Integral UK Holdings Ltd - Annual Report 2013

a one team approach

www.integral.co.uk

Integral UK Holdings LtdAnnual Report 2013

directors B GlastonburyP SalmonsM JohnsA Kenny

company secretary

P Salmons

registered office

1290 Aztec WestAlmondsburyBristolBS32 4SG

auditors

KPMG LLP100 Temple StreetBristolBS1 6AG

bankers

National Westminster Bank1 Waterhouse StreetHalifax HX1 1JA

Lloyds TSBCanons HouseCanons WayBristol BS99 7LB

Integral UK Holdings UK LimitedAnnual Report 2013

2overview 2013

7-11statements and reports

Directors’ Report

Statement Of Directors’ Responsibilities In Respect Of The Strategic Report &

The Financial Statements

Independent Auditors Report To The Members Of Integral Uk Holdings Limited

12-16accounts & balance sheets

Profit And Loss Account

Group Balance Sheets

Company Balance Sheet

Group Cash Flow Statement

20-33notes to the financial statements

Turnover

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 & Negative Goodwill

Tangible Fixed Assets

Investments

Stocks

Debtors

Creditors: Amounts Falling Due Within One Year

Borrowings

Deferred Tax Asset

Share Capital

Movements In Equity Share Capital & Reserves

Capital Commitments

Operating Leases

Cash Flow From Operating Activities

Reconciliation Of Movement In Net Debt

Reconciliation Of Net Cash Flow To Movement In Net Debt

Pensions

Acquisitions

Post Balance Sheet Events

Related Party Disclosures

17-19accounting policies

Basis Of Preperation

Basis Of Consolidation

Going Concern

Investments

Tangible Fixed Assets

Stocks

Taxation

Pensions

Operating Leases

Accounting For Contracts

Equity Dividends

Exceptional Items

Research & Development Expenditure

34-36the board & management team

Directors’ Biographies

Management Team

3-6strategic report

Managing Director’s Review

www.integral.co.uk2

overview 2013

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.

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

M&E MaintenanceCritical EnvironmentsFabric MaintenanceM&E ProjectsRefrigeration MaintenanceEnergy ManagementFire & Project MaintenancePredictive Maintenance

Integral BuildRefurbishment ProjectsFixed Wire / PAT TestingBMS ControlsHousing ServicesCleaning ServicesEstates ManagementRecruitment Consultancy

servicesIntegral is the largest independently owned mechanical, electrical and fabric property maintenance business in the UK.

• over 3,000 directly employed staff

• over 1,700 mobile technicians & engineers

• £240 million turnover

key facts

our clients


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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-time-fix. 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 PerformanceWe 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. Operations2013 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

strategic reportManaging Director’s ReviewIn 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.

www.integral.co.uk4

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,

Integral RefrigerationTraining CentreBirmingham


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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.

PeopleAs 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 ResponsibilityAs 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 ex-offenders reaching interview and in turn securing employment.

Integral is also working with Manchester College, whoseOffender Learning Contract provides around 60% of training in the UK’s prisons, to provide work experience placements for

Mark DaviesIntegral UK Limited

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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.

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 full-time positions within the Company.

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 DevelopmentsThe 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 roll-out 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 life-cycle.

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

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.

Future ProspectsThere 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 end-user 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 GlastonburyManaging Director31 March 2014

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statements & reports

www.integral.co.uk8

Principal activitiesThe 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 3 to 6 for a review of the business during the year.

DonationsThe Group made no political donations (2012: £Nil). Charitable donations of £8,000 were made (2012: £8,000).

Results and dividendsThe 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 interestsThe 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 provisionSubject 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 involvementThe Group seeks to engage all employees in both its short term and long term goals. This is mainly achieved through briefings.

Employment of disabled personsIt 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

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.

Principal risks and uncertaintiesThe 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.

CompetitionThe 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. EmployeesBeing 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 IndicatorsThe 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 managementThe 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.

Directors’ reportThe 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.


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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.

Price riskThe 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.

Credit riskThe 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 riskThe 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 riskThe 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.

AuditorsPursuant to Section 487 of the Companies Act 2006, the auditors will be deemed to be reappointed and KPMG LLP will therefore continue in office.

Disclosure of information to auditorsThe 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 SalmonsSecretary31 March 2014

The MallCribbs Causeway, Bristol

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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

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.

Museum of LiverpoolLiverpool Docks


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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 auditorAs 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 statementsA 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 statementsIn 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 2006In our opinion the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exceptionWe 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 AuditorChartered Accountants100 Temple StreetBristolBS1 6AG

31 March 2014


accounts & balance sheets


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Profit and loss accountfor the year ended 31 December 2013

Note 2013 2012£000 £000

Turnover 2 238,600 239,661Cost of sales (202,173) (205,071)

Gross profit 36,427 34,590Administrative expenses (25,012) (23,533)

Operating profit before amortisation and release of negative goodwill 11,415 11,057Goodwill amortisation 3 (1,788) (1,788)Release of negative goodwill 3 1,266 -

Operating profit 3 10,893 9,269Interest receivable and similar income 5 2 -Interest payable and similar charges 6 (155) (211)

Profit on ordinary activities before taxation 10,740 9,058Tax on profit on ordinary activities 7 (2,678) (2,738)

Profit on ordinary activities after taxation 19 8,062 6,320Equity minority interests 15 -

Profit for the financial year 8,077 6,320

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


Group Balance Sheetas at 31 December 2013

Note 2013 2012£000 £000

Fixed assetsIntangible assets 10 21,425 23,213Negative Goodwill 10 (1,273) -Tangible assets 11 536 870

20,688 24,083

Current assets

Stocks 13 496 476Debtors 14 57,082 52,771Cash at bank and in hand 3,825 1,205

61,403 54,452Creditors: amounts falling due within one year 15 (50,821) (47,327)

Net current assets 10,582 7,125

Total assets less current liabilities 31,270 31,208Creditors: amounts falling due after more than one yearPreference shares 16 (256) (256)

Net assets 31,014 30,952Capital and reserves

Called up share capital 18 5 5Share premium 19 11,791 11,791Capital redemption reserve 19 3,133 3,133Profit and loss account 19 16,108 16,031Total shareholders’ funds 31,037 30,960Minority interests (23) (8)

Capital employed 31,014 30,952

The financial statements were approved by the Board of Directors on 31 March 2014 and were signed on its behalf by:

B GlastonburyDirector


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Company Balance Sheetas at 31 December 2013

Note 2013 2012

£000 £000

Fixed assets

Investments 12 36,526 36,616

Current assets 14 587 -

Creditors: amounts falling due within one year 15 - (62)

Net current assets/(liabilities) 587 (62)

Total assets less current liabilities 37,113 36,554

Creditors: amounts falling due after more than one year 16 (21,907) (21,844)

Net assets 15,206 14,710

Capital and reserves

Called up share capital 18 5 5

Share premium 19 11,791 11,791

Capital redemption reserve

Profit and loss account

19

19

3,133

277

3,133

(219)

Total shareholders’ funds 15,206 14,710

The financial statements were approved by the Board of Directors on 31 March 2014 and were signed on its behalf by:

B GlastonburyDirector


Group Cash Flow Statementfor the year ended 31 December 2013

Note 2013 2012£000 £000

Net cash inflow from operating activities 22 12,349 2,336

Returns on investments and servicing of financeInterest paid (124) (180)Interest received 2 -Preference share dividends paid (31) (31)Dividend paid (8,000) -

Net cash outflow from returns on investments and servicing of finance

(8,153) (211)

Taxation (2,671) (2,383)

Capital expenditure and financial investmentPurchase of tangible fixed assets (171) (461)

Net cash outflow for capital expenditure and financial investment (171) (461)

AcquisitionsNet 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 2,620 (1,469)FinancingCancellation of share warrant - (1,000)Issue of share capital - 1,000

Net cash inflow from financing - -

Increase/(decrease) in net cash 24 2,620 (1,469)

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


Basis of preparationThe financial statements have been prepared in accordance with applicable accounting standards and under the historical cost accounting rules.

Basis of consolidationThe 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 concernThe 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.

InvestmentsInvestments in subsidiary undertakings are stated at cost less provision for permanent diminution in value.

Tangible fixed assetsThe 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:

Leasehold land and buildings - Term of lease

Plant, machinery and vehicles - 25% - 50%

Fixtures and fittings - 20% - 33%

StocksStocks are valued at the lower of cost and net realisable value. Provision is made for obsolete, slow moving and defective items.

TaxationThe 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.

PensionsThe 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 leasesRentals under operating leases are charged to the profit and loss account as they are incurred.

Accounting for contractsTurnover 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.

Accounting policiesThe following accounting policies have been applied consistently in dealing with items which are considered material in relation to the financial statements.


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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 dividendsDividends are only recognised as a liability at that date to the extent that they are declared prior to the year end.

Exceptional itemsItems 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.

Research and development expenditureExpenditure on research and development is written off to the profit and loss account in the year in which it is incurred.

HalfordsBirmingham

“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

notes to the financial statements



21

1. TurnoverAll turnover and profits are derived from the supply of services, which, in the Directors’ opinion, constitutes one class of business.

2. Operating profitOperating profit is stated after charging/(crediting) the following items:

2013 2012£000 £000

Auditor’s remuneration- audit of these financial statements 15 13- audit of financial statement of subsidiaries pursuant to legislation 57 57- other services relating to taxation 30 9Depreciation 505 368Amortisation of goodwill 1,788 1,788Hire of plant and machinery – operating leases 6,597 6,589Hire of other assets – operating leases 683 680Research and development expenditure 61 195Release of negative goodwill (1,266) -

3. Directors and employees(a) Directors’ remuneration

The remuneration of the directors was as follows:

2013 2012£000 £000

Emoluments in respect of qualifying services 642 583Company pension contributions to money purchase schemes 23 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 directorThe remuneration of the highest paid director was as follows:

2013 2012

£000 £000

Emoluments in respect of qualifying services 319 282

Company pension contributions to money purchase schemes - 79


(c) Directors’ interestsThe beneficial interests of the directors in the share capital of the Company as at 31 December 2013 were as follows:

Preference shares Ordinary shares

B Glastonbury 125,150 7,864,167

P Salmons 50,000 766,667

M Johns 50,000 766,667

A Kenny 20,833 946,761

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 numbersThe average weekly number of persons employed by the Group (including directors) during the year was as follows:

2013 2012

Operations 1,959 2,161

Management and administration 782 661

2,741 2,822

(e) Staff costsAggregate payroll costs (including directors) were as follows:

2013 2012£000 £000

Wages and salaries 74,681 70,295Social security costs 8,061 7,195Other pension costs 860 698

83,602 78,188

4. Interest receivable and similar income

2013 2012

£000 £000

On bank deposits 2 -


23

5. Interest payable and similar charges

2013 2012

£000 £000

On bank loans and overdraft 124 180

Preference share dividends 31 31

155 211

6. Tax on profit on ordinary activities(a) Analysis of tax charge in year

2013 2012£000 £000

UK Corporation tax

Current tax on income for the year 2,727 2,724

Adjustments in respect of prior years (13) (5)

Total current tax 2,714 2,719

Deferred tax (note 17)

Origination and reversal of timing differences (43) (23)

Adjustment in respect of prior years - 39

Effect of tax rate change on opening balance 7 3Total deferred tax (credit) / charge (36) 19

Tax on profit on ordinary activities 2,678 2,738

‘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


(b) Factors affecting the tax charge for the current yearThe 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:

2013 2012

£000 £000

Profit on ordinary activities before taxation 10,740 9,058

Corporation tax at the standard rate of 23.25% (2012: 24.5%) 2,497 2,219

Effects of:

Goodwill amortisation not deductible for tax purposes 416 585

Release of negative goodwill not taxable for tax purposes (295) -

Income not taxable for tax purposes - (160)

Other expenses not deductible for tax purposes 42 42

Adjustments in respect of prior periods (13) (5)

Accelerated capital allowance and other timing differences 55 25

Chargeable gains - 13

Group relief 12 -

Current tax charge for the year 2,714 2,719

(c) Factors that may affect future tax chargesReductions 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 accountIntegral 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. DividendsAn 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.


25

9. Intangible fixed assets and negative goodwill

Goodwill Negative Goodwill

£000 £000

As at 1 January 2013 23,213 -

Acquired during the year (note 26) - (2,539)

Amortisation (1,788) -

Released to the profit and loss account - 1,266

Net book value at 31 December 2013 21,425 (1,273)

10. Tangible fixed assetsGroup

Short leasehold land and buildings

Plant machinery and vehicles

Total

£000 £000 £000

Cost

At 1 January 2013 339 1,631 1,970

Additions - 171 171

At 31 December 2013 339 1,802 2,141

Accumulated depreciation

At 1 January 2013 199 901 1,100

Charge for year 54 451 505

At 31 December 2013 253 1,352 1,605

Net book value

At 31 December 2013 86 450 536

At 31 December 2012 140 730 870


11. InvestmentsShares in subsidiary company undertakings:

2013 2012

£000 £000

Cost 36,616 36,616

Impairment (90) -

Carrying value 36,526 36,616

Impairment testingDuring 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 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

Integral Uptime Limited England and Wales 100% Business environment management

* ceased trading during the year.


27

12. StocksGroup

2013 2012

£000 £000

Raw materials and consumables 496 476

13. Debtors

Group Company Group Company

2013 2013 2012 2012

£000 £000 £000 £000

Amount due from group companies

- 587 - -

Trade debtors 46,411 - 37,109 -

Amounts recoverable on contracts

8,899 - 14,024 -

Deferred tax (note 17) 91 - 55 -

Other debtors 617 - 668 -

Prepayments and accrued income

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


14. Creditors: amounts falling due within one year


2013 2013 2012 2012

£000 £000 £000 £000

Amount owed to group undertakings

- - - 62

Trade creditors 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

The amount due to group undertakings is repayable on demand and interest is charged at a current rate of 2.0%.

15. Borrowings


2013 2013 2012 2012

£000 £000 £000 £000

Preference shares 256 256 256 256

Amounts due to group companies

- 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.


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16. Deferred tax assetThe 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

Analysis of deferred tax asset:

2013 2012

£000 £000

Accelerated capital allowances 62 38

Short term timing differences 29 17

91 55

17. Share capital The share capital is summarised below:

2013 2012 2013 2012

Number Number £000 £000

Authorised

Ordinary shares 17,000,000 17,000,000 9,364 9,364

Preference shares 256,400 256,400 2,564 2,564

Allotted and fully paid

Ordinary shares 11,935,650 11,935,650 4,775 4,775

Preference shares 256,400 256,400 2,564 2,564


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 reservesThe statutory share capital and reserves of the group are set out below:

Ordinaryshares

£000

Capital redemption

reserve£000

Share premium

£000


£000

Total

£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)

At 31 December 2013 5 3,133 11,791 16,108 31,037

The statutory share capital and reserves of the company are set out below:

Ordinary shares

£000

Capital redemption

reserve£000

Sharepremium

£000


£000

Total

£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)

At 31 December 2013 5 3,133 11,791 277 15,206


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19. Capital commitmentsThere is no capital expenditure authorised and contracted for at 31 December 2013 for which no provision has been made in these accounts.

20. Operating leasesAnnual commitments under operating leases are as follows:

Land and buildings Other operating leases

2013£000

2012£000

2013£000

2012£000

Operating leases which expire:

Within one year 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

21. Cash flow from operating activities

2013 £000

2012 £000

Operating profit 10,893 9,269

Amortisation of goodwill 1,788 1,788

Depreciation of fixed assets 505 368

(Increase)/decrease in debtors (4,311) (3,135)

(Increase)/decrease in stock (20) (11)

Increase/(decrease) in creditors 3,494 (5,943)

12,349 2,336


22. Reconciliation of movement in net debt

At 1 January 2013£000

Cash flow

£000

At 31 December 2013£000

Cash in hand and at bank 5,084 (1,259) 3,825

Bank overdraft (3,879) 3,879 -

1,205 2,620 3,825

Preference shares redeemable after one year (256) - (256)

Net cash 949 2,620 3,569

23. Reconciliation of net cash flow to movement in net debt

2013 £000

2012 £000

Increase/(decrease) in cash in the year 2,620 (1,469)

Change in net debt resulting from cash flows - -

Movement in net debt in the year 2,620 (1,469)

Net debt at start of the year 949 2,418

Net debt at end of the year 3,569 949

24. PensionsThe 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


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25. AcquisitionDuring the year, the Group acquired the trade and assets of WR Refrigeration.

Book value£000

Re-valuation£000

Fair value£000

Work in progress and debtors 5,318 (103) 5,215

Cash consideration 2,676

Negative goodwill (see Note 10) 2,539

The fair value adjustments arose following an assessment of the recoverability of the work in progress and debtor balances.

26. Post balance sheet eventsOn 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 disclosuresThe 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


the board & management team


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Bryan GlastonburyManaging Director

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 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.

Paul SalmonsFinance Director

Mark JohnsOperations Director

Tony KennyNon-Executive Chairman


Steve Collins

South West & WalesRegional Director

Martin Forbes

HR Director

Martin McCormack

South East & LondonRegional Director

Andy Nichol

North & ScotlandRegional Director

Kevin Doughty

Midlands & East AngliaRegional Director

Don Urquhart

H&S and CSR Director

Chris Todd

Commercial Director

Andrew Dutton

Critical Environment Director

Joe Chapman

National Projects Director

Antony Collett

Strategic Development Director

Mike Nicholas

Refrigeration Director

John Moore

South East & London Sales Director

registered office

1290 Aztec West, Almondsbury, Bristol BS32 4SGt: 01454 278 900 f: 01454 201 169

sales enquiries 03333 212 216e: [email protected]

Company Registration No. 5307588

www.integral.co.uk

Integral UK Holdings Ltd - Annual Report 2013

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Transcript of Integral UK Holdings Ltd - Annual Report 2013