www.integral.co.uk
a one team approach
Integral UK Holdings Ltd Annual Report 2013
directors
B Glastonbury P Salmons M Johns A Kenny
company secretary P Salmons
registered office 1290 Aztec West Almondsbury Bristol BS32 4SG
auditors KPMG LLP 100 Temple Street Bristol BS1 6AG
bankers National Westminster Bank 1 Waterhouse Street Halifax HX1 1JA Lloyds TSB Canons House Canons Way Bristol BS99 7LB
Integral UK Holdings UK Limited Annual Report 2013
2
overview 2013
3-6
strategic report
20-33
notes to the financial statements Turnover Operating Profit
Managing Director’s Review
Directors And Employees Interest Receivable And Similar Income
7-11
statements and reports
Interest Payable And Similar Charges Tax On Profit On Ordinary Activities Parent Company Profit And Loss Account Dividends Intangible Fixed Assets & Negative Goodwill Tangible Fixed Assets
Directors’ Report
Investments
Statement Of Directors’ Responsibilities In Respect Of The Strategic Report &
Stocks
The Financial Statements
Debtors
Independent Auditors Report To The Members Of Integral Uk Holdings Limited
Creditors: Amounts Falling Due Within One Year Borrowings
12-16
accounts & balance sheets
Deferred Tax Asset Share Capital Movements In Equity Share Capital & Reserves Capital Commitments Operating Leases Cash Flow From Operating Activities
Profit And Loss Account
Reconciliation Of Movement In Net Debt
Group Balance Sheets
Reconciliation Of Net Cash Flow To Movement In Net Debt
Company Balance Sheet
Pensions
Group Cash Flow Statement
Acquisitions Post Balance Sheet Events
17-19
Related Party Disclosures
accounting policies Basis Of Preperation Basis Of Consolidation Going Concern Investments Tangible Fixed Assets Stocks Taxation
34-36
the board & management team
Pensions Operating Leases
Directors’ Biographies
Accounting For Contracts
Management Team
Equity Dividends Exceptional Items Research & Development Expenditure
overview 2013 Integral is the largest independently owned mechanical, electrical and fabric property maintenance business in the UK. At Integral, we listen to our clients and tailor our support to match requirements. Our “one team” approach ensures we utilise the skills and expertise from across our business, helping us identify opportunities for improved performance. We always aim to provide the most cost-effective maintenance solutions. ...delivering engineering excellence
key facts •
over 3,000 directly employed staff
•
over 1,700 mobile technicians & engineers
•
£240 million turnover
our clients
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www.integral.co.uk
services M&E Maintenance Critical Environments Fabric Maintenance M&E Projects Refrigeration Maintenance Energy Management Fire & Project Maintenance Predictive Maintenance
Integral Build Refurbishment Projects Fixed Wire / PAT Testing BMS Controls Housing Services Cleaning Services Estates Management Recruitment Consultancy
top track Integral climbed an impressive 87 places over last year in the 2013 Sunday Times Top Track 250 League Table to position 115. The league table ranks Britain’s leading mid-market private companies.
Integral UK Holdings UK Limited Annual Report 2013
strategic report
Managing Director’s Review In the second half of 2013, we have experienced real signs of “green shoots” after 5 years of tough trading conditions in the UK. There is far more optimism from within our large and varied client base, and major capital expenditure projects and life-cycle replacement programmes were very much back on our clients’ agendas. This strong second half performance allowed us to achieve comparable year-on-year sales of £239m and a record trading profit of £11.6m (excluding the release of negative goodwill), an increase of over 3.4% compared with last year’s figures. Integral’s national strength, regional coverage and financial independence has enabled us to continue developing our engineering services direct delivery model to ensure we successfully retain our loyal existing customers as well as bringing new client names to our portfolio. With over 1,900 directly employed technicians spread throughout the country with an engineer in every UK postcode, we are able to meet the most challenging performance targets. As a business, in 2013 we have concentrated our efforts on improving first-timefix. This improvement in performance provides less disruption and inconvenience to our clients’ trading and also allows us to remain more competitive and profitable. Being an engineering-led business, we are always striving for “engineering excellence.” Through both our static and mobile engineering workforce we collect a massive amount of data regarding our clients’ assets. We are now developing ways to allow us to intelligently use this data to enable us to manage our clients’ property maintenance budgets where best needed instead of working to standard specifications which are not always relevant. We can’t do this in isolation and look forward to working closely with our key clients to develop new maintenance strategies. The continued successful development of our “UptimePlus” software platform is enabling us to bring something new to the data centre / critical site market. This software provides an interactive maintenance platform, allowing us to deliver a maintenance strategy aimed at reducing the consequence and cost of failure. Predictive tools play a vital role in this strategy with results from these tools being analysed through algorithms provided by the major plant providers. Our clients can now, as a result, forecast when a critical asset should be maintained, based on condition, not time, and are able to measure real-time the operational risk of key assets. We are also able to provide accurate key asset condition surveys which allow life-cycle plans to be developed that replace plant at the most cost-effective time, not just based on the age of the equipment. I was delighted Integral’s achievements were recognised by Ernst & Young in their Entrepreneur Awards. We won the Business Services category for the London and South Region, the judges recognising
the turnaround of the business and the substantial long-term growth of both sales and profits. Integral also climbed an impressive 87 places over last year in the 2013 Sunday Times Top Track 250 league table to 115th. The league table ranks Britain’s leading mid-market private companies and we are amongst some very innovative and developing companies. Integral is committed to delivering engineering innovation and continued service differentiation to keep us at the forefront of our industry. We actively look at partnering with clients who want their service provider to deliver a comprehensive holistic approach to their property maintenance.
Financial Performance
We were delighted to achieve comparable sales in 2013 of £239m but more importantly our trading profit by 3.4% to £9.6m (excluding the release of negative goodwill). We have maintained our strategy throughout the year of not “chasing volume” and this will continue into 2014. It is imperative we tender new work at sensible margins if we are to provide the level of service our clients rightly expect. The above-mentioned results were achieved after our continuing investment in “Integral Uptime,” our critical sites maintenance platform, and the setting up of a new refrigeration division for the food sector, which was quickly expanded by the acquisition of WR Refrigeration from Administration, saving nearly 300 peoples’ jobs, just prior to Christmas. Our balance sheet net assets at Year End are £31m and we continue to be debt free. There has also been an operating cash increase in the year of £2.6m (2012: decrease of £1.47m). The Company’s principal risks and uncertainties, Key Performance Indicators and financial risk management processes are discussed in the Director’s Report.
Operations
2013 heralded HSE changes to RIDDOR reporting but this did not adversely affect our figures as expected. We have achieved an excellent result in reducing our RIDDOR reportable incidents by
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40% year-on-year (from 17 in 2012 to 10 in 2013). Also, the total accidents reported in the year fell by over 10%. We have achieved these excellent results by a combination of training and tool-box talks specifically aimed at safety awareness, and the further development of Integral’s “National Near Miss Reporting Line” which is now available to all of our 2,700+ employees. Our key business message is for clients’ staff, members of the public we come into contact with and the whole of our workforce to return home safely every day. As a business, and with the UK economic climate in the UK still under pressure in some sectors, we are well aware of the need to provide valued service proposals to our clients if we wish to win or retain their business. As a management team we constantly review our systems and processes to determine the most cost-effective methods to deliver our services. This, in the past year, has come through a mixture of technological improvements and changes to working practices. For example, due to our growing portfolio of retail clients, many who operate 7 days per week, we have changed the working and shift patterns of numerous mobile engineers to allow us to more cost-effectively work weekends and provide much needed cover. On talking to some major food retailers, we felt there was a place for a new entrant in the food refrigeration market. Our ethos of providing a high standard of planned, preventative maintenance which we use in our core mechanical and electrical business would, we felt, also work well with refrigeration. At Half Year we were delighted to be awarded a refrigeration contract by the CO-OP Group for their stores in the South of England and Wales. In November 2013, we acquired a significant part of the WR Refrigeration business and novated contracts into Integral from Tesco, Morrisons, Waitrose and Costco. We also acquired WR’s award-winning National Training Centre in the Midlands which allows us to train refrigeration engineers on both water cooled and CO² systems as well as fault finding on electrical and control systems. We are now able to offer our food retail clients a truly one-stop-shop approach whereby our in-house Integral technicians can maintain their refrigeration, mechanical & electrical services, lighting, HVAC, fire and security, water and fabric requirements and be responsible for the co-ordination of these varied trades. I genuinely believe that Integral being truly independent and privately owned allows us to take a more flexible approach to finding workable solutions than some of our large, corporate competitors. Whether it is negotiating contract T&C’s, agreeing stringent KPIs and SLAs or working with a client’s bespoke management information system,
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Integral Refrigeration Training Centre Birmingham
Integral UK Holdings UK Limited Annual Report 2013
we are able to be both flexible and look at each point individually and on its merits as opposed to having to follow tight, regulated guidelines. I am sure this is seen as beneficial to an ever-increasing number of clients.
People
As a service sector business it would be impossible to run a company like ours and achieve the results we do, year-on-year, without the commitment and dedication of our employees. As a business, we look to employ people who care, not only about their personal performance but also our clients’ buildings and trading needs. Our focus will remain on providing the right level of training to enable our staff to provide the level of service we expect from them. We are still totally committed to training as demonstrated by the purchase of the Refrigeration Training School and we currently have over 80 apprentices or trainees spread across the UK. Our employees constantly demonstrate their loyalty to our business and we regularly receive commendations about them from our clients. We are very lucky to enjoy a core of very diligent people who have been with the business a long time and this allows us business stability. In fact, 2013 saw our lowest level of employee churn since I have been involved with the business. The Board would truly like to thank everyone at Integral who has helped to make the business so successful.
Corporate and Social Responsibility
As a business, our main theme remains working with young people and trying to get them started on the career ladder. We work with the Prince’s Trust and Barnardo’s and have recently become involved with a charity “Tomorrow’s People”, where we are placing young, disadvantaged youths into employment. Our whole management team are committed to this initiative and we hope to make a real difference to young peoples’ lives. Our HR advisors also work around the country in many schools and colleges, helping the students prepare CVs and prepare for interviews. Integral has been an active member of the Reducing Re-offending through Employment Taskforce since its launch in 2012. This Business in the Community (BITC) initiative is led by Alliance Boots and involves a number of significant employers who are suppliers of Boots. The Taskforce seeks to level the playing field for people with criminal convictions trying to gain employment. It actively supports the BITC Ban the Box campaign which seeks to remove the need for applicants to declare non spent convictions on application forms with convictions being considered where appropriate later in the recruitment process, thereby improving the prospects for exoffenders reaching interview and in turn securing employment.
Mark Davies
Integral UK Limited
Integral is also working with Manchester College, whose Offender Learning Contract provides around 60% of training in the UK’s prisons, to provide work experience placements for
5
ex-offenders, either on release or through release on temporary licence. The initiative is to be piloted in our Warrington office with an expectation to widen the provision across the Company’s branch network during 2014.
in education where we have utilised 3D modelling with the architect and structural engineers to ensure the most co-ordinated methods of construction are utilised. We are now exploring how BIFM can aid us in the FM field and with life-cycle predictive maintenance.
This year our new Refrigeration division has linked up with the Regular Forces Employment Association (REFA) to provide training openings for air-conditioning and refrigeration engineers. Integral will be expanding the scheme and offering several work placement and training opportunities, some of which it is hoped will lead to fulltime positions within the Company.
Future Prospects
Another area we have developed is our “Carbon Arc” initiative around saving energy. We maintain services in over 44,000 properties throughout the UK, each one uses energy. We have produced an energy strategy which provides our clients with advice ranging from good energy housekeeping, to the latest technology advice to reduce both energy and their carbon footprint. As energy costs continue to soar, this initiative provides both an economical and environmental advantage to all parties.
New Developments
The most exciting new development for the business this year has been the formation of a Refrigeration maintenance division. From a standing start and through acquisition of WR Refrigeration, Integral is now one of the largest Refrigeration maintenance providers to the food service industry in the UK. Our strategy in this market segment is to differentiate our service offering by championing the importance of PPM and case cleaning and to offer our customers the combination of a refrigeration and electrical and mechanical maintenance service. Our objective is to achieve a top three position in the food services market by 2016. Our “Integral Uptime” software platform, modelled on ISO5500X is also creating a massive amount of interest in the critical maintenance arena. During 2013, we have seen the actual benefits of operating the system on several critical sites and this has convinced us to rollout the next stage of the platforms development which will make the system more client/user-friendly. The Government Construction Strategy was published by the Cabinet Office on 31st May 2011. The report announced the Government’s intention to require: collaborative 3D BIM (with all project and asset information, documentation and data being electronic) on its projects by 2016. Central to these ambitions is the adoption of information rich Building Information Modelling (BIM) technologies, process and collaborative behaviours that will unlock new, more efficient ways of working at all stages of the project lifecycle. Integral has recognised and is meeting this challenge by investing and developing our own in-house BIM facilities. These facilities have to date been utilised on mechanical and electrical design build projects for a battery plant contract at Nissan and several projects
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There has been a great deal of consolidation with companies in the FM sector over the last 18 months which has created quite a large number of “Juggernauts” in the UK market. I don’t necessarily believe “big is best” and genuinely feel that as a privately owned, mid-market niche business, we are tremendously well placed for future growth. Our strategy of concentrating on the hard services sector in the FM market is clearly working and I believe more clients are understanding the importance of compliance and business continuity and the risks associated with poor maintenance of their property assets. Our business model, with over 1,700 directly employed mobile technicians, allow us to service that need either directly with enduser clients, or as part of the supply chain of a global TFM provider. As mentioned earlier, our investment in technology will continue; the use of predictive tools in the building services sector is not new, using information taken from vibration analysis, thermal imagery and topology, and feeding that information into algorithms provided by plant manufacturers is new and innovative in our industry and could change the way we maintain major plant in the future. Also, the advantages this technology gives the plant owner when deciding on life-cycle replacement is invaluable and we are using it on our own PFI portfolio, where we are responsible for life-cycle costs for 25 years on certain projects. With our strong Balance Sheet and no debt, we are in a strong financial position and will continue to add “bolt-on” acquisitions, if we believe they will add value to our overall business. It is very likely, as we move out of the recession throughout 2014 opportunities will present themselves. Finally, we enter 2014 with a record order book and a stable, tried and trusted management team which I believe will deliver significant sales and profit growth throughout the year. By order of the board,
B Glastonbury Managing Director 31 March 2014
statements & reports
7
Directors’ report The directors present their report and the audited financial statements of Integral UK Holdings (the “Company”) and together with its subsidiaries (the “Group”) for the year ended 31 December 2013. Principal activities
The Company’s principal activity is that of an investment holding Company. The principal activity of the Group is facilities services, including mechanical, electrical and fabric maintenance.
applicants. Employees who become disabled during their working life will be retained in employment wherever possible and will be given help with any necessary rehabilitation and retraining.
Review of business
Principal risks and uncertainties
Donations
Competition The Group operates in an environment where cost is not the sole procurement criteria; the quality of service delivery increasingly allows a company to differentiate its offering from that of its competitor.
Please refer to the Managing Director’s Review on pages 3 to 6 for a review of the business during the year.
The Group made no political donations (2012: £Nil). Charitable donations of £8,000 were made (2012: £8,000).
Results and dividends
The Group profit after tax for the year amounted to £8,062,000 (2012: £6,320,000). An interim dividend of £8,000,000 (2012: £Nil) was paid during the year. This represents a payment per share of £0.67 (2012: £Nil). No final dividend is proposed.
Directors and their interests
The directors who have served during the year and at the time of signing this report are set out at the beginning. See note 4c to the financial statements for details of Directors’ interests.
Indemnity provision
Subject to the provisions of the Companies Act, every Director, officer or employee of the Company is indemnified out of the assets of the Company, against any liability incurred in defending any proceedings relating to their conduct as an officer or employee of the Company.
Employee involvement
The Group seeks to engage all employees in both its short term and long term goals. This is mainly achieved through briefings.
Employment of disabled persons
It is the policy of the Group in the United Kingdom that disabled people, whether registered or not, should receive full and fair consideration for all job vacancies for which they are suitable
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The management of the business and the execution of the Group’s strategy are subject to a number of risks. The key business risks affecting the Group are set out below.
Employees Being a service business our people are by far our most important asset. In order to deliver the business strategy of continued quality growth the business needs to recruit and retain its staff. In order to mitigate the impact from staff resignations or skill shortages, the Group operates a staff development and succession planning programme, promoting from within where possible.
Key Performance Indicators
The key performance indicators used to run the business are contained within a board pack, produced monthly and distributed to board members. The most important key performance indicators include: • Monthly value of work done by division • Gross Margin achieved by division • Overheads • Orders received in the month • Working capital including cash, work in progress and debtors • Prospects and tender opportunities in hand.
Financial risk management
The Group’s operations expose it to a variety of financial risks that include the effects of changes in prices, credit risk, liquidity risk and interest rate risk. The Group has in place a risk management programme that seeks to limit the adverse effects on the financial performance of the Group by monitoring the Group’s exposure to each of these identified risks.
Integral UK Holdings UK Limited Annual Report 2013
Given the nature of the Group’s operations, the Directors have not delegated the responsibility of monitoring financial risk management to a sub-committee of the board. The board take an active involvement in the Group’s management of financial risk and circumstances where it would be appropriate to use financial instruments to manage these.
liabilities arranged at variable interest rates based on Lloyds TSB base rate. Exposure to interest rate movements is monitored by the board and the policy will be revisited should the Group’s financing needs change.
Price risk The Group is not directly exposed to commodity price risk as a result of its operations. The Group has no exposure to equity securities price risk as it holds no listed equity investments. Exposure to changes in prices charged by suppliers is managed on an ongoing basis.
Pursuant to Section 487 of the Companies Act 2006, the auditors will be deemed to be reappointed and KPMG LLP will therefore continue in office.
Credit risk The Group has implemented policies that require appropriate credit checks on potential customers before sales are made. The amount of exposure to any individual counterpart is reassessed on a regular basis. Liquidity risk The Group’s financing is arranged with Lloyds TSB. Financing is designed to ensure the Group has sufficient available funds for operations and planned expansions. Compliance with financing covenants is monitored by the board on a monthly basis. Interest rate cash flow risk The Group has both interest bearing assets and interest bearing
Auditors
Disclosure of information to auditors
The directors who held office at the date of approval of this directors’ report confirm that, so far as they are each aware, there is no relevant audit information of which the Company’s auditors are unaware; and each director has taken all the steps that he ought to have taken as a director to make himself aware of any relevant audit information and to establish that the Company’s auditors are aware of that information. By order of the Board
P Salmons Secretary 31 March 2014
The Mall
Cribbs Causeway, Bristol
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Statement of directors’ responsibilities in respect of the Strategic Report, the Directors’ Report and the financial statements The directors are responsible for preparing the Strategic Report, the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company law requires the directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice). Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the group and parent company and of their profit or loss for that period. In preparing each of the group and parent company financial statements, the directors are required to:
• • •
select suitable accounting policies and then apply them consistently; make judgments and estimates that are reasonable and prudent; state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements; and
•
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and parent company will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the parent company’s transactions and disclose with reasonable accuracy at any time the financial position of the parent company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the group and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions
Museum of Liverpool Liverpool Docks
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Integral UK Holdings UK Limited Annual Report 2013
Independent auditor’s report to the members of Integral UK Holdings Limited We have audited the financial statements of Integral UK Holdings Limited for the year ended 31 December 2013 set out on pages 12 to 33. The financial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 8, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s (APB’s) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s web-site at www.frc.org.uk/auditscopeukprivate.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or • the 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.
Antonio Antonius (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 100 Temple Street Bristol BS1 6AG 31 March 2014
Opinion on financial statements In our opinion the financial statements:
• • •
give a true and fair view of the state of the group’s and the parent company’s affairs as at 31 December 2013 and of the group’s profit for the year then ended; have been properly prepared in accordance with UK Generally Accepted Accounting Practice; and have been prepared in accordance with the requirements of the Companies Act 2006.
Opinion on other matter prescribed by the Companies Act 2006
In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
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accounts & balance sheets
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Integral UK Holdings UK Limited Annual Report 2013
Profit and loss account for the year ended 31 December 2013
Note Turnover Cost of sales
2
Gross profit Administrative expenses
2013 £000 238,600 (202,173)
2012 £000 239,661 (205,071)
36,427 (25,012)
34,590 (23,533)
Operating profit before amortisation and release of negative goodwill Goodwill amortisation Release of negative goodwill
3 3
11,415 (1,788) 1,266
11,057 (1,788) -
Operating profit Interest receivable and similar income Interest payable and similar charges
3 5 6
10,893 2 (155)
9,269 (211)
Profit on ordinary activities before taxation Tax on profit on ordinary activities
7
10,740 (2,678)
9,058 (2,738)
8,062 15
6,320 -
8,077
6,320
Profit on ordinary activities after taxation Equity minority interests Profit for the financial year
19
All of the Group’s activities are classed as continuing. There is no difference between the profit on ordinary activities before taxation and the profit for the financial year stated above and their historical cost equivalents. The Group has no recognised gains or losses other than those included in the results above and therefore no separate statement of recognised gains and losses has been presented. The notes on pages 20 to 33 form part of these financial statements.
“Thank you to the Integral team for their sterling efforts in keeping our building open during the recent bad weather ensuring we were able to maintain a professional service. In particular your commitment to arriving on site early to clear the snow was highly commendable”. M Southgate, Managing Director, JTI UK
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Group Balance Sheet as at 31 December 2013
Note
2013 ÂŁ000
2012 ÂŁ000
10 10 11
21,425 (1,273) 536
23,213 870
20,688
24,083
496 57,082 3,825
476 52,771 1,205
61,403 (50,821)
54,452 (47,327)
Net current assets
10,582
7,125
Total assets less current liabilities Creditors: amounts falling due after more than one year Preference shares
31,270
31,208
(256)
(256)
31,014
30,952
5 11,791 3,133 16,108 31,037 (23)
5 11,791 3,133 16,031 30,960 (8)
31,014
30,952
Fixed assets Intangible assets Negative Goodwill Tangible assets
Current assets Stocks Debtors Cash at bank and in hand
13 14
Creditors: amounts falling due within one year
15
16
Net assets Capital and reserves Called up share capital Share premium Capital redemption reserve Profit and loss account Total shareholders’ funds Minority interests Capital employed
18 19 19 19
The financial statements were approved by the Board of Directors on 31 March 2014 and were signed on its behalf by:
B Glastonbury Director
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Integral UK Holdings UK Limited Annual Report 2013
Company Balance Sheet as at 31 December 2013
Note
2013
2012
ÂŁ000
ÂŁ000
Fixed assets Investments
12
36,526
36,616
Current assets
14
587
-
Creditors: amounts falling due within one year
15
-
(62)
587
(62)
37,113
36,554
(21,907)
(21,844)
15,206
14,710
Net current assets/(liabilities) Total assets less current liabilities Creditors: amounts falling due after more than one year
16
Net assets Capital and reserves Called up share capital
18
5
5
Share premium
19
11,791
11,791
Capital redemption reserve
19
3,133
3,133
Profit and loss account
19
277
(219)
15,206
14,710
Total shareholders’ funds
The financial statements were approved by the Board of Directors on 31 March 2014 and were signed on its behalf by:
B Glastonbury Director
15
Group Cash Flow Statement for the year ended 31 December 2013
Note
2013 ÂŁ000
2012 ÂŁ000
22
12,349
2,336
(124) 2 (31) (8,000)
(180) (31) -
Net cash outflow from returns on investments and servicing of finance
(8,153)
(211)
Taxation
(2,671)
(2,383)
Capital expenditure and financial investment Purchase of tangible fixed assets
(171)
(461)
Net cash outflow for capital expenditure and financial investment
(171)
(461)
Acquisitions Net cash inflow/(outflow) in relation to purchase of trade and assets
1,266
(750)
Net cash inflow/(outflow) for acquisitions
1,266
(750)
Net cash inflow/(outflow) before financing Financing Cancellation of share warrant Issue of share capital
2,620
(1,469)
-
(1,000) 1,000
-
-
2,620
(1,469)
Net cash inflow from operating activities
Returns on investments and servicing of finance Interest paid Interest received Preference share dividends paid Dividend paid
Net cash inflow from financing
Increase/(decrease) in net cash
24
A reconciliation of net cash flow to movement in net debt is given in note 24 to the financial statements.
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accounting policies
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Accounting policies The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements. Basis of preparation The financial statements have been prepared in accordance with applicable accounting standards and under the historical cost accounting rules. Basis of consolidation The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 December 2013. Subsidiaries acquired have been dealt with in the consolidated accounts using acquisition accounting. Upon the acquisition of a subsidiary, the fair values that reflect the condition at the date of acquisition are attributed to the identifiable assets and liabilities acquired. Adjustments are made to bring the accounting policies of subsidiaries acquired into alignment with those of the Group. Transactions between Group companies are eliminated. Where the fair value of the consideration paid differs from the fair value of the acquired assets and liabilities, the difference is treated as goodwill. In accordance with the FRS 10 (Goodwill and Intangible Assets), goodwill arising on acquisitions is capitalised and amortised on a straight line basis over its useful economic life. The goodwill on the acquisition of Integral UK Group Limited is being amortised over its estimated useful economic life of 20 years. The results of businesses acquired are included from the effective date of acquisition and businesses sold are included up to the date of disposal. Negative goodwill is released to the profit and loss account in the period in which the fair values of the assets are recovered. Going concern The directors have considered the financial position of the Group and Company and have concluded that the Group and Company will continue to meet its liabilities as they fall due for the foreseeable future and hence the accounts are prepared on a going concern basis. Investments Investments in subsidiary undertakings are stated at cost less provision for permanent diminution in value. Tangible fixed assets The cost of tangible fixed assets is their purchase cost, together with any incidental expenses of acquisition.
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Tangible fixed assets are depreciated over their estimated useful lives using the straight-line method of depreciation. The following annual rates are applied to original cost less estimated residual value where appropriate:
Leasehold land and buildings
-
Term of lease
Plant, machinery and vehicles
-
25% - 50%
Fixtures and fittings
-
20% - 33%
Stocks Stocks are valued at the lower of cost and net realisable value. Provision is made for obsolete, slow moving and defective items. Taxation The charge for taxation is based on the profit for the year and takes into account taxation deferred because of timing differences between the treatment of certain items for taxation and accounting purposes. Full provision is made on an undiscounted basis for deferred tax assets and liabilities arising from timing differences between the recognition of gains and losses in the financial statements and their recognition in the tax computation. Deferred tax assets are recognised only to the extent that they are more likely than not to be recovered. Pensions The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Company in an independently administered fund. The pension cost charge represents contributions payable by the Company to the fund. Contributions to the Scheme are charged to the profit and loss account when they become payable. Operating leases Rentals under operating leases are charged to the profit and loss account as they are incurred. Accounting for contracts Turnover represents amounts earned on contracts for planned maintenance and reactive maintenance works. Turnover for long term contracts is stated at the cost appropriate to their stage of completion plus attributable profits, less amounts recognised in previous years.
Integral UK Holdings UK Limited Annual Report 2013
Amounts recoverable on contracts are included in debtors and represent turnover recognised in excess of payments on account. Payments received on account in respect of contracts that exceed the recognised turnover are included in creditors. Provision is made for any losses that are foreseen. Equity dividends Dividends are only recognised as a liability at that date to the extent that they are declared prior to the year end. Exceptional items Items that are both individually significant and are not expected to recur are classified as exceptional items. Exceptional items are recorded within reported operating profit on the face of the profit and loss account.
“The engineers working on our boiler installation project were absolutely brilliant throughout, and I am very grateful to them for persevering with things until they and we were happy that everything was working as it should …” M Guffogg, Business Support Supervisor, Rowanmoor Group plc
Research and development expenditure Expenditure on research and development is written off to the profit and loss account in the year in which it is incurred.
Halfords
Birmingham
19
notes to the financial statements
20
www.integral.co.uk
Integral UK Holdings UK Limited Annual Report 2013
1.
2.
Turnover
All turnover and profits are derived from the supply of services, which, in the Directors’ opinion, constitutes one class of business.
Operating profit Operating profit is stated after charging/(crediting) the following items:
3.
Auditor’s remuneration - audit of these financial statements - audit of financial statement of subsidiaries pursuant to legislation - other services relating to taxation Depreciation Amortisation of goodwill Hire of plant and machinery – operating leases Hire of other assets – operating leases Research and development expenditure Release of negative goodwill
2013 £000
2012 £000
15 57 30 505 1,788 6,597 683 61 (1,266)
13 57 9 368 1,788 6,589 680 195 -
Directors and employees (a) Directors’ remuneration The remuneration of the directors was as follows:
Emoluments in respect of qualifying services Company pension contributions to money purchase schemes
2013 £000
2012 £000
642 23
583 98
The number of Directors to whom retirement benefits are accruing in respect of qualifying services under money purchase schemes is three.
(b) Highest paid director The remuneration of the highest paid director was as follows:
Emoluments in respect of qualifying services Company pension contributions to money purchase schemes
2013
2012
£000
£000
319
282
-
79
21
(c) Directors’ interests The beneficial interests of the directors in the share capital of the Company as at 31 December 2013 were as follows:
Preference shares
Ordinary shares
125,150
7,864,167
P Salmons
50,000
766,667
M Johns
50,000
766,667
A Kenny
20,833
946,761
B Glastonbury
Except as reported in note 28, no Director had any material interest in any contract of significance to the business of the Company at any time during the period under review.
(d) Staff numbers The average weekly number of persons employed by the Group (including directors) during the year was as follows:
Operations Management and administration
(e) Staff costs Aggregate payroll costs (including directors) were as follows:
Wages and salaries Social security costs Other pension costs
4.
22
2013
2012
1,959
2,161
782
661
2,741
2,822
2013 £000
2012 £000
74,681 8,061 860
70,295 7,195 698
83,602
78,188
2013
2012
£000
£000
2
-
Interest receivable and similar income
On bank deposits
www.integral.co.uk
Integral UK Holdings UK Limited Annual Report 2013
5.
6.
Interest payable and similar charges 2013
2012
£000
£000
On bank loans and overdraft
124
180
Preference share dividends
31
31
155
211
2013 £000
2012 £000
2,727
2,724
(13)
(5)
2,714
2,719
(43)
(23)
-
39
7 (36)
3 19
2,678
2,738
Tax on profit on ordinary activities (a) Analysis of tax charge in year
UK Corporation tax Current tax on income for the year Adjustments in respect of prior years Total current tax Deferred tax (note 17) Origination and reversal of timing differences Adjustment in respect of prior years Effect of tax rate change on opening balance Total deferred tax (credit) / charge Tax on profit on ordinary activities
‘Voted Capita’s Cambridge Team Good News Winner for March 2013’ : Rob Sherry - nominated by the Team for going beyond the call of duty to ensure the smooth operation of our contract and client’s facilities.” S Ganiford, Associate, Capita Symonds
23
(b) Factors affecting the tax charge for the current year The tax assessed for the year is higher (2012: higher) than the standard rate of corporation tax in the UK of 23.25% (2012: 24.5%). The differences are explained overleaf:
Profit on ordinary activities before taxation Corporation tax at the standard rate of 23.25% (2012: 24.5%)
2013
2012
£000
£000
10,740
9,058
2,497
2,219
416
585
(295)
-
-
(160)
42
42
(13)
(5)
55
25
-
13
12
-
2,714
2,719
Effects of: Goodwill amortisation not deductible for tax purposes Release of negative goodwill not taxable for tax purposes Income not taxable for tax purposes Other expenses not deductible for tax purposes Adjustments in respect of prior periods Accelerated capital allowance and other timing differences Chargeable gains Group relief
Current tax charge for the year
(c) Factors that may affect future tax charges Reductions in the UK corporation tax rate from 26% to 24% (effective from 1 April 2012) and to 23% (effective 1 April 2013) were substantively enacted on 26 March 2012 and 3 July 2012 respectively. Further reductions to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. This will reduce the company’s future current tax charge accordingly. The deferred tax asset at 31 December 2013 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.
7.
Parent company profit and loss account Integral UK Holdings Limited has not presented its own profit and loss account as permitted by Section 408 of the Companies Act 2006. The retained profit for the year dealt with in the accounts of Integral UK Holdings Limited is £496,000 (2012: £38,000) after payment of a dividend of £8,000,000 (2012: £Nil).
8.
Dividends An interim dividend of £8,000,000 has been paid (2012: £Nil). No final dividend is proposed. Dividends on redeemable preference shares have been recorded as interest as under the provisions of FRS 25 the shares are recorded as a liability.
24
www.integral.co.uk
Integral UK Holdings UK Limited Annual Report 2013
9.
Intangible fixed assets and negative goodwill Goodwill
Negative Goodwill
£000
£000
23,213
-
-
(2,539)
(1,788)
-
-
1,266
21,425
(1,273)
Short leasehold land and buildings
Plant machinery and vehicles
Total
£000
£000
£000
339
1,631
1,970
-
171
171
339
1,802
2,141
199
901
1,100
54
451
505
253
1,352
1,605
At 31 December 2013
86
450
536
At 31 December 2012
140
730
870
As at 1 January 2013 Acquired during the year (note 26) Amortisation Released to the profit and loss account
10.
Net book value at 31 December 2013
Tangible fixed assets Group
Cost At 1 January 2013 Additions At 31 December 2013 Accumulated depreciation At 1 January 2013 Charge for year At 31 December 2013 Net book value
25
11.
Investments Shares in subsidiary company undertakings:
Cost Impairment
Carrying value
2013
2012
£000
£000
36,616
36,616
(90)
-
36,526
36,616
Impairment testing During the year management conducted an impairment review of investments due to the uncertainty regarding the recoverability of the investment value based on the trading performance of Hub Professional Services Limited. As a result of the review, the impairment charge is equivalent to the full value of the investment. The impairment loss has been recognised in admin expenses within the profit and loss account. The company’s principal subsidiary undertaking is as follows:
Name of company
Country of registration and operation
Holding %
Activity
Integral UK Limited
England and Wales
100%
Facilities maintenance
The company’s other trading subsidiary undertakings are as follows:
Name of company
Country of registration and operation
Facility Associates Recruitment Limited
England and Wales
100%
Employment bureau
Hub Professional Services Limited
England and Wales
90%
Professional services
Integral UK Staff Limited *
England and Wales
100%
Employment bureau
Integral Payroll Limited *
England and Wales
100%
Payroll services
Mobius Support Services Limited*
England and Wales
100%
Facilities management
Integral Uptime Limited
England and Wales
100%
Business environment management
* ceased trading during the year.
26
www.integral.co.uk
Holding %
Activity
Integral UK Holdings UK Limited Annual Report 2013
12.
Stocks Group
Raw materials and consumables
13.
2013
2012
£000
£000
496
476
Debtors
Amount due from group companies Trade debtors Amounts recoverable on contracts Deferred tax (note 17) Other debtors Prepayments and accrued income
Group
Company
Group
Company
2013
2013
2012
2012
£000
£000
£000
£000
-
587
-
-
46,411
-
37,109
-
8,899
-
14,024
-
91
-
55
-
617
-
668
-
1,064
-
915
-
57,082
587
52,771
-
Integral’s efforts ensured the impact on our businesses has been minimised, with over 30 stores closed being re-opened within a day. Despite the conditions and all the demands being placed on your teams at this time, the commitment in ensuring our stores re-open at this crucial trading time has not gone unnoticed.” M Bolton, Supplier Strategy Manager - Assets, Co-Op Retail Facilities Management Shared Service
27
14.
Creditors: amounts falling due within one year Group
Company
Group
Company
2013
2013
2012
2012
£000
£000
£000
£000
-
-
-
62
25,228
-
18,886
-
Payments received on account
6,503
-
9,353
-
Corporation tax
1,508
-
1,422
-
Other taxes and social security
8,858
-
8,798
-
Accruals and deferred income
8,724
-
8,868
-
50,821
-
47,327
62
Amount owed to group undertakings Trade creditors
The amount due to group undertakings is repayable on demand and interest is charged at a current rate of 2.0%.
15.
Borrowings
Preference shares Amounts due to group companies
Group
Company
Group
Company
2013
2013
2012
2012
£000
£000
£000
£000
256
256
256
256
-
21,651
-
21,588
256
21,907
256
21,844
The amounts due to group companies are long term and have no fixed repayment date. Details of the preference shares can be found in note 18.
28
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Integral UK Holdings UK Limited Annual Report 2013
16.
Deferred tax asset The movement on the Group’s deferred tax asset can be analysed as follows: 2013
2012
£000
£000
At 1 January 2013
55
74
Credit/(charge) for the year
36
(19)
At 31 December 2013
91
55
2013
2012
£000
£000
Accelerated capital allowances
62
38
Short term timing differences
29
17
91
55
Analysis of deferred tax asset:
17.
Share capital The share capital is summarised below: 2013
2012
2013
2012
Number
Number
£000
£000
17,000,000
17,000,000
9,364
9,364
256,400
256,400
2,564
2,564
11,935,650
11,935,650
4,775
4,775
256,400
256,400
2,564
2,564
Authorised Ordinary shares Preference shares
Allotted and fully paid Ordinary shares Preference shares
29
The rights allocated to the Ordinary shares and Preference shares are the same except where listed below.
• • •
Preference shareholders participate in a fixed cumulative cash dividend at 12% of the paid up value of the shares. On a return of capital of the Company, any surplus shall be distributed to the shareholders in the following order: - Preference shares - Ordinary shares Preference shares shall be redeemed at their paid up value in the event of a listing or an acquisition of the company’s Ordinary shares.
In accordance with Financial Reporting Standard No 25 (“Financial Instruments: Disclosure and presentation), the preference shares have been disclosed in the financial statements as “Creditors: Amounts falling due after more than one year”.
18.
Movements in equity share capital and reserves
The statutory share capital and reserves of the group are set out below: Ordinary shares
Share premium
Profit and loss account
Total
£000
Capital redemption reserve £000
£000
£000
£000
At 1 January 2013
5
3,133
11,791
16,031
30,960
Profit for the year
-
-
-
8,077
8,077
Dividend
-
-
-
(8,000)
(8,000)
11,791
16,108
31,037
Share premium
Profit and loss account
Total
£000
Capital redemption reserve £000
£000
£000
£000
At 1 January 2013
5
3,133
11,791
(219)
14,710
Profit for the year after taxation
-
-
-
8,496
8,496
Dividend
-
-
-
(8,000)
(8,000)
5
3,133
11,791
277
15,206
At 31 December 2013 5 3,133 The statutory share capital and reserves of the company are set out below: Ordinary shares
At 31 December 2013
30
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Integral UK Holdings UK Limited Annual Report 2013
19.
Capital commitments There is no capital expenditure authorised and contracted for at 31 December 2013 for which no provision has been made in these accounts.
20.
Operating leases Annual commitments under operating leases are as follows:
Land and buildings
Other operating leases
2013 £000
2012 £000
2013 £000
2012 £000
39
11
1,073
282
Within two to five years
330
463
4,658
4,148
After five years
472
252
-
-
841
726
5,731
4,430
2013 £000
2012 £000
10,893
9,269
1,788
1,788
505
368
(4,311)
(3,135)
(20)
(11)
3,494
(5,943)
12,349
2,336
Operating leases which expire: Within one year
21.
Cash flow from operating activities
Operating profit Amortisation of goodwill Depreciation of fixed assets (Increase)/decrease in debtors (Increase)/decrease in stock Increase/(decrease) in creditors
31
22.
Reconciliation of movement in net debt
Cash in hand and at bank Bank overdraft
Preference shares redeemable after one year Net cash
23.
At 1 January 2013 £000
Cash flow £000
At 31 December 2013 £000
5,084
(1,259)
3,825
(3,879)
3,879
-
1,205
2,620
3,825
(256)
-
(256)
949
2,620
3,569
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash in the year Change in net debt resulting from cash flows Movement in net debt in the year Net debt at start of the year Net debt at end of the year
24.
2013 £000
2012 £000
2,620
(1,469)
-
-
2,620
(1,469)
949
2,418
3,569
949
Pensions The Group operates defined contribution pension schemes. Contributions to these schemes are held in separate trustee administered funds. The pension charge during the year was £860,000 (2012: £698,000). At the year end £137,000 (2012: £76,000) was due to the Group to the pension scheme.
“ … the high levels of partnership that Northern Trust’s Corporate Services Group enjoys with its key vendors such as Integral serves only to underscore the collaborative nature of our relationship.” A Hamilton-Briscoe, Vice President, Northern Trust, Canary Wharf
32
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Integral UK Holdings UK Limited Annual Report 2013
25.
Acquisition During the year, the Group acquired the trade and assets of WR Refrigeration.
Work in progress and debtors
Book value £000
Re-valuation £000
Fair value £000
5,318
(103)
5,215 2,676
Cash consideration
2,539
Negative goodwill (see Note 10) The fair value adjustments arose following an assessment of the recoverability of the work in progress and debtor balances.
26.
Post balance sheet events On 13th January 2014, Integral UK Holdings Limited acquired the chattels, customer contracts, goodwill, business information and software licenses held by Berkeley Environmental Services Limited for a nominal fee.
27.
Related party disclosures The Company has taken advantage of the exemption available under FRS 8 not to disclose transactions or balances with wholly owned subsidiaries which form part of the Group. During the year, the company has carried out no transactions with non-wholly owned subsidiaries (Hub Professional Services Limited) in the normal course of business (2012: £nil). Mr A Kenny, a director of the Company, is also a director of Clifton Down Corporate Finance Limited. Clifton Down Corporate Finance Limited performed advisory services for the Company. The total amount paid to Clifton Down Corporate Finance Limited in the year was £200,000 (2012: £100,000).
“Many thanks to you and Carly for the great effort to complete our Fit Out at such short notice; it was good to work together and I am sure we will continue to do so.” A Rogers MBIFM, Director – Corporate Facilities Management, Eddisons
33
the board & management team
34
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Integral UK Holdings UK Limited Annual Report 2013
Bryan Glastonbury
Paul Salmons
Bryan’s main objective is to ensure the business remains closely aligned with its customers – focusing on supporting them in the achievement of their business goals; a determined and resilient leader with proven experience of being able to challenge and think strategically. Bryan passionately promotes integrity and professionalism into the heart of the business.
Paul heads up strategic financial planning, establishing a solid financial operating framework and delivering sound financial control, ensuring our processes and systems of risk management are robust and defensible. Paul also successfully manages all Integral’s acquisitions.
Mark Johns
Tony Kenny
Mark is responsible for maintaining the operational performance of the company ensuring that the objectives and standards of performance are not only understood but owned by the management and our employees. Mark works closely with our clients solving problems and helping them run their built environment more efficiently and we are fully engaged with our clients’ strategic decisions to add value.
Tony is responsible for determining the company’s strategic objectives and policies, directing strategy towards the profitable growth and operation of the company. Tony explores all areas where significant business improvements can be made and is actively involved with all potential acquisitions.
Managing Director
Operations Director
Finance Director
Non-Executive Chairman
35
36
www.integral.co.uk
Martin McCormack
Andy Nichol
South East & London Regional Director
North & Scotland Regional Director
Steve Collins
Kevin Doughty
South West & Wales Regional Director
Midlands & East Anglia Regional Director
Mike Nicholas
Antony Collett
Refrigeration Director
Strategic Development Director
Andrew Dutton
Joe Chapman
Critical Environment Director
National Projects Director
John Moore
Chris Todd
South East & London Sales Director
Commercial Director
Martin Forbes
Don Urquhart
HR Director
H&S and CSR Director
registered office 1290 Aztec West, Almondsbury, Bristol BS32 4SG t: 01454 278 900 f: 01454 201 169
sales enquiries 03333 212 216 e: enquiries@integral.co.uk Company Registration No. 5307588
www.integral.co.uk