the Group’s operational policies, guidelines and authorisation procedures which are outlined in the Corporate governance
statement. The key financial risks resulting from financial instruments are credit, liquidity, currency and market risk.
a) Credit risk
Credit risk is the risk of loss if a customer fails to meet its financial obligations and results primarily from the Group’s trade and
other receivables. The degree to which the Group is exposed to this risk depends on the individual financial situation of each
specific customer. The Group 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 13.
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 21 and reserves as disclosed in Note 22. 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 16 to 18 and the retirement benefit obligations disclosed in Note 25. An analysis of the maturity profile
for finance lease liabilities is given in Note 18.
FINANCIAL STATEMENTS 55
20 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 2016
the unhedged portion of the inter-company loan was $2,771,000 (2015: $2,271,000). The dollar closing exchange rate was
$1.30: £1 (2015: $1.51: £1) resulting in a foreign exchange gain of £323,000 (2015: £80,000) 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 £291,000. The total equity statement would be impacted by £19,000 for each $0.01 movement in exchange rates.
All functional currencies of the Group operations are denominated in sterling, with the exception of the US operations whose
functional currency is the US dollar.
d) Market risk
Market risk is the risk that changes in market prices will affect the Group’s income or the carrying amount of its holding of
financial instruments. The principal risk relates to interest rates where the Group’s risk is limited to the rates applying to its
interest bearing short-term deposits and its bank loan. A reduction in market interest rates could lead to a reduction in the
Group’s interest income and a reduction in its interest costs. Consequently a 1% decrease in market interest rates would reduce
annual finance costs by £10,000 for every £1m of outstanding loan.
The Group’s hire purchase financial liabilities are all at fixed rates of interest.
21 Share capital
Allotted, called up and fully paid:
62,317,948 (2015: 61,917,948) Ordinary Shares of 10p each
2016
£000
2015
£000
6,232
6,192
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 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.
52,445 options are in issue under the Approved 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 succeeded 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 2016, there were 750,200 options outstanding under the scheme. On 27 January 2016, options to
subscribe for a further 309,700 Ordinary Shares were granted. On 17 January 2016, 400,000 options were exercised.
The options are exercisable at a nominal cost or at the par value of an Ordinary Share 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 dependant 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.
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 56
NOTES TO THE ACCOUNTS CONTINUED
21 Share capital continued
Share options 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. There will be no vesting if TSR growth
is 25% or less.
The comparator group TSR performance target measures the Company’s TSR over the 3 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.
22 Reserves
At 1 October 2014
Transfer from income statement for the year
Dividends paid
Recognition of share based payments
New shares issued
Exchange differences
Actuarial movement recognised in pension scheme
Movement on deferred tax relating to the
pension scheme
At 1 October 2015
Transfer from income statement for the year
Dividends paid
Recognition of share based payments
New shares issued
Exchange differences
Actuarial movement recognised in pension scheme
Movement on deferred tax relating to the
pension scheme
Share
Capital
premium
redemption
reserve
£000
3,896
account
£000
5,942
1,047
Share based
payments
reserve
£000
292
35
Cumulative
translation
reserve
£000
752
304
6,989
3,896
1,056
327
1,492
244
291
At 30 September 2016
8,481
3,896
1,347
571
Retained
earnings
£000
(3,160)
5,905
(3,546)
8,880
(1,570)
6,509
10,612
(4,611)
(14,229)
2,561
842
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 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.
£244,000 has been charged (2015: £35,000) to administrative expenses. There is no impact on net assets since an equivalent
amount has been credited to the share based payments reserve. 400,000 options were exercised during the year. The value
per option represents the fair value of the option less the consideration payable.
FINANCIAL STATEMENTS
57
22 Reserves continued
Share based payments reserve continued
Renew Holdings plc Long Term Incentive Plan continued
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 2016 were as follows:
Date of grant
Awards outstanding at 30 September 2016
– 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
23 Capital and leasing commitments
Commitments under non-cancellable operating leases:
Under one year
Two to five years
Five or more years
3 January 2014
7 January 2015
27 January 2016
Total
253,166
0.0p
180.0p
10 years
3 years
32%
2.0%
1.03%
87.5p
Land and
buildings
£000
1,164
2,792
2,197
6,153
256,667
0.0p
288.5p
10 years
3 years
31%
1.7%
0.63%
99.0p
Other
£000
1,758
1,087
1,104
3,949
240,367
10.0p
410.0p
10 years
3 years
30%
1.7%
0.58%
212.5p
Total
2016
£000
2,922
3,879
3,301
10,102
750,200
Total
2015
£000
2,990
7,921
3,059
13,970
With regard to the operating leases held by the Group as lessor, the Group recognised £281,000 (2015: £297,000) of rental
income in the income statement for 2016, relating to sub-letting of surplus premises.
The future minimum sub-lease receipts expected to be received under non-cancellable operating leases which all relate to land
and buildings are as follows:
Receivables under non-cancellable operating leases:
Under one year
Two to five years
2016
£000
94
119
213
2015
£000
159
166
325
The Group had capital commitments at 30 September 2016 of £77,000 (2015: £2,044,000).
24 Contingent liabilities
Under the terms of the Group’s banking agreement, security over the Group’s UK assets has been granted to the Group’s bankers.
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 58
NOTES TO THE ACCOUNTS CONTINUED
25 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 2016 shows a surplus of £7,704,000
based on the assumptions set out below. The Amco scheme shows a deficit of £2,110,000 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 the Lovell
scheme, 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 2016
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
2016
4.0%
3.5%
2.4%
2.0%
3.0%
2.9%
3.0%
2.6%
2.4%
2.0%
3.0%
2.0%
2015
4.0%
3.0%
3.7%
2.0%
3.0%
2.9%
3.0%
2.6%
3.7%
2.0%
3.0%
1.8%
2014
4.0%
3.0%
3.9%
2.1%
3.1%
3.1%
3.3%
2.7%
3.9%
2.3%
3.3%
2.3%
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 23.1 years and
the further life expectancy of a male aged 65 in 2036 is 24.8 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 22.5 years
and the further life expectancy of a male aged 65 in 2036 is 24.3 years.
FINANCIAL STATEMENTS 59
25 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
2016
£000
101,201
88,592
731
190,524
Value as at
30 September
2015
£000
43,216
121,985
402
165,603
Current
allocation
53%
47%
-
100%
Value as at
30 September
2014
£000
43,410
101,002
1,180
145,592
Current
allocation
26%
74%
-
100%
Current
allocation
30%
69%
1%
100%
During 2011 and 2016, 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
2016
£000
7,660
6,435
1,226
15,321
Value as at
30 September
2015
£000
6,940
6,341
984
14,265
Current
allocation
50%
42%
8%
100%
Value as at
30 September
2014
£000
7,270
6,427
585
14,282
Current
allocation
49%
44%
7%
100%
Current
allocation
51%
45%
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 carried out the triennial valuation of the Lovell Pension Scheme as at 31 March 2015. The scheme showed
a deficit of £12.1m compared to £24.1m when measured as at 31 March 2012. The Group has agreed a revised recovery plan
with the Trustees which commits the Group 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 Group may be required to make further contributions to achieve a buy out of all pension liabilities
and the Group 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 as 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. 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 £3.1m.
The scheme rules permit the return of any surplus funds to the Group on the winding up of the scheme.
Amco Pension Scheme
The scheme actuary carried out the triennial valuation of the Amco Pension Scheme as at 31 December 2013. The scheme
showed a deficit of £2.1m compared to £2.5m when measured as at 31 December 2010. A subsidiary undertaking has agreed a
revised recovery plan with the Trustees which commits the subsidiary undertaking 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 subsidiary undertaking may be required to make further
contributions to achieve a buy out of all pension liabilities. The necessity and quantum of these contributions will be remeasured
by the scheme actuary at the next triennial valuation which is due as at 31 December 2016.
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. 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 £0.7m.
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 60
NOTES TO THE ACCOUNTS CONTINUED
25 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
Running costs
Actual return on scheme assets less interest on scheme assets
Total fair value of scheme assets carried forward
2016
£000
2015
£000
165,603
145,592
6,056
4,316
(8,221)
(11)
22,781
190,524
5,606
3,894
(7,634)
-
18,145
165,603
Present value of scheme obligations brought forward
150,449
144,852
Interest on scheme obligations
Current and past service costs
Benefits paid
Actuarial movement due to experience on benefit obligation
Actuarial movement due to changes in financial assumptions
Actuarial movement 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
Running costs
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 movement due to changes in assumptions on scheme obligations
Actuarial movement
Movement in the net scheme surplus during the year:
Net scheme surplus brought forward
Current and past service costs
Running costs
Employer contributions
Net pension interest
Actuarial movement
Net scheme surplus carried forward
5,416
47
(8,221)
(619)
35,748
-
5,502
248
(7,634)
2,844
4,369
268
182,820
150,449
7,704
(1,387)
6,317
(47)
(11)
(58)
6,056
(5,416)
640
22,781
(35,129)
(12,348)
15,154
(47)
(11)
4,316
640
(12,348)
7,704
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
FINANCIAL STATEMENTS 25 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 scheme assets
Total fair value of scheme assets carried forward
Present value of scheme obligations brought forward
Interest on scheme obligations
Benefits paid
Actuarial movement due to changes in financial and demographic assumptions
Total fair value of scheme obligations carried forward
Deficit in the scheme
Deferred tax
Net deficit
Amount (debited)/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 movement due to changes in assumptions on scheme obligations
Actuarial movement
Movement in the net scheme (deficit)/surplus during the year:
Net scheme (deficit)/surplus brought forward
Employer contributions
Net pension interest
Actuarial movement
Net scheme deficit carried forward
61
2016
£000
2015
£000
14,265
14,282
521
385
(780)
930
600
385
(705)
(297)
15,321
14,265
14,864
536
(780)
2,811
17,431
(2,110)
380
(1,730)
521
(536)
(15)
930
(2,811)
(1,881)
(599)
385
(15)
(1,881)
(2,110)
13,566
515
(705)
1,488
14,864
(599)
108
(491)
600
(515)
85
(297)
(1,488)
(1,785)
716
385
85
(1,785)
(599)
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 62
NOTES TO THE ACCOUNTS CONTINUED
25 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
Total amount recognised in the statement
of comprehensive income
As a percentage of the obligations at the end
of the year
2016
£000
22,781
12.0%
2015
£000
18,145
11.0%
2014
£000
16,348
11.2%
2013
£000
(1,168)
(0.9)%
2012
£000
6,891
5.4%
(12,348)
10,664
1,514
(5,711)
(3,972)
(6.8)%
7.1%
1.0%
(0.9)%
(3.1)%
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
Total amount recognised in the statement of
comprehensive income
As a percentage of the obligations at the end of
the year
2016
£000
930
6.1%
2015
£000
(297)
(2.1)%
2014
£000
731
5.1%
2013
£000
(967)
(7.2)%
(1,881)
(1,785)
(446)
(1,059)
(10.8)%
(12.0)%
(3.3)%
(8.4)%
2012
£000
1,346
9.3%
530
4.2%
The Amco scheme’s sole employer is the Company’s wholly owned subsidiary, Amalgamated Construction Ltd.
Defined contribution pension schemes
The Group operates a number of defined contribution pension schemes and individual stakeholder pension plans for its
employees. The Group made contributions of £4,701,000 (2015: £4,361,000) into these plans during the year. There are also
£430,000 (2015: £424,000) of accruals relating to these plans.
26 Related parties
The Group has a related party relationship with its key management personnel who were Directors of the Company during the year:
BW May, J Samuel, P Scott, A Liebenberg, RJ Harrison, J Bishop and DM Forbes, whose total compensation amounted to £3,314,000
(2015: £2,577,000) all of which was represented by short-term employment benefits.
BW May was appointed a director of RTC Group Plc on 10 September 2015. In the year ended 30 September 2016 the Group has
purchased services amounting to £2,554,000 (2015: £173,000) from RTC Group Plc and at 30 September 2016 there was a balance
due to RTC Group Plc of £186,000 (2015: £207,000).
J Samuel is a director of Yorkshire Air Ambulance Ltd. In the year ended 30 September 2016 the Group made a charitable donation
of £5,000 (2015: £5,000) to sponsor the charity’s annual recognition awards dinner.
There were no other transactions with key management personnel in the year.
27 Post balance sheet event
On 31 October 2016 the Group acquired the whole of the issued share capital of Giffen Holdings Ltd (“Giffen”) for a cash
consideration of £5m with a further £2m to redeem loans from Giffen’s private equity owners. Giffen, which is based in
St Albans, specialises in mechanical, electrical and power services within the railway environment.
FINANCIAL STATEMENTS COMPANY BALANCE SHEET
AT 30 SEPTEMBER
Fixed assets
Tangible assets
Investments
Current assets
Stocks and work in progress
Assets held for resale
Debtors due after one year
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
22 November 2016
63
2015
£000
657
2016
£000
642
101,995
102,637
101,995
102,652
632
1,500
7,704
75,616
76
85,528
500
-
15,154
67,923
1,314
84,891
(118,790)
(110,971)
(33,262)
69,375
(26,080)
76,572
(3,100)
(9,300)
66,275
67,272
6,232
8,481
3,896
571
47,095
66,275
6,192
6,989
3,896
327
49,868
67,272
Note
E
F
G
H
H
I
J
L
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 64
COMPANY 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:
Note
2016
£000
11,963
(12,348)
2,223
(10,125)
2015
£000
16,149
10,664
(1,920)
8,744
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
1,838
24,893
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER
Called up
Share
Capital
Share based
share
premium redemption
payments
Retained
capital
£000
account
reserve
reserve
earnings
£000
£000
£000
£000
292
35
Total
equity
£000
28,521
44,803
16,149
16,149
(3,546)
(3,546)
1,087
35
10,664
10,664
(1,920)
(1,920)
At 1 October 2014
6,152
5,942
3,896
Transfer from income statement for the year
Dividends paid
New shares issued
Recognition of share based payments
Actuarial gain recognised in pension schemes
Movement on deferred tax relating to the pension schemes
40
1,047
At 30 September 2015
6,192
6,989
3,896
327
49,868
67,272
Transfer from income statement for the year
Dividends paid
New shares issued
Recognition of share based payments
Actuarial loss recognised in pension schemes
Movement on deferred tax relating to the pension schemes
40
1,492
11,963
11,963
(4,611)
(4,611)
1,532
244
(12,348)
(12,348)
2,223
2,223
244
At 30 September 2016
6,232
8,481
3,896
571
47,095
66,275
FINANCIAL STATEMENTS
NOTES TO THE COMPANY ACCOUNTS
65
A Accounting policies
(i) Basis of accounting
The accounts have been prepared on the going concern basis and in accordance with FRS 102, under the historical cost convention.
In determining that the going concern basis is appropriate the Directors have reviewed budgets, including cash flow forecasts, and
concluded that the Company has adequate cash resources to continue trading for the foreseeable future.
In the transition to FRS 102 from UK GAAP, the Company has made measurement and recognition adjustments. An explanation
of these adjustments is provided in Note T.
FRS 102 grants certain first-time adoption exemptions from the full requirements of FRS 102. The following exemption has been
taken in the Company’s financial statements:
Business combinations - Business combinations that took place prior to the transition date have not been restated.
The presentation currency of these financial statements is sterling.
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 stated at cost less accumulated depreciation. Where parts of an item of tangible fixed assets have
different useful lives, they are accounted for as separate items of tangible fixed assets, for example land is treated separately
from buildings. The Company assesses at each reporting date whether tangible fixed assets are impaired.
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) Taxation
Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the profit and loss account except
to the extent that it relates to items recognised directly in equity or other comprehensive income. Current tax is the expected
tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the
balance sheet date, and any adjustment to tax payable in respect of previous years.
Deferred tax is provided, except as noted below, on timing differences that have arisen but not reversed by the balance sheet
date, where the timing differences result in an obligation to pay more tax, or a right to pay less tax, in the future. Timing
differences arise because of differences between the treatment of certain items for accounting and taxation purposes.
In accordance with FRS 102 ‘The Financial Reporting Standard’, deferred tax is not provided on permanent timing differences.
Unrelieved tax losses and other deferred tax assets are recognised to the extent that it is probable that they will be recovered
against the reversal of deferred tax liabilities or other future taxable profits.
Deferred tax is measured at the tax rates that are expected to apply in the periods when the timing differences are expected
to reverse, based on tax rates and law enacted or substantively enacted at the balance sheet date.
(vi) Basic financial instruments - trade and other debtors/creditors
Trade and other debtors are recognised initially at transaction price less attributable transaction costs. Trade and other
creditors are recognised initially at transaction price plus attributable transaction costs. Subsequent to initial recognition they
are measured at amortised cost using the effective interest method, less any impairment losses in the case of trade debtors.
(vii) 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.
(viii) Related party transactions
Interest is not charged on balances outstanding with fellow subsidiaries as they are repayable on demand.
(ix) Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction or at the contracted rate if the
transaction is covered by a forward exchange contract. Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance sheet date or, if appropriate, at the forward contract rate. Exchange
differences are taken to the profit and loss account.
(x) Employee benefits
Defined benefit pension scheme
The Company’s net obligation in respect of the defined benefit scheme is calculated by estimating the amount of future benefit that
employees have earned in return for their service in prior periods; that benefit is discounted to determine its present value. The fair
value of any scheme assets is deducted. The Company determines the net interest (income)/expense on the net defined benefit asset/
(liability) for the period by applying the discount rate as determined at the beginning of the annual period to the net defined benefit
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 66
NOTES TO THE COMPANY ACCOUNTS CONTINUED
A Accounting policies continued
(x) Employee benefits continued
Defined benefit pension scheme continued
asset/(liability) taking account of changes arising as a result of contributions and benefit payments. The discount rate is the yield at
the balance sheet date on AA credit rated bonds denominated in the currency of, and having maturity dates approximating to the
terms of, the Company’s obligations. A valuation is performed annually by a qualified actuary using the projected unit credit method.
The Company recognises net defined benefit scheme assets to the extent that it is able to recover the surplus either through reduced
contributions in the future or through refunds from the scheme. Changes in the net defined benefit liability arising from employee
service rendered during the period, net interest on net defined benefit liability, and the cost of scheme introductions, benefit
changes, curtailments and settlements during the period are recognised in profit or loss. Remeasurement of the net defined benefit
asset/(liability) is recognised in other comprehensive income in the period in which it occurs.
Defined contribution pension schemes
A defined contribution scheme is a post-employment benefit scheme under which the Company pays fixed contributions
into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions
to defined contribution pension schemes are recognised in expense in the profit and loss account in the periods during
which services are rendered by employees.
Share based payments
FRS 102 “The Financial Reporting Standard’ 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.
(xi) 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.
B Profit and loss account
As permitted by Section 408 of the Companies Act 2006, the Company has not presented its own profit and loss account.
The profit after taxation for the financial year dealt with in the accounts of the Company was £11,963,000 (2015: £16,149,000).
The audit fee charged within the profit and loss account amounted to £31,000 (2015: £34,000).
C Employee numbers and remuneration
The average monthly number of employees, all of whom were administrative staff including Executive
Directors, employed in continuing activities during the year was:
At 30 September:
Cost of staff, including Executive Directors, during the year amounted to:
Wages and salaries
Social security costs
Other pension costs
Share based payments
Directors’ emoluments
Aggregate emoluments
Highest paid director: aggregate emoluments
2016
Number
36
37
£000
2,654
379
318
1,776
5,127
£000
3,314
1,476
2015
Number
38
36
£000
2,555
395
274
1,118
4,342
£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 2016)
Final (related to the year ended 30 September 2015)
Total dividend paid
Interim (related to the year ended 30 September 2016)
Final (related to the year ended 30 September 2015)
Total dividend paid
2016
Pence/share
2.65
4.75
7.40
£000
1,651
2,960
4,611
2015
Pence/share
2.25
3.50
5.75
£000
1,393
2,153
3,546
FINANCIAL STATEMENTS 67
D Dividends continued
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 5.35p per Ordinary Share be paid in respect of the year ended
30 September 2016. This will be accounted for in the 2016/17 financial year.
E Tangible fixed assets
Cost:
At 1 October 2015
Additions
At 30 September 2016
Depreciation:
At 1 October 2015
Charge for year
At 30 September 2016
Net book value:
At 30 September 2016
At 30 September 2015
F Investments
Shares at cost:
At 1 October 2015
At 30 September 2016
Provisions:
At 1 October 2015
At 30 September 2016
Net book value:
At 30 September 2016
At 30 September 2015
Freehold land
Plant, vehicles
and buildings
& equipment
£000
701
-
701
66
10
76
625
635
£000
69
4
73
47
9
56
17
22
Total
£000
770
4
774
113
19
132
642
657
Subsidiary
undertakings
£000
217,048
217,048
115,053
115,053
101,995
101,995
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 cash flows.
G Stock and work in progress
Undeveloped land
H Debtors
Debtors due after one year:
Pension scheme asset (see Note R)
Due within one year:
Trade debtors
Due from subsidiary undertakings
Corporation tax
Other debtors
Prepayments and accrued income
2016
£000
632
2016
£000
2015
£000
500
2015
£000
7,704
15,154
12
73,239
2,070
37
258
75,616
83,320
4
61,326
3,778
259
2,556
67,923
83,077
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 68
NOTES TO THE COMPANY ACCOUNTS CONTINUED
I Creditors: amounts falling due within one year
Bank loans and overdraft (secured)
Trade creditors
Other taxation and social security
Due to subsidiary undertakings
Other creditors
Deferred tax
Accruals and deferred income
J Creditors falling due after more than one year
Bank loans
Bank loans and overdraft repayable:
Within one year
Within two to five years
2016
£000
81,459
516
929
29,136
205
977
5,568
118,790
2016
£000
3,100
81,459
3,100
84,559
2015
£000
70,091
885
520
25,278
139
2,312
11,746
110,971
2015
£000
9,300
70,091
9,300
79,391
Under the terms of the Renew Holdings plc’s group banking agreement, security has been granted over the Company’s assets.
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 2016
the unhedged portion of the inter-company loan was $2,771,000 (2015: $2,271,000).
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:
62,317,948 (2015: 61,917,948) Ordinary Shares of 10p each
2016
£000
2015
£000
6,232
6,192
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 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.
52,445 options are in issue under the Approved 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 succeeded 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 2016, there were 750,200 options outstanding under the scheme. On 27 January 2016, options to
subscribe for a further 309,700 Ordinary Shares were granted. On 17 January 2016, 400,000 options were exercised.
The options are exercisable at a nominal cost or at the par value of an Ordinary Share 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.
FINANCIAL STATEMENTS 69
L Share capital continued
Share options continued
Renew Holdings plc Long Term Incentive Plan continued
Vesting of one half of the options is dependant on absolute growth in the Company’s Total Shareholder Return (‘TSR’),
and the other half is dependant on the Company’s TSR performance as compared to the TSR achieved by other companies
in a comparator group of 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. There will be no
vesting if TSR growth is 25% or less.
The comparator group TSR performance target measures the Company’s TSR over the 3 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.
M Share based payments reserve
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.
£244,000 has been charged (2015: £35,000) to administrative expenses. There is no impact on net assets since an equivalent
amount has been credited to the share based payments reserve. 400,000 options were exercised during the year. The value
per option represents the fair value of the option less the consideration payable.
The expected volatility has been calculated based on weekly historical volatility of the Company’s share price over the three
years prior to the date of grant. The risk free rate of return has been based on the yields available on three year UK government
bonds as at the date of grant.
Options granted under the Renew Holdings plc Long Term Incentive Plan over the Company’s Ordinary Shares at
30 September 2016 were as follows:
Date of grant
Awards outstanding at 30 September 2016
– 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
N Capital and leasing commitments
Annual commitments under non-cancellable operating
leases expiring in:
Under one year
Two to five years
Five or more years
3 January 2014
7 January 2015
27 January 2016
Total
253,166
0.0p
180.0p
10 years
3 years
32%
2.0%
1.03%
87.5p
Land and
buildings
£000
236
767
120
1,123
256,667
0.0p
288.5p
10 years
3 years
31%
1.7%
0.63%
99.0p
Other
£000
18
14
-
32
240,367
10.0p
410.0p
10 years
3 years
30%
1.7%
0.58%
212.5p
Total
2016
£000
254
781
120
1,155
750,200
Total
2015
£000
349
788
276
1,413
The Company had no capital commitments at 30 September 2016 (2015: £nil).
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 70
NOTES TO THE COMPANY ACCOUNTS CONTINUED
O 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.
P 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 £318,000 (2015: £274,000) into these plans during the year. There are also £17,000
(2015: £22,000) of accruals relating to these plans.
Q 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, A Liebenberg, RJ Harrison, J Bishop and DM Forbes, whose total compensation amounted to £3,314,000
(2015: £2,577,000) all of which was represented by short-term employment benefits.
BW May was appointed a director of RTC Group Plc on 10 September 2015. In the year ended 30 September 2016 the Group has
purchased services amounting to £2,554,000 (2015: £173,000) from RTC Group Plc and at 30 September 2016 there was a
balance due to RTC Group Plc of £186,000 (2015: £207,000).
J Samuel is a director of Yorkshire Air Ambulance Ltd. In the year ended 30 September 2016 the Group made a charitable
donation of £5,000 (2015: £5,000) to sponsor the charity’s annual recognition awards dinner.
There were no other transactions with key management personnel in the year.
R Employee benefits: Retirement benefit obligations
Defined benefit pension schemes
The Company operates a defined benefit pension scheme, the Lovell Pension Scheme. The scheme has been closed to new
members and to further benefits accrual for many years.
FRS 102
The Directors have adopted the accounting required by FRS 102 with effect from the transition date. The Directors have
discussed the assumptions used in determining the actuarial valuation set out below with independent pensions advisors and
have determined that they are appropriate. The Lovell scheme’s valuation at 30 September 2016 shows a surplus of £7,704,000
based on the assumptions set out below.
The Directors have determined that it is appropriate to recognise the surplus as, having reviewed the rules of the Lovell scheme,
they are of the view that the surplus can be recovered either through reduced contributions in the future or through refunds
from the plan.
The following disclosures required by FRS 102 have been based on the most recent actuarial valuation as at 30 September 2016
carried out by Lane Clark & Peacock LLP, Consulting Actuaries, using the following assumptions:
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
2016
4.0%
3.5%
2.4%
2.0%
3.0%
2.9%
2015
4.0%
3.0%
3.7%
2.0%
3.0%
2.9%
2014
4.0%
3.0%
3.9%
2.1%
3.1%
3.1%
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 23.1 years and the further
life expectancy of a male aged 65 in 2036 is 24.8 years.
FINANCIAL STATEMENTS 71
R Employee benefits: Retirement benefit obligations continued
FRS 102 continued
The assets in the Lovell scheme were:
Annuities
Diversified portfolio
Cash
Total
Value as at
30 September
2016
£000
101,201
88,592
731
190,524
Value as at
30 September
2015
£000
43,216
121,985
402
165,603
Current
allocation
53%
47%
-
100%
Value as at
30 September
2014
£000
43,410
101,002
1,180
145,592
Current
allocation
26%
74%
-
100%
Current
allocation
30%
69%
1%
100%
During 2011 and 2016, 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.
Scheme Funding Level and Actuarial Valuation
The scheme actuary carried out the triennial valuation of the Lovell Pension Scheme as at 31 March 2015. The scheme showed
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 as at 31 March 2018.
For accounting purposes under FRS 102, 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. The key sensitivity for the valuation of the scheme under FRS 102 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 3.1m.
The scheme rules permit the return of any surplus funds to the Company on the winding up of the scheme.
Actual return on scheme assets less interest
on scheme assets
As a percentage of the assets 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
2016
£000
22,781
12.0%
2015
£000
18,145
11.0%
2014
£000
16,348
11.2%
2013
£000
(1,168)
(0.9)%
2012
£000
6,891
5.4%
(12,348)
10,664
1,514
(5,711)
(3,972)
(6.8)%
7.1%
1.0%
(0.9)%
(3.1)%
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 72
NOTES TO THE COMPANY ACCOUNTS CONTINUED
R Employee benefits: Retirement benefit obligations continued
FRS 102 continued
The following amounts at 30 September were measured in accordance with the requirements of FRS 102.
Movements in scheme assets and obligations
Total fair value of scheme assets brought forward
Interest on scheme assets
Employer contributions
Benefits paid
Running costs
Actual return on scheme assets less interest on scheme assets
Total fair value of scheme assets carried forward
2016
£000
2015
£000
165,603
145,592
6,056
4,316
(8,221)
(11)
22,781
190,524
5,606
3,894
(7,634)
-
18,145
165,603
Present value of scheme obligations brought forward
150,449
144,852
Interest on scheme obligations
Current and past service costs
Benefits paid
Actuarial (gains)/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
Running costs
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)/gain
Movement in the net scheme surplus during the year:
Net scheme surplus brought forward
Current and past service costs
Running costs
Employer contributions
Net pension interest
Actuarial (loss)/gain
Net scheme surplus carried forward
5,416
47
(8,221)
(619)
35,748
-
5,502
248
(7,634)
2,844
4,369
268
182,820
150,449
7,704
(1,387)
6,317
(47)
(11)
(58)
6,056
(5,416)
640
22,781
(35,129)
(12,348)
15,154
(47)
(11)
4,316
640
(12,348)
7,704
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
FINANCIAL STATEMENTS 73
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
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
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
Owned by Renew Holdings plc
England and Wales
Owned by Renew Holdings plc
England and Wales
Renew Pension Trustee Company Ltd
Owned by Renew Holdings plc
England and Wales
Renew Property Developments Ltd
Owned by Renew Holdings plc
England and Wales
Seymour (C.E.C.) Holdings Ltd
Owned by Renew Holdings plc
England and Wales
Shepley Engineers Ltd
V.H.E. Construction Plc
YJL Homes Ltd
VHE Land Projects Ltd
YJL 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
England and Wales
YJL Pension Trustee Company Ltd
Owned by Renew Holdings plc
England and Wales
Lovell America, Inc
Owned by Renew Holdings plc
Amalgamated Construction (Scotland) Ltd
Owned by subsidiary
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
Nuclear Decontamination Services Ltd
P.P.S. Electrical Ltd
Renew Civil Engineering Ltd
Renew Construction Ltd
Renew Specialist Services Ltd
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
Seymour (Civil Engineering Contractors) Ltd
Owned by subsidiary
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
Inject-O-Matic Guarantee Ltd
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
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%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
28.9%
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016 74
NOTES TO THE COMPANY ACCOUNTS CONTINUED
S Subsidiary undertakings continued
Acquired subsequent to the balance sheet date:
Incorporation &
principal place
Proportion of
Ordinary Shares
of business
held by the Company
Subsidiary undertakings
Giffen Holdings Ltd
Giffen Group Ltd
Owned by subsidiary
Owned by subsidiary
England and Wales
England and Wales
100%
100%
T Explanation of transition to FRS 102 from old UK GAAP
As stated in Note A, these are the Company’s first financial statements prepared in accordance with FRS 102. The accounting
policies set out in Note A have been applied in preparing the financial statements for the year ended 30 September 2016 and
the comparative information presented in these financial statements for the year ended 30 September 2015.
In preparing its FRS 102 balance sheet the Company has adjusted amounts reported previously in financial statements prepared
in accordance with its old basis of accounting UK GAAP. An explanation of how the transition from UK GAAP to FRS 102 has
affected the Company’s financial position and financial performance is set out in the following tables:
1 October 2014 comparative
30 September 2015 comparative
Fixed assets
Tangible assets
Investments
Current assets
Stocks and work in progress
Debtors
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
UK GAAP
£000
651
101,449
102,100
226
40,436
66
40,728
(83,104)
(42,376)
59,724
(15,500)
44,224
6,152
5,942
3,896
292
27,942
44,224
Effect of
FRS 102
transition
£000
-
-
-
-
743
-
743
FRS 102
£000
651
101,449
102,100
226
41,179
66
41,471
UK GAAP
£000
657
101,995
102,652
500
68,336
1,314
70,150
Effect of
FRS 102
transition
£000
-
-
-
-
14,741
-
14,741
FRS 102
£000
657
101,995
102,652
500
83,077
1,314
84,891
(164)
579
(83,268)
(41,797)
(108,640)
(38,490)
(2,331)
12,410
(110,971)
(26,080)
579
-
579
-
-
-
-
579
579
60,303
64,162
12,410
76,572
(15,500)
44,803
(9,300)
54,862
-
12,410
6,152
5,942
3,896
292
28,521
44,803
6,192
6,989
3,896
327
37,458
54,862
-
-
-
-
12,410
12,410
(9,300)
67,272
6,192
6,989
3,896
327
49,868
67,272
Notes to the reconciliation of equity
Under FRS 102 “an entity shall recognise the cost of all employee benefits to which its employees have become entitled as a
result of service rendered to the entity during the reporting period.” Consequently holiday pay accruals under FRS 102 are
included within accruals, and the balance sheet creditor has been adjusted accordingly. Deferred tax has been provided on
this timing difference, and therefore creditors falling due within one year has also been adjusted.
FRS 102 requires “the net defined benefit cost of a defined benefit plan shall be recognised in the individual financial statements
of the group entity which is legally responsible for the plan”. Consequently the Lovell Pension scheme surplus is included within
debtors. Deferred tax has been provided on this timing difference.
The impact of the above adjustments has been to increase the profit after taxation for the financial year ending 30 September 2015
dealt with in the accounts of the Company from £13,062,000 to £16,149,000.
FINANCIAL STATEMENTS DIRECTORS, OFFICERS AND ADVISORS
75
Company Secretary
J Samuel FCA
Company number
650447
Registered address
Yew Trees
Main Street North
Aberford
Leeds
LS25 3AA
Website address
www.renewholdings.com
Directors
R J Harrison OBE (Non-executive Chairman)
P Scott
J Bishop FCA
D M Forbes
A Liebenberg
J Samuel FCA
(Chief Executive)
(Independent non-executive)
(Independent non-executive)
(Director)
(Group Finance Director)
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
FINANCIAL STATEMENTSRENEW HOLDINGS PLCANNUAL REPORT AND ACCOUNTS 2016
76
SHAREHOLDER INFORMATION
Annual General Meeting
25 January 2017
Results
Announcement of interim results – 23 May 2017
Preliminary announcement of full year results – 21 November 2017
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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.
FINANCIAL STATEMENTS
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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
RENEW HOLDINGS PLC
ANNUAL REPORT AND ACCOUNTS 2016
OUR SUBSIDIARY BUSINESSES
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
Seymour House
Harbour Walk
Hartlepool
TS24 0UX
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
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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
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