Renew Holdings plc
Annual Report and Accounts 2018
ENGINEERING
INFRASTRUCTURE
FOR THE FUTURE
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ENGINEERING
INFRASTRUCTURE
FOR THE FUTURE
We provide essential engineering services to
maintain and renew critical infrastructure networks.
Our multidisciplinary engineering services are
delivered through our independently branded UK
subsidiary businesses that support the day-to-day
running of these infrastructure networks.
Read more online at: renewholdings.com
Why invest in Renew Holdings
01
02
CLEAR GROWTH STRATEGY
REGULATED MARKETS
Focused on delivering organic growth whilst
looking to build on our strengths through selective
and complementary acquisitions in both existing
and new markets.
Read more on pages 16 & 17
We work in regulated markets with high barriers
to entry. These markets are driven by long-term
programmes of spending on asset renewal and
maintenance, often over many years. Positioned
as a key supplier to our clients, we assist them in
maintaining their assets and providing continuity
of service.
Read more on pages 14 & 15
STRATEGIC REPORT HIGHLIGHTS
• Adjusted operating profit1 increased to £31.1m (2017: £28.4m)
• Engineering Services order book increased 16%
to £510m (2017: £438m)
• Full year dividend per share increased 11% to 10.0p (2017: 9.0p)
• Acquisition of QTS Group Limited further strengthens
the Group’s position in the rail market
STRATEGIC REPORT
1 Highlights
2 Our business
4 Our year in review
6 Chairman’s statement
8 Chief Executive’s review
12 Business model
14 Markets
16 Strategy and KPIs
18 Operational review
25 Sustainability
27 Financial review
29 Risk management
GOVERNANCE
30 Board of Directors
32 Corporate governance
40 Audit Committee report
41 Directors’ report
44 Directors’ remuneration report
48 Statement of Directors’ responsibilities
FINANCIAL STATEMENTS
49 Independent auditor’s report
52 Group income statement
53 Group statement of comprehensive income
53 Group statement of changes in equity
54 Group balance sheet
55 Group cashflow statement
56 Notes to the accounts
83 Company balance sheet
84 Company statement of comprehensive income
84 Company statement of changes in equity
85 Notes to the company accounts
95 Directors, officers and advisors
96 Shareholder information
IBC Our subsidiary businesses
1
Renew uses a range of statutory performance measures and alternative
performance measures when reviewing the performance of the Group
against its strategy. Definitions of the alternative performance measures,
and a reconciliation to statutory performance measures, are included
in Note 29 to these accounts.
Annual Report and Accounts 2018 Renew Holdings plc
1
03
RESILIENCE
The Group has extensive framework positions to
deliver its engineering maintenance and renewals
services across its markets. The Group’s skills and
established relationships continue to provide
a strong platform for future growth.
Read more on pages 12 & 13
Our business
ABOUT US
As a holding company, Renew grants autonomy to its operating
subsidiaries, enabling them to be competitive and effective in
their individual markets whilst setting overall standards.
Our independently branded subsidiary businesses have expert knowledge in their individual
markets and directly deliver engineering services aligned to the needs of our clients, many of
whom are responsible for the long-term maintenance and renewal of national infrastructure networks.
We seek to deliver value to shareholders through our established and proven strategy, providing
reliable capital growth alongside a progressive dividend policy.
ENERGY
ENVIRONMENTAL
NUCLEAR
Our services are associated with high hazard risk reduction
operations at nuclear facilities that include waste treatment,
reprocessing, decommissioning, decontamination and
clean-up operations. We deliver mechanical and electrical
services, specialist fabrication, and machining as well as
maintenance of operational plants. Our integration of
generation, grid and decommissioning services proves
a differentiator in this market.
THERMAL AND RENEWABLE
We provide long-term maintenance and asset renewal support
at many of the UK’s thermal power generation plants.
WATER
The Group has extensive expertise in delivering maintenance
and renewals across water infrastructure networks. We support
our clients through asset maintenance, flood alleviation and
river and coastal defence schemes.
LAND REMEDIATION
Our in-house capabilities include soil washing, biophysical
treatment and geotechnical improvements, which can add value,
recovering up to 100% of soils and excavated materials on site.
Read more about Energy on pages 18 & 19
Read more about Environmental on pages 20 & 21
OUR SUBSIDIARY BUSINESS BRANDS
2
Renew Holdings plc Annual Report and Accounts 2018
STRATEGIC REPORT
INFRASTRUCTURE
HIGH QUALITY RESIDENTIAL
RAIL
Our directly employed, multi-skilled local delivery teams carry
out planned, reactive and emergency asset maintenance and
renewal works across the rail network. We undertake a high
volume of small value civil, mechanical and electrical engineering
and maintenance services tasks supporting a wide range of
rail infrastructure assets.
WIRELESS TELECOMS
We provide specialist infrastructure services to network
operators and increasingly to multi-site operators and vendors
acting as managed services providers. The work includes all
aspects of site acquisition, design, installation, commissioning
and integration of stations onto the networks.
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 which often
require extensive structural engineering works. We provide
in-house design and engineering capabilities for extensive
underground development, design management, planning,
traffic management and logistics support as well as expertise
in specialist finishes.
Read more about Infrastructure on pages 22 & 23
Read more about High Quality Residential on page 24
Annual Report and Accounts 2018 Renew Holdings plc
3
Our year in review
RENEW IN 2018
2018 has been strategically a very
important year for the Group. We have
further strengthened our position as a
leading provider of Engineering Services,
delivering essential maintenance and
renewals tasks across our markets.
JANUARY 2018
The Group holds its Annual
General Meeting (AGM) where
David Forbes was appointed
as Chairman. David has previously
served as a non-executive
Director since June 2011.
Read more about the Board
of Directors on pages 30 & 31
4
Renew Holdings plc Annual Report and Accounts 2018
FEBRUARY 2018
We announced our
decision to exit the
gas infrastructure
market with the sale
of subsidiary,
Forefront.
MARCH 2018
Awarded the Environment Agency’s 5-year Flood
and Coastal Risk Management Frameworks in the
North, Central and South West Hubs as the only
contractor to secure a position in all three areas.
This national programme of works will protect and
improve the environment through small scale civil
engineering and maintenance works.
APRIL 2018
Re-awarded all our existing
frameworks on the 5-Year Asset
Management Buildings and Civils
Frameworks with Network Rail as
well as adding a number of
additional positions in the
South East.
QTS were successfully awarded
a position on 10 Civils Asset
Management, 5-year frameworks.
These frameworks will see us deliver
both planned maintenance and a
24/7 reactive support service across
a range of assets on the rail network.
STRATEGIC REPORT APRIL 2018
Following on from earlier
successes, we have
maximised the
opportunities in dam
safety for Welsh Water
with major schemes
delivered at Llanishen
and Talybont.
JUNE 2018
The broader rail capabilities
of AmcoGiffen were reflected
in the award of Network Rail’s
Minor Signalling Maintenance
Frameworks in Kent and
Sussex where they operate
as one of two suppliers.
MAY 2018
Acquisition of QTS for £80m. QTS is a provider of specialist
services to the rail industry which include civil engineering,
geotechnical services, fencing and devegetation.
QTS has a long-standing relationship with Network Rail and
operates under a number of frameworks. QTS brings a diverse
set of capabilities to the Group, broadening the opportunities
available to Renew under Network Rail’s Control Period 6 which
runs from 2019 to 2024.
AUGUST 2018
Working on key long-term
decommissioning frameworks,
we have undertaken over 10
million hours without a RIDDOR
event at the Sellafield nuclear
site in Cumbria. Our work
supports operational plant
associated with waste treatment,
reprocessing, decontamination,
and decommissioning.
Image courtesy
of the NDA.
Annual Report and Accounts 2018 Renew Holdings plc
5
Chairman’s statement
ENGINEERING SERVICES
TO CRITICAL INFRASTRUCTURE
NETWORKS
Dear Shareholder
Introduction
I am pleased to announce an excellent
set of results for Renew. The Group focuses
on directly delivering its engineering services
to critical infrastructure networks in the UK.
2018 has been another successful year for
Renew in which we have made decisive
progress in delivering our strategic objectives
and further strengthening our position in our
chosen markets. We continue to improve our
trading performance with an increase in
adjusted operating profit1 of 9.6% to £31.1m
(2017: £28.4m) and an increase in adjusted
operating profit margin1 to 5.7% (2017: 5.2%).
Adjusted EPS1 of 35.48p (2017: 37.18p) is
down on the restated prior year comparatives
primarily due the impact of accounting for
discontinued operations.
As a leading provider of Engineering
Services in the regulated Energy,
Environmental and Infrastructure markets,
the Group’s operations are underpinned
by clear strategic priorities which include
direct service delivery and the development
of long-term relationships through
responsiveness. The Group looks to
deliver growth both organically and
through selective complementary
acquisitions. During the year the Group
undertook its largest ever acquisition in
QTS Group Limited (“QTS”), a specialist rail
contractor, which was funded through an
oversubscribed £45million equity placing
combined with new debt facilities. The
acquisition materially strengthens the
Group’s position in the rail market and
brings a range of complementary skills to
those of our existing rail business. Since we
acquired QTS, we have been particularly
pleased with its performance to date and
remain confident of its growth opportunities.
Over the next 5-year investment period
in rail (CP6), the government has stated
that Network Rail spending must have
a greater emphasis on renewals and
maintenance with a focus on improving
the customer experience. This spending
emphasis aligns with Renew’s expanded
range of rail service capabilities as we
continue to undertake large volumes of
day-to-day maintenance tasks to keep
the network operational. In addition to rail,
the Group targets the nuclear, wireless
telecoms and water markets which also
benefit from similar long-term programmes
of investment to support their essential
operational assets.
In February, the Group made the decision
to exit from its gas infrastructure activities
with the disposal of Forefront, allowing
management to focus on the continuing
growth opportunities elsewhere in the Group.
Governance
Our strategy is to safely and responsibly
deliver essential engineering services to
the country’s key infrastructure assets:
“Engineering Infrastructure for the Future.”
In order to continue to deliver for all our
stakeholders, the Board of Renew
are actively involved in ensuring the highest
standards of governance. During the year
we committed to ensure that we adhere
to the QCA Corporate Governance Code
2018. More details of this can be found in
the Corporate Governance section of this
report and on the Group’s website.
As a holding company, we set overall
standards for the Group's subsidiary
businesses through a formal governance
framework to promote best practice
and knowledge sharing. We believe that
ensuring a healthy corporate culture is an
important element in helping us to deliver
our strategic objectives and ultimately
in delivering value for our shareholders.
1
Renew uses a range of statutory performance measures and alternative performance measures when reviewing the
performance of the Group against its strategy. Definitions of the alternative performance measures, and a reconciliation
to statutory performance measures, are included in Note 29 to these accounts.
D M Forbes
Chairman
• Excellent results
• Largest ever acquisition in QTS,
a specialist rail contractor
• Continued progress in executing
our long-standing strategy
ADJUSTED OPERATING PROFIT 1
£31.1m
2017: £28.4m
ADJUSTED EPS 1
35.48p
2017: 37.18p
FULL YEAR DIVIDEND
10.0p
2017: 9.0p
6
Renew Holdings plc Annual Report and Accounts 2018
STRATEGIC REPORT “During the year the
Group undertook its
largest ever acquisition
in QTS Group Limited
("QTS"), a specialist rail
contractor, which was
funded through an
oversubscribed
£45 million equity
placing combined with
new debt facilities.”
In achieving these objectives, the Board is
assisted by its senior management team who
play a vital role in disseminating the Group’s
shared values with all its employees and
other stakeholders. The Board is responsible
for ensuring thorough corporate governance
is applied throughout the Group and it will
continue to work towards further improving
its governance framework through 2019.
Dividend
The Board remains confident of the
strength of the Group’s capabilities and
its position within its chosen markets
and as such proposes a final dividend of
6.67p per share to be paid to shareholders
on the register as at 1 February 2019. This
will represent a full year dividend of 10.0p
per share (2017: 9.0p).
Board changes
I was proud to succeed Roy Harrison as
Chairman following his retirement at the
conclusion of the AGM in January. I would
like to welcome Sean Wyndham-Quin
who joined the Group as Chief Financial
Officer in November 2017 succeeding
John Samuel who left the Board on
29 November 2017. I would like to thank
Roy and John for the valuable contribution
they have made to the Group during their
time as Directors.
People
The Group operates across a diverse range
of markets and our continued success in
these markets is the result of our employees’
expertise, drive and dedication. The Board
would like to thank all its employees and
wider stakeholders for their continued
effort and support.
Future focus
Our results in 2018 demonstrate that we
continue to make progress in executing our
long-standing strategy. The Board remains
committed to continue to grow the business
in our chosen markets both organically and
through selective complementary acquisitions
whilst maintaining a disciplined approach
to risk management.
The Board believes that having a robust
corporate governance framework is a key
element in guaranteeing our long-term
success. As part of this, we are committed to
ensuring that succession planning, training
and development remain key areas of focus.
Our solid foundations allow the Board to look
forward to 2019 with confidence.
David M Forbes
Chairman
27 November 2018
Annual Report and Accounts 2018 Renew Holdings plc
7
Chief Executive’s review
LONG‑TERM OPPORTUNITIES
“The nature of the UK’s
ongoing requirement for
investment in its critical
infrastructure networks
provides us with
long‑term prospects
for continued growth.”
Dear Shareholder
Results
These strong results demonstrate continued
progress and the delivery of our strategic
objectives. During 2018, we have strengthened
our position as a leading provider of
engineering services across the Energy,
Environmental and Infrastructure markets.
Group revenue1 of £541.5m (2017: £545.9m)
reflected growth in Engineering Services,
despite an anticipated reduction in Rail
revenue due to being in the final year of the
control period, and the anticipated reduction
in Specialist Building revenue. Adjusted
operating profit1 was up 9.6% to £31.1m
(2017: £28.4m) delivering an adjusted
operating margin1 of 5.7% (2017: 5.2%). The
Group saw strong growth in its order book1
which stood at £558m (2017: £511m) as at
30 September 2018. Net debt at the year end
was £21.4m (2017: net cash £3.9m) reflecting
the £80m acquisition of QTS in the year
and our conservative approach to gearing.
Corporate activity
Acquisitions are an important element
of the Group’s long-term strategy and in
May the Group announced the acquisition of
QTS. QTS is a provider of specialist services
to the rail industry which include civil
engineering, geotechnical services, fencing
and devegetation. QTS has a longstanding
relationship with Network Rail and during
2018 it successfully broadened its framework
positions extending geographical coverage.
Since we acquired QTS in May, trading
has been in line with our expectations.
The integration of QTS has gone extremely
well and as a Group we now have a more
diverse range of rail capabilities which
increase the opportunities available to us
under Network Rail’s next control period
CP6 (2019–2024). The focus of expenditure
in this control period will be renewal and
maintenance of existing infrastructure
which are the areas we specifically support.
In February, the Group announced its
decision to exit the gas infrastructure
market with the sale of Forefront. This
disposal allows management to focus on
opportunities that can deliver better value
for shareholders.
P Scott
Chief Executive Officer
• Adjusted Engineering Services
revenue1 ahead of management
expectations at £466.5m
• Adjusted Engineering Services
operating profit1 up 19% to
£32.5m
• Extended our range of services
in Rail with the acquisition of
QTS Group
1
Renew uses a range of statutory performance
measures and alternative performance measures
when reviewing the performance of the Group
against its strategy. Definitions of the alternative
performance measures, and a reconciliation to
statutory performance measures, are included
in Note 29.
2
Nuclear Decommissioning Authority, Nuclear
Provision: the cost of cleaning up Britain’s historic
nuclear sites (12 July 2018).
3 Ofwat PR14 Setting price controls for 2015-20
Overview (December 2014).
4 Network Rail - Strategic Business Plan Summary
(9 February 2018).
8
Renew Holdings plc Annual Report and Accounts 2018
STRATEGIC REPORT supports operational plant as well as
decontamination, decommissioning,
waste management and new major
project programmes.
The Group operates on long-term
decommissioning frameworks at Sellafield,
including the 10-year Decommissioning
Delivery Partnership programme where we
work across all 3 lots. During the year the
Group was also engaged via the SR&DP
Asset Care, Magnox Swarf Storage Silo,
Bulk Sludge Retrieval, Bundling Spares and
the Tanks and Vessels frameworks. Our
work on these high-profile programmes
positions us strongly for future long-term
opportunities at the site.
For BAE Systems in Barrow-in-Furness, we
provide engineering support to the Astute
Class Nuclear Submarine Programme
as well as supporting the major ongoing
redevelopment and upgrade at this facility.
The Group continues to work for Westinghouse
at Springfields as a preferred contractor
and for Low Level Waste Repository where
we have delivered mechanical, electrical
& instrumentation packages. We were
operational at 7 Magnox sites providing a
range of services through decommissioning,
civil and electrical maintenance
framework contracts.
In addition to our nuclear operations,
the Group provides long-term engineering
maintenance at 7 of the UK’s thermal power
stations and were appointed to a 4-year
electrical maintenance framework at the
Drax Power Station.
In renewable energy, we provide
maintenance and engineering support to
windfarm facilities as well as hydroelectric
assets in Scotland.
Environmental
The Group provides engineering support
to a range of water infrastructure assets
including clean and waste water networks,
flood alleviation programmes and coastal
protection schemes.
The water industry operates on 5-year
network infrastructure investment cycles,
known as Asset Management Programmes.
The regulator, Ofwat, estimates through the
current investment period AMP6, to 2020,
a total expenditure of approximately
£44bn will have been spent on delivering,
maintaining and improving services3.
The Board anticipates that the next AMP
cycle will see at least the same level
of investment due to population growth
and the changing climate.
Engineering Services
Adjusted Engineering Services revenue1
was ahead of management expectations at
£466.5m (2017: £435.3m). Adjusted operating
profit1 has grown 19% to £32.5m (2017: £27.3m)
with an operating margin of 7.0% (2017: 6.3%).
At 30 September 2018, the Engineering
Services order book1 strengthened to
£510m (2017: £438m). The profile of the
order book reflects our focus on renewals
and maintenance rather than large capital
projects and demonstrates the extremely
strong positions we hold in our target markets.
Energy
Working across the nuclear, thermal and
renewable energy markets we support
the operation and maintenance of key
infrastructure assets. Our clients include
Sellafield, Westinghouse, BAE Systems,
SSE, E.ON, Magnox, Low Level Waste
Repository and Scottish Power.
The Nuclear Decommissioning Authority’s
(“NDA”) latest estimate for the UK’s nuclear
clean-up is approximately £121 billion over
the next 120 years2. At the Sellafield nuclear
site in Cumbria, which is allocated around
75% of the NDA’s £3bn annual expenditure2,
we operate as the largest employer of
mechanical, electrical and instrumentation
trades. The Group provides multidisciplinary
services at the site where our work
Annual Report and Accounts 2018 Renew Holdings plc
9
Chief Executive’s review continued
ADJUSTED ENGINEERING SERVICES
OPERATING PROFIT 1 £M
ENGINEERING SERVICES
OPERATING MARGIN %
£32.5m
5
.
2
3
3
.
7
2
5
.
1
2
1
.
0
2
3
.
6
1
7.0%
0
.
7
3
.
6
9
.
4
.
6
4
3
.
4
2018
2017
2016
2015
2014
2018
2017
2016
2015
2014
1
Renew uses a range of statutory performance measures and alternative performance measures when
reviewing the performance of the Group against its strategy. Definitions of the alternative performance
measures, and a reconciliation to statutory performance measures, are included in Note 29.
10
Renew Holdings plc Annual Report and Accounts 2018
Environmental continued
Working for Dŵr Cymru Welsh Water
through the Major Civils Framework, the
Pressurised Pipelines Framework and the
Capital Delivery Alliance Civils contracts
we have seen an increase in demand for
our services. In addition to engineering
maintenance tasks the Group also
undertook a high level of emergency
reactive works following a period of severe
weather in the region. We have developed
an expertise in dam safety, a new market
where we see growth opportunities and
during the year the Group delivered major
schemes at the Llanishen and Talybont
reservoirs. We continue to work for Wessex
Water on the AMP 6 Civils & EMI Delivery
Partners Framework and during the year
we were pleased to be awarded our first
project for new client, Bristol Water.
The Group has grown its activities with the
Environment Agency where we are helping
to protect and improve the environment
through small scale civil engineering and
maintenance tasks. In March, we were
awarded 5-year Flood and Coastal Risk
Management Frameworks in the North,
Central and South West Hubs as the only
contractor to secure a position in all
3 regions. We also continue to operate as
sole provider on the Northern Mechanical,
Electrical, Instrumentation, Control, and
Automation ("MEICA") Framework as well
as in the South East where our framework
was recently extended for 2 years.
For the Canal and River Trust, we continue
to maintain the trust’s waterway assets
across England and Wales through a 7-year
MEICA Framework. During the year we
provided routine maintenance and renewal
services as well as emergency support to
around 1,200 assets on the network.
In land remediation, our clients include
SGN and National Grid where we have
frameworks to remediate former gas works
sites. New clients include Leeds City Council,
Yorkshire Wildlife Park and during the year
we successfully completed the Sighthill
transformational regeneration scheme
for Glasgow City Council.
At the Palace of Westminster, further
progress has been made on the Courtyard
Conservation Framework and additional
work has been secured on the Cast Iron
Roof Restoration programme which will
continue to 2022. Our activities at this
unique World Heritage site have been
extended to include specialist restoration
activity on the Elizabeth Tower, home to
the iconic ‘Big Ben’.
STRATEGIC REPORT Infrastructure
As a leading provider of infrastructure
services to Network Rail, we undertake
a high volume of asset maintenance and
renewals tasks across the UK. Our range
of services, alongside our 24/7 emergency
support, are essential to maintain the safe
operation of the rail network.
We are pleased that the importance of
operating maintenance in this sector has
been reflected in Network Rail’s £48bn
CP6 investment plan which is expected
to include a 25% increase in operations,
maintenance, support, and renewals
compared to the previous control period4
to improve existing infrastructure and
consequently the passenger experience.
The Group has organically expanded its
capabilities in rail, which together with the
acquisition of QTS, positions us well for
future growth during this next period of
rail investment.
We continue to provide services on rail
infrastructure project frameworks and in
April, we secured the Civils and Buildings
Asset Management Frameworks for
Network Rail on 7 of the 8 geographical
routes, with 6 of these on a single source
basis for a term of 6 years (5+1).
The Group has electrification and plant
frameworks in the Scotland and London
North Eastern (LNE) routes and we have
extended our offering in signalling with the
award of a minor works framework in the
South East region. These positions are
important in terms of growth opportunities
emerging from the Digital Railway Strategy.
Outside of Network Rail’s portfolio, the
Group was appointed as a Strategic Partner
by SPL Powerlines UK Limited on the Midland
Mainline Electrification Programme and
more recently we were appointed to a
4-year civil engineering framework for
Transport for Wales.
Working for London Underground, we
deliver specialist electrical, plant and power
schemes through 5 frameworks. The Group
continues to develop its opportunities in
this sector where our work on the depot
refurbishment programme is evidence of
our growing range of civils, mechanical
and electrical engineering services.
In wireless telecoms, to support the
growing demand on current infrastructure
from increasing data usage, the networks
require long-term investment in upgrade
programmes. We work for the UK’s major
cellular network operators and original
equipment manufacturers on their 3G
and 4G programmes. During the year the
Group were awarded new frameworks for
Telefonica in the North and London on their
latest network programme. We have also
expanded our customer base with national
programmes being delivered for BT Link
and on the Emergency Services Network.
We were recently awarded a 5-year national
telecommunications framework by Network
Rail, again demonstrating the advantages
of the Group’s combined capabilities.
In future, the UK government’s ambition
to be a leader in the provision of the next
generation of mobile communications
technologies will see opportunities arise
on long-term 5G investment programmes.
Specialist Building
As previously announced, and in line with
our strategy of risk management and
contract selectivity, revenue in Specialist
Building reduced to £74.2m (2017: £106.8m)
and operating profit reduced to £0.6m
(2017: £2.4m). At the year end, the forward
order book stood at £48m (2017: £73m).
The Group’s Specialist Building operation
remains focused on the High Quality
Residential market in London and the
Home Counties where we specialise in
major structural engineering works.
Outlook
The nature of the UK’s ongoing requirement
for investment in its critical infrastructure
networks provides us with long-term
prospects for continued growth. The
Group has successfully developed its
strategy to align with the opportunities
that exist across numerous programmes.
Specifically, we have targeted critical
infrastructure networks that require ongoing
essential renewal and maintenance support
delivered through non-discretionary,
operational expenditure budgets.
The Group has established an enviable
reputation across its markets through a
track record of reliable and responsive
service, evidenced through our long-
standing relationships with customers.
This strong platform, and our strategy to
broaden our range of services both organically
and through selective complementary
acquisitions, will continue to provide
growth opportunities.
Whilst Brexit is a source of uncertainty, our
focus on non-discretionary UK infrastructure
markets gives us confidence that it will not
have a material impact on the financial
performance of the Group. After another
good year, in which we have successfully
renewed our framework positions, we have
good momentum going into 2019 and look
forward to delivering on our strategic
priorities over the next 12 months.
Paul Scott
Chief Executive Officer
27 November 2018
Annual Report and Accounts 2018 Renew Holdings plc
11
Business model
HOW WE DELIVER VALUE
STAKEHOLDER
VALUE CREATION
Quality
Our businesses focus on maintaining and improving
standards across their operations through training,
technology, sustainability and the management of
their supply chain. We strive to continue to develop
and improve our business processes.
Long‑term positions in target markets
We provide both planned and responsive services where
we fulfil a high volume of low-cost tasks on a range of
assets through long-term framework agreements. Our
responsive engineering services, combined with consistent
delivery, mean we are well positioned to work on some of
the largest asset maintenance and renewal frameworks
nationally, which are largely delivered through our clients’
operational expenditure budgets.
Growth strategy
We develop our engineering services both organically and
by acquisition to broaden our service offering to existing
and new clients. Organic growth is achieved by aligning
our operating subsidiaries with their clients. The Group
also continues to look for complementary acquisition
opportunities where businesses have strong relationships
in regulated markets.
Risk management
Our subsidiary businesses are governed by a system
of controls that includes our Group minimum standards.
These standards are monitored by an internal audit process
to ensure compliance. Minimum requirements ensure
compliance in areas such as 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 at
least ISO 9001.
12
Renew Holdings plc Annual Report and Accounts 2018
WHAT SETS US APART
IN‑HOUSE
DESIGN AND
FABRICATION
SAFE OPERATIONS
IN CHALLENGING
ENVIRONMENTS
SPECIALIST PLANT
DIRECT
DELIVERY MODEL
NATIONAL
COVERAGE
RESPONSIVE
SERVICE
Underpinned by our approach to Health & Safety
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.
Read more about Sustainability on pages 25 & 26
STRATEGIC REPORT SPECIALIST
MARKET
KNOWLEDGE
PLANNED AND
REACTIVE
MAINTENANCE
SERVICES
INVESTMENT IN SKILLS
AND LABOUR
WIDE RANGE OF INTEGRATED
ENGINEERING CAPABILITIES
KEY RESOURCES
AND RELATIONSHIPS
Shareholders
By the effective management and control of our subsidiary
businesses, we deliver shareholder value through capital
growth and a progressive dividend policy.
DIVIDEND PER SHARE
10p
Employees
The success of the Group depends on its employees. Our
subsidiary businesses provide a range of opportunities for
employees from training and career progression to health and
wellbeing benefits. Our subsidiary businesses have a range of
initiatives to engage with their employees which include social
media channels and surveys.
NUMBER OF EMPLOYEES
2,759*
* As at 30 September 2018.
Community
Our businesses work hard to ensure its operations have
a lasting, positive impact on local communities. Ensuring
effective communication with our stakeholders is key and
our businesses hold public events to inform and update the
public on the nature and progress of works as appropriate.
Where we receive feedback from the public we would seek
to take this into consideration. Our businesses also support
a wide range of charities by organising and participating
in fundraising events throughout the year.
Customers
We develop safe, innovative and efficient solutions for our
clients, many of whom we have worked with for a number of
years. Our ability to provide a range of services from across our
subsidiary businesses provides both cost and time efficiencies.
Our businesses are leading providers in their markets with
a highly experienced, directly employed workforce. We are
aligned with our clients to deliver long-term solutions.
NUMBER OF HOURS OF SAFE OPERATIONS
AT THE SELLAFIELD SITE IN CUMBRIA
10 million
Annual Report and Accounts 2018 Renew Holdings plc
13
Markets
MARKETS DRIVEN
BY REGULATION
Our clients’ infrastructure networks are some of the largest, and oldest,
in the country and comprise a range of complex and challenging
assets. Regulation exists to maintain operational standards on these
critical networks, with maintenance requirements delivered through
long-term programmes of care with visible funding.
ENERGY
Nuclear
The UK government’s nuclear
decommissioning provision, to manage
the whole of the mission, is currently
estimated at £121 billion over the next
120 years.1 The Nuclear Decommissioning
Authority’s medium-term forecasts
indicate a rate of expenditure of around
£3bn per annum, with around 75% of
this commitment at the Sellafield site
in Cumbria.1
New nuclear power is an essential part of
the government’s objective of delivering a
sustainable and low-carbon energy future
to meet increasing demand.2
Thermal and renewable
There remain good opportunities in
the renewable energy market as the UK
responds to increasing energy demand
whilst looking to deliver its targets for
renewable power generation.
Read more about Energy on pages 18 & 19
The UK government has also committed
a record £2.3bn investment in coastal and
river flood risk management to 2021.4
Land remediation
The Environment Agency estimates that
in England and Wales approximately
300,000 hectares of land could potentially
be affected by historical contamination.
In the UK, the focus on brownfield land
as a potential solution to the UK’s land
shortage and environmental regulations
continue to drive remediation opportunities.
Read more about Environmental
on pages 20 & 21
ENVIRONMENTAL
Water
The UK's water industry operates on 5-year
network infrastructure investment cycles,
known as Asset Management Programmes.
The regulator, Ofwat, estimates through the
current investment period AMP6, to 2020,
a total expenditure of approximately
£44bn3 will have been spent on delivering,
maintaining and improving services. The
Board anticipates that the next 5-year AMP
cycle will see at least the same level
of investment due to population growth
and the changing climate.
We work for clients including Northumbrian
Water, Wessex Water and Welsh Water who
are undertaking large scale asset renewal
and maintenance spending programmes
in the current investment period, AMP6.
14
Renew Holdings plc Annual Report and Accounts 2018
STRATEGIC REPORT INFRASTRUCTURE
Rail
Network Rail is investing around £41bn in the
current control period (“CP5”) to 2019 in running,
maintaining and improving Britain’s railway.
The government recently announced an
increase in funding to £48bn for CP6, which
runs from 2019 to 20245. Control Period 6
(CP6) is expected to see a 25% increase
compared to the previous control period
in operations, maintenance, support, and
renewals to improve existing infrastructure
and consequently the passenger experience.
Opportunities will arise from the
integration of the HS2 scheme with
existing rail infrastructure.
The long-term investment requirement to
deliver renewal and maintenance services
on London Underground’s assets continues
to provide opportunities for the Group.6
Wireless telecoms
The wireless telecoms infrastructure market
remains attractive as demand for mobile
internet access and communication continues
to outstrip the capability and capacity of the
current networks. Licence obligations under
the 4G programme continue to demand
significant investment and our addressable
market remains strong.
In future, the UK government’s ambition
to be a leader in the provision of the next
generation of mobile communications
technologies will see opportunities arise
on long-term 5G investment programmes.
Read more about Infrastructure
on pages 22 & 23
References
1
Nuclear Decommissioning Authority, Nuclear
Provision: the cost of cleaning up Britain’s historic
nuclear sites (12 July 2018).
2
3
4
5
6
HM Government Industrial strategy: government and
industry in partnership The UK’s Nuclear Future (2013).
Ofwat PR14 Setting price controls for 2015–20
Overview (December 2014).
Department for Environment Food and Rural Affairs,
Reducing the risks of flooding and coastal erosion:
An investment plan (December 2014).
Network Rail – Strategic Business Plan Summary
(9 February 2018).
https://tfl.gov.uk/campaign/tube-improvements/
what-we-are-doing/improving-the-trains.
Annual Report and Accounts 2018 Renew Holdings plc
15
Strategy and KPIs
A FOCUSED STRATEGY
Our long-term strategy
concentrates on
developing our range
of engineering services
capabilities, both
organically and through
selective acquisitions. The
Group targets acquisitions
that bring complementary
skills and allow us to
deliver a wider range of
services to our clients.
TO BE A KEY PROVIDER OF
ENGINEERING SERVICES
IN OUR TARGET MARKETS
PROGRESS IN 2018
We have made good progress in
developing our position as a leading
provider of engineering services,
achieving a number of key framework
awards and extensions in the period.
Appointments to these long-term
frameworks for essential maintenance
services strengthen our existing
relationships with clients responsible
for critical UK networks.
HOW WE DELIVERED
During the year we delivered growth
in our engineering services business,
expanding our range of services and
geographical coverage.
TO FOCUS ON ASSET
SUPPORT, MAINTENANCE AND
RENEWALS PROGRAMMES
WITH NON‑DISCRETIONARY
FUNDING
PROGRESS IN 2018
We continued to work closely with our
clients in the year, providing essential
maintenance services to their long-term
asset management spending programmes.
These programmes, which often last many
years, are driven by regulation with asset
maintenance and renewals delivered through
visible operational expenditure budgets
rather than capital expenditure funding.
HOW WE DELIVERED
Key frameworks were secured in the year
including our 5-Year Asset Management
Buildings and Civils Frameworks with
Network Rail and the Environment Agency’s
5-year Flood and Coastal Risk Management
Frameworks in the North, Central and South
West Hubs.
FUTURE FOCUS
Develop strategically important
relationships by delivering market-leading
innovation and cost efficiencies to
our clients.
FUTURE FOCUS
Building on our reputation and responsive
delivery, with a focus on positioning our
business to access additional essential
maintenance spending programmes with
our existing clients.
KEY PERFORMANCE INDICATORS
The Group has certain key performance indicators (“KPIs”) which are
used to measure and monitor its performance in a number of areas.
The operating profit KPIs are measured on a non-GAAP basis which
reflect the most appropriate view of the underlying performance of
the business.
* Results are shown prior to impairment, amortisation and exceptional
items and exclude the results of discontinued operations.
16
Renew Holdings plc Annual Report and Accounts 2018
ADJUSTED ENGINEERING SERVICES
OPERATING PROFIT AS A
PERCENTAGE OF REVENUE* %
7.0%
2018
2017
2016
2015
2014
7.0
6.3
4.9
4.6
4.3
TO EXPAND OUR DIRECT
TO ESTABLISH LONG‑TERM
TO CONTINUE TO DELIVER
DELIVERY MODEL
THROUGH STRONG
LOCAL BRANDS
RELATIONSHIPS THROUGH
ORGANIC GROWTH
RESPONSIVENESS TO
COMBINED WITH SELECTIVE
CLIENTS’ NEEDS
COMPLEMENTARY
ACQUISITIONS
PROGRESS IN 2018
PROGRESS IN 2018
PROGRESS IN 2018
Operating as wholly owned subsidiaries
The Group’s direct delivery, market
During the year we made further progress
of Renew, our businesses have strong,
expertise and local operation enables us to
in developing our position as a major
recognised brands within their
provide a responsive service to our clients.
engineering services provider to the rail
individual markets.
We continue to develop our service offering
market with the acquisition of QTS Group.
adapting to our clients evolving requirements
The range of skills QTS brings are
where we are able to offer long-term solutions.
complementary to the Group’s existing rail
capabilities. We achieved good organic
growth in our Environmental activities
including work arising from the development
of our expertise in dam safety for Welsh Water.
HOW WE DELIVERED
HOW WE DELIVERED
HOW WE DELIVERED
Our subsidiary businesses are committed
During the year we developed a capability
With the acquisition of QTS the Group is
to delivering their services directly. At the
responding to demand for support in Dam
able to offer an extended range of services
30 September 2018 we employed over
safety. Major schemes were undertaken for
in the rail market including civil asset
2,750 people.
Welsh Water in the year. We also undertook
management, geotechnical & earthworks,
emergency reactive works for Welsh Water
fencing, devegetation and plant hire.
following a period of severe weather.
FUTURE FOCUS
FUTURE FOCUS
FUTURE FOCUS
Continue to build on our subsidiary
Develop our range of capabilities and utilise
It remains the Board’s long-term strategy to
businesses’ reputations for quality
our market knowledge to align our business
continue to grow its Engineering Services
and responsive service within their
to our clients’ long-term objectives.
operations, both organically and through
individual markets.
Continue to deliver a quality, safe and
selective complementary acquisitions.
cost-effective service to our clients.
Continue to develop the market opportunities
associated with Group acquisitions.
STRATEGIC REPORT TO BE A KEY PROVIDER OF
TO FOCUS ON ASSET
ENGINEERING SERVICES
SUPPORT, MAINTENANCE AND
IN OUR TARGET MARKETS
RENEWALS PROGRAMMES
WITH NON‑DISCRETIONARY
FUNDING
PROGRESS IN 2018
PROGRESS IN 2018
We have made good progress in
We continued to work closely with our
developing our position as a leading
clients in the year, providing essential
provider of engineering services,
maintenance services to their long-term
achieving a number of key framework
asset management spending programmes.
awards and extensions in the period.
These programmes, which often last many
Appointments to these long-term
years, are driven by regulation with asset
frameworks for essential maintenance
maintenance and renewals delivered through
services strengthen our existing
visible operational expenditure budgets
relationships with clients responsible
rather than capital expenditure funding.
for critical UK networks.
HOW WE DELIVERED
HOW WE DELIVERED
During the year we delivered growth
Key frameworks were secured in the year
in our engineering services business,
including our 5-Year Asset Management
expanding our range of services and
Buildings and Civils Frameworks with
geographical coverage.
Network Rail and the Environment Agency’s
5-year Flood and Coastal Risk Management
Frameworks in the North, Central and South
West Hubs.
FUTURE FOCUS
FUTURE FOCUS
Develop strategically important
Building on our reputation and responsive
relationships by delivering market-leading
delivery, with a focus on positioning our
innovation and cost efficiencies to
business to access additional essential
our clients.
maintenance spending programmes with
our existing clients.
TO EXPAND OUR DIRECT
DELIVERY MODEL
THROUGH STRONG
LOCAL BRANDS
TO ESTABLISH LONG‑TERM
RELATIONSHIPS THROUGH
RESPONSIVENESS TO
CLIENTS’ NEEDS
PROGRESS IN 2018
Operating as wholly owned subsidiaries
of Renew, our businesses have strong,
recognised brands within their
individual markets.
PROGRESS IN 2018
The Group’s direct delivery, market
expertise and local operation enables us to
provide a responsive service to our clients.
We continue to develop our service offering
adapting to our clients evolving requirements
where we are able to offer long-term solutions.
TO CONTINUE TO DELIVER
ORGANIC GROWTH
COMBINED WITH SELECTIVE
COMPLEMENTARY
ACQUISITIONS
PROGRESS IN 2018
During the year we made further progress
in developing our position as a major
engineering services provider to the rail
market with the acquisition of QTS Group.
The range of skills QTS brings are
complementary to the Group’s existing rail
capabilities. We achieved good organic
growth in our Environmental activities
including work arising from the development
of our expertise in dam safety for Welsh Water.
HOW WE DELIVERED
Our subsidiary businesses are committed
to delivering their services directly. At the
30 September 2018 we employed over
2,750 people.
HOW WE DELIVERED
During the year we developed a capability
responding to demand for support in Dam
safety. Major schemes were undertaken for
Welsh Water in the year. We also undertook
emergency reactive works for Welsh Water
following a period of severe weather.
HOW WE DELIVERED
With the acquisition of QTS the Group is
able to offer an extended range of services
in the rail market including civil asset
management, geotechnical & earthworks,
fencing, devegetation and plant hire.
FUTURE FOCUS
Continue to build on our subsidiary
businesses’ reputations for quality
and responsive service within their
individual markets.
FUTURE FOCUS
Develop our range of capabilities and utilise
our market knowledge to align our business
to our clients’ long-term objectives.
Continue to deliver a quality, safe and
cost-effective service to our clients.
FUTURE FOCUS
It remains the Board’s long-term strategy to
continue to grow its Engineering Services
operations, both organically and through
selective complementary acquisitions.
Continue to develop the market opportunities
associated with Group acquisitions.
ADJUSTED GROUP OPERATING
ENGINEERING SERVICES ORDER
DIVIDEND p
PROFIT AS A PERCENTAGE
BOOK £M
OF REVENUE* %
5.7%
£510m
2018
2017
2016
2015
2014
5.7
5.2
4.2
3.9
3.5
2018
2017
2016
2015
2014
510
438
421
400
361
10p
2018
2017
2016
2015
2014
10
9
8
7
5
Annual Report and Accounts 2018 Renew Holdings plc
17
Operational review
The Group’s engineering services are focused on specific target markets, namely energy,
environmental and infrastructure. The operational review contains commentary and
background on our activities in each of these three markets.
ENERGY
Magnox Swarf Storage Silo, Bulk Sludge
Retrieval, Bundling Spares and the Tanks
and Vessels Frameworks. Our work on
these high-profile programmes positions us
strongly for future long-term opportunities
at the site.
For BAE Systems in Barrow-in-Furness, we
provide engineering support to the Astute
Class Nuclear Submarine Programme as
well as supporting the major ongoing
redevelopment and upgrade at this facility.
We continue to work for Westinghouse
at Springfields as a preferred contractor
and for Low Level Waste Repository
where we have delivered mechanical,
electrical & instrumentation packages.
We were operational at 7 Magnox sites
providing a range of services through
decommissioning, civil and electrical
maintenance framework contracts.
Future focus
We continue to look for opportunities to
broaden our range of skills and develop our
service offering in the nuclear market which
has high barriers to entry and requires an
exceptional safety record. In the emerging
new nuclear market, we focus on the
supply of high integrity fabrications as well
as mechanical and electrical installation
support to specialist equipment vendors.
Nuclear
Capabilities
Our services are associated with high
hazard risk reduction operations at nuclear
facilities that include waste treatment,
reprocessing, decommissioning,
decontamination and clean-up operations.
Our integration of generation, grid and
decommissioning services proves
a differentiator in this market.
• Operational support and asset care
• Critical planned and reactive
maintenance and renewals
• Civil, mechanical and electrical
engineering
• Nuclear decommissioning and
decontamination
• Specialist fabrication and manufacturing
Progress
At the Sellafield nuclear site in Cumbria,
which is allocated around 75% of the NDA’s
£3bn annual expenditure, we operate
as the largest employer of mechanical,
electrical and instrumentation trades. We
provide multidisciplinary services at the
site where our work supports operational
plant as well as decontamination,
decommissioning, waste management
and new major project programmes.
We operate on long-term decommissioning
frameworks at Sellafield, including the
10-year Decommissioning Delivery
Partnership programme where we work
across all 3 lots. During the year we were
also engaged via the SR&DP Asset Care,
18
Renew Holdings plc Annual Report and Accounts 2018
Image courtesy
of the NDA.
STRATEGIC REPORT Thermal and
renewable
Capabilities
• Operational support and asset care
• Critical planned and reactive
maintenance and renewals
• Civil, mechanical and electrical engineering
Progress
We provide long-term engineering
maintenance at 7 of the UK’s thermal power
stations and were appointed to a 4-year
electrical maintenance framework at the
Drax Power Station.
In renewable energy, we provide
maintenance and engineering support to
windfarm facilities as well as hydroelectric
assets in Scotland.
Future focus
We continue to develop our existing
relationships with clients responsible for
assets in the thermal and renewable energy
market. Our range of capabilities and
experience in maintenance and renewal
nationally means we are well placed to
meet the needs of a wide range of assets
across this sector.
Annual Report and Accounts 2018 Renew Holdings plc
19
We have grown our activities with the
Environment Agency where we are helping
to protect and improve the environment
through small scale civil engineering and
maintenance tasks. In March, we were
awarded the 5-year Flood and Coastal Risk
Management Frameworks in the North,
Central and South West Hubs as the only
contractor to secure a position in all
3 regions. We also continue to operate as
sole provider on the Northern Mechanical,
Electrical, Instrumentation, Control, and
Automation ("MEICA") Framework as well
as in the South East where our framework
was recently extended for 2 years.
For the Canal and River Trust, we continue
to maintain the trust’s waterway assets
across England and Wales through a 7-year
MEICA Framework. During the year we
provided routine maintenance and renewal
services as well as emergency support to
around 1,200 assets on the network.
Future focus
We will continue to develop the
opportunities available through our
existing framework agreements with
our water clients, supporting them in
the day-to-day running of their water
infrastructure networks.
Operational review continued
ENVIRONMENTAL
Water
and the Capital Delivery Alliance Civils
contracts we have seen an increase in
demand for our services. In addition to
engineering maintenance tasks we also
undertook a high level of emergency
reactive works following a period of severe
weather in the region. We have developed
an expertise in dam safety, a new market
where we see growth opportunities and
during the year we delivered major schemes
at the Llanishen and Talybont reservoirs.
We continue to work for Wessex Water on
the AMP 6 Civils & EMI Delivery Partners
Framework and during the year we were
pleased to be awarded our first project
for new client, Bristol Water.
Capabilities
The Group has extensive expertise in
delivering maintenance and renewals
across water infrastructure networks. We
support our clients through asset
maintenance, flood alleviation, and river
and coastal defence schemes. Our work
includes mains replacement, upgrades to
the sewer network and storm water
alleviation schemes.
• Operational support and asset care
• Critical planned and reactive
maintenance and renewals
• Civil, mechanical and
electrical engineering
• Emergency works including flood
risk management programmes
• Maintaining strategic water mains
and mains drainage
• Clean and wastewater
rehabilitation infrastructure
• Port, harbour and sea defences
Progress
We provide engineering support to a range
of water infrastructure assets including
clean and waste water networks, flood
alleviation programmes and coastal
protection schemes.
Working for Dŵr Cymru Welsh Water
through the Major Civils Framework,
the Pressurised Pipelines Framework
20
Renew Holdings plc Annual Report and Accounts 2018
STRATEGIC REPORT Progress
In land remediation, our clients include SGN
and National Grid where we have frameworks
to remediate former gas works sites. New
clients include Leeds City Council and
Yorkshire Wildlife Park and during the year
we successfully completed the Sighthill
transformational regeneration scheme
for Glasgow City Council.
At the Palace of Westminster, further
progress has been made on the Courtyard
Conservation Framework and additional
work has been secured on the Cast Iron
Roof Restoration programme which will
continue to 2022. Our activities at this
unique World Heritage site have been
extended to include specialist restoration
activity on the Elizabeth Tower, home to
the iconic ‘Big Ben’.
Future focus
We continue to maximise the potential of
the position we have developed in the UK
remediation and restoration markets.
Land
remediation
Capabilities
As an industry leader of bespoke and
innovative remediation solutions, we have
over 30 years’ expertise in providing
specialist remediation and associated
earthworks nationwide. Our in-house
capabilities include soil washing,
biophysical treatment and geotechnical
improvements, which can add value,
recovering up to 100% of soils and
excavated materials on site.
• Soil and groundwater remediation
• Soil washing, biophysical treatment,
solidification and stabilisation,
enhanced segregation and
geotechnical improvements
• Design of bespoke remediation and
ground engineering solutions
• In-house technology and environmental
engineering resources
• Remediation strategies combined with
infrastructure delivery
Annual Report and Accounts 2018 Renew Holdings plc
21
Operational review continued
INFRASTRUCTURE
Working for London Underground, we deliver
specialist electrical, plant and power schemes
through 5 frameworks. We continue to develop
our opportunities in this sector where our
work on the depot refurbishment programme
is evidence of our growing range of civils,
mechanical and electrical engineering services.
Future focus
We focus on developing the opportunities
arising from our acquisitions where our
expanded range of services provides
opportunities in the wider rail market. We
continue to align our business with the
requirements of our largest client, Network
Rail, over the CP6 investment period.
Rail
Capabilities
As a leading provider of infrastructure
services to Network Rail, we undertake a
high volume of asset maintenance and
renewals tasks across the UK. Our range
of services, alongside our 24/7 emergency
support, are essential to maintain the safe
operation of the rail network.
• Operational support and asset care
• Critical planned and reactive
maintenance and renewals
• Civil, mechanical and electrical
engineering services
• Plant, power and signalling renewals
• 24/7 emergency provision
• Asset renewal and refurbishment
• Tunnel and shaft refurbishment
• Fencing and devegetation
• In-house design capability
Progress
We have organically expanded our capabilities
in rail, which together with our acquisition
of QTS, provides us with a strong platform
for future growth during the next period of
rail investment.
We continue to provide services on rail
infrastructure project frameworks and in April,
we secured the Civils and Buildings Asset
Management Frameworks for Network Rail
on 7 of the 8 geographical routes, with 6
of these on a single source basis for a term
of 6 years (5+1).
We have electrification and plant frameworks
in the Scotland and London North Eastern
(LNE) routes and we have extended our
offering in signalling with the award of a minor
works framework in the South East region.
We believe these positions are important
in terms of growth opportunities which will
emerge from the Digital Railway Strategy.
Outside of Network Rail’s portfolio, we
were appointed as a Strategic Partner by
SPL Powerlines UK Limited on the Midland
Mainline Electrification Programme and more
recently we were appointed to a 4-year civil
engineering framework for Transport for Wales.
22
Renew Holdings plc Annual Report and Accounts 2018
STRATEGIC REPORT Wireless
Telecoms
Capabilities
In wireless telecoms, we provide specialist
infrastructure services to network operators
and increasingly to multi-site operators
and vendors acting as managed services
providers. The work includes all aspects
of site acquisition, design, installation,
commissioning and integration of
stations onto the networks.
• Operational support and asset care
• Critical planned and reactive
maintenance and renewals
• Civil, mechanical and
electrical engineering
• Wireless telecoms installations
• Radio network planning, including
the installation of specialist indoor
and outdoor coverage solutions
• Provision of 2G, 3G, 4G and
Wi-Fi technologies
Progress
In wireless telecoms, we work for the
UK’s major cellular network operators and
original equipment manufacturers on their
3G and 4G programmes. During the year
we were awarded new frameworks for
Telefonica in the North and London on their
latest network programme. We have also
expanded our customer base with national
programmes being delivered for BT Link
and on the Emergency Services Network.
We were recently awarded a 5-year national
telecommunications framework by Network
Rail again demonstrating the advantages of
the Group’s combined capabilities.
Future focus
We remain focused on the requirements of
the 4G and 5G wireless telecoms network
programmes in the UK. In the future, the UK
government’s ambition is to be a leader
in the provision of the next generation of
mobile communications technologies will
see opportunities arise on long-term 5G
investment programmes.
Annual Report and Accounts 2018 Renew Holdings plc
23
Progress
During the year we worked on several
country residence properties within the
Home Counties area including projects
at Englefield Green and Basingstoke for
private clients. We have seen the demand
increase in the country residence market
where our expertise in temporary works
and specialist finishes prove a differentiator.
In these markets our focus remains on
reducing risk through contract selectivity
and management of contract terms.
Future focus
We focus on delivering technically
challenging high value projects in London
and the Home Counties where our
expertise and experience prove
differentiators in this market with
high barriers to entry.
Operational review continued
SPECIALIST
BUILDING
High Quality
Residential
Capabilities
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 undertaken often require
extensive structural engineering works
which, together with space restrictions in
the South and the complex nature of the
work means that this market has high
barriers to entry.
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.
24
Renew Holdings plc Annual Report and Accounts 2018
STRATEGIC REPORT Sustainability
SUSTAINABILITY
As a business we understand the wider
responsibility of our activities and work
hard to ensure consideration is given to
the social, environmental and economic
benefits our activities can bring. We are
committed to ensuring our employees,
clients, supply chain and other stakeholders
are not adversely affected by our work but
that we leave a lasting positive impact on
those around us.
Environment and sustainability
Our business management systems and
procedures ensure our compliance with
all the relevant legislation relating to the
environment as well as managing the
implementation of our environmental
procedures.
Schemes designed to focus on specific
areas of environmental concern include
those to reduce our carbon footprint,
prevent environmental harm, reduce flood
risk, manage our resources responsibly
and divert waste away from landfill. Our
environmental initiatives help to raise
awareness and promote sustainable
solutions. One example in the year was at
AmcoGiffen where an external awareness
campaign prompted the business to look
at how it could contribute to a reduction
in single use plastics. Raising awareness
of the cause and promoting individual
action, AmcoGiffen abolished single use
plastic cups throughout its business.
Health & Safety
As a group, Renew and its subsidiary
businesses continue to put Health and
Safety at centre of what they do. The
safety of employees, those who work with
us and wider stakeholders is paramount.
Our subsidiary businesses employ their
own safety advisors who understand the
complex needs of their individual markets.
The Group also has its Safety, Health and
Environmental Group forum where senior
operational personnel and senior safety
advisors from around the Group meet
to share best practice and knowledge.
The development of a positive learning
culture throughout the business is key to
building on our improvements in health
and safety. The positive learning culture
is supported through close call reporting,
incident investigation training, and a fair
and just culture reinforcement.
As in recent years, we continue to focus
on behavioural safety based initiatives to
promote learning by understanding the
reasons behind the incidents that occur.
Behavioural based initiatives such as
Achieving Behavioural Change “ABC”
training run alongside more traditional
courses on manual handling and working
in confined spaces.
Our businesses undertake a wide range
of initiatives throughout the year to drive
Health and Safety performance
improvement in a number of key areas.
This year these have included fatigue
management which involves the use of
wearable technology and online training
trialled to look at reducing the exposure to
risk of incidents due to tiredness. Driver
safety has also been an area of focus with
in-cab technology trialled to help modify
driver behaviour and deliver both safety
benefits and environmental improvements.
Safety Stand Down days are undertaken
where employees participate in discussions
and presentations on various topics. Our
ongoing Change=Stop campaign also
continues to deliver improvements in our
health and safety performance targets.
The year has also seen many of our
businesses raising awareness of mental
health issues. Initiatives have included
mental health first aid training.
Our businesses continue to be accredited
with various health and safety schemes,
including Constructionline, SafeContractor,
the Contractors Health & Safety Assessment
Scheme (CHAS), Achilles Verify and the
Railway Industry Supplier Qualification
Scheme (RISQS).
Employment and training
The Group recognises the importance
investing in training for future success.
Our businesses undertake a range of
work placements, apprenticeships, work
experience and day release placements
to support their employees.
Seymour continues their close links with
Hartlepool College of Further Education’s
Apprenticeship Programme as well as
working closely with the college to provide
a training academy for the next generation.
Seymour also has a number of Science,
Technology, Engineering and Maths (STEM)
and CITB ambassadors.
Walter Lilly continue their relationship with
Loughborough University, supporting
degree courses including Construction
Engineering Management, Commercial
Management & Quantity Surveying
and Architectural Engineering Design
Management. Walter Lilly also works with
local primary schools to deliver ‘Brilliant Build
Days’ giving children the opportunity to
explore the work of the construction industry.
AmcoGiffen, in collaboration with the
head of Barnsley’s Science, Technology,
Engineering and Maths (STEM) Centre,
has created a ‘Learning & Skills Academy’,
specialising in mechanical engineering and
construction for 16 and 17 year old students
through work experience and NVQ
qualifications across a range of disciplines.
Community
Our businesses understand their
responsibility to the wider communities in
which they operate and carefully consider
the impact of their operations throughout
planning phases and site operations.
Our businesses seek to leave a lasting
positive impact by engaging with and
supporting their local communities. Our
businesses’ commitment includes taking
part in projects where they provide their
time, resources and skills to help. During the
year projects included a 3-day volunteering
initiative where a team spent time improving
gardens at a local care home.
Many of our businesses support local
sports clubs for young people providing kit
and sponsorship. QTS supports Kilmarnock
Football Club youth academy and are involved
in the Kilmarnock Community Sports Trust,
where people of all ages are encouraged to
be more active and get involved in sport. The
QTS Youth Athlete programme also continues
into its 4th year and currently supports eight
young athletes in their chosen disciplines.
Annual Report and Accounts 2018 Renew Holdings plc
25
Sustainability continued
Community continued
AmcoGiffen has established an initiative
to allow employees three days paid leave
per year to undertake charitable work
which has been actively bought in to
across the business.
Charity
Working to support charities up and down
the country, our businesses hosted and
participated in a number of fundraising
events throughout the year. At AmcoGiffen
employees ran a charity car-wash to raise
money for Children with Cancer UK. After
several months of training, a team of 20
Lewis staff took part in the Carten100
Charity Cycle Ride, a 109 mile route between
Cardiff and Tenby raising money towards
many local Welsh charities. Seymour were
again proud be involved with the 6th
annual ‘It’s A Knockout’ tournament,
sponsoring the running of the event
and providing a team to participate.
Shepley, through the Cumbria Community
Foundation, made grants to local causes
and UK wide initiatives throughout the
year. Walter Lilly have once again hosted
the HQR Summer Ball raising over
£100,000 for a number of charities.
A team from Walter Lilly also took part
in ‘The Cyclothon’ raising money for the
Butterfly Tree Children’s Charity and the
RFU Injured Player’s Fund. Clarke Telecom
have been supporting the Manchester
Homeless Partnership Business Group
which is working in collaboration with
other agencies to help tackle the problems
of homelessness in Greater Manchester.
Other charities supported in the year
include Children in Need, Macmillan
Cancer Support, Children with Cancer,
Cancer Research UK, British Heart
Foundation, Guide Dogs for the Blind,
Tiny Tickers and Barnsley Hospice.
This Strategic report was approved by the
Board on 27 November 2018 and is signed
on its behalf by:
Awards
• AmcoGiffen won ‘Best Workplace Health & Wellbeing Intervention Award’
at the 2018 Healthy Workplace Awards
• AmcoGiffen was awarded the prestigious Network Rail STAR award at its
Cowley Junction site in Exeter
• Lewis Civil Engineering achieved a Gold Award for a fourth year at the
Royal Society for the Prevention of Accidents (“RoSPA”) Occupational
Health and Safety Awards 2018
• Seymour Civil won Civils Project of the Year and the Health, Safety and
Wellbeing award at the 2018 Construction Excellence North East Awards
• Seymour Civil awarded the 2018 Institute of Civil Engineering’s Mike Gardiner Cup
for commitment to the institute's education programme
• Seymour Civil has won a number of categories at the 2017 North East Civil
Engineering Contractor Association (“CECA”) Awards including:
– Project of the Year 2017 (Hartlepool Town Wall)
– Training Company of the Year 2017
– Health and Safety Company of the Year 2017
– “Going the Extra Mile Award 2017” (Hartlepool Town Wall)
• Shepley Engineers, West Cumberland Engineering and PPS Electrical all received
RoSPA awards recognising health and safety achievements
• VHE was awarded a second RoSPA Order of Distinction
P Scott
Chief Executive
27 November 2018
26
Renew Holdings plc Annual Report and Accounts 2018
STRATEGIC REPORT Financial review
FINANCIAL REVIEW
Results
Group revenue from continuing activities
was £540.6m (2017: £543.7m), with an
operating profit before tax from continuing
activities prior to amortisation, impairment
and exceptional items of £31.1m (2017: £28.4m).
A tax charge of £6.4m (2017: £4.8m) resulted
in a profit after tax prior to amortisation and
exceptional items for the year of £24.0m
(2017: £23.2m), an increase of 3.4%. After
deducting £15.6m (2017: £8.3m) of
amortisation, impairment and exceptional
costs, the profit for the year from continuing
activities was £9.2m (2017: £15.3m).
Impairment, amortisation
and exceptional items
The £15.6m of exceptional items and
amortisation is made up of the £6.9m
impairment to the carrying value of goodwill
and a £3m loss on disposal both arising
from the disposal of Forefront Group Limited.
The remaining £1.5m of exceptional costs
represent professional fees in connection
with the acquisition of QTS Group Limited.
There was £4.2m of amortisation charges
in the year relating to contractual rights and
customer relationships which are primarily
associated with QTS Group Limited.
Following this amortisation there remains
£16.0m of other intangible assets on the
balance sheet.
Discontinued operations
The loss for the year from discontinued
operations relate to the four months trading
of Forefront Group Limited prior to its
disposal as well as the operating losses of
our small US business, Lovell America Inc,
where the Board has decided to exit this
geographical sector. The prior year
comparatives have been restated to
reflect the treatment of the discontinued
operations in accordance with applicable
accounting standards.
Cash
The Group’s balance sheet shows a
cash balance of £9.2m (2017: £7.0m) and
borrowings of £30.6m (2017: £3.1m) at the
year end. Consequently, the Group’s net
debt position as at 30 September 2018 was
£21.4m (2017: net cash of £3.9m). The increase
in the net debt position is as a result of the
new £35m term loan with HSBC used to part
fund the acquisition of QTS Group Limited.
The HSBC loan is repayable in quarterly
instalments over a term of four years and is
secured by a fixed and floating charge over
the Group’s assets. The Group has complied
with the covenants associated with the
term loans throughout the year.
Taxation
The tax charge on profit for the year is
£5.5m (2017: £4.5m), a rate of 38%. This rate
is higher than the headline rate of 19% as
the impairment charge and loss on disposal
of £9.9m is not a tax deductible item.
Excluding these items, the tax rate falls to
21% which is still higher than the headline
rate but reflects the impact of the 35%
deferred tax rate on pension contributions
for both pension schemes.
Corporation tax payable for the year
amounted to £3.6m (2017: £3.3m), a rate of
15% on profit before non-taxable exceptional
items. The Group has been able to utilise
some brought forward losses which had
not previously been recognised as deferred
tax assets. Due to the tax deductibility of
pension scheme contributions which are
not charged to the Income Statement, the
rate of corporation tax payable in each of
the next few years should remain below the
headline rate of corporation tax in effect
for the relevant accounting period.
Annual Report and Accounts 2018 Renew Holdings plc
27
Sean Wyndham‑Quin CA
Chief Financial Officer
“Group revenue
from continuing
activities was
£540.6m (2017:
£543.7m), with an
operating profit
before tax from
continuing activities
prior to amortisation,
impairment and
exceptional items
of £31.1m
(2017: £28.4m).”
Financial review continued
Pension schemes
At 30 September 2018, the IAS 19
valuation of the Lovell Pension Scheme,
which was closed to new members in
2000, resulted in an accounting surplus
of £12.6m (2017: £6.3m) after accounting
for deferred taxation. The net surplus has
increased by £6.3m during the year, due
to an increase in the discount rate,
updated mortality assumptions and the
contributions made by the Company.
The actuarial movement is accounted
for through the Group Statement of
Comprehensive Income.
During the year, the Board has continued
to work with the Trustees of the Lovell
Scheme, to reduce the risks associated
with the scheme’s liabilities by regularly
reviewing the scheme’s investment strategy
which includes a liability driven model
featuring interest rate hedging techniques.
At the year end, 51% (2017: 54%) of the
scheme’s total liabilities were matched by
annuities. In accordance with the scheme
specific funding requirements of the
Pensions Act 2005, the Board reached
an agreement with the Trustees of the
scheme on the level of future
contributions at £4.3m per annum. This
recovery plan was projected to eliminate
the deficit under the Statutory Funding
Objective of the Pensions Act 2004 by
31 July 2018. Despite the elimination of
the deficit, the Company ultimately
intends to buy out the Lovell Scheme
and so is committed to continuing to
make contributions to the scheme at £4.3m
per annum until the scheme is fully funded
on a buy out basis. The next triennial
valuation was due as at 31 March 2018
and is currently being finalised.
The IAS 19 valuation of the Amco Pension
Scheme shows a net surplus of £0.7m
(2017: deficit of £0.6m) after accounting
for deferred taxation. The liability from
prior year has turned into a surplus this
year primarily due to an increase in the
discount rate, updated mortality assumptions
and the contributions made by the Company.
Similar to the Lovell Scheme, the Board has
worked closely with the Trustees of the
Amco Scheme, to reduce the risks associated
with the liabilities of the scheme. This has
included agreeing to make £0.9m of additional
contributions to provide liquidity so that the
Trustees could fund transfer values requested
by a number of members without disturbing
the investment portfolio of the scheme. It is
likely that further contributions will be made
in 2018/19 for the same purpose. At the
year end, 43% (2017: 46%) of the scheme’s
total liabilities were matched by annuities.
In the triennial valuation of the scheme which
was carried out as at 31 December 2016,
the scheme actuary measured the deficit in
the scheme at £3.4m. In accordance with
the scheme specific funding requirements
of the Pensions Act 2005, the Board agreed
the level of future contributions with the
Trustees of the scheme at £0.5m 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 on 31 December 2019.
Acquisitions
On 10 May 2018, the Group acquired QTS
Group Limited (“QTS”), a leading specialist
independent rail contractor based in
Scotland for a cash consideration of
£80m. The acquisition was funded
through a combination of a new £35m,
4-year term loan from HSBC and a £45m,
oversubscribed equity placing. The equity
placing resulted in the issue of 12,676,056
new ordinary shares in the company of 10p
each (“Ordinary Shares”) at an issue price
of 355p per Ordinary Share. Following the
conclusion of the placing, the Company’s
issued share capital consists 75,267,507
Ordinary Shares with one voting right
per share.
IFRS 15 and 16
These two new international financial
reporting standards will be applicable to
the Group’s results for the years ending
30 September 2019 and 2020 respectively.
Following a thorough review of the Group’s
current major contract types, the Board has
determined that it does not expect a
material impact from the adoption of IFRS15
on the reported revenue of the Group, but
that we will continue to review a sample of
different types of contract to ensure the
impact is fully understood and acted upon
in advance of the 2019 financial statements.
There will be some evolution of processes
to ensure that IFRS 15 implications of new
contracts, or contract variations are
considered. Regarding IFRS 16, the Board
assesses that the net impact to the Income
Statement will be immaterial. Both assets
and liabilities on the Balance Sheet are
expected to increase by corresponding
amounts, which as at 30 September 2018
would have been approximately £10m.
Distributable profits
The distributable profits of Renew Holdings plc
are £36.2m (2017: £50.9m). The reduction
is primarily as a consequence of accounting
for discontinued operations. The Board is
recommending a final dividend of 6.7p per
share (2017: 6.0p) bringing the total for the
year to 10.0p (2017: 9.0p), an increase of 11.1%.
Sean Wyndham‑Quin CA
Chief Financial Officer
27 November 2018
28
Renew Holdings plc Annual Report and Accounts 2018
STRATEGIC REPORT Risk management
PRINCIPAL RISKS
AND UNCERTAINTIES
This Annual Report contains certain forward-looking statements. These statements are made by the Directors in good faith, based on the
information available to them up to the time of approval of this report.
Actual results may differ to those expressed in such statements, depending on a variety of factors. These factors include customer
acceptance of the Group’s services, levels of demand in the market, restrictions to market access, competitive pressure on pricing
or additional costs, failure to retain or recruit key personnel and overall economic conditions.
Effective risk management
The Executive Directors provide regular updates to the Board on the principle risks and controls across the Group, including the roles
and responsibilities of key management in managing those risks. The Executive team works with its subsidiary businesses to identify
and assess key risks in their businesses. It also facilitates the embedding and monitoring of the Board’s agreed risk management
process within the business, under the direction of the Executive Directors ensuring controls are implemented effectively.
The Group identifies the following risks to the Group:
Loss of a major customer
As we have moved progressively into the Engineering Services business we have fewer, larger clients. We mitigate this risk by keeping close to our clients and by
being seen as responsive, compliant, safe, innovative and proactive. The business strategy also includes ambition to grow our workshare with a number of other
key clients such as London Underground and the Environment Agency.
Major project loss
We continue to mitigate this risk by ensuring rigorous selectivity procedures, carrying out thorough risk management and by maintaining first class
records to enable effective management of any disputes. Projects carrying risk are fully discussed in the business unit plans. Discontinued activities
(predominantly Allenbuild related) continue to present legacy risk and new issues can still emerge that challenge the provisioning we have
previously determined.
Economic conditions
With uncertainty in the economic outlook there remains a risk of inflation in supply chain costs, particularly in the building sector in the South East. Our
Specialist Building business in high quality residential has dealt with these increases well although as previously noted we have recently experienced
a shift towards single stage tenders so this will become an increased area of focus over the strategic plan period. The strategic shift of the Group
has naturally mitigated the effect of volatile economic conditions. We keep our workload trends and cost base under constant review to ensure
we continue to act decisively to any change in conditions. As a predominantly direct delivery group there is also the threat of availability of suitably
qualified and experienced resources to support our plans. This issue remains under constant review and is mitigated with training, development and
successions plans.
Management and succession planning
Continuity of business leadership is recognised as a critical factor in maintaining both short-term and longer-term business success. Succession
planning and management is key to delivering this continuity. Each year, the Group carries out a review of succession planning and management in
each subsidiary business. The primary focus is associated with Managing Director positions in the immediate and longer term. In conclusion, the review
identified that, with the support from Group, appropriate leadership capability does exist to manage any disaster recovery event.
Business continuity interruption
With the ever-increasing dependence on electronic communication and management systems in the conduct of our activities, the potential for
a serious business interruption event has increased. This is amplified in our case due to our small number of large customers working in complex
environments supporting critical networks. As a mitigation measure we have developed and shared best practice and introduced minimum standards.
Improvement initiatives are ongoing but this threat will remain a feature of our business and one that will require continuous and diligent management.
Business under performance
The group assumes that all businesses perform at least in line with their established plans.
Annual Report and Accounts 2018 Renew Holdings plc
29
Board of Directors
The members of the Board bring a range of expertise on issues of
performance, strategy and governance, which are vital to the success
of the Group. The Board is satisfied that, between the Directors, it has
an effective and appropriate balance of skills and experience.
David Forbes
Chairman
A R N
John Bishop FCA
Non‑executive Director
David Brown
Non‑executive Director
A R N
A R N
Appointment date:
Non-executive Director from June 2011.
Appointment date:
Non-executive Director from October 2006.
Appointment date:
Non-executive Director in April 2017.
Chairman from January 2018.
Experience:
Qualified as a Chartered Accountant
in 1984 with over 20 years’ experience
in corporate advisory services with
N M Rothschild & Son Limited. David has
held a variety of non-executive Director
appointments at listed and private equity
backed companies since 2004.
External appointments:
None.
Skills brought to the Board:
Expertise in mergers and acquisitions,
corporate strategy and corporate finance.
Number of Board meetings attended:
Eight out of eight.
Sector experience:
Construction, retail, engineering,
communications and support services.
Experience:
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.
External appointments:
None.
Skills brought to the Board:
Industry and finance expertise.
Experience:
Over 35 years of experience in the transport
industry with particular expertise in the
London bus market. Former managing
director of Surface Transport at Transport for
London and chief executive of Go-Ahead’s
London Bus business.
External appointments:
Group Chief Executive of The Go-Ahead
Group Plc and Director of the Rail Delivery
Group Limited.
Number of Board meetings attended:
Six out of eight.
Skills brought to the Board:
Transport industry experience.
Sector experience:
Construction and engineering.
Number of Board meetings attended:
Eight out of eight.
Sector experience:
Transport.
30
Renew Holdings plc Annual Report and Accounts 2018
GOVERNANCE A
R
Audit Committee
N
Nominations Committee
Remuneration Committee
Chairman
Paul Scott
Chief Executive Officer
Sean Wyndham‑Quin CA
Chief Financial Officer
Andries Liebenberg
Executive Director
N
Appointment date:
As Chief Executive on the 1 October 2016,
previously as Group Engineering Services
Director on 21 July 2014.
Appointment date:
Appointed to the Board on 8 November 2017.
Appointed Chief Financial Officer on
29 November 2017.
Experience:
A qualified engineer who has been with
the Group for 19 years. Having directly lead
subsidiaries through substantial growth in line
with the Group strategy, Paul’s responsibilities
gradually developed into a wider Group role
before being appointed as the CEO.
Experience:
Previously served as a partner at SPARK
Advisory Partners, a business he co-founded
in early 2012. Prior to that Sean worked for
Brewin Dolphin and Ernst & Young where
he qualified as a Chartered Accountant.
Appointment date:
Appointed as Executive Director on
31 March 2016.
Experience:
Managing director of Renew subsidiary,
AmcoGiffen. Andries has been with the
Group for over ten years. Previously worked
internationally in Africa and the UK overseeing
multi-million pound multidisciplinary fast
track construction projects and long-term
framework agreements.
External appointments:
None.
Skills brought to the Board:
Strong experienced leadership capability
with a track record of compliant delivery.
Proven capability in terms of developing
a culture to support the execution of our
agreed growth strategy.
Number of Board meetings attended:
Eight out of eight.
Sector experience:
Highly experienced across the UK
Infrastructure sectors that remain our
strategic focus.
External appointments:
None.
External appointments:
None.
Skills brought to the Board:
Track record in advising Boards on strategy,
corporate governance and mergers and
acquisitions. Experience in financial modelling,
forecasting and business planning.
Skills brought to the Board:
Experienced in strategic business
management including mergers
and acquisitions.
Number of Board meetings attended:
Eight out of eight.
Number of Board meetings attended:
Seven out of eight.
Sector experience:
A broad range of experience across
a number of sectors including support
services and construction.
Sector experience:
Multidisciplinary infrastructure project
delivery with a bias towards Rail, Energy
and Environmental sectors.
Annual Report and Accounts 2018 Renew Holdings plc
31
Corporate governance
Renew’s vision is to safely and responsibly deliver essential engineering services
to the country’s key infrastructure assets: “Engineering Infrastructure for the future”.
In order to deliver a growing business in the challenging Specialist Building, Energy,
Environmental and Infrastructure market sectors as a holding company we set
overall standards for our subsidiary businesses through a formal governance
framework which promotes best practice and knowledge sharing. The Group’s
business model and strategy drive its corporate culture.
Key challenges to the successful delivery of our business
model and strategy include:
Loss of a major customer
As we have moved progressively into the Engineering Services
business we have fewer, larger clients. We mitigate this risk by
keeping close to our clients and by being seen as responsive,
compliant, safe, innovative and proactive. The business strategy
also includes ambition to grow our workshare with a number
of other key clients such as London Underground and the
Environment Agency.
Major project loss
We continue to mitigate this risk by ensuring rigorous selectivity
procedures, carrying out thorough risk management and by
maintaining first class records to enable effective management
of any disputes. Projects within focus carrying risk are fully
discussed in the business unit plans. Discontinued activities
(predominantly Allenbuild related) continue to present legacy
risk and new issues can still emerge that challenge the
provisioning we have previously determined.
Economic conditions
With uncertainty in the economic outlook there remains a risk
of inflation in supply chain costs, particularly in the building
sector in the South East. Our Specialist Building business in high
quality residential has dealt with these increases well although
as previously noted we have recently experienced a shift towards
single stage tenders so this will become an increased area of focus
over the strategic plan period. The strategic shift of the Group has
naturally mitigated the effect of volatile economic conditions. We
keep our workload trends and cost base under constant review to
ensure we continue to act decisively to any change in conditions.
As a predominantly direct delivery group there is also the threat
of availability of suitably qualified and experienced resources to
support our plans. This issue remains under constant review and
is mitigated with training, development and successions plans
in each of our businesses.
Management and succession planning
Continuity of business leadership is recognised as a critical factor
in maintaining both short-term and longer-term business success.
Succession planning and management is key to delivering this
continuity. Each year, the Group carries out a review of succession
planning and management in each subsidiary business. The primary
focus was associated with Managing Director positions in the
immediate and longer term. In conclusion, the review identified
that, with the support from Group, appropriate leadership
capability does exist to manage any disaster recovery event.
The Board monitors and promotes a healthy corporate culture
assisted by its senior management team who play a vital role in
disseminating the Group’s shared values with all our employees.
Within our subsidiary businesses, monthly management meetings
are attended by at least one member of the senior management
team and, along with annual events such as the Senior Manager’s
Conference, the Board is able to monitor and assess the Group’s
corporate culture on an ongoing basis.
Renew seeks to adhere to the principles of the QCA Corporate
Governance Code (“QCA Code”) to the extent considered
appropriate for a company of this size. The ten Principles of
the QCA Code are set out below with details as to how Renew
complies with that principle or an explanation as to why it does not.
Principle 1: Establish a strategy and business model
which promotes long-term value for shareholders.
We seek to deliver value to shareholders through our established
and proven strategy, providing reliable capital growth alongside a
progressive dividend policy. As a holding company, Renew grants
a degree of autonomy to its operating subsidiaries, enabling them
to be competitive and effective in their individual markets whilst
setting overall standards. Our independently branded subsidiary
businesses have expert knowledge in their individual markets
and directly deliver engineering services aligned to the needs
of our clients, many of whom are responsible for the long-term
maintenance and renewal of national infrastructure networks.
Business model
Our long-term strategy is focused on continuing to develop
our range of engineering services capabilities, both organically
and through selective acquisitions in order to deliver value to
our shareholders.
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
32
Renew Holdings plc Annual Report and Accounts 2018
GOVERNANCE Business continuity interruption
With the ever-increasing dependence on electronic
communication and management systems in the conduct of our
activities, the potential for a serious business interruption event has
increased. This is amplified in our case due to our small number
of large customers working in complex environments supporting
critical networks. As a mitigation measure we have developed
and shared best practice and introduced minimum standards.
Improvement initiatives are ongoing but this threat will remain
a feature of our business and one that will require continuous
and diligent management.
Business underperformance
The plan assumes that all businesses perform at least in line with
their established plans.
The Group undertakes an annual strategic review process with
each subsidiary business to review market trends, business
operations and strategic objectives to support our continued
success within our chosen markets. In order to strengthen our
business model, the Group targets acquisitions that bring
complementary skills, expanding the Group’s core capabilities
and allow us to deliver a wider range of services to our clients.
Principle 2: Seek to understand and meet shareholder
needs and expectations.
Individual shareholders
Members of the Board have dialogue with individual shareholders
during the year and the Chairman addresses shareholders at the
Group’s Annual General Meeting (“AGM”) where questions are
invited. Notice of the AGM is provided to shareholders at least
21 days in advance. Where resolutions at the AGM are dealt with
by show of hands, the results of proxy votes are also announced
by the Company Secretary.
Financial and other information about the Group is available via the
Company’s website: www.renewholdings.com. Shareholders can
also find a link to the website of Link Asset Services Limited for
details of their shareholding.
Shareholders wishing to contact the Company directly should
address communication to the Group’s Company Secretary,
Sean Wyndham-Quin by email to info@renewholdings.com
or by post to Renew Holdings plc, Yew Trees, Main Street North,
Aberford, West Yorkshire LS25 3AA.
Institutional shareholders
The Chief Executive and Chief Financial Officer communicate
with institutional investors frequently through formal meetings
immediately following the Group’s interim and preliminary financial
results as well as through capital markets presentations and
informal briefings. It is the intention of the Directors to understand
the objectives and concerns of its institutional shareholders
through both direct communications and through analyst and
broker briefings.
The Chief Financial Officer is responsible for informing the Board of
the views and concerns of its major shareholders. The Board makes
itself available to meet with institutional investors as required to
discuss matters as they arise.
Shareholder engagement activities
November
Preliminary results roadshow
January
May
Annual General Meeting
Interim results roadshow
Principle 3: Take into account wider stakeholder
and social responsibilities and their implications
for long-term success.
By the effective management and control of our subsidiary
businesses, we deliver the key elements of the Group’s business
model and ultimately shareholder value. Our business is supported
in this through its key resources and relationships.
Operating companies
Our Executive Directors are in daily contact with our subsidiary
businesses. Each month the subsidiary management meetings are
attended by at least one member of the senior management team.
Our subsidiary businesses are supported by the central Renew
team across its business functions. One example in the year was
in health and safety where safety advisors from around the Group
shared their knowledge and best practice at an internal forum.
Similarly in IT, commercial, HR and finance knowledge sharing is
key to achieving our improvement targets. Our Executive team
frequently visits the Group’s subsidiary businesses and has an
in-depth knowledge of their day-to-day operations. Communication
between our subsidiary businesses and the Executive team is
a critical element of the effective running of the Group’s operations.
Employees
Effective communication with our employees is key to successfully
managing our business. Renew’s subsidiaries benefit from
Group-wide communications on shared topics including health
and safety, HR, IT, commercial and finance policies and procedures.
Our subsidiary businesses undertake a range of initiatives to engage
with their employees including employee newsletters, social media
channels and employee surveys. The Board recognises the critical
role our employees play in the delivery of the Group’s success.
Customers
Strong communication with our customers is critical for our businesses
to understand and deliver the requirements of their clients. The
long-term nature of the work we undertake means this assists us in
forging close working relationships where recognising both current and
future requirements supports the entire life cycle of these relationships.
Shareholders
Communication with our shareholders takes place throughout the
year and includes dialogue at our Annual General Meeting, through
participation in investor and analysts site visits as well as meetings
with institutional investors. The feedback we receive through these
channels helps guide the structure of future communications.
In addition to the Regulatory News Service announcements the
Company releases we also provide information to shareholders
via the Group’s website at www.renewholdings.com.
Public
Our businesses work hard to ensure they effectively communicate
with the public when undertaking their work. Our businesses hold
public events to inform and update the public on the nature and
progress of work as appropriate.
Where we receive feedback from the public on societal matters
we would seek to amend our programme of works where possible
to address any concerns raised.
Annual Report and Accounts 2018 Renew Holdings plc
33
Corporate governance continued
Principle 4: Embed effective risk management,
considering both opportunities and threats,
throughout the organisation.
The Executive Directors provide regular updates to the Board on the
principle risks and controls across the Group, including the roles and
responsibilities of key management in managing those risks. The
Executive team works with its subsidiary businesses to identify and
assess key risks in their businesses. It also facilitates the embedding
and monitoring of the Board’s agreed risk management process
within the business, under the direction of the Executive Directors
ensuring controls are implemented effectively.
The Group identifies the following risks to the Group:
Loss of a major customer
As we have moved progressively into the Engineering Services
business we have fewer, larger clients. We mitigate this risk by
keeping close to our clients and by being seen as responsive,
compliant, safe, innovative and proactive. The business strategy
also includes ambition to grow our workshare with a number of
other key clients such as London Underground and the
Environment Agency.
Major project loss
We continue to mitigate this risk by ensuring rigorous selectivity
procedures, carrying out thorough risk management and by
maintaining first class records to enable effective management
of any disputes. Projects within focus carrying risk are fully
discussed in the business unit plans. Discontinued activities
(predominantly Allenbuild related) continue to present legacy
risk and new issues can still emerge that challenge the provisioning
we have previously determined.
Economic conditions
With uncertainty in the economic outlook there remains a risk of
inflation in supply chain costs, particularly in the building sector
in the South East. Our Specialist Building business in high quality
residential has dealt with these increases well although as
previously noted we have recently experienced a shift towards
single stage tenders so this will become an increased area of focus
over the strategic plan period. The strategic shift of the Group has
naturally mitigated the effect of volatile economic conditions. We
keep our workload trends and cost base under constant review to
ensure we continue to act decisively to any change in conditions.
As a predominantly direct delivery group there is also the threat
of availability of suitably qualified and experienced resources to
support our plans. This issue remains under constant review and
is mitigated with training, development and successions plans
in each of our businesses.
Management and succession planning
Continuity of business leadership is recognised as a critical factor
in maintaining both short-term and longer-term business success.
Succession planning and management is key to delivering this
continuity. Each year, the Group carries out a review of succession
planning and management in each subsidiary business. The
primary focus was associated with Managing Director positions in
the immediate and longer term. In conclusion, the review identified
that, with the support from Group, appropriate leadership
capability does exist to manage any disaster recovery event.
Business continuity interruption
With the ever-increasing dependence on electronic
communication and management systems in the conduct of our
activities, the potential for a serious business interruption event has
increased. This is amplified in our case due to our small number
of large customers working in complex environments supporting
critical networks. As a mitigation measure we have developed
and shared best practice and introduced minimum standards.
34
Renew Holdings plc Annual Report and Accounts 2018
Improvement initiatives are ongoing but this threat will remain a
feature of our business and one that will require continuous and
diligent management.
Business underperformance
The plan assumes that all businesses perform at least in line with
their established plans.
Internal controls
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.
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, medium and long-term cash monitoring achieved
by means of daily, weekly and monthly 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 Group minimum requirements
in a number of financial, commercial and operational areas with
which each business within the Group must comply. The senior
management team monitors and reviews compliance with these
requirements on a regular 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 twelve years and including 2018,
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.
Senior management and employees play a critical role in the
identification of risk. Employees are often the first to become
aware of risk and the effective communication between employees
and senior management is considered key in this area.
Risk management framework
Risk management
Board of Directors
Audit
Committee
Remuneration
Committee
Nomination
Committee
GOVERNANCE Principle 5: Maintain the Board as a well-functioning,
balanced team led by the chair.
Independence of non‑executive Directors
The Board adopts the principles of the code regarding tenure of
the Board and seeks to balance experience and the need to refresh
the Board. In assessing the continued independence of Directors,
where they have served more than nine years, the Board considers
their independence of judgement and ability to continue to
challenge the Board.
In respect of John Bishop who has served since 2006, the Board
recognises that independence cannot be determined solely based
on time served. Following due consideration, the Board is confident
John Bishop remains independent.
Renew complies with the provision of Board independence as the
Group has at least two independent non-executive Directors.
D M Forbes
Non-executive Chairman
Independent
D A Brown
Non-executive Director
Independent
J Bishop
P Scott
Non-executive Director
Independent
Chief Executive Officer
S Wyndham-Quin
Chief Financial Officer
A Liebenberg
Executive Director
Board Committees
The Board operates with a number of committees. John Bishop,
the Senior Independent non-executive Director, acts as Chairman
of the Audit Committee, David Forbes acts as Chairman of the
Nominations Committee and David Brown chairs the Remuneration
Committee. 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.
Remuneration Committee
The Remuneration Committee, which comprises all 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.
Nominations Committee
The Nominations Committee, which comprises all the non-
executive Directors and Paul Scott, monitors the composition of
the Board and recommends the appointment of new Directors. The
Nominations Committee, with all Directors present, has held two
meetings during the year to discuss nomination matters.
The Nominations Committee terms of reference include:
(a) to review the structure, size and composition of the Board;
(b) to consider succession planning for Directors and
senior executives;
(c) to identify and nominate, for approval by the Board, suitable
candidates to fill Board vacancies; and
Audit Committee
The Audit Committee has held four 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.
General Purposes Committee
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.
Board and Committee Meetings
The Board met formally eight times in the year ended
30 September 2018 with all Directors in attendance other than
on three occasions. 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.
The Directors attended the following meetings in the year ended
30 September 2018:
Board
Meeting
Audit
Committee
Remuneration
Committee
Nominations
Committee
David Forbes
David Brown
John Bishop
Paul Scott
Andries Liebenberg
Sean Wyndham-Quin
8/8
8/8
6/8
8/8
7/8
8/8
4/4
4/4
2/4
—
—
—
3/3
3/3
2/3
—
—
—
2/2
2/2
2/2
2/2
—
—
Board Effectiveness
Board composition
The Board comprises the independent non-executive Chairman,
Chief Executive Officer, two Executive Directors and two independent
non-executive directors. Brief biographies of the Directors can be
viewed on pages 30 and 31.
(d) to make recommendations to the Board on the contents
of letters of appointment, Directors’ duties, reappointment
or re-election of Directors upon conclusion of a specified
term or retirement by rotation.
Sean Wyndham-Quin was appointed as Chief Financial Officer on
29 November 2017. David Forbes was appointed as Chairman on
the 31 January 2018. The Board comprises of three independent
non-executive Directors and three Executive Directors.
Time commitment
Directors are expected to commit as much time as is necessary
to fully undertake their duties. Board members are expected to
attend all Board meetings and committee meetings where they
are a member and any additional meetings as requested.
Annual Report and Accounts 2018 Renew Holdings plc
35
Corporate governance continued
Principle 6: Ensure that, between them, the Directors
have the necessary up-to-date experience, skills
and capabilities.
Details of the Board members’ skills and experience are noted
on pages 30 and 31 of this report.
The members of the Board bring a range of expertise on issues
of performance, strategy and governance, which are vital to the
success of the Group. The Board is satisfied that, between the
Directors, it has an effective and appropriate balance of skills
and experience.
Senior Independent Director
John Bishop is the Senior Independent Director and undertakes
a key role in supporting the Chairman in the effective running
of the Board.
Company Secretary
Sean Wyndham-Quin is responsible for assisting the Board in
discharging their statutory duties and responsibilities as well as
liaising with the Group’s shareholders and other stakeholder groups.
External advisors
To assist with the recent acquisition of QTS, the Group sought
external advice from a number of advisors including on legal,
financial, tax and insurance matters. In addition, for the recent
appointment of a new Chief Financial Officer, a specialist
executive search agency was engaged.
Professional development
Appropriate training, briefings and inductions are available to
all Directors on appointment and subsequently as necessary,
considering existing qualifications and experience. The Board
members have many years of relevant experience and each
is responsible for ensuring their continuing professional
development to maintain their effective skills and knowledge.
Independent advice
Procedures are in place for the Directors to seek independent
professional advice, if necessary, at the Company’s expense.
Principle 7: Evaluate Board performance based
on clear and relevant objectives, seeking
continuous improvement.
The Chairman and fellow members of the Board are responsible for
making sure Board members are updated with information concerning
the state of the business and its performance, and information
necessary for them to effectively discharge their duties and
responsibilities, in a timely manner.
36
Renew Holdings plc Annual Report and Accounts 2018
Each year Board members are required to complete a
questionnaire to evaluate both the Board as a whole and its
individual members providing an opportunity for comment and
suggestions for improvements. The responses to the surveys are
provided to the Chairman who prepares a report and actions are
shared with the Board. The formal Board review for 2018 is
underway but not yet completed and we will include the criteria
and some of its results on our website.
It is the intention of the Board that every three years the evaluation
of the Board will be externally facilitated to assess the Board and its
Committees to ensure they are equipped to support the Group’s
evolving requirements. This process takes the format of an initial
questionnaire followed by interviews and board observations.
Areas of focus are identified, and an action plan prepared for
the Board.
Succession planning
Continuity of leadership is recognised as a critical factor in
maintaining both short-term and longer-term business success.
Succession planning and management is key to delivering this
continuity. Each year the Board carries out its annual review of
succession planning at both Board and subsidiary business level.
Board
The Nominations Committee considers succession planning for
the Board each year, considering the challenges specific to the
required role. The Chairman is responsible for overseeing the
process of succession planning for the Board. In identifying
suitable external Board candidates, independent executive
search consultants will normally be used.
Senior management
The executive level succession framework, which addresses senior
management succession in the Group’s subsidiary businesses
forms part of the subsidiary budget and strategic planning process
and is reported to the Board on an annual basis.
Principle 8: Promote a corporate culture that is
based on ethical values and behaviours.
Renew’s vision is to safely and responsibly deliver essential
engineering services to some of the country’s key infrastructure
assets: “Engineering Infrastructure for the future”. To deliver a
growing business in the challenging Energy, Environmental and
Infrastructure market sectors we set overall standards for our
subsidiary businesses through a formal framework to promote
best practice and knowledge sharing. The Board is responsible
for ensuring the corporate culture is implemented throughout the
business and it will continue to evolve the governance framework
as we move through 2019.
Our business model and strategy drive our corporate culture and
in the year the Group focused on further developing its behavioural
safety initiatives supported across the subsidiary businesses with
campaigns to empower employees to improve the safety of their
individual environments.
The Board monitors and promotes its corporate culture assisted by
its senior management team who play a vital role in disseminating
the Company’s shared values with its employees. Within our
subsidiary businesses, monthly management meetings are
attended by at least one member of the senior management team.
Regular executive management committee meetings are held with
the involvement of all the Managing Directors and the senior
management team. In conjunction with annual events including
the Senior Manager’s Conference, the Board can assess the
Group’s culture on an ongoing basis.
GOVERNANCE
Principle 9: Maintain governance structures and
processes that are fit for purpose and support
good decision making by the Board.
Roles and responsibilities
Chairman
The Board, run by Chairman David Forbes, is responsible for
Group strategy, results, direction, risk management and business
performance. The Board is ultimately responsible for overseeing
the success of the Group.
Chief Executive
Chief Executive Paul Scott oversees the management of the
business supported by his executive team with responsibility
for delivery of the Group’s strategic direction and management
of its day-to-day performance.
The Senior Independent Director
John Bishop is the Senior Independent Director and undertakes
a key role in supporting the Chairman in the effective running
of the Board.
Chief Financial Officer and Company Secretary
Sean Wyndham-Quin is responsible for assisting the Board
in discharging its statutory duties and responsibilities
as well as liaising with the Group’s shareholders and other
stakeholder groups.
Appropriate training, briefings and inductions are available to
all Directors on appointment and subsequently as necessary,
taking into account existing qualifications and experience.
Procedures are in place for the Directors to seek independent
professional advice, if necessary, at the Company’s expense.
Board and Committee Meetings
The Board typically meets eight times a year with all Directors in
attendance other than on three occasions. 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.
Board Committees
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.
Remuneration Committee
The Remuneration Committee, which comprises of David Forbes,
David Brown and John Bishop, determines and agrees
with the Board the framework and policy of executive
remuneration packages.
Key responsibilities:
• Remuneration packages
• Bonuses
• Incentive payments
• Share options or awards
• Pension arrangements
Nominations committee
The Nominations Committee, which comprises all the non-executive
Directors and Paul Scott, monitors the composition of the Board
and recommends the appointment of new Directors.
Key responsibilities:
• Reviews the structure, size and composition of the Board
• Considers succession planning for Directors and
senior executives
• Identifies and nominates, for approval by the Board, suitable
candidates to fill Board vacancies
• Makes recommendations to the Board on the contents of letters
of appointment, Directors’ duties, reappointment or re-election
of Directors upon conclusion of a specified term or retirement
by rotation
Audit Committee
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.
Key responsibilities:
• Considers the adequacy and effectiveness of the risk
management and control systems of the Group, and reports
the results to the Board
• Reviews the scope and results of the external audit, its cost
effectiveness and the objectivity of the auditor
• Monitors the non-audit work performed by the auditor to help
ensure that the independence of the auditor is maintained
• Approves all fees paid to the auditor whether for audit or
non-audit work in advance
• Reviews the Interim statement, the preliminary announcement,
the Annual Report and Accounts and accounting policies
The Board is responsible for ensuring thorough corporate
governance is applied throughout its business and will be
continuing to work towards improving its governance framework
throughout 2019. The continued growth of the Group has
necessitated further review and revaluation of the governance
framework the Group applies. The acquisition of QTS Group in
May 2018 saw the Group update its Group minimum requirements,
a series of minimum standards in a number of financial and
operational areas with which each business within the Group
must comply.
Principle 10: Communicate how the Company is
governed and is performing by maintaining dialogue
with shareholders and other relevant stakeholders.
Board and Committee Meetings
The Board met formally eight times in the year ended
30 September 2018 with all Directors in attendance other than
on three occasions. 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.
Annual Report and Accounts 2018 Renew Holdings plc
37
Corporate governance continued
Principle 10: Communicate how the Company is
governed and is performing by maintaining dialogue
with shareholders and other relevant stakeholders.
continued
Committee reporting
Audit report
The Audit Committee Report is set out on page 40.
Remuneration Report
The Remuneration Report is set out on pages 44 to 47.
Shareholder engagement
We regularly engage with our shareholders including through
results presentations and roadshows, our Annual General Meeting,
investor and analysts site visits and institutional investor meetings.
Feedback received via these channels is an important element of
shaping the Group’s future communications.
Corporate information (including all Company announcements
and presentations) is available to shareholders, investors and the
public in the Investors section of the Company’s corporate website,
www.renewholdings.com/investors.
Ordinary resolution 1
The Chief Financial Officer and Company Secretary,
Sean Wyndham-Quin, is the primary contact for all
investor relations queries and can be contacted by email
at info@renewholdings.com or by post at Renew Holdings plc,
Yew Trees, Main Street North, Aberford, West Yorkshire LS25 3AA.
Shareholder voting
The tables below show the votes cast at the 2018 Annual General
Meeting held on the 31 January and the subsequent General
Meeting held on 26 February 2018.
2018 Annual General Meeting voting results
The fifty-eighth Annual General Meeting of Renew Holdings plc
was held at the offices of KPMG LLP, 1 Sovereign Square, Sovereign
Street, Leeds LS1 4DA on the 31 January 2018 at 11.00am. All
resolutions put to the meeting were passed.
Voting for
Voting against
Voting withheld
To receive, approve and adopt the Company’s audited financial statements for the year
ended 30 September 2017 and the reports of the Directors and auditor thereon.
26,731,657
222,976
2,847
Ordinary resolution 2
To declare a final dividend for the year ended 30 September 2017 of 6.00p per
Ordinary Share in the capital of the Company to be paid on 13 March 2018 to
shareholders who appear on the register at the close of business on 2 February 2018.
Ordinary resolution 3
To re-elect Paul Scott as a Director of the Company. Mr Scott retires as a Director
in accordance with the Company’s Articles of Association and offers himself
for re-election.
Ordinary resolution 4
26,957,480
0
0
26,921,866
35,054
560
To re-elect David Brown as a Director of the Company. Mr Brown was appointed as a
Director during the year and in accordance with the Company’s Articles of Association
offers himself for re-election.
26,947,383
9,537
560
Ordinary resolution 5
To re-elect Sean Wyndham-Quin as a Director of the Company. Mr Wyndham-Quin was
appointed as a Director during the year and in accordance with the Company’s Articles
of Association offers himself for re-election. (Explanatory note: biographical details
of Mr Scott, Mr Brown and Mr Wyndham-Quin are included in the Directors’ Report
in the Annual Report and Accounts.)
Ordinary resolution 6
26,808,420
48,500
100,560
To approve the Remuneration Report for the year ended 30 September 2017.
(Explanatory note: this is an advisory resolution only.)
25,746,109
1,184,833
26,538
Ordinary resolution 7
To appoint KPMG LLP as auditor of the Company.
26,509,187
338,157
110,136
Ordinary resolution 8
To authorise the Directors of the Company to determine the remuneration of the auditor.
26,850,693
102,085
4,702
38
Renew Holdings plc Annual Report and Accounts 2018
GOVERNANCE
Voting for
Voting against
Voting withheld
26,715,274
219,623
22,583
26,712,189
226,924
18,367
Special resolution 9
THAT the Directors be and are generally and unconditionally authorised pursuant to
and in accordance with Section 551 of the Companies Act 2006 (“Act”) to exercise all
the powers of the Company to allot shares or grant rights to subscribe for or to convert
any security into shares in the Company up to a nominal amount of £312,957 such
authority to apply in substitution for all previous authorities pursuant to Section 80 of
the Companies Act 1985 or Section 551 of the Act and to expire at the end of the
Annual General Meeting in 2018 or on 25 April 2018 whichever is the earlier (unless
renewed, varied or revoked by the Company prior to or on such date) but, in each case,
save that the Company may make offers and enter into agreements before this
authority expires which would, or might, require shares to be allotted or rights to
subscribe for or to convert any security into shares to be granted after this authority
ends and the Directors may allot shares or grant such rights pursuant to any such
agreement as if this authority had not expired.
Special resolution 10
THAT, subject to the passing of resolution 9 above, the Directors be and are hereby
given the general power pursuant to Section 570 of the Act to allot equity securities (as
defined by Section 560(1) of the Act) wholly for cash pursuant to the authority given in
resolution 9 above, as if Section 561(1) of the Act did not apply to any such allotment,
provided that this power shall be limited to the allotment of equity securities: (a) in
connection with an offer by way of rights issue to holders of ordinary shares in
proportion (as nearly as may be practicable) to their respective holdings of such shares,
but subject to such exclusions or other arrangements as the Directors may deem
necessary or expedient in relation to fractional entitlements, record dates, or any legal
or practical problems under the laws of any territory, or the requirements of any
regulatory body or stock exchange; and (b) otherwise than in connection with a rights
issue, up to an aggregate nominal amount of £312,957. The power granted by this
resolution will expire on 30 April 2019 or, if earlier, the conclusion of the Company’s
next Annual General Meeting (unless renewed, varied or revoked by the Company prior
to or on such date) save that the Company may, before such expiry make offers or
agreements which would or might require equity securities to be allotted after such
expiry and the Directors may allot equity securities in pursuance of any such offer or
agreement notwithstanding that the power conferred by this resolution has expired.
This resolution revokes and replaces all unexercised powers previously granted to the
Directors to allot equity securities as if either Section 89(1) of the Companies Act 1985
or Section 561(1) of the Act did not apply but without prejudice to any allotment of
equity securities already made or agreed to be made pursuant to such authorities.
2018 General Meeting voting results
A general meeting of Renew Holdings plc was held at the registered office of the Company at Yew Trees, Main Street North, Aberford,
West Yorkshire LS25 3AA on 26 February 2018 at 4.00pm. All resolutions put to the meeting were passed.
Voting for
Voting against
Voting withheld
Ordinary resolution 1
To grant the Directors of the Company authority to allot shares, or grant rights over
shares, up to an aggregate nominal amount of £2,086,382.
22,325,392
242,253
10,410
Special resolution 2
In connection with the exercise of any authority granted pursuant to resolution 1, to disapply
statutory pre-emption rights which would otherwise apply on an issue of shares for cash in
connection with rights issues, or otherwise up to a maximum nominal amount of £312,957.
22,108,948
458,414
10,693
Sean Wyndham‑Quin CA
Company Secretary
27 November 2018
Annual Report and Accounts 2018 Renew Holdings plc
39
Committee responsibilities
The Audit Committee is established by and is responsible to the
Board. It has written terms of reference, which are available for
review at www.renewholdings.com. Its main responsibilities are:
• to consider the appropriateness of the accounting policies, key
accounting judgements and sources of estimation;
• to review the full year results including the annual report and
accounts, preliminary results statement and the report from the
external auditor and to be satisfied with the truth and fairness of
the Group’s financial statements including compliance with the
appropriate accounting standards, the AIM Rules and the law;
• keep under review the effectiveness of the Group’s internal
controls and risk management systems;
• monitor and review the effectiveness of the Group’s internal
audit process in the context of the Group’s overall risk
management system; and
• oversee the relationship with, and remuneration of, the external
auditor, including reviewing the effectiveness and independence
of the incumbent external auditor prior to any decision to re-appoint.
External Audit
KPMG has been the external auditor since 2007 but has regularly
rotated its audit partner in line with best practice. As required, the
external auditor provided the Audit Committee with information for
review about policies and processes for maintaining its independence
and compliance regarding the rotation of audit partners and staff.
The Audit Committee considered all relationships between the
external auditor and the Group and was satisfied that they did not
compromise the external auditor’s judgement or independence,
particularly with the provision of non-audit services.
Management was satisfied with the external audit team’s
knowledge of the business and that the scope of the audit was
appropriate, all significant accounting judgements had been
challenged robustly and the audit had been effective.
All of the above was taken into account before a recommendation
was made by the Committee to the Board to propose KPMG for
re-election at the AGM.
Approval
The Audit Committee Report was approved by the Board on
27 November 2018 and signed on its behalf by:
John Bishop
Chairman of the Audit Committee
27 November 2018
Audit Committee report
John Bishop
Chairman of the Audit Committee
Introduction
Dear Shareholder
On behalf of the Audit Committee I am pleased to present
the Audit Committee Report for the financial year ended
30 September 2018.
The Audit Committee Report sets out the details of the
composition of the Audit Committee including its responsibilities
and seeks to provide an insight into the work undertaken by the
Audit Committee during the year.
Committee composition
The Audit Committee consists of all three Non-executive Directors
and is chaired by me as the Senior Independent Non-executive Director.
The composition of the Audit Committee has not changed in this
financial year however the Board monitors and evaluates membership
of the Audit Committee on an annual basis. The Board believes that
the current members have sufficient skills, qualifications and experience
to discharge their duties in accordance with the committee’s terms
of reference and as a committee have competence in the sector
within which the Group operates.
The Audit Committee met on four occasions during the year and
other than two meetings which I was unable to attend, all members
attended the meetings. The Chief Executive Officer and the
Chief Financial Officer attend committee meetings by invitation
to ensure that the committee is fully informed of material matters
within the Group. The external auditor attended two of the meetings
and, for part of both of those meetings, the external auditor met with
the Audit Committee without any of the executive directors present.
40
Renew Holdings plc Annual Report and Accounts 2018
GOVERNANCE Directors’ report
The Directors present their report and the audited accounts for the
year ended 30 September 2018.
Principal activities
For the year ended 30 September 2018 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. 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 2018 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 £6,773,000 (2017: £12,427,000). The Directors
recommend the payment of a final dividend on the Ordinary
Shares of 6.67p (2017: 6p) giving a total for the year of 10.0p
(2017: 9.0p).
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, revolving credit
facility and overdraft facility bear interest at floating rates.
Liquidity risk
The Group’s policy is to ensure availability of operating funds
by maintaining an appropriate cash balance in both current and
deposit accounts and, when necessary, to establish appropriate
levels of borrowing facilities to provide short-term flexibility.
Foreign currency risk
As a result of the discontinuation of the Group’s operations in
the United States the remaining investment in operations in the
United States is no longer material and therefore movements
in the US dollar/sterling exchange will not materially affect the
Group’s and the Company’s balance sheet. As at 30 September 2018
£474,000 (2017: £4,856,000) of the Group’s net assets are
denominated in US dollars. The Group does not use derivative
financial instruments in its management of foreign currency risk.
Credit risk
The Group’s principal financial assets are bank balances, cash,
amounts recoverable on contracts and trade receivables, which
represent the Group’s maximum exposure to credit risk in relation
to financial assets.
The Group’s credit risk is primarily attributable to its amounts
recoverable on contracts and trade receivables. Credit risk is
managed by monitoring the aggregate amount and duration
of exposure to any one customer depending upon their credit
rating. The amounts presented in the balance sheet are net
of allowances for doubtful debts, estimated by the Group’s
management based on prior experience and their assessment
of the current economic environment.
Payment of creditors
The Group recognises the importance of good relationships
with its suppliers and 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.
Annual Report and Accounts 2018 Renew Holdings plc
41
Directors’ report continued
Health and safety management
Paul Scott, the Chief Executive Officer, was the designated
Director of Health and Safety with Group responsibility for safety
and environmental management throughout the year. 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 Officer, discusses and progresses policy,
legislative changes, best practice, training needs, inspections,
audits (internal and external), performance measurement and
statistical information. All topics are discussed with a specific
focus on improvement.
Control at business level remains with subsidiary Managing
Directors who are required to appoint a director who is
responsible for safety and environmental matters. Health, safety
and environmental issues are discussed as the first agenda item at
monthly Board meetings. Each business safety and environmental
meeting encourages open communication between all employees
and is a key part of the Group’s efforts to gather and disseminate
good practice for inclusion in business-based management
systems. Our safety and environmental standards are contained
within bespoke business Safety and Environmental Management
Systems. This system is based on Group activities and provides
specific standards, procedures, information, forms and advice
which accommodate changes in legislation expected during the
coming financial year. Management advice is provided by the
Group Health, Safety, Environmental and Quality (“SHEQ”) Director.
Certain Group companies employ their own specialist advisors
who liaise directly with the Group SHEQ 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.
Sustainability
The Group’s Sustainability Report, which includes its report on
corporate social responsibility, is on pages 25 to 26.
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, 73, 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 Brown – Director, 57, was appointed to the Board on
3 April 2017. He is currently Group Chief Executive of The Go-Ahead
Group Plc, a position he has held since 2011. Prior to that, he was
Managing Director of Surface Transport for Transport for London
and Chief Executive of Go-Ahead’s London Bus business. He is
also a director of the Rail Delivery Group Limited.
David Forbes – Director, 58, 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 succeeded
Roy Harrison OBE as Chairman after the 2018 Annual General Meeting.
Executive Directors
Andries Liebenberg – Director 50, 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 ten years.
Paul Scott – Director, 54, was appointed to the Board as
Engineering Services Director on 21 July 2014 and as Chief
Executive on 1 October 2016. Paul has been with the Group for
nineteen years, serving as Managing Director of Shepley Engineers
Limited, the Group’s nuclear services business prior to assuming
the Group-wide Engineering Services role.
Sean Wyndham‑Quin – Director, 38, was appointed to the
Board on 8 November 2017 and as Chief Financial Officer on
29 November 2017. Previously, he served as a partner at SPARK
Advisory Partners, a business he co-founded in early 2012. Prior
to that he worked for Brewin Dolphin and Ernst & Young where
he qualified as a chartered accountant.
David Forbes and Andries Liebenberg retire by rotation at the
2019 Annual General Meeting (“AGM”) and offer themselves for
reappointment. The Board recommends their reappointment as it
considers that they continue to perform their roles well and bring
considerable strategic, financial and management experience
to the Group’s business.
The Articles of Association provide that each Director shall be
indemnified by the Company against losses, costs and expenses
he may sustain or incur in connection with the performance of his
duties of office, to the fullest extent permitted by law. The Company
has purchased and maintained throughout the year directors’ and
officers’ liability insurance in respect of its Directors.
Directors’ interests
The beneficial interests of the Directors (and their immediate family
members) in the shares of the Company and options for shares are
set out on pages 46 and 47. No Director has any interest in any
other Group company. Details of the Directors’ remuneration and
service contracts appear on pages 45 and 46.
42
Renew Holdings plc Annual Report and Accounts 2018
GOVERNANCE Disclosable interests
As at 26 November 2018, the Company has been notified of the
following disclosable interests in the voting rights of the Company:
Number
of ordinary
shares
Percentage
of issued
share capital
Octopus Investments Nominees Limited
12,196,239
16.20%
Investec Wealth & Investment Limited
6,048,812
Charles Stanley Group PLC
Canaccord Genuity Group Inc.
Polar Capital LLP
4,994,849
4,328,000
3,934,814
8.04%
6.64%
5.75%
5.23%
BlackRock Asset Management Limited
3,042,283
4.04%
Soros Fund Management LLC
2,637,832
3.50%
Rathbone Brothers PLC
2,315,381
3.08%
Hargreaves Lansdown PLC
2,288,027
3.04%
Share capital
As at the date of this report, the total number of shares in issue
(being ordinary shares of 10p each) is 75,267,507. During the
year, the Company has not bought back any of its own shares.
12,676,056,503 new ordinary shares of 10p each were issued at
355p during the year as part of the placing to fund the acquisition
of QTS Group Limited in May 2018.
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 27 November 2018.
By Order of the Board
Sean Wyndham‑Quin
Company Secretary
27 November 2018
Company number 650447
Annual Report and Accounts 2018 Renew Holdings plc
43
Directors’ remuneration report
Introduction
Dear Shareholder
On behalf of the Remuneration Committee I am pleased to present
the Directors’ remuneration report (the “Remuneration Report”) for
the financial year ended 30 September 2018.
The Remuneration Reports sets out the details of the Remuneration
Committee including its terms of reference, the Company’s
Remuneration Policy, Remuneration for the year ended 30
September 2018 and the intended Remuneration for the year
ending 30 September 2019.
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 Remuneration
Committee 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 this report
works towards including 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 Remuneration Report will be presented at the AGM on
30 January 2019 and will be the subject of an advisory vote.
Remuneration Committee
The Remuneration Committee is chaired by D A Brown and comprises
D M Forbes and J Bishop. The Committee held three meetings during
the financial year to discuss remuneration arrangements. D A Brown
was appointed Chairman of the Remuneration Committee on
31 January 2018 succeeding D M Forbes who became Chairman
of Renew and was therefore unable to continue as Chairman of the
Remuneration Committee in line with best practice. On the same
day R J Harrison resigned as Chairman of the Company and from
the Remuneration Committee.
At the last annual general meeting, votes on the advisory resolution
relating to the Remuneration Report were cast as follows:
In favour
– 25,745,809 (95.6 per cent)
Against
– 1,184,833 (4.4 per cent)
Total votes cast
– 26,930,642 (100 per cent)
The Remuneration Committee typically 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 where appropriate. No material matters have been raised by
shareholders relating to directors’ remuneration during the year.
Terms of reference
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
Remuneration 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 Remuneration 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
Remuneration Committee refers to published survey data. The Board
determines the terms and conditions of non-executive Directors.
There are four main elements to the remuneration packages of the
Executive Directors and other senior executives:
• basic salary and benefits;
• annual bonus awards;
• long-term equity incentive plans; and
• pension arrangements.
Basic salary and benefits
Basic salaries are reviewed annually by the Remuneration
Committee and adjusted where the committee believes that
adjustments are appropriate to reflect performance, changed
responsibilities and/or market conditions. Other benefits for
Executive Directors include car allowances and certain medical
cover for 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 linked directly to the financial performance of the Group.
The Executive Directors’ bonuses are related to the performance of
the Group as a whole, including the health and safety performance
of the Group. In the year ended 30 September 2018, A.Liebenberg’s
bonus criteria related to the performance of the businesses for
which he is directly responsible however in future his bonus criteria
will be aligned with the other Executive Directors. 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.
44
Renew Holdings plc Annual Report and Accounts 2018
GOVERNANCE
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 the 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 an Executive 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.
The constituents of the comparator group are reconsidered by
the Remuneration Committee each year. All TSR calculations are
based on the average of the opening and closing share price over
a 30 day period prior to the commencement and end of the
performance period.
The absolute TSR growth target requires the Company’s TSR over
the three year performance period to have grown by more than 25
per cent. For aggregate 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 aggregate TSR growth is 25 per cent or less. The
Remuneration Committee consider this mechanism important
to ensure that it meets the overall objectives of the LTIP.
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 nil
options outstanding under the ESOS. The Remuneration
Committee does not currently intend to grant any further options
under the ESOS. 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.
Executive Director minimum shareholding requirement
The remuneration committee has this year introduces a minimum
shareholding requirement for the Executive Directors whereby
each Executive Director is required by the Remuneration
Committee to build up and hold a minimum of 100% of their
basic annual salary equivalent value in ordinary shares in the
Group before they are permitted to sell any shares. In exceptional
circumstances, and at the sole discretion of the Remuneration
Committee, or if shares are sold to cover a tax liability that arises as
a result of an exercise of an LTIP, this requirement may be waived.
Remuneration for the year ending 30 September 2018
Service contracts and letters of appointment
The Company’s policy is for all of the Executive Directors to have
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 at least every 3 years.
The service contracts of the Directors, who served during the year ended 30 September 2018 and were in post on that date, include the
following terms:
Directors
D M Forbes
J Bishop
D A Brown
P Scott
A Liebenberg
S C Wyndham-Quin
Executive/Non-executive
Non-executive
Non-executive
Non-executive
Executive
Executive
Executive
Date of contract
1 June 2011
Unexpired term
Rolling one month
1 September 2008
Rolling one month
2 April 2017
1 July 2014
31 March 2016
8 November 2017
Rolling one month
Rolling one year
Rolling one year
Rolling one year
Notice period
(months)
1
1
1
12
12
12
S C Wyndham-Quin was appointed to the Board on 8 November 2017. J Samuel resigned from the Board on 29 November 2017 and
R J Harrison resigned from the Board on 31 January 2018.
Annual Report and Accounts 2018 Renew Holdings plc
45
Directors’ remuneration report continued
Remuneration for the year ending 30 September 2018 continued
Directors’ remuneration
Information is provided below for Directors who served during the financial year and as at 30 September 2018:
Notes
Salary/fees
£000
Bonuses
£000
LTIP
£000
Pension
£000
Benefits
£000
Executive Directors
P Scott
A Liebenberg
S Wyndham-Quin
J Samuel
Non-executive Directors
D M Forbes
J Bishop
D A Brown
R J Harrison
Notes:
1,2,3,4,5
2,3,4,5,6
2,4,5,7
1,4,5,8
9,11
12
10,12
9
283
209
189
43
62
42
42
22
163
193
121
—
—
—
—
—
155
113
—
—
—
—
—
—
—
—
—
—
—
—
—
—
62
49
42
11
—
—
—
—
Total
emoluments
2018
£000
Total
emoluments
2017
£000
663
564
352
54
473
455
—
946
1,633
1,874
62
42
42
22
34
34
17
63
1,801
2,022
1
The highest paid Director for 2018 was P Scott who received emoluments of £663,000 (2017: J Samuel £946,000).
2
Bonuses were earned by P Scott, A Liebenberg and S Wyndham-Quin during the current financial year and will be paid in the year ending 30 September 2019.
3
Details of the LTIP options exercised during the year can be found in the Directors’ remuneration report.
4
Benefits include car allowances and certain medical cover for the Director and immediate family.
5
Executive Directors received payments amounting to 15 per cent of their basic salary, in lieu of Company pension contributions. These were paid through the payroll and taxed as
salary and are included in Benefits above.
6
All of A Liebenberg’s emoluments were borne by a subsidiary undertaking.
7
S Wyndham-Quin was appointed as a Company Director on 8 November 2018 and took responsibility as Chief Financial Officer on 29 November 2018. Emoluments represent the
period from 8 November 2017 until 30 September 2018.
8
J Samuel resigned as a Company Director on 29 November 2017 and so the emoluments represent the period from 1 October 2017 until 29 November 2017.
9
R J Harrison resigned as the Non-executive Chairman on 31 January 2018 and so the emoluments represent the period from 1 October 2017 until 31 January 2018. D M Forbes
succeeded R J Harrison as Chairman on 31 January 2018.
10 D A Brown was appointed as a Non-executive Director with effect from 2 April 2017 and so the comparative emoluments represent the period from 2 April 2017 until 30 September 2017.
11 D M Forbes remuneration increased from 1 February 2018 to £75,000 per annum following his appointment as Chairman.
12 J Bishop and D A Brown’s fees increased from 1 February 2018 to £40,000 per annum plus an additional £5,000 per annum for chairing a board committee.
Annual bonus awards
The Company provides a bonus incentive scheme for Executive
Directors which (other than A Liebenberg) is linked to the
performance of the Group.
At the beginning of the current financial year, the Remuneration
Committee agreed a target for operating profit before exceptional
items for the Group. In this year, if the Group meets that target, then
the Executive Directors were entitled to receive an annual bonus
equal to 50 per cent of their salary. The level of over and under
performance results in the level of annual bonus to be varied on a
straight-line basis, with the maximum bonus of 100 per cent of salary
being paid if the performance exceeded the target by 30 per cent
with no bonus being payable if performance was 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 2018, 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. The target was increased in May 2018 to £29.5m
following the acquisition of QTS Group Limited and the closure
of Forefront. The operating profit before exceptional items for the
Group exceeded this revised target by approximately 5.4 per cent.
The annual bonuses were reduced by 2.5% for P Scott and
S Wyndham-Quin because their respective Health & Safety
targets were not met during the year.
Accordingly, under the terms of the scheme, the Executive Directors
are entitled to receive an annual bonus equal to 57.6 per cent of
salary. A Liebenberg’s annual bonus arrangements were set in
relation to the business unit over which he has direct responsibility.
That business unit’s performance was such that A Liebenberg is
entitled to receive a bonus of 91.7 per cent of his salary. The bonus
for A Liebenberg was reduced by 5% because his Health & Safety
targets were not met during the year.
Long‑term equity incentive plans
The market price of the Company’s shares at 28 September 2018
(being the last trading day of the month) was 392p and the range
of market prices during the year was between 365p and 457p.
Information is provided below for Directors who served during the
financial year and as at 30 September 2018.
Pursuant to the LTIP, the Board has granted options to the Executive
Directors as set out in the following table.
46
Renew Holdings plc Annual Report and Accounts 2018
GOVERNANCE 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.
Number of Ordinary Shares under option
Exercisable between
28 Jan 2019 & 27 Jan 2023
Exercisable between
25 Nov 2019 & 24 Nov 2026
Exercisable between
23 Nov 2020 & 22 Nov 2027
LTIP Options
P Scott
A Liebenberg
S Wyndham-Quin
67,700
58,000
—
91,400
67,700
—
99,000
73,500
73,500
Performance criteria for the vesting of the share options under the LTIP are set out in the Remuneration Policy above and in Note 23 to
the Accounts.
During the year, options awarded on 7 January 2015 amounting
to 107,136 shares in aggregate, vested in accordance with their
vesting conditions. These options were subsequently exercised
on 8 January 2018 and 35,081 shares were issued to P Scott and
25,614 shares to A Liebenberg. Additionally, following his retirement
from the Board, J Samuel was entitled to exercise a proportion of
LTIP and CSOP options which had been awarded on 7 January 2015,
on 27 January 2016 and on 24 November 2016. He exercised these
options on 8 January 2018 which resulted in his acquiring a further
46,411 shares which he immediately sold. His remaining entitlement
was settled in cash. All of J Samuel’s option entitlements have now
been exercised. The level of vesting reflects the material 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 £6,106 and £4,071 were made to P Scott and
A Liebenberg respectively representing dividends accrued during
the vesting period on the shares vested as detailed above.
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; P Scott, A Liebenberg
and S Wyndham-Quin 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 2018 as follows:
Ordinary Shares of 10p each
30 September
2018
30 September
2017
D M Forbes
J Bishop
D A Brown
P Scott
A Liebenberg
S Wyndham-Quin
35,000
15,024
7,042
29,042
17,634
11,628
20,000
9,390
—
5,000
Remuneration for the year ending 30 September 2019
Basic salary and benefits
The basic salary of P Scott and S Wyndham-Quin has increased
by 5.9% and 7.1% to £300,000 and £225,000 respectively to
reflect the management of a larger business and the additional
responsibilities that entails. A. Liebenberg’s salary increased by 2.5%
to £215,373 which is 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 structure of the annual bonus scheme for the year ending
30 September 2019 has been amended to be comparable with
similarly sized companies in the markets in which the Group
operates. Executive Directors will therefore be entitled to receive
a cash bonus of 100 per cent of their basic salary if the Group
achieves target operating profit and a maximum of 130 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. Commencing in respect of
the year ending 30 September 2019, any bonus payable in excess
of 100 per cent of basic salary will be paid in shares and will be
subject to the minimum shareholding requirements introduced
this year and set out earlier in this report. As in previous years, the
bonus payable will be reduced by the Remuneration Committee
if certain Health & Safety targets are not achieved during the year.
Long‑term equity incentive plan
The Remuneration Committee have made annual awards under
the LTIP since it was set up in 2012 and will do so again this year.
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 for each participant in the Scheme are limited in amount
to 150 per cent of that participants basic salary. The fifth tranche
of options granted under the LTIP, granted on 27 January 2016
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 27 November 2018 and signed on its behalf by:
David A Brown
Chairman of the Remuneration Committee
27 November 2018
Annual Report and Accounts 2018 Renew Holdings plc
47
Statement of Directors’ responsibilities
in respect of the Annual Report and the financial statements
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 are responsible for such internal control as they
determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due
to fraud or error, and 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.
Under applicable law and regulations, the directors are also
responsible for preparing a Strategic Report and a Directors’ Report
that complies with that law and those regulations.
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.
The directors are responsible for preparing the Annual Report
and the Group and parent Company financial statements in
accordance with applicable law and regulations.
Company law requires the directors to prepare Group and parent
Company financial statements for each financial year. Under
the AIM Rules of the London Stock Exchange they are required
to prepare the Group financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union (IFRSs as adopted by the EU) and applicable law
and they 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:
• select suitable accounting policies and then apply them consistently;
• make judgements and estimates that are reasonable, relevant,
reliable and prudent;
• for the Group financial statements, state whether they have been
prepared in accordance with IFRSs as adopted by the EU;
• for the parent Company financial statements, state whether
applicable UK accounting standards have been followed,
subject to any material departures disclosed and explained
in the financial statements;
• assess the Group and parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern; and
• use the going concern basis of accounting unless they either intend
to liquidate the Group or the parent Company or to cease operations,
or have no realistic alternative but to do so.
48
Renew Holdings plc Annual Report and Accounts 2018
GOVERNANCE Independent auditor’s report
to the members of Renew Holdings plc
1 Our opinion is unmodified
We have audited the financial statements of Renew Holdings plc (“the Company”) for the year ended 30 September 2018 which comprise
the Group income statement, Group statement of comprehensive income, Group statement of changes in equity, Group balance sheet,
Group cashflow statement, Company balance sheet, Company statement of comprehensive income, Company statement of changes in
equity, and the related notes, including the accounting policies in notes 1 and A.
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 2018
and of the Group’s profit for the year then ended;
• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards as
adopted by the European Union (IFRSs as adopted by the EU);
• the parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 102
The Financial Reporting Standard applicable in the UK and Republic of Ireland; and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical
requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a
sufficient and appropriate basis for our opinion.
2 Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the financial statements
and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those
which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the
engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit
matters, in decreasing order of audit significance, were as follows:
Recognition of
revenue and profit,
and carrying value
of contract balances
Recurring risk
£126.1 million of
contract balances
(2017: £111.9 million).
£541.5 million of revenue
(2017: £545.9 million)
Refer to page 56
(accounting policy)
and page 69
(financial disclosures).
Subjective estimate
The carrying value of the contract
balances as well as the revenue and
profit recognised are based on
estimates of costs to complete, a
level of unagreed variations and
judgement as to the recoverability
of those variations.
Estimated contract costs are
impacted by a variety of
uncertainties that depend on
the outcome of future events
that could result in revisions
throughout the contract period.
Our procedures included:
• Test of detail: Identifying contracts with risk indicators, including
low margin or loss making contracts, large carrying values of
amounts receivable on contracts and contracts with known
recoverability risks. For these contracts we agreed the year-end
contract balance to cash recovered post period end or the work
certified to date;
• Test of detail: Challenging the Group in respect of contract
balances in the sample identified, where cash has not been
received or work has not been certified post year end, by
inspecting correspondence with the customer and where relevant
third party legal correspondence, to corroborate the position;
• Test of detail: Inspecting a sample of contract agreements
with customers to identify key terms and conditions, including
contracting parties, contract sum, the scope of work and
evaluating whether these key terms and conditions had been
appropriately reflected in the total estimated revenue and costs
to complete in the forecast of the outcome of the contract;
• Historical comparisons: Assessing the reliability of the directors’
forecasting process by performing a retrospective review by
comparing the final margin achieved on a sample of completed
contracts with previous margin estimates made for those
contracts.; and
• Assessing transparency: Assessing the adequacy of the Group’s
disclosures on revenue recognition and the degree of estimation
involved in arriving at the contract balances and associated
revenue and profit recognition.
Annual Report and Accounts 2018 Renew Holdings plc
49
Independent auditor’s report continued
to the members of Renew Holdings plc
2 Key audit matters: our assessment of risks of material misstatement continued
Accounting for
the acquisition
of QTS Group
New risk
£71.7 million of goodwill
& intangible assets.
Refer to page 57
(accounting policy)
and page 81
(financial disclosures).
.
Subjective valuation
The Group acquired QTS Group
during the year for £80m.
The determination of separately
identifiable intangible assets arising
on business combinations involves a
degree of judgement.
Valuation of the intangible assets
identified by the Group may be
complex and/or sensitive to
underlying assumptions around future
cash flows and discount rates.
Forecast‑based valuation
The carrying amount of the parent
company’s investments in subsidiaries
and group debtor balance are
significant. The estimated recoverable
amount of these balances is
subjective due to the inherent
uncertainty in forecasting trading
conditions and cash flows used
in the budgets.
Recoverability of
parent company’s
investment in
subsidiaries &
debt due from
group entities
Recurring risk
£167.3 million
(2017: £100.8 million)
of investments
in subsidiaries.
£63.1 million (2017:
£69.0 million) of debt
due from group entities.
Refer to page 85
(accounting policy)
and page 87
(financial disclosures).
Our procedures included:
• Methodology choice: Assessing, using our own valuation
specialist, whether the Group’s intangible asset valuations were
performed in accordance with relevant accounting standards
and acceptable valuation practice;
• Evaluating assumptions: Challenging the revenue and margin
forecast and discount rate assumptions that are used by the
Group to determine the value of intangible assets using our
valuation specialists, our knowledge of the business and industry,
and through comparison to externally derived data; and
• Assessing transparency: considering the adequacy of the
Group’s disclosures in respect of the assumptions inherent with
the valuation of intangible assets.
• Benchmarking assumptions: Challenging the assumptions used
in the cash flows included in the budgets based on our
knowledge of the Group and the markets in which the
subsidiaries operate;
• Historical comparisons: Assessing the reasonableness
of the budgets by considering the historical accuracy of
the previous forecasts;
• Our sector experience: Evaluating the current level of trading,
including identifying any indications of a downturn in activity,
by examining the post year end management accounts and
considering our knowledge of the Group and the market; and
• Assessing transparency: Assessing the adequacy of the
parent company’s disclosures in respect of the investment
in subsidiaries/group debtor balance.
3 Our application of materiality and an overview of the scope of our audit
Materiality for the Group financial statements as a whole was set at £1.4 million (2017: £0.8 million), determined with reference to
a benchmark of Group profit before taxation from continuing operations (normalised to exclude the loss on disposal of Forefront,
impairment of goodwill and QTS acquisition expenses, totalling £11.5 million), of which it represents 5% (2017: 5%).
Materiality for the parent company financial statements as a whole was set at £1.16 million (2017: £0.75 million), determined with
reference to a benchmark of company net assets, of which it represents 1% (2017: 1.0%).
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.075 million
(2017: £0.04 million), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Of the group’s 29 (2017: 28) reporting components, we subjected 22 (2017: 26) to full scope audits for group purposes. These audits
covered 100% (2017: 100%) of total Group revenue, 100% (2017: 96%) of Group profit before tax, and 99% (2017: 94%) of Group total
assets. Component materiality levels were set individually for all components having regard to the mix of size and risk profile of the
Group across the components, and ranged from £1,340,000 to £34,500 (2017: £750,000 to £1).
The work on all component was performed by the Group team. The group team performed procedures on the items excluded from
profit before tax before continuing operations.
4 We have nothing to report on going concern
We are required to report to you if we have anything material to add or draw attention to in relation to the directors’ statement in note 1
to the financial statements on the use of the going concern basis of accounting with no material uncertainties that may cast significant
doubt over the Group and Company’s use of that basis for a period of at least twelve months from the date of approval of the financial
statements. We have nothing to report in these respects.
50
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 5 We have nothing to report on the other information in the Annual Report
The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion
on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as
explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the
information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work
we have not identified material misstatements in the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
• we have not identified material misstatements in the strategic report and the directors’ report;
• in our opinion the information given in those reports for the financial year is consistent with the financial statements; and
• in our opinion those reports have been prepared in accordance with the Companies Act 2006.
6 We have nothing to report on the other matters on which we are required to report by exception
Under the Companies Act 2006, we are required 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 and the part of the Directors’ Remuneration Report which we were engaged to audit 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.
We have nothing to report in these respects.
7 Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page 48, the directors are responsible for: the preparation of the financial statements
including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation
of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative
but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does
not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.
8 The purpose of our audit work and to whom we owe our responsibilities
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.
David Morritt (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
1 Sovereign Square
Sovereign Street
Leeds
LS1 4DA
27 November 2018
Annual Report and Accounts 2018 Renew Holdings plc
51
Group income statement
for the year ended 30 September
Before
exceptional
items and
amortisation
of intangible
assets
2018
Exceptional
items and
amortisation
of intangible
assets
(see Note 3)
2018
Note
£000
£000
Before
exceptional
items and
amortisation
of intangible
assets
2017
(*Restated)
£000
Exceptional
items and
amortisation
of intangible
assets
(see Note 3)
2017
(*Restated)
£000
Total
2018
£000
Revenue: Group including
share of joint venture
Less share of joint
venture’s revenue
Group revenue from
continuing activities
Cost of sales
Gross profit
Administrative expenses
Share of post-tax result
of joint venture
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 operations
Profit for the year
attributable to equity
holders of the parent
company
Basic earnings per share
from continuing activities
Diluted earnings per share
from continuing activities
Basic earnings per share
Diluted earnings per share
Total
2017
(*Restated)
£000
545,932
(2,239)
543,693
(481,065)
62,628
(42,699)
2
2
2
541,469
(853)
540,616
(469,008)
71,608
—
—
—
—
—
541,469
545,932
(853)
(2,239)
540,616
543,693
(469,008)
(481,065)
71,608
(40,504)
(15,626)
(56,130)
14
—
—
—
—
—
—
—
—
(8,289)
31,104
(15,626)
15,478
4
(1,080)
306
30,334
(6,364)
—
—
—
(15,626)
841
4
(1,080)
306
14,708
(5,523)
62,628
(34,410)
166
28,384
30
(528)
197
28,083
(4,838)
—
166
(8,289)
20,095
—
—
—
(8,289)
388
30
(528)
197
19,794
(4,450)
23,970
(14,785)
9,185
23,245
(7,901)
15,344
(2,412)
(2,917)
6,773
13.60p
13.52p
10.03p
9.97p
12,427
24.54p
24.39p
19.88p
19.75p
3
5
5
5
7
4
9
9
9
9
*
The prior year comparatives for the financial year ended 30 September 2017 have been restated following the reclassification of two discontinued subsidiary undertakings (see Note 4).
52
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 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 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
Group statement of changes in equity
for the year ended 30 September
Note
27
2018
£000
6,773
5,477
(1,917)
3,560
6
6
2017
£000
12,427
(2,089)
806
(1,283)
(42)
(42)
10,339
11,102
Share
premium
account
£000
Capital
redemption
reserve
£000
Cumulative
translation
adjustment
£000
Share
based
payments
reserve
£000
Retained
earnings
£000
Total
equity
£000
8,481
3,896
1,347
571
366
20,893
Share
capital
£000
6,232
27
1,154
109
(42)
At 1 October 2016
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
At 30 September 2017
6,259
9,635
3,896
1,305
680
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
1,268
42,049
18
6
At 30 September 2018
7,527
51,684
3,896
1,311
698
10,355
75,471
Annual Report and Accounts 2018 Renew Holdings plc
53
12,427
(5,226)
12,427
(5,226)
1,181
109
(42)
(2,089)
(2,089)
806
6,284
6,773
(6,262)
806
28,059
6,773
(6,262)
43,317
18
6
5,477
5,477
(1,917)
(1,917)
Group balance sheet
at 30 September
Non‑current assets
Intangible assets
– goodwill
– other
Property, plant and equipment
Investment in joint venture
Retirement benefit asset
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 obligation
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:
D M Forbes
Chairman
27 November 2018
54
Renew Holdings plc Annual Report and Accounts 2018
Note
2018
£000
2017
£000
57,982
2,679
13,497
237
9,692
2,057
86,144
3,900
1,500
115,598
220
6,967
128,185
214,329
—
(2,376)
(760)
(3,892)
(314)
(7,342)
105,282
15,991
19,710
123
20,424
1,592
163,122
1,691
1,500
129,376
—
9,179
141,746
304,868
(21,873)
(2,253)
—
(9,912)
(298)
(34,336)
(8,752)
(3,100)
(179,913)
(173,245)
(2,100)
(2,245)
(2,051)
(2,547)
—
(36)
(195,061)
(178,928)
(229,397)
(186,270)
75,471
7,527
51,684
3,896
1,311
698
10,355
75,471
28,059
6,259
9,635
3,896
1,305
680
6,284
28,059
10
10
11
14
27
7
12
13
15
17
19
20
27
7
21
19
18
20
21
23
24
24
24
24
24
FINANCIAL STATEMENTS Group cashflow statement
for the year ended 30 September
Profit for the year from continuing operating activities
Share of post-tax trading result of joint venture
Impairment and amortisation of intangible assets
Loss on disposal of discontinued business
Depreciation
Profit on sale of property, plant and equipment
Expense in respect of share option exercise
(Increase)/decrease in inventories
Increase in receivables
(Decrease)/increase in payables and provisions
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 expense
Interest paid
Income taxes paid
Income tax expense
Net cash inflow from continuing operating activities
Net cash inflow/(outflow) from discontinued operating activities
Net cash inflow from operating activities
Investing activities
Interest received
Dividend received from joint venture
Proceeds on disposal of property, plant and equipment
Purchases of property, plant and equipment
Acquisition of subsidiaries net of cash acquired
Net cash outflow from investing activities
Financing activities
Dividends paid
Issue of share equity
New loan
Loan repayments
Repayments of obligations under finance leases
Net cash inflow/(outflow) from financing activities
Net increase/(decrease) in continuing cash and cash equivalents
Net increase/(decrease) in discontinued cash and cash equivalents
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Bank balances and cash
Note
14
10
3
11
3
27
27
24
5
5
7
14
8
19
31
2018
£000
9,185
—
4,157
9,930
4,356
(469)
—
(1,190)
(4,974)
(3,054)
64
(5,772)
18
(4)
774
(1,080)
(1,717)
5,523
15,747
825
16,572
4
114
788
(1,329)
(75,874)
(76,297)
(6,262)
43,317
35,000
(7,475)
(2,699)
61,881
1,331
825
2,156
6,967
56
9,179
9,179
2017
(*Restated)
£000
15,344
(166)
8,080
—
3,675
(501)
1,181
2,895
(24,418)
13,685
60
(5,291)
109
(30)
331
(528)
(2,145)
4,450
16,731
(1,693)
15,038
30
—
973
(2,150)
(7,024)
(8,171)
(5,226)
—
—
(6,200)
(2,542)
(13,968)
(5,408)
(1,693)
(7,101)
14,084
(16)
6,967
6,967
* The prior year comparatives for the financial year ended 30 September 2017 have been restated following the reclassification of two discontinued subsidiary undertakings (see Note 4).
Annual Report and Accounts 2018 Renew Holdings plc
55
Notes to the accounts
1 Accounting policies
Presentation of consolidated financial statements
The consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (“IFRSs”)
as adopted by the EU (“adopted IFRSs”). The financial statements are presented in sterling since this is the currency in which the majority
of the Group’s transactions are denominated.
Accounting estimates and judgements
In the preparation of these financial statements the Board has made certain judgements and estimates which impact the measurement
of various assets and liabilities in the Group balance sheet, the value of transactions recorded in the Group income statement and the
movements in equity as shown in the Group statement of changes in equity. The actual financial outcomes may ultimately differ from
that which is indicated by these judgements and estimates. Estimates and judgements are reviewed by management and the Board on
an ongoing basis and changes which may arise in them are reflected in the financial statements for the period in which such changes
are made.
The Board has determined that the following areas are those in which estimates and judgements have been made and where material
impacts could arise in the financial statements were such estimates and judgements to be varied.
a) Accounting for construction contracts in accordance with IAS 11 “Construction Contracts”
IAS 11 requires management to estimate the total expected costs on a contract and the stage of contract completion in order to determine
both the revenue and profit to be recognised in an accounting period. The Group has control and review procedures in place to monitor,
and evaluate regularly, the estimates being made to ensure that they are consistent and appropriate. This includes reviewing the independent
certification of the value of work done, the progress of work against contracted timescales and the costs incurred against plan.
b) Impairment of goodwill in accordance with IAS 36 “Impairment of Assets”
In accordance with IAS 36, goodwill is tested annually for impairment by comparing the carrying value of goodwill with the recoverable
amount which is determined by an estimation of the value in use of the related cash generating unit to which the goodwill is attributed.
The calculation of the value in use requires estimates to be made of the future cash flows of the cash generating unit and the timescale
over which they will arise. Estimated growth rates and discount factors are also used in the calculation to estimate the net present value
of the cash flows. More information is given in Note 10 to these financial statements.
c) Accounting for the defined benefit pension schemes in accordance with IAS 19 “Employee Benefits”
Independent actuaries calculate the Group’s asset/liability in respect of the defined benefit pension schemes. The actuaries make
assumptions as to discount rates, salary escalations, net interest on scheme assets/liabilities, 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 asset/liability
may differ from that shown in these financial statements. More information is given in Note 27 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.
On an ongoing basis the Group is party to various contractual or legal disputes, the outcome of which cannot be assessed with a high
degree of certainty. A liability is recognised only where, based on the Group’s view or legal advice, it is considered probable that an
outflow of resource will be required to settle a present obligation that can be measured reliably. Disclosure of contingent liabilities is made
in Note 26 unless the possibility of a loss arising is considered remote. These potential liabilities are subject to uncertain future events, may
extend over several years and their timing may differ from current assumptions. Management applies judgement in determining whether
a liability should be recognised in the balance sheet or disclosed as a contingent liability.
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.
56
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 1 Accounting policies continued
f) Accounting for discontinued operations in accordance with IFRS 5 “Non‑current assets held for sale and discontinued
operations” continued
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 remeasurement
although gains are not recognised in excess of any cumulative impairment loss. Any impairment loss on a disposal group first is allocated to
goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred
tax assets, employee benefit assets and investment property, which continue to be measured in accordance with the Group’s accounting
policies. Intangible assets and property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated.
In accordance with IFRS 5, the above policy is effective from the start of the accounting period in which the operation meets the criteria
to be classified as held for sale.
A discontinued operation is a component of the Group’s business that represents a separate major line of business or geographical area
of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a
discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an
operation is classified as a discontinued operation, the comparative income statement is restated as if the operation has been
discontinued from the start of the comparative period.
g) Carrying value of intangible fixed assets
A number of commercial and financial assumptions and judgements have been made to support both the initial recognition and the current
carrying value of the intangible asset, categories of goodwill, customer related intangible assets, order book and software for own use.
The Group undertakes a fair value assessment of any acquisition during the year. This assessment includes a detailed analysis of the
accounting policies and methods adopted by the acquired business and an estimate of the value of the separately identifiable intangible
assets, principally customer related intangible assets and order book. The estimate requires the Directors to estimate the likely revenues
from and costs of the delivery of the future services to the customers of the acquired business at the date that the business was acquired.
(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.
EU endorsed standards effective in the year
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 has carried out a systematic review to ensure that the impact and effects
of IFRS 15 and IFRS 16 are fully understood and any necessary changes to current accounting procedures can be implemented in time. In
respect of IFRS 15 the Group has reviewed all of its existing major contract types and does not consider that any material adjustments to
recorded revenue or to its accounting policies are required. This is because, under IFRS 15, the services provided under a typical contract
for the Group represent one performance obligation. Furthermore, revenue on construction contracts meets the criteria for recognition
over time under IFRS 15 and revenue will be recognised by measurement of contract progress and by reference to cost to complete.
This is similar to IAS 19. IFRS 15 will apply to the Group for the year ending 30 September 2019.
In respect of IFRS 16, no material net impact from the adoption of this new standard is expected, although assets and liabilities will
increase correspondingly.
IFRS 9 is not expected to have a material impact on the financial statements of the Group.
The Group has chosen not to adopt any of the standards and interpretations noted below earlier than required.
International Financial Reporting Standards
Applies to periods beginning after
IFRS 9 Financial Instruments
IFRS 15 Revenue from Contracts with customers
IFRS 16 Leases
January 2018
January 2018
January 2019
The other standards and interpretations that are applicable for the first time in the Group’s financial statements for the year ended
30 September 2018 have had no effect on these financial statements.
(ii) Basis of consolidation
The Group accounts consolidate the accounts of the Company and its subsidiary undertakings. The results and net assets of undertakings
acquired are included in the Group income statement and balance sheet using the acquisition method of accounting. The results of
undertakings acquired/disposed of are included from the date the Group obtains/loses control as defined in IFRS 10. Business combinations
are accounted for under IFRS 3 Business combinations using the purchase method. The Group’s interests in joint ventures are accounted
for using the equity method. Under this method the Group’s share of the profits less losses of joint ventures is included in the consolidated
income statement and its interest in their net assets is included in investments in the consolidated balance sheet. Where the share of
losses exceeds the Group’s interest in the entity and there is no obligation to fund these losses, the carrying value is reduced to nil,
following which no further losses are recognised.
Annual Report and Accounts 2018 Renew Holdings plc
57
Notes to the accounts continued
1 Accounting policies continued
(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 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 and claims 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. For the purpose of such impairment reviews, goodwill is allocated to the relevant
cash generating unit (CGU), or group of CGUs which are expected to benefit from synergies of the combination. A goodwill impairment
loss is recognised in the income statement for the amount by which the carrying value of the related CGU, or group of CGUs,
exceeds the recoverable amount, which is the higher of a CGU’s net realisable value and its value in use.
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)
Intangible assets acquired as part of a business combination are capitalised separately from goodwill if the fair value can be measured reliably
on initial recognition. 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.
(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 land 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.
58
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS
1 Accounting policies continued
(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 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 pension schemes expected to arise from employee
service in the period is charged to the income statement. The Group 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 asset/(liability) taking account of changes arising as a result of contributions and benefit payments. This is recognised in the income
statement. Movements in actuarial measurement of the net defined benefit asset/(liability) is recognised in other comprehensive income
in the period in which it occurs. Pension scheme surpluses, to the extent they are considered recoverable, or deficits are recognised in full
and presented on the face of the Group balance sheet.
(xvi) Defined contribution pension plans
Contributions to defined contribution pension plans are charged to the income statement as incurred.
(xvii) Taxation
The tax charge is composed of current tax and deferred tax, calculated using tax rates that have been enacted or substantively enacted
by the balance sheet date. Current tax and deferred tax are charged or credited to the income statement, except when they relate to
items charged or credited directly to equity, in which case the relevant tax is also dealt with in equity.
Current tax is based on the profit for the year. Deferred tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the financial statements.
Deferred tax on such assets and liabilities is not recognised if the temporary difference arises from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the temporary
differences can be utilised. The carrying amount of deferred tax assets is reviewed at each balance sheet date.
Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same taxation authority and the Group intends
to settle its current assets and liabilities on a net basis.
(xviii) Foreign currencies
Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated
in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. The income statements of overseas subsidiary
undertakings are translated at the average rate of exchange ruling throughout the financial year. The balance sheets of overseas subsidiary
undertakings are translated at the rate of exchange ruling at the balance sheet date. Exchange differences arising from this policy and arising
on the retranslation of the opening net assets are taken directly to reserves. All other exchange differences are taken to the income statement.
(xix) Financial instruments
Financial assets are divided into the following categories: trade receivables and financial assets at fair value. The Board assigns financial
assets to each category on initial recognition dependant on the purpose for which the asset was acquired. The categorisation of these
assets is reconsidered at each reporting date at which a choice of categorisation or accounting treatment is available. All financial assets
are recognised whenever the Group becomes party to the contractual provisions of the financial instrument. All such assets are initially
recognised at fair value. Derecognition of such assets occurs when the Group’s right to receive cash flows from the asset ceases or the
rights and rewards of ownership have been transferred. All such assets are reviewed for impairment at least annually. Interest and other
cash flows which arise from holding a financial asset 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.
Annual Report and Accounts 2018 Renew Holdings plc
59
Notes to the accounts continued
1 Accounting policies continued
(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 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 37.7% (2017: 34.3%) of Group revenue. No other customer represented more than 10% of the Group’s revenue.
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, 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, Allenbuild Limited.
On 2 February 2018, The Group disposed of Forefront Group Limited, an Engineering Services subsidiary. Following a strategic review
during the year, the Board has decided to close Lovell America Inc, a subsidiary that carried out land development in the USA, which
formed part of the Group’s central activities. The results of these businesses are shown as discontinued operations.
(a) Business analysis
Revenue is analysed as follows:
Engineering Services
Specialist Building
Inter segment revenue
Segment revenue
Central activities
60
Renew Holdings plc Annual Report and Accounts 2018
Group including
share of joint
venture
2018
Less share
of joint
venture
2018
Group revenue
from continuing
activities
2018
Group revenue
from continuing
activities
2017
(Restated)
£000
435,278
106,834
(921)
541,191
2,502
£000
(853)
—
—
£000
466,482
74,208
(1,208)
(853)
539,482
—
1,134
(853)
540,616
543,693
£000
467,335
74,208
(1,208)
540,335
1,134
541,469
FINANCIAL STATEMENTS Before
exceptional
items and
amortisation
of intangible
assets
2017
(Restated)
£000
27,255
2,418
29,673
(1,289)
28,384
(301)
Exceptional
items and
amortisation
of intangible
assets
2017
(Restated)
£000
(8,289)
—
(8,289)
—
2017
(Restated)
£000
18,966
2,418
21,384
(1,289)
(8,289)
20,095
—
(301)
Assets
(Restated)
£000
200,821
83,894
110,354
50,106
2017
Liabilities
(Restated)
£000
(172,900)
(79,002)
(108,684)
(56,530)
Net assets
(Restated)
£000
27,921
4,892
1,670
(6,424)
—
2 Segmental analysis continued
(a) Business analysis continued
Analysis of profit on ordinary activities before taxation from continuing activities
Before
exceptional
items and
amortisation
of intangible
assets
2018
£000
32,520
574
Engineering Services
Specialist Building
Exceptional
items and
amortisation
of intangible
assets
2018
£000
2018
£000
(15,626)
16,894
—
Segment operating profit
33,094
(15,626)
(1,990)
31,104
(770)
—
(15,626)
—
574
17,468
(1,990)
15,478
(770)
Central activities
Operating profit
Net financing costs
Profit on ordinary activities before
income tax
Balance sheet analysis of business segments
2018
Assets
Liabilities
Net assets
30,334
(15,626)
14,708
28,083
(8,289)
19,794
Engineering Services
Specialist Building
Central activities
Discontinued operations
Group eliminations
Group net assets
Other information
Engineering Services
Specialist Building
Central activities
£000
£000
227,038
(164,964)
75,303
189,133
8,530
(70,419)
(169,309)
£000
62,074
4,884
19,824
(19,841)
(11,311)
(195,136)
195,136
—
(230,846)
230,846
304,868
(229,397)
75,471
214,329
(186,270)
28,059
Capital additions
Depreciation
Amortisation
2018
£000
2,121
39
1,183
3,343
£000
3,377
110
869
4,356
£000
4,157
—
—
4,157
Capital additions
(Restated)
£000
2,881
56
946
3,883
2017
Depreciation
(Restated)
£000
2,941
125
609
3,675
Amortisation
£000
2,280
—
—
2,280
(b) Geographical analysis
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.
3 Operating profit
Operating profit is arrived at after charging/(crediting)
Auditor’s remuneration – audit services
Auditor’s remuneration – non 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
2018
£000
360
134
2,424
1,932
1,547
1,533
2,129
(247)
(469)
2017
(Restated)
£000
288
31
1,510
2,165
1,070
1,145
2,544
(185)
(501)
Annual Report and Accounts 2018 Renew Holdings plc
61
Notes to the accounts continued
3 Operating profit continued
During the year, the following services were provided by the Group auditor:
Fees payable to the Company’s auditor for the audit of the financial statements
Fees payable to the Company’s auditor and its associates for other services:
Audit of the financial statements of the Company’s subsidiaries pursuant to legislation
Tax compliance services
Tax advisory services
Other non-audit services
Other assurance services
2018
£000
75
285
—
12
120
2
494
2017
£000
34
254
16
13
—
2
319
Details of the Group’s policy on the use of the auditor for non-audit services, the reason why the auditor was used and how the auditor’s
independence and objectivity was safeguarded, are set out in the Audit Committee report. No services were performed pursuant to
contingent fee arrangements.
Exceptional items and amortisation of intangible assets
Acquisition costs
Impairment of goodwill
Loss on disposal of subsidiary undertaking
Total losses arising from exceptional items
Amortisation of intangible assets (see Note 10)
2018
£000
1,539
6,893
3,037
11,469
4,157
15,626
2017
(Restated)
£000
209
5,800
—
6,009
2,280
8,289
Costs of £1,539,000 were incurred during the acquisition of QTS Group Limited (2017: £209,000 on acquisition of Giffen Group).
The sale of Forefront Group Limited incurred a loss on disposal of net assets of £3,037,000, and resulted in a £6,893,000 write-off
of goodwill attributable to that subsidiary undertaking. The total loss on disposal was £9,930,000.
As a consequence of the disposal, the £657,000 exceptional redundancy and restructuring cost incurred in the year ended
30 September 2017 has been reclassified and is now included within the respective comparative loss for the year from
discontinued operations.
The Board has separately identified the charge of £4,157,000 (2017: £2,280,000) for the amortisation of the fair value ascribed to certain
intangible assets, other than goodwill, arising from the acquisitions of Giffen Holdings Ltd and QTS Group Ltd. Further details are given in
Note 10.
4 Loss for the year from discontinued operations
Revenue
Expenses
Loss before income tax
Income tax credit – benefit of tax losses
Income tax charge
2018
£000
11,412
(13,667)
(2,255)
—
(157)
2017
(Restated)
£000
15,032
(18,524)
(3,492)
575
—
Loss for the year from discontinued operations
(2,412)
(2,917)
On 31 October 2014, the Board reached an agreement to sell Allenbuild Ltd to Places for People Group Ltd 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, in so far as it impacts the Group, is shown in the table above. As a term of the disposal Renew Holdings plc retains both the
benefits and the obligations associated with a number of Allenbuild contracts which are in the process of being finally settled with the client.
On 2 February 2018 Ferns Group Ltd acquired 100% of the ordinary share capital of Forefront Group Ltd, an Engineering Services
subsidiary, for £1. The trading result for this cash generating unit has therefore been included within the loss for the year from
discontinued operations and the comparative figures have been reclassified accordingly.
Following a strategic review of the opportunities available, the Board has decided to close Lovell America Inc, a subsidiary which carried
out land development projects around Maryland in the USA. The exit from a geographical region means that the trading result from this
cash generating unit is included within the loss for the year from discontinued operations and the comparative figures have been
reclassified accordingly. The closure of Lovell America Inc, is not expected to complete until late 2019.
62
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 2018
£000
2017
(Restated)
£000
(825)
(255)
(1,080)
4,782
(4,476)
306
2018
Number
2,675
2,759
1,826
849
2,675
2018
£000
125,030
13,200
6,522
18
(405)
(123)
(528)
4,849
(4,652)
197
2017
(Restated)
Number
2,713
2,693
1,829
884
2,713
2017
(Restated)
£000
120,711
12,226
4,362
109
144,770
137,408
2018
£000
1,801
663
2017
£000
2,022
946
5 Finance income and costs
Finance income
Finance income of £4,000 (2017: £30,000) has been earned during the year on bank deposits.
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 27 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
Executive Directors
P Scott
A Liebenberg
S Wyndham-Quin
J Samuel
Non‑executive Directors
D M Forbes
J Bishop
D Brown
R J Harrison
Salary/fees
£000
Bonuses
£000
LTIP
£000
Benefits
£000
Total emoluments
2018
£000
Total emoluments
2017
£000
283
209
189
43
62
42
42
22
163
193
121
—
—
—
—
—
155
113
—
—
—
—
—
—
62
49
42
11
—
—
—
—
663
564
352
54
1,633
62
42
42
22
473
455
—
946
1,874
34
34
17
63
1,801
2,022
Annual Report and Accounts 2018 Renew Holdings plc
63
Notes to the accounts continued
6 Employee numbers and remuneration continued
Directors’ share options
Pursuant to the long term incentive plan (“LTIP”), 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.
Number of Ordinary Shares under option
LTIP Options
P Scott
A Liebenberg
S Wyndham-Quin
Exercisable
between
28 Jan 2019
& 27 Jan 2023
Exercisable
between
25 Nov 2019
& 24 Nov 2026
Exercisable
between
23 Nov 2020
& 22 Nov 2027
67,700
58,000
—
91,400
67,700
—
99,000
73,500
73,500
During the year £18,000 (2017: £109,000) was charged to the income statement with a corresponding credit to the share based
payments reserve in accordance with IFRS 2.
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 19% (2017: 19.5%)
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
2018
£000
2017
(Restated)
£000
(3,571)
(336)
(3,907)
(1,969)
353
(1,616)
(5,523)
2018
£000
14,708
(2,795)
(808)
(670)
(914)
—
(336)
(3,294)
825
(2,469)
(1,753)
(228)
(1,981)
(4,450)
2017
(Restated)
£000
19,794
(3,860)
(1,241)
43
48
(265)
825
(5,523)
(4,450)
Timing differences not provided for in deferred tax arise principally from the utilisation of tax losses not previously recognised.
Deferred tax has been provided at a rate of 17% (2017: 17%) which will be the effective corporation tax rate from 1 April 2020. The Group has
available further unused UK tax losses of £37m (2017: £43m) to carry forward against future taxable profits. 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 £5.3m (2017: £8.6m).
64
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 7 Income tax expense continued
(c) Deferred tax asset
Defined benefit pension schemes
Accelerated capital allowances
Future tax losses
(d) Deferred tax liabilities
Defined benefit pension schemes
Fair value adjustments
(e) Reconciliation of deferred tax asset
As at 1 October
Origination of timing differences
Change of deferred tax rate
Acquisition of subsidiary undertaking
Reclassification of opening pension scheme asset as a liability
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 subsidiary undertaking
Arising on fair value adjustments
Change of deferred tax rate
Reclassification of opening pension scheme asset as a liability
Defined benefit pension schemes – income statement
Defined benefit pension schemes – SOCI
At 30 September
8 Dividends
Interim (related to the year ended 30 September 2018)
Final (related to the year ended 30 September 2017)
Total dividend paid
Interim (related to the year ended 30 September 2018)
Final (related to the year ended 30 September 2017)
Total dividend paid
2018
£000
—
566
1,026
1,592
2018
£000
(7,149)
(2,763)
(9,912)
2018
£000
2,057
(336)
—
—
(129)
—
—
1,592
2018
£000
(3,892)
(2,970)
707
—
129
(1,969)
(1,917)
(9,912)
2017
£000
129
712
1,216
2,057
2017
£000
(3,392)
(500)
(3,892)
2017
£000
1,581
(554)
(77)
1,358
—
(180)
(71)
2,057
2017
£000
(2,973)
(625)
388
14
—
(1,573)
877
(3,892)
2018
Pence/share
2017
Pence/share
3.33
6.00
9.33
£000
2,506
3,756
6,262
3.00
5.35
8.35
£000
1,877
3,349
5,226
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 6.67p per Ordinary Share be paid in respect of the year ended 30 September 2018.
This will be accounted for in the 2018/19 financial year.
Annual Report and Accounts 2018 Renew Holdings plc
65
Notes to the accounts continued
9 Earnings per share
Earnings before exceptional items
and amortisation
Exceptional items and amortisation
Basic earnings per share –
continuing activities
Loss for the year from
discontinued operations
Basic earnings per share
Earnings
£000
23,970
(14,785)
2018
EPS
Pence
35.48
(21.88)
DEPS
Pence
35.28
(21.76)
Earnings
(Restated)
£000
23,245
(7,901)
2017
EPS
(Restated)
Pence
37.18
(12.64)
DEPS
(Restated)
Pence
36.94
(12.55)
9,185
13.60
13.52
15,344
24.54
24.39
Weighted average number of shares
67,558
67,938
(2,412)
6,773
(3.57)
10.03
(3.55)
9.97
(2,917)
12,427
(4.66)
19.88
62,514
(4.64)
19.75
62,917
The dilutive effect of share options is to increase the number of shares by 380,000 (2017: 403,000) and reduce basic earnings per share
by 0.06p (2017: 0.13p).
Contractual
rights and
customer
relationships
£000
12,323
3,679
16,002
17,469
Goodwill
£000
57,067
7,523
64,590
54,193
(13,501)
(2,495)
105,282
30,976
808
—
5,800
6,608
—
6,893
(13,501)
—
105,282
57,982
56,259
11,043
2,280
—
13,323
4,157
—
(2,495)
14,985
15,991
2,679
1,280
10 Intangible assets
Cost:
At 1 October 2016
Addition
At 1 October 2017
Addition
Eliminated on disposal
At 30 September 2018
Impairment losses/amortisation:
At 1 October 2016
Charge for year
Impairment
At 1 October 2017
Charge for year
Impairment
Eliminated on disposal
At 30 September 2018
Carrying amount:
At 30 September 2018
At 30 September 2017
At 30 September 2016
66
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 10 Intangible assets continued
The carrying amounts of goodwill classified as cash generating units (“CGUs”) are as follows:
Britannia Construction Ltd
V.H.E. Construction PLC
P.P.S. Electrical Ltd
Seymour (C.E.C.) Holdings Ltd and its subsidiary
West Cumberland Engineering Ltd and its subsidiary
Amco Group Holdings Ltd and its subsidiaries
Lewis Civil Engineering Ltd and its subsidiaries
Clarke Telecom Ltd
Nuclear Decontamination Services Ltd
Giffen Holdings Ltd and its subsidiaries
QTS Group Ltd and its subsidiaries
Forefront Group Ltd and its subsidiaries
2018
£000
1,253
1,796
227
4,017
207
18,168
6,556
11,143
199
7,523
54,193
—
105,282
2017
£000
1,253
1,796
227
4,017
207
18,168
6,556
11,143
199
7,523
—
6,893
57,982
QTS Group Ltd
Goodwill of £54,193,000 was acquired on the acquisition of QTS Group Ltd and will be reviewed for impairment one year after the acquisition
and then on an ongoing basis as required by IFRS 3. Further details are given in Note 30.
Goodwill impairment
Goodwill of £6,893,000 was eliminated on the disposal of Forefront Group Limited (see Note 3).
Amortisation charges in respect of intangible assets with a finite life are recorded within administrative expenses in the income statement.
The amortisation policy is disclosed in the accounting policies and approximates to a period of 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 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. A growth rate
of 3% (2017: 3%) per annum has been used. The rate used to discount the forecast cash flows is 7.5% (2017: 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 14.6% (2017: 20%) or the assumed operating margins would have to decrease by more than 50% (2017: 10%) before
any impact on any single CGU.
Annual Report and Accounts 2018 Renew Holdings plc
67
Notes to the accounts continued
11 Property, plant and equipment
Freehold
land and buildings
£000
Plant, vehicles
and equipment
£000
Cost:
At 1 October 2016
Additions
Disposals
Acquisition of subsidiary
At 1 October 2017
Additions
Disposals
Acquisition of subsidiary
At 30 September 2018
Depreciation:
At 1 October 2016
Charge for year
Disposals
At 1 October 2017
Charge for year
Disposals
At 30 September 2018
Net book value:
At 30 September 2018
At 30 September 2017
At 30 September 2016
2,019
319
—
—
2,338
60
—
2,971
5,369
161
27
—
188
95
—
283
13,382
3,630
(4,908)
274
12,378
3,283
(5,599)
5,451
15,513
1,567
4,065
(4,601)
1,031
4,261
(4,403)
889
5,086
2,150
1,858
14,624
11,347
11,815
Total
£000
15,401
3,949
(4,908)
274
14,716
3,343
(5,599)
8,422
20,882
1,728
4,092
(4,601)
1,219
4,356
(4,403)
1,172
19,710
13,497
13,673
The net book value of assets under finance leases at 30 September 2018 was £6,995,000 (2017: £7,583,000).
During the year £1,932,000 (2017: £2,332,000) of depreciation was charged against assets held under finance leases.
12 Inventories
Land
Raw materials
2018
£000
—
1,691
1,691
2017
£000
3,145
755
3,900
The comparative figure for land inventories related to land held in the USA. Following the sale of Horse Farm, and the remaining stock
being fully provided against during the year, land inventory at the year end had no carrying value. £1.7m (2017: £0.8m) of inventories are
pledged as security for liabilities.
13 Assets held for resale
Property
2018
£000
1,500
2017
£000
1,500
This office property has been actively marketed but disposal has been delayed by current market conditions.
The building is carried at net realisable value based on an annual independent third party valuation.
68
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 14 Investment in joint venture
a) Movement in year
At 1 October
Acquired on 31 October 2016
Dividend received
Equity accounted share of net profits
At 30 September
b) Summarised financial information related to equity accounted joint venture
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
Current liabilities
Trade and other payables
Current tax liabilities
Total liabilities
Net assets reported by equity accounted joint venture (100%)
Revenue (100%)
Expenses (100%)
Net profit after tax (100%)
c) Results of equity accounted joint venture (33%)
Group share of profit before tax
Group share of tax
Group share of profit after tax
2018
£000
237
—
(114)
—
123
2018
£000
297
70
367
367
(101)
57
(44)
(44)
323
2,559
(2,559)
—
2018
£000
—
—
—
2017
£000
—
71
—
166
237
2017
£000
378
2,681
3,059
3,059
(2,601)
(89)
(2,690)
(2,690)
369
6,718
(6,222)
496
2017
£000
207
(41)
166
The Group, through a subsidiary undertaking, has the following interest in the joint venture:
Switchgear & Substation Alliance Ltd
The joint venture was acquired as part of the acquisition of Giffen Holdings Ltd.
Country of
incorporation
Principal
activity
UK
Engineering
Percentage
shares held
33%
15 Trade and other receivables
Trade receivables
Amounts due from construction contract customers
Other receivables
Prepayments and accrued income
2018
£000
13
126,085
1,522
1,756
129,376
2017
£000
73
111,889
2,058
1,578
115,598
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 £5.1m (2017: £2.5m) which are past due at the reporting date
for which the Group has not provided as there has not been a significant change in credit quality and the Group believes that the amounts
are still considered recoverable since there is no objective evidence that these financial assets are impaired. The Group does not hold any
collateral over these balances. £1.5m (2017: £1.2m) of these balances relate to certified retentions.
The average age of these receivables is 345 days (2017: 294 days).
Annual Report and Accounts 2018 Renew Holdings plc
69
Notes to the accounts continued
15 Trade and other receivables continued
Ageing of past due but not impaired receivables:
30–180 days
180–365 days
Greater than 1 year
16 Construction contracts
Contracts in progress at the 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
2018
£000
360
2,433
2,259
5,052
2017
£000
848
759
939
2,546
2018
£000
2017
£000
126,085
(6,971)
119,114
111,889
(2,429)
109,460
3,818,338
2,954,631
(3,699,224)
(2,845,171)
119,114
109,460
At 30 September 2018 retentions held by customers amounted to £12.2m (2017: £13.7m). Advances received from customers for contract work
amounted to £7.0m (2017: £2.4m).
Amounts due from construction contract customers which are past due at the reporting date amounted to £5.1m (2017: £2.5m).
This amount includes retention balances of £1.5m (2017: £1.2m). The Group does not hold any collateral over these balances or other trade and
other receivables.
Contract revenue recognised in the year amounted to £541.5m (2017: £542.1m).
17 Cash and cash equivalents
Cash at bank
Cash in hand
18 Trade and other payables
Amounts due to construction contract customers
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
19 Borrowings
Bank loans repayable:
Within one year
Within two to five years
2018
£000
9,168
11
9,179
2018
£000
6,971
2017
£000
6,958
9
6,967
2017
£000
2,429
60,932
48,905
11,451
6,538
94,021
179,913
2018
£000
8,752
21,873
30,625
8,583
7,512
105,816
173,245
2017
£000
3,100
—
3,100
The QTS acquisition was partially funded by a £35m loan from HSBC, repayable by equal instalments over a 4 year period.
The bank loans are secured by a fixed and floating charge over the Group’s UK assets.
70
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 20 Obligations under finance leases
Minimum lease payments
Present value of minimum
lease payments
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
2018
£000
2,222
2,387
4,609
(256)
4,353
2017
£000
2,672
2,542
5,214
(291)
4,923
2018
£000
2,100
2,253
4,353
—
4,353
(2,100)
2,253
2017
£000
2,547
2,376
4,923
—
4,923
(2,547)
2,376
It is the Group’s policy to lease certain items of its plant, vehicles and equipment under finance leases. The average outstanding lease term is 3
years (2017: 3 years). For the year ended 30 September 2018, the average effective borrowing rate was 3% (2017: 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.
21 Provisions
At 1 October 2017
Provision transferred from accruals/(released) during the year
At 30 September 2018
Non-current liabilities
Current liabilities
At 30 September 2018
Property
obligations
£000
350
(1)
349
298
51
349
Other
provisions
£000
—
2,000
2,000
—
2,000
2,000
Total
£000
350
1,999
2,349
298
2,051
2,349
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.
Other provisions are in respect of various contractual or legal disputes, the outcome of which cannot be assessed with a high degree of
certainty. A liability is only recognised where, based on the Group’s view or legal advice, it is considered probable that an outflow of resource
will be required to settle a present obligation that can be measured reliably.
22 Other financial instruments
The Group’s principal financial instruments comprise bank loans, cash and short-term deposits and obligations under finance leases.
The main purpose of these financial instruments is to provide finance for the Group’s operations. The Group has various other financial
instruments such as trade receivables and trade payables that arise directly from its operations.
It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken.
The disclosures below provide information about the contractual terms of the Group’s interest bearing deposits, loans and borrowings.
Interest rate profile of financial assets and liabilities
Financial assets/(liabilities)
2018
Assets
Sterling
Dollar
Liabilities
Sterling
Fixed rate
interest rate
%
—
—
3.0
Fixed
rate
£000
—
—
—
Floating
rate
£000
7,440
1,728
9,168
Total
£000
7,440
1,728
9,168
(4,353)
(4,353)
(30,625)
(34,978)
(30,625)
(34,978)
Annual Report and Accounts 2018 Renew Holdings plc
71
Notes to the accounts continued
22 Other financial instruments continued
Interest rate profile of financial assets and liabilities continued
2017
Assets
Sterling
Dollar
Liabilities
Sterling
Fixed rate
interest rate
%
Financial assets/(liabilities)
Fixed
rate
£000
Floating
rate
£000
—
—
3.0
—
—
—
(4,923)
(4,923)
6,633
325
6,958
(3,100)
(3,100)
Total
£000
6,633
325
6,958
(8,023)
(8,023)
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 20. The fixed rate liabilities have a weighted average period of 3 years
(2017: 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 15. The Group does not use any form of invoice discounting or debt factoring.
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 23 and reserves
as disclosed in Note 24. 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 19 and 20 and
the retirement benefit obligations disclosed in Note 27. An analysis of the maturity profile for finance lease liabilities is given in Note 20.
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) has been in respect of an inter-company loan which was repaid during the year. The foreign exchange charge to
finance costs amounted to £247,000 (2017: £121,000). Exchange rate movements on translation of Lovell America, Inc’s net assets are
charged to the cumulative translation adjustment within total equity. The exchange profit arising on the translation of Lovell America, Inc’s
net assets was £6,000. The total equity statement would be impacted by £4,000 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.
72
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 22 Other financial instruments continued
Financial risks continued
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.
23 Share capital
Allotted, called up and fully paid:
75,267,507 (2017: 62,591,451) Ordinary Shares of 10p each
2018
£000
2017
£000
7,527
6,259
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.
On 9 May 2018 12,676,056 Ordinary Shares were issued in a placing to raise £45m to partly fund the acquisition of QTS Group Ltd.
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.
As at 30 September 2018, there were no options outstanding under the scheme. During the year 31,467 options were exercised at an
exercise price of 286p. Any options granted under the scheme 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 the 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 2018, there were 530,800 options outstanding under the scheme. On 22 November 2017, options to subscribe for a
further 246,000 Ordinary Shares were granted. During the year 107,136 options were exercised and 76,864 options lapsed.
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.
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.
Annual Report and Accounts 2018 Renew Holdings plc
73
Notes to the accounts continued
24 Reserves
At 1 October 2016
Transfer from income statement for the year
Dividends paid
Recognition of share based payments
New shares issued
Exchange differences
Actuarial movement recognised in pension schemes
Movement on deferred tax relating to the
pension schemes
Share
premium
account
£000
8,481
Capital
redemption
reserve
£000
3,896
Cumulative
translation
reserve
£000
1,347
Share based
payments
reserve
£000
571
1,154
109
(42)
At 1 October 2017
9,635
3,896
1,305
680
Transfer from income statement for the year
Dividends paid
Recognition of share based payments
New shares issued
Exchange differences
Actuarial movement recognised in pension schemes
Movement on deferred tax relating to the
pension schemes
42,049
18
6
Retained
earnings
£000
366
12,427
(5,226)
(2,089)
806
6,284
6,773
(6,262)
5,477
(1,917)
At 30 September 2018
51,684
3,896
1,311
698
10,355
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.
£18,000 (2017: £109,000) has been charged to administrative expenses in accordance with IFRS 2. There is no impact on net assets since
an equivalent amount has been credited to the share based payments reserve. 107,136 options were exercised during the year and 76,864
lapsed. 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.
74
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 24 Reserves continued
Share based payments reserve continued
Renew Holdings plc Long Term Incentive Plan continued
Options granted under the Renew Holdings plc Long Term Incentive Plan over the Company’s Ordinary Shares at 30 September 2018
were as follows:
Date of grant
27 January 2016 24 November 2016
22 November 2017
Total
Awards outstanding at 30 September 2018
– Directors and employees
Exercise price
Price at date of grant
Maximum option life
125,700
10.0p
410.0p
10 years
159,100
246,000
530,800
10.0p
394.0p
10 years
10.0p
428.75p
10 years
Assumed option life for purposes of valuation
3 years
2.85 years
2.86 years
Expected volatility
Dividend yield
Risk free interest rate
Value per option
25 Capital and leasing commitments
Commitments under non‑cancellable operating leases:
Under one year
Two to five years
Five or more years
30%
1.7%
0.58%
212.5p
Land and
buildings
£000
1,733
3,972
1,327
7,032
28%
2.0%
0.29%
289.0p
Other
£000
1,994
1,977
—
3,971
25%
2.1%
0.52%
262.0p
Total
2018
£000
3,727
5,949
1,327
11,003
Total
2017
£000
3,455
5,996
1,594
11,045
During the year £5,209,000 (2017: £4,759,000) was recognised as an expense in the income statement in respect of operating leases.
With regard to the operating leases held by the Group as lessor, the Group recognised £247,000 (2017: £185,000) of rental income in the
income statement for 2018, 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
2018
£000
320
370
690
2017
£000
185
345
530
The Group had capital commitments at 30 September 2018 of £1,011,000 (2017: £697,000).
26 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.
Liabilities have been recorded based on the Directors’ best estimate of uncertain contract positions, known legal claims, investigations and legal
actions in progress. The Group takes legal advice as to the likelihood of the success of claims and actions and no liability is recorded where the
Directors consider, based on that advice, that the action is unlikely to succeed, or that the Group cannot make a sufficiently reliable estimate of the
potential obligation. The Group also has contingent liabilities in respect of other issues that may have occurred, but where no claim has been made
and it is not possible to reliably estimate the potential obligation (see Note 1d).
Annual Report and Accounts 2018 Renew Holdings plc
75
Notes to the accounts continued
27 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. 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 2018 shows a surplus of £19,335,000 based on the assumptions set out below. The Amco scheme shows a surplus
of £1,088,000 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 in both schemes as, having
reviewed the rules of both schemes, they are of the view that the employer has an unconditional right to those surpluses.
The following disclosures required by IAS 19 have been based on the most recent actuarial valuation as at 30 September 2018 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
30 September
2018
As at
30 September
2017
As at
30 September
2016
4.0%
4.3%
2.9%
2.2%
3.3%
3.1%
2.3%
3.1%
2.9%
2.3%
3.3%
2.3%
4.0%
4.2%
2.6%
2.1%
3.2%
3.1%
3.2%
2.7%
2.6%
2.2%
3.2%
2.2%
4.0%
3.5%
2.4%
2.0%
3.0%
2.9%
3.0%
2.6%
2.4%
2.0%
3.0%
2.0%
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 2017 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 2038 is 23.9 years.
The mortality tables adopted for the valuation of the Amco scheme are the S2PA Mortality tables with future improvements in line with the
Continuing Mortality Investigations 2017 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 21.9 years and the further life expectancy of a male aged 65
in 2038 is 23.3 years.
The assets in the Lovell scheme were:
Annuities
Diversified portfolio
Cash
Total
Value as at
30 September
2018
£000
85,850
81,202
2,117
169,169
Current
allocation
51%
48%
1%
100%
Value as at
30 September
2017
£000
91,400
81,273
778
173,451
Value as at
30 September
2016
£000
101,201
88,592
731
Current
allocation
53%
47%
—
100%
190,524
Current
allocation
53%
47%
—
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.
76
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 27 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
The assets in the Amco scheme were:
Annuities
Diversified portfolio
Cash
Total
Value as at
30 September
2018
£000
6,255
7,739
418
14,412
Current
allocation
43%
54%
3%
Value as at
30 September
2017
£000
6,614
7,524
201
100%
14,339
Value as at
30 September
2016
£000
7,660
6,435
1,226
15,321
Current
allocation
46%
53%
1%
100%
Current
allocation
50%
42%
8%
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 was 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 was due as at 31 March 2018.
For accounting purposes under IAS19, 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 IAS19 is the selection of the discount rate which
is the major determinant in measuring scheme liabilities. A reduction of 0.1% in the discount rate would increase scheme liabilities by £2.2m.
Amco Pension Scheme
The scheme actuary carried out the triennial valuation of the Amco Pension Scheme as at 31 December 2016. The scheme showed a
deficit of £3.4m compared to £0.9m when measured as at 31 December 2013. The subsidiary undertaking has agreed a revised recovery
plan with the Trustees which commits the subsidiary undertaking to paying annual contributions of £504,000 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 will be measured as at 31 December 2019.
For accounting purposes under IAS19, 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 IAS19 is the selection of the discount rate
which is the major determinant in measuring scheme liabilities. A reduction of 0.1% in the discount rate would increase scheme liabilities
by £0.2m.
Scheme Governance
Both the Lovell Pension Scheme and the Amco Pension Scheme have boards of trustees chaired by an independent professional trustee,
Capital Cranfield Trustees Ltd. The Lovell Pension Scheme also has member-elected trustees who must be members of the scheme. Both
Renew Holdings plc for the Lovell Pension Scheme, and Amalgamated Construction Ltd for the Amco Pension Scheme have the right to
appoint employer-nominated trustees although neither has elected to do so other than to appoint Capital Cranfield Trustees Ltd.
The Lovell Pension Scheme trustees are advised by Lane, Clark & Peacock LLP on both actuarial and investment matters. The Lovell Scheme
investments are independently managed by BlackRock Asset Management who are set a target return against which the trustees monitor their
performance on a regular basis. Annuities purchased in both 2011 and 2016 are held by Legal & General and Just Retirement.
The Amco Pension Scheme trustees are advised by Capita Employee Benefits (Consulting) Ltd on both actuarial and investment matters.
The Amco Scheme investments are independently managed by BlackRock Asset Management who are set a target return against which
the trustees monitor their performance on a regular basis.
Diversified Portfolio
BlackRock Asset Management’s portfolio, described above as “diversified portfolio”, can consist of a wide range of underlying,
return-seeking assets including but not restricted to equities, bonds, gilts, cash, commodities and other openly traded assets.
Annual Report and Accounts 2018 Renew Holdings plc
77
Notes to the accounts continued
27 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
2018
£000
2017
£000
173,451
190,524
4,412
4,323
(11,879)
—
(1,138)
169,169
4,489
4,319
(11,315)
(1)
(14,565)
173,451
Present value of scheme obligations brought forward
163,759
182,820
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
4,104
64
(11,879)
2,404
(7,437)
(1,181)
4,253
60
(11,315)
(220)
(6,652)
(5,187)
Total fair value of scheme obligations carried forward
149,834
163,759
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
78
Renew Holdings plc Annual Report and Accounts 2018
19,335
(6,767)
12,568
(64)
—
(64)
4,412
(4,104)
308
(1,138)
6,214
5,076
9,692
(64)
—
4,323
308
5,076
19,335
9,692
(3,392)
6,300
(60)
(1)
(61)
4,489
(4,253)
236
(14,565)
12,059
(2,506)
7,704
(60)
(1)
4,319
236
(2,506)
9,692
FINANCIAL STATEMENTS 27 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
2018
£000
2017
£000
14,339
370
1,449
(1,656)
(90)
14,412
15,099
372
(1,656)
(491)
15,321
360
972
(1,634)
(680)
14,339
17,431
399
(1,634)
(1,097)
Total fair value of scheme obligations carried forward
13,324
15,099
Surplus/(deficit) in the scheme
Deferred tax
Net surplus/(deficit)
Amount debited 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 during the year:
Net scheme deficit brought forward
Employer contributions
Net pension interest
Actuarial movement
Net scheme surplus/(deficit) carried forward
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
2018
£000
(1,138)
(0.7)%
5,076
3.4%
2017
£000
(14,565)
(8.4)%
(2,506)
(1.5)%
2016
£000
22,781
12.0%
(12,348)
(6.8)%
1,088
(381)
707
370
(372)
(2)
(90)
491
401
(760)
1,449
(2)
401
1,088
2015
£000
18,145
11.0%
10,664
7.1%
(760)
129
(631)
360
(399)
(39)
(680)
1,097
417
(2,110)
972
(39)
417
(760)
2014
£000
16,348
11.2%
1,514
1.0%
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. The surplus
for the scheme is accounted for in the individual financial statements of Renew Holdings plc which is legally the sponsoring employer
for the plan.
Annual Report and Accounts 2018 Renew Holdings plc
79
Notes to the accounts continued
27 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
Amco Pension Scheme
Actual return on scheme assets less interest on
scheme assets
As a percentage of the assets at the end of the year
Total amount recognised in the statement of
comprehensive income
As a percentage of the obligations at the end of the year
2018
£000
(90)
(0.6)%
401
3.0%
2017
£000
(680)
(4.7)%
417
2.8%
2016
£000
930
6.1%
2015
£000
(297)
(2.1)%
2014
£000
731
5.1%
(1,881)
(10.8)%
(1,785)
(12.0)%
(446)
(3.3)%
The Amco scheme’s sole employer is the Company’s wholly owned subsidiary, Amalgamated Construction Ltd.
Post balance sheet non‑adjusting event
On 26 October, the High Court handed down a judgment involving the Lloyds Banking Group’s defined benefit pension schemes. The judgment
concluded the schemes should be amended to equalise pension benefits for men and women in relation to guaranteed minimum pension
benefits. The issues determined by the judgment arise in relation to many other defined benefit pension schemes. We are working with the
trustees of our pension schemes, and our actuarial and legal advisers, to understand the extent to which the judgment crystallises additional
liabilities for Renew’s pension schemes. We estimate this could be in excess of £100,000 for the Amco Pension Scheme and £1,000,000 for the
Lovell Pension Scheme. Any adjustment necessary is expected to be recognised as an exceptional item in the 30 September 2019 accounts.
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 £6,432,000 (2017: £4,218,000) into these plans during the year. There are also £376,000 (2017: £286,000)
of accruals relating to these plans.
28 Related parties
The Group has a related party relationship with its key management personnel who were Directors of the Company during the year: P Scott,
A Liebenberg, S Wyndham-Quin, J Samuel, DM Forbes, J Bishop, DA Brown and RJ Harrison, whose total compensation amounted to £1,801,000
(2017: £2,022,000) all of which was represented by short-term employment benefits, including £268,000 (2017: £505,000) relating to share option
charges, in accordance with IFRS 2. An analysis of this compensation is given in Note 6.
There were no other transactions with key management personnel in the year.
29 Alternative performance measures
Renew uses a variety of alternative performance measures (‘APM’) which, although financial measures of either historical or future
performance, financial position or cash flows, are not defined or specified by IFRSs. The Directors use a combination of APMs and IFRS
measures when reviewing the performance, position and cash of the Group.
The APMs used by the Group are defined below:
Net Cash/(Debt) – This is the cash and cash equivalents less bank debt. This measure is visible in Note 31. The Directors consider this to
be a good indicator of the financing position of the Group.
Adjusted operating profit and adjusted profit before tax – Both of these measures are reconciled to total operating profit and total
profit before tax on the face of the consolidated income statement. The Directors consider that the removal of exceptional items and
amortisation provides a better understanding of the underlying performance of the Group.
Adjusted operating margin – This is calculated by dividing operating profit before exceptional items and amortisation of intangible
assets by group revenue from continuing activities both of which are visible on the face of the income statements. The Directors believe
that removing exceptional items and amortisation from the operating profit margin calculation provides a better undestanding of the
underlying performance of the Group.
Adjusted earnings per share – This measure is reconciled to the earnings per share calculation based on earnings before exceptional
items and amortisation in Note 9. The Directors believe that removing exceptional items and amortisation from the EPS calculation
provides a better understanding of the underlying performance of the Group.
Group Revenue – This measure is visible on the face of the income statement as Revenue: Group including share of joint venture.
Group order book, Engineering Services order book and Specialist Building order book – This measure is calculated by the Directors
taking a conservative view on secured orders and visible workload through long-term frameworks.
80
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 29 Alternative performance measures continued
Adjusted Engineering Services revenue – This measure is visible in Note 2 part (a) business analysis as Engineering Services Revenue from
continuing activities. The Directors consider this to be a good indicator of the underlying performance of the Group’s Engineering Services business.
Adjusted Engineering Services operating profit – This measure is visible in Note 2 part (a) business analysis as Engineering Services
operating profit before exceptional items and amortisation of intangible assets. The Directors consider this to be a good indicator of the
underlying performance of the Group’s Engineering Services business.
Adjusted Engineering Services operating profit margin – this is calculated in the same way as adjusted operating profit margin but
based on the adjusted Engineering Services operating profit and the Adjusted Engineering services revenue figures as set out above.
30 Acquisition of subsidiary undertaking – QTS Group Ltd
On 10 May 2018, the Company acquired the whole of the issued share capital of QTS Group Ltd (“QTS”) for a cash consideration of £80m.
The acquisition was funded by a placement of 12,676,056 new ordinary shares raising £45m, and a four year term loan of £35m provided
by HSBC Bank plc.
The value of the assets and liabilities of QTS at the date of acquisition were:
Book value
£000
Adjustments
£000
Fair value
£000
Non‑current assets
Intangible assets
– goodwill
– other
Property, plant and equipment
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Non‑current liabilities
Deferred tax liabilities
Current liabilities
Trade and other payables
Obligations under finance leases
Current tax liability
Total liabilities
Net assets
—
—
9,331
9,331
879
11,553
4,126
16,558
25,889
1
1
(13,571)
(140)
(118)
(13,829)
(13,828)
12,061
54,193
17,469
(907)
54,193
17,469
8,424
70,755
80,086
—
—
—
—
70,755
(2,816)
(2,816)
—
—
—
—
(2,816)
67,939
879
11,553
4,126
16,558
96,644
(2,815)
(2,815)
(13,571)
(140)
(118)
(13,829)
(16,644)
80,000
Goodwill of £54,193,000 arises on acquisition and will be reviewed for impairment one year after the acquisition as required by IFRS 3.
The goodwill is attributable to the expertise and workforce of the acquired business. Other intangible assets provisionally valued at
£17,469,000, which represent customer relationships and contractual rights, were also acquired and will be amortised over their useful
economic lives in accordance with IFRS 3. Deferred tax has been provided on this amount. Amortisation of this intangible asset commenced
from June 2018.
Annual Report and Accounts 2018 Renew Holdings plc
81
Notes to the accounts continued
30 Acquisition of subsidiary undertaking – QTS Group Ltd continued
Fair value adjustments arising from the acquisition
In accordance with IFRS 3, the Board will review the fair value of assets and liabilities using information available up to 12 months after the
date of acquisition. Fair value has been calculated using Level 3 inputs as defined by IFRS 13.
Property, plant and equipment
The Directors reviewed the depreciation policy for property, plant and equipment which is now aligned with the Group policy. Prior to the
acquisition, the directors of QTS used a reducing balance depreciation policy for motor vehicles and vans. Leasehold improvements were
not written off over the duration of the lease. The consequence of this was that, in the opinion of the Directors, the fair value of property,
plant and equipment was overstated at the point of acquisition. As a result, the Directors carried out a valuation of property, plant and
equipment in accordance with IAS 36. The impact of this was to reduce fixed assets, increase deferred tax assets and goodwill.
Deferred tax liabilities
A deferred tax asset has been recognised in relation to the adjustment to property, plant and equipment noted above, whilst a deferred tax
liability has been recognised in relation to the amortisation of other intangible assets.
Goodwill impairment review
The Board has reviewed the goodwill arising on acquisition for impairment as required by IFRS 3. No such impairment was identified.
If the acquisition of QTS had occurred on 1 October 2017, Group revenue would have been approximately £581m and profit from
continuing activities for the year ended 30 September 2018 would have been approximately £11m.
31 Reconciliation of net cash flow to net (debt)/cash
Increase/(decrease) in net cash and cash equivalents
(Increase)/decrease in bank borrowings
Decrease in net cash from cash flows
Net cash at 1 October
Net (debt)/cash at 30 September
32 Analysis of net (debt)/cash
Cash and cash equivalents
Bank loans
Net (debt)/cash
2018
£000
2,212
(27,525)
(25,313)
3,867
(21,446)
2017
£000
(7,117)
6,200
(917)
4,784
3,867
At 1 October
2017
£000
6,967
(3,100)
3,867
Cash
flows
£000
2,212
(27,525)
(25,313)
At 30 September
2018
£000
9,179
(30,625)
(21,446)
82
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS Company balance sheet
At 30 September
Fixed assets
Tangible assets
Investments
Current assets
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:
D M Forbes
Chairman
27 November 2018
Note
2018
£000
2017
£000
E
F
G
H
H
I
J
L
679
167,325
168,004
1,500
19,335
65,503
48
86,386
625
100,825
101,450
1,500
9,692
74,301
89
85,582
(125,729)
(112,283)
(39,343)
128,661
(26,701)
74,749
(28,641)
(3,387)
100,020
71,362
7,527
51,684
3,896
698
36,215
100,020
6,259
9,635
3,896
680
50,892
71,362
Annual Report and Accounts 2018 Renew Holdings plc
83
Company statement of comprehensive income
for the year ended 30 September
(Loss)/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 scheme
Movement on deferred tax relating to the pension scheme
Total items that will not be reclassified to profit or loss
Items that are or may be reclassified subsequently to profit or loss:
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
2018
£000
(11,714)
5,076
(1,777)
3,299
—
(8,415)
2017
£000
11,128
(2,506)
877
(1,629)
—
9,499
Company statement of changes in equity
for the year ended 30 September
At 1 October 2016
Transfer from profit and loss account for the year
Dividends paid
New shares issued
Recognition of share based payments
Movement in actuarial valuation of the defined benefit
pension scheme
Movement on deferred tax relating to the pension scheme
Share
capital
£000
6,232
Share
premium
account
£000
Capital
redemption
reserve
£000
Share based
payments
reserve
£000
Retained
earnings
£000
Total equity
shareholders’
funds
£000
8,481
3,896
571
46,619
65,799
27
1,154
11,128
(5,226)
11,128
(5,226)
1,181
109
(2,506)
(2,506)
109
877
877
71,362
(11,714)
(6,262)
43,317
18
5,076
(1,777)
At 30 September 2017
6,259
9,635
3,896
680
50,892
Transfer from profit and loss account for the year
Dividends paid
New shares issued
Recognition of share based payments
Movement in actuarial valuation of the defined benefit
pension scheme
Movement on deferred tax relating to the pension scheme
1,268
42,049
18
(11,714)
(6,262)
5,076
(1,777)
At 30 September 2018
7,527
51,684
3,896
698
36,215
100,020
84
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS Notes to the company accounts
A Accounting policies
(i) Basis of accounting
Renew Holdings plc (the “Company”) is a company limited by shares and domiciled in the UK.
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.
The presentation currency of these financial statements is sterling. All amounts in the financial statements have been rounded to the
nearest £1,000.
The Company’s results are included in the consolidated financial statements of the Group. The consolidated financial statements of
Renew Holdings plc are prepared in accordance with International Financial Reporting Standards as adopted by the EU. In these financial
statements, the Company is considered to be a qualifying entity (for the purposes of this FRS) and has applied the exemptions available
under FRS 102 in respect of the following disclosure:
• Cash Flow Statement and related notes.
As the consolidated financial statements of Renew Holdings plc include the equivalent disclosures, the Company has also taken the
exemptions under FRS 102 available in respect of the following disclosures:
• the disclosure required by FRS 102.11 Basic Financial Instruments and FRS 102.12 Other Financial Instrument Issues in respect of
financial instruments not falling within the fair value accounting rules of Paragraph 36(4) of Schedule 1.
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) Related party transactions
Interest is neither recognised nor charged on balances outstanding with fellow subsidiaries as they are repayable on demand.
(viii) 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.
Exchange differences are taken to the profit and loss account.
Annual Report and Accounts 2018 Renew Holdings plc
85
Notes to the company accounts continued
A Accounting policies continued
(ix) Employee benefits
Defined benefit pension scheme
The Company’s net asset/(liability) 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 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. Changes in the net defined benefit asset/(liability) arising from employee
service rendered during the period, net interest on net defined benefit asset/(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.
(x) Dividends
Dividends unpaid at the balance sheet date are only recognised as a liability at that date to the extent that they are appropriately authorised
and are no longer at the discretion of the Company. Unpaid dividends that do not meet these criteria are disclosed in the notes to the
financial statements.
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 loss after
taxation for the financial year dealt with in the accounts of the Company was £(11,714,000) (2017: profit £11,128,000).
The audit fee charged within the profit and loss account amounted to £75,000 (2017: £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
2018
Number
2017
Number
28
26
£000
2,745
338
168
18
3,269
£000
1,801
663
31
29
£000
2,278
478
235
1,290
4,281
£000
2,022
946
Details of individual Directors’ emoluments and pension contributions can be found in Note 6 to the consolidated accounts.
D Dividends
Interim (related to the year ended 30 September 2018)
Final (related to the year ended 30 September 2017)
Total dividend paid
86
Renew Holdings plc Annual Report and Accounts 2018
2018
Pence/share
2017
Pence/share
3.33
6.00
9.33
3.00
5.35
8.35
FINANCIAL STATEMENTS D Dividends continued
Interim (related to the year ended 30 September 2018)
Final (related to the year ended 30 September 2017)
Total dividend paid
2018
£000
2,506
3,756
6,262
2017
£000
1,877
3,349
5,226
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 6.67p per Ordinary Share be paid in respect of the year ended 30 September 2018.
This will be accounted for in the 2018/19 financial year.
E Tangible fixed assets
Cost:
At 1 October 2017
Additions
At 30 September 2018
Depreciation:
At 1 October 2017
Charge for year
At 30 September 2018
Net book value:
At 30 September 2018
At 30 September 2017
F Investments
Shares at cost:
At 1 October 2017
Additions
Disposals
At 30 September 2018
Provisions:
At 1 October 2017
Provided during the year
At 30 September 2018
Net book value:
At 30 September 2018
At 30 September 2017
Freehold land
and buildings
£000
Plant, vehicles
& equipment
£000
701
—
701
86
10
96
605
615
75
74
149
65
10
75
74
10
Total
£000
776
74
850
151
20
171
679
625
Subsidiary
undertakings
£000
224,718
80,000
(6,893)
297,825
123,893
6,607
130,500
167,325
100,825
Details of subsidiary undertakings are included in Note S.
On 10 May 2018, the Company acquired the whole of the issued share capital of QTS Group Ltd for a cash consideration of £80m.
On 2 February 2018 Ferns Group Ltd acquired 100% of the ordinary share capital of Forefront Group Ltd for a cash consideration of £1.
Following a strategic review opportunities available, the Board has decided to close Lovell America Inc, a subsidiary which carried out land
development projects around Maryland in the USA. The investment has been written down accordingly.
Annual Report and Accounts 2018 Renew Holdings plc
87
Notes to the company accounts continued
G Assets held for resale
Property
2018
£000
1,500
2017
£000
1,500
This office property has been actively marketed but disposal has been delayed by current market conditions. The building is carried at net
realisable value based on an annual independent third party valuation.
H Debtors due after one year
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
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
Accruals and deferred income
J Creditors falling due after more than one year
Bank loans
Deferred tax
Bank loans and overdraft repayable:
Within one year
Within two to five years
2018
£000
2017
£000
19,335
9,692
13
63,086
2,128
21
255
65,503
84,838
2018
£000
87,971
565
635
29,515
186
6,857
73
69,042
4,903
26
257
74,301
83,993
2017
£000
77,036
409
1,565
26,801
297
6,175
125,729
112,283
2018
£000
21,873
6,768
28,641
87,971
21,873
109,844
2017
£000
—
3,387
3,387
77,036
—
77,036
Under the terms of the Renew Holdings plc’s group banking agreement, security has been granted over the Company’s assets.
Deferred tax liability:
Defined benefit pension scheme
Accelerated capital allowances
6,767
1
6,768
3,392
(5)
3,387
88
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS 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) was in respect of an inter-company loan. At 30 September 2018, this loan was $Nil (2017: $4,521,000).
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:
75,267,507 (2017: 62,591,451) Ordinary Shares of 10p each
2018
£000
2017
£000
7,527
6,259
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.
On 9 May 2018 12,676,056 Ordinary Shares were issued in a placing to raise £45m to partly fund the acquisition of QTS Group Ltd.
Share options
Renew Holdings 2004 Executive Share Option Scheme
The Company operates a share option scheme, the Renew Holdings plc 2004 Executive Share Option Scheme. The scheme has both
an Approved and Unapproved element. The difference between the two elements is that the Approved scheme has the advantage of
certain HMRC approved tax benefits.
Both elements have the same general terms and conditions. Options issued under the scheme must be held for three years before
they can vest and become exercisable. They must be exercised within ten years from the date of grant.
As at 30 September 2018, there were no options outstanding under the scheme. During the year 31,467 options were exercised at an
exercise price of 286p. Any options granted under the scheme 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 the 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 2018, there were 530,800 options outstanding under the scheme. On 22 November 2017, options to subscribe for a
further 246,000 Ordinary Shares were granted. During the year 107,136 options were exercised and 76,864 options lapsed.
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.
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.
£18,000 (2017: £109,000) has been charged to administrative expenses in accordance with FRS 102. There is no impact on net assets
since an equivalent amount has been credited to share based payments reserve. 184,000 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.
Annual Report and Accounts 2018 Renew Holdings plc
89
Notes to the company accounts continued
M Share based payments reserve continued
Renew Holdings plc Long Term Incentive Plan continued
Options granted under the Renew Holdings plc Long Term Incentive Plan over the Company’s Ordinary Shares at 30 September 2018
were as follows:
Date of grant
27 January 2016 24 November 2016
22 November 2017
Total
Awards outstanding at 30 September 2018
– Directors and employees
Exercise price
Price at date of grant
Maximum option life
125,700
10.0p
410.0p
10 years
159,100
246,000
530,800
10.0p
394.0p
10 years
10.0p
428.75p
10 years
Assumed option life for purposes of valuation
3 years
2.85 years
2.86 years
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
30%
1.7%
0.58%
212.5p
28%
2.0%
0.29%
289.0p
Land and
buildings
£000
269
786
296
1,351
Other
£000
21
25
—
46
25%
2.1%
0.52%
262.0p
Total
2018
£000
290
811
296
1,397
Total
2017
£000
251
677
—
928
During the year £203,000 (2017: 348,000) was recognised as an expense in the profit and loss account in respect of operating leases.
The Company had no capital commitments at 30 September 2018 (2017: £nil).
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’s 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 defined contribution pension scheme with individual stakeholder pension plans for its employees.
The Company made contributions of £167,000 (2017: £241,000) into these plans during the year. There are also £12,000 (2017: £11,000) 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: P Scott,
A Liebenberg, S Wyndham-Quin, J Samuel, DM Forbes, J Bishop, DA Brown and RJ Harrison, whose total compensation amounted to
£1,801,000 (2017: £2,131,000) all of which was represented by short-term employment benefits including £268,000 (2017: £109,000)
relating to share options exercised during the year. An analysis of this compensation is given in Note 6 of the consolidated accounts.
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.
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 2018 shows a surplus of
£19,335,000 based on the assumptions set out below.
90
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS R Employee benefits: Retirement benefit obligations continued
Defined benefit pension schemes continued
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 FRS 102 have been based on the most recent actuarial valuation as at 30 September 2018 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
30 September
2018
As at
30 September
2017
As at
30 September
2016
4.0%
4.3%
2.9%
2.2%
3.3%
3.1%
4.0%
3.5%
2.4%
2.0%
3.0%
2.9%
4.0%
3.0%
3.7%
2.0%
3.0%
2.9%
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 2017 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 2038 is 23.9 years.
The assets in the Lovell scheme were:
Annuities
Diversified portfolio
Cash
Total
Value as at
30 September
2018
£000
85,850
81,202
2,117
169,169
Current
allocation
51%
48%
1%
100%
Value as at
30 September
2017
£000
91,400
81,273
778
173,451
Value as at
30 September
2016
£000
101,201
88,592
731
Current
allocation
53%
47%
—
100%
190,524
Current
allocation
53%
47%
—
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 Group has agreed a revised recovery plan with the Trustees
which commits the Group to paying annual contributions of £4,260,000 which was 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 was 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 £2.2m.
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
2018
£000
(1,138)
(0.7)%
2017
£000
(14,565)
(8.4)%
2016
£000
22,781
12.0%
2015
£000
18,145
11.0%
5,076
(2,506)
(12,348)
10,664
3.4%
(1.5)%
(6.8)%
7.1%
2014
£000
16,348
11.2%
1,514
1.0%
Annual Report and Accounts 2018 Renew Holdings plc
91
Notes to the company accounts continued
R Employee benefits: Retirement benefit obligations continued
Scheme Funding Level and Actuarial Valuation 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
2018
£000
2017
£000
173,451
190,524
4,412
4,323
(11,879)
—
(1,138)
169,169
4,489
4,319
(11,315)
(1)
(14,565)
173,451
Present value of scheme obligations brought forward
163,759
182,820
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
4,104
64
(11,879)
2,404
(7,437)
(1,181)
4,253
60
(11,315)
(220)
(6,652)
(5,187)
Total fair value of scheme obligations carried forward
149,834
163,759
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
92
Renew Holdings plc Annual Report and Accounts 2018
19,335
(6,767)
12,568
(64)
—
(64)
4,412
(4,104)
308
(1,138)
6,214
5,076
9,692
(64)
—
4,323
308
5,076
19,335
9,692
(3,392)
6,300
(60)
(1)
(61)
4,489
(4,253)
236
(14,565)
12,059
(2,506)
7,704
(60)
(1)
4,319
236
(2,506)
9,692
FINANCIAL STATEMENTS 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 and joint ventures are listed below.
Subsidiary undertakings and joint ventures
Incorporation &
principal place
of business
Proportion of
Ordinary Shares
held by the Company
Amco Group Holdings Ltd
Owned by Renew Holdings plc
England and Wales
Britannia Group Ltd
Clarke Telecom Ltd
Inhoco 3520 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
Lewis Civil Engineering Ltd
Owned by Renew Holdings plc
England and Wales
QTS Group 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
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
VHE Land Projects Ltd
YJL Homes 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
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Amco Giffen Ltd (formerly Amco Group Trustees Ltd) Owned by subsidiary
Amco Rail Engineering Ltd
Amco Rail Ltd
Britannia Construction Ltd
David Lewis Civil Engineering Ltd
Geodur UK Ltd
Giffen Holdings Ltd
Giffen Group Ltd
‘Hire One’ Ltd
Knex Pipelines & Cables Ltd
Mothersill Engineering 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
Nuclear Decontamination Services Ltd
Owned by subsidiary
P.P.S. Electrical Ltd
QTS Rail Ltd
QTS Specialist Plant Services Ltd
QTS Training 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
Seymour (Civil Engineering Contractors) Ltd
Owned by subsidiary
VHE (Civil Engineering) Ltd
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
Scotland
Scotland
Scotland
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%
Annual Report and Accounts 2018 Renew Holdings plc
93
Notes to the company accounts continued
S Subsidiary undertakings continued
Subsidiary undertakings and joint ventures
VHE Equipment Services Ltd
VHE Technology Ltd
Walter Lilly & Co Ltd
West Cumberland Engineering Ltd
YJL Construction Ltd
YJL Infrastructure Ltd
YJL London Ltd
Switchgear & Substation Alliance 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
Incorporation &
principal place
of business
Proportion of
Ordinary Shares
held by the Company
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%
33.3%
28.9%
The registered office of Amalgamated Construction (Scotland) Ltd is 5 Carradale Crescent, Glasgow, G68 9LE.
The registered office of Lovell America Inc, is 9200 Rumsey Road, Columbia, Maryland, MD 21045, USA.
The registered office of Switchgear & Substation Alliance Ltd is Hamilton Office Park, 31 High View Close, Leicester, LE4 9LJ.
The registered office of QTS Group Ltd and its subsidiaries is Rench Farm, Drumclog, Strathaven, Lanarkshire, ML10 6QJ.
The registered office of all other subsidiary undertakings is Yew Trees, Main Street North, Aberford, LS25 3AA.
94
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS Directors, officers and advisors
(Non-executive Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(Independent non-executive)
(Independent non-executive)
(Executive Director)
Company Secretary
S Wyndham-Quin CA
Company number
650447
Registered address
Yew Trees
Main Street North
Aberford
Leeds
LS25 3AA
Website address
www.renewholdings.com
Directors
D M Forbes
P Scott
S Wyndham-Quin CA
J Bishop FCA
D A Brown
A Liebenberg
Registrars
Link 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
Annual Report and Accounts 2018 Renew Holdings plc
95
Shareholder information
Annual General Meeting
30 January 2019
Results
Announcement of interim results – May 2019
Preliminary announcement of full year results – November 2019
Share Portal
The Share Portal is a secure online site where you can manage your shareholding quickly and easily. To register for the Share Portal just
visit www.signalshares.com.
Dividend re‑investment plan
Link’s Dividend Re-investment Plan offers a convenient way for shareholders to build up their shareholding by using dividend money
to purchase additional shares. For more information please call +44 (0)371 664 0381 (Calls are charged at the standard geographic rate
and will vary by provider. Calls outside the United Kingdom will be charged at the applicable international rate). Lines are open between
09:00 - 17:30, Monday to Friday excluding public holidays in England and Wales. Alternatively, you can email shares@linkgroup.co.uk or
log on to www.signalshares.com.
Donate your shares to charity
If you have only a small number of shares which are uneconomical to sell you may wish to donate them to charity free of charge through
ShareGift (Registered Charity 1052686). Find out more at www.sharegift.org or by telephoning 020 7930 3737.
Share fraud warning
Share fraud includes scams where investors are called out of the blue and offered shares that often turn out to be worthless
or non-existent, or an inflated price for shares they own. These calls typically come from fraudsters operating in “boiler rooms” that
are mostly based abroad. If you are offered unsolicited investment advice you should:
• Check the Financial Services Register at 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 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”).
Link’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@linkgroup.co.uk.
96
Renew Holdings plc Annual Report and Accounts 2018
FINANCIAL STATEMENTS
Clarke Telecom
Unit E
Madison Place
Northampton Road
Manchester
M40 5AG
Tel: 0161 785 4500
Lewis Civil Engineering
Mwyndy Cross Industries
Cardiff Road
Pontyclun
Rhondda Cynon Taff
CF72 8PN
Tel: 01443 449 200
Seymour Civil Engineering
Seymour House
Harbour Walk
Hartlepool
TS24 0UX
Tel: 01429 233 521
Shepley Engineers
Robinson House
Westlakes Science Park
Moor Row
Cumbria
CA24 3HY
Tel: 01946 599 022
Our subsidiary businesses
Engineering services
AmcoGiffen
Whaley Road
Barugh
Barnsley
South Yorkshire
S75 1HT
Tel: 01226 243 413
QTS
Rench Farm
Drumclog
Strathaven
South Lanarkshire
ML10 6QJ
Tel: 01357 440 222
VHE
Whaley Road
Barugh
Barnsley
South Yorkshire
S75 1HT
Tel: 01226 320 150
Specialist building
Walter Lilly
Knollys House
17 Addiscombe Road
Croydon
Surrey
CR0 6SR
Tel: 020 8730 6200
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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