Renew Holdings plc
Annual Report and Accounts 2020
Engineering
Infrastructure
for a sustainable future
Renew Holdings plc Annual Report and Accounts 2020
A
STRATEGIC REPORT Engineering
Infrastructure
for a sustainable future
Our purpose
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.
Our vision
To safely and responsibly deliver essential engineering services
to the country’s key infrastructure assets.
Read more online at
www.renewholdings.com
B
Renew Holdings plc Annual Report and Accounts 2020
HIGHLIGHTS
Financial highlights
Operational highlights
Group revenue1
Full year dividend per share
£620.4m
2019: £600.6m
541.5
600.6
620.4
8.33p
2019: 11.50p
11.50
10.00
8.33
2018
2019
2020
2018
2019
2020
Adjusted operating profit1
Adjusted operating margin1
£39.6m
2019: £38.3m
38.3
39.6
31.1
6.4%
2019: 6.4%
5.7
6.4
6.4
2018
2019
2020
2018
2019
2020
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 30 to these accounts.
Record results in challenging times
Our differentiated and resilient business
model has delivered record results.
Expanding into new markets
Expansion into the regulated Highways
market with the acquisition of Carnell.
Strategic report
1
Highlights
2 Our business
4
6
8
Investment case
Chairman’s statement
Chief Executive’s review
13 Section 172(1) statement
14 Our business model
16 Our stakeholders
18 Market overview
22 Our strategy
24 Key performance indicators
26 Operational review
35 Financial review
38 Sustainability
44 Risk management
Strengthening our relationships
Strategic framework awards and renewals
with key clients during the year.
Governance
Financial statements
48 Board of Directors
72
Independent auditor’s report
50 Statement of corporate governance
76 Group income statement
59 Audit and Risk Committee report
61 Nomination Committee report
77
77
Group statement of comprehensive income
Group statement of changes in equity
62 Directors’ remuneration report
78 Group balance sheet
68 Directors’ report
79 Group cashflow statement
71
Statement of Directors’ responsibilities
80 Notes to the accounts
111 Company balance sheet
112
Company statement of
comprehensive income
112
Company statement of changes in equity
113 Notes to the Company accounts
124 Directors, officers and advisors
124 Shareholder information
IBC Our subsidiary businesses
Renew Holdings plc Annual Report and Accounts 2020
1
STRATEGIC REPORT OUR BUSINESS
Infrastructure expertise
Our subsidiary businesses have expert knowledge in their individual markets
and directly deliver day-to-day engineering services aligned to the needs of
our clients. The long-term maintenance and renewal of critical infrastructure
networks remains our focus.
Our Engineering Services focus
Rail
As a major provider of infrastructure services to the rail
network nationally, we support its day-to-day operations by
providing a high volume of essential, non-discretionary asset
maintenance activities. Through our long-term frameworks
we deliver a range of services including civils asset
management, fencing, devegetation and drainage.
Infrastructure
We deliver specialist engineering services across the
strategic highways network predominantly to Highways
England through a number of asset delivery framework
agreements. Services include infrastructure civils, specialist
drainage, lighting and electricals. We also undertake all
aspects of wireless telecoms network infrastructure delivery.
Energy
Our services are associated with high hazard risk reduction
operations at nuclear facilities that include waste treatment,
reprocessing, decommissioning and decontamination
operations. We also provide long-term maintenance and
asset renewal support at many of the UK’s thermal power
generation plants.
Environmental
We support our water clients by directly delivering asset
maintenance and renewals across water infrastructure
networks including flood alleviation and river and coastal
defence schemes. We also specialise in undertaking
complex remediation schemes for our clients.
2
Renew Holdings plc Annual Report and Accounts 2020
Specialist Building
Our subsidiaries
High Quality Residential and Science
Operating in London and the Home Counties, we are a
market-leading provider of luxury prestigious private
residential refurbishment schemes where we specialise in
extensive temporary works, often underground. In the
science sector, we have a number of frameworks to build
and refurbish scientific facilities.
Our markets
Rail
Rail
Infrastructure
Energy
Environmental
Highways
Wireless Telecoms
Nuclear
Decommissioning
Power Distribution
Water
Land Remediation and
Specialist Restoration
Read more about our activities in these
markets on pages 26–34
Renew Holdings plc Annual Report and Accounts 2020
3
STRATEGIC REPORT INVESTMENT CASE
Resilient value
The regulated markets in which we operate have long-term spending
programmes and high barriers to entry and provide continued opportunities
for sustainable growth.
Our investment case
Differentiated
business model
Our subsidiary businesses operate
across a diversified range of markets
providing critical asset maintenance
and renewal services.
Our differentiated business model delivers
reliability and a competitive advantage
and is key to the Group’s success in
these markets.
Non-discretionary
spending programmes
The Group operates in regulated markets
which have long-term asset renewal and
maintenance spending programmes,
visible in our clients’ operational
expenditure budgets.
We work on long-term frameworks
delivering the day-to-day renewal and
maintenance tasks required to keep critical
networks operational.
Delivering
sustainable returns
We seek to deliver share price growth
opportunities through our established
and proven strategy, delivering reliable
capital growth.
Read about our business model
on pages 14 & 15
Read more about our regulated markets
on pages 18–21
Read about our strategy on pages 22 & 23
Key differentiators
Frameworks in regulated markets
Adjusted EPS1
5
See page 10
150+
41.22p
Impact of Covid-19
Due to the critical nature of the work the
Group undertakes, financial performance
remains strong, in spite of the operational
challenges of Covid-19. Our operations
can often be delivered by small teams
supported by office based functions
which moved to home working.
We are also able to ensure safe working
practices through the employment of our own
highly skilled, directly employed workforce.
Impact of Covid-19
We undertake day-to-day maintenance and
renewals tasks on key UK infrastructure
assets including on the rail, water, wireless
telecoms and strategic highway networks.
During the initial phases of the pandemic a
large percentage of the work we undertook
was deemed as “critical” to the Covid-19
response and, as such, continued with
minimal disruption where we were able to
safely implement the Government’s social
distancing guidelines.
Impact of Covid-19
In response to the escalation of the
Covid-19 pandemic, the Board focused on
taking actions to preserve cash and protect
liquidity in a way that did not compromise
the long-term prospects of the business.
The presence of these defensive and
resilient qualities and the implementation
of numerous mitigation measures have
proved to be extremely effective in
responding to the challenges of Covid-19.
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 30.
4
Renew Holdings plc Annual Report and Accounts 2020
" Due to the critical nature of the work the
Group undertakes, financial performance
remains strong, in spite of the operational
challenges of Covid-19."
Established
market position
Our businesses work in markets with high
barriers to entry which demand a highly
skilled, experienced workforce and a
proven track record of safe delivery.
We continue to develop our range of skills
enabling us to provide a more efficient
and cost-effective service to our clients.
Long-term
growth prospects
The Group is committed to growing
the business in its chosen markets
both organically and through selective
complementary acquisitions whilst
maintaining a disciplined approach to risk.
Details about the Group’s operations can
be found on pages 26–34
Read how we manage our principal risks
on pages 44–47
Highly skilled workforce
Adjusted EPS growth over last 5 years
3,800
58%
Impact of Covid-19
The markets in which the Group operates
are mainly governed by regulation and benefit
from long-term spending programmes for
renewals and maintenance due to the
critical nature of the infrastructure assets.
We have positions on many long-term
frameworks to deliver these essential
requirements and were able to continue
to do so for the majority of our clients.
An exception to this was at Sellafield
which continues its return to work
programme across the site.
Impact of Covid-19
Organic growth opportunities for the Group
remain strong with potential to increase our
market share across our Rail, Infrastructure,
Energy and Environmental market sectors.
The Group also continues to position itself
strongly to take advantage of acquisitive
opportunities that are complementary to
the Group’s existing skills.
Working
together
Tunnel collaboration
Close collaboration between the
teams at AmcoGiffen and QTS
successfully brought to a conclusion a
challenging drainage project at Severn
Tunnel for Network Rail in April.
Following emergency works,
AmcoGiffen and QTS developed a
programme to deliver drainage repairs
and maintenance to the existing
Severn Tunnel drainage system.
Improvement and enhancement
works were carried out over a
challenging nine day blockade
during the Easter period.
Taking into account the constraints
of implementing UK Government
guidance on Covid-19 precautions
to keep everyone safe, works were
undertaken around the clock for
nine days.
Renew Holdings plc Annual Report and Accounts 2020
5
STRATEGIC REPORT CHAIRMAN’S STATEMENT
A resilient performance
in challenging times
Dear Shareholder
Introduction
Despite the challenges of Covid-19, the
Group is pleased to announce a record
revenue performance, sustained profit
growth and strong cash generation, all of
which exceeded last year’s performance
and reflect the core defensive strengths
and resilience of Renew’s business model.
Following an excellent trading result in the
first half of the year, the Group continued to
make strong progress in the second half
including winning and renewing long-term
framework appointments across our
markets. We expanded into the Highways
market with the acquisition of Carnell, a
company that delivers specialist
engineering services across the strategic
road network. We continue to focus on
delivering essential asset maintenance and
critical infrastructure renewals which are
underpinned by non-discretionary
regulatory requirements.
" The Board would
like to sincerely
thank all its
employees for their
ongoing dedication
and hard work in
what have been
and remain,
extremely difficult
circumstances
both at work and at
home."
Results
Group revenue1 increased to £620.4m
(2019: £600.6m) with adjusted operating
profit1 increasing to £39.6m (2019: £38.3m).
Statutory operating profit was £32.9m
(2019: £27.5m). The adjusted EPS1 was
41.22p (2019: 40.43p) and basic earnings
per share was 26.78p (2019: 29.55p). The
Group is also pleased to report a return to
net cash1 of £0.3m (2019: net debt £10.2m),
in line with our expectations.
Covid-19
Covid-19 presented challenges across our
entire business although it also served to
highlight the importance of the mission-
critical services we provide in the Rail,
Infrastructure, Energy and Environmental
sectors. The initial lockdown, and
subsequent ongoing Government
restrictions, have necessitated many
changes to our working practices. Our
priority from the start has been to ensure
both the safety of our workforce and the
continuous delivery of essential renewal
and maintenance operations. Our
employees continue to tirelessly implement
Covid-19 precautions, often in extremely
difficult environments. The Group’s culture
of robust governance, risk management
and focus on health and safety have
together provided a strong platform from
which we have been able to continue to
operate whilst delivering uninterrupted
services for our customers.
People
Our employees are critical to the continued
success of the Group and the Board would
like to sincerely thank all its employees for
their ongoing dedication and hard work in
what have been, and remain, extremely
difficult circumstances both at work and
at home.
David M Forbes
Chairman
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 30.
6
Renew Holdings plc Annual Report and Accounts 2020
Board change
On 1 March 2020, we were pleased to
announce the appointment of Stephanie
Hazell as a Non-executive Director.
Stephanie has over 20 years’ relevant
experience working in high profile
businesses including
PricewaterhouseCoopers LLP, Orange SA,
Virgin Management Ltd and National Grid
Plc where she held the position of director,
strategy and corporate development. She
is an industrial partner at Infracapital and
a non-executive director for a number
of its investments.
Future focus
The Board is committed to building on
its track record of consistently creating
shareholder value through the delivery of
its strategic priorities whilst focusing on
its environmental, social and governance
responsibilities. The Group is supported
in the delivery of its long-term strategy
through its effective relationships with our
directly employed workforce, customers,
suppliers, shareholders, and wider
stakeholders which are critical to the
continued success of our business.
Renew is a leading provider of engineering
services and operates in attractive markets
underpinned by long-term growth drivers and
non-discretionary Government spending.
Growth, both organic and through strategic
earnings-enhancing acquisitions, is focused
on maintenance and renewals tasks in
markets where non-discretionary spending
programmes exist to maintain critical
infrastructure. Our differentiated business
model and the reliable long-term nature
of the UK infrastructure markets give
the Board continued confidence in the
Group’s future and the significant growth
opportunities ahead.
David M Forbes
Chairman
8 December 2020
Differentiated business model
Our differentiated business model and the
services we provide to support key
infrastructure assets are more critical than
ever, providing the Group with ongoing
growth opportunities across our chosen
markets. These markets enjoy committed
funding which provides visible, reliable and
resilient revenues via long-term
maintenance and renewal programmes. We
deliver non-discretionary maintenance and
renewals tasks and have little exposure to
the financial and contractual risks of larger
enhancement schemes. Operating in
complex, challenging and highly regulated
environments, our markets have high
barriers to entry and we directly employ a
highly skilled workforce which enables us to
be extremely responsive to our clients’
needs.
Working
together
Our core values
As a holding company, Renew grants
autonomy to its operating subsidiaries,
enabling them to be effective in their
individual markets whilst setting overall
standards and shared values. Renew
has the following values at its core:
• Compliance
• Consideration
• Responsibility
• Progression
• Reliability
• Sustainability
• Responsiveness
• Integrity
Read more about our core values
on page 14
Dividend
The Covid-19 pandemic saw the Board take
a number of decisive actions to preserve
cash and protect liquidity. One of the
prudent measures, taken in April 2020, was
the suspension of the Group’s interim
dividend which would ordinarily have been
paid to shareholders in July 2020. We have
continued to review our dividend policy
whilst understanding the importance of the
dividend to our shareholders. The Group’s
strong trading performance, cash position
and positive outlook has given the Board
the confidence to propose a final dividend
of 8.33p per share, an increase of 8.6 per
cent over the prior year final dividend of
7.67p. This will be paid on 5 March 2021 to
shareholders on the register as at 29
January 2021, with an ex-dividend date of
28 January 2021. As no interim dividend was
paid to shareholders, this will represent a
full year dividend of 8.33p per share (2019:
11.50p). In the absence of unforeseen
circumstances, or a material adverse
impact on trading caused by a worsening
of the Covid-19 situation, we expect
dividend payments to continue in line with
our pre-Covid dividend policy going
forward.
Governance
We have continued to develop our
approach to corporate governance in the
year. As a Board, we are responsible for
ensuring the effective application of high
levels of governance within our business,
balancing the interests of all our
stakeholders. As a minimum, the Group
complies with the QCA Corporate
Governance Code, more details of which
can be found in the corporate governance
section of the Group’s website.
Risk management
Risk management is led by the Board,
which reviews the Group’s risk profile on an
ongoing basis alongside the Audit and Risk
Committee. Subsidiary management teams
are responsible for the effective
embedding and monitoring of the Board’s
agreed risk management protocols and the
Executive Directors provide regular updates
to the Board on the principal risks and
controls across the Group.
Board effectiveness
During the year, the Nomination Committee
reviewed the Board’s structure and
composition and undertook a detailed
effectiveness review, in order to ensure it
continues to have the balance of skills and
experience to deliver the Group’s strategy.
Diversity in its widest sense remains an area
of focus as we move through 2021.
Renew Holdings plc Annual Report and Accounts 2020
7
STRATEGIC REPORT CHIEF EXECUTIVE’S REVIEW
Focused on markets
with committed
long-term spending
cycles
we have delivered extraordinary and record
results for the Group and strengthened our
position across our markets. This highlights
our defensive characteristics and the
importance of our role in keeping the
nation’s infrastructure functioning
efficiently and safely at all times.
I am incredibly proud of the way our entire
workforce continues to deliver
uninterrupted, mission-critical infrastructure
services to our clients despite challenging
working environments and the introduction
of stringent Covid-19 protection measures
across all our sites. We remain focused on
the health, safety and wellbeing of all our
employees and stakeholders.
Operations across our key sectors were
designated critical to the Covid-19 response
and, as such, demand for our directly
delivered maintenance and renewal
services remained strong with over 80% of
our operations continuing throughout the
peak of the first lockdown period. Since
then, the majority of the Group’s operations
have returned to levels similar to those
experienced prior to the pandemic across
all of our markets, with the exception of our
nuclear operations at Sellafield where we
do not expect the site to be fully
operational until April 2021.
At the interim results in May, the Group
announced the actions it had taken to
preserve cash and protect liquidity. These
included the deferral of all non-essential
capital expenditure, a hiring freeze, deferral
of VAT payments, utilisation of the
Government’s Coronavirus Job Retention
Scheme (“CJRS”) and a temporary 20%
reduction in the salaries/fees of the Board
and senior management, as well as the
suspension of an interim dividend payment
to shareholders. These measures, as well as
the core defensive qualities of our operating
model and our resilience, have proven to be
extremely effective in responding to the
challenges of Covid-19 whilst strengthening
the Group’s balance sheet.
As encouraged by the UK Government, we
utilised the CJRS to protect and retain jobs
when the initial lockdown restrictions came
into force resulting in a temporary
interruption to our services. Given the
positive progress we have made since then,
and the fact that the majority of our
activities have returned to pre-pandemic
levels, we are no longer utilising the
scheme and it is our intention not to do so
unless there are even tougher restrictions
imposed which start to affect our markets.
Currently the Group’s working capital
facilities include a £44.2m revolving credit
facility provided by HSBC UK Bank plc and
National Westminster Bank plc, expiring in
January 2024 and a £10m unsecured
overdraft facility. The Group’s cash generation
continued to be very strong in the second
half of the year and we returned to a small
net cash position of £0.3m at the year end.
Our available cash and bank facilities mean
we had headroom of approximately £68m
as at 30 September 2020. This position was
bolstered by the deferment of c.£17m of VAT
that will now be paid in the 2021 financial year.
Market drivers
Renew’s businesses operate in markets
underpinned by sustainable, long-term
structural growth dynamics and committed
regulatory spend. Increasing demand for
the maintenance and renewal of existing UK
infrastructure is driven by a number of
long-term economic factors including:
• a commitment by the Government to
invest £640bn2 in the UK’s infrastructure;
• greater focus on sustainability and
climate change, the net zero target, flood
risk and investment in renewables and
electrification programmes;
Paul Scott
Chief Executive
Dear Shareholder
Introduction
Renew is a leading provider of essential
engineering services to critical UK
infrastructure networks, operating in
regulated markets including rail, highways,
telecommunications, civil nuclear, water
and environmental. In March, the UK
Government committed to a record
£640bn2 investment in the UK’s
infrastructure and we expect to benefit
from an increased focus on maintaining
and renewing assets. These markets are
underpinned by regulatory requirements
and therefore benefit from committed
long-term spending cycles and a visible
pipeline of opportunities. This exposure to
non-discretionary, reliable and regulated
expenditure fully supports our low risk, high
quality and value accretive earnings model.
Covid-19
The pandemic has helped to fully
demonstrate the core strengths of Renew’s
differentiated business model. Despite the
many challenges presented by Covid-19,
For references please see page 12.
8
Renew Holdings plc Annual Report and Accounts 2020
• population growth increasing the
pressure on housing, energy, water and
demand for natural resources;
• technological innovation driving a shift
towards digital roads, smart cities and the
transformation of transport and
telecommunications networks; and
• increased Government regulation.
Our track record of growth and
long-term value creation
Renew has a strong track record of sustainable
value creation across the economic cycle.
Over the past five years, we have delivered:
• adjusted earnings per share1 growth of
58 per cent;
• an increase in our adjusted operating
margin1 growth from 3.9 per cent to 6.4
per cent; and
• revenue1 growth of 19 per cent.
Our track record of reliable revenue growth
and cash generation has resulted in our
ability to deliver highly predictable organic
earnings growth and funding for the
acquisition of complementary businesses
that meet our strategic requirements.
Results
Despite the impact of Covid-19, the Group
delivered an extraordinary and record
trading performance, with strong cashflow
and continued EPS growth. This
performance reflects our industry-leading
capabilities, the fundamental strengths of
our differentiated, low-risk business model
and the critical support services we provide
to clients in complex, challenging and
regulated environments.
Group revenue1 increased to £620.4m
(2019: £600.6m) with an adjusted1
operating profit of £39.6m (2019: £38.3m)
and a maintained adjusted1 operating margin
of 6.4% (2019: 6.4%). As at 30 September 2020
the Group had a net cash1 position of
£0.3m (2019: net debt £10.2m) reflecting
the Group’s continued focus on cash
generation and conservative approach
to gearing. These results include a
contribution from Carnell, a leading
provider of specialist engineering services
on the strategic highways network.
Acquired in January 2020, the business
continues to perform in line with expectations.
The Group’s order book1 at 30 September 2020
has strengthened to £692m (2019: £581m).
During the year, we conducted a detailed
review of the remaining liabilities relating to
Allenbuild Limited, a business that was sold
in 2014. As a consequence of this review
we have determined that an additional
provision of £5.3m is required to enable us
to deal with these legacy contractual
issues. This is shown as a loss for the year
from discontinued operations in the Group
income statement.
We are pleased to report that after the end
of the financial year, the Trustees of the
Lovell Pension Scheme, in consultation with
the Board of Renew, entered into a “buy-in”
agreement with Rothesay Life plc. This
transaction significantly de-risks the Group’s
balance sheet, further reduces its pension
exposure risks and improves its cashflow
in the medium term.
Engineering Services
Our Engineering Services activities, which
account for over 90 per cent of the Group’s
adjusted1 operating profit, delivered
revenue of £577.2m (2019: £563.8m) with
an adjusted1 operating profit of £40.8m
(2019: £39.4m) resulting in an operating
margin of 7.1% (2019: 7.0%). At 30
September 2020, the Engineering Services
order book was £603m (2019: £542m).
Continued positive momentum in our rail
and telecommunications businesses
helped drive this strong performance as
well as a contribution from Carnell, which
has performed well and leaves the Group
ideally positioned to capitalise on the
growth opportunity across the UK’s
strategic highways network.
Rail
Our largest customer, Network Rail, will
invest £53bn3 over Control Period 6 (“CP6”),
the current five year investment cycle,
which runs to 2024, with an increased focus
on operational support and maintenance
compared to the previous CP5 period.
In addition, the Government is committed
to its rail decarbonisation programme,
including a significant investment in
electrification programmes, as part of the
overall UK target to deliver net zero by 2050.
As a major provider of multidisciplinary
maintenance and renewals engineering
services to Network Rail, we support the
day-to-day operation of the rail network
nationally, directly delivering essential asset
maintenance through our long-term CP6
frameworks. The Group now holds in
excess of fifty CP6 maintenance and
renewals frameworks across all disciplines,
covering the entire UK rail network.
During the year we secured new positions
on the CP6 Wales and Western five year
renewals frameworks across all five lots,
where we will deliver a programme of
engineering services to assets across the rail
network including bridges, embankments,
tunnels, signalling and electrification and plant.
Covid-19
resilience
Our priorities
Covid-19 task force
• Keep people safe
• Ensuring compliance with
Government guidelines
• Continuous monitoring and audit
Respond to critical
infrastructure demand
• Ongoing maintenance and renewals
requirements despite pandemic
• Responding to increasing demand
in Rail and Highways
Adapt operational approach
• Office layouts changed to support
social distancing
• Working from home facilities increased
• Shifting to online meetings
Protect all stakeholders’ interests
• Maintain business operations
• Consistently review risks to
the business
• Ensuring continued good liquidity
How this impacts our business
Implementing the above working practices
meant we were able to continue to operate
across the majority of our sectors. In Rail
and Highways, which account for the
majority of our engineering activity, we
worked closely with our public sector
customers in areas designated critical
to the Covid-19 response. Water and
Telecommunications were also
designated “critical sectors”. Our key
workers continued to be deployed
across all areas where we have
framework contracts.
Renew Holdings plc Annual Report and Accounts 2020
9
STRATEGIC REPORT
CHIEF EXECUTIVE’S REVIEW CONTINUED
We were also awarded an additional
rail drainage framework in Scotland,
complementing our existing rail drainage
framework positions. We have existing
frameworks for the delivery of
multidisciplinary maintenance and
renewals, minor signalling, geotechnical
and earthworks, devegetation, slab track,
station information and security systems
and telecoms. We also provide a 24/7
emergency support service across the
rail network and during the period we
responded to significant events at
Stonehaven and Falkirk.
We remain committed to adding value
through innovation. We have developed
bespoke and unique solutions for
devegetation, tunnel maintenance and
drainage to deliver safer and more
sustainable working practices that create
high barriers to new entrants.
Since the lockdown restrictions were imposed
in March, we have seen our planned work
for our rail customers continue with minimal
disruption, albeit with enhanced safety
requirements in place to comply with
the Government’s Covid-19 guidelines.
Infrastructure
Highways
The UK Government has committed to an
investment of £27.4bn4 in the strategic road
network over the next five years, as part of
its second Road Investment Strategy
(“RIS2”). £11.9bn of this funding will be
ringfenced for operations, maintenance
and renewals, a significant increase from
the £5.1bn5 invested in RIS1. This represents
an attractive growth opportunity for Renew
and in January 2020 we announced the
acquisition of Carnell, a leading provider of
specialist engineering services on the strategic
Our differentiators
• Our Rail, Infrastructure, Energy and
Environmental markets enjoy
committed funding
road network. Carnell directly delivers
non-discretionary renewals and maintenance
through long-term framework agreements,
employing plant-led technologies as part of
its unique range of services deployed across
the highways network.
Operating nationally, Carnell has built
strong relationships with key public and
private sector clients, including its largest
customer, Highways England, for which it is
one of only three suppliers working across
all Asset Delivery Areas. During the period,
Carnell performed in line with expectations
and saw a number of its existing frameworks
extended as well as securing a new Asset
Delivery Framework for Highways England
in the East Region.
Carnell works closely with its clients and
suppliers to develop innovative solutions to
improve safety, sustainability and value in
the delivery of drainage, infrastructure,
specialist surveys and highways technology
across the strategic road network. In the
last year it recycled 53,000m3 of filter drain
using its STONEmaster and STABLEdrain
systems. This saved 62,000 litres of fuel
and reduced HGV journeys saving over 500
tonnes of CO2 and was recognised with an
International Green Apple Award for
environmental best practice. Carnell was
also awarded the HRH Prince Michael
International Road Safety Award for its
mobile road worker protection system
SAFETYcam.
During the Covid-19 restrictions, our
activities in Highways have continued at
levels similar to those seen prior to the
pandemic. We remained operational across
all Highways England areas which is
reflective of the resilience of this new
market sector for Renew.
Focused
SHEQ
Support in a pandemic
Renew has delivered a Group wide
series of stand down events which
focus on the distraction caused by
responding to the Covid-19 pandemic.
Health and safety information is shared
via a Safety, Health, Environmental and
Quality (“SHEQ”) portal and employees
are supported through our Employee
Assistance Programme.
All our office and site locations
have been reviewed and changed to
ensure they meet strict Government
guidelines on social distancing,
including one way systems. Increased
handwashing facilities and PPE have
been made available to keep our
colleagues safe.
We continue to review our procedures
as guidance changes. Our safe
operations mean our key employees
can continue to support critical
UK infrastructure throughout
the pandemic.
Wireless Telecoms
The Wireless Telecoms market continues to
grow significantly as 5G networks are rolled
out. The Government is investing £5bn2 to
roll out gigabit broadband across the UK,
a significant component of which is 5G.
In addition, the four major UK network
operators are also making significant
investments in the deployment of 5G.
• Provides visible, reliable and resilient revenues via long-term maintenance and
renewal programmes
• We deliver non-discretionary
maintenance and renewals tasks
• We have little exposure to the financial and contractual risks facing those businesses
that deliver large enhancement schemes funded by capex spend
• We work in complex, challenging
and highly regulated environments
• We employ a highly skilled, directly
employed workforce
• We have a proven track record of
revenue growth, profitability and
cash generation
• In rail maintenance our average task size is less than £20k
• Mainly funded from operational expenditure budgets
• Markets with high barriers to entry
• Underpins safe working practices
• Creates a culture of responsiveness to client needs
• Reduces our exposure to sub-contractor pricing volatility
• Presenting an attractive, long-term investment case
10
Renew Holdings plc Annual Report and Accounts 2020
Delivering all aspects of wireless telecoms
infrastructure, including 4G and 5G
deployment, maintenance and
decommissioning services, we have
long-term relationships with all the main UK
network operators, equipment vendors and
managed service providers. In the period,
we have seen a significant increase in work
across all our frameworks as the 5G roll-out
programme accelerates. We were awarded
positions on both Telefonica’s and MBNL’s
new three year 5G services frameworks as
well as a contract to deliver Telefonica’s
microwave services for the next two years.
In March 2020, the Government
announced it would also invest £500m6 in
the Shared Rural Network, a programme to
extend 4G mobile coverage to 95% of the
UK. Collaboration between the main
network operators will see them provide
220 new sites in rural areas that are
currently without coverage. We have
already secured a large portion of the site
search activities and this places us in a
strong position to deliver a full acquire,
design and construct turnkey programme.
Following the Government’s
announcement to remove Huawei
equipment from the UK’s 5G networks by
2027, we are currently working with EE and
BT to deliver 95 trial sites in Hull, London
and Cardiff, and we expect to see
significant growth in this programme over
the next three years.
Wireless telecoms was designated critical
to the Covid-19 response and, as such, we
continued to support the network operators
where it remained safe for our employees
to do so. Our multi-skilled, direct delivery
teams have continued to provide a
responsive service with limited interruption.
Energy
Nuclear
As a major mechanical, electrical and
instrumentation (“ME&I”) services
contractor, our operations in the nuclear
and chemical process environment focus
on decontamination and decommissioning
services, operational support and asset
care. Working for over 75 years in civil
nuclear, we deliver a multidisciplinary
service through our large complement of
highly skilled employees who operate to
demanding nuclear standards.
The Nuclear Decommissioning Authority
(“NDA”) spends c.£3bn7 per annum on its
nuclear decommissioning programme
across its 17 nuclear licensed sites in the UK
and we continue to support sites that
command approximately 90 per cent of
this expenditure. The Government’s total
nuclear decommissioning provision is
estimated at £124bn8 over the next 120
years, with around 75% of the total spend
allocated to Sellafield which is the largest of
the NDA’s sites and where we remain a
principal ME&I contractor.
Operating on the major Decommissioning
Delivery Partnership Framework, which runs
to 2026, we deliver work across some of the
most hazardous areas of Sellafield
including waste retrieval from legacy
storage ponds and silos. Our activities
include decontamination, decommissioning
and waste management. Our long-term
frameworks include the SR&DP Asset Care,
Magnox Swarf Storage Silo, Bundling
Spares and Tanks and Vessels Frameworks.
During the period, we were appointed to
both lots of the four year Fabrication and
Machining Spares Framework for the
delivery of highly engineered nuclear
components and we remain strongly
positioned for future opportunities that
will emerge from the major projects
programme at the site.
In line with nuclear safety protocols, the
Sellafield site suspended the majority of
operations at the start of the Covid-19
lockdown in March. The mobilisation of
work programmes and decommissioning at
Sellafield continues to gain momentum;
however, we do not expect to be fully
operational until April 2021. At Springfields,
where we deliver operational support and
decommissioning activities, we have seen a
significant increase in activity since the
lockdown and we have recently been
appointed to a major programme of works
associated with the decommissioning of
the Magnox Island.
We continue to build on our relationship with
Rolls Royce to secure further opportunities
since our appointment to the Diesel
Generator Programme at Hinkley Point “C”.
Thermal power and networks
Our essential engineering maintenance
services continue at four of the UK’s
thermal power stations at near normal
levels. We remain operational on the Minor
Works Framework with National Grid as well
as securing a Minor Civils Framework with
Western Power Distribution in the period.
Environmental
Water
In the current five year investment period,
AMP7 (which runs from 2020 to 2025), an
estimated c.£50bn9 will be spent,
representing a 16% increase from AMP6,
with higher expenditure committed to
capital maintenance and asset
optimisation. Additional investment is
allocated to deliver supply resilience
including dam safety and infrastructure
refurbishment schemes. These long-term
renewal programmes require sustained
investment through our clients’ operational
expenditure budgets.
For Dŵr Cymru Welsh Water (“DCWW”), we
continue to operate across the region on
the Pressurised Pipelines Framework, the
Major Civils Framework and the Capital
Delivery Alliance Civils & Pipeline
Framework. In addition to ongoing
maintenance and renewals tasks, we have
provided extensive 24/7 emergency
reactive works across the water network, in
particular supporting the response to the
disruption caused by severe storms early in
2020. During the year we were awarded
seven schemes as part of DCWW’s dam
safety programme, enhancing our position
as an approved dam safety contractor and
providing ongoing opportunities.
Works continue with Wessex Water and
Bristol Water as they develop their plans for
AMP7. With our new client Yorkshire Water,
we will carry out engineering works to
existing assets on operational treatment
and distribution facilities over the next five
years through the AMP7 Minor Civils
Framework where we have recently been
awarded our first project. Additionally, we
were appointed to a treatment works
scheme for new client Thames Water.
The Government has committed record
investment of £5.2bn2 over a six year period
to improve flood defences nationally. Our
clients in this market include the
Environment Agency and the Canal and
River Trust where we deliver essential
maintenance and improvement works
nationally. We continue to build on our
success with other water clients working for
Scottish Canals, Peel Ports and Natural
Resources Wales during the year.
Work continues for all our water clients with
minimal disruption albeit with enhanced
safety precautions in place to comply with
the UK Government’s strict Covid-19 safety
guidelines. The essential nature of the
maintenance and renewals tasks we undertake
on the water network ensured we remained
fully operational across all frameworks.
Land Remediation and
Specialist Restoration
In Land Remediation during the year, we
experienced significant disruption across
our site activities due to the Covid-19
pandemic. This was particularly the case
in Scotland where all of our schemes were
suspended during the first lockdown.
All activity had returned to pre-pandemic
levels by July with enhanced safety
protection measures in place in line with
the UK Government’s Covid-19 guidelines.
Renew Holdings plc Annual Report and Accounts 2020
11
STRATEGIC REPORT CHIEF EXECUTIVE’S REVIEW CONTINUED
In Specialist Restoration, despite a temporary
cessation of works, our operations at the
Palace of Westminster have been at normal
capacity since June. During the period we
have also been appointed to a new five year
conservation framework at this UNESCO
World Heritage Site.
In addition to our ongoing safety programmes,
the Covid-19 pandemic has necessitated
significant changes to working practices
across all our operations to ensure we are
able to continue to operate safely whilst
implementing the Government’s Covid-19
prevention guidelines.
Specialist Building
We specialise in the High Quality
Residential and Science markets in London
and the Home Counties.
Revenue was in line with the Group’s
expectations at £43.2m (2019: £36.1m)
reflecting a continued focus on contract
selectivity and risk management. Operating
profit was £1.0m (2019: £0.9m), with an
operating margin of 2.3% (2019: 2.4%). In
Specialist Building, the order book was
£89m (2019: £39m).
During the initial lockdown period in March,
we experienced some disruption in the
High Quality Residential sector in London
although operations returned to pre-
pandemic levels by July. The Group
continues to be selective in these markets
where we have a long-established track
record. During the period, work continued
uninterrupted on our critical science
schemes for Defra and the MRC London
Institute of Medical Science where we
continue to make good progress.
New and emerging markets
As part of the Group’s growth ambition,
we entered the Highways market with
the acquisition of Carnell which delivers
renewal and maintenance services across
the strategic highways network. We also
continue to explore opportunities for our
existing portfolio of subsidiaries to work
together and to leverage their skills
and capabilities to enter adjacent
market segments and exploit new
emerging opportunities.
Health and safety
We continue to make health and safety a
priority, ensuring safe working practices for
the Group’s employees and those who work
with us.
Our progress during the year was
overshadowed by an accident in April when
our colleague Aden Ashurst was fatally
injured in the performance of his duties as a
Controller of Site Safety. This incident
remains the subject of ongoing
investigations and our thoughts remain with
the family, friends and colleagues of Aden
who lost his life in the conduct of delivering
essential rail services.
Sustainability
At Renew, our vision is to safely and
responsibly deliver essential engineering
services to support and maintain the
country’s key infrastructure assets. Our
specialist engineering services help to
future-proof the critical infrastructure upon
which millions of people rely as they go
about their day-to-day business, from the
rail network to roads and telecoms to the
energy we use. A long-term approach to
sustainability has therefore always been at
the heart of our business.
We continue to align our business with the
ESG requirements of our stakeholders and
during the year we further developed our
sustainability strategy which is now reported
in five key areas: customer value, climate
action, operating responsibly, engaging our
people and supporting our local communities.
The pandemic has intensified the world’s
focus on climate change and during the year
we have introduced a number of initiatives
including trialling the use of electric powered
plant. We have also been rolling out the
installation of electric vehicle charging points
at our offices and depots which supports
our growing fleet of electric vehicles and
reduces the carbon footprint of our operations.
This is our first year of reporting under the
Streamlined Energy and Carbon Reporting
(“SECR”) regulations which will provide us
with a baseline for future reporting and to
ensure we continue to support the UK
target to deliver net zero carbon by 2050.
Outlook
These results demonstrate the resilient and
long-term nature of the UK infrastructure
markets in which we operate and provide a
solid platform for our continued growth
ambitions. The UK Government remains
committed to investing in infrastructure
over the long-term, and the Group’s market
leading capabilities mean we are well
positioned as a partner of choice in a
number of infrastructure sectors to take
advantage of this investment.
Since the Covid-19 societal restrictions
were imposed, we have continued to
demonstrate a safe and pro-active
response to a continuous demand for
our essential services. This situation has
prevailed since the second lockdown was
enforced on the 5 November 2020 and
we have continued to operate safely,
in compliance with the latest guidance
and without any reduction in the levels
of service demand. Given our positive
progress, with the majority of our activities
at pre-pandemic levels, we do not intend to
further utilise the Government’s
Coronavirus Job Retention Scheme.
Our entry into the Highways market has
broadened our offering into a compelling
new growth area and we continue to seek
opportunities in markets with similar
characteristics of non-discretionary
regulated investment, ongoing renewal and
maintenance requirements and high
barriers to entry. Our clients have clear
spending plans underpinned by strategic
national need, regulatory commitments
and essential maintenance requirements
delivered through long-term programmes
of investment, providing visibility of spend
over regulatory cycles.
Our differentiated and resilient business
model, highly skilled directly employed
workforce and proven track record provide
us with a competitive advantage which is
fundamental to the Group’s success in its
chosen markets.
The Board remains confident that Renew is
strongly positioned to play a significant role in
the long-term recovery opportunities that will
emerge across UK infrastructure, a sector that
will play an important role in rebuilding the
economy over the next decade and beyond.
Paul Scott
Chief Executive
8 December 2020
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 30 to these accounts
2 HM Treasury Budget 2020 12 March 2020
3
4
5
6
7
8
Network Rail Delivery Plan Control Period 6 High Level
Summary 26 March 2020
Department for Transport Road Investment Strategy 2:
2020-2025 March 2020
Department for Transport Road Investment Strategy:
for the 2015/16–2019/20 Road Period March 2015
UK Government press release ‘£1bn deal to end poor
rural mobile coverage agreed’ 9 March 2020
Nuclear Decommissioning Authority Business Plan
1 April 2020 to 31 March 2023
UK Government Nuclear Provision: the cost of cleaning
up Britain’s historic nuclear sites 4 July 2019
9
Renew estimates from water companies’ business plans
10 Ofgem RIIO-ED1 Price Control Financial Model for the
annual iteration process November 2020
Ofgem RIIO-ET1 Financial Model following the annual
iteration process 2019
12
Renew Holdings plc Annual Report and Accounts 2020
SECTION 172(1) STATEMENT
Read more about our business model on pages 14 & 15 which
identifies the Group’s key stakeholders
Find out more about how we engage with our key stakeholders
on page 17
More details of the Group’s sustainability commitments can
be found on pages 38–43
Details of how the Group manages risk can be found
on pages 44–47
Renew Holdings plc (the “Company”
or “Group”) Section 172(1) statement
As required by Section 172 of the
Companies Act 2006, the Directors
confirm that, during the year, they
continued to act in such a way as to
promote the success of the Company
for the benefit of all its stakeholders and
confirm their commitment to ensuring due
consideration of, amongst other matters:
• the likely consequences of any decision
in the long term;
• the interests of the Group’s employees;
• the need to foster the Group’s business
relationships with suppliers, customers
and others;
• the impact of the Group’s operations on
the community and the environment;
• the desirability of the Group maintaining
a reputation for high standards of
business conduct; and
• the need to act fairly between members
of the Group.
Stakeholder engagement
Our business model on pages 14 and 15
identifies the Group’s key stakeholders.
Information about why and how we engage
with our key stakeholders can be found on
page 17 of this report. More information on
the Group’s sustainability commitments
can be found on pages 38 to 43 of this
report. The Group considers its broader
sustainability commitments as part of its
decision-making process which includes an
assessment of the impact of the decisions
it takes on the environment.
While there are circumstances where
the Board engages directly with certain
stakeholder groups or on certain issues,
the structure of the Group means that it
is usually best for stakeholder engagement
to take place at a subsidiary level.
More information on the stakeholder
engagement that takes place, which
informs the Company’s decision-making
process, can be found in the Strategic
report on pages 1 to 47 of this report.
During the year the Renew Board has
engaged across our stakeholder groups
including attendance at employee and
management conferences, and participation
in our Safety and Environmental Management
Group events, capital markets days,
supplier and community events.
Impact on decision making
The day-to-day management of our
subsidiary businesses is undertaken by
the senior teams within the businesses.
Renew oversees its subsidiary businesses
in the areas of finance, health and safety,
human resources, commercial and
risk management. More details of how the
Group manages risk can be found on pages
44 to 47. Members of Renew’s executive
management team attend each subsidiary’s
monthly management meetings as well as
reviewing the Group’s overall financial
and operational performance at monthly
Board meetings.
The Renew Board is responsible for
shareholder relations, business strategy,
governance, reviewing progress against
strategic objectives for both the Group
and its subsidiary businesses as well as
considering the impact of the Company’s
activities on the environment. More
information on the Group’s sustainability
commitments can be found on pages 38
to 43 of this report. The Board receives
information on these areas prior to its
monthly Board meetings and as required
throughout the year.
In making its key decisions, Renew
considers all its stakeholders. The Board
understands that whilst not all the decisions
made are able to benefit all the Group’s
stakeholders at any one time, the Board is
confident it reaches its decisions in a fair
and consistent manner. One example
during the year was its decision to
suspend payment of the interim dividend
to shareholders as part of the Board’s
range of measures in response to the
Covid-19 pandemic. In making this decision,
which is in contrast to the Group’s
established dividend policy, the Board
carefully considered the direct impact this
would have on its shareholders. The Board,
by drawing on its regular engagement with
shareholders, recognised its shareholders’
support in making the decision in the best
interests of the Group’s long-term success.
The Board also considered the impact on
our operating companies, employees,
customers and suppliers and took steps to
ensure the decision was communicated
effectively with each stakeholder group.
The Board has continued to review the
impact of this decision regularly since May,
maintaining contact with all its stakeholders
to understand the continued impact of
its decision.
Renew Holdings plc Annual Report and Accounts 2020
13
STRATEGIC REPORT OUR BUSINESS MODEL
Working together to
deliver stakeholder value
Our subsidiaries, directly employed workforce and supply chain work
together to deliver a safe and responsive service supporting the
day-to-day demands of the UK’s critical infrastructure.
Our inputs
Our core values
Market position
We have strong positions in our markets
where we operate often under long-term
framework agreements. The reliable nature
of the UK infrastructure markets in which we
are deeply embedded gives the Board
confidence in our strategy.
Engaged and committed workforce
Our directly employed workforce are highly
trained and experienced in the individual
markets in which they operate. The Group is
committed to the development of its
workforce and direct engagement supports
the responsive nature of the work we
undertake.
Financial visibility and strength
The markets in which we operate are
largely governed by regulation and, as such,
benefit from long-term programmes of
committed funding.
Our results are reflective of our
defensive qualities, resilience and the
implementation of numerous mitigation
measures that have proven to be extremely
effective in responding to the challenges
of Covid-19.
National infrastructure
Operating on the UK’s critical networks
including the rail, telecoms, water, highways
and energy networks we support the
day-to-day operation of these key
infrastructure assets. The UK Government
designated the majority of our activities as
critical to the Covid-19 response and we have
safely and proactively responded to the
ongoing network demands.
Compliant
• The safety, health and welfare of our
employees and those potentially affected
by our activities is a fundamental driver
to our highest priority of compliant
service delivery.
Reliable
• Demonstrable and reliable delivery
performance aligned with our clearly
defined strategic priorities.
Considerate
• To be considerate, inclusive and
respectful in the way we employ and
develop our workforce giving full
recognition to our socio-economic
responsibilities.
Sustainable
• Our ambitions are long term and build
on the solid foundations we have
established. We are committed to
an approach that delivers sustainable
economic, social and
environmental value.
Responsible
• Our responsible business strategy is
underpinned by our core values and
supported by our corporate governance
framework which facilitates our
growth ambition.
Responsive
• A customer focused “can do” attitude
that recognises the priorities of our
clients and all stakeholders.
Progressive
• Encouraging entrepreneurial spirit to
drive continuous improvement in all that
we do with the objective of adding value
to all stakeholders.
Integrity
• To behave honestly, openly and fairly
with the highest levels of integrity and
professionalism at all times.
14
Renew Holdings plc Annual Report and Accounts 2020
Delivering value
Shareholders
Through our strong governance framework
and system of internal controls, the Group is
effectively managed, producing consistently
strong results. We are well positioned in our
chosen markets with a differentiated
business model for continued success.
Number of meetings held
with existing shareholders
during the year
80
Employees
We provide a range of training and
development opportunities for our
employees as well as attractive
remuneration packages.
Highly skilled workforce
3,800
Operating companies
We support our subsidiary businesses to
retain their own strong identities as well as
providing central health and safety, IT, HR
and commercial functions.
Number of principal
subsidiaries
9
Customers
Our range of complementary skills and
responsive service assist us in providing our
customers with their day-to-day requirements
and helps them achieve their longer-term goals.
Suppliers
Operating with fairness and integrity we work
with our supply chain to develop a working
relationship which benefits all parties.
Frameworks in regulated
markets
150+
Our core values
8
Communities
We support the local communities in which
we operate by engaging with them on
charitable, environmental and social causes.
We operate responsibly and ensure a lasting
positive impact from the work we undertake.
Number of charities we
support
50+
Working
together
Delivering value to
our stakeholders
Despite the impact of Covid-19, the
Group delivered an extraordinary and
record trading performance, with
strong cashflow and continued EPS
growth. Group revenue1 increased to
£620.4m (2019: £600.6m) with an
adjusted1 operating profit of £39.6m
(2019: £38.3m) and a maintained
adjusted1 operating margin of 6.4%
(2019: 6.4%). As at 30 September 2020
the Group had a net cash1 position of
£0.3m (2019: net debt £10.2m)
reflecting the Group’s continued focus
on cash generation and conservative
approach to gearing.
The Group expanded into the Highways
market with the acquisition of Carnell, a
leading provider of engineering services
to the strategic highways network.
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 30 to these accounts.
Read more about our 2020 results
on pages 6–12
Renew Holdings plc Annual Report and Accounts 2020
15
STRATEGIC REPORT OUR STAKEHOLDERS
Engaging with
our stakeholders
Effective relationships with our employees, customers,
suppliers, shareholders and wider stakeholders is critical
to the continued success of our business.
Our six key stakeholders
Communities
Shareholders
Suppliers
Working
together
for a sustainable
future
Employees
Customers
Operating
companies
Culture
Our subsidiary businesses drive a culture of fairness, diversity, inclusion and respect
ensuring that the behaviours across their organisations are closely aligned to the
Group’s core values.
16
Renew Holdings plc Annual Report and Accounts 2020
• Financial
performance
• Corporate
governance
• Environmental, Social
and Governance
("ESG")
• Social
• Training,
development and
succession
• Group progress
• Health and wellbeing
We engage because How we engage and respond
Key areas of interest
• Updating our
shareholders
regularly enables
them to understand
our business and
progress.
• Investor roadshows delivering Group results to
the city.
• Capital markets events to engage and inform new
and existing investors.
• The Annual General Meeting is a chance for
engagement with all our stakeholders.
Shareholders
• Our employees are
critical to the success
of the Group.
• Breakfast briefings for regular, timely updates.
• Newsletters help share employee news and contract
awards and reinforce the Company’s values.
• Social events help bring our employees together
and often provide an opportunity to raise money
for our businesses’ chosen charities.
• Group roadshows delivered by the Chief Executive
focus on Group performance and priorities.
• We support our
subsidiaries,
providing them with a
framework to share
efficiencies and
opportunities.
• Management meetings attended each month by
a member of the executive team.
• The Executive Management Committee is a
forum for all MDs and the senior team to share
information and best practice.
• Workshop events to reinforce key objectives.
• Opportunities with
other Group
businesses
• Cost efficiencies
• Sharing best practice
• Strong relationships
with our clients is key
to delivering their
requirements over
the long term.
• Strong management communication – an open
manner fosters strong relationships.
• Regular communication builds trust.
• Delivering a responsive service helps us become
a partner of choice.
• Capabilities
• Experience
• Responsive service
• Trusted suppliers
• Key events help us align suppliers with our key
assist us in delivering
a “right first time” and
responsive service.
deliverables.
• Questionnaires ensure compliance with our
requirements.
• Prompt payment terms build good working
relationships.
• Key requirements
• Our values
• Health and safety
• Financial strength
Employees
Operating
companies
Customers
Suppliers
• We value being a
• Engaging with local education providers supporting
responsible member
of the communities in
which we operate.
them to develop the skills of tomorrow.
• Community schemes give our businesses an
opportunity to leave a lasting positive impact.
• Neighbourhood liaisons help keep communities
informed.
• Charitable events to help us give back.
• The work we are
undertaking
• Environmental
considerations
• Community action
Communities
With a focus on sustainable operations
Support local communities
Customer value
Climate action
Operate responsibly
Engage our people
Read more about our sustainable operations on pages 38–43
Renew Holdings plc Annual Report and Accounts 2020
17
STRATEGIC REPORT MARKET OVERVIEW
Meeting national needs
The UK infrastructure market is robust and sustainable with continued
growth in forecast spending, backed by strong Government support
and committed investment in all key long-term programmes.
Engineering services in markets
with committed investment
UK Government
investment in
infrastructure
March 2020 Budget2
£640bn
2020–2025
Regulatory periods ensure visible pipeline to 2029
Rail
CP6
CP7
Strategic highways
RIS1
RIS2
RIS3
Wireless networks
4G/5G
5G
Nuclear decommissioning
NDA
Water
AMP7
AMP8
Flood defences
NGSA 1
Power distribution
RIIO ED1
NGSA 2
RIIO ED2
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
Record investment in UK infrastructure includes:
• £53bn investment in Control Period 63
• £3bn Nuclear Decommissioning Authority spend per annum7
• £51bn estimated spend in Asset Management Programme 79
• £5bn estimated investment to roll out 5G across the UK2
• £27.4bn Road Investment Strategy 24
• £37bn estimated investment in electricity network during RIIO-110
For references please see page 12.
18
Renew Holdings plc Annual Report and Accounts 2020
Green
Economy
Mark
London Stock Exchange
Green Award
In 2019 Renew was awarded the London
Stock Exchange’s Green Economy Mark
which highlights companies listed on the
Main Market and the Alternative
Investment Market ("AIM") that are driving
the global green economy. To qualify for
the Green Economy Mark, companies
must generate at least 50% of their total
annual revenues from environmental
solutions.
Market drivers
There are five fundamental long-term trends that will support the Group’s growth over the next ten years.
Long-term trends
Political and
economic landscape
• Conservative
Government
infrastructure
election pledge
• Impact of Covid-19
on working practices
• Brexit uncertainty
Population growth
Government
regulation
Climate change
• Increased pressure on
transport capacity
• Housing shortages
• Demand for natural
resources increases
• Drive to optimise
• Focus on
assets
• Incentives linked to
customer satisfaction
decarbonisation
• Increased flood risk
Technological
developments
• Move towards smart
cities and smart
transport
• Need for improved
wireless networks
Opportunity for Renew
Political and
economic landscape
• Increased speed of
investment in UK
critical infrastructure
• Additional
investment in
telecoms
• Infrastructure
investment acts as
fiscal stimulus
Population growth
• Investment to improve
rail and highways
capacity
• Regeneration of urban
areas and brownfield
sites
• Need for better
resilience in energy
and water supply
Government
regulation
• Focus on upgrading
and maintaining
infrastructure assets
• Increased spend to
reduce leaks, faults
and network delays
Climate change
• Investment in
renewables,
electrification and
new technology
• Flood alleviation, dam
safety and network
resilience programmes
Technological
developments
• Digital railway, digital
roads, battery storage
and electric vehicle
charging
• Roll-out of 5G
network, including
the Shared Rural
Network, across the
UK
Opportunities underpinned by strategic national need
Renew Holdings plc Annual Report and Accounts 2020
19
STRATEGIC REPORT MARKET OVERVIEW CONTINUED
A strong position
Our markets have seen unprecedented levels of capital investment in
recent years with increased spend on maintenance and renewals. This is
driving improved organic growth opportunities through our focus on
asset management programmes with non-discretionary funding and
high barriers to entry.
Key markets
We operate in mainly regulated markets where our clients’ investment
programmes give long-term visibility of committed spending on
maintenance and renewals programmes often over many years.
Change in investment during the year:
Decrease
Increase
Same as last year
Rail
Nuclear
Water
Investment in Control Period 6
Nuclear Decommissioning
Estimated spend in Asset
Authority spend per annum
Management Programme 7 (“AMP7”)
£53bn3
£3bn7
£51bn9
Market opportunity
• There will be a 25% increase in spend
on operations, maintenance, support
and renewals in CP6 compared with CP5.
• Opportunities will arise from the
integration of HS2 with the existing rail
infrastructure.
• Long-term investment will be required
to deliver the Government’s
decarbonisation commitments by 2050,
including significant spend on
electrification programmes.
Market opportunity
• The Government’s nuclear
decommissioning provision is
estimated at £124bn8 over the next
120 years, with around 75% allocated
to Sellafield.
• Momentum in Magnox
decommissioning programme.
• New nuclear is an essential part of the
Government’s objective of delivering
a sustainable and low-carbon
energy future.
Our response
• National coverage with regional offices
Our response
• Over 75 years of proven performance
and depots.
in civil nuclear.
• Strong relationships.
• Large multidisciplinary direct delivery
renewals and maintenance capability.
• Reputation for being “user friendly”,
responsive and able to react at short notice.
• In-house multidisciplinary design.
• Innovation in specialist plant.
• Exemplary, market leading safety record.
• Multidisciplinary service offering
including manufacture.
• Highly qualified and working to
stringent nuclear standards.
• Large complement of highly skilled
and security-cleared resource.
20
Renew Holdings plc Annual Report and Accounts 2020
Market opportunity
• AMP7 will focus on cost efficiency
and leak reduction with expenditure
to increase by 16% from AMP6.
• OFWAT focused on improving the
customer experience and outcome-
based solutions leading to an increase
in expenditure on capital maintenance
and asset optimisation.
• Additional spending to enhance supply
resilience including on dam safety and
infrastructure refurbishment schemes.
Our response
• Excellent client relationships.
• Strong track record of complex delivery.
• Trusted partners over numerous AMPs.
• Operating in high barrier to entry
sectors driving higher margins – dam
safety, live network upgrades.
• Direct delivery teams with excellent
safety record.
Entry to
Highways
market
Acquisition of Carnell
In January 2020 we acquired Carnell,
a provider of specialist renewal and
maintenance engineering services to
the strategic highways network. Carnell is
an excellent fit with our established and
proven strategy, operating in a regulated
sector through long-term frameworks.
This acquisition expanded our addressable
markets into an attractive new growth
sector.
Road Investment Strategy 2
(2020–2025)
£27.4bn4
Essential airport
infrastructure
During the year we have been
involved in a number of schemes
at UK airports. We see long-term
organic growth opportunities in
the essential maintenance and
renewal requirements.
Wireless telecoms
Highways
Power
Estimated investment to roll out
Road Investment Strategy 2
5G across the UK
£5bn2
Market opportunity
• Wireless telecoms infrastructure
market to grow significantly as demand
for 5G internet access increases.
• All four major UK networks have
announced their 5G launch sites
as part of a roll-out of wireless
infrastructure across the UK.
• Government to invest over £500m in the
Shared Rural Network to extend 4G
mobile coverage to 95% of the UK.
Our response
• Long-term relationships with all the
main UK network operators, equipment
vendors and managed service providers.
• Scale and location of multi-skilled direct
delivery teams able to provide a rapid,
UK-wide service.
• In-house expertise to provide a full
acquisition, design and construct
service.
• Reputation for delivery during roll-out
of 2G to 4G.
(“RIS2”)
£27.4bn4
Market opportunity
• Unprecedented level of committed
spend on England’s strategic road
network over the 2020–2025 period.
• Increase in Highways England
spending in renewals.
Our response
• Strong relationships in all Highways
England areas and with other
maintenance and renewals providers.
• Reputation for innovation that delivers
efficiency and safety benefits.
• Multi-skilled direct delivery teams are
able to provide a UK-wide service.
• Plant-led solutions that deliver
margin enhancements.
Estimated investment in
electricity network during RII0-1
£37bn10
Market opportunity
• 40GW of new power generation
needed by 2030 that will require new
network infrastructure.
• £37bn of Ofgem funding to enhance
electricity network (2013–2023).
• £500m to support the roll-out of
super-fast electric vehicle charging
network in March 2020 Budget.
• Demand for distribution networks to
manage load to accommodate local
generation and storage.
Target market
A market that has been identified as
having similar characteristics to those
we already operate in and that is a
good fit or complementary to the
Group’s existing skills.
For references please see page 12.
Renew Holdings plc Annual Report and Accounts 2020
21
STRATEGIC REPORT
OUR STRATEGY
A sustainable 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.
1.
2.
3.
To be a key provider of
engineering services
in our target markets
To focus on asset support,
maintenance and renewals
programmes with
non-discretionary funding
To expand our direct
delivery model through
strong local brands
Progress in 2020
We have achieved further progress in our
markets with a number of key framework
awards and extensions in the period with
both existing and new clients responsible
for critical UK networks.
Progress in 2020
We continued to develop our range of
maintenance and renewals capabilities
enabling us to provide long-term engineering
services to our clients. We focus on essential
non-discretionary spending on critical
networks to ensure their continued reliability.
These spending programmes are delivered
through our clients’ visible operational
expenditure budgets. Our engineering
services, which keep key infrastructure
networks operational, were deemed critical
to the Covid-19 response.
Progress in 2020
In January the Group acquired Carnell,
an established provider of specialist
maintenance and renewals engineering
services to the strategic highways network.
Carnell has a national presence and is
focused on direct delivery, non-discretionary
maintenance and renewals.
Future focus
Develop strategically important
relationships by delivering
market-leading innovation and
cost efficiencies to our clients.
Future focus
We position our business to access
essential maintenance and renewals
spending programmes with our new
and existing clients.
Future focus
We continue to focus on the organic
expansion of our engineering services
capabilities and geographical coverage
as well as seeking complementary
engineering services acquisitions.
Link to KPIs
Read more on pages 24 & 25
Link to KPIs
Read more on pages 24 & 25
Link to KPIs
Read more on pages 24 & 25
A
C
E
F
A
B
C
E
E
F
22
Renew Holdings plc Annual Report and Accounts 2020
Discover more about
how we create value
Read more on pages
14 & 15
Discover more about
how we manage risk
Read more on pages
44 to 47
Emergency
support
In February 2020, in response to the
effects of severe storms, we saw
significant and sustained demand for
our emergency support services
across the rail and water networks. The
most severely impacted locations
included Wales, North West and
Central, Eastern and Scotland. Working
around the clock, despite the
challenging weather conditions and
remote locations, our teams undertook
vital works to ensure the integrity and
safety of the railway for passengers
and freight customers, minimising
disruption and protecting community
transport links as well as on critical
water infrastructure to maintain
continuity of supply.
Read more in our operational review
on pages 26–34
4.
5.
To establish long-term
relationships through
responsiveness to
clients’ needs
To continue to deliver
organic growth combined
with selective
complementary
acquisitions
Progress in 2020
We offer direct delivery, market expertise
and a local, responsive service to our
clients. We continue to expand our range
of capabilities to better meet the needs
of our key clients.
We continued to strengthen our
relationships with our clients throughout
the pandemic.
Progress in 2020
We continue to deliver both organic and
acquisitive growth over the medium term.
The Group’s range of capabilities has grown
with the acquisition of Carnell, a provider of
specialist renewal and maintenance
engineering services to the strategic
highways network.
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 in our markets.
Future focus
Continue to grow the Group’s
Engineering Services operations, both
organically and through selective
complementary acquisitions.
Continue to develop growth
opportunities in both existing
and targeted emerging markets.
Link to KPIs
Read more on pages 24 & 25
Link to KPIs
Read more on pages 24 & 25
C
E
A
B
D
Renew Holdings plc Annual Report and Accounts 2020
23
STRATEGIC REPORT
KEY PERFORMANCE INDICATORS
Measuring performance
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 reflects the most appropriate view of the underlying
performance of the business.
A.
Adjusted Engineering Services operating profit1 as a percentage of revenue
7.1%
7.0%
7.0%
7.1%
2018
2019
2020
Description
Adjusted Engineering Services operating profit1 as a percentage
of revenue.
Why it’s a KPI
The strength of our margin illustrates the Group’s focus on quality
of earnings.
Link to
strategy
Read more on
pages 22 & 23
2020 performance
We continue to work to improve our Engineering Services margin
through efficiencies and innovative working practice.
1
2
5
B.
Adjusted Group operating profit1 as a percentage of revenue
6.4%
6.4%
6.4%
5.7%
Description
Adjusted Group operating profit1 as a percentage of revenue.
Why it’s a KPI
An increase in margin illustrated the Group’s focus on quality of
earnings.
Link to
strategy
Read more on
pages 22 & 23
2020 performance
We maintained, despite tough market conditions, the Group’s
margin through efficiencies and innovative working practice.
2018
2019
2020
C.
Engineering Services order book1
£602m
£510m
£542m
£602m
2018
2019
2020
Description
The Group’s Engineering Services order book1.
Why it’s a KPI
This is a KPI to demonstrate the development of our position as a
leading provider of essential engineering services and supports
workload visibility.
2020 performance
The Engineering Services order book1 has increased following a
number of strategic framework appointments and renewals
together with the acquisition of Carnell.
1
2
4
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 30 to these accounts.
24
Renew Holdings plc Annual Report and Accounts 2020
2
5
Link to
strategy
Read more on
pages 22 & 23
D.
Dividend
8.33p
11.50p
10.00p
8.33p
2018
2019
2020
E.
Health and safety
0.08
0.27
0.11
0.08
2018
2019
2020
Continuous focus on AFR reduction.
Read more about our approach to Health
and Safety on page 41
F.
Investment in training
11,259
16,337
11,987
11,259
2018
2019
2020
Description
The Group’s full year dividend to its shareholders.
Why it’s a KPI
The Group’s dividend shows the Board’s confidence in the strength
of its capabilities and position within its key markets.
2020 performance
As part of the Covid-19 defensive measures implemented in the
first half of the year, the Group suspended payment of its interim
dividend to shareholders. The Board approved a final dividend
of 8.33p.
Link to
strategy
Read more on
pages 22 & 23
5
Description
The Accident Frequency Rate ("AFR") measuring reportable incidents of
over seven day absence per million hours worked.
Why it’s a KPI
The safety of our employees and those who work with us remains a
high priority for the Group. This measure reflects one of the
Group’s commitments to improving its safety record.
Link to
strategy
Read more on
pages 22 & 23
2020 performance
Our frequency rate, measured over the year, compares favourably
to the most recently published rates of comparable construction
businesses.
Description
Number of training days undertaken across the Group in our
various education programmes.
Why it’s a KPI
Measuring training days undertaken demonstrates our continued
investment in our direct delivery workforce.
1
2
3
4
Link to
strategy
Read more on
pages 22 & 23
2020 performance
The number of training days undertaken in 2020 has reduced
compared with previous years due to the Covid-19 restrictions.
1
3
Renew Holdings plc Annual Report and Accounts 2020
25
STRATEGIC REPORT OPERATIONAL REVIEW
Rail
Keeping the nation
on the move
Rail
Capabilities
• Operational support and asset
care
• Critical planned and reactive
maintenance and renewals
• Civil, mechanical and electrical
engineering services
• Geotechnical and earthworks
• Plant, power and signalling renewals
• 24/7 emergency provision
• Asset renewal and refurbishment
• Tunnel and shaft refurbishment
• Fencing and devegetation
• Multidisciplinary in-house design
capability
Progress
As a major provider of multidisciplinary
maintenance and renewals engineering
services to Network Rail, we support the
day-to-day operation of the rail network
nationally, directly delivering essential
asset maintenance through our long-
term CP6 frameworks. The Group now
holds in excess of fifty CP6 maintenance
and renewals frameworks across all
disciplines, covering the entire UK rail
network.
During the year we secured new
positions on the CP6 Wales and Western
five year renewals frameworks across all
five lots, where we will deliver a programme
of engineering services to assets across the
rail network including bridges,
embankments, tunnels, signalling,
electrification and plant. We were also
awarded an additional rail drainage
framework in Scotland, complementing our
existing rail drainage framework positions.
We have existing frameworks for the
delivery of multidisciplinary maintenance
and renewals, minor signalling,
geotechnical and earthworks, devegetation,
slab track, station information and security
systems and telecoms. We also provide a
24/7 emergency support service across the
rail network and during the period we
responded to significant events at
Stonehaven and Falkirk.
We remain committed to adding value
through innovation. We have developed
bespoke and unique solutions for
devegetation, tunnel maintenance and
drainage to deliver safer and more
sustainable working practices that create
high barriers to new entrants.
Since the lockdown restrictions were
imposed in March, we have seen our
planned work for our rail customers
continue with minimal disruption, albeit
with enhanced safety requirements in
place to comply with the Government’s
Covid-19 guidelines.
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.
26
Renew Holdings plc Annual Report and Accounts 2020
Working
together
Covid-19: rail
maintenance and
emergency support
When the lockdown restrictions were
imposed in March, our largest
customer Network Rail confirmed its
intention to proceed with all our
planned works where we were able to
comply with the UK Government’s
Covid-19 safety guidelines. We have
since experienced limited site closures
and in some cases we have taken the
opportunity to deliver some schemes
ahead of plan while the network has
been running at limited capacity. We
are operational in all Network Rail
routes and regions.
Renew Holdings plc Annual Report and Accounts 2020
27
STRATEGIC REPORT OPERATIONAL REVIEW CONTINUED
Infrastructure
Working together to
meet national needs
Wireless telecoms
Capabilities
• Operational support and asset care
• Critical planned and reactive
maintenance and renewals
• Acquisition, planning and design
services
• Provision of 3G, 4G, 5G and Wi-Fi
technologies
• Temporary sites and special events
• Maintenance and
decommissioning services
Progress
We continue to deliver all aspects of
wireless telecoms infrastructure,
including 4G and 5G deployment,
maintenance and decommissioning
services. We have long-term relationships
with all the main UK network operators,
equipment vendors and managed
service providers. In the period, we have
seen a significant increase in work across
all our frameworks as the 5G roll-out
programme accelerates. We were
awarded positions on both Telefonica’s
and MBNL’s new three year 5G services
frameworks as well as a contract to
deliver Telefonica’s microwave services
for the next two years.
As part of the Shared Rural Network
programme, to extend 4G mobile coverage
to 95 per cent of the UK, collaboration
between the main network operators will
see them provide 220 new sites in rural
areas that are currently without coverage.
We have already secured a large portion of
the site search activities and this places us
in a strong position to deliver a full acquire,
design and construct turnkey programme.
Following the Government’s
announcement to remove Huawei
equipment from the UK’s 5G networks by
2027, we are currently working with EE and
BT to deliver 95 trial sites in Hull, London
and Cardiff, and we expect to see
significant growth in this programme over
the next three years.
Wireless telecoms was designated critical
to the Covid-19 response and, as such, we
continued to support the network operators
where it remained safe for our employees
to do so. Our multi-skilled, direct delivery
teams have continued to provide a
responsive service with limited interruption.
Future focus
We remain focused on the
requirements of the 4G and 5G
wireless telecoms network
programmes in the UK. The UK
Government’s ambition to be a
leader in the provision of the next
generation of mobile
communications technologies is
providing opportunities through
long-term 5G investment
programmes.
28
Renew Holdings plc Annual Report and Accounts 2020
Highways
Capabilities
• General civils including structures, groundworks,
drainage, fencing and geotechnical schemes
• Installation and maintenance of roadside
communication assets
• Repair, refurbish and install highway drainage networks
• Unique STONEmaster filter drain refurbishment process
• Drainage surveys including pipe-jetting and record
digitisation
• Full turnkey road lighting service
• SAFETYcam fleet of mobile road worker protection vehicles
Progress
In January 2020 we announced the acquisition of Carnell,
a leading provider of specialist engineering services on
the strategic road network. Carnell directly delivers non-
discretionary renewals and maintenance through long-term
framework agreements, employing plant-led technologies
as part of its unique range of services deployed across the
highways network. Operating nationally, Carnell has built
strong relationships with key public and private sector clients,
including its largest customer, Highways England, for which it
is one of only three suppliers working across all Asset Delivery
Areas. During the period, Carnell performed in line with
expectations and saw a number of its existing frameworks
extended as well as securing a new Asset Delivery Framework
for Highways England in the East region.
Carnell works closely with its clients and suppliers to develop
innovative solutions to improve safety, sustainability and value
in the delivery of drainage, infrastructure, specialist surveys
and highways technology across the strategic road network.
In the last year it recycled 53,000m3 of filter drain using its
STONEmaster and STABLEdrain systems. This saved 62,000
litres of fuel and reduced HGV journeys saving over 500 tonnes
of CO2 and was recognised with an International Green Apple
Award for environmental best practice. Carnell was also
awarded the HRH Prince Michael International Road Safety
Award for its mobile road worker protection system
SAFETYcam.
During the Covid-19 restrictions, our activities in Highways
have continued at levels similar to those seen prior to the
pandemic. We remained operational across all Highways
England areas which is reflective of the resilience of this new
market sector for Renew.
Future focus
We remain focused on the increased spending in the run
up to Scheme Delivery Framework contract awards and
continue to position ourselves for the committed RIS2
Government investment.
Renew Holdings plc Annual Report and Accounts 2020
29
STRATEGIC REPORT OPERATIONAL REVIEW CONTINUED
Energy
High hazard risk
reduction
Nuclear
Capabilities
• Operational support and
asset care
• Critical planned and reactive
maintenance and renewals
• Civil, mechanical and electrical
engineering
• Nuclear decommissioning and
decontamination
• In-house specialist fabrication
and manufacturing
Progress
As a major mechanical, electrical and
instrumentation (“ME&I”) services
contractor, our operations in the nuclear
and chemical process environment focus
on decontamination and
decommissioning services, operational
support and asset care. Working for over
75 years in civil nuclear, we deliver a
multidisciplinary service through our
large complement of highly skilled
employees who operate to demanding
nuclear standards.
Operating on the major
Decommissioning Delivery Partnership
Framework, which runs to 2026, we
deliver work across some of the most
hazardous areas of Sellafield including
waste retrieval from legacy storage
ponds and silos. Our activities include
decontamination, decommissioning and
waste management. Our long-term
frameworks include the SR&DP Asset Care,
Magnox Swarf Storage Silo, Bundling
Spares and Tanks and Vessels Frameworks.
During the period, we were appointed to
both lots of the four year Fabrication and
Machining Spares Framework for the
delivery of highly engineered nuclear
components and we remain strongly
positioned for future opportunities that will
emerge from the major projects
programme at the site.
In line with nuclear safety protocols, the
Sellafield site suspended the majority of
operations at the start of the Covid-19
lockdown in March. The mobilisation of
work programmes and decommissioning at
Sellafield continues to gain momentum;
however, we do not expect to be fully
operational until April 2021. At Springfields,
where we deliver operational support and
decommissioning activities, we have seen
a significant increase in activity since the
lockdown and we have recently been
appointed to a major programme of
works associated with the
decommissioning of the Magnox Island.
We continue to build on our relationship
with Rolls Royce to secure further
opportunities since our appointment to
the Diesel Generator Programme at
Hinkley Point “C”.
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.
30
Renew Holdings plc Annual Report and Accounts 2020
Carbon
footprint
initiative
Commitment to clean
energy starts at home
As part of an initiative to reduce our
carbon footprint, electric vehicle
charging points have been installed at
a number of our office locations.
At our AmcoGiffen office in Barnsley,
our internal design department
undertook a study to confirm our
power supply capability as well as the
capacity for additional charging points
in the future. The selected area for the
points had an available cable supply
route, allowing the installation of ten EV
charging points. The surrounding kerbs
and flags were upgraded in each
location to ensure that people could
use the points safely. All the upgrade
works were completed using in-house
delivery teams.
Thermal
Capabilities
• Operational support and asset care
• Critical planned and reactive
maintenance and renewals
• Civil, mechanical and
electrical engineering
Progress
We deliver continuing essential
engineering maintenance services at
four of the UK’s thermal power stations at
near normal levels. Our embedded
maintenance teams support these sites
through programmes of planned
maintenance and an emergency support
provision. We remain operational on the
Minor Works Framework with National
Grid as well as securing a Minor Civils
Framework with Western Power
Distribution in the period.
Future focus
We continue to develop our existing
relationships with clients responsible
for assets in the thermal energy
market. Our range of capabilities
and experience means we are well
placed to meet the needs of a wide
range of assets across this sector.
Image courtesy of Sellafield.
Renew Holdings plc Annual Report and Accounts 2020
31
STRATEGIC REPORT OPERATIONAL REVIEW CONTINUED
Environmental
Maintaining complex
water infrastructure
Water
Capabilities
• Operational support and asset
care
• Critical planned and reactive
maintenance and renewals
• Civil, mechanical and electrical
engineering
• 24/7 emergency reactive works
including flood risk management
programmes
• Maintenance of strategic water
mains and mains drainage
• Clean and wastewater
rehabilitation infrastructure
• Dam safety and pressurised
pipeline specialisms
• Port, harbour and sea defences
Progress
For Dŵr Cymru Welsh Water (“DCWW”),
we continue to operate across the region
on the Pressurised Pipelines Framework,
the Major Civils Framework and the
Capital Delivery Alliance Civils & Pipeline
Framework. In addition to ongoing
maintenance and renewals tasks, we
have provided extensive 24/7 emergency
reactive works across the water network,
in particular supporting the response to
the disruption caused by severe storms
early in 2020. During the year we were
awarded seven schemes as part of
DCWW’s dam safety programme,
enhancing our position as an approved
dam safety contractor and providing
ongoing opportunities.
success with other water clients working
for Scottish Canals, Peel Ports and
Natural Resources Wales during the year.
Works continue with Wessex Water and
Bristol Water as they develop their plans for
AMP7. With our new client Yorkshire Water,
we will carry out engineering works to
existing assets on operational treatment
and distribution facilities over the next five
years through the AMP7 Minor Civils
Framework where we have recently been
awarded our first project. Additionally, we
were appointed to a treatment works
scheme for new client Thames Water.
The Government has committed record
investment of £5.2bn2 over a six year period
to improve flood defences nationally. Our
clients in this market include the
Environment Agency and the Canal and
River Trust where we deliver essential
maintenance and improvement works
nationally. We continue to build on our
Work continues for all our water clients
with minimal disruption albeit with
enhanced safety precautions in place to
comply with the UK Government’s strict
Covid-19 safety guidelines. The essential
nature of the maintenance and renewals
tasks we undertake on the water network
ensured we remained fully operational
across all frameworks.
For references please see page 12.
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.
32
Renew Holdings plc Annual Report and Accounts 2020
Land Remediation and
Specialist Restoration
Capabilities
• 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
• Specialist restoration
pandemic. This was particularly the case
in Scotland where all of our schemes
were suspended during the first
lockdown. All activity had returned to
pre-pandemic levels by July with
enhanced safety protection measures in
place in line with the UK Government’s
Covid-19 guidelines.
In Specialist Restoration, despite a
temporary cessation of works, our
operations at the Palace of Westminster
have been at normal capacity since June.
During the period we have also been
appointed to a new five year
conservation framework at this UNESCO
World Heritage Site.
Progress
In Land Remediation during the year, we
experienced significant disruption across
our site activities due to the Covid-19
Future focus
We continue to maximise the
potential of the position we have
developed in the UK remediation
and restoration markets.
Renew Holdings plc Annual Report and Accounts 2020
33
STRATEGIC REPORT OPERATIONAL REVIEW CONTINUED
Specialist Building
High Quality Residential
and Science
Capabilities
• High quality residential
refurbishment schemes in London
and the Home Counties
• Development of research and
laboratory schemes
• Extensive temporary structural
engineering provision
• In-house design and engineering
capabilities
Progress
During the initial lockdown period in
March, we experienced some disruption
in the High Quality Residential sector in
London although operations returned to
pre-pandemic levels by July. The Group
continues to be selective in these markets
where we have a long-established track
record. During the period, work continued
uninterrupted on our critical science
schemes for Defra and the MRC London
Institute of Medical Science where we
continue to make good progress.
Future focus
We focus on delivering technically
challenging High Quality Residential
and Science projects in London
and the Home Counties where our
expertise and experience prove
differentiators in this market.
We continue to be selective in
these markets with a focus on
risk management.
34
Renew Holdings plc Annual Report and Accounts 2020
Working
together
Community collaboration
Walter Lilly, working with the
engagement team of the Medical
Research Council London Institute of
Medical Sciences ("LMS"), reached
out to its neighbouring school. The
team began a collaborative project
with students of the Ark Burlington
Danes Academy to create an
innovative, interactive hoarding
design. The hoarding provides the
perfect canvas for students to
explore whether traits they possess
are controlled by their genes or by
their environment, a theme that runs
through much of the research that
takes place at LMS.
The design consists of DNA helices
and reflects LMS research in genetics
and epigenetics. Over 300 students
contributed to the hoarding which
runs the length of the academy’s
playing field facilitating engagement
between these young stakeholders
and the exciting construction project
taking place within their community.
FINANCIAL REVIEW
A strong performance
Dear Shareholder
Results
Group revenue1 from continuing activities
was £620.4m (2019: £600.6m), with an
operating profit before tax1 from continuing
activities prior to amortisation and
exceptional items of £39.6m (2019:
£38.3m). A tax charge of £6.9m (2019:
£7.3m) resulted in a profit after tax prior to
amortisation and exceptional items for the
year of £31.9m (2019: £30.4m), an increase
of 5 per cent. After deducting £6.7m (2019:
£10.8m) of amortisation and exceptional
costs, the profit for the year from
continuing activities was £26.3m (2019:
£22.3m).
Amortisation and exceptional items
The £6.7m of exceptional items and
amortisation is made up of £5.5m of
amortisation charges in the year relating to
contractual rights and customer
relationships which are primarily associated
with the acquisition of Giffen Holdings
Limited, QTS Group Limited and Carnell
Group Holdings Limited (“Carnell”).
Following this amortisation there remains
£23.1m of other intangible assets on the
balance sheet. In addition, we have
recognised an exceptional charge in the
year of £1.2m in relation to deal expenses
relating to the acquisition of Carnell.
Net cash
The Group’s balance sheet shows a cash
balance of £13.4m (2019: £11.7m) and bank
borrowings of £13.1m (2019: £21.9m) at the
year end. Consequently, the Group’s net
cash1 position as at 30 September 2020
was £0.3m (2019: net debt1 of £10.2m).
Banking facilities
The Group has a four year term loan with
HSBC UK Bank plc which was used to
part-fund the acquisition of QTS Group
Limited in 2018. The loan is repayable in
quarterly instalments and is secured by a
fixed and floating charge over the Group’s
assets. The loan will be fully repaid during
the year ended 30 September 2022.
The Group has committed debt facilities
of £44.2m in the form of a revolving credit
facility with HSBC UK Bank plc and National
Westminster Bank plc which is committed
until January 2024. In addition, the Group
has a further £10.0m overdraft, also with
HSBC, which is renewed annually in January.
The Group has complied with the
covenants associated with all of its debt
facilities throughout the year.
Going concern
The Directors continue to adopt the going
concern basis in preparing the Group’s
2020 financial statements.
Leasing
At 30 September 2020, the Group had
£15.4m (2019: £5.8m) of lease liabilities. The
increase in lease liabilities is because of the
implementation of IFRS 16 for the first time
this year which requires the inclusion of the
liabilities associated with right of use assets
to be included in the lease liabilities figure.
The liability associated with right of use
assets as at 30 September 2020 was
£9.9m.
Impact of IFRS 16
IFRS 16 “Leases” has become effective for
the year ended 30 September 2020 and
replaces the requirements of IAS 17
“Leases”. The Group has adopted IFRS 16
using the modified retrospective approach
under which the cumulative effect of
adoption is recognised through reserves,
with comparatives continuing to be
reported under IAS 17. An asset
representing the Group’s right as a lessee
to use a leased item and a liability for the
associated future lease payments have
been recognised for all leases, subject to
limited exceptions for short-term leases
and low-value lease assets.
Renew Holdings plc Annual Report and Accounts 2020
35
Sean Wyndham-Quin CA
Chief Financial Officer
Revenue
£620.4m
2019: £600.6m
Net cash
£0.3m
2019: Net debt £10.2m
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 30.
STRATEGIC REPORT FINANCIAL REVIEW CONTINUED
Impact of IFRS 16 continued
The cost of leases has been recognised in
the Consolidated income statement split
between depreciation of the lease asset
and a finance charge on the lease liability.
This is similar to the accounting for finance
leases under IAS 17, but different to the
accounting for operating leases where no
lease asset or lease liability was recognised,
and operating lease rentals were charged
to the Consolidated income statement on a
straight-line basis.
As a result of adopting the new accounting
standard for the year ended 30 September
2020, the Group’s profit before tax has
reduced by £154,000 and operating profit
has increased by £148,000. The reduction
in profit before tax is the net impact of
£302,000 of additional finance charges
and £3,873,000 of additional depreciation,
replacing £4,021,000 of operating lease
rental charges. On 1 October 2019 there
was no impact on the net assets of the
Group; however, there was a grossing up of
£10m with the creation of a new £10m right
of use asset and a corresponding £10m
increase in lease liabilities.
Taxation
The tax charge on profit for the year is
£5.8m (2019: £4.7m), a rate of 17.9 per cent
which is broadly in line with the headline
rate of 19.0 per cent. Corporation tax paid
in the year amounted to £8.2m (2019: £5.5m).
The higher than usual amount paid during
the year is as a consequence of HMRC
changing the timing of when payments on
account are made which resulted in the
Group making six payments on account
during the financial year rather than the
usual four. The Group will revert to the usual
four payments on account in the year
ended 30 September 2021, which will
normalise the payment profile. The Group
has deferred payment of c.£17m of VAT to
the following financial year.
Pension schemes
At 30 September 2020, the IAS 19 valuation
of the Lovell Pension Scheme, which was
closed to new members in 2000, resulted
in an accounting surplus of £17.8m (2019:
£15.6m) after accounting for deferred
taxation. The net surplus has increased by
£2.2m during the year, due primarily to
contributions made by the Company.
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, 50 per cent (2019: 52 per
cent) of the scheme’s total liabilities were
matched by annuities. In the triennial
valuation of the scheme, which was carried
out as at 31 March 2018, the scheme
actuary measured the deficit in the scheme
at £0.3m. 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 until 31 July 2023 by
which point the scheme’s buy-out deficit is
expected to be cleared. The next triennial
valuation is due on 31 March 2021.
The IAS 19 valuation of the Amco Pension
Scheme shows a net surplus of £0.5m
(2019: £1.0m) after accounting for deferred
taxation. The net surplus has decreased by
£0.5m during the year, primarily due to the
reduction in the discount rate used to
calculate the future liability but offset by 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. At the year end,
47 per cent (2019: 49 per cent) 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 was projected to eliminate
the deficit under the Statutory Funding
Objective of the Pensions Act 2004 by
31 October 2020. The next triennial valuation
is for the period ending 31 December 2019
and will be completed during the next financial
year at which an updated recovery plan will be
agreed with the Trustees.
Discontinued operations
The Group made a loss for the year from
discontinued operations of £5.6m (2019:
£0.0m). £5.3m of this relates to an
additional accrual to cover latent defect
liabilities in Allenbuild Limited, a business
that was sold to Places for People Group
Ltd in October 2014, but where the Group
retains a liability for a number of historic
contracts. The remaining £0.3m relates to
costs incurred in the cessation of all
activities at Lovell America Inc. which the
Group has now fully exited and which will not
incur any further costs.
Post balance sheet event
After the year end the Trustees of the Lovell
Scheme used scheme assets to purchase
36
Renew Holdings plc Annual Report and Accounts 2020
annuities which match pensions liabilities
in a transaction known as a “buy-in” where
the annuity policy remains an asset of the
scheme. Following the conclusion of this
buy-in all of the schemes liabilities are now
matched with annuities and consequently
there will be a reduction of the IAS19
Retirement Benefit assets in the Group’s
accounts for the year ended 30 September
2021. If the buy-in had occurred during the
current financial year, the effect would have
been to reduce the Retirement benefit asset
by £27,337,000, reverse the associated
Deferred tax liability of £9,568,000 with a
consequent £17,769,000 reduction in the
Group’s Retained earnings.
Whilst an additional cash contribution into the
scheme is likely to be required once the GMP
equalisation calculations have been
completed in 18–24 month’s time, this buy-in
is a significant event in the history of the
Group as it means that the cash contributions
to be paid into the scheme are no longer
required and all of the scheme’s liabilities
have been matched with corresponding
annuities removing the Group’s exposure to
investment and funding risks in that scheme.
It is the intention of the Board to use the cash
savings from the reduced contributions into
the Lovell Scheme to be diverted into the
Amco Scheme which will enable the Group
to achieve a full buy-in of the Amco scheme
quicker than would otherwise have been the
case and further reduce the Group’s
exposure to pension risks.
Earnings per share
Earnings per share1 before exceptional
items and amortisation was 41.2p (2019:
40.4p) and on a statutory basis, after the
impact of exceptional items, amortisation
and loss for the year from discontinued
operations was 26.8p (2019: 29.6p). The
weighted average number of shares in
issue for the period was 77.5 million.
Distributable profits
The distributable profits of Renew Holdings
plc are £46.5m (2019: £46.4m). The Board
is recommending a final dividend of 8.33p
per share (2019: 7.67p) bringing the total for
the year to 8.33p (2019: 11.50p).
Sean Wyndham-Quin CA
Chief Financial Officer
8 December 2020
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 30 to these accounts.
Capital Allocation Policy
Capital allocation in priority order:
For the year ending 30 September 2021
1
2
3
4
5
To maintain sufficient financial headroom to comfortably manage temporary
variations in working capital and to provide headroom against known risks
and contingencies.
To maintain a conservative approach to leverage by seeking to pay down
debt quickly post-acquisitions and by ensuring that our net debt:EBITDA
multiple remains at an appropriate level.
To appropriately invest in the business to deliver organic growth.
To continue to pursue a progressive dividend policy whilst maintaining an
appropriate level of dividend cover.
To build sufficient headroom to enable us to quickly respond to acquisition
opportunities that are consistent with our stated strategy and which are
earnings enhancing.
To the extent that all of these priorities have been achieved, we would consider
returning additional excess cash to shareholders.
Sean Wyndham-Quin CA
Chief Financial Officer
8 December 2020
Renew Holdings plc Annual Report and Accounts 2020
37
STRATEGIC REPORT SUSTAINABILITY
A better, more
sustainable future
Our purpose-led approach is based on our five commitments which
ensure we continue to align our business with the Environmental, Social
and Governance ("ESG") requirements of our stakeholders. It is important
that we work responsibly and in a sustainable manner to leave a lasting
positive impact.
Dear Shareholder,
Renew is committed to operating responsibly and as such it is my
role, together with the Group’s SHEQ Director, to drive the Group’s
approach to sustainability.
During the year we have developed our sustainability strategy
which is now reported in five key areas: customer value, climate
action, operating responsibly, engaging our people and supporting
our local communities. This enables our subsidiary businesses to
align their approach to ESG with those of the markets and
communities in which they operate.
We continue to add value to our customers through sustainable
innovation which assists in the delivery of the UK’s net-zero carbon
target by 2050. This is our first year of reporting under the
Streamlined Energy and Carbon Reporting ("SECR") regulations and
this data will provide us with a baseline to understand the benefit our
improvements are having and how we are supporting the nation’s
low-carbon transition targets.
Beyond 2020
We are committed to reducing our footprint and we will continue to
review our consumption data and identify areas for improvements.
Sustainability data will be reported by our subsidiary businesses
monthly as we look to develop our targets for 2021.
Paul Scott
Chief Executive
Our commitments
Support local
communities
Customer
value
Working
together
for a better future
Climate
action
Engage our
people
Operate
responsibly
38
Renew Holdings plc Annual Report and Accounts 2020
Customer value
• Customer engagement
• Sustainable innovation
• Support our customers’
sustainability goals
Climate action
• Support the UK’s net-zero carbon goals
• Reduce carbon emissions
• Climate related risks and opportunities
Operate responsibly
• Health and safety
• Supply chain engagement
• Resource efficiency
• Waste management
• Green infrastructure
Engage our people
• Training and development
• Diversity and inclusion
• Employee wellbeing
• Employee engagement
Support local communities
• Future skills
• Charitable giving
Customer value
We are constantly striving to extend the
range of benefits we can provide for our
existing and potential customers.
Understanding our customers’
requirements and our ability to deliver
innovative solutions can assist them in
achieving their own goals.
Customer engagement
Understanding a client’s challenges and
developing solutions to help overcome
these, assists us in building lasting
relationships. Engagement with our
customers takes many forms with clear
communication and transparent working
practices at the core of how we operate.
Our subsidiaries work closely with their
clients engaging in events such as
workshops, training days and briefings.
During the year we collaborated with
new customer, Bristol Water, to produce
guidance for safe excavations around
buried services. In highways, we developed
a customer induction and workforce
training guides. We are able to provide
planned and reactive services in the short
and medium term whilst understanding
and assisting our clients in achieving their
long-term goals.
Sustainable innovation
We deliver efficiencies for our clients
through the use of innovative plant
and working methods. Our subsidiary
businesses research and develop bespoke
solutions to the challenges they face in
their individual markets. An example of
this is our work in rail where our plant fleet
includes numerous first of type Road Rail
Vehicles ("RRV") which reduce the cost
of maintenance activities and increase
productivity during rail possessions.
During the year, our fencing team
operating for Network Rail, improved
efficiency by employing innovative
installation techniques. In just one region,
the team achieved a record performance
installing c.12,000m of fencing over a four
week period against the regional target
of c.7,000m.
Assisting with our clients’
sustainability goals
We work to ensure the solutions we deliver
assist our clients in achieving their
sustainability ambitions. Our subsidiaries
have been involved with a wide range of
initiatives to support our clients during the
year such as schemes to reduce single use
plastic, carbon and energy usage.
Working
together
To reduce the impact of
our operations
We are constantly looking to
introduce innovative working
practices to reduce our site fuel
usage and emissions. These include
the introduction of electric vehicles
including Eco excavators and
alternative power sources.
We also recently worked with a site
security provider to develop a solar
powered site security unit to further
reduce our carbon emissions.
Working together
Closing the skills gap
In recognition of the ever growing skills gap within the
construction industry, Seymour has created a pioneering
construction and civil engineering skills academy to support
training needs across all aspects of construction and
civil engineering.
Working strategically with further education, local government and industry partners,
the Academy has embraced new opportunities to expand its construction training
offer to proactively support new cross sector skills and employment initiatives in
response to national digital infrastructure policy and market need. By blending
collective industry and training skills expertise, the Academy is helping to bridge
current skills gaps, creating a new gateway to sustainable jobs.
Renew Holdings plc Annual Report and Accounts 2020
39
STRATEGIC REPORT
SUSTAINABILITY CONTINUED
Climate action
The effects of climate change are
increasingly visible and we are committed
to taking measures to offset the impact of
our operations. We seek to do this through
governance, risk management, innovative
working practices and education.
Supporting the UK’s net-zero
carbon goals
Aligned with the UK Government’s target to
achieve net zero carbon emissions by
2050, our businesses focus on improving
working practices and education. The
Board of Renew oversees governance and
risk management to support our
businesses in delivering these critical
improvements.
Our subsidiary businesses incorporate
innovative working practices in the course
of their operations such as recycling,
reducing works traffic volumes and
engaging specialist waste management
partners to dispose of materials.
We invest in developing technologies and
solutions that cut down waste and carbon
emissions for our clients. An example of this
is the STONEmaster process deployed in
our highways operations which provides
significant benefits compared to traditional
filter drain recycling methods. In the last
year it recycled 53,000m3 of filter drain
saving 62,000 litres of fuel and over 500
tonnes of CO2. During the year the
STONEmaster product won two International
Green Apple Environment Awards in the
Environmental Improvement and
Sustainable Development categories.
We operate some of the most innovative
plant on the rail network with many one of a
kind Road Rail Vehicles (“RRV”) which have
been designed by our rail teams and built
specifically for our business. These RRVs
deliver both environmental and cost
efficiencies for our clients.
Reducing our impact
Working to reduce climate change within
our business is focused on two key areas,
the reduction of carbon emissions and
energy. During 2020 our commitment to
reducing our carbon emissions and energy
included hire, lease and procurement of
more efficient plant and equipment, the
introduction of electric motor vehicles and
renewable energy sources and schemes to
eliminate single use plastics.
The Group continued with its implementation
of Lightfoot, a Government-supported
technology, designed to make our roads
safer, our environment cleaner and our
fleet operations more economically sound
by monitoring drivers’ behaviour and
encouraging efficient and environmentally
friendly driving behaviours. The introduction
of this technology has reduced the Group’s
fuel usage by around 10% in the year.
In 2019 the Group was awarded the London
Stock Exchange Green Economy Mark
which recognises businesses where at least
50% of revenue is derived from delivering
environmental solutions.
Climate related risks
and opportunities
Climate change has the potential to impact
our business in a variety of ways from
resource constraints to the changing
energy and political landscape as well as
market regulation, changes in technology
and increased costs. Our subsidiary
businesses manage the risks posed by
climate change in their individual markets
and report to the Board on a monthly basis.
40
Renew Holdings plc Annual Report and Accounts 2020
Streamlined Energy
and Carbon Reporting ("SECR")
We measure and report our energy and
carbon data across the entire Group,
providing comprehensive data to
substantiate our overall environmental
impact. Our Streamlined Energy and
Carbon Reporting statement includes all
emission sources required under the 2019
regulations for the financial year ended 30
September 2020. This is our first year of
reporting and we will be using the
2019/20 reporting year as our benchmark
for improvements moving forwards.
Renew emitted 38,084.88 carbon
dioxide equivalent tonnes (“tCO2e”)
of energy during the year. 60% of these
emissions were from commercial
vehicles and 31% from gas oil use.
We have chosen two carbon intensity
ratios that reflect our business performance.
Our carbon intensity ratio was 11.57 tCO2e
per average employee headcount, and
0.06 tCO2e per £000 of revenue. Moving
forward, we will set both absolute and
percentage reduction targets for carbon
emissions, so we can begin to measure
energy efficiency performance
alongside business performance.
In order to calculate the carbon
emissions, we have used the emission
factors from the UK Government’s
GHG Conversion Factors for Company
Reporting 2020. The scope 1 and 2
emissions reported are for all facilities
across the Group under our operational
control. This includes all the Group’s
subsidiaries as listed at the back of
this report. We have also voluntarily
chosen to report scope 3 emissions from
grey fleet i.e. employee vehicles driven on
company business, and emissions from
leased vehicles. This will provide a full
picture of our vehicle emissions.
Greenhouse gas emissions
Carbon emissions (tCO2e)*
* tCO2e/year defined as tonnes of
CO2 equivalent per year.
Transport (scope 1)
Transport (scope 3)
Electricity (scope 2)
Purchased gas (scope 1)
Gas Oil (scope 1)
Other fuels (scope 1)
24,193.4
922.8
841.5
400.6
11,656.1
70.4
Total emissions
38,084.88
Carbon intensity ratio 1
(tCO2e/£000)
Carbon intensity ratio 2
(tCO2e/avg. headcount)
0.06
11.57
Total UK energy usage (kWh)
155,619,622
Operate
responsibly
Renew is responsible for operating in a way
that benefits, and does not cause any
negative impact on, a wide range of
stakeholders including our responsibility to
our employees, clients and supply chain as
well as the communities in which we operate.
Health and safety
Health and safety remains a priority across
the Group and as such is led by the Chief
Executive with the support of the Renew
Board and the Group’s SHEQ Director.
Our directly employed regional safety
practitioners are based within our subsidiary
businesses and have industry experience
and specific knowledge of the challenging
environments in which we work.
Ensuring the safety of all the Group’s
stakeholders is the key focus of the Group’s
Safety and Environmental Management Group
forum, which met four times in the year. The
forum is attended by senior operational
personnel and senior safety practitioners
from around the Group and is a forum for
the sharing of best practice and knowledge.
Our focus during the year
The Group’s focus during the year was
driven by events and close call incidents
and these included:
• road risk including fatigue management;
• slips, trips and falls;
• environmental management; and
• incident investigation.
Covid-19
We have implemented Covid-19
precautions throughout our business to
ensure the safety of everyone involved with
the work we undertake. We have ensured
office layouts have been changed to
implement a strict 2m distance between
our employees and one-way systems limit
the contact between our employees. We
have increased access to hand sanitiser
and masks and increased the amount and
frequency of cleaning operations across
the business. A large number of our
employees now work from home and we
continue to support our colleagues in a
number of ways including through the
Group’s Employee Assistance Programme.
A safety focused culture
The Group continues to develop its positive
learning culture with a focus on behavioural
change. Health and safety remains the
priority at all management and Board
meetings. The positive learning culture
Aden Ashurst
On the 8th of April 2020, our colleague Aden Ashurst was fatally injured when he
was struck by a train at one of our work sites near Roade, Northamptonshire. At the
time of the incident, Aden was performing his role as Controller of Site Safety and
this tragic event remains the subject of ongoing investigations led by Network Rail,
the Office of Rail and Road and the Rail Accident Investigation Branch. Our thoughts
remain with the family and friends of our colleague who lost his life in the conduct of
delivering essential rail services.
Working
together
Green infrastructure
We recently completed a 1.3km haul
road using lime and cement
stabilisation allowing access to a
remote rail infrastructure works site
near Wootton Bassett.
This innovative technique avoided
the need for the importation and
disposal of thousands of tonnes
of aggregates.
continues to be driven by close call
reporting, incident investigations and
culture reinforcement.
Safety action
Safety Stand Down days involve employees
participating in workshops and
presentations on specific topics. Our
subsidiary businesses undertake a wide
range of health and safety initiatives to
deliver improvements in our health and
safety performance targets. The year has
also seen many of our businesses focus on
raising awareness of mental health issues
and the support that is available through
our mental health first aid training and our
Employee Assistance Programme.
Awards and accreditations
Our businesses continue to be accredited
with various health and safety schemes,
including Constructionline, SafeContractor,
the Contractors Health & Safety
Assessment Scheme, Achilles Verify and
the Railway Industry Supplier Qualification
Scheme. Our businesses also conform to
the ISO 14001 and ISO 18001 standards.
Many of our businesses have also achieved
awards for their health and safety
achievements during the period including
Shepley Engineers which received an
RoSPA Order of Distinction for health
and safety performance, and Clarke
Telecom which received a merit in the
British Safety Council’s International Safety
Awards 2020.
Supply chain engagement
We work with our supply chain to increase
the range of sustainable materials we
incorporate in our operations. Innovations
include sustainable retaining wall systems,
green concrete and grey water collection
systems. Initiatives include using
Hydrotreated Vegetable Oil (“HVO”) fuel in
our plant and onsite generation activities.
Materials and waste management
We are making good progress in reducing
the volume of material we send as waste.
Examples of this include recycling aggregate
and materials on many of our renewals
programmes and in land remediation we
adopt in situ remediation techniques.
Green infrastructure
Green infrastructure plays a crucial role in
making a positive contribution to the
environment. A significant proportion of
our activity is associated with green
infrastructure, including the
decarbonisation agenda in rail and all of our
environmental activity as well as our services
to civil nuclear.
Renew Holdings plc Annual Report and Accounts 2020
41
STRATEGIC REPORT SUSTAINABILITY CONTINUED
Engaging with
our people
Engagement of our employees is critical to
the success of the Group. As a direct
delivery organisation our people are our
biggest asset.
Training and development
Investing in training is key to recruiting and
retaining our highly skilled workforce. The
Group supports a range of training and
professional development opportunities for
its employees throughout the business.
Examples include Walter Lilly with 13 day
release and sponsored students studying in
construction and engineering
management, commercial management
and quantity surveying. Additionally, it also
has two site managers completing their
NVQ Level 6 in Construction Site
Management.
Working
together
AmcoGiffen’s Training Academy
provides construction, mechanical and
electrical engineering qualifications for
students from across the North East.
AmcoGiffen take on a number of
apprentices each year as part of their
commitment to protect the future of
engineering skills. In collaboration with
Barnsley College, AmcoGiffen also
provide upskilling opportunities to
their employees through various
courses in maths, English, and
computer skills.
Shepley continues to develop its
apprenticeship training programme in
partnership with Lakes College. VHE
extends its long tradition of providing
vocational training through university
placements.
In conjunction with Barnsley College’s
Science, Technology, Engineering and
Maths (“STEM”) centre, the AmcoGiffen
Academy provides 16 and 17 year olds
with the opportunity to progress to
apprenticeships. Although the academy
is based in South Yorkshire, it provides
training and apprenticeships nationally,
supplying weekday accommodation for
those students who will be travelling a long
distance. The academy provides
mechanical and electrical engineering
qualifications and takes in around 16
apprentices annually.
Diversity and inclusion
The Group strives to create a diverse
workforce and a positive working
environment that allows all employees,
regardless of their gender, disabilities,
sexuality, race or religion to build their
careers in an open and collaborative culture.
The industry in which we operate is
historically male dominated and our
subsidiaries work hard to recruit women into
the industry through specific recruitment
drives, supporting and increasing the
opportunities available to women.
Currently female representation on the
Renew Board accounts for 14%. As at 30
September 2020, women accounted for
13% of the total number of employees in the
Group.
Employee wellbeing
Our employees’ wellbeing is supported
with a range of initiatives across the Group
from health checks to healthy eating
initiatives which our subsidiaries manage
within their businesses. Examples include
QTS which, through July and August as part
of its rolling health surveillance programme,
delivered over 120 face to face
appointments for employees with Ayrshire
Medical’s occupational health specialist.
These appointments will continue through
to 2021 to support the health and wellbeing
of their employees.
At Group level the Employee Assistance
Programme (“EAP”) provides support to
employees in a number of our subsidiary
businesses on topics such as finance,
general health matters and mental health.
The scheme has recently launched a new
app “My Healthy Advantage” to improve
engagement and reach within our
workforce and includes the use of personal
metrics to set goals and achievements.
During the year initiatives designed to
improve awareness around the stigma of
mental health were a focus and included
training Mental Health Champions in a
number of our businesses as well as having
Mental Health First Aiders within the
workplace to provide support to
employees.
Since the Covid-19 ‘work from home’
restrictions were announced by the UK
Government in March, we established a
Covid-19 task force to co-ordinate advice
and guidance to our subsidiary businesses,
assisting them in supporting their
employees.
Employee engagement
Our subsidiaries used a range of employee
engagement initiatives during the year
including workshops, newsletters, social
events, team briefings, employee surveys
as well as training and development
opportunities.
Specific initiatives to support our
employees during the ongoing Covid-19
pandemic included a cook-along with
Home Cook School which helped bring
employees together. QTS also undertook
“The Great QTS Tour”, a virtual challenge
that saw employees walk, jog, run or cycle
6,486km, the distance around the UK
coastline, with the aim of helping to keep
minds and bodies active.
Number of training days undertaken
across our business
11,259
2019: 16,337
42
Renew Holdings plc Annual Report and Accounts 2020
Support local
communities
Our subsidiaries are committed to
engaging with their communities to
understand what is important to them.
Our teams provide support for charitable
causes, environmental schemes and
education programmes as an integral
part of the work they undertake.
Many of our businesses undertake
community volunteering days including
AmcoGiffen where employees completed
a number of volunteering days during
the year.
Shepley Engineers continued to work with
the Cumbria Community Foundation which
supports charitable projects across West
Cumbria. The Foundation aims to break
down inequality barriers and improve
health, wellbeing and learning
opportunities in the community. Senior
managers from Shepley Engineers also
helped to create a ‘Green Gym’ at the "Grow
West" market garden in Allerby, Cumbria as
part of the national "Green Gym" scheme.
The scheme encourages people of all
abilities to take part in free outdoor
activities such as planting trees, sowing
meadows and establishing wildlife ponds,
while getting some exercise and improving
their physical and mental wellbeing.
Earlier this year VHE also volunteered to
replace the play area at the Rotunda
Liverpool Nursery in Kirkdale. The team
removed the old cover materials from the
garden, uneven paving was re-laid, stone
and soil were imported and compacted to
level and existing fencing was repainted.
The play area was topped off with rubber
tarmac prior to opening. The aim of the
works was to provide a new nursery garden
for the children to be able to play safely.
A QTS team working near Garelochhead
volunteered its time to participate in the
Keep Britain Tidy campaign which
recognises the importance of contributing
to the communities in which we live and
work.
As part of the Highways England East
Midlands Asset Delivery Community,
Carnell joined in an initiative to raise food
and essential items for food banks helping
to support families in crisis.
As part of 3D Crowd, a group of almost
5,000 volunteers around the UK who are
using 3D printers to supply face shields for
NHS staff, QTS has been using its 3D printer
to create the shields’ frames (top
headbands and bottom reinforcements)
which were carefully packaged and sent to
a central hub in Sheffield. The frames were
assembled with clear visors to create the
face shields to be distributed to frontline
NHS staff. Also alongside Network Rail
Scotland, QTS provided protective eyewear
for theatre staff at the Queen Elizabeth
University Hospital.
QTS also supported a number of food
banks and charities in their local office
areas including Hope Nottingham, Leeds,
North and West Foodbank, Clyde, Avon &
Nethan Foodbank, Blackburn Foodbank,
West FM Cash for Kids, Ayrshire East
Foodbank, Malmesbury & District Foodbank
and the Penrith Salvation Army.
Future skills
Dedicated to bridging the industry skills
gap, raising awareness of careers in
construction and engineering, and
safeguarding the future of tomorrow’s
generation, AmcoGiffen participates in
numerous school based activities and
training days including delivering
interactive employability panels, workshops
and attending various “world of work days”.
QTS remains the principal sponsor in
Ayrshire for the Youth & Philanthropy
Initiative for a fourth year. The initiative
allows pupils from each school in the region
the opportunity to win support for a charity
in their local community. QTS also visited
primary schools in Kilmarnock to deliver
sessions promoting Science, Technology,
Engineering and Maths ("STEM"). The pupils
learnt more about the work QTS does and
looked at some of the equipment the team
uses during a typical working day.
Seymour employees continue to attend
industry and community events as STEM
and Construction Industry Training Board
("CITB") Ambassadors. Seymour continues
to have strong connections with a number
of schools and colleges in its local area.
Charitable giving
Our subsidiaries support a range of charitable
causes. In February, a team from Walter Lilly
travelled to Rwanda to build a bridge
between two communities which currently
lack safe access between their villages.
The charity behind the project, Bridges to
Prosperity, works with isolated communities
to create access to essential health care,
education and economic opportunities
to help remove rural isolation as a cause
of poverty.
AmcoGiffen supported “Children
with Cancer UK” throughout the year with
various fundraising activities. Children with
Cancer UK works to improve survival rates
in young cancer patients.
In October, responding to a call out in the
local community, VHE joined a group of
volunteers to help transform the churchyard
at St Oswald’s Church, Methley, back to its
former tranquil space. VHE also supports its
local community sports teams and is
sponsoring Methley Utd under 13s for the
coming season.
Renew Holdings plc Annual Report and Accounts 2020
43
STRATEGIC REPORT RISK MANAGEMENT
Embedding effective
risk management
The Group keeps its principal risks under continuous
review and ensures those identified risks are being
effectively managed.
Risk management structure
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. Group
minimum standards ensure compliance in
areas such as risk management, control
environment and activities, information and
communication, and the evaluation of our
ability to deliver robust commercial risk
management.
Regular operational and financial reporting
is supported by monthly management
meetings attended by a senior group
representative, Executive Management
Committee meetings and monthly Board
meetings.
Principal risks
The Group’s principal risks are identified as
those risks which have the potential for the
highest impact on the Group. The Board
reviews the principal risks annually along
with the mitigation measures in place.
Read about how our strategy helps mitigate
our principal risks on pages 22 & 23
Board
• Review and agree risk profile
• Identify new risks
• Agree principal risks
• Review results of the internal audit and process
• Review external audits
• Review Group risk register and actions taken to
mitigate risks
management reports
• Risk management reviewed in monthly
• Oversee Group minimum requirements for risk
• Identify and control local risk
• Delivery of risk management processes
and procedures
• Risk mitigation
Audit and Risk
Committee
Executive
Directors
Operating
subsidiaries
1 Major accident or hazard
2
Loss of a major customer
3 Major project loss
4
5
6
Economic conditions
Business continuity
and cyber risk
Management and
succession planning
Change from previous year
Very
high
High
Medium
Low
Very
low
d
o
o
h
i
l
e
k
i
L
4
5
6
3
2
1
Impact
Medium
Low
Very
low
High
Very
high
44
Renew Holdings plc Annual Report and Accounts 2020
Covid-19
The Board has reviewed the principal
risks and uncertainties affecting the
Group in the context of the impact of
the Covid-19 pandemic. The Board
recognises that the impact of Covid-19
is being felt across all aspects of the
Group’s operations and that the overall
risk environment has increased as a
result of the pandemic. Despite this,
the Board considers that the principal
risks and uncertainties are still
appropriate and therefore remain
unchanged. The Board has taken
additional actions to address those
risks specifically arising from Covid-19.
Brexit
The Board has considered the risk
of the impact of the UK’s withdrawal
from the European Union and has
concluded that it is unlikely to have any
material effect on the performance of
the Group. This is because Renew is a
UK-only business operating in markets
with long-term, non-discretionary
spending programmes and it has very
little exposure to European supply
chains or labour.
Decrease
Increase
Same as last year
1
2
Major accident or hazard
Loss of a major customer
Risk trend
Risk trend
Link to strategy
Read more on pages 22 & 23
Link to strategy
Read more on pages 22 & 23
1
2
4
1
2
4
Potential impact
A major accident or incident for which we
are held primarily accountable could result
in personal or environmental harm and lead
to operational loss, regulatory, legal or
financial penalties and/or reputational loss.
Potential impact
As a consequence of the market in which
we operate we inevitably have fewer, larger
clients. The loss of one such client could
result in both financial and reputational
consequences for the business.
Mitigation
Our established and proven processes,
policies and approach provide mitigation to
such an occurrence.
We directly employ safety practitioners
within our individual businesses who
understand the complex needs of the
individual environments in which they work.
Change in the year
Taking account of the increasingly diverse
activities of the Group, the Board has
reassessed the impact of a major accident
or hazard during the year and have
concluded that the impact of such an event
has moved from ‘Very high’ to ‘High’.
Mitigation
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 expand our client base to
further lessen the reliance on larger clients.
Change in the year
A number of appointments with new clients
were made in the year. Our engineering
services are usually provided through
long-term framework agreements, often
over many years.
Renew Holdings plc Annual Report and Accounts 2020
45
STRATEGIC REPORT RISK MANAGEMENT CONTINUED
Decrease
Increase
Same as last year
3
4
5
Major project loss
Economic conditions
Business continuity and
cyber risk
Risk trend
Risk trend
Risk trend
Link to strategy
Read more on pages 22 & 23
Link to strategy
Read more on pages 22 & 23
Link to strategy
Read more on pages 22 & 23
4
5
2
3
4
1
4
Potential impact
A major project loss could result in a
significant financial loss to the business.
Discontinued activities could present
legacy risk that could potentially incur
financial costs.
Potential impact
Potential uncertainty in the economic
outlook includes a risk of inflation in supply
chain costs and availability of suitably
qualified and experienced personnel.
Potential impact
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.
Mitigation
We continue to mitigate this risk by
ensuring rigorous selection procedures,
carrying out thorough risk management
and maintaining first class records to
enable effective management of any
disputes. Projects within focus carrying risk
are fully discussed in the business unit plans.
Change in the year
Progress has been made in the year to
close out a number of remaining legacy
issues. The risk relating to these has been
significantly reduced over the year.
Mitigation
We focus on non-discretionary markets
and activities where expenditure is
delivered through long-term frameworks
with committed levels of funding.
Change in the year
In light of Covid-19 and its serious
economic impact, the Board has
determined that the likelihood of a major
economic downturn has increased from
‘Medium’ to ‘High’.
Mitigation
We recognise the importance of maintaining
the integrity of the businesses’ electronic
communications and management systems
from both failure and cyber-attack. Defence
mechanisms are in place using industry best
practice tools and a business continuity
approach to disaster recovery is maintained
with automated offsite backup facilities and
secondary communication systems.
Change in the year
We continue to develop our approach to cyber
risk management through improvements to
IT security and through the continuation of
our user awareness training programme.
Minimum standards are in place, with all
businesses audited to ensure compliance.
46
Renew Holdings plc Annual Report and Accounts 2020
Viability statement
6
Management and
succession planning
Risk trend
Link to strategy
Read more on pages 22 & 23
1
3
4
Potential impact
Lack of continuity of business leadership is
recognised as a risk to the business which
has the potential for both financial and
reputational damage to the business.
Mitigation
Each year, the Group carries out a review
of succession planning and management
in each of its subsidiary businesses. The
review looks at succession planning for
the senior teams in the short, medium and
long term.
Change in the year
The Group has further developed its
succession planning procedures during the
year and continues to carefully monitor any
changes at regular intervals with our
subsidiaries.
The Directors confirm that they have a
reasonable expectation that the Group will
continue in operation, meet liabilities as
they fall due and not breach banking
covenants within this period.
In support of the Viability statement the
Group financial forecasts have been stress
tested by estimating the potential impact of
key risks. These estimates reflected the
Directors’ judgement as to the net potential
financial impact and the likelihood of these
key risks occurring.
Assessing the business
The Directors have conducted a review
and assessed the prospects and viability
of the Group.
Although the Directors have no reason to
believe that the Group will not be viable
over a longer period, the Board has chosen
to conduct this review for a period of three
years. The Group believes that this is an
appropriate timeframe as it aligns with its
strategic and financial planning horizon.
The Directors have taken account of the
Group’s financial forecasts for the three
year period following the balance sheet
date, comparing future funding
requirements with committed external
borrowing facilities. These external facilities
are due for refinancing by January 2024,
which is after the period being considered.
Working
together
to deliver environmental
and safety improvements
In the last year Carnell recycled
53,000m3 of filter drain using its
STONEmaster and STABLEdrain
systems. This saved 62,000 litres of
fuel and reduced HGV journeys,
saving over 500 tonnes of CO2 and
was recognised with an International
Green Apple Award for environmental
best practice. Carnell were also
awarded the HRH Prince Michael
International Road Safety Award for
its mobile road worker protection
system SAFETYcam.
Renew Holdings plc Annual Report and Accounts 2020
47
STRATEGIC REPORT BOARD OF DIRECTORS
Our Board
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. The Group continues to
review the composition and effectiveness of its Board through its biannual
Board performance review process.
A
R
N
A
R
N
A
R
N
A
R
N
David Brown
Non-executive Director
Appointment date:
Non-executive Director from
April 2017.
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.
Skills brought to the Board:
Transport industry experience.
Number of Board meetings
attended:
15 out of 15.
Stephanie Hazell
Non-executive Director
Appointment date:
Non-executive Director from
1 March 2020.
Experience:
Over 20 years’ relevant
experience working in high
profile businesses including
PricewaterhouseCoopers LLP,
Orange SA, Virgin Management
Ltd and National Grid Plc where
she held the position of director,
strategy and corporate
development.
External appointments:
Industrial partner at Infracapital
and a non-executive director for
a number of its investments.
Skills brought to the Board:
Infrastructure sector
experience.
Number of Board meetings
attended:
10 out of 10.
Sector experience:
Transport.
Sector experience:
Utilities and telecoms.
David Forbes
Chairman
Appointment date:
Non-executive Director from
June 2011.
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:
15 out of 15.
Sector experience:
Construction, retail,
engineering, communications
and support services.
Shatish Dasani
Non-executive Director
Appointment date:
Non-executive Director from
February 2019.
Experience:
A Chartered Accountant with
over 20 years’ experience in
senior public company finance
roles across various sectors
including building materials,
advanced electronics, general
industrial and business services.
He was previously the chief
financial officer of Forterra plc
and chief financial officer of TT
Electronics plc and has also
been alternate non-executive
director of Camelot Group plc
and public member at Network
Rail plc.
External appointments:
Interim chair of Unicef UK.
Skills brought to the Board:
Strategy development and
execution, performance
improvement, financial
management, corporate
finance, mergers
and acquisitions.
Number of Board meetings
attended:
15 out of 15.
Sector experience:
Building materials, advanced
electronics, general industrial,
business services
and infrastructure.
48
Renew Holdings plc Annual Report and Accounts 2020
A
R
N
Audit and Risk Committee
Remuneration Committee
Nomination Committee
Chairman
Experience
and skills
The Board has a
complementary range of
skills which are relevant to
the Group’s medium and
longer-term objectives.
Regulated markets
Infrastructure
Corporate governance
Financial
Strategy and development
Paul Scott
Chief Executive
Appointment date:
As Chief Executive from 1
October 2016, previously as
Group Engineering Services
Director from 21 July 2014.
Experience:
A qualified engineer who has
been with the Group for over 21
years. Having directly led
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.
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:
15 out of 15.
Sector experience:
Highly experienced across the
UK Infrastructure sectors that
remain our strategic focus.
Sean Wyndham-Quin
Chief Financial Officer
Appointment date:
Appointed to the Board on 8
November 2017.
Appointed Chief Financial
Officer on 29 November 2017.
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.
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.
Number of Board meetings
attended:
15 out of 15.
Sector experience:
A broad range of experience
across a number of sectors
including support services and
construction.
Andries Liebenberg
Executive Director
Appointment date:
Appointed as Executive
Director on 31 March 2016.
Experience:
Previously managing director of
Renew subsidiary AmcoGiffen,
Andries has been with the Group
for over eleven years. Prior to
this Andries 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:
Experienced in strategic
business management
including mergers
and acquisitions.
Number of Board meetings
attended:
15 out of 15.
Sector experience:
Multidisciplinary infrastructure
project delivery with a bias
towards Rail, Energy
and Environmental sectors.
Renew Holdings plc Annual Report and Accounts 2020
49
GOVERNANCE STATEMENT OF CORPORATE GOVERNANCE
Our business is supported by strong
corporate governance
Company values
The Group’s core values remain central to
the way we operate. Our values of
compliance, consideration, responsibility,
progression, reliability, sustainability,
responsiveness and integrity set out the
expectations of the Renew Board and
ensure, as a Group, we consider the wider
responsibilities we have to all our
stakeholders when making key decisions
and undertaking our operations.
Shareholder engagement
Despite the challenges Covid-19 brings to
shareholder engagement the Board
continues to welcome the views of its
shareholders. Throughout the year we have
communicated with our shareholders
through the delivery of our results
information, virtual meetings and the
Company’s Annual General Meeting
("AGM").
Future focus
The Board is focused on continuing to
improve the application of corporate
governance throughout the business. To
ensure we continue to have an effective
balance of skills and experience on the
Board we will continue to review the
diversity of the Board as we move through
2021.
The Board looks forward to driving further
improvements through 2021 as well as
continuing to develop our core values
which underpin the delivery of sustainable
economic, social and environmental
value for all our stakeholders.
David Forbes
Chairman
8 December 2020
Board induction process
The Board has a robust Board
induction process led by the Chief
Executive. Once appointed, new
members of the Board are provided
with a comprehensive set of documents
to facilitate their understanding of the
Group including, amongst others,
minutes of previous meetings,
overview of Committees and their
membership, the Group’s three year
Strategic Plan, details of the Group’s
subsidiary businesses, organisation
charts and details of the Executive team.
Subsequently the Chief Executive
provides a detailed one to one meeting
to outline how the business operates
using the Strategic Plan and covering
in detail areas such as health and
safety, risk management, strategy and
culture. This includes an introduction
to the senior team.
The Board usually meets at one of the
Group’s operating subsidiaries at least
twice a year and a visit is usually
arranged shortly after a new Board
member is appointed so they can
meet members of the business and
view the facilities.
Whilst the core elements of the
onboarding process are the same for
all new Board members, the process is
also flexible to take account of a new
member’s Board experience. This
approach ensures the process fits the
needs of each new member.
Covid-19 has imposed practical
limitations on this process this year, as
a result of which it is intended to hold
board meetings at four of the Group’s
businesses in the next 12 months.
David Forbes
Chairman
Dear Shareholder,
The Board of Renew Holdings has
continued to drive the highest standards of
corporate governance throughout the
business during what has been a
challenging year due to the Covid-19
pandemic. Our corporate governance
provides the Group with a reliable and
robust framework with which to navigate
these unique challenges.
Compliance with the QCA
Corporate Governance Code 2018
The Group complies with the principles
of the Quoted Companies Alliance ("QCA")
Corporate Governance Code 2018 to
the extent considered appropriate for
a company of this size and in many areas
we exceed and continue to improve on the
requirements of the QCA Code where we
are able to.
The ten principles of the QCA Code are set
out on the following pages with details as to
how Renew complies with each principle or
an explanation as to why it does not. More
details of how the Group complies can be
found in the Corporate Governance section
of our website at www.renewholdings.com.
50
Renew Holdings plc Annual Report and Accounts 2020
Our strategy
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.
Strategic priorities
1
2
3
4
5
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
Read more about our strategy on
pages 22 & 23
Principle 1: Establish a strategy and
business model which promote
long-term value for shareholders.
We seek to deliver value to shareholders
through our established and proven
strategy, providing reliable capital growth.
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 which are responsible for
the long-term maintenance and renewal of
national infrastructure networks.
Read more about how we manage risk
to ensure the successful delivery of our
strategy on pages 44 to 47
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 Group’s AGM is provided to
shareholders at least 21 days in advance of
the meeting. 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, 3175 Century Way,
Thorpe Park, Leeds LS15 8ZB.
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
December Preliminary results roadshow
January
Annual General Meeting
May
Interim results roadshow
Read more about how we engage with our
shareholders on pages 16 & 17
Read more about our strategy
on pages 22 & 23
Read more about our Board of Directors on
pages 48 & 49
Read more about our business model
on pages 14 & 15
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.
Effective relationships with our stakeholders
are critical to the continued success of our
business.
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.
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.
During the year the Group’s safety advisors
shared their knowledge and best practice
at an internal safety 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.
Communities
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.
Renew Holdings plc Annual Report and Accounts 2020
51
GOVERNANCE
STATEMENT OF CORPORATE GOVERNANCE CONTINUED
Shareholders
Communication with our shareholders
takes place throughout the year and
includes dialogue at our AGM, through
participation in investor and analyst 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.
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.
Suppliers
Trusted suppliers assist us in delivering a
“right first time” and responsive service.
Read more about how we engage with our
stakeholders on pages 16 & 17
Read more about how we deliver value for
our stakeholders on pages 14 & 15
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 principal 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.
Read more about how we identify and
manage risk on pages 44–47
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.
Q&A
Stephanie Hazell
Non-executive Director
Stephanie, you joined the Board
of Renew in March 2020; how
have you found the experience?
My experience has been very positive.
I joined the Board just as we entered
lockdown for Covid-19 so the majority
of my onboarding has been undertaken
remotely. There was a clear process
which involved a detailed review of the
business with the Chief Executive,
Paul Scott.
What key skills do you bring to
the Board?
My background is in the infrastructure
sector and in particular in the areas of
business strategy and corporate
development. I have direct experience
in the telecoms and utilities sectors
and I am an industrial partner
at Infracapital.
Tell us about how the Board are
working together to create
value for Renew.
Renew is a business with a differentiated
business model, which provides
stability and opportunities even in
difficult economic environments.
I am looking forward to helping the
business move forwards with its growth
strategy.
52
Renew Holdings plc Annual Report and Accounts 2020
Our Board
Members
57%
43%
Executive
Non-executive
60+
50+
Up to 3 years
4
2
1
Length of tenure
4–6 years
7+ years
Diversity
1
85+
Male
6
Female
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 14 years and
including 2020, the Group has carried out a
programme of internal audit conducted by
the Group Commercial Director and by
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. The Remuneration
Committee has held four meetings in the year.
Read more about the Remuneration
Committee’s key responsibilities and
activity during 2020 on pages 62–67
Nomination Committee
The Nomination Committee, which
comprises all the Non-executive Directors,
monitors the composition of the Board and
recommends the appointment of new
Directors. The Nomination Committee has
held two meetings during the year.
Read more about the Nomination
Committee’s key responsibilities and
activity during 2020 on page 61
Audit and Risk Committee
The Audit and Risk Committee has held
four meetings to consider matters within its
terms of reference as set out in its report.
The Audit and Risk Committee consists
of all four Non-executive Directors. The
Executive Directors are invited to attend
Audit and Risk Committee meetings but at
least one meeting each year is held with the
external auditor at which the Executive
Directors are not present.
Read more about the Audit and Risk
Committee’s key responsibilities and
activity during 2020 on pages 59 & 60
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.
members of the various subsidiaries’
finance teams. This system of peer review
promotes best practice as well as ensuring
that Group minimum requirements, as well
as 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.
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 QCA
Corporate Governance Code 2018 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.
Renew complies with the provision of Board
independence as the Group has at least
two independent Non-executive Directors.
D M Forbes
D A Brown
S D Dasani
S A Hazell
Non-executive Chairman
Independent
Non-executive Director
Independent
Non-executive Director
Independent
Non-executive Director
Independent
P Scott
Chief Executive Officer
S C Wyndham-Quin Chief Financial Officer
A P Liebenberg
Executive Director
Board Committees
The Board operates with a number of
Committees. Shatish Dasani acts as Chairman
of the Audit and Risk Committee,
David Forbes acts as Chairman of the
Nomination Committee and David Brown,
the Senior Independent Non-executive
Director, chairs the Remuneration
Committee. The Board delegates clearly
defined powers to its Remuneration,
Nomination and Audit and Risk Committees.
Each of the Board’s Committees has
carefully drafted terms of reference.
Renew Holdings plc Annual Report and Accounts 2020
53
GOVERNANCE40
+
L
30
+
20
+
L
15
+
L
STATEMENT OF CORPORATE GOVERNANCE CONTINUED
Board and Committee meetings
The Board met formally 15 times in the year
ended 30 September 2020 with all Directors
in attendance. Committee meetings dealing
with the daily business of the Company were
held as necessary. The Board receives written
and oral reports from the Executive Directors
ensuring matters are considered fully and
enabling Directors to discharge their duties
properly. There is a formal schedule of
matters reserved for the Board’s decision
ensuring the maintenance of control over
strategic, financial and operational matters.
Board effectiveness
Board composition
The Board comprises the independent
Non-executive Chairman, the Chief
Executive Officer, two Executive Directors
and three independent Non-executive
Directors.
Stephanie Hazell was appointed as a
Non-executive Director on 1 March 2020.
The Board comprises four 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 as well as any additional meetings
as requested.
Brief biographies of the Directors can be
viewed on pages 48 & 49
Read more about how we evaluate Board
performance on page 57
Working together
How the Board
worked together
2020 has been a challenging year due to the
effects of the Covid-19 pandemic. The Board
has played a critical role in steering the
Group through what remain unprecedented
times. During the initial phase of the
pandemic in March/April the Board
increased the frequency in which it met
formally to every two weeks in addition to
providing more informal counsel as required.
As well as the additional requirements of
responding to Covid-19, the Board
worked on its processes and procedures
to improve the running of the Board and
its Committees. The Board also
implemented a new Board portal to
facilitate efficiency improvements and
will continue to develop the portal to
assist with longer-term planning and
governance requirements.
Skills of the Board members
The Board members bring a range of
complementary skills and experience
from across the markets in which the
Group operates. In March, the Board was
delighted to welcome Stephanie Hazell
who joined as Non-executive Director.
Stephanie increased the Board’s
infrastructure expertise with experience
across regulated sectors including
utilities and telecoms.
Stephanie has over 20 years’ relevant
experience working in high profile
businesses including
PricewaterhouseCoopers LLP, Orange
SA, Virgin Management Ltd and National
Grid Plc where she held the position of
director, strategy and corporate
development.
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 48 and 49
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
David Brown 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 its
statutory duties and responsibilities as well
as liaising with the Group’s shareholders
and other stakeholder groups.
External advisors
For the appointment of a new Non-executive
Director, 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.
Read more about our onboarding process
on page 50
54
Renew Holdings plc Annual Report and Accounts 2020
Board and Committee meetings
The Directors attended the following meetings in the year ended 30 September 2020:
D M Forbes
D A Brown
S A Hazell*
S D Dasani
P Scott
S C Wyndham-Quin
A P Liebenberg
Main Board
Audit and Risk
Committee
Remuneration
Committee
Nomination
Committee
15/15
15/15
10/10
15/15
15/15
15/15
15/15
4/4
4/4
2/2
4/4
—
—
—
4/4
4/4
2/2
4/4
—
—
—
2/2
2/2
2/2
2/2
—
—
—
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 which plays 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 Managers’
Conference, the Board can assess the
Group’s culture on an ongoing basis.
Read more about our sustainability
on pages 38–43
Read more about our core values
on page 14
* Stephanie Hazell joined the Board in March 2020.
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.
Every two years 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 last formal Board review
was undertaken in 2020.
It is the ambition of the Board that the
evaluation of the Board will be externally
facilitated every three years 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 is 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 are key to delivering
this continuity. Each year the Board carries
out its annual review of succession planning
at both Board and subsidiary business level
as part of its strategic review process.
Board
The Nomination 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.
Read more about our Board performance
evaluation process on page 57
Read more on how our Board works
together on page 54
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
Rail, 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 2021.
Renew Holdings plc Annual Report and Accounts 2020
55
GOVERNANCE
STATEMENT OF CORPORATE GOVERNANCE CONTINUED
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
David Brown 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 met 15 times during the year.
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, Nomination and Audit
and Risk 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,
Shatish Dasani and Stephanie Hazell,
determines and agrees with the Board the
framework and policy of executive
remuneration packages.
Read about the Remuneration Committee’s
responsibilities and activity during 2020 on
pages 62–67
Nomination Committee
The Nomination Committee, which
comprises all four Non-executive Directors,
monitors the composition of the Board and
recommends the appointment of new
Directors.
Read more about the Nomination
Committee’s responsibilities and activity
during 2020 on page 61
Audit and Risk Committee
The Audit and Risk Committee consists of
all four Non-executive Directors. The
Executive Directors are invited to attend
Audit and Risk Committee meetings but at
least one meeting is held each year with the
external auditor at which the Executive
Directors are not present.
Read more about the Audit and Risk
Committee’s responsibilities and activity
during 2020 on pages 59 & 60
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 2021.
The continued growth of the Group has
necessitated further review and revaluation
of the governance framework the Group
applies. The Group has a series of Group
minimum requirements in a number of
financial and operational areas with which
each business within the Group must comply.
Read more about how we manage risk on
pages 44–47
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 15 times in the year
ended 30 September 2020 with all Directors
in attendance. Committee meetings dealing
with the daily business of the Company were
held as necessary. The Board receives written
and oral reports from the Executive Directors
ensuring matters are considered fully and
enabling Directors to discharge their duties
properly. There is a formal schedule of
matters reserved for the Board’s decision
ensuring the maintenance of control over
strategic, financial and operational matters.
Committee reporting
The Audit and Risk Committee report is set
out on pages 59 and 60.
The Remuneration Committee report is set
out on pages 62 to 67.
The Nomination Committee report is set
out on page 61.
Shareholder engagement
We regularly engage with our shareholders
including through results presentations and
roadshows, our Annual General Meeting,
investor and analyst 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.
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, 3175 Century Way,
Thorpe Park, Leeds LS15 8ZB.
56
Renew Holdings plc Annual Report and Accounts 2020
Working together
Our Board evaluation process
As part of the Board’s commitment to continuous improvement, a Board performance evaluation process is undertaken every two
years. The evaluation looks at how the Board members feel they perform as individuals as well as how they interact with the rest of the
Board. The Board performance evaluation takes the form of an online questionnaire with the anonymised results reviewed by the
Chairman. Areas for further discussion or action are agreed at subsequent Board meetings.
The last Board performance evaluation took place in July 2020 and the results highlighted some areas for further consideration by
the Board. The Board will use the areas identified in this review to develop an action plan to work through during 2021.
Timeline for Board performance evaluation process
July 2020
August 2020
September 2020
November 2020
2021
Board performance evaluation survey distributed to Board members electronically.
Board performance evaluation survey responses received.
Confidential survey responses collated for Chairman’s review.
Key areas for discussion outlined at the Board meeting and an action plan agreed.
The Board will work through the areas raised in the Board performance evaluation process.
Shareholder voting
The tables below show the votes cast at the 2020 Annual General Meeting held on 29 January 2020.
2020 Annual General Meeting voting results
The 60th Annual General Meeting of Renew Holdings plc was held at Thorpe Park Hotel on 29 January 2020 at 11.00am. Voting on the
resolutions put to the meeting was as follows:
Voting for Voting against Voting withheld
Ordinary resolution 1
To receive, approve and adopt the Company’s audited financial statements for the year ended
30 September 2019 and the reports of the Directors and auditor thereon.
43,695,491
2,697
Ordinary resolution 2
To declare a final dividend for the year ended 30 September 2019 of 7.67p per Ordinary Share in
the capital of the Company to be paid on 6 March 2020 to shareholders who appear on the
register at the close of business on 31 January 2020.
43,696,991
1,197
0
0
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.
42,730,591
2,341
965,256
Ordinary resolution 4
To re-elect Shatish Dasani as a Director of the Company. Mr Dasani was appointed as a Director
during the year and, in accordance with the Company’s Articles of Association, retires as a
Director and offers himself for re-election.
43,376,651
102,341
219,196
Ordinary resolution 5
To approve the Remuneration Report for the year ended 30 September 2019.
43,167,104
429,084
102,000
Ordinary resolution 6
To appoint KPMG LLP as auditor of the Company.
43,165,226
527,351
5,611
Ordinary resolution 7
To authorise the Audit Committee of the Board of Directors of the Company to determine the
remuneration of the auditor.
43,589,847
103,841
4,500
Renew Holdings plc Annual Report and Accounts 2020
57
GOVERNANCE Voting for Voting against Voting withheld
43,365,651
307,009
25,528
43,365,651
307,009
25,528
42,844,006
843,572
10,610
STATEMENT OF CORPORATE GOVERNANCE CONTINUED
Ordinary resolution 8
THAT the directors of the Company (the “Directors”) be and are generally and unconditionally
authorised pursuant to and in accordance with Section 551 of the Companies Act 2006 (the
“Act”) to exercise all the powers of the Company to allot shares in the capital of the Company
(“Shares”) or grant rights to subscribe for or to convert any security into shares in the Company
(“Rights”) up to a nominal amount of £2,510,974 such authority to apply in substitution for all
previous authorities pursuant to Section 551 of the Act and to expire at the end of the next
Annual General Meeting of the Company or, if earlier, at the close of business on 30 April 2021
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 be
granted after this authority ends and the Directors may allot such shares or grant such rights
pursuant to any such agreement as if this authority had not expired.
Special resolution 9
THAT, subject to the passing of resolution 8, the directors of the Company (the “Directors”) be
empowered to allot equity securities (as defined in the Companies Act 2006 (the “Act”)) for cash
under the authority given by resolution 8 and/or to sell ordinary shares held by the Company as
treasury shares for cash as if section 561 of the Act did not apply to any such allotment or sale,
such authority to be limited:
(A)
in connection with an offer by way of rights issue to holders of ordinary shares in the
capital of the Company in proportion (as nearly 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
to the allotment of equity securities or sale of treasury shares (otherwise than under
paragraph (A) above) up to a nominal amount of £376,646, such power to expire at the
end of the next annual general meeting of the Company or, if earlier, at the close of
business on 30 April 2021 but, in each case, prior to its expiry the Company may make
offers, and enter into agreements, which would or might require equity securities to be
allotted (and treasury shares to be sold) after the power expires and the Directors may
allot equity securities (and sell treasury shares) under any such offer or agreement as if
the power had not expired.
Special resolution 10
THAT, subject to the passing of resolution 8 above, the directors of the Company (the “Directors”)
be empowered in addition to any authority granted under resolution 9 to allot equity securities
(as defined in the Companies Act 2006 (the “Act”)) for cash under the authority given by
resolution 8 and/or to sell ordinary shares held by the Company as treasury shares for cash as if
section 561 of the Act did not apply to any such allotment or sale, such power to be:
(A)
limited to the allotment of equity securities or sale of treasury shares up to a nominal
amount of £376,646; and
used only for the purposes of financing (or refinancing, if the power is to be used
within six months after the original transaction) a transaction which the Directors
determine to be an acquisition or other capital investment of a kind contemplated by
the Statement of Principles on Disapplying Pre-Emption Rights most recently published
by the Pre-Emption Group prior to the date of this notice, such power to expire at the
end of the next annual general meeting of the Company or, if earlier, at the close of
business on 30 April 2021 but, in each case, prior to its expiry the Company may make
offers, and enter into agreements, which would or might require equity securities to be
allotted (and treasury shares to be sold) after the power expires and the Directors may
allot equity securities (and sell treasury shares) under any such offer or agreement as if
the power had not expired.
(B)
(B)
By order of the Board
Sean Wyndham-Quin CA
Company Secretary
8 December 2020
58
Renew Holdings plc Annual Report and Accounts 2020
AUDIT AND RISK COMMITTEE REPORT
Managing risk through effective
controls
Introduction
Dear Shareholder,
I am pleased to present the Audit and Risk
Committee report for the financial year
ended 30 September 2020. The role of the
Audit and Risk Committee is to protect the
interests of shareholders by ensuring the
integrity of the Group’s financial reporting
and by monitoring the ongoing effectiveness
of the Group’s internal controls. The
Committee is appointed by the Board and
comprises independent Non-executive
Directors and provides independent
monitoring, guidance and challenge to
the Executive Directors. The Audit and Risk
Committee report sets out the responsibilities
of the Committee, its composition and
the work undertaken during the year.
Responsibilities and terms
of reference
The terms of reference are approved by the
Board and are available for review on the
Company website (www.renewholdings.com).
The principal responsibilities of the
Committee are set out on the left.
Committee composition
The Audit and Risk Committee consists of
all four Non-executive Directors and is
chaired by me as an independent Non-
executive Director with recent and relevant
financial experience. The Board believes that
the members have sufficient skills,
qualifications and experience to discharge
their duties in accordance with the
Committee’s terms of reference and as a
Committee has competence in the sector
within which the Group operates.
Summary of activity
The Audit and Risk Committee formally met
on four occasions since the date of the last
report. The Chief Executive Officer, the
Chief Financial Officer and the Executive
Director 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 on one of these occasions also
met separately with the Audit and Risk
Committee without any of the Executive
Directors present.
Shatish Dasani
Chairman of the Audit and Risk
Committee
Audit and Risk Committee
key areas of focus
• Monitor the integrity, clarity and
completeness of the financial
statements, the half year report and
any other announcements relating to
the Group’s financial performance or
position;
• review and challenge, where
necessary, the appropriateness of
accounting policies, key accounting
judgements and sources of estimation;
• keep under review the adequacy and
effectiveness of the Group’s internal
control and risk management systems;
• evaluate the effectiveness of the
Group’s internal audit process;
• review the policies and process for
identifying and assessing business
risks and managing their impact on
the Group;
• review the Group’s systems and
controls for preventing bribery, fraud
and ensuring compliance with relevant
legal and regulatory requirements;
• ensuring that the Group has adequate
whistleblowing policies and
procedures; and
• review the effectiveness and
independence of the external auditor,
negotiate and agree its remuneration
and make recommendations to the
Board in respect of its appointment.
Committee focus areas in the year
• Managing risk in the Covid-19
environment
• Risk management framework,
including implementation of new
whistleblowing policy
Priorities for 2021
• Continued focus on risk management
and control environment during period
of economic uncertainty
The members of the Committee
as at the date of this report are:
David Forbes
Shatish Dasani
David Brown
Stephanie Hazell
Meeting attendance¹
David Forbes
Shatish Dasani
David Brown
Stephanie Hazell2
1 There were four meetings during the year.
2 Stephanie Hazell joined the Board in March 2020.
Renew Holdings plc Annual Report and Accounts 2020
59
GOVERNANCE The Audit and Risk 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.
With input from management, the
Committee was satisfied with the external
audit team’s knowledge of the business,
that the scope of the audit was appropriate
and that all significant accounting
judgements had been challenged robustly.
All of the above was considered before
a recommendation was made by the
Committee to the Board to propose
KPMG LLP for re-election at the AGM.
Approval
The Audit and Risk Committee report was
approved by the Board on 8 December
2020 and signed on its behalf by:
Shatish Dasani
Chairman of the Audit and Risk
Committee
8 December 2020
AUDIT AND RISK COMMITTEE REPORT CONTINUED
Internal financial audit
process
The Group carries out a programme of
internal financial audits where a review
of the processes and procedures used
in financial management is undertaken.
The audits are undertaken by a senior
member of the finance team and reviews
processes such as payroll, ledgers,
fixed assets and cash amongst others.
The findings of the internal audit
include any recommendations for
corrective or preventative action and
are reviewed with the business and the
Group’s Chief Financial Officer before
being shared with the Audit and Risk
Committee.
The Group has a rolling schedule of
internal audits ensuring each
subsidiary is audited at least every
three years.
During the period to the date of this report,
the principal activities of the Committee
were as follows:
• conduct a detailed assessment of the
risks faced by the Group in light of the
Covid-19 pandemic;
• implement a new whistleblowing policy;
• review the Group’s financial statements
and preliminary results announcements
including consideration of significant
financial reporting issues and matters
of judgement inherent within the above;
• review the content of the Annual Report
and Accounts to ensure it provides the
information necessary for shareholders
to assess the Group’s financial position
and performance, business model and
strategy;
• monitor and review the Group’s internal
control and risk management systems;
• consider the external auditor’s audit plan,
scope and coverage of audit work,
internal quality procedures and
independence and agree the audit fee;
• update the policy for the use of the
external auditor to perform non-audit
services in order to ensure auditor
independence and objectivity; and
• agree changes to the terms of reference
of the Committee in order to clarify its
responsibilities, including changing the
name of the Committee to include both
audit and risk.
Significant financial reporting risks
and judgement areas considered
The following judgement areas and
significant estimates were considered by
the Committee in the review and approval
of the 2019/20 financial statements:
Revenue recognition and valuation of
contract balances
In accordance with IFRS 15, the Group
makes assessments as to the stage of
completion of a contract in order to
determine the amount of revenue it is able
to recognise. The Committee has critically
reviewed the process adopted to make
these assessments and discussed key
contract issues with exposure to
recognition risks with management.
It also considered the work undertaken
by the external auditor in relation to
key contract judgements.
Valuation of the defined benefit
obligation in relation to both the AMCO
and Lovell pension schemes
The valuation of the defined benefit plan
liabilities is based on a number of key
assumptions including inflation, discount
rate and mortality rates. The Committee
received reports from management
outlining the assumptions used, including
input from the Group’s actuaries. It has also
considered the external benchmark of
key assumptions provided by the external
auditor and the sensitivity of changes
to these assumptions.
Valuation of intangibles recognised on
acquisition
The acquisition of Carnell on 30 January 2020
required the valuation of separately
identifiable intangible assets which involved
a degree of judgement. An independent
accounting firm (PwC) was commissioned
to produce a report on this matter which was
reviewed and approved by the Committee.
External auditor
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 and
Risk Committee with information about its
policies and processes for maintaining
independence and compliance regarding
the rotation of audit partners and staff.
The use of the external auditor for
performing non-audit services is only
permitted where the service is not
prohibited by the FRC Ethical Guideline and
where the external auditor is best placed to
provide the service. In this case, the
engagement needs to be authorised in line
with the policy agreed by the Committee.
60
Renew Holdings plc Annual Report and Accounts 2020
NOMINATION COMMITTEE REPORT
Ensuring an effective Board
The members of the Committee
as at the date of this report are:
David Forbes
Shatish Dasani
David Brown
Stephanie Hazell
Meeting attendance¹
David Forbes
Shatish Dasani
David Brown
Stephanie Hazell2
1 There were two meetings during the year.
2 Stephanie Hazell joined the Board in March 2020.
David Forbes
Chairman of the Nomination Committee
Nomination Committee
key areas of focus
• Review the structure, size and
composition of the Board and its
Committees
• Succession planning for Directors and
senior executives
• Keep under review the leadership
needs of the organisation, both
Executive and Non-executive
Committee focus in the year
• The appointment of a new Non-
executive Director to the Board
• Continued QCA Corporate
Governance Code compliance
• Succession planning
Priorities for 2021
• Continue to develop the diversity of
the Board in its widest sense
• Ensure the skills of the Board are
aligned to the Group’s Strategic Plan
• Succession planning
Introduction
Dear Shareholder,
As Chairman of the Nomination Committee,
below is my report on the Committee’s
activities during the year.
Board changes
In March 2020 we appointed Stephanie
Hazell as Non-executive Director to the
Board. Stephanie brings infrastructure
sector experience in particular in the
regulated telecoms and utilities sectors
where she gained valuable strategy and
corporate development experience.
Board effectiveness
We have recently undertaken our Board
performance evaluation to assess the
performance and effectiveness of the Board.
The issues raised from this process will shape
our improvement plans as we move forward.
Board composition and diversity
The composition of the Board and its
Committees is reviewed annually. In previous
reviews the diversity of the Board was
challenged. Over the last two years we have
worked to improve the diversity of the Board
in its widest sense with two new
appointments. The Board recognises there
is still work to do in this area and diversity
remains a focus of the Nomination Committee
as we look towards 2021.
Succession planning
Succession planning for the Board and its
senior executives is reviewed on an annual
basis as part of the Group’s strategic
planning process. Succession for all
identified roles is reviewed for the short,
medium and long term and this underpins
the development of individuals at both
Group and subsidiary business level.
Retirement by rotation
Sean Wyndham-Quin, David Brown and
Stephanie Hazell will retire from the Board
by rotation at the Group’s AGM in 2021.
2021 and beyond
The Nomination Committee will focus on
ensuring the Board retains the appropriate
set of skills, experience and diversity that is
required to execute the Group’s long-term
Strategic Plan and ensure the continued
success of the Group.
David Forbes
Chairman of the Nomination Committee
8 December 2020
Renew Holdings plc Annual Report and Accounts 2020
61
GOVERNANCE 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 2020.
The Remuneration report 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 2020 and the intended
remuneration for the year ending
30 September 2021.
As an AIM company, whilst we are not
required to prepare this Remuneration
Report in accordance with the UK
Corporate Governance Code 2018, we
follow it to the fullest extent considered
relevant/appropriate for an AIM listed
company of our size. The Remuneration
Committee will continue to ensure that this
report provides disclosures at least as good
as current best practice for AIM listed
companies.
The auditor is not required to report to the
shareholders on the Remuneration report.
The Remuneration report will be presented
at the AGM on 27 January 2021 and will be
the subject of an advisory vote.
Remuneration Committee
The Remuneration Committee is chaired by
David Brown and comprises David Forbes,
Stephanie Hazell and Shatish Dasani.
The Committee held four meetings
during the financial year to discuss
remuneration arrangements.
Stephanie Hazell was appointed to the
Board and the Remuneration Committee
on 1 March 2020.
At the last Annual General Meeting, votes
on the advisory resolution relating to the
Remuneration report were cast as follows:
In favour
– 43,167,104 (98.8 per cent)
Against
– 429,084 (1.0 per cent)
Withheld
– 102,000 (0.2 per cent)
Total votes cast – 43,698,188 (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.
Priorities for 2021
• Remuneration policy review
• Board and senior management
remuneration
The members of the Committee
as at the date of this report are:
David Forbes
Shatish Dasani
David Brown
Stephanie Hazell
Meeting attendance¹
David Forbes
Shatish Dasani
David Brown
Stephanie Hazell2
1 There were four meetings during the year.
2
Stephanie Hazell joined the Board in March 2020.
David A Brown
Chairman of the
Remuneration Committee
Remuneration Committee
key areas of focus
• 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;
• Review and approve the design of all
share incentive plans and performance
related pay schemes for approval by
the Board and shareholders as
applicable;
• Determine targets and awards made
under share incentive plans and
performance related pay schemes;
• Determine the policy for, and scope of,
pension arrangements for each
Executive Director and other senior
executives; and
• Ensure that contractual terms and
payments made on termination are fair
to the individual and the Company and
that failure is not rewarded.
Committee focus in the year
• Ensuring continued compliance with
best practice and the QCA
Remuneration Guidance
• LTIP scheme
• 2020 Remuneration report
• Board and senior management
remuneration
62
Renew Holdings plc Annual Report and Accounts 2020
Terms of reference
The Remuneration Committee’s terms
of reference include:
our strategy is supported through our LTIP
under which performance is tested over
three years.
a.
b.
c.
d.
e.
to determine and agree with the Board
the framework and policy for the
remuneration packages, including
bonuses, incentive payments and
share options or share awards of the
Executive Directors and members
of the Executive Management;
to review and approve the design of all
share incentive plans and performance
related pay schemes for approval by the
Board and shareholders as applicable;
to determine targets and awards made
under share incentive plans and
performance related pay schemes;
to determine the policy for, and scope
of, pension arrangements for each
Executive Director and other senior
executives; and
to ensure that 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 their
own remuneration.
Remuneration policy
The Remuneration Committee has
reviewed the remuneration policy during
the year and remains satisfied that the
policy is appropriate for our Company at its
current stage of development, is aligned to
both shareholders’ and other key
stakeholders’ interests and continues to
support our long-term business strategy,
values and culture.
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
long-term strategic objectives, including
the creation of sustainable shareholder
returns, without making excessive
payments. The annual performance-related
bonus rewards Executive Directors for
delivering our short-term financial and
operational goals. The long-term focus of
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. 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. All performance criteria are
subject to approval by the Remuneration
Committee at the beginning of the year and
all payments are made only when approved
by the Remuneration Committee.
Details of the annual bonus scheme for the
year under review and the following year
are set out below.
Long-term equity incentive plans
The Remuneration Committee
implemented a new long-term incentive
plan (“LTIP”) which was approved at an
Extraordinary General Meeting (“EGM”)
held on 25 January 2012. The LTIP has
been designed so as to comply with ABI
guidelines in all material respects and
to align a material part of 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 over the 3 year
performance period is 25 per cent or less.
The Remuneration Committee considers
this mechanism important to ensure that it
meets the overall objectives of the LTIP.
The relative TSR target requires the
companies TSR performance over the three
year period to be better than the median
TSR performance of the comparator group.
There is no vesting if the relative TSR is less
than the median of the TSR comparator
group. If the company’s relative TSR
performance is in the top decile of the TSR
comparator group then 100 per cent of this
portion of the LTIP will vest. Relative TSR
performance between the median and the
top decile will result in the LTIP vesting on a
straight line basis.
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).
Renew Holdings plc Annual Report and Accounts 2020
63
GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED
Long-term equity incentive plans continued
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.
The LTIP rules allow, at the discretion of the Remuneration Committee, for the amount of dividends paid (including the tax credit) during
the vesting period that are applicable to the number of shares over which the option has become exercisable to be paid to the LTIP
participant once the LTIP has vested as either a cash payment or in the form of additional shares.
Pension arrangements
Under their terms of engagement, the Executive Directors are entitled to receive an annual pension contribution of 15 per cent of their
basic salary or an equivalent cash amount. The Remuneration Committee believes that these payments are broadly in line with senior
management in other comparable public companies.
Executive Director minimum shareholding requirement
The Executive Directors are required by the Remuneration Committee to build up and hold a minimum of 100 per cent 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.
Shareholding requirement % of salary
108%
109%
Target
Current shareholding
69,392
74,739
53,097
26%
13,993
50,442
55,025
Paul Scott
Sean Wyndham-Quin
Andries Liebenberg
Notes
The current shareholding as a percentage of salary has been calculated using the Group Chief Executive’s, Chief Financial Officer’s and
Rail Director’s full base salaries of £313,650, £240,000 and £228,000 respectively.
The value of the Ordinary Shares shown above has been based on the average share price between the period 30 September 2019 and
1 October 2020, being £4.52.
Unvested LTIP shares do not count towards satisfaction of the shareholding requirement but the Board note that in addition to the
shareholdings above, the executive directors also have an interest in the unvested share options detailed on page 66.
Remuneration for the year ended 30 September 2020
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 three years.
The service contracts of the Directors, who served during the year ended 30 September 2020 and were in post on that date, include the
following terms:
Directors
D M Forbes
D A Brown
S D Dasani
S A Hazell
P Scott
A P Liebenberg
S C Wyndham-Quin
Executive/Non-executive
Date of contract
Unexpired term
Non-executive
Non-executive
Non-executive
Non-executive
Executive
Executive
Executive
1 June 2011
2 April 2017
8 February 2019
1 March 2020
1 July 2014
31 March 2016
8 November 2017
Rolling one month
Rolling one month
Rolling one month
Rolling one month
Rolling one year
Rolling one year
Rolling one year
Notice period
(months)
1
1
1
1
12
12
12
Stephanie Hazell was appointed to the Board on 1 March 2020.
64
Renew Holdings plc Annual Report and Accounts 2020
Directors’ remuneration
Due to the uncertainty caused by the Covid-19 pandemic the Board decided to implement a temporary 20% reduction to the basic
salaries/fees of the all the Directors with effect from 1 April 2020. This temporary measure was removed with effect from 1 July 2020 once
it became clear that the business was continuing to trade well throughout the pandemic and that the salary/fee reductions were no
longer necessary.
Information is provided below for Directors who served during the financial year and as at 30 September 2020:
Notes
Salary/fees
£000
Bonuses
£000
1,2,3,4,5
2,3,4,5,6
2,3,4,5
7
8
9
292
210
219
73
44
44
25
—
270
194
203
—
—
—
—
—
LTIP
£000
208
154
—
—
—
—
—
—
Total
emoluments
2020
£000
Total
emoluments
2019
£000
Benefits
£000
63
51
52
—
—
—
—
—
833
609
474
1,916
73
44
44
25
—
797
607
509
1,913
75
45
30
—
19
2,104
2,082
Executive Directors
P Scott
A P Liebenberg
S C Wyndham-Quin
Non-executive Directors
D M Forbes
D A Brown
S D Dasani
S A Hazell
J Bishop
Notes:
1. The highest paid Director for 2020 was P Scott who received emoluments of £833,000 (2019: £797,000).
2. Bonuses were earned by P Scott, A P Liebenberg and S C Wyndham-Quin during the current financial year and will be paid in the year ending 30 September 2021.
3. Details of the LTIP options exercised during the year can be found in the 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 P Liebenberg’s emoluments were borne by a subsidiary undertaking.
7. S D Dasani was appointed as a Non-executive Director with effect from 8 February 2019 and so the comparative emoluments represent the period from 8 February 2019 until
30 September 2019.
8. S A Hazell was appointed as a Non-executive Director with effect from 1 March 2020 and so the emoluments represent the period from 1 March 2020 until 30 September 2020.
9. J Bishop resigned as a Non-executive Director on 8 February 2019 and so the comparative emoluments represent the period from 1 October 2018 until 8 February 2019.
Annual bonus awards
The Company provides a bonus incentive scheme for Executive Directors which 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
100 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 130 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. 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 set out in this report; however, the Remuneration
Committee can, in exceptional circumstances and at its discretion, make the payment in cash. 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 2020, the Remuneration Committee agreed a target for
operating profit1 before exceptional items for the Group of £39,023,000. This was revised to £42,156,000 following the acquisition of
Carnell in January 2020. The operating profit before exceptional items for the Group fell short of this target by approximately 6 per cent.
Accordingly, under the terms of the scheme, the Executive Directors are entitled to receive an annual bonus equal to 88 per cent of salary.
Because the Directors were in an unusually long close period (from 25 October 2019 until 31 January 2020) due to the acquisition of
Carnell Support Services Limited the Board was unable to issue shares or grant options to the Directors. Given these exceptional
circumstances, and the relatively small sums involved, the Remuneration Committee decided to make a cash payment to the Executive
Directors for the element of their bonuses that would ordinarily have been paid in shares in respect of the bonus payable for the year
ended 30 September 2019. The total amount paid to P Scott, A P Liebenberg and S C Wyndham-Quin was £22,306 in aggregate,
representing 3% of their basic salary.
Renew Holdings plc Annual Report and Accounts 2020
65
GOVERNANCE DIRECTORS’ REMUNERATION REPORT CONTINUED
Long-term equity incentive plans
The market price of the Company’s shares at 30 September 2020 (being the last trading day of the month) was 455p and the range of
market prices during the year was between 335p and 568p.
Information is provided below for Directors who served during the financial year and as at 30 September 2020.
Pursuant to the long-term incentive plan (“LTIP”), the Board has granted options to the Executive Directors as set out in the following table:
Number of Ordinary Shares under option
Exercisable between
23 Nov 2020 and 22 Nov 2027
Exercisable between
4 Dec 2021 and 3 Dec 2028
Exercisable between
21 Feb 2023 and 20 Feb 2030
LTIP options
P Scott
A P Liebenberg
S C Wyndham-Quin
99,000
73,500
73,500
129,310
92,833
96,983
118,269
84,907
88,702
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. For consistency with previous years, the close of market on the Friday following
the Group’s preliminary results announcement was used as the valuation point for the LTIP grant albeit the grant was not made until after
the end of the extended close period caused by the acquisition of Carnell, this was to ensure the Directors were not at any advantage or
disadvantage due to the extended close period.
During the year, options awarded on 24 November 2016 amounting to 67,936 shares in aggregate vested in accordance with their vesting
conditions. This represents 83.3 per cent of the relative TSR measure and 0 per cent of the absolute measure in accordance with the
scheme rules, as set out in the graph below. These options were subsequently exercised on 4 February 2020 and 39,028 shares were
issued to P Scott and 28,908 shares to A P Liebenberg.
Renew Holdings TSR performance vs comparator group
80%
60%
40%
20%
0%
-20%
-40%
Median
Upper decile
Renew Holdings
30/09/2016
31/03/2017
30/09/2017
31/03/2018
30/09/2018
31/03/2019
30/09/2019
In addition, and in accordance with the rules of the LTIP, payments of £13,992 and £10,364 were made to P Scott and A P Liebenberg
respectively representing dividends accrued during the vesting period on the shares vested as detailed above. As a consequence of the
LTIP vesting, P Scott made a gain on exercise of options of £193,579 and A P Liebenberg made a gain on exercise of options of £143,384.
Post the period end, on 23 November 2020, 126,280 options awarded on 22 November 2017 vested in accordance with their vesting
conditions but have not yet been exercised. During the year £244,000 (2019: £(122,000)) was charged/(credited) to the income statement
with a corresponding (credit)/charge to the share based payments reserve in accordance with IFRS 2. Performance criteria for the vesting
of the share options under the LTIP are set out in the remuneration policy above and in Note 24 to the accounts.
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 P Liebenberg
and S C Wyndham-Quin receive a sum equivalent to 15 per cent of their basic salary in lieu of pension contributions from the Company.
Under their terms of engagement, the Executive Directors are entitled to receive an annual pension contribution of 15 per cent of their
basic salary or an equivalent cash amount. The Remuneration Committee believes that these payments are broadly in line with senior
management in other comparable public companies.
66
Renew Holdings plc Annual Report and Accounts 2020
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 2020 as follows:
Ordinary Shares of 10p each.
D M Forbes
D A Brown
S D Dasani
S A Hazell
P Scott
A P Liebenberg
S C Wyndham-Quin
2020
35,000
7,042
15,000
4,476
74,739
55,025
13,993
2019
35,000
7,042
5,000
—
47,412
33,371
11,628
30 September
2018
35,000
7,042
—
—
29,042
17,634
11,628
2017
20,000
2016
20,000
—
—
—
—
—
—
5,000
5,000
—
—
—
—
Remuneration for the year ending 30 September 2021
Basic salary and benefits
The basic salary of P Scott has increased by 2.0 per cent to £313,650 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. The basic salary of S C Wyndham-Quin and A P
Liebenberg increased by 4.1 per cent to £240,000 and 3.3 per cent to £228,000 respectively. These increases are closely aligned to the
average annual pay award across the Group as a whole and contain an additional increase to reflect changes in responsibility and market
rates. There have been no material changes in the benefits which the Executive Directors are entitled to receive. The Non-executive
Directors’ fees increased by 2.0 per cent.
Annual bonus awards
The structure of the annual bonus scheme for the year ending 30 September 2021 is the same as for the previous year, as set out above,
in all material respects (except for the targets). Executive Directors will therefore be entitled to receive a 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. 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 set out earlier in this report. As in previous years, the bonus payable will be reduced by the Remuneration Committee if
certain health and safety targets are not achieved during the year.
Long-term equity incentive plan
The Remuneration Committee has 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 as soon as practicable 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 participant’s basic salary. The seventh tranche of options granted under the LTIP, granted on 22 November 2017 as detailed above,
vested on 23 November 2020 subject to the performance criteria contained therein.
Approval
The Directors’ remuneration report was approved by the Board on 8 December 2020 and signed on its behalf by:
David A Brown
Chairman of the Remuneration Committee
8 December 2020
Renew Holdings plc Annual Report and Accounts 2020
67
GOVERNANCE DIRECTORS’ REPORT
The Directors present their report and
the audited accounts for the year ended
30 September 2020.
Principal activities
For the year ended 30 September 2020 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 2020
is listed in Note S to the Company’s
financial statements.
Results and dividends
The Group profit for the year after tax
and after accounting for discontinued
operations was £23,052,000
(2019: £22,257,000). The Directors
recommend the payment of a final dividend
on the Ordinary Shares of 8.33p (2019:
7.67p) giving a total for the year of 8.33p
(2019: 11.50p).
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 2020 £439,000
(2019: £474,000) 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, contract assets 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 contract assets 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
noticeboard statements and newsletters,
keeps them informed of the Group’s
progress.
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.
68
Renew Holdings plc Annual Report and Accounts 2020
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, 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 Frequency Rate
(“AFR”) for the year 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 38 to 43.
Directors
The Directors of the Company who served,
or were appointed, during the year and
their brief biographical details are set out
below.
Non-executive Directors
David Brown – Director, 59, 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, 60, was appointed
to the Board as a Non-executive Director in
June 2011 and became Chairman in January
2018. He qualified as a Chartered
Accountant in 1984 and has over 20 years’
experience in corporate advisory services
with N M Rothschild & Son Limited.
Shatish Dasani – Director, 58, was
appointed to the Board as a Non-executive
Director in February 2019. He is currently
interim chair of Unicef UK. Shatish is a
Chartered Accountant with over 20 years’
experience in senior public company
finance roles across various sectors
including building materials, advanced
electronics, general industrial and business
services. Previously he was the chief financial
officer of Forterra plc and TT Electronics plc
and has also been alternate non-executive
director of Camelot Group plc and public
member at Network Rail plc.
Stephanie Hazell – Director ,45, was
appointed to the Board as a Non-executive
Director in March 2020. Stephanie is
currently industrial partner at Infracapital
and a non-executive director for a number
of their investments. Stephanie has over 20
years’ relevant experience working in high
profile businesses including
PricewaterhouseCoopers LLP, Orange SA,
Virgin Management Ltd and National Grid
Plc where she held the position of Director,
Strategy and Corporate Development.
Executive Directors
Andries Liebenberg – Director, 52, was
appointed to the Board on 31 March 2016.
Andries was previously Managing Director of
Renew’s largest business, Amalgamated
Construction Limited, and has been with the
Group over ten years.
Paul Scott – Director, 56, 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 20 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, 40, 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.
Sean Wyndham-Quin and David Brown
retire by rotation at the 2021 Annual General
Meeting (“AGM”) and offer themselves for
reappointment. Additionally, Stephanie
Hazell, who was appointed during the year,
offers herself 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.
Renew Holdings plc Annual Report and Accounts 2020
69
GOVERNANCE DIRECTORS’ REPORT CONTINUED
Disclosable interests
As at 30 September 2020, the Company has been notified of the following disclosable
interests in the voting rights of the Company:
Octopus Investments Nominees Limited
Investec Wealth & Investment Limited
Charles Stanley Group PLC
Canaccord Genuity Group Inc.
Polar Capital LLP
BlackRock Asset Management Limited
Rathbone Brothers PLC
The Articles of Association provide that
each Director shall be indemnified by the
Company against losses, costs and
expenses they may sustain or incur in
connection with the performance of their
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 as at 30 September 2020 are set out
on pages 66 and 67. No Director has any
interest in any other Group company.
Details of the Directors’ remuneration and
service contracts appear on pages 64 and 65.
Share capital
As at the date of this report, the total
number of shares in issue (being Ordinary
Shares of 10p each) is 78,555,054. During
the year, the Company has not bought back
any of its own shares. 3,157,894 new
Ordinary Shares of 10p each were issued at
475p during the year as part of the placing
to fund the acquisition of Carnell Support
Services Limited and 67,936 new Ordinary
Shares of 10p each were issued at nominal
cost during the year to satisfy the exercise
of share options.
Number
of Ordinary
Shares
13,774,335
6,346,917
5,273,238
4,130,741
3,301,215
3,247,096
3,023,483
Percentage
of issued
share capital
17.5%
8.1%
6.7%
5.3%
4.2%
4.1%
3.9%
Forward-looking statements
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.
Viability statement
The Directors have conducted a review
and assessed the prospects and viability
of the Group.
Although the Directors have no reason to
believe that the Group will not be viable
over a longer period, the Board has chosen
to conduct this review for a period of three
years. The Group believes that this is an
appropriate timeframe as it aligns with its
strategic and financial planning horizon.
The Directors have taken account of the
Group’s financial forecasts for the three
year period following the balance sheet
date, comparing future funding
requirements with committed external
borrowing facilities. These external facilities
are due for refinancing by January 2024,
which is after the period being considered.
The Directors confirm that they have a
reasonable expectation that the Group will
continue in operation, meet liabilities as
they fall due and will not breach banking
covenants within this period.
In support of the Viability statement the
Group financial forecasts have been stress
tested by estimating the potential impact of
key risks. These estimates reflected the
Directors’ judgement as to the net potential
financial impact and the likelihood of these
key risks occurring.
Section 172(1) Statement
As required by Section 172 of the
Companies Act 2006, the Directors confirm
that, during the year, they continued to act
in such a way as to promote the success of
the Company for the benefit of all its
stakeholders. Our full Section 172(1)
Statement can be read on page 13.
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 its remuneration.
Approval
The Board approved the Report of the
Directors on 8 December 2020.
By order of the Board
Sean Wyndham-Quin
Company Secretary
8 December 2020
Company number 650447
70
Renew Holdings plc Annual Report and Accounts 2020
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
comply with that law and those regulations.
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.
Renew Holdings plc Annual Report and Accounts 2020
71
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 2020 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 2020
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;
• 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: including our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgment, 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
were as follows.
Recognition of
revenue and profit,
and carrying value
of contract balances
Recurring risk
£121.9 million of contract
balances (2019: £113.5
million).
£620.3 million
of revenue (2019: £600.6
million)
Refer to pages 82 and 83
(accounting policy)
and pages 87 and 97
(financial disclosures).
Subjective estimate
The Group’s activities are undertaken
via construction contracts.
The carrying value of construction
contract assets as well as revenue and
profit recognised are based on estimates
of work performed and may also include
an element of variable considerations,
such as in instances where the value of
variations is not yet agreed.
Estimated contract costs, and as a
result revenues, can be affected by
a variety of uncertainties, including
associated customer claims, that
depend on the outcome of future
events resulting in revisions throughout
the contract period. These uncertainties
have increased as a result of Covid-19.
The effect of these matters is that, as
part of our risk assessment for audit
planning purposes, we determined
that the carrying value of contract
assets, revenue and profit recognised
on construction contracts has a high
degree of estimation uncertainty, with
a potential range of reasonable
outcomes greater than our materiality
for the financial statements as a whole.
Our procedures included:
• Test of detail: Identifying contracts with risk indicators, including
material contracts with low margin or loss making, large carrying
values of contract assets, large margin movements and contracts
with known recoverability risks. For these contracts we agreed
the year-end contract balance to certification received post year
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 including agreed variation
schedules, and where relevant third party legal correspondence,
to corroborate the position. We challenged the Group on uncertain
variable consideration and contract asset positions where evidence
of customer agreement was not available;
• 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 cost to complete, including
consideration of Covid-19 related impacts;
• Test of detail: Assessed the existence of customer claims
and disputes to external correspondence and challenging the
Group’s assessment of these involving our own major project
advisory specialists to challenge the position taken on such
higher risk contracts;
• Test of detail: Assessing the accuracy of costs incurred to date
through sample testing, including an assessment of whether the
cost sampled was allocated to the appropriate contract;
72
Renew Holdings plc Annual Report and Accounts 2020
2 Key audit matters: including our assessment of risks of material misstatement continued
Recognition of
revenue and profit,
and carrying value
of contract balances
continued
Valuation of
intangible assets
identified in relation
to the acquisition of
Carnell Group
Goodwill: £19.4m
Intangible Assets: £17.5m
(net of in year
amortisation of £1.6m).
Refer to page 83
(accounting policy) and
page 93 (financial
disclosures).
Recoverability of
parent company’s
investment in
subsidiaries
Recurring risk
£195.0 million (2019:
£164.3 million) of
investments in
subsidiaries.
Refer to page 113
(accounting policy) and
page 116 (financial
disclosures).
• Historical comparisons: Assessing the reliability of the Group’s
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.
Subjective Valuation
On 30 January 2020, the Group
acquired Carnell Group for a total
cash consideration of £43.7 million. In
accounting for the acquisition, the
Group needs to ensure all identifiable
assets are recognised at their
acquisition-date fair values.
The valuation of intangible assets
requires a significant degree of
judgement with estimates including
the trading performance of Carnell
Group, the timing of future cashflows
and the discount rate applied.
The effect of these matters is that, as
part of our risk assessment, we
determined that valuation of
intangible assets identified in relation
to Carnell Group acquisition has a
high degree of estimation uncertainty,
with a potential range of reasonable
outcomes greater than our materiality
for the financial statements as a whole.
Our procedures included:
• Our sector experience: Evaluating assumptions used, in particular
those relating to forecast revenue and EBITDA performance, and
customer attrition rates, engaging our own valuation specialists
to evaluate assumptions such as the discount rate used;
• Methodology choice: Using our own valuation specialists to
assess the methodology used in valuing the intangible assets
recognised, such as the customer contracts intangible assets;
• Tests of detail: Corroborating management’s calculations to
supporting documentation such as Sale Purchase Agreement,
and supporting documentation relating to the balance sheet on
acquisition;
• Sensitivity analysis: We performed our own analysis to assess
the sensitivity of the valuation of intangible assets to changes in
the key assumptions, noted above.
• Historical comparisons: Evaluating how management’s
assumptions for future performance at acquisition date compared
to actual performance, both prior to acquisition and since.
• Assessing transparency: Assessing the adequacy of the Group’s
disclosures in respect of the identification and valuation of
acquisition related intangible assets.
Forecast-based valuation
The carrying amount of the parent
company’s investments in subsidiaries
is significant and the estimated
recoverable amount is subjective due
to the inherent uncertainty involved in
forecasting and discounting their
future cashflows.
The discounted expected future
cashflows are based on assumptions
of forecast future financial performance,
which inherently contain an element
of judgement and uncertainty.
Significant assumptions in the
forecast future financial performance
include sales growth rates, operating
margins and the discount rate applied
to future cashflows.
• Tests of detail: Comparing the carrying amount of the
investments with management’s value in use calculation, being
an estimate of the minimum recoverable amount, to consider
whether there is an indicator of potential impairment;
• Benchmarking assumptions: Challenging the assumptions used
in the cashflow forecasts 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;
• Tests of detail: For investments where the carrying amount
exceeded the value in use, comparing the carrying amount of the
investment with the recoverable value of the business based on a
fair value less cost to sell model, using a suitable multiple of the
subsidiaries’ sustainable earnings;
• Assessing transparency: Assessing the adequacy of the parent
company’s disclosures in respect of the investment in subsidiaries.
Renew Holdings plc Annual Report and Accounts 2020
73
FINANCIAL STATEMENTS INDEPENDENT AUDITOR’S REPORT CONTINUED
to the members of Renew Holdings plc
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 £1.5 million (2019: £1.5 million), determined with reference to a
benchmark of Group profit before taxation from continuing operations normalised to exclude the charge related to acquisition costs of
Carnell Group, totalling £1.2m (2019: normalised to exclude the charge related to the defined benefit scheme guaranteed minimum
pension equalisation, totalling £4.3 million), of which it represents 5% (2019: 5%).
Materiality for the parent company financial statements as a whole was set at £1.3 million (2019: £1.13 million), determined with reference to
a benchmark of the Company net assets, of which it represents 1.0% (2019: 1.0%).
We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding £0.074 million (2019:
£0.075 million), in addition to other identified misstatements that warranted reporting on qualitative grounds.
Of the Group’s 31 (2019: 29) reporting components, we subjected 21 (2019: 20) to full scope audits for Group purposes. These audits
covered 97% (2019: 100%) of total Group revenue, 95% (2019: 98%) of Group profit before tax, and 97% (2019: 98%) 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 £1,197,600 to £41,500 (2019: £1,173,000 to £19,200).
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
The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the
Group or to cease their operations, and as they have concluded that the Company’s and the Group’s financial position means that this is
realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to
continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).
Our responsibility is to conclude on the appropriateness of the Directors’ conclusions and, had there been a material uncertainty related to
going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions and as subsequent
events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of
reference to a material uncertainty in this auditor’s report is not a guarantee that the Group or the Company will continue in operation.
In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Group’s and Company’s business model and analysed
how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period.
The risks that we considered most likely to adversely affect the Group’s and Company’s available financial resources over this period was:
• The ongoing availability & headroom on bank facilities in order to meet working capital requirements.
As this was a risk that could potentially cast significant doubt on the Group’s and the Company’s ability to continue as a going concern,
we considered sensitivities over the level of available financial resources indicated by the Group’s financial forecasts taking account of
reasonably possible (but not unrealistic) adverse effects that could arise from this risk and evaluated the achievability of the actions the
Directors consider they would take to improve the position should the risks materialise. We also considered less predictable but realistic
second order impacts, such as the impact of Brexit and Covid-19 on the erosion of customer confidence which could result in a reduction
of available financial resources.
Based on this work, we are required to report to you if we have concluded that the use of the going concern basis of accounting is
inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at
least a year from the date of approval of the financial statements.
We have nothing to report in these respects, and we did not identify going concern as a key audit matter.
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.
74
Renew Holdings plc Annual Report and Accounts 2020
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 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 71, 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
8 December 2020
Renew Holdings plc Annual Report and Accounts 2020
75
FINANCIAL STATEMENTS GROUP INCOME STATEMENT
for the year ended 30 September
Revenue: Group including share of joint venture
Before
exceptional
items and
amortisation
of intangible
assets
2020
£000
620,375
Note
Exceptional
items and
amortisation
of intangible
assets
(see Note 3)
2020
£000
Before
exceptional
items and
amortisation
of intangible
assets
2019
£000
Exceptional
items and
amortisation
of intangible
assets
(see Note 3)
2019
£000
Total
2020
£000
— 620,375
600,631
Total
2019
£000
600,631
(709)
599,922
(514,299)
85,623
—
—
—
—
—
Less share of joint venture’s revenue
—
—
—
(709)
Group revenue from continuing activities
2
620,375
— 620,375
599,922
Cost of sales
Gross profit
(527,274)
— (527,274)
(514,299)
93,101
—
93,101
85,623
Administrative expenses
(53,453)
(6,741)
(60,194)
(47,390)
(10,788)
(58,178)
Share of post-tax result of joint venture
15
(39)
—
(39)
96
—
96
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
3
5
5
5
7
4
9
9
9
9
39,609
(6,741)
32,868
38,329
(10,788)
27,541
44
(1,343)
532
—
—
—
44
50
(1,343)
(1,244)
532
615
—
—
—
50
(1,244)
615
38,842
(6,741)
32,101
37,750
(10,788)
26,962
(6,905)
1,146
(5,759)
(7,306)
2,601
(4,705)
31,937
(5,595)
26,342
30,444
(8,187)
22,257
(5,590)
20,752
34.00p
33.72p
26.78p
26.57p
—
22,257
29.55p
29.34p
29.55p
29.34p
76
Renew Holdings plc Annual Report and Accounts 2020
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
28
2020
£000
20,752
(2,775)
971
(1,804)
(23)
(23)
2019
£000
22,257
3,543
(1,240)
2,303
28
28
18,925
24,588
Share
premium
account
£000
Capital
redemption
reserve
£000
Cumulative
translation
adjustment
£000
Share
based
payments
reserve
£000
51,684
3,896
1,311
698
Share
capital
£000
7,527
6
220
(122)
28
At 1 October 2018
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 2019
7,533
51,904
3,896
1,339
576
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
323
14,474
245
(23)
Retained
earnings
£000
10,355
22,257
(7,905)
Total
equity
£000
75,471
22,257
(7,905)
226
(122)
28
3,543
3,543
(1,240)
(1,240)
27,010
20,752
(5,778)
92,258
20,752
(5,778)
14,797
245
(23)
(2,775)
(2,775)
971
971
At 30 September 2020
7,856
66,378
3,896
1,316
821
40,180
120,447
Renew Holdings plc Annual Report and Accounts 2020
77
FINANCIAL STATEMENTS
GROUP BALANCE SHEET
at 30 September
Non-current assets
Intangible assets
– goodwill
– other
Property, plant and equipment
Right of use assets
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
Lease liabilities
Obligations under finance leases
Deferred tax liabilities
Provisions
Current liabilities
Borrowings
Trade and other payables
Lease liabilities
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
8 December 2020
78
Renew Holdings plc Annual Report and Accounts 2020
Note
2020
£000
2019
£000
10
10
11
12
15
28
7
13
14
16
18
20
21
21
7
22
20
19
21
21
22
24
25
25
25
25
25
124,691
23,062
14,806
17,481
—
28,059
2,164
210,263
1,619
1,500
129,838
2,174
13,396
148,527
358,790
(4,373)
(9,347)
—
(14,252)
(441)
105,282
9,463
20,932
—
139
25,554
1,416
162,786
2,632
1,500
118,623
—
11,667
134,422
297,208
(13,123)
—
(3,214)
(10,598)
(452)
(28,413)
(27,387)
(8,752)
(8,752)
(192,370)
(164,450)
(6,047)
—
—
(2,761)
—
(2,546)
(1,804)
(11)
(209,930)
(177,563)
(238,343)
(204,950)
120,447
7,856
66,378
3,896
1,316
821
40,180
120,447
92,258
7,533
51,904
3,896
1,339
576
27,010
92,258
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
Defined benefit pension scheme guaranteed minimum pension equalisation
Depreciation of property, plant and equipment and right of use assets
Profit on sale of property, plant and equipment
Decrease/(increase) in inventories
Decrease in receivables
Increase/(decrease) in payables and provisions
Current and past service cost in respect of defined benefit pension scheme
Cash contribution to defined benefit pension schemes
Charge/(credit) 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 (outflow)/inflow 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
Loan repayments
Repayments of obligations under lease liabilities
Net cash outflow from financing activities
Net increase in continuing cash and cash equivalents
Net (decrease)/increase in discontinued cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of year
Effect of foreign exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of year
Bank balances and cash
Note
15
10
3
11,12
3
28
28
25
5
5
7
15
8
32
2020
£000
26,342
39
5,529
—
9,672
(483)
301
1,465
17,080
69
(4,817)
245
(44)
811
(1,343)
(8,179)
5,759
52,446
(592)
51,854
44
100
725
(3,756)
(40,512)
(43,399)
(5,778)
14,797
(8,750)
(6,972)
(6,703)
2,344
(592)
1,752
11,667
(23)
13,396
13,396
2019
£000
22,257
(96)
6,528
4,260
5,561
(621)
(210)
7,769
(15,239)
46
(5,279)
(122)
(50)
629
(1,244)
(5,524)
4,705
23,370
71
23,441
50
80
939
(2,619)
—
(1,550)
(7,905)
226
(8,750)
(3,076)
(19,505)
2,315
71
2,386
9,179
102
11,667
11,667
Renew Holdings plc Annual Report and Accounts 2020
79
FINANCIAL STATEMENTS 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 involving 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) Construction contract revenue
IFRS 15 “Revenue from Contracts with Customers” is applicable to these financial statements which commenced on 1 October 2018.
Whilst it applies to all revenue recognition, it has replaced IAS 11 Construction contracts and represents a key area of judgement.
Management must assess the performance obligations under each contract and the point at which those obligations have been fulfilled,
allocating the transaction price as necessary to each obligation. The estimates and judgements which management must carry out to
assess the total expected cost on a contract remain necessary under IFRS 15. The Group has control and review procedures in place to
regularly monitor and evaluate 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. In particular, management makes judgements on the expected recoverability of value recorded in respect of performance
obligations which have been completed but not yet agreed with the customer and on the likelihood of the entitlement to any variable
consideration. Differences arising on the ultimate completion of the contract and any unforeseen changes or events as the contract
progresses may result in material changes to the expected financial outcome.
b) 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. The only assumption where it is considered that a reasonably possible change could give rise to a materially
different value is the discount rate. More information is given in Note 28 to these financial statements.
c) 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.
d) Provisions
Provisions are made where the outcome of a legal or contractual liability 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.
Accounting judgements
e) Going concern
The Group’s business activities, together with the factors likely to affect its future development performance and position, are set out in
the Operating Review. The financial position of the Group, its cashflows, liquidity position and borrowing facilities are described in the
Financial Review. In addition, Note 23 to the financial statements includes: the Group’s objective, policies and processes for managing its
capital; its financial risk management objectives; details of its financial instruments; and its exposure to credit, liquidity, currency and
market risk.
(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 which
consider the Group’s future development, performance and its financial position, including cashflows, liquidity position and borrowing
facilities, as well as the risks and uncertainties relating to the Group’s business activities. The budgets cover a three year period.
80
Renew Holdings plc Annual Report and Accounts 2020
1 Accounting policies continued
(i) Basis of accounting and preparation continued
The following factors were considered relevant:
• the current order book and pipeline of potential future framework orders;
• the Group’s liquidity and its bank facilities which are committed until January 2024, including both the level of those facilities and the
covenants attached to them; and
• the continued potential impact of Covid-19 on the Group’s profit and cashflows
The Board has reviewed the principal risks and uncertainties affecting the Group in the context of the Covid-19 pandemic. The Board
recognises that the impact of Covid-19 is being felt across all aspects of the Group’s operations and that the overall risk environment has
increased as a result of the pandemic. Despite this, the Board considers that it has taken additional actions to address those risks
specifically arising from Covid-19. In this context the directors have modelled a base-case and a severe but plausible scenario. However,
even with a severe downturn, with a strong balance sheet the directors are confident that the Group has sufficient cash and committed
funding in place to meet its obligations for a period of at least 12 months from the approval of the financial statements.
Consequently, the directors are confident that the Group and Company will have sufficient funds to continue to meet its liabilities as they
fall due for at least 12 months from the date of approval of the financial statements and therefore have prepared the financial statements
on a going concern basis.
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
In these financial statements various IFRSs which are effective for the first time have been adopted, including the following standards,
amendments and interpretations:
IFRS 16 “Leases”
IFRS 16 “Leases” has become effective for the year ended 30 September 2020 and replaces the requirements of IAS 17 “Leases”. The
Group has adopted IFRS 16 using the modified retrospective approach under which the cumulative effect of adoption is recognised
through reserves, with comparatives continuing to be reported under IAS 17. An asset representing the Group’s right as a lessee to use a
leased item and a liability for the associated future lease payments has been recognised for all leases, subject to limited exceptions for
short term leases and low value lease assets. The cost of leases has been recognised in the consolidated income statement split between
depreciation of the lease asset and a finance charge on the lease liability. This is similar to the accounting for finance leases under IAS 17,
but different to the accounting for operating leases (under which no lease asset or lease liability was recognised, and operating lease
rentals were charged to the consolidated income statement on a straight-line basis).
As a result of adopting the new accounting standard for the year ended 30 September 2020, the Group’s profit before tax has reduced by
£154,000 and operating profit has increased by £148,000. The reduction in profit before tax is the net impact of £302,000 of additional
finance charges and £3,873,000 of additional depreciation, replacing £4,021,000 of operating lease rental charges. Finance charges
under IFRS 16 are front-loaded in the early part of the lease term and, when using the modified retrospective approach, this resulted in the
overall cost of the lease being greater than the operating lease rental charges would have been under IAS 17.
The Group adopted IFRS 16 with a date of initial application of 1 October 2019 using the modified retrospective approach whereby the
right of use asset on transition equalled the lease liability. The comparative information for the year ended 30 September 2019 has not
been restated and continues to be reported under IAS 17.
The Group applied the following measures/exemptions available on transition to IFRS 16, to leases previously classified as operating leases:
• on transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are
leases. It applies IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under
IAS 17 and IFRIC 4 were not reassessed for whether there is a lease. Therefore, the definition of a lease under IFRS 16 was applied only to
contracts entered into or changed on or after 1 October 2019;
• the Group has relied on its previous assessment of whether leases are onerous in accordance with IAS 37 immediately before the date
of the initial application as an alternative to performing an impairment review.
• the Group has not recognised right of use assets and liabilities for leases of low value or for which the lease term ends within 12 months
of the date of initial application, on a lease-by-lease basis;
• the Group has applied a single discount rate to a portfolio of leases with reasonably similar characteristics (such as leases with a similar
remaining lease term in a similar class of underlying assets).
• the Group has excluded initial direct costs from the measurement of the right of use asset at the date of initial application; and
• the Group may use hindsight in determining the lease term if the contract contains options to extend or terminate the lease.
The Group has changed its accounting policies and updated its internal processes and controls related to leasing. The new definition of
lease has been applied to contracts entered into from 1 October 2019.
Renew Holdings plc Annual Report and Accounts 2020
81
FINANCIAL STATEMENTS NOTES TO THE ACCOUNTS CONTINUED
1 Accounting policies continued
(i) Basis of accounting and preparation continued
EU endorsed standards effective in the year continued
IFRS 16 “Leases” continued
The impact on the Group’s opening balance sheet at 1 October 2019 as a result of the adoption of IFRS 16 was as follows:
Net assets at 30 September 2019
Right of use asset recognised
Lease liabilities recognised
Net assets at 1 October 2019
£000
92,258
10,001
(10,001)
92,258
Applying the Group’s incremental borrowing rate to discount the operating lease commitments reported at 30 September 2019 results in
a liability of £10.0m. This reconciles to the right of use asset recognised as follows:
Operating lease commitments at 30 September 2019
Recognition exemption for short-term and low-value leases
Discount using the incremental borrowing rate at 1 October 2019
Lease liability recognised at 1 October 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
£000
10,885
(272)
(612)
10,001
1,482
8,519
10,001
The change in accounting policy affected the following items in the consolidated balance sheet on 1 October 2019:
• plant, vehicles and equipment: decrease by £8,437,000
• right of use assets: increase by £18,438,000
• lease liabilities: increase by £10,001,000
The Group did not need to make any adjustments to the accounting for assets held as a lessor under operating leases as a result of the
adoption of IFRS 16.
The other standards and interpretations that are applicable for the first time in the Group’s financial statements for the year ended 30
September 2020 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.
(iii) Revenue
Revenue, which excludes intra-group revenue and Value Added Tax, comprises:
• value of performance obligations satisfied over time on construction contracts; and
• sales of land which are recorded upon legal completion.
The Engineering segment encompasses businesses in the rail, environmental, infrastructure and energy sectors. The nature of the
deliverables and performance obligations within these businesses is, however, consistent since revenue is earned from the maintenance
of infrastructure assets, with a high volume of relatively short duration contracts, the terms of which are usually governed by larger frameworks.
The Specialist Building segment earns revenues from the refurbishment of private residential assets and the construction, renovation and
refurbishment of science facilities. Revenues in this segment are earned from a low volume of high value contracts, each of which is
governed by a separate contract with the customer.
Each contract represents a separate performance obligation on the basis that performance is not interdependent with other contracts,
and each contract represents a deliverable which is a distinct promise, separately agreed and negotiated, and whose progress can be
individually and reliably measured.
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Renew Holdings plc Annual Report and Accounts 2020
1 Accounting policies continued
(iii) Revenue continued
Revenue from each performance obligation is recognised over time, on the basis that contractual performance takes place on the
customer’s premises and the Group has a legally enforceable right to payment for performance to date.
As each contract represents a separate single performance obligation, the transaction price allocated to each performance obligation
is usually stated within either the contract or the wider framework agreement. Variable consideration arises from pain/gain sharing
arrangements in addition to contract variations where not stated in the contract. Variable consideration is recognised only to the extent
that it is considered highly probable that it will be agreed by the customer.
(iv) Construction contracts
When the outcome of individual contracts can be estimated reliably, contract revenue and costs are recognised as revenue and expenses
respectively over time by reference to the fulfilment of performance obligations using the input method of estimating progress of delivery
at the reporting date. Costs are recognised as incurred, and revenue is recognised using the input method. The stage of completion of a
contract is assessed by reference to the contract costs incurred to date as a proportion of estimated total contract costs. Revenue
includes the initial amount agreed in the contract plus any variations in contracted work, to the extent that it is probable that they will
result in revenue and can be measured reliably. Revenue includes an assessment of any variable which may become receivable based
upon relevant performance measures. Variable consideration is included based on the expected amount or most likely amount only to the
extent that it is highly probable that there will not be a significant reversal in the amount of the cumulative revenue recognised. When an
amendment to an existing contract arises, the Group reviews the nature of the modification and whether or not it reflects a separate or
new performance obligation to be satisfied or whether it is an amendment to an existing performance obligation.
Provision is made for all known or expected losses on contracts as soon as they are foreseen. These provisions are reviewed throughout
the contract life and are adjusted as required. However, the nature of the risks on contracts are such that it is often not possible to resolve
them until the end of the contract and therefore the provisions may not reverse until the contract is concluded.
The Group does not expect to have any contracts where the period between the transfer of the promised goods or services to the
customer and payments by the customer exceeds one year. As a consequence, the Group does not adjust its transaction price for the
time value of money.
(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 is 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 cashflows 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
Right of use assets are depreciated from the commencement date to the earlier of the end of the useful life of the right of use asset or the
end of the lease term.
Renew Holdings plc Annual Report and Accounts 2020
83
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
1 Accounting policies continued
(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 cashflows that the
asset is expected to generate. For this purpose, assets are grouped into cash generating units which represent the lowest level for which
there are separately identifiable cashflows. Impairment losses in respect of goodwill are not reversed in future accounting periods.
Reversals of other impairment losses are recognised in income when they arise.
(ix) Inventories
Inventories comprise 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) Contract assets
Contract assets represent amounts for which the Group has an unconditional right to consideration in respect of unbilled revenue
recognised at the balance sheet date and comprise costs incurred plus attributable margin.
(xii) Trade payables
Trade payables on normal terms are not interest bearing and are initially recognised at their fair value and then at amortised cost.
(xiii) Contract liabilities
Contract liabilities represent the obligation to transfer goods or services to a customer for which the consideration has been received, or
consideration is due, from the customer.
(xiv) Cash and cash equivalents
Cash and cash equivalents in the cashflow statement comprise cash at bank and in hand, including bank deposits with original maturities
of less than three months, net of bank overdrafts.
Bank overdrafts are included within borrowings within current liabilities in the balance sheet.
(xv) 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.
(xvi) Leasing accounting policy
The Group has relied upon the exemption under IFRS 16 to exclude the impact of low-value leases and leases that are short-term in nature
(defined as leases with a term of 12 months or less). Costs on those leases are recognised on a straight-line basis as an operating expense
within the income statement. All other leases are accounted for in accordance with this policy.
The Group has various lease arrangements for properties (e.g. office buildings and storage facilities), vehicles, and other equipment
including plant and machinery. At the inception of a lease contract, the Group assesses whether the contract conveys the right to control
the use of an identified asset for a certain period of time and whether it obtains substantially all the economic benefits from the use of
that asset, in exchange for consideration. The Group recognises a lease liability and a corresponding right of use asset with respect to all
such lease arrangements in which it is a lessee.
A right of use asset is capitalised on the balance sheet at cost which comprises the present value of future lease payments determined at
the inception of the lease adjusted for any lease payments made at or before the commencement date, plus any initial direct costs
incurred in addition to an estimate of costs to remove or restore the underlying asset. Where a lease incentive is receivable, the amount is
offset against the right of use asset at inception. Right of use assets are depreciated using the straight-line method over the shorter of the
estimated useful life of the asset or the lease term and are assessed in accordance with IAS 36 “Impairment to Assets” to determine
whether the asset is impaired and to account for any loss.
The lease liability is initially measured at the present value of lease payments as outlined above and is subsequently increased by the
interest cost on the lease liability and decreased by lease payments made. Lease payments comprise fixed lease rental payments. Lease
liabilities are classified between current and non-current on the balance sheet.
Since the discount rate implicit in the leases could not be readily determined, the key estimate applied by management relates to the
assessment of the incremental borrowing rate adopted by the Group to discount the future lease rentals to present value in order to
measure the lease liabilities. The weighted average rate applied by the Group at transition was 3.0%.
If an underlying asset is re-leased by the Group to a third party and the Group retains the primary obligation under the original lease, the
transaction is deemed to be a sub-lease. The Group continues to account for the original lease (the head lease) as a lessee and accounts
for the sublease as a lessor (intermediate lessor). When the head lease is a short-term lease, the sublease is classified as an operating lease.
Otherwise, the sublease is classified using the classification criteria applicable to Lessor Accounting in IFRS 16 by reference to the right of
use asset in the head lease (and not the underlying asset of the head lease). After classification lessor accounting is applied to the sublease.
84
Renew Holdings plc Annual Report and Accounts 2020
1 Accounting policies continued
(xvii) 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. Movement 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.
(xviii) Defined contribution pension plans
Contributions to defined contribution pension plans are charged to the income statement as incurred.
(xix) 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.
(xx) 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.
(xxi) Financial instruments
Financial assets classified as “loans and receivables” under IAS 39 (being trade and other receivables and amounts due from undertakings
in which the Group has a participating interest) continue to be classified within the “amortised cost” category according to IFRS 9. The
Group has no derivative financial assets or hedging instruments. Non-derivative financial assets include trade and other receivables and
contract assets, as defined by IFRS 15. Neither of these two categories contain a significant financing element and, as such, expected
credit losses are measured under IFRS 9 using the simplified impairment approach. This approach requires expected lifetime losses to be
recognised upon the initial recognition of the asset. At initial recognition, the Group measures a non-derivative financial asset at its fair
value plus transaction costs that are directly attributable to the acquisition of the financial asset. The Group subsequently measures trade
and other receivables and contract receivables at amortised cost.
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each balance
sheet date to determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is
estimated. An impairment loss is recognised whenever the carrying amount of an asset or its CGU exceeds its estimated recoverable
amount. Impairment losses are recognised in the income statement. Impairment losses recognised in respect of CGUs are allocated first
to reduce the carrying amount of any goodwill allocated to CGUs and then to reduce the carrying amount of the other assets in the unit
on a pro-rata basis. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash
inflows from other assets or group of assets.
Renew Holdings plc Annual Report and Accounts 2020
85
FINANCIAL STATEMENTS NOTES TO THE ACCOUNTS CONTINUED
1 Accounting policies continued
(xxii) 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.
(xxiii) 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.
(xxiv) 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.
(xxv) Finance income and expense
Finance income comprises interest income on funds invested 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 that are recognised in income or expense. All borrowing costs are recognised in income or
expense using the effective interest method.
(xxvi) Exceptional items
Exceptional items are defined as items of income and expenditure which are material and unusual in nature and which are considered to
be of such significance that they require separate disclosure on the face of the income statement. Any future movement on items
previously classified as exceptional will also be classified as exceptional.
(xxvii) Government grants
Government grant income is recognised at the point that there is reasonable assurance that the Group will comply with the conditions
attached to it, and that the grant will be received. During the year, Coronavirus Job Retention Scheme (“CJRS”) income has been received
and offset against cost of sales or administrative expenses depending on where the employee costs are recorded.
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 47.0% (2019: 49.4%) 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;
• 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. Following a
strategic review during the financial year ended 30 September 2018, the Board decided to close Lovell America Inc, which was completed
in the current financial year. The results of these businesses are shown as discontinued operations.
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Renew Holdings plc Annual Report and Accounts 2020
2 Segmental analysis continued
(a) Business analysis
Revenue is analysed as follows:
Engineering Services
Specialist Building
Inter segment revenue
Segment revenue
Central activities
Group revenue
from continuing
activities
2020
£000
Group revenue
from continuing
activities
2019
£000
577,238
43,207
(2,025)
563,769
36,125
(1,461)
618,420
598,433
1,955
1,489
620,375
599,922
Analysis of profit on ordinary activities before taxation from continuing activities
Before
exceptional
items and
amortisation
of intangible
assets
2020
£000
40,754
1,014
41,768
(2,159)
39,609
(767)
Exceptional
items and
amortisation
of intangible
assets
2020
£000
(6,741)
—
(6,741)
—
2020
£000
34,013
1,014
35,027
(2,159)
(6,741)
32,868
—
(767)
Before
exceptional
items and
amortisation
of intangible
assets
2019
£000
39,410
882
40,292
(1,963)
38,329
(579)
Exceptional
items and
amortisation
of intangible
assets
2019
£000
(6,788)
—
(6,788)
(4,000)
(10,788)
—
2019
£000
32,622
882
33,504
(5,963)
27,541
(579)
38,842
(6,741)
32,101
37,750
(10,788)
26,962
Engineering Services
Specialist Building
Segment operating profit
Central activities
Operating profit
Net financing costs
Profit on ordinary activities before
income tax
Balance sheet analysis of business segments
Engineering Services
Specialist Building
Central activities
Discontinued operations
Group eliminations
Group net assets
Other information
Engineering Services
Specialist Building
Central activities
Assets
£000
2020
Liabilities
£000
282,885
(206,020)
63,306
217,860
3,348
(57,069)
(165,132)
Net assets
£000
76,865
6,237
52,728
(18,731)
(15,383)
(208,609)
208,609
—
Assets
£000
2019
Liabilities
£000
235,435
(168,024)
60,288
173,497
4,999
(177,011)
(54,815)
(142,840)
(16,282)
177,011
Net assets
£000
67,411
5,473
30,657
(11,283)
—
358,790
(238,343)
120,447
297,208
(204,950)
92,258
2020
2019
Capital
additions
£000
8,878
24
1,460
10,362
Depreciation
£000
Amortisation
£000
7,610
225
1,837
9,672
5,529
—
—
5,529
Capital
additions
£000
4,480
27
2,594
7,101
Depreciation
£000
Amortisation
£000
4,256
89
1,216
5,561
6,528
—
—
6,528
(b) Geographical analysis
Group 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.
Renew Holdings plc Annual Report and Accounts 2020
87
FINANCIAL STATEMENTS NOTES TO THE ACCOUNTS CONTINUED
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 as leases (2019: Depreciation of assets held under finance leases)
Operating lease rentals - plant and machinery
Operating lease rentals - motor vehicles
Operating lease rentals - other
Rental income
CJRS government grants
Profit on sale of property, plant and equipment
During the year, the following services were provided by the Group’s 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 advisory services
Other non-audit services
Other assurance services
2020
£000
610
11
3,769
5,903
—
—
—
(197)
(4,751)
(483)
2020
£000
194
416
9
—
2
621
2019
£000
380
13
3,884
1,677
1,708
2,312
2,690
(252)
—
(621)
2019
£000
83
297
11
—
2
393
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 were 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
Defined benefit pension scheme guaranteed minimum pension equalisation
Acquisition costs
Total losses arising from exceptional items
Amortisation of intangible assets (see Note 10)
Total exceptional items and amortisation charge before income tax
Taxation credit on exceptional items and amortisation
Total exceptional items and amortisation charge
Acquisition costs relate to the acquisition of Carnell on 30 January 2020.
2020
£000
—
1,212
1,212
5,529
6,741
(1,146)
5,595
2019
£000
4,260
—
4,260
6,528
10,788
(2,601)
8,187
On 26 October 2018, 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. The
impact of additional liabilities amounted to £260,000 for the Amco Pension Scheme and £4,000,000 for the Lovell Pension Scheme.
The Board has separately identified the charge of £5,529,000 (2019: £6,528,000) for the amortisation of the fair value ascribed to certain
intangible assets, other than goodwill, arising from the acquisitions of Giffen Holdings Ltd, QTS Group Ltd and Carnell Group Holdings Ltd.
Further details are given in Note 10.
88
Renew Holdings plc Annual Report and Accounts 2020
4 Loss for the year from discontinued operations
Revenue
Expenses
Loss before income tax
Income tax charge
Loss for the year from discontinued operations
2020
£000
—
(5,590)
(5,590)
—
(5,590)
2019
£000
—
—
—
—
—
During the year the Group completed the closure of Lovell America Inc having incurred £271,000 additional costs in finalising historical
taxation issues. Once any surplus cash has been repatriated, the Group will no longer have any overseas exposure.
On 31 October 2014, the Board reached an agreement to sell Allenbuild Ltd to Places for People Group Ltd. As a term of the disposal
Renew Holdings plc retained both the benefits and the obligations associated with a number of Allenbuild contracts which have resulted
in the requirement for an additional £5,319,000 accrual. This is as a result of new latent defects coming to light during the financial year
and a subsequent internal reassessment of the costs required to settle other known contractual disputes.
5 Finance income and costs
Finance income
Finance income of £44,000 (2019: £50,000) 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 28 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
2020
£000
(871)
(472)
(1,343)
3,961
(3,429)
532
2020
Number
3,292
3,338
2,087
1,204
3,292
2020
£000
140,612
15,381
6,932
245
2019
£000
(1,086)
(158)
(1,244)
5,230
(4,615)
615
2019
Number
2,775
3,338
1,893
882
2,775
2019
£000
137,811
14,467
10,115
(122)
163,170
162,271
Renew Holdings plc Annual Report and Accounts 2020
89
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
6 Employee numbers and remuneration continued
Directors’ emoluments
Aggregate emoluments
Highest paid director: aggregate emoluments
Executive Directors
P Scott
A P Liebenberg
S C Wyndham-Quin
Non-executive Directors
D M Forbes
D A Brown
S D Dasani
S A Hazell
J Bishop
Salary/fees
£000
Bonuses
£000
292
210
219
73
44
44
25
—
270
194
203
—
—
—
—
—
LTIP
£000
208
154
—
—
—
—
—
—
2020
£000
2,102
833
2019
£000
2,082
797
Total
emoluments
2020
£000
Total
emoluments
2019
£000
Benefits
£000
63
51
52
—
—
—
—
—
833
609
474
1,916
73
44
44
25
—
797
607
509
1,913
75
45
30
—
19
2,102
2,082
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 P Liebenberg
S C Wyndham-Quin
Exercisable
between
23 Nov 2020
& 22 Nov 2027
Exercisable
between
3 Dec 2021
& 2 Dec 2028
Exercisable
between
20 Feb 2023
& 19 Feb 2030
99,000
73,500
73,500
129,310
92,833
96,983
118,269
84,907
88,702
During the year £244,000 (2019: £(122,000)) was charged/(credited) to the income statement with a corresponding (credit)/charge 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
90
Renew Holdings plc Annual Report and Accounts 2020
2020
£000
2019
£000
(5,732)
216
(5,516)
(1,848)
1,605
(243)
(5,759)
(5,291)
208
(5,083)
(556)
934
378
(4,705)
7 Income tax expense continued
(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% (2019: 19%)
Effects of:
Expenses not deductible for tax purposes
Timing differences not provided in deferred tax
Change in tax rate
Adjustments in respect of previous period
2020
£000
32,101
(6,099)
(297)
433
(12)
216
2019
£000
26,962
(5,123)
(114)
326
(2)
208
(5,759)
(4,705)
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 19% (2019: 17%) following the decision that the UK corporation tax rate should remain at
19% (effective from 1 April 2020 and substantively enacted on 17 March 2020). The Group has available further unused UK tax losses of
£29.3m (2019: £31m) 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 £4.0m (2019: £4.5m).
(c) Deferred tax asset
Accelerated capital allowances
Other timing differences
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
At 30 September
2020
£000
689
241
1,234
2,164
2020
£000
(9,821)
(4,431)
2019
£000
625
—
791
1,416
2019
£000
(8,944)
(1,654)
(14,252)
(10,598)
2020
£000
1,416
582
166
2,164
2019
£000
1,592
(176)
—
1,416
Renew Holdings plc Annual Report and Accounts 2020
91
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
7 Income tax expense continued
(f) Reconciliation of deferred tax liability
As at 1 October
Acquisition of subsidiary undertaking
Arising on fair value adjustments
Change of deferred tax rate
Defined benefit pension schemes - income statement
Defined benefit pension schemes - SOCI
At 30 September
8 Dividends
Interim (related to the year ended 30 September 2020)
Final (related to the year ended 30 September 2019)
Total dividend paid
Interim (related to the year ended 30 September 2020)
Final (related to the year ended 30 September 2019)
Total dividend paid
2020
£000
(10,598)
(3,634)
1,051
(194)
(1,848)
971
2019
£000
(9,912)
—
1,110
—
(556)
(1,240)
(14,252)
(10,598)
2020
Pence/share
2019
Pence/share
—
7.67
7.67
£000
—
5,778
5,778
3.83
6.67
10.50
£000
2,885
5,020
7,905
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 8.33p per Ordinary Share be paid in respect of the year ended 30 September 2020.
This will be accounted for in the 2020/21 financial year.
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
Weighted average number of shares
Earnings
£000
31,937
(5,595)
2020
EPS
Pence
41.22
(7.22)
DEPS
Pence
Earnings
£000
2019
EPS
Pence
40.89
(7.17)
30,444
(8,187)
40.43
(10.88)
DEPS
Pence
40.13
(10.79)
26,342
34.00
33.72
22,257
29.55
29.34
(5,590)
20,752
(7.22)
26.78
77,480
(7.15)
26.57
78,114
—
22,257
—
29.55
75,308
—
29.34
75,856
The dilutive effect of share options is to increase the number of shares by 634,000 (2019: 548,000) and reduce basic earnings per share
by 0.21p (2019: 0.21p).
92
Renew Holdings plc Annual Report and Accounts 2020
10 Intangible assets
Cost:
At 1 October 2018 and 30 September 2019
Addition
At 30 September 2020
Impairment losses/amortisation:
At 1 October 2018
Charge for year
At 1 October 2019
Charge for year
At 30 September 2020
Carrying amount:
At 30 September 2020
At 30 September 2019
At 30 September 2018
The carrying amounts of goodwill classified as cash generating units (“CGUs”) are as follows:
Britannia Construction Ltd
V.H.E. Construction PLC
Seymour (C.E.C.) Holdings Ltd and its subsidiary
Shepley Engineers Ltd and its subsidiaries
Amco Group Holdings Ltd and its subsidiaries
Lewis Civil Engineering Ltd and its subsidiaries
Clarke Telecom Ltd
QTS Group Ltd and its subsidiaries
Carnell Group Holdings Ltd (formerly Agger Ltd)
Contractual
rights and
customer
relationships
£000
30,976
19,128
50,104
14,985
6,528
21,513
5,529
27,042
23,062
9,463
15,991
2019
£000
1,253
1,796
4,017
633
25,691
6,556
11,143
54,193
—
Goodwill
£000
105,282
19,409
124,691
—
—
—
—
—
124,691
105,282
105,282
2020
£000
1,253
1,796
4,017
633
25,691
6,556
11,143
54,193
19,409
Carnell Group Holdings Ltd (formerly Agger Ltd)
Goodwill of £19,409,000 was acquired on the acquisition of Carnell Group Holdings Ltd and will be reviewed for impairment one year
after the acquisition and then on an ongoing basis as required by IFRS 3.
Other intangible assets provisionally valued at £19,128,000, which represent customer relationships and contractual rights, were also
acquired and will be amortised over their useful economic lives in accordance with IAS 38. Deferred tax has been provided on this
amount. Amortisation of this intangible asset commenced from February 2020.
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 thirteen years.
124,691
105,282
Renew Holdings plc Annual Report and Accounts 2020
93
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
10 Intangible assets continued
Carnell Group Holdings Ltd (formerly Agger Ltd) continued
In order to test goodwill for impairment the Group performs value in use calculations by preparing cashflow 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 cashflows 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 perpetual growth rate
range of 1-5% (2019: 2%) per annum has been used. The range of discount rates used within each CGU is 10.0% - 12% (2019: 9.6-13%). The
Board considers the rates appropriate as, based on publicly available information, they represent the rates that a market participant would
require for these assets. The Board has chosen the discount rates 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 rates 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 30% (2019: 6.3%) or the assumed EBITDA would have to decrease by
25% (2019: operating profit decrease by 36%).
11 Property, plant and equipment
Freehold
land and buildings
£000
Long leasehold
land and buildings
£000
Plant, vehicles
and equipment
£000
Cost:
At 1 October 2018 (restated)*
Additions
Disposals
At 1 October 2019 (restated)
Additions
Disposals
Transfer to right of use assets
Transfer from right of use assets
Acquisition of subsidiary
At 30 September 2020
Depreciation:
At 1 October 2018 (restated)*
Charge for year
Disposals
At 1 October 2019 (restated)
Charge for year
Disposals
Transfer to right of use assets
Transfer from right of use assets
At 30 September 2020
Net book value:
At 30 September 2020
At 30 September 2019
At 30 September 2018
5,369
688
—
6,057
78
—
—
—
—
6,135
283
201
—
484
212
—
—
—
696
5,439
5,573
5,086
—
—
—
—
—
—
—
—
411
411
—
—
—
—
70
—
—
—
70
341
—
—
Total
£000
45,844
7,101
(4,744)
48,201
4,010
(3,373)
(10,965)
964
905
40,475
6,413
(4,744)
42,144
3,932
(3,373)
(10,965)
964
494
33,196
39,742
25,851
5,360
(4,426)
26,785
3,487
(3,169)
(3,598)
665
26,134
5,561
(4,426)
27,269
3,769
(3,169)
(3,598)
665
24,170
24,936
9,026
15,359
14,624
14,806
20,932
19,710
Prior year adjustment
*
The cost and depreciation at 1 October 2018 has been restated to gross up the opening balances. Acquisition date accumulated depreciation of assets acquired through business
combinations had continued to be eliminated on consolidation after the disposal of the underlying assets. The impact of the adjustment is to increase overall cost and
accumulated depreciation at 1 October 2018 by £24,962,000 each. There is no impact on the overall net book value as at 30 September 2019 and 30 September 2020.
Leased Plant, vehicles and equipment
At 30 September 2019 the net carrying value of leased plant, vehicles and equipment was £8,438,000. At 30 September 2019, the leased
equipment secured lease obligations (see Note 21). From 1 October 2019, and following the adoption of IFRS 16 “Leases”, leased assets are
presented as Right of use assets in the Group Balance Sheet (see Note 12).
94
Renew Holdings plc Annual Report and Accounts 2020
12 Right of use assets
Cost:
At 1 October 2019
Transition to IFRS 16
Additions
Disposals
Transfer from Property, plant and equipment
Transfer to Property, plant and equipment
At 30 September 2020
Depreciation:
At 1 October 2019
Charge for year
Disposals
Transfer from Property, plant and equipment
Transfer to Property, plant and equipment
At 30 September 2020
Net book value:
At 30 September 2020
At 30 September 2019
Freehold
land and buildings
£000
Long leasehold
land and buildings
£000
Plant, vehicles
and equipment
£000
—
6,311
1,874
—
—
—
8,185
—
1,947
—
—
—
1,947
6,238
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
3,690
4,478
(1,107)
10,965
(964)
17,062
—
3,956
(1,070)
3,598
(665)
5,819
11,243
—
Total
£000
—
10,001
6,352
(1,107)
10,965
(964)
25,247
—
5,903
(1,070)
3,598
(665)
7,766
17,481
—
In the year ended 30 September 2019, the Group only recognised lease assets and lease liabilities in relation to leases that were classified
as ‘finance leases’ under IAS 17 Leases. The assets were presented in Plant, vehicles and equipment and the liabilities were separately
disclosed on the face of the Group Balance Sheet as Obligations under finance leases (see Note 21). During the year ended 30 September
2019 £1,677,000 of depreciation was charged against assets held under finance leases.
13 Inventories
Land
Raw materials
£1.6m (2019: £1.9m) of inventories are pledged as security for liabilities.
14 Assets held for resale
Property
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.
15 Investment in joint venture
a) Movement in year
At 1 October
Dividend received
Equity accounted share of net (loss)/profit
At 30 September
2020
£000
—
1,619
1,619
2020
£000
1,500
2020
£000
139
(100)
(39)
—
2019
£000
731
1,901
2,632
2019
£000
1,500
2019
£000
123
(80)
96
139
Renew Holdings plc Annual Report and Accounts 2020
95
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
15 Investment in joint venture continued
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 (loss)/profit after tax (100%)
c) Results of equity accounted joint venture (33%)
Group share of (loss)/profit before tax
Group share of tax
Group share of (loss)/profit after tax
2020
£000
—
—
—
—
—
—
—
—
—
—
(112)
(112)
2020
£000
(46)
7
(39)
2019
£000
—
544
544
544
(106)
(22)
(128)
(128)
416
2,128
(1,841)
287
2019
£000
118
(22)
96
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
Percentage of
shares held
UK
Engineering
33%
16 Trade and other receivables
Trade receivables
Contract assets
Other receivables
Prepayments and accrued income
2020
£000
53,244
68,819
2,152
5,623
129,838
2019
£000
43,196
70,364
468
4,595
118,623
The Directors consider that the carrying amount of trade, contract assets and other receivables approximates to their fair value.
The Group has a variety of credit terms depending on the customer. These terms generally range from 30 to 60 days.
Included in trade and other receivables are debtors with a carrying value of £4.9m (2019: £4.0m) 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. £2.1m (2019: £1.1m) of these balances relate to certified retentions.
The average age of these receivables is 358 days (2019: 331 days).
96
Renew Holdings plc Annual Report and Accounts 2020
16 Trade and other receivables continued
Ageing of past due but not impaired receivables:
30-180 days
180 - 365 days
Greater than 1 year
17 Construction contracts
Contracts in progress at the balance sheet date:
Amounts due from construction contract customers included in trade and other receivables
Amounts due from construction contract customers included in contract assets
Amounts due to construction contract customers included in contract liabilities
Contract costs incurred plus recognised profits less recognised losses to date
Less: progress billings
2020
£000
864
1,112
2,919
4,895
2019
£000
953
1,062
1,984
3,999
2020
£000
2019
£000
53,169
68,819
(6,092)
115,896
43,161
70,364
(4,355)
109,170
3,585,693
3,681,291
(3,469,797)
(3,572,121)
115,896
109,170
At 30 September 2020 retentions held by customers amounted to £10.3m (2019: £10.0m). Advances received from customers for
contract work amounted to £6.1m (2019: £4.4m).
Amounts due from construction contract customers which are past due at the reporting date amounted to £4.9m (2019: £4.0m).
This amount includes retention balances of £2.1m (2019: £1.1m). The Group does not hold any collateral over these balances or other trade
and other receivables.
Contract revenue recognised in the year amounted to £620.4m (2019: £599.9m).
18 Cash and cash equivalents
Cash at bank
Cash in hand
19 Trade and other payables
Contract liabilities
Trade payables
Other taxation and social security
Other payables
Accruals and deferred income
2020
£000
13,388
8
13,396
2020
£000
6,092
44,170
30,695
6,092
105,321
2019
£000
11,655
12
11,667
2019
£000
4,355
61,393
11,692
5,996
81,014
192,370
164,450
Renew Holdings plc Annual Report and Accounts 2020
97
FINANCIAL STATEMENTS
NOTES TO THE ACCOUNTS CONTINUED
20 Borrowings
Bank loans repayable:
Within one year
Within two to five years
2020
£000
8,752
4,373
13,125
2019
£000
8,752
13,123
21,875
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. The Group has committed debt facilities of £44.2m in the form of a
revolving credit facility with HSBC UK Bank plc and National Westminster Bank plc which is committed until January 2024. In addition, the
Group has a further £10.0m overdraft also with HSBC which is renewed annually in January.
21 Lease liabilities
Amounts payable under finance leases:
Within one year
Within two to five years
Less: future finance charges
Present value of lease obligations
Less: amount due for settlement within twelve months
Amount due for settlement after twelve months
Minimum lease payments
2020
£000
6,426
9,727
16,153
(759)
15,394
2019
£000
2,696
3,350
6,046
(286)
5,760
Present value of minimum
lease payments
2020
£000
2019
£000
6,047
9,347
15,394
—
15,394
(6,047)
9,347
2,546
3,214
5,760
—
5,760
(2,546)
3,214
It is the Group’s policy to lease certain of its plant, vehicles and equipment under finance leases. The average outstanding lease term is 3 years
(2019: 3 years). For the year ended 30 September 2020, the average effective borrowing rate was c.3% (2019: c.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.
Following the adoption of IFRS 16 “Leases” from 1 October 2019 lease liabilities include both finance lease liabilities together with liabilities
associated with Right of use assets. The present value of minimum lease payments can be split:
Within one year
Within two to five years
Finance lease
£000
Right of use
£000
2,669
2,825
5,494
3,378
6,522
9,900
Total
2020
£000
6,047
9,347
15,394
Total
2019
£000
2,546
3,214
5,760
On 1 October 2019 £10,001,000 Right of use asset obligations were recognised on adoption of the IFRS 16.
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.
22 Provisions
At 1 October 2019
Movement in provision during the year
At 30 September 2020
Non-current liabilities
Current liabilities
At 30 September 2020
Property
obligations
£000
Other
provisions
£000
463
(11)
452
441
11
452
—
2,750
2,750
—
2,750
2,750
Total
£000
463
2,739
3,202
441
2,761
3,202
Property obligations represent commitments on leases for properties where the Group expects outflows to occur at the end of the lease.
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.
98
Renew Holdings plc Annual Report and Accounts 2020
23 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
2020
Assets
Sterling
Dollar
Liabilities
Sterling
2019
Assets
Sterling
Dollar
Liabilities
Sterling
Financial assets/(liabilities)
Fixed rate
interest rate
%
Fixed
rate
£000
Floating
rate
£000
—
—
—
12,949
439
13,388
(15,394)
(15,394)
(13,125)
(13,125)
(28,519)
(28,519)
Fixed rate
interest rate
%
Financial assets/(liabilities)
Fixed
rate
£000
Floating
rate
£000
Total
£000
12,949
439
13,388
Total
£000
11,161
494
11,655
—
—
—
11,161
494
11,655
(5,760)
(5,760)
(21,875)
(21,875)
(27,635)
(27,635)
—
—
3.0
—
—
3.0
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 21. The fixed rate liabilities have a weighted average period of 3 years
(2019: 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 16. 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.
Renew Holdings plc Annual Report and Accounts 2020
99
FINANCIAL STATEMENTS NOTES TO THE ACCOUNTS CONTINUED
23 Other financial instruments continued
Financial risks continued
b) Liquidity risk continued
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 24 and reserves
as disclosed in Note 25. 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 20 and 21 and
the retirement benefit obligations disclosed in Note 28. An analysis of the maturity profile for finance lease liabilities is given in Note 21.
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 amounting to £230,000 (2019: £28,000). The foreign exchange
charge to finance costs amounted to £Nil (2019: £Nil). Exchange rate movements on translation of Lovell America, Inc’s net assets are
charged to the cumulative translation adjustment within total equity. The exchange loss arising on the translation of Lovell America Inc’s
net assets was £23,000. The total equity statement would be impacted by £2,000 for each $0.01 movement in exchange rates.
All functional currencies of the Group operations are denominated in sterling, with the exception of the U.S. subsidiary’s bank account
whose functional currency is the US dollar.
d) Market risk
Market risk is the risk that changes in market prices will affect the Group’s income or the carrying amount of its holding of financial instruments.
The principal risk relates to interest rates where the Group’s risk is limited to the rates applying to its interest bearing short-term deposits and its
bank loan. A reduction in market interest rates could lead to a reduction in the Group’s interest income and a reduction in its interest costs.
Consequently a 1% decrease in market interest rates would reduce annual finance costs by £10,000 for every £1m of outstanding loan.
The Group’s hire purchase financial liabilities are all at fixed rates of interest.
24 Share capital
Allotted, called up and fully paid:
78,555,054 (2019: 75,329,224) Ordinary Shares of 10p each
2020
£000
2019
£000
7,856
7,533
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 30 January 2020 3,157,894 Ordinary Shares were issued pursuant to the acquisition of Carnell Group Holdings Ltd (formerly Agger Ltd).
On 5 February 2020 67,936 Ordinary Shares were issued pursuant to the Group’s Long Term Incentive Plan.
Share options
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 2020, there were 864,696 options outstanding under the scheme. On 20 February 2020, options to subscribe for a further
299,570 Ordinary Shares were granted. During the year 67,936 options were exercised and 91,164 did not vest. No options lapsed during the year.
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.
100
Renew Holdings plc Annual Report and Accounts 2020
25 Reserves
At 1 October 2018
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
51,684
Capital
redemption
reserve
£000
3,896
Cumulative
translation
reserve
£000
1,311
Share based
payments
reserve
£000
698
220
(122)
28
At 1 October 2019
51,904
3,896
1,339
576
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
14,474
245
(23)
Retained
earnings
£000
10,355
22,257
(7,905)
3,543
(1,240)
27,010
20,752
(5,778)
(2,775)
971
At 30 September 2020
66,378
3,896
1,316
821
40,180
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., the Group’s
discontinued U.S. subsidiary.
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.
£(245,000) (2019: £122,000) has been (charged)/credited to administrative expenses in accordance with IFRS 2. There is no impact on net
assets since an equivalent amount has been credited /(charged) to the share based payments reserve. 67,936 options were exercised and
91,164 options did not vest during the year. The value per option represents the fair value of the option less the consideration payable.
The expected volatility has been calculated based on weekly historical volatility of the Company’s share price over the three years prior to the
date of grant. The risk free rate of return has been based on the yields available on three year UK government bonds as at the date of grant.
Options granted under the Renew Holdings plc Long Term Incentive Plan over the Company’s Ordinary Shares at 30 September 2020 were as follows:
Date of grant
22 November 2017
3 December 2018
20 February 2020
Total
Awards outstanding at 30 September 2020
– Directors and employees
Exercise price
Price at date of grant
Maximum option life
246,000
10.0p
428.75p
10 years
319,126
10.0p
350.00p
10 years
299,570
864,696
10.0p
548.00p
10 years
Assumed option life for purposes of valuation
2.86 years
2.83 years
2.61 years
Expected volatility
Risk free interest rate
Value per option
25%
0.52%
262.0p
28%
0.75%
226.0p
27%
0.46%
519.0p
Renew Holdings plc Annual Report and Accounts 2020 101
FINANCIAL STATEMENTS NOTES TO THE ACCOUNTS CONTINUED
26 Capital and leasing commitments
Commitments under non-cancellable operating leases:
Under one year
Two to five years
Five or more years
Land and
buildings
£000
—
—
—
—
Other
£000
—
—
—
—
Total
2020
£000
—
—
—
—
Total
2019
£000
3,518
6,731
636
10,885
During the year £Nil (2019: £6,410,000) was recognised as an expense in the income statement in respect of operating leases, following
the adoption of IFRS 16.
With regard to the leases held by the Group as lessor, the Group recognised £197,000 (2019: £252,000) of rental income in the income
statement for 2020, 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
2020
£000
184
110
294
2019
£000
296
73
369
The Group had capital commitments at 30 September 2020 of £443,000 (2019: £910,000).
27 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).
28 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 2020 shows a surplus of £27,337,000 based on the assumptions set out below. The Amco scheme
shows a surplus of £722,000 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.
102
Renew Holdings plc Annual Report and Accounts 2020
28 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
The following disclosures required by IAS 19 have been based on the most recent actuarial valuation as at 30 September 2020 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
RPI 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
RPI increases to pensions in payment
Discount rate
Inflation assumption (CPI)
Inflation assumption (RPI)
Increases in deferred pensions
As at
30 September
2020
As at
30 September
2019
As at
30 September
2018
4.0%
4.2%
1.5%
2.1%
2.9%
2.9%
2.2%
2.9%
1.5%
2.2%
2.9%
2.2%
4.0%
4.2%
1.9%
2.1%
3.2%
3.1%
2.1%
3.0%
1.8%
2.1%
3.1%
2.1%
4.0%
4.3%
2.9%
2.2%
3.3%
3.1%
2.3%
3.1%
2.9%
2.3%
3.3%
2.3%
The mortality tables adopted for the valuation of the Lovell scheme are the 95% S2NA tables with future improvements in line with the Continuing
Mortality Investigations 2019 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 2040 is 23.8 years.
The mortality tables adopted for the valuation of the Amco scheme are the S3PA Mortality tables with future improvements in line with the
Continuing Mortality Investigations 2019 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 22.1 years and the further life expectancy of a male aged 65 in 2040 is 23.4 years.
The assets in the Lovell scheme were:
Annuities
Diversified portfolio
Cash
Total
Value as at
30 September
2020
£000
87,497
114,039
2,149
Current
allocation
43%
56%
1%
Value as at
30 September
2019
£000
89,317
106,775
666
203,685
100%
196,758
Value as at
30 September
2018
£000
85,850
81,202
2,117
169,169
Current
allocation
45%
54%
1%
100%
Current
allocation
51%
48%
1%
100%
During 2011 and 2016, the Trustees of the Lovell scheme, in consultation with the Directors, used scheme assets to purchase annuities
which match certain pension liabilities in a transaction known as a “buy in”. This asset provides protection against falls in gilt yields and
risks in the performance of other asset classes.
The assets in the Amco scheme were:
Annuities
Diversified portfolio
Cash
Total
Value as at
30 September
2020
£000
6,738
8,052
317
15,107
Current
allocation
45%
53%
2%
100%
Value as at
30 September
2019
£000
6,685
8,329
213
15,227
Value as at
30 September
2018
£000
6,255
7,739
418
14,412
Current
allocation
44%
55%
1%
100%
Current
allocation
43%
54%
3%
100%
During 2013, the Trustees of the Amco scheme, in consultation with the Directors, used scheme assets to purchase annuities which match
certain pension liabilities in a transaction known as a “buy in”. This asset provides protection against falls in gilt yields and risks in the
performance of other asset classes.
Renew Holdings plc Annual Report and Accounts 2020 103
FINANCIAL STATEMENTS NOTES TO THE ACCOUNTS CONTINUED
28 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
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 2018. The scheme showed a deficit of
£0.3m compared to £12.1m when measured as at 31 March 2015. The Group has reached an agreement with the Trustees which commits
the Group to paying annual contributions of £4,260,000 per annum until 31 July 2023 by which point the Scheme’s buyout deficit is
expected to be cleared. The next Triennial valuation is due on 31 March 2021.
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
£2.0m. Sensitivity analysis has been performed on the other key assumptions, and a reasonably possible change is not considered likely
to give rise to a materially different valuation to the surplus.
Post balance sheet event
On 26 November 2020, 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” where the annuity policy remains an asset of the scheme.
Following the conclusion of this buy-in all of the schemes liabilities are now matched with annuities which has removed the scheme’s
investment and funding risks. As a consequence there will be a reduction of the IAS 19 Retirement Benefit assets in the Group’s accounts
for the year ended 30 September 2021. If the buy-in had occurred during the current financial year, the effect would have been to reduce
the Retirement benefit asset by £27,337,000, reverse the associated Deferred tax liability of £9,568,000 with a consequent £17,769,000
reduction in the Group’s Retained earnings. In due course the main benefit of this transaction will be the cessation of further cash
contributions to the scheme.
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 reviewed by the scheme actuary as part of the 31 December 2019 valuation.
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. Sensitivity analysis has been performed on the other key assumptions, and a reasonably possible change is not considered likely
to give rise to a materially different valuation to the surplus.
Recognition of Pension Schemes’ Surplus
Having taken legal advice with regard to the rights of the Company under the trust deeds and rules, the Directors do believe there is a
right to recognise a pension surplus on an accounting basis for both schemes. The Directors do not believe that the surplus on an
accounting basis will result in a surplus on an actuarial funding basis. However, the Directors are required to account for the plans’ surplus
as required by IFRS. As the Group has a legal right to benefit from the surplus, under IAS 19 and IFRIC 14, it must recognise the economic
benefit it considers to arise from either a reduction to its future contributions or a refund of the surplus. This is a technical adjustment
made on an accounting basis. Management does not believe there is an asset ceiling under IFRIC 14 which limits the economic benefit
available. There is no cash benefit from the surplus.
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 which is set a target return against which the trustees
monitor its 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 which is set a target return against which
the trustees monitor its 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.
104
Renew Holdings plc Annual Report and Accounts 2020
28 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
Present value of scheme obligations brought forward
Interest on scheme obligations
Current and past service costs
Past service cost and settlements
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
2020
£000
2019
£000
196,758
169,169
3,703
4,313
(8,401)
(13)
7,325
203,685
172,685
3,201
56
—
(8,401)
(596)
8,388
1,015
4,832
4,310
(9,449)
(1)
27,897
196,758
149,834
4,262
45
4,000
(9,449)
(310)
25,776
(1,473)
Total fair value of scheme obligations carried forward
176,348
172,685
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
Past service cost and settlements
Net pension interest
Actuarial movement
Net scheme surplus carried forward
27,337
(9,568)
17,769
(56)
(13)
(69)
3,703
(3,201)
502
7,325
(8,807)
(1,482)
24,073
(8,426)
15,647
(45)
(1)
(46)
4,832
(4,262)
570
27,897
(23,993)
3,904
24,073
19,335
(56)
(13)
4,313
—
502
(1,482)
27,337
(45)
(1)
4,310
(4,000)
570
3,904
24,073
Renew Holdings plc Annual Report and Accounts 2020 105
FINANCIAL STATEMENTS NOTES TO THE ACCOUNTS CONTINUED
28 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
Lovell Pension Scheme continued
On 26 October 2018, 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.
The impact of additional liabilities amounted to £4,000,000 for the Lovell Pension Scheme which is disclosed within the comparative past
service costs and settlements.
On 20 November 2020 the High Court handed down a further judgment in the Lloyds Bank case regarding equalising for guaranteed minimum
pension benefits (“GMP’s”). The judge found that pension schemes do have a liability to pay top-ups to members who transferred out in the past.
We are working with the trustees of our pensions schemes, and our actuarial and legal advisers, to understand the extent to which the judgement
crystallises additional liabilities for Renew’s pension schemes. Subject to materiality, any adjustment necessary is expected to be recognised as an
exceptional item in the 30 September 2021 accounts. At the current time we are unable to estimate the amount of this potential additional liability
and we will be working with the trustees of the scheme to assess the extent to which former members of the scheme might be impacted.
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
Past service cost and settlements
Benefits paid
Actuarial movement due to changes in financial and demographic assumptions
Total fair value of scheme obligations carried forward
Surplus in the scheme
Deferred tax
Net surplus
Amount credited to other financial income:
Interest on scheme assets
Interest on scheme obligations
Net pension interest
Amounts recognised in the statement of comprehensive income:
Actual return on scheme assets less interest on scheme assets
Actuarial 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
Employer contributions
Past service cost and settlements
Net pension interest
Actuarial movement
Net scheme surplus carried forward
106
Renew Holdings plc Annual Report and Accounts 2020
2020
£000
2019
£000
15,227
258
504
(1,450)
568
15,107
13,746
228
—
(1,450)
1,861
14,385
722
(253)
469
258
(228)
30
568
(1,861)
(1,293)
1,481
504
—
30
(1,293)
722
14,412
398
969
(1,916)
1,364
15,227
13,324
353
260
(1,916)
1,725
13,746
1,481
(518)
963
398
(353)
45
1,364
(1,725)
(361)
1,088
969
(260)
45
(361)
1,481
28 Employee benefits: Retirement benefit obligations continued
IAS 19 “Employee Benefits” continued
Amco Pension Scheme continued
On 26 October 2018, 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. The impact of additional
liabilities amounted to £260,000 for the Amco Pension Scheme which is disclosed within the comparative past service cost and settlements.
On 20 November 2020 the High Court handed down a further judgment in the Lloyds Bank case regarding equalising for guaranteed
minimum pension benefits (“GMP’s”). The judge found that pension schemes do have a liability to pay top-ups to members who transferred
out in the past. We are working with the trustees of our pensions schemes, and our actuarial and legal advisers, to understand the extent
to which the judgement crystallises additional liabilities for Renew’s pension schemes. Subject to materiality, any adjustment necessary is
expected to be recognised as an exceptional item in the 30 September 2021 accounts. At the current time we are unable to estimate the
amount of this potential additional liability and we will be working with the trustees of the scheme to assess the extent to which former
members of the scheme might be impacted.
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
2020
£000
7,325
3.6%
(1,482)
(0.8)%
2019
£000
27,897
14.2%
3,904
2.3%
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)%
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.
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
2020
£000
568
3.8%
(1,293)
(9.0)%
2019
£000
1,364
9.0%
(361)
(2.6)%
2018
£000
(90)
(0.6)%
401
3.0%
2017
£000
(680)
(4.7)%
417
2.8%
2016
£000
930
6.1%
(1,881)
(10.8)%
The Amco scheme’s sole employer is the Company’s wholly owned subsidiary, Amalgamated Construction Ltd.
Defined contribution pension schemes
The Group operates a number of defined contribution pension schemes and individual stakeholder pension plans for its employees. The
Group made contributions of £6,932,000 (2019: £10,115,000) into these plans during the year. There are also £513,000 (2019: £435,000)
of accruals relating to these plans.
29 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, AP Liebenberg, SC Wyndham-Quin, DM Forbes, DA Brown, SD Dasani and SA Hazell, whose total compensation
amounted to £2,102,000 (2019: £2,082,000) all of which was represented by short-term employment benefits, including
£362,000 (2019: £332,000) 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.
Renew Holdings plc Annual Report and Accounts 2020 107
FINANCIAL STATEMENTS NOTES TO THE ACCOUNTS CONTINUED
30 Alternative performance measures
Renew uses a variety of alternative performance measures (‘APMs’) which, although financial measures of either historical or future
performance, financial position or cashflows, are not defined or specified by IFRSs. The Directors use a combination of APMs and IFRS
measures when reviewing the financial performance, position and cash of the Group.
The Directors believe that APMs provide a better understanding of the underlying trading performance of the business because they remove
the impact of non-trading related accounting adjustments. Furthermore, they believe that the Group’s shareholders use these APMs when
assessing the performance of the Group and it is therefore appropriate to give them prominence in the Annual Report and Accounts.
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 32. The Directors consider this
to be a good indicator of the financing position of the Group.
Adjusted operating profit (£39.609m) and adjusted profit before tax (£38.842m) – 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. The equivalent
GAAP measures are operating profit (£32.868m) and profit before tax (£32.101m).
Adjusted operating margin (6.4%) – This is calculated by dividing operating profit before exceptional items and amortisation of
intangible assets (£39.609m) by group revenue including share of joint venture (£620.375m) both of which are visible on the face of the
income statement. The Directors believe that removing exceptional items and amortisation from the operating profit margin calculation
provides a better understanding of the underlying performance of the Group. The equivalent GAAP measure is operating profit margin
(5.3%) which is calculated by dividing operating profit (£32.868m) from group revenue including share of joint venture (£620.375m).
Adjusted earnings per share (41.22p) – 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 (£620.375m) – 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.
Engineering Services revenue (£577.238m) – This measure is visible in Note 2 part (a) business analysis as Engineering Services
Revenue including share of joint venture. 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 (£40.754m) – 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. The GAAP equivalent measure is engineering
services operating profit (£34.013m) which is also visible in Note 2 part (a).
Adjusted Engineering Services operating profit margin (7.1%) – This is calculated in the same way as adjusted operating profit margin
but based on the adjusted Engineering Services operating profit (£40.754m) and the Engineering Services revenue (£577.238m) figures
as set out above. The equivalent GAAP measure is engineering services operating profit margin (5.9%) which is calculated by dividing
engineering services operating profit (£34.013m) from engineering services revenue including share of joint venture (£577.238m).
31 Reconciliation of net cashflow to net cash/(debt)
Increase in net cash and cash equivalents
Decrease in bank borrowings
Increase in net cash from cashflows
Net debt at 1 October
Net cash/(debt) at 30 September
2020
£000
1,729
8,750
10,479
(10,208)
271
2019
£000
2,488
8,750
11,238
(21,446)
(10,208)
108
Renew Holdings plc Annual Report and Accounts 2020
32 Analysis of net cash/(debt)
Cash and cash equivalents
Bank loans
Net cash/(debt)
At 1 October
2019
£000
11,667
(21,875)
(10,208)
Cash
flows
£000
At 30 September
2020
£000
1,729
8,750
10,479
13,396
(13,125)
271
Previously, Renew Holdings plc has not included finance lease liabilities within its measure of net debt due to their asset-backed nature.
Therefore, whilst IFRS 16 has brought additional lease liabilities onto the balance sheet, the standard has had no effect on the Group’s net
debt measure, which has been calculated consistently with previous reporting periods.
Alternative measurement of debt
Some stakeholders include leasing commitments within their definition of net debt. The equivalent figures on that basis are:
Net cash/(debt) (as above)
Finance lease liabilities
Net debt including finance leases
IFRS 16 right of use liabilities
Net debt including all lease liabilities
2020
£000
271
(5,494)
(5,223)
(9,900)
(15,123)
2019
£000
(10,208)
(5,760)
(15,968)
—
(15,968)
On 1 October 2019 £10,001,000 of additional lease liabilities were recognised which would have increased the comparative total debt to
£25,969,000.
33 Acquisition of subsidiary undertaking – Carnell Group Holdings Ltd (formerly Agger Ltd)
On 30 January 2020, the Company acquired the whole of the issued share capital of Carnell Group Holdings Ltd (“Carnell”) for a
cash free/debt free consideration of £38m, after excluding a locked-box working capital adjustment. The acquisition was funded by a
placement of 3,157,894 new ordinary shares raising £15m gross and an expanded revolving credit facility provided by HSBC UK Bank plc
and National Westminster Bank plc.
The provisional value of the assets and liabilities of Carnell 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
Current tax asset
Cash and cash equivalents
Total assets
Non-current liabilities
Deferred tax liabilities
Current liabilities
Trade and other payables
Total liabilities
Net assets
12,142
—
905
13,047
20
13,523
540
3,203
17,286
7,267
19,128
—
26,395
—
—
—
—
—
30,333
26,395
—
—
(9,379)
(9,379)
(9,379)
20,954
(3,634)
(3,634)
—
—
(3,634)
22,761
19,409
19,128
905
39,442
20
13,523
540
3,203
17,286
56,728
(3,634)
(3,634)
(9,379)
(9,379)
(13,013)
43,715
Renew Holdings plc Annual Report and Accounts 2020 109
FINANCIAL STATEMENTS NOTES TO THE ACCOUNTS CONTINUED
33 Acquisition of subsidiary undertaking – Carnell Group Holdings Ltd (formerly Agger Ltd) continued
Goodwill of £19,409,000 arises on acquisition and will be reviewed annually for impairment. The goodwill is attributable to the expertise
and workforce of the acquired business. Other intangible assets provisionally valued at £19,128,000, which represent customer
relationships and contractual rights, were also acquired and will be amortised over their useful economic lives in accordance with IAS 38.
Deferred tax has been provided on this amount. Amortisation of this intangible asset commenced from February 2020.
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.
Deferred tax liabilities
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 Carnell had occurred on 1 October 2019, Group revenue would have been approximately £638m and profit before tax
for the year ended 30 September 2020 would have been approximately £32.4m.
34 Post balance sheet events
a) On 26 November 2020, 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” where the annuity policy remains an asset of the scheme.
Following the conclusion of this buy-in all of the schemes liabilities are now matched with annuities which has removed the scheme’s investment
and funding risks. As a consequence there will be a reduction of the IAS 19 Retirement Benefit assets in the Group’s accounts for the year ended
30 September 2021. If the buy-in had occurred during the current financial year, the effect would have been to reduce the Retirement benefit
asset by £27,337,000, reverse the associated Deferred tax liability of £9,568,000 with a consequent £17,769,000 reduction in the Group’s
Retained earnings. In due course the main benefit of this transaction will be the cessation of further cash contributions to the scheme.
b) On 20 November 2020 the High Court handed down a further judgment in the Lloyds Bank case regarding equalising for guaranteed
minimum pension benefits (“GMP’s”). The judge found that pension schemes do have a liability to pay top-ups to members who
transferred out in the past. We are working with the trustees of our pensions schemes, and our actuarial and legal advisers, to understand
the extent to which the judgement crystallises additional liabilities for Renew’s pension schemes. Subject to materiality, any adjustment
necessary is expected to be recognised as an exceptional item in the 30 September 2021 accounts. At the current time we are unable
to estimate the amount of this potential additional liability and we will be working with the trustees of the scheme to assess the extent
to which former members of the scheme might be impacted.
110
Renew Holdings plc Annual Report and Accounts 2020
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
8 December 2020
Note
2020
£000
2019
£000
E
F
G
H
H
I
J
L
726
195,002
195,728
1,500
27,337
55,227
48
84,112
781
164,325
165,106
1,500
24,074
62,452
48
88,074
(141,047)
(121,355)
(56,935)
138,793
(13,312)
125,481
7,856
66,378
3,896
821
46,530
125,481
(33,281)
131,825
(21,549)
110,276
7,533
51,904
3,896
576
46,367
110,276
Renew Holdings plc Annual Report and Accounts 2020 111
FINANCIAL STATEMENTS COMPANY STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September
Profit for the year attributable to equity holders of the parent company
Items that will not be reclassified to profit or loss:
Movement in actuarial valuation of the defined benefit pension 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
2020
£000
6,904
(1,482)
519
(963)
—
—
2019
£000
15,519
3,904
(1,366)
2,538
—
—
Total comprehensive income for the year attributable to equity holders of the parent company
5,941
18,057
COMPANY STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September
Share
capital
£000
7,527
Share
premium
account
£000
51,684
Capital
redemption
reserve
£000
Share based
payments
reserve
£000
3,896
698
6
220
(122)
At 1 October 2018
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
At 30 September 2019
7,533
51,904
3,896
576
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
323
14,474
245
Retained
earnings
£000
36,215
15,519
(7,905)
Total equity
shareholders’
funds
£000
100,020
15,519
(7,905)
226
(122)
3,904
3,904
(1,366)
46,367
6,904
(5,778)
(1,366)
110,276
6,904
(5,778)
14,797
245
(1,482)
(1,482)
519
519
At 30 September 2020
7,856
66,378
3,896
821
46,530
125,481
112
Renew Holdings plc Annual Report and Accounts 2020
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 cashflow 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:
• Cashflow 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.
Renew Holdings plc Annual Report and Accounts 2020 113
FINANCIAL STATEMENTS NOTES TO THE COMPANY ACCOUNTS CONTINUED
A Accounting policies continued
(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.
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its Group, the
Company treats the guarantee contract as a contingent liability until such time as it becomes probable that the Company will be required
to make a payment under the guarantee.
(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.
(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 profit after
taxation for the financial year dealt with in the accounts of the Company was £6,904,000 (2019: £15,519,000).
The audit fee charged within the profit and loss account amounted to £194,000 (2019: £83,000).
114
Renew Holdings plc Annual Report and Accounts 2020
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
2020
Number
2019
Number
27
27
£000
2,400
369
153
245
3,167
£000
2,102
833
27
27
£000
3,133
341
188
(122)
3,540
£000
2,082
797
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 2020)
Final (related to the year ended 30 September 2019)
Total dividend paid
Interim (related to the year ended 30 September 2020)
Final (related to the year ended 30 September 2019)
Total dividend paid
2020
Pence/share
2019
Pence/share
—
7.67
7.67
£000
—
5,778
5,778
3.83
6.67
10.50
£000
2,885
5,020
7,905
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 8.33p per Ordinary Share be paid in respect of the year ended 30 September 2020.
This will be accounted for in the 2020/21 financial year.
E Tangible fixed assets
Cost:
At 1 October 2019
Additions
At 30 September 2020
Depreciation:
At 1 October 2019
Charge for year
At 30 September 2020
Net book value:
At 30 September 2020
At 30 September 2019
Freehold land
and buildings
£000
Plant, vehicles
& equipment
£000
701
—
701
106
10
116
585
595
307
13
320
121
58
179
141
186
Total
£000
1,008
13
1,021
227
68
295
726
781
Renew Holdings plc Annual Report and Accounts 2020 115
FINANCIAL STATEMENTS NOTES TO THE COMPANY ACCOUNTS CONTINUED
F Investments
Shares at cost:
At 1 October 2019
Additions
At 30 September 2020
Provisions:
At 1 October 2019
Provided during the year
At 30 September 2020
Net book value:
At 30 September 2020
At 30 September 2019
Details of subsidiary undertakings are included in Note S.
G Assets held for resale
Property
Subsidiary
undertakings
£000
297,825
43,315
341,140
133,500
12,638
146,138
195,002
164,325
2020
£000
1,500
2019
£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
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
116
Renew Holdings plc Annual Report and Accounts 2020
2020
£000
27,337
75
44,254
7,169
24
3,705
55,227
82,564
2020
£000
105,819
2,380
804
23,326
225
8,493
141,047
2019
£000
24,074
35
56,374
3,123
49
2,871
62,452
86,526
2019
£000
88,597
2,678
538
20,937
157
8,448
121,355
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
2020
£000
4,373
8,939
13,312
105,819
4,373
110,192
2019
£000
13,123
8,426
21,549
88,597
13,123
101,720
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
Future tax losses
Accelerated capital allowances
Other timing differences
£000
£000
9,568
8,426
(359)
(29)
(241)
—
—
—
8,939
8,426
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 2020, this loan was £230,000 (2019: £28,000).
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:
78,555,054 (2019: 75,329,224) Ordinary Shares of 10p each
2020
£000
2019
£000
7,856
7,533
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 30 January 2020 3,157,894 Ordinary Shares were issued pursuant to the acquisition of Carnell Group Holdings Ltd (formerly Agger
Ltd). On 5 February 2020 67,936 Ordinary Shares were issued pursuant to the Group’s Long-Term Incentive Plan.
Share options
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 2020, there were 864,696 options outstanding under the scheme. On 20 February 2020, options to subscribe for a
further 299,570 Ordinary Shares were granted. During the year 67,936 options were exercised and 91,164 did not vest. No options lapsed
during the year.
Renew Holdings plc Annual Report and Accounts 2020 117
FINANCIAL STATEMENTS NOTES TO THE COMPANY ACCOUNTS CONTINUED
L Share capital continued
Share options continued
Renew Holdings plc Long Term Incentive Plan continued
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.
£(245,000) (2019: £(122,000) has been charged/(credited) to administrative expenses in accordance with FRS 102. There is no impact on
net assets since an equivalent amount has been (credited)/debited to share based payments reserve. 67,936 options were exercised and
91,164 options did not vest during the year. The value per option represents the fair value of the options less the consideration payable.
The expected volatility has been calculated based on weekly historical volatility of the Company’s share price over the three years prior to the
date of grant. The risk free rate of return has been based on the yields available on three year UK government bonds as at the date of grant.
Options granted under the Renew Holdings plc Long Term Incentive Plan over the Company’s Ordinary Shares at 30 September 2020
were as follows:
Date of grant
22 November 2017
3 December 2018
20 February 2020
Total
Awards outstanding at 30 September 2020
– Directors and employees
Exercise price
Price at date of grant
Maximum option life
246,000
10.0p
428.75p
10 years
319,126
10.0p
350.00p
10 years
299,570
864,696
10.0p
548.00p
10 years
Assumed option life for purposes of valuation
2.86 years
2.83 years
2.61 years
Expected volatility
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
25%
0.52%
262.0p
Land and
buildings
£000
222
429
178
829
28%
0.75%
226.0p
27%
0.46%
519.0p
Other
£000
22
6
—
28
Total
2020
£000
244
435
178
857
Total
2019
£000
296
737
118
1,151
During the year £268,000 (2019: £326,000) 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 2020 (2019: £nil).
118
Renew Holdings plc Annual Report and Accounts 2020
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 £153,000 (2019: £188,000) into these plans during the year. There are also £12,000 (2019: £12,000)
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, AP Liebenberg,
SC Wyndham-Quin, DM Forbes, DA Brown, SD Dasani and SA Hazell, whose total compensation amounted to £2,102,000 (2019: £2,082,000)
all of which was represented by short-term employment benefits including £362,000 (2019: £235,000) 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 2020 shows a surplus of
£27,337,000 based on the assumptions set out below.
The Directors have determined that it is appropriate to recognise the surplus as, having reviewed the rules of the Lovell scheme, they are
of the view that the 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
2020
As at
30 September
2019
As at
30 September
2018
4.0%
4.2%
1.5%
2.1%
2.9%
2.9%
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 95% S2NA tables with future improvements in line with the
Continuing Mortality Investigations 2019 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 2040 is 23.8 years.
Renew Holdings plc Annual Report and Accounts 2020 119
FINANCIAL STATEMENTS NOTES TO THE COMPANY ACCOUNTS CONTINUED
R Employee benefits: Retirement benefit obligations continued
Defined benefit pension schemes continued
The assets in the Lovell scheme were:
Annuities
Diversified portfolio
Cash
Total
Value as at
30 September
2020
£000
87,497
114,039
2,149
Current
allocation
43%
56%
1%
Value as at
30 September
2019
£000
89,317
106,775
666
203,685
100%
196,758
Value as at
30 September
2018
£000
85,850
81,202
2,117
169,169
Current
allocation
45%
54%
1%
100%
Current
allocation
51%
48%
1%
100%
During 2011 and 2016, the Trustees of the Lovell scheme, in consultation with the Directors, used scheme assets to purchase annuities
which match certain pension liabilities in a transaction known as a “buy in”. This asset provides protection against falls in gilt yields and
risks in the performance of other asset classes.
Scheme Funding Level and Actuarial Valuation
The scheme actuary carried out the triennial valuation of the Lovell Pension Scheme as at 31 March 2018. The scheme showed a deficit of
£0.3m compared to £12.1m when measured as at 31 March 2015. The Group has reached an agreement with the Trustees which commits
the Group to paying annual contributions of £4,260,000 per annum until 31 July 2023 by which point the Scheme’s buyout deficit is
expected to be cleared. The next Triennial valuation is due on 31 March 2021.
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 £2.0m. Sensitivity analysis has been performed on the other key assumptions, and a reasonably possible change is not considered
likely to give rise to a materially different valuation to the surplus.
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
2020
£000
7,325
3.6%
(1,482)
(0.8)%
2019
£000
27,897
14.2%
3,904
2.3%
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)%
Post balance sheet events
a)
On 26 November 2020, 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” where the annuity policy remains an asset of the
scheme. Following the conclusion of this buy-in all of the schemes liabilities are now matched with annuities which has removed the
scheme’s investment and funding risks. As a consequence there will be a reduction of the FRS 102 pension scheme asset in the
Company’s accounts for the year ended 30 September 2021.
If the buy-in had occurred during the current financial year, the effect would have been to reduce the Debtors due after one year by
£27,337,000, reverse the associated Deferred tax liability of £9,568,000 with a consequent £17,769,000 reduction in the Company’s
Profit and loss account reserve. In due course the main benefit of this transaction will be the cessation of further cash contributions to
the scheme.
b)
On 20 November 2020 the High Court handed down a further judgment in the Lloyds Bank case regarding equalising for guaranteed
minimum pension benefits (“GMP’s”). The judge found that pension schemes do have a liability to pay top-ups to members who
transferred out in the past. We are working with the trustees of our pensions schemes, and our actuarial and legal advisers, to
understand the extent to which the judgement crystallises additional liabilities for Renew’s pension schemes. Subject to materiality,
any adjustment necessary is expected to be recognised as an exceptional item in the 30 September 2021 accounts. At the current
time we are unable to estimate the amount of this potential additional liability and we will be working with the trustees of the scheme
to assess the extent to which former members of the scheme might be impacted.
120
Renew Holdings plc Annual Report and Accounts 2020
R Employee benefits: Retirement benefit obligations 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
Present value of scheme obligations brought forward
Interest on scheme obligations
Current and past service costs
Past service costs and settlements
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
2020
£000
2019
£000
196,758
169,169
3,703
4,313
(8,401)
(13)
7,325
203,685
172,685
3,201
56
—
(8,401)
(596)
8,388
1,015
4,832
4,310
(9,449)
(1)
27,897
196,758
149,834
4,262
45
4,000
(9,449)
(310)
25,776
(1,473)
Total fair value of scheme obligations carried forward
176,348
172,685
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
Past service costs and settlements
Net pension interest
Actuarial movement
Net scheme surplus carried forward
27,337
(9,568)
17,769
(56)
(13)
(69)
3,703
(3,201)
502
7,325
(8,807)
(1,482)
24,073
(8,426)
15,647
(45)
(1)
(46)
4,832
(4,262)
570
27,897
(23,993)
3,904
24,073
19,335
(56)
(13)
4,313
—
502
(1,482)
27,337
(45)
(1)
4,310
(4,000)
570
3,904
24,073
On 26 October 2018, 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. The
impact of additional liabilities amounted to £Nil (2019: £4,000,000) for the Lovell Pension Scheme and is disclosed in the comparatives as
past service costs and settlements.
Renew Holdings plc Annual Report and Accounts 2020 121
FINANCIAL STATEMENTS NOTES TO THE COMPANY ACCOUNTS CONTINUED
R Employee benefits: Retirement benefit obligations continued
On 20 November 2020 the High Court handed down a further judgment in the Lloyds Bank case regarding equalising for guaranteed
minimum pension benefits (“GMP’s”). The judge found that pension schemes do have a liability to pay top-ups to members who
transferred out in the past. We are working with the trustees of our pensions schemes, and our actuarial and legal advisers, to understand
the extent to which the judgement crystallises additional liabilities for Renew’s pension schemes. Subject to materiality, any adjustment
necessary is expected to be recognised as an exceptional item in the 30 September 2021 accounts. At the current time we are unable to
estimate the amount of this potential additional liability and we will be working with the trustees of the scheme to assess the extent to
which former members of the scheme might be impacted.
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.
Incorporation & principal
place of business
Proportion of Ordinary
Shares held by the Company
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%
Subsidiary undertakings and joint ventures
Amco Group Holdings Ltd
Britannia Group Ltd
Carnell Group Holdings 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
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
YJL Homes Ltd
VHE Land Projects Ltd
YJL Ltd
Owned by Renew Holdings plc
England and Wales
Owned by Renew Holdings plc
England and Wales
Owned by Renew Holdings plc
England and Wales
Owned by Renew Holdings plc
England and Wales
Owned by Renew Holdings plc
England and Wales
YJL Pension Trustee Company Ltd
Owned by Renew Holdings plc
England and Wales
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
Owned by subsidiary
Owned by subsidiary
Scotland
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
122
Renew Holdings plc Annual Report and Accounts 2020
S Subsidiary undertakings continued
Subsidiary undertakings and joint ventures
Britannia Construction Ltd
Carnell Support Services Ltd
Clarke EV 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
Nuclear Decontamination Services Ltd
Pine Plant Ltd
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
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Owned by subsidiary
Seymour (Civil Engineering Contractors) Ltd
Owned by subsidiary
VHE (Civil Engineering) Ltd
VHE Equipment Services Ltd
VHE Technology Ltd
Walter Lilly & Co Ltd
West Cumberland Engineering Ltd
YJL Construction Ltd
YJL Infrastructure Ltd
YJL London Ltd
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
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
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
England and Wales
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
33.3%
28.9%
The registered office of Amalgamated Construction (Scotland) Ltd is 5 Carradale Crescent, Glasgow, G68 9LE.
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 3175 Century Way, Thorpe Park, Leeds, LS15 8ZB.
Renew Holdings plc Annual Report and Accounts 2020 123
FINANCIAL STATEMENTS DIRECTORS, OFFICERS AND ADVISORS
SHAREHOLDER INFORMATION
Annual General Meeting
27 January 2021
Results
Announcement of interim results
– May 2021
Preliminary announcement of full
year results – November 2021
Signal Shares
Signal Shares is a secure online site where you can manage your
shareholding quickly and easily. To register for Signal Shares
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)371 664 0300 (calls are charged at the
standard geographical 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. By email Shareholderenquiries@linkgroup.co.uk.
(Non-executive Chairman)
(Chief Executive Officer)
(Chief Financial Officer)
(Independent non-executive)
(Independent non-executive)
(Independent non-executive)
(Executive Director)
Directors
D M Forbes
P Scott
S C Wyndham-Quin
S D Dasani
D A Brown
S A Hazell
A P 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
FTI Consulting
200 Aldersgate
Aldersgate Street
London
EC1A 4HD
Nominated advisor and broker
Numis Securities Limited
London Stock Exchange Building
10 Paternoster Square
London
EC4M 7LT
Company Secretary
S Wyndham-Quin
Company number
650447
Registered address
3175 Century Way
Thorpe Park
Leeds
LS15 8ZB
Website address
www.renewholdings.com
124
Renew Holdings plc Annual Report and Accounts 2020
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
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
Carnell
Gothic House
Market Place
Penkridge
Staffordshire
ST19 5DJ
Tel: 01785 715 472
CBP004712
Renew Holdings plc
3175 Century Way
Thorpe Park
Leeds
LS15 8ZB
tel: 0113 281 4200
fax: 0113 281 4210
web: www.renewholdings.com
Company Number: 650447
Registered in England & Wales