www.integral.co.uk
delivering engineering excellence
Integral UK Holdings Ltd Annual Report 2012
Integral UK Holdings Limited has grown to be one of the largest independent providers of property maintenance services in the UK. The business is privately owned and debt free with more than £30 million of net assets. A solid business that its customers can depend upon. Integral employs over 2800 people and has a mobile enginerring fleet of more than 1300 vehicles. It has an engineer in every UK postcode and a presence on every UK high street.
services • • • • •
M&E Maintenance M&E Project Management Critical Environment Maintenance Fabric Maintenance Energy Management & Sustainability
sectors Accountants Air Bank Building Society Care Home Central Government Clinic Commercial Critical Site Defence Education Electric Energy Engineering Entertainment Finance Fitness Food Gas Health High Street Hospital Hotel Housing Industrial Insurance Investment IT Laboratory Legal Leisure Local Government Logistics Managing Agent Museum Offices Pharmaceutical Public Sector Rail Retail Shopping Centre Sporting Arena Technology Telecoms Transport TV Utilities Venue Water
• • • • •
Lighting Solutions Fire Services Cleaning Services Interior Fit-out & Refurbishment Fixed Wire/PAT Testing
• • •
Housing Services – Domestic Gas & Fabric Hub Estate & Design Management Recruitment Consultancy
2-6
19-30
2012 overview
notes to the financial statements
Managing Directors’ Review Highlights
Turnover
7-11 statements and reports Directors’ Report Statement of Directors’ responsibilities in respect of the Directors’ Report and the financial statement Independant auditors’ report to the members of Integral UK Holdings Limited
Operating Profit Directors and Employees Interest Receivable and Similar income Interest Payable and Similar Charges Tax on Profit on Ordinary Activities Parent Company profit and loss account dividends Intangible fixed assets Tangible fixed assets Investments Stocks Debtors Creditors: amounts falling due within one year Borrowings
12-16 accounts & balance sheets Profit and Loss Account
Share Capital Movements in equity share capital and reserves Capital commitments Operating Leases Cash Flow from operating activities Reconciliation of movement in net cash Reconciliation of net cash flow to movement in net cash Pensions
Group Balance Sheets
Acquisition
Company Balance Sheet
Related party disclosures
Group Cash Flow Statement
31-32
17-18 accounting policies Basis of Consolidation Going Concern Investments Tangible Fixed Assets Stocks Taxation Pensions Operating Leases Accounting for Contracts Equity Dividends Exceptional Items
3
Deferred tax asset
www.integral.co.uk
cost effective, sustainable solutions Energy Services - Carbon Arc
33-36 the board & accreditations Directors’ Biographies Management Team Accreditations
Managing Director’s Review Integral’s philosophy of offering ‘best in class’ technical services is paying dividends, leading to record results for 2012, despite the continued depression of the UK economy. Sales at £240m were over 20% up on 2011 and operating profit at £11.1m showed a 29% increase against last year’s results. This success can be attributed to a number of factors including: •
Our continued review and streamlining of processes to eliminate waste has enabled us to deliver cost-effective technical solutions to existing clients and win new business in a competitive market.
•
Our focus on customer care and flexibility to meet our customers’ needs has helped us retain our clients when expiring contracts have come up for renewal and re-tender.
•
Our highly skilled in-house operations team and dedicated management ensure our customers’ properties are safe, compliant and energy efficient, allowing them to concentrate on their core business.
•
Our growth has been achieved through a combination of new business wins with blue chip companies, including Boots and Sainsbury’s, acquisition of parts of the MJN Colston technical services business and renewal of existing contracts.
•
We realise how difficult the marketplace is, especially for our financial services and retail clients. We would like to thank our existing clients for their continued loyalty and our new clients for trusting us to look after their properties.
Financial performance Our focus on customer care and eliminating waste has enabled us to grow both our sales and profits in 2012. Integral grew turnover by 20% from £199 million in 2011 to £240 million in 2012. This is partly due to the continued strong relationships with existing clients, new wins (particularly with large retail clients) and additional sales arising from the purchase of some of the engineering assets of MJN Colston Limited which went into administration during 2012.
20%
turnover £m
2010
2011
11.1m
2009
8.6m
2008
9.07m
2007
9.5m
2012
29%
operating profit £m 9.0m
2011
The strong trading performance further strengthened the balance sheet and net assets increased from £25 million to £31 million during the year.
7.2m
240m
2010
199m
www.integral.co.uk
2009
178m
2008
184m
2
180m
147m 2007
The additional volume linked with the increased operating efficiencies and process improvements during the year led to a 29% increase in trading profit from £8.6 million to £11.1 million.
2012
Integral UK Holdings UK Limited Annual Report 2012
Operations Maintaining the highest possible standards for Health and Safety remains top of our agenda. IOSH Managing Safely training has been rolled out across the whole operational management team. Health and Safety training and tool box talks continue to reinforce the importance of safety within our delivery teams. 2012 saw the launch of Integral’s ‘National Near Miss Reporting Line’, welcomed by all. Since its introduction, reporting of Near Misses has increased nearly 1000%, helping to promote good safety practice and avoid incidents. In 2012 total incidents reduced by almost 40%, with a 0.5% reduction in reportable incidents. Whilst we are pleased with the downward trend, we are redoubling our efforts in 2013 to target further reductions. Building compliance is fundamental to our clients’ needs and one of the main reasons given when selecting Integral for building maintenance services. To ensure we keep our clients’ properties 100% compliant and provide peace of mind, we have not only strengthened our in-house technical specialist teams, but have also developed our reporting systems to offer clients visibility of compliance status with supporting compliance certification documentation through a web portal. New contract wins with both Sainsbury’s and Boots, where we maintain the mechanical and electrical services to nearly 3,000 retail outlets throughout the UK, has enabled us to expand our mobile technician workforce to over 1,300 staff. The size and spread of our mobile workforce, all with vehicle tracking linked to our helpdesk, enables us to minimise travel time, and operate cost-effectively. Furthermore, through our helpdesk system we are able to identify engineers with the appropriate skill base located near the client’s property, helping us achieve ‘first time fix’ rates in the high 70% plus; this is an important measure of our performance as it very much influences our clients’ perception of our service. As a technical services business, it is also important for us to support our clients with major capital asset replacement programmes and property refurbishments. Integral provides full design and build solutions for mechanical and electrical installations and our in-house design consultancy, Hub Professional Solutions work closely with our installation project teams to provide the most practical cost effective end-to-end solutions. For fabric projects, Integral Interiors provide specialist fit out and refurbishments undertaking minor up to multi-million pound projects.
Our People The results achieved in 2012, taking into account the continuing challenging economic environment, are excellent and could not be produced without the dedication and commitment of our directly employed workforce. As a “service sector business”
our people are genuinely our main assets and it is essential we employ staff with the right mindset, people who want to deliver a “great client experience” to our 1,600 customers throughout the UK. Finding the right staff is not easy, even with the recession, and we are greatly assisted by our in-house recruitment agency, which source the highest calibre staff when top industry people become available and give us prompt access to engineering resource when needed. In line with our policy on training young people, we aim to have 80 apprentices and trainees employed at any one time, which releases 20 Integral-trained staff into our business each year. As a technical services provider, it is essential we provide the correct level of training to our engineers to ensure their accreditations are current and they can provide the quality of service expected by us and our customers. In addition to technical training, during the year we have worked with customers like Boots, to develop bespoke customer care training for all our front line technicians. Reflecting the importance of both technical and developmental training to our ‘best in class’ service, we have set aside a significantly increased training budget for 2013. Our training programmes are welcomed by our staff and, I believe, aid our staff retention, which in turn provides greater stability for our clients. Staff continuity is nowhere more important than in new contract wins, where staff have the opportunity to transfer under TUPE. We value the experience and knowledge these staff can bring to Integral and through the TUPE process, group meetings and individual consultations we take care to reassure staff of their future and to welcome them into Integral. In essence, we believe in demonstrating to our staff that we care, and that we take personal development very seriously. Our ‘promote from within’ policy is part of this philosophy. A ‘happy team’ is far more likely to go the extra mile to meet our clients’ needs and my thanks go to the whole Integral team for helping make 2012 so successful. I know I can rely on your continued support going forward.
Helping our Communities The main aim within our Communities programme is to offer disadvantaged young people either work experience or permanent employment. We have, over the past few years, worked with the Barnardo’s charity to help identify these young people and have in addition this year started working with the Prince’s Trust. Our whole management team are committed to this initiative and we hope to make a real difference to young people’s lives.
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We also continue to work with “Tools with a Mission”; a charity set up to provide tools and equipment to Third World Countries to help them deliver projects in areas such as water and sanitation. Each of our regions also work with their own local communities providing help with projects such as decorating classrooms, helping with interview techniques and preparation of CVs. We also take part in joint charity initiatives with our clients and suppliers, helping to raise funds and promote teamwork. Finally, one of our managers sadly passed away during Christmas 2011 and our team organised a cycle ride from our Bristol to Birmingham office to raise funds for a local hospice. This was well supported and our staff raised £25,000, shared between the hospice and other charities.
New Developments In November 2012 Integral launched “galileo” at the DataCentre Dynamics Conference at EXCEL London. This has generated a great deal of interest from existing and prospective clients. This innovative software tool manages key processes, predictive maintenance tools, reporting and real time updates on electrical and mechanical schematics highlighting all areas of risk. This product incorporates technology used by advanced manufacturing processes and brings it into the building maintenance market. Whilst the main purpose for developing “galileo” was to ensure the maximum possible resilience to critical sites, the technology around the results measured by our predictive maintenance tools feeding into plant algorithms provided by manufacturers is becoming a major interest in its own right. This technology is allowing us to produce accurate and objective information about major items of plant which not only demonstrates the actual current condition of plant, but the forward maintenance required around definitive life cycles. This enables capital expenditure budgets to be much more realistically prepared, and provides the technical data to support plant replacement applications.
let the business become complacent; an enormous effort by the whole team was required to produce such impressive results and we will go into 2013 with the same enthusiasm and commitment to become the “best in class” technical maintenance business in the UK. Our strategy will continue to be the delivery of cost-effective technical services through our directly employed workforce. We will not chase sales volume and will focus on clients who value the services we provide, take a long term view and to whom we can offer the greatest benefits. This strategy has been instrumental in helping us achieve a contract retention rate of over 90% in 2012. The systems and processes developed by our Critical Site Team are I believe groundbreaking and could change the way maintenance is carried out in future on major sites. Modelled on ISO 5500X, Integral support the first ever international family of standards planned to provide steady state lifecycle asset management. For the first time this product incorporates predictive, energy and sustainable management strategies, demonstrating Integral’s progressive approach to whole life asset management and support. Working with and talking to food retailers, we believe there is a great opportunity for a new entrant in the food refrigerant market. We intend to fully explore this opportunity and, if realistic, expect to have a regional presence by the end of 2013. We also intend to further develop our lighting division as new lighting technology can have a major impact on energy savings. Bulk lamp replacement teams will be in place on a national basis by the half year. All our business streams performed well in 2012 and Integral enter 2013 with strong order books. I therefore very much look forward to the challenges that lie ahead, knowing we have the teams to meet them.
The tools also give clients the flexibility to move away from regimented quarterly or half year maintenance regimes, only maintaining the plant when it is required, in turn reducing maintenance costs of expensive plant.
Future Prospects I have said in the past that Integral is “recession resistant.” The 2012 results with sales growing by 20% and operating profits by 29% admirably justify this statement. I do not however intend to
B Glastonbury Managing Director 21 March 2013
The results achieved in 2012, taking into account the continuing challenging economic environment, are excellent and could not be produced without the dedication and commitment of our directly employed workforce. Bryan Glastonbury, Managing Director, Integral UK Limited
4
www.integral.co.uk
Integral UK Holdings UK Limited Annual Report 2012
Highlights Understanding our client’s strategy is core to our service offering; after all in fast moving industries such as Retail, Financial Services, Commercial, Healthcare and the Public Sector, property requirements change quickly and we offer a range of flexible contract terms to suit. Highlights this year include:Integral has been awarded a three year M&E maintenance services contract to provide the heating and cooling servicing to all of the Boots Pharmacy stores. The portfolio includes 2,764 sites spread across the UK, including high-street stores, flagship sites, as well as specialist sites such as ones at train stations and airports. Integral’s national coverage and depth of resource were key to the successful award, ensuring the delivery of the compliance and “great customer care” expected by Boots.
Integral has been awarded the M&E maintenance services of 165 Sainsbury’s stores spread across central and South Western England, and South Wales. The Sainsbury’s portfolio consists of 557 stores in total nationally, with a market share of over 16% and employing over 150,000 staff. Through Integral’s provision of planned and reactive M&E maintenance, Sainsbury’s will gain maximum output whilst also having minimal service disruption.
ISS UK awarded Integral the Barclays Retail and CAT 2 Corporate Estate in October, this includes 1,709 sites throughout the UK where we deliver PPM and reactive M&E together with Fabric and Security reactive services. This contract allows for strategic development for both companies and a platform to promote full Technical Facilities Management.
integral.co.uk 5
Liverpool John Moores University and the Construction Industry Development Board Malaysia invited Mark Whittaker, our Business Development Manager in the northern region, to deliver a keynote speech on the role of innovation in property lifecycle and the built environment to around three hundred delegates at the Malaysia FM conference in Pahang in November. This event was the latest in several collaborative projects Integral have been working with Liverpool John Moores University School of the Built Environment on. Mark has already been involved in a research project on BS11000 on Collaborative Partnerships, delivering FM lectures to UK and foreign students, assisting in student dissertations and providing work placements. Integral helped National Museums Liverpool triumph at Merseyside Environment Awards 2012 to be crowned “Carbon Champion”. The awards recognise people and organisations who have contributed to making Merseyside a greener, healthier and more sustainable place to live and work. Integral have worked with the museums group since 2009 and amongst the measures taken have been to review the operation of their building management systems and the heating and cooling equipment throughout their estate and introduce a programme to optimise their performance and reduce their energy consumption.
Integral in Newcastle continue their long working relationship with Sir Robert McAlpine by being awarded the contract for M&E services at the new Akzo Nobel Paint Plant in Northumberland. The services valued in excess of £5m include HVAC, sprinklers, fire suppression and hazardous area services. The plant will be BREAM excellent and provide a low carbon low environmental impact manufacturing facility.
Integral has climbed 18 places to position 202 in The Sunday Times Top Track 250 league table, The league ranks Britain’s leading midmarket private companies. The Top Track 250 national awards dinner was held on October 11, 2012, in London.
Integral have moved up 20 places in the rankings of property service suppliers on the back of the 2012 supplier performance assessments. We were also informed by RBS we have once again regained their approved supplier Kite Mark award for the year.
6
www.integral.co.uk
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 2012. 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.
Review of business Please refer to the Managing Director’s Review on pages 2 to 4 for a review of the business during the year.
Donations The Group made no political donations (2011: £Nil). Charitable donations of £8,000 were made (2011: £13,000).
Results and dividends The Group profit after tax for the year amounted to £6,320,000 (2011: £4,226,000). An interim dividend of £Nil (2011 : £Nil) was paid during the year. This represents a payment per share of £Nil (2011: £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 on page 32. See note 3c 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.
Creditor payment policy It is Group policy that payments to suppliers are made in accordance with the terms and conditions agreed with the supplier, provided that the supplier is also complying with all relevant terms and conditions. The number of day’s purchases outstanding at the end of 2012 was 26 (2011: 51).
Principal risks and uncertainties 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. 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. 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
Employee involvement
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:
The Group seeks to engage all employees in both its short term and long term goals. This is mainly achieved through briefings.
•
Monthly value of work done by divisions
•
Gross Margin achieved by division
•
Overheads
•
Orders received in the month
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
8
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.
www.integral.co.uk
Integral UK Holdings UK Limited Annual Report 2012
•
Working capital including cash, work in progress and debtors
•
Prospects and tender opportunities in hand.
operations and planned expansions. Compliance with financing covenants is monitored by the board on a monthly basis. Interest rate cash flow risk
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. 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.
The Group has both interest bearing assets and interest bearing 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.
Auditors Pursuant to Section 487 of the Companies Act 2006, the auditor will be deemed to be reappointed and KPMG LLP will therefore continue in office.
Disclosure of information to auditor’s
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.
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.
Credit risk
By order of the Board
Price 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
Paul Salmons Secretary 21st March 2013
“I would like to place on record how pleased Northern Trust are with the performance of the Integral onsite team; this was particularly so during the Olympic and Paralympics Games, with them going above and beyond the norm.” D Stephens, Officer, Corporate Services Group, Northern Trust Corporation
9
Statement of directors’ responsibilities in respect of the Directors’ Report and the financial statements The directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations. Company 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 these 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 the 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 company and to prevent and detect fraud and other irregularities.
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 2012 set out on pages 13 to 30. The financial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice). 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 above, 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.
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www.integral.co.uk
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.
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 2012 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.
Integral UK Holdings UK Limited Annual Report 2012
Opinion on other matter prescribed by the Companies Act 2006
•
certain disclosures of directors’ remuneration specified by law are not made; or
In our opinion the information given in the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.
•
we have not received all the information and explanations we require for our audit.
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
Antonio Antonius (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants 100 Temple Street Bristol BS1 6AG 22 March 2013
"Here at Hill Dickinson, we have been reviewing our list of top suppliers and I'm pleased to inform you that Integral is in our top 10 category. We are pleased to be doing business with you and hope that we can build on this relationship". N Magee, Head of Operations, Hill Dickinson LLP.
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accounts and balance sheets
12
www.integral.co.uk
Integral UK Holdings UK Limited Annual Report 2012
Profit and loss account for the year ended 31 December 2012
2012
2011
ÂŁ000
ÂŁ000
239,661
198,851
Cost of sales
(205,071)
(170,027)
Gross profit
34,590
28,824
Administrative expenses
(23,533)
(20,248)
Operating profit before goodwill amortisation
11,057
8,576
Note
Turnover
2
Goodwill amortisation
3
(1,788)
(1,788)
Operating profit
3
9,269
6,788
Interest receivable and similar income
5
-
1
Interest payable and similar charges
6
(211)
(355)
9,058
6,434
7
(2,738)
(2,208)
19
6,320
4,226
-
22
6,320
4,248
Profit on ordinary activities before taxation Tax on profit on ordinary activities Profit on ordinary activities after taxation Equity minority interests Profit for the financial year 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 18 to 30 form part of these financial statements.
13
Group Balance Sheet as at 31 December 2012
Note
2012
2011
£000
£000
23,213
25,001
Fixed assets Intangible assets
10
Tangible assets
11
870
777
24,083
25,778
Current assets Stocks
13
476
465
Debtors
14
52,771
48,907
1,205
2,674
54,452
52,046
(47,327)
(52,936)
7,125
(890)
31,208
24,888
(256)
(256)
Cash at bank and in hand
Creditors: amounts falling due within one year
15
Net current assets Total assets less current liabilities Creditors: amounts falling due after more than one year Preference shares
16
Net assets
30,952
24,632
Capital and reserves Called up share capital
18
5
5
Share premium
19
11,791
10,791
Capital redemption reserve
19
3,133
3,133
Profit and loss account
19
16,031
10,711
30,960
24,640
Total shareholders’ funds
(8)
(8)
30,952
24,632
Minority interests Capital employed
The financial statements were approved by the Board of Directors on 21 March 2013 and were signed on its behalf by:
B Glastonbury Managing Director
14
www.integral.co.uk
Integral UK Holdings UK Limited Annual Report 2012
Company Balance Sheet as at 31 December 201
Note
2012
2011
£000
£000
Fixed assets Investments
12
36,616
36,616
Creditors: amounts falling due within one year
15
(62)
(7,212)
Net current liabilities Total assets less current liabilities Creditors: amounts falling due after more than one year
16
Net assets
(62)
(7,212)
36,554
29,404
(21,844)
(14,732)
14,710
14,672
Capital and reserves Called up share capital
18
5
5
Share premium
19
11,791
10,791
Capital redemption reserve
19
3,133
3,133
Profit and loss account
19
(219)
743
Total shareholders’ funds
14,710
14,672
The financial statements were approved by the Board of Directors on 21 March 2013 and were signed on its behalf by:
B Glastonbury Managing Director
"We have successfully completed our Lloyds Register external audit which included visits to our PO2 and EO1 plant rooms. These areas were both impeccably managed and Integral's positive response to some rectifications made some weeks ago has not gone unnoticed and has in part contributed to the successful outcome today." B Whiting, Contract Manager, Sodexo Corporate Services IFM.
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Group Cash Flow Statement for the year ended 31 December 2012
Note
Net cash inflow from operating activities
22
2012
2011
£000
£000
2,336
11,044
(180)
(326)
Returns on investments and servicing of finance Interest paid Interest received
-
1
Sale of investments
-
39
Preference share dividends paid
Net cash outflow from returns on investments and servicing of finance
Taxation
(31)
(31)
(211)
(317)
(2,383)
(3,250)
(461)
(367)
(461)
(367)
(750)
-
(750)
-
(1,469)
7,110
-
(7,137)
Capital expenditure and financial investment Purchase of tangible fixed assets Net cash outflow for capital expenditure and financial investment Acquisitions Purchase of trade and assets Net cash outflow for acquisitions Net cash (outflow)/inflow before financing Financing Repayment of bank loans Directors’ loans
(4,890) (1,000)
Cancellation of share warrant Issue of share capital Net cash outflow from financing Decrease in net cash
23
A reconciliation of net cash flow to movement in net cash is given in note 22 to the financial statements.
16
www.integral.co.uk
-
1,000
-
-
(12,027)
(1,469)
(4,917)
accounting policies
17
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 consolidation
Stocks
The consolidated financial statements include the financial statements of the Company and its subsidiary undertakings made up to 31 December 2012.
Stocks are valued at the lower of cost and net realisable value. Provision is made for obsolete, slow moving and defective items.
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 credited to the profit and loss over the period of expected benefit from the underlying assets acquired.
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. 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:
18
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. 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.
Leasehold land and buildings -
Term of lease
Exceptional items
Plant, machinery and vehicles -
25% - 50%
Fixtures and fittings
20% - 33%
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.
www.integral.co.uk
-
notes to the financial statements
19
1. Turnover
All turnover and profits are derived from the supply of services, which, in the Directors’ opinion, constitutes one class of business.
2. Operating profit
Operating profit is stated after charging the following items: 2012
2011
£000
£000
- audit of these financial statements
13
13
- audit of financial statement of subsidiaries pursuant to legislation
57
57
9
17
368
289
Amortisation of goodwill
1,788
1,788
Hire of plant and machinery – operating leases
6,589
6,338
Hire of other assets – operating leases
680
530
Research and development expenditure
195
-
Auditor’s remuneration
- other services relating to taxation Depreciation
3. 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
2012
2011
£000
£000
583
578
98
50
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: 2012
2011
£000
£000
282
280
79
31
Emoluments in respect of qualifying services Company pension contributions to money purchase schemes
(c) Directors’ interests
The beneficial interests of the directors in the share capital of the Company as at 31 December 2012 were as follows:
20
www.integral.co.uk
Integral UK Holdings UK Limited Annual Report 2012
B Glastonbury
Preference shares
Ordinary shares
125,150
9,104,167
50,000
766,667
P Salmons M Johns
50,000
766,667
A Kenny
20,833
946,761
Except as reported in note 26, 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: 2012
2011
£000
£000
2,161
1,931
661
674
2,822
2,605
Operations Management and administration
(e) Staff costs Aggregate payroll costs (including directors) were as follows: 2012
2011
£000
£000
Wages and salaries
70,295
63,961
Social security costs
7,195
6,412
698
450
78,188
70,823
Other pension costs
4. Interest receivable and similar income
On bank deposits
2012
2011
£000
£000
-
1
21
5. Interest payable and similar charges
On bank loans and overdraft
2012
2011
£000
£000
180
324
31
31
211
355
Preference share dividends
6. Tax on profit on ordinary activities (a) Analysis of tax charge in year 2012
2011
£000
£000
2,724
2,243
(5)
(34)
2,719
2,209
(23)
(7)
UK Corporation tax Current tax on income for the year Adjustments in respect of prior years Total current tax Deferred tax (note 16) Origination and reversal of timing differences
39
-
3
6
Adjustment in respect of prior years Effect of tax rate change on opening balance Total deferred tax
19
(1)
Tax on profit on ordinary activities
2,738
2,208
(b) Factors affecting the tax charge for the current year The tax assessed for the year is higher (2011: higher) than the standard rate of corporation tax in the UK of 24.5% (2011: 26.5%). The differences are explained below:
“I would like to take this opportunity to say a big thank you for your help, support and professionalism with regard to a recent fire incident. From Integral’s arrival on site whilst London Fire Brigade were still dealing with the fire. your sterling efforts throughout the week and seeing it through to final completion of works have certainly not gone un-noticed”. J Moore, Building Manager, CB Richard Ellis Central London Team.
22
www.integral.co.uk
Integral UK Holdings UK Limited Annual Report 2012
2012
2011
£000
£000
9,058
6,434
2,219
1,705
585
474
Profit on ordinary activities before taxation Corporation tax at the standard rate of 24.5% (2011: 26.5%) Effects of: Goodwill amortisation not deductible for tax purposes
-
-
(160)
-
Other expenses not deductible for tax purposes
42
80
Adjustments in respect of prior periods
(5)
(34)
Accelerated capital allowance and other timing differences
25
(22)
Chargeable gains
13
6
2,719
2,209
Amortisation of negative goodwill not taxable Income not taxable for tax purposes
Current tax charge for the year
(c) Factors that may affect future tax charges The 2012 Budget on 21 March 2012 announced that the UK corporation tax rate will reduce to 22% by 2014. A reduction in the rate from 26% to 25% (effective from 1 April 2011) was substantively enacted on 5 July 2011, and further reductions to 24% (effective from 1 April 2012) and 23% (effective from 1 April 2013) were substantively enacted on 26 March 2012 and 6 July 2012 respectively. This will reduce the Group’s future current tax charge accordingly. The deferred tax asset at the year end has been consolidated based on the rate of 23% substantively enacted at the balance sheet date. It has not yet been possible to quantify the full anticipated effect of the announced further 1% rate reduction, although this will further reduce the Group’s future current tax charge and deferred tax asset accordingly.
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 within the accounts of Integral UK Holdings Limited is £38,000 (2011: £38,000) after payment of a dividend of £Nil (2011: £Nil).
8. Dividends An interim dividend of £Nil has been paid (2011: £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.
RBS CAI 2012 East Update. “... all the CAI works up to this point has been excellent and with the quantity of work Integral have, I am very pleased with your efforts to-date”. C Fells BSc (Hons) MCQI CQP, Project Manager, Faithful+Gould.
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9. Intangible fixed assets Goodwill £000 As at 1 January 2012
25,001
Amortisation
(1,788)
Net book value at 31 December 2012
23,213
10. Tangible fixed assets Group Short leasehold land and buildings
Plant machinery and vehicles
Total
£000
£000
£000
At 1 January 2012
189
1,320
1,509
Additions
150
311
461
Cost
At 31 December 2012
339
1,631
1,970
Accumulated depreciation At 1 January 2012
181
Charge for year
551
18
At 31 December 2012
350
199
732 368
901
1,100
Net book value At 31 December 2012
140
At 31 December 2011
11. Investments
730
8
870
769
777
Shares in subsidiary company undertakings:
Cost
24
www.integral.co.uk
2012
2011
£000
£000
36,616
36,616
Integral UK Holdings UK Limited Annual Report 2012
The company’s principal subsidiary undertaking is as follows: Name of company
Country of registration and operation
Integral UK Limited
England and Wales
Holding %
Activity
100%
Facilities maintenance
The company’s other trading subsidiary undertakings are as follows: Name of company
Country of registration and operation
Holding %
Activity
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
* ceased trading during the year.
12. Stocks Group
Raw materials and consumables
2012
2011
£000
£000
476
465
13. Debtors Group
Company
Group
Company
2012
2012
2011
2011
£000
£000
£000
£000
Trade debtors
37,109
-
33,603
-
Amounts recoverable on contracts
14,024
-
13,379
-
55
-
74
-
Other debtors
668
-
805
-
Prepayments and accrued income
915
-
1,046
-
52,771
-
48,907
-
Deferred tax (note 16)
"I was most impressed with the 'can-do' attitude of the Integral Engineer who attended a call-out to our Hammersmith store recently … a fantastic service ... he was a great ambassador for your company and certainly allowed the store manager to get on with his day knowing that all was in hand." T Butcher, Regional Store Care Manager, Boots plc.
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14. Creditors: amounts falling due within one year Group
Company
Group
Company
2012
2012
2011
2011
£000
£000
£000
£000
-
62
-
7,112
18,886
-
20,296
-
Payments received on account
9,353
-
15,802
-
Corporation tax
1,422
-
1,085
-
Other taxes and social security
8,798
-
6,990
-
Accruals and deferred income
8,868
-
8,763
100
47,327
62
52,936
7,212
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 Group
Company
Group
Company
2012
2012
2011
2011
£000
£000
£000
£000
256
256
256
256
-
21,588
-
14,476
256
21,844
256
14,732
2012
2011
£000
£000
74
73
Preference shares Amounts due to group companies
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 17.
16. Deferred tax asset
The movement on the group’s deferred tax asset can be analysed as follows:
At 1 January (Charge)/credit for the year At 31 December
26
www.integral.co.uk
(19)
1
55
74
Integral UK Holdings UK Limited Annual Report 2012
Analysis of deferred tax asset:
Accelerated capital allowances
2012
2011
£000
£000
38
59
17
15
55
74
Short term timing differences
17. Share capital
The share capital is summarised below: 2012
2011
2012
2011
Number
Number
£
£
17,000,000
17,000,000
9,364
9,364
256,400
256,400
2,564
2,564
11,935,650
11,691,666
4,775
4,677
256,400
256,400
2,564
2,564
Authorised Ordinary shares Preference shares Allotted and fully paid Ordinary shares Preference shares
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
Capital redemption reserve
Share premium
Profit and loss account
Total
£000
£000
£000
£000
£000
At 1 January 2012
5
3,133
10,791
10,711
24,640
Profit for the year
-
-
-
6,320
6,320
Dividend
-
-
-
-
-
Cancellation of warrant
-
-
-
(1,000)
(1,000)
Share issue
-
-
1,000
-
1,000
At 31 December 2012
5
3,133
11,791
16,031
30,960
27
The statutory share capital and reserves of the company are set out below:
Ordinary shares
Capital redemption reserve
Share premium
Profit and loss account
Total
£000
£000
£000
£000
£000
At 1 January 2012
5
3,133
10,791
743
14,672
Profit for the year after taxation
-
-
-
38
38
Dividend
-
-
-
-
-
Cancellation of warrant
-
-
-
(1,000)
(1,000)
Share issue At 31 December 2012
-
-
1,000
-
1,000
5
3,133
11,791
(219)
14,710
19. Capital commitments
There is no capital expenditure authorised and contracted for at 31 December 2012 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
2012
2011
2012
2011
£000
£000
£000
£000
Operating leases which expire: Within one year Within two to five years
11
81
282
595
463
300
4,148
3,209
252
364
-
-
726
745
4,430
3,804
After five years
21. Cash flow from operating activities
28
2012
2011
£000
£000
Operating profit
9,269
6,788
Amortisation of goodwill
1,788
1,788
Depreciation of fixed assets
368
(Increase) in debtors
(3,135)
(Increase)/decrease in stock
(11)
Increase in creditors
(5,943)
11,455
2,336
11,044
www.integral.co.uk
289 (9,220) (56)
Integral UK Holdings UK Limited Annual Report 2012
22. Reconciliation of movement in net cash
Cash in hand and at bank Bank overdraft
Preference shares redeemable after one year Net cash
At 1 January 2012
Cash flow
At 31 December 2012
£000
£000
£000
2,674
2,410
5,084
-
(3,879)
(3,879)
2,674
(1,469)
1,205
(256)
-
(256)
2,418
(1,469)
949
23. Reconciliation of net cash flow to movement in net cash 2012 Decrease in cash in the year
£000
£000
(1,469)
(4,917)
-
12,027
(1,469)
7,110
2,418
(4,692)
949
2,418
Change in net cash resulting from cash flows Movement in net cash in the year
2011
Net cash / (debt) at start of the year Net cash at end of the year
24. 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 £698,000 (2011: £450,000). At the year end £76,000 (2011: £54,000) was due to the group to the pension scheme.
25. Acquisition
During the year, the Group acquired the trade and assets of MJN Colston in relation to two framework agreements.
Work in progress and debtors
Book value
Re-valuation
Fair value
£000
£000
£000
2,229
1,479
750
Net assets acquired
750
Cash consideration
(750)
Goodwill
-
The fair value adjustments arose following an assessment of the recoverability of the work in progress and debtor balances.
29
26. 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. 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 £100,000 (2011: £100,000).
“I would like to acknowledge the professionalism and support that, under your contract manager’s excellent leadership, the Integral cleaning team have given to the school. It has sometimes been a thankless task, with cleaning being done, only to have contractors undo their excellent work. However, they have stoically endured this upheaval and continued to clean all the buildings to a very high standard. A Butler, Business Manager, Westhoughton High School.
30
www.integral.co.uk
cost effective, sustainable solutions
31
Energy Services – Carbon Arc Integral can support in the reduction of Energy consumption through staff communications and active participation. Ideally energy awareness and cultural change should complement other elements of good practice as part of an integrated approach to energy management within your organisation. Carbon Arc provides ideas and resources to motivate everybody to save energy. This will ensure long-term benefits for people, the organisation and the environment. Integral Carbon Arc is a series of information guides, which will provide useful support information on how to implement the wider aspects of energy management across your organisation. Integral Carbon Arc support documentation and training is supplied free to all participating Clients:
Integral Foundation course, Technical Description of Critical Assets, these are also supported by workshops hosted on Integral’s WebEx. This is Ideal for Facilities Managers who are new to this environment, and requires a basic understanding of the plant found within a complex building. Integral Basic Energy Awareness Guide, a target audience would be Facilities Managers, Energy Marshalls, Energy Champions as an engagement tool and supplies basic strategies to reduce the energy consumption within the workplace and at home, either WebEx delivery or workshop, but distributed widely to all staff on the Green Awareness Day.
Integral Basic Energy Audits Guide, intended for both the Facilities Manager and the Energy Champions, it supplies basic tools on which to base simple audits to ensure that cost free savings are recognised and acted upon.
Integral Planning Green Awareness Days, key to Integral’s strategy for full inclusion, aimed for Facilities management teams. This guide supplies the steps necessary to run a successful “Green Awareness Day”.
Integral Basic Monitoring and Targeting Guide, designed for Facilities Managers and Energy Champions to engage and supply a basic means to calculate energy consumption, supplying basic solutions to common problems.
“Our one team approach ensures we always strive to identify opportunities for improved efficiency which provide our clients with cost effective, sustainable solutions every time.” Andrew Dutton, Critical Environment Director, Integral UK Ltd.
32
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the board, management team & accreditations 33
www.integral.co.uk
33
Bryan Glastonbury
Paul Salmons
Bryan has led the company since being appointed Managing Director in 1999. At the time the business had a turnover of £60M and was loss making. He has led the turnaround and, particularly since a management buyout in 2004, the rapid growth of the business. He has strong leadership skills demonstrated by a proven ability to inspire others, establish a shared vision and motivate people to work together to achieve shared goals. Bryan’s main objective during 2012 has been to ensure the business remains closely aligned with its customers - focusing on supporting them in the achievement of their business goals.
He is responsible for setting budgets and monitoring the financial performance in each of the regions and business units. He is also responsible for the development of the financial systems and procedures to ensure they keep pace with the growth of the business and the reporting requirements of our clients. Paul holds a MBA from Bath University and is a Cost & Management Accountant.
Managing Director
Mark Johns
Operations Director Prior to his appointment as Operations Director in 2005, Mark has held a number of senior roles at Integral. He is an excellent problem solver who takes a dynamic and pro-active approach to finding effective solutions. He is a hands-on driver of operational excellence and continuous improvement ensuring the highest standards are achieved and maintained in line with our Quality Assurance and Health & Safety policies.
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www.integral.co.uk
Finance Director
Tony Kenny
Non-Executive Chairman Tony was appointed as Non-Executive Chairman in 2006. He is a Chartered Accountant and holds a number of similar Non-Executive positions with other director owned businesses. He was previously a corporate finance partner with PricewaterhouseCoopers LLP. Tony plays a key role in the evolution of Integral’s strategy and is particularly involved with Integral’s business development activities.
Integral UK Holdings UK Limited Annual Report 2012
Martin McCormack
Andy Nichol
South East & London Regional Director
North & Scotland Regional Director
Steve Collins
Kevin Doughty
South West & Wales Regional Director
Midlands Regional Director
Mark Stratford
Antony Collett
National Sales Director
Strategic 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
35
Accreditations INTEGRAL have a process which enables us to formulate the necessary policies, with approval from the management team. This means that we are able to make quick decisions in order to assist all within the business, whilst additionally ensuring that we fully comply with Legislation and our agreed aims.
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www.integral.co.uk
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
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
‌maintaining your building