Integral UK Ltd Annual Report & Accounts 2011

...maintaining your building

annual report and accounts 2011

Integral UK Holdings Limited

integral.co.uk

“Integrity: Trust is hard earned and easily lost. So we make a commitment to work honestly and ethically, without excuse or exception. At Integral, it’s never about just turning up – it’s about stepping up.

Each of us accountable. Each of us making a difference.

Full dedication. Full stop.”

managing director’s review 1contract wins 5services 7the board 9directors report 11statement of directors’ responsibilities in respect of the director’s report and the financial statements 13independent auditor’s report to the members of Integral UK Holdings Ltd 14profit & loss account 15group balance sheet 16company balance sheet 17group cash flow statement 18accounting policies 19notes to the financial statements 21client testimonials 33accreditations 35

contents

...maintaining your building 1

managing director’s review

Businesses continue looking at ways to reduce their property operating costs and the fact we are seen as being successful, competitive and providing a good service in this marketplace has provided us with the largest volume of tenders we have ever received in a twelve month period. Working very closely with potential clients on providing maintenance solutions to meet their needs, we are delighted to have converted a significant proportion of these tender opportunities into sales. This gives us great optimism for the future growth of Integral.

By working closely with our existing clients we have explored ways of adding value to their business, implementing energy savings and operational efficiencies that help drive down our

customers’ cost base. This has enabled our client retention rate to remain at over 85%.

Our continued focus on health & safety has further reduced the number of RIDDOR reportable incidents from 23 in 2010, to 17 in 2011. An exercise has taken place throughout the year to encourage our staff to report all incidents and near misses. This has allowed our health & safety teams to monitor trends and deliver the appropriate training where it can have the maximum effect. We will continue to ensure that all new Directors and Managers undergo the relevant IOSH Directing and Managing Safely Courses in an effort to reduce incidents even further.

Bryan GlastonburyManaging Director

For the third consecutive year the UK economy has struggled and our financial and retail clients have had to contend with difficult trading conditions. At Integral we have assumed that this financial position is “the norm” and we have structured the business to enable it to trade profitably in this climate. Against this difficult economic back drop our model of providing cost-effective, high quality property maintenance solutions has enabled Integral to deliver record sales of over £199m, an increase of more than 10% compared with 2010, together with a trading profit of £8.6m.

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Integral UK Holdings Ltd annual report & accounts 2011

Financial Performance Integral was successful in retaining a number of large clients during late 2010 with increased scope which, along with other large blue chip client wins during 2011, has significantly increased the trading volume from £178m to £199m.

As with any new contract win, the increased pressure on price, along with margins achieved during the initial period of some of the contracts, has impacted on the trading margin percentage. Also during the year Integral suffered a bad debt of £640k when a client went into administration before the final account monies had all been received. Notwithstanding these factors the group has achieved a trading profit of £8.6m compared with £9.1m in 2010.

Integral remained focused on continued improvements in cash management allowing it to repay all loans during the year and end 2011 with a positive cash balance of £2.7m.

This strong trading performance has seen the Group’s net assets increase from £20m in 2010, to £25m at the end of 2011.

Turnover

Operating Profit

OperationsIn 2011, the management team carried out a review on the service delivery for our core business. All processes were assessed, from logging incoming client calls, monitoring engineers’ work processes, through to the final billing of those calls to ensure a standardisation of service delivery from our four regions and 16 local offices. Efficiency was behind the review and every effort was made to eliminate any waste from our delivery model. The exercise was extremely effective, allowing us to increase turnover per head of employees from £65k in 2010 to £76k in 2011.

During the year we relocated our National Service Centre and installed state-of-the-art technology designed to effectively manage our 1,300 mobile technicians. The facility, which enjoys total disaster recovery back-up, has also played a major role in maintaining our competitive edge for both national and regional mobile maintenance contracts.

The National Service Centre technology details the location of the engineer, their skill matrix and forward-work programme, enabling the labour allocators to dispatch the most appropriately-skilled and located engineer to the reactive call out. This has allowed us to achieve “first time fix” of over 70% on our major national contracts. The new system has significantly reduced travel times enabling us to keep fuel costs to a minimum; cost savings which are passed on to our clients.Year

(£m

)

2006

50

0

100

150

200

2007 2008 2009 2010 2011

131m

147m

180m 184m 178m199m

Year(£

m)

2

4

6

8

10

0

5.5m

7.2m

9.0m 9.5m 9.07m8.6m

2006 2007 2008 2009 2010 2011


We will continue to provide robust planned preventative maintenance to our many clients, whether on large residential sites or multiple branch networks. Our statistics prove that by providing high quality, planned maintenance we can reduce the number of reactive call outs. The benefits to this are less disruption to our clients and, by planning more visits, improved productivity of our engineering workforce.

Another major advantage of providing high quality PPM, which sometimes goes un-noticed, is that life cycles of major plant is extended thus reducing capital expenditure requirements.

We continue to provide a national service from 16 regional offices, maintaining a local presence with mobile engineers based from every postcode area in the UK.

Our mechanical and electrical projects teams have been highly successful in 2011, being included on frameworks with several of our largest maintenance clients. The teams call on the services of Hub Professional Solutions, our in-house design consultancy when there is a need for expert input. This has proved extremely successful in delivering beneficial, cost-effective solutions to our clients.

New Developments During the year we have further developed our critical site engineering team who now operate under the name of “Integral Uptime.”

The services Integral Uptime offer are wide-ranging, but all have a common thread, that is to maximise the return on investment in outsourced and internally managed critical facilities management and support. The team focuses on the delivery of critical site services to major businesses whilst also providing energy control and sustainability within the built environment.

During 2011, Integral Uptime have been extremely successful on a number of projects for various high profile clients, including National Grid, Royal Bank of Scotland and Lloyds Banking Group, all resulting in increased resilience and availability.

The development of our national Lighting team continued with significant projects being successfully implemented with Hammerson Shopping Centres, relighting their car parks and back-of-house areas, and B&Q in many of their stores. Both schemes provide enhanced lighting at a greatly reduced operating cost.

Our PeopleAs well as the loyalty of our many clients, the success in 2011 is due to the outstanding performance of our staff.

Our employees are prepared to go “that extra mile.” This was aptly demonstrated following the summer riots when a large number of our people worked around the clock to get our clients’ businesses back up and running.

We focus strongly on the training needs of our employees, identifying career development opportunities for our hard working staff and we look to promote from within, wherever possible. This is further enhanced through ongoing training for young people, employing over 80 apprentices and trainees.

All of the above has led to our highest ever employee retention figures which help us deliver the consistent, high quality levels of service our clients rightly demand.

Based on our performance in 2011 Integral was the only Royal Bank of Scotland supplier to retain the prestigious Kite Mark for Most Improved Supply Chain Partner across the FM sector, confirming Integral as the ‘Best in Class’ amongst maintenance suppliers in the UK.

Finally, for the third consecutive year we were named in The Sunday Times Top Track 250 league table ranking Britain’s leading mid-market private companies with the largest sales growth.

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Where we have to recruit externally, our in-house recruitment division does an amazing job sourcing some of the most proficient people in the business and again keeping our operating costs as competitive as possible.

Once again, the whole of Integral’s management team would like to thank our employees for the commitment and dedication shown throughout the year which has allowed us to report another excellent set of results.

Corporate & Social ResponsibilityIntegral aims to be the first choice of our customers and employees by excelling at customer satisfaction and creating profitable growth based on our unique strengths. We are committed to being a responsible business, employer, partner and neighbour.

As a business, we believe in conducting our business safely, ethically, sustainably, ensuring our activities are carried out in conformance with all applicable employment, H&S, environmental and corporate legislation.

As a partner to our clients, we are focused on technical excellence in our service delivery, and helping our clients achieve improvement, innovation and value.-to our supply chain, treating them fairly, ethically and with respect.

As an employerbeing the employer of choice to our staff, offering equal opportunities and staff development, recognising success and rewarding achievement.

As a neighbourmaking a real impact in the community, supporting local organisations and charities and especially helping young people through work experience and apprenticeships.


Among the new contracts signed in 2011: -

National Grid UK: 984 sites with 2,336 individual buildings and structures, including former gas works, shops, offices and residential sites. In order to rationalise the existing supply chain Integral consolidated services in one national contract maintaining standards and ensuring value for money.

University of Liverpool: Integral provides planned and reactive mechanical, electrical and fabric maintenance services to the University, which spans 5 million sq ft of property including residential properties, academic buildings, the Ness Botanical Gardens and School of Veterinary Science on the Wirral. The contract is a NEC partnering contract as both parties are keen to develop a collaborative, partnership approach to the delivery of the works.

Northern Trust International Investment Bank: Appointed by MBE Consultants, Integral provide comprehensive Mechanical & Electrical Services to Northern Trust at their prestigious site on Canary Wharf.

Victoria Square Shopping Centre & Leisure Complex in Belfast: Appointed by Savills, Integral is responsible for the planned and preventative M&E services to one of Northern Ireland’s most successful shopping centres; the development is an ‘urban neighbourhood’ comprising of 800,000 sq ft over 6 levels integrating retail, entertainment activities and car parking. 24/7 emergency support is also being provided, with all activity managed via a new software solution.

Arcadia Group: Our new contract with SGP Facilities Management, on behalf of Arcadia Group – the UK’s largest privately owned clothing retailer. This builds on a long-standing relationship with Bhs Stores (now part of the Arcadia Group) which Integral has worked with since 1994. New stores include Top Shop, Miss Selfridge, Burton, Dorothy Perkins, Wallis and Topman.

contract wins

“Integral is passionate about delivering superb mechanical and electrical services - and helping our clients to get more efficiency from their buildings: it’s the reason that we keep and grow our superb client list.”

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Eastland Homes: A housing association managing over 6,000 of East Manchester’s former council homes, Integral provides a cohesive Mechanical and Electrical maintenance strategy across 19 buildings, from offices to sheltered accommodation buildings and multi-accommodation blocks. By consolidating Mechanical & Electrical services, Eastland Homes now benefit from a more cost-effective service through the optimisation of equipment performance. The services also provide greater flexibility with the ability to accommodate additional buildings as the association grows. Stephenson Harwood LLP: Integral is responsible for the technical and critical support for this prominent international law firm. The move of their headquarters earlier in 2011 to a prestigious, purpose-built and specified building for critical operations in Finsbury Circus, London, highlighted the requirement for a bespoke outsourced FM solution requiring a high level of critical delivery. Our bespoke operational structure ensures Stephenson Harwood the best possible service levels and the peace of mind their new property and investment is in excellent hands.

Yorkshire Water Services: Integral now provides planned and reactive heating, ventilation and air conditioning maintenance to 19 properties in the North, including the regional operations centre, call centre and water treatment works which provide water and waste water services to 4.7 million customers. The contract also includes the maintenance of business critical uninterrupted power supply equipment for Yorkshire Water’s IT systems.

Other major contract wins

B & Q: Full M&E, Building Fabric Maintenance and Lighting Solutions to 360 stores across the UK and Ireland.

Leeds Primary Care Trust: Estates Management and Maintenance Services.

Cranfield University: Full PPM of Mechanical & Electrical Plant & HVAC Equipment.

Hill Dickinson LLP: Comprehensive M&E Maintenance for Hill Dickinson’s national network of offices including Chester, Sheffield, Manchester, London and their flagship office in St. Paul’s Square in Liverpool.

“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 Integral and hope that we can build on this relationship”. Neil Magee, Head of Operations.

Following the acquisition in 2010 of Babcock Professional Services, renamed Hub Professional Services Ltd, we are delighted to report particular achievements for the division:

• Framework contract to provide design, cost management and project management to the Royal School of Military Engineering for Babcock.

• Contract extension from Berkshire Fire and Rescue, where Hub provides all property services including consultancy, environment, compliance and building development and management.

• On the back of the successful design of the Bank of England’s security projects, Hub was awarded the final stage to manage the project through to completion.

Hub now offers specialist estate management services for all mobile telecom services, including prompt collection of rents, a forensic service to ensure the correct rent is being charged for the equipment installed, lease negotiations for new mobile masts and to ensure the mobile company fulfills its obligations under the lease, namely, repair to the fabric of the building.


servicesOne of the largest independent providers of property maintenance in the UK, providing both Planned Preventative and Reactive Maintenance to over 1,600 clients in 40,000 locations, achieving high 90%+ for KPI’s on many contracts.

Complete single or multi-site specific packages can be provided as a stand-alone offering or delivered in tandem with other Integral building maintenance services, including: -

M&E Maintenance – mobile and staticM&E Project ManagementCritical Environment MaintenanceFabric MaintenanceEnergy Management & SustainabilityEnvironment Services – Air & Water HygieneLighting SolutionsFire ServicesCleaning ServicesInteriors Fit-Out & RefurbishmentFixed Wire/PAT TestingHousing Services – Domestic Gas & Fabric Hub Estate & Design ManagementRecruitment Consultancy

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Mike JonesMobile Engineer


Paul SalmonsFinance Director

Paul was appointed Finance Director in 2003 having joined the business in 1997. He heads up strategic financial planning, establishing a solid financial operating framework and delivering sound financial control. He is extremely competent at managing the company’s assets and resources, ensuring they deliver sustainable levels of profitability and growth.

[email protected]: 01454 278900

the boardBryan GlastonburyManaging Director

Bryan has very successfully led the company since being appointed in May 1999; a determined and resilient leader with proven experience of being able to challenge, think strategically and influence at the highest levels. Bryan passionately promotes integrity and professionalism into the heart of the business.


Tony KennyNon-Executive Chairman

Tony is a Chartered Accountant, a partner in Momentum Corporate Finance LLP and was previously a corporate finance partner with PricewaterhouseCoopers LLP. Tony joined the team in 2006 to ensure the Board as a whole functions effectively and meets its strategic objectives.


Mark JohnsUK Operations Director

Mark joined the business in 1975 as an HVCA Apprentice. Mark has exceptionally strong leadership skills to effectively manage and motivate his teams to continually achieve optimal performance and exceed targets. He has a demonstrable track record of leading major change and improving customer service levels with focus on efficiency.




directors report

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 1 to 4 for a review of the business during the year.

DonationsThe Group made no political donations (2010: £Nil). Charitable donations of £12,577 were made (2010: £4,047).

Results and dividendsThe Group profit after tax for the year amounted to £4,226,000 (2010: £9,666,000).

An interim dividend of £Nil (2010 : £10,000,000) was paid during the year. This represents a payment per share of Nil (2010 : £0.85). 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 on page 36. 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.

Creditor payment policyIt 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 days’ purchases outstanding at the end of 2011 was 51 (2010: 41).

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 competitors. 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.

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 2011.

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Key performance indicatorsThe key performance indicators used to run the business are contained within a board pack, produced monthly anddistributed 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.

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.

AuditorsDuring the year PricewaterhouseCoopers LLP resigned as auditors and KPMG LLP were appointed. Pursuant to Section 487 of the Companies Act 2006, the auditor’s will deem to be reappointed and KPMG LLP will therefore continue in office.

Disclosure of information to auditor’sThe 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 SalmonsSecretary19 March 2012


statement of directors’ responsibilities in respect of the directors’ report and the financial statementsThe directors are responsible for preparing the Directors’ Report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare group and parent company financial statements for each financial year. Under 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.

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independent auditor’s report to the members of Integral UK Holdings LtdWe have audited the financial statements of Integral UK Holdings Limited for the year ended 31 December 2011 set out on pages 15 to 31. The financial reporting framework that has been applied in their preparation in accordance with UK Accounting Standards and applicable law (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 auditorsAs explained more fully in the Directors’ Responsibilities Statement set out on page 9, 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 APB’s web-site at :

www.frc.org.uk/apb/scope/private.cfm.

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 2011 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 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.

AC Antonius (Senior Statutory Auditor)for and on behalf of KPMG LLP, Statutory AuditorChartered Accountants100 Temple StreetBristolBS1 6AG

19 March 2012


profit & loss accountfor the year ended 31 December 2011

note 2011£000

2010£000

Turnover 2 198,851 177,701

Cost of Sales (170,027) (147,736)

Gross Profit 28,824 29,965Administrative Expenses (20,248) (20,893)

Operating profit before goodwill amortisation, exceptional items and share of operating loss of associateGoodwill amortisationExceptional other operating incomeShare of operating loss of associate

33

8,576(1,788)

--

9,0721,2263,118(12)

Operating profitInterest receivable and similar incomeInterest payable and similar charges

356

6,7881

(355)

13,4042

(374)

Profit on ordinary activities before taxationTax on profit on ordinary activities 7

6,434(2,208)

13,032(3,366)

Profit on ordinary activities after taxationEquity minority interests

19 4,22622

9,666(5)

Profit for the financial year 4,248 9,661

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 21 to 31 form part of these financial statements.

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group balance sheetas at 31 December 2011

note 2011£000

2010£000

Fixed assetsIntangible assetsTangible assetsInvestments

101112

25,001777

-

25,778

26,78970012

27,501Current assetsStocksDebtorsCash at bank in hand

1314

46548,9072,674

52,046

40939,7117,591

47,711Creditors:amounts falling due within one year 15 (52,936) (48,363)

Net current liabilities (890) (652)

Total assets less current liabilities 24,888 26,849

Creditors: amounts falling due after more than one yearBank loansPreferance Shares

1616

-(256)

(256)

(6,187)(256)

(6,443)Net assets 24,632 20,406Capital and reservesCalled up share capitalShare premiumCapital redemption reserveProfit and loss account

18191919

510,7913,13310,711

510,7913,1336,463

Total shareholders’ fundsMinority interests

24,640(8)

20,39214

Capital employed 24,632 20,406

The financial statements were approved by the Board of Directors on 19 March 2012 and were signed on its behalf by:



company balance sheetas at 31 December 2011

The financial statements were approved by the Board of Directors on 19 March 2012 and were signed on its behalf by:


note 2011£000

2010£000

Fixed assetsInvestments

Current assetsDebtorsCreditors:amounts falling due within one year

12

1415

36,616

-(7,212)

36,616

4,890(6,685)

Net current liabilities (7,212) (1,795)Total assets less current liabilities 29,404 34,821

Creditors: amounts falling due after more than one yearBank loansAmounts due to group companiesPreferance shares

16

16

-(14,476)

(256)

14,732

(6,187)(13,744)

(256)

(20,187)Net assets 14,672 14,634Capital and reservesCalled up share capitalShare premiumCapital redemption reserveProfit and loss account

18191919

510,7913,113743

510,7913,133705

Total shareholders’ funds 14,672 14,634

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group cash flow statementfor year ended 31 December 2011

A reconciliation of net cash flow to movement in net debt is given in note 23 to the financial statements.

note 2011£000

2010£000

Net cash inflow from operating activities 22 11,044 15,605Returns on investments and servicing of financeInterest paidInterest receivedSale of investmentsPreference share dividends paid

(326)139

(31)

(293)225

(31)

Net cash outflow from returns on investments and servicing of finance (317) (297)Taxation (3,250) (2,517)

Capital expenditure and financial investmentPurchase of tangible fixed assetsProceeds from sale of tangible fixed assets

(367)-

(819)5

Net cash outflow for capital expenditure and financial investment (367) (814)

AcquisitionsPurchase of business - (530)

Net cash outflow for acquisitions - (530)Equity dividends paid - (10,000)Net cash inflow before financingFinancingRepayment of bank loansDirectors’ loansIssue of shares to minority interest

7,110

(7,137)(4,890)

-

1,447

(1,000)4,890

10Net cash (outflow)/inflow from financing (12,027) 3,900

(decrease)/increase in net cash 23 (4,917) 5,347


accounting policiesfor year ended 31 December 2011

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

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 2011.

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.

Associated companies are consolidated using the equity method of accounting, whereby the group recognises its share of the associates net assets and profits.

Going concernThe directors have considered the financial position of the Group and Company and have concluded that the Company will continue to meet its liabilities as they fall due

Penny RobinsonFinancial Controller

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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:

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.

Debt issue costsThe direct costs incurred on raising new debt are deferred on the balance sheet and set against the principal outstanding under the related debt instrument. These deferred costs are amortised over the expected life of the debt, with the charge being included as part of interest payable in the profit and loss account.

Hire purchase and leased assetsLeasing agreements which transfer to the Company substantially all the benefits and risks of ownership of an asset are treated as if the asset had been purchased outright. The assets are included in fixed assets and the capital elements of the leasing commitments are shown as obligations under finance leases. Leasing payments are treated as consisting of capital and interest elements and the interest is charged to the profit and loss account.

Rentals 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.

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.

Leasehold land and buildings - Term of lease

Plant, machinery and vehicles - 25% - 50%

Fixtures and fittings - 20% - 33%


notes to the financial statementsfor year ended 31 December 20111. 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:

Exceptional itemIn the prior year the group achieved significant savings for one of its major clients and recognised £3,118,000 of non-recurring revenue as its share of the saving delivered to the client.

2011£000

2010£000

Auditor’s remuneration- audit of these financial statements 13 14- audit of financial statement of subsidiaries pursuant to legislation 67 66- other services realting to taxation 17 21Depreciation 289 217Profit on disposal of tangible fixed assets - (20)Amortisation of goodwill 1,788 (1,226)Hire of plant and machinery - operating leases 6,338 5,298Hire of other assets - operating leases 530 622

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3. Directors & Employees

(a) Directors’ remuneration

The remuneration of the directors was as follows:

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:

(c) Directors’ interests

The beneficial interests of the directors in the share capital of the Company as at 31 December 2011 were as follows:

Preference Shares

Ordinary Shares

B Glastonbury 125,150 9,104,167P Salmons 50,000 766,667M Johns 50,000 766,667A Kenny 20,833 702,777

(d) Staff numbers

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

2011£000

2010£000

Emoluments in respect of qualifying services 578 561

Company pension contributions to money purchase schemes 50 49

2011£000

2010£000

Emoluments in respect of qualifying services 280 273

Company pension contributions to money purchase schemes 31 31

2011 2010

Operations 1,931 1,979Management and administration 674 678

2,605 2,657

Except as reported in note 25, 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.


(e) Staff costs

Aggregate payroll costs (including directors) were as follows:

4. Interest receivable and similar income

2011£000

2010£000

On bank deposits 1 2

5. Interest payable and similar charges

6. Tax on profit on ordinary activities

(a) Analysis of tax charge in year

2011£000

2010£000

UK Corporation TaxCurrent tax on income for the yearAdjustments in respect of prior years

2,243(34)

3,348(28)

Total current tax

Deferred tax (note 17)Origination and reversal of timing differences (note17)Effect of tax rate change on opening balance

2,209

(7)6

3,320

46-

Total deferred tax (1) 46Tax on profit on ordinary activities 2,208 3,366

2011£000

2010£000

Wages and salariesSocial security costsOther pension costs

63,9616,412450

62,2466,306585

70,823 69,137

2011£000

2010£000

On bank loans and overdraftPreference share dividends

32431

34331

355 374

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(b) Factors affecting the tax charge for the current year

The tax assessed for the year is higher (2010: lower) than the standard rate of corporation tax in the UK of 26.5% (2010: 28%). The differences are explained below:

2011£000

2010£000

Profit on ordinary activities before taxation

Corporation tax at the standard rate of 26.5% (2010: 28%)Effects of:Goodwill amortisation not deductible for tax purposesAmortisation of negative goodwill not taxableOther expenses not deductible for tax purposesAdjustments in respect of prior periodsAccelerated capital allowance and other timing differencesChargeable gains

6,434

1,705

474-

80(34)(22)6

13,032

3,649

501(846)76

(28)(32)

-

Current tax charge for the year 2,209 3,320

7. Parent company profit and loss account

Integral UK Holdings Limited has not presented its own profit and loss account as permitted by Section 408 of the Companies Act 2006. The retained profit for the year dealt with in the accounts of Integral UK Holdings Limited is £38,000 (2010: £217,000) after payment of a dividend of £Nil (2010: £10,000,000).

8. Dividends

An interim dividend of £Nil has been paid (2010: £10,000,000). 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.

9. Intangible fixed assets

Goodwill£000

As at January 2011Amortisation

26,7891,788

Net book value at 31 December 2011 25,001


10. Tangible fixed assets

Group

Short leasehold land and buildings

£000

Plant machinery

and vehicles

£000

Total £000

CostAt 1 January 2011Additions

189-

954366

1,143366

At 31 December 2011 189 1,320 1,509Accumulated depreciationAt 1 January 2011Charge for year

16318

280271

443289

At 31 December 2011 181 551 732Net book valueAt 31 December 2011 8 769 777

At 31 December 2010 26 674 700

11. Investments

(a) Group

Investments£000

As at January 2011Disposals

12(12)

At 31 December 2011 -

During the year, the investment in Brentwood Community Hospital PFI was sold.

(b) Company

Shares in subsidiary company undertakings:

2011£000

2010£000

Cost 36,616 36,616

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The company’s principal subsidiary undertaking is as follows:

Name of the Company Country of registration and operation Holding % Activity

Integral UK Limited England & Wales 100% Facilities Maintenance

The company’s other trading subsidiary undertakings are as follows:

Name of the Company Country of registration and operation Holding % Activity

Facility Associates Recruitment Limited England & Wales 100% Employment Bureau

Hub Professional Services Limited England & Wales 90% Professional Services

Integral UK Staff Limitied England & Wales 100% Employment Bureau

Integral Payroll Limited England & Wales 100% Payroll Services

Mobius Support Service Limited England & Wales 100% Facilities Management

12. Stocks

Group

2011£000

2010£000

Raw materials and consumables 465 409


13. Debtors

Group 2011£000

Company 2011£000

Group 2010 £000

Company 2010£000

Trade debtorsAmounts owed by group undertakingsAmounts recoverable on contractsDeferred tax (note 17)Other debtorsPrepayments and accrued income

33,603-

13,37974805

1,046

------

28,149-

9,42473730

1,335

-4,890

----

48,907 - 39,711 4,890

14. Creditors: amounts falling due within one year

Group 2011£000

Company 2011£000

Group 2010 £000

Company 2010£000

Bank loans and overdrafts (note 16)Amount owed to group undertakingsTrade creditorsPayments received on accountDirectors’ loansCorporation taxOther taxes and social securityAccruals and deferred income

--

20,29615,802

-1,0856,9908,763

-7,112

-----

100

950-

14,25811,6024,8902,1275,6328,904

950732

--

4,890--

113

52,936 7,212 48,363 6,685

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

15. Borrowings

(a) Total Borrowings

Group 2011£000

Company 2011£000

Group 2010 £000

Company 2010£000

Preference sharesDirectors’ loansBank loans and overdrafts

256--

256--

2564,8907,137

2564,8907,137

256 256 12,283 12,283

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(b) Bank loans and overdrafts

The bank loans and overdrafts are repayable as follows:

Group 2011£000

Company 2011£000

Group 2010 £000

Company 2010£000

Amounts falling due:In one year or less, or on demandWithin two to five years

--

--

9506,187

9506,187

- - 7,137 7,137

The bank facilities bore interest at 1.5% above Lloyds TSB Bank base rate and were secured by fixed and floating charges on the assets of the Group.

16. Deferred tax asset

The movement on the group’s deferred tax asset can be analysed as follows:

2011£000

2010£000

At 1 JanuaryCredit/(charge) for the year

731

119(46)

At 31 December 74 73

On 23 March 2011 the Chancellor announced the reduction in the main rate of UK corporation tax to 26% with effect from 1 April 2011. This change became substantially enacted on 29 March 2011 and therefore the effect of the rate reduction creates a reduction in the deferred tax asset above.

The Chancellor also proposed changes to further reduce the main rate of corporation tax by 1% per annum to 23% by 1 April 2014, but these changes have not yet been substantially enacted and therefore are not included in the figures above. The overall effect of the further reductions from 26% to 23% if these were applied to the deferred tax balance at 31 December 2011, would be to further reduce the deferred tax asset by £8,000.

Analysis of deferred tax asset:

2011£000

2010£000

Accelerated capital allowancesShort term timing differences

5915

87(14)

74 73


17. Share capital

The share capital is summarised below:

2011Number

2010Number

2011£

2010£

AuthorisedOrdinary sharesPreference shares

17,000,000256,400

17,000,000256,400

9,3642,564

9,3642,564

Allotted and fully paidOrdinary sharesPreference shares

11,691,666256,400

11,691,666256,400

4,6772,564

4,6772,564

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 reserves

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

Capital redemption

reserve£000

Ordinary shares£000

Share premium

£000

Profit and loss account

Total£000

At 1 January 2011Profit for the year after taxationDividend

3,133--

5--

10,791--

6,4634,248

-

20,3924,248

-

At 31 December 2011 3,133 5 10,791 10,711 24,640

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

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Capital redemption

reserve£000

Ordinary shares£000

Share premium

£000

Profit and loss account

Total£000

At 1 January 2011Profit for the year after taxationDividend

3,133--

5--

10,791--

70538-

14,63438-

At 31 December 2011 3,133 5 10,791 743 14,672

19. Capital commitments

There is no capital expenditure authorised and contracted for at 31 December 2011 for which no provision has been made in these accounts.

20. Operating leases

Annual commitments under operating leases are as follows:

Land and Building

2011£000

Land and Building

2010£000

Other Operating

Leases2011£000

Other Operating Leases 2010£000

Operating leases which expire:Within one yearWithin two to five yearsAfter five years

81300364

16308311

5953,209

-

4432,560

-

745 635 3,804 3,003

21. Cash flow from operating activities

2011£000

2010£000

Operating profitShare of profit of associateAmortisation of goodwillDepreciation of fixed assetsProfit on disposal of fixed assets(Increase) in debtors(Increase)/decrease in stockIncrease in creditors

6,788-

1,788289

-(9,220)

(56)11,455

13,40412

(1,226)217(20)

(4,539)20

7,737

11,044 15,605


22. Reconciliation of movement in net debt

At 1 January

2011£000

Cash Flow Non CashMovement

At 31 December

2011£000

Cash in hand and at bank 7,591 (4,917) - 2,674

Net cash in hand and at bank

Bank loans due within one yearBank loans due after one yearDirectors’ loansPreference shares redeemable after one year

7,591

(950)(6,187)(4,890)(256)

(4,917)

9506,1874,890

-

-

----

2,674

---

(256)

12,027

Net debt (4,692) 7,110 - 2,418

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

2011£000

2010£000

(Decrease)/increase in cash in the year

Change in net debt resulting from cash flowsNon-cash movements

(4,917)

12,027-

5,347

(3,890)(51)

Movement in net debt in the yearNet debt at start of the year

7,110(4,692)

(1,406)(6,098)

Net debt at end of the period 2,418 (4,692)

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 £437,000 (2010: £583,000). At the year end £54,000 (2010: £62,000) was due to the group to the pension scheme.

25. Related Party Disclosures

During the year the Company paid interest of £289,000 (2010: 710,000) to its subsidiaries.

Mr A Kenny, a director of the Company, is also a partner in Momentum Corporate Finance LLP. Momentum Corporate Finance LLP performed advisory services for the Company. The total amount payable to Momentum Corporate Finance LLP in the year was £100,000 (2010: £100,000). £100,000 was outstanding to Momentum Corporate Finance LLP at 31 December 2011.

integral.co.uk32


Urbain MackMobile Engineer


client testimonials

“.....Although we have only had one year in partnership with Integral, we have already seen enough that convinces us that Integral will be a long-term partner for The Hepworth Wakefield.”R Taylor, Estates ManagerThe Hepworth Wakefield Gallery, August 2011

“Integral have provided a range of buildings management and maintenance services for NHS Nottingham City HQ at Standard Court since November 1997. We have been very pleased with the level of service we have received and are happy to provide a reference regarding the quality of work that has been delivered.”P Hunt, Assistant Director of Strategy & AssuranceNHS Nottingham City, May 2011

… thank you to our clients and our staff.

“Integral UK Ltd are our national service provider for mechanical and electrical services, catering equipment, lifts and associated specialist equipment for our office accommodation in Glasgow, Manchester and Surrey. Esure has worked with Integral since 2007 and found them to be a very professional organisation, able to provide a variety of in-house technical ability and a high standard of specialist sub-contractors. Contact management and administration is also an important part of any contract and this has been delivered by a knowledgeable and helpful team.” R Comfort, National Facilities ManagerEsure, March 2011

Syeda HaqueContracts Administrator

integral.co.uk34


“I am delighted to inform you that as a result of your hard work we have achieved ISO14001 certification and we received no major non-conformities in our H&S audit. This is all as a result of the Integral team’s hard work.” J Tallack, Interim General Manager, Highcross Shopping Centre, April 2011

“Facilities Management is committed to delivering service excellence. We welcome Integral on board as our term contract partner and look forward to working with them on our journey of continuing service improvement. Integral have demonstrated through the tender process that they understand the meaning of a true partnership approach and that will service us well moving forward.” S Dickson, Director Facilities Management University of Liverpool, December 2011

“... The Integral National Service Centre Team are great; always helpful, always responsive to emails and phone calls and are constantly chasing for responses to quotes and work requests, which is very much welcomed.”L Tanner, National Procurement Management, CB Richard Ellis, July 2011

“Integral Housing achieved 1st place out of 50 service providers for Landlord’s Gas Safety Registers (LGSR) HouseMark Benchmark 2010/11. HouseMark is the leading source of cost and performance data for social housing, making HouseMark the essential continuous improvement and VFM tool.” T Pinder, Chief ExecutivePeaks & Plains Housing Trust, September 2011

“I would not hesitate to recommend Integral to my peers within the business and this is due to the level of faith I have in Integral’s ability to consistently deliver”. A McGuirk, Customer Business Manager,Carillion FM,October 2011

“Thanks for the successful outcome of the DRUPS (Diesel Rotary UPS System) project we undertook this year ... in my personal opinion, the determination of everyone involved paid off and we in the Bank are in a better place for it”.R Tulloch Ceng BEng Hons, Tech Ops Mgr (UK),Royal Bank of Scotland, December 2011


accreditations

DirectorsB Glastonbury P Salmons M Johns A Kenny

Company SecretaryP Salmons

Registered Office1290 Aztec WestAlmondsburyBristolBS32 4SG

AuditorsKPMG LLP100 Temple StreetBristolBS1 6AG

BankersLloyds TSBCanons HouseCanons WayBristol BS99 7LB National Westminster Bank1 Waterhouse StreetHalifaxHX1 1JA

...maintaining your building

...quality at the heart of your business

Registered office1290 Aztec West, Almondsbury, Bristol BS32 4SG

t: 01454 278 900

sales enquiries 03333 212 216 e: [email protected]

www.integral.co.ukCompany Registration No. 5307588

Documents

Integral UK Ltd Annual Report & Accounts 2011