Annual Report and fi nancial statements 2014 Katy Poacher from Yardley in the West Midlands was one of 13 Remploy candidates who started work at Sainsbury’s new store in Longbridge.

Katy, who has Down’s Syndrome, received tailored support from Remploy’s Yardley branch after she left her last job as a care home assistant.

“Remploy gave me the confi dence to go for this job,” said Katy, who is a clothing sales assistant. “I wasn’t very happy at my last job, but I’m a different person now.”

Su Tranter, Sainsbury’s HR manager at the store added: “I’m passionate about working with Remploy because I know they will always provide motivated candidates.”

Remploy Limited. Company Registration No. 394532 Contents

Remploy Limited Report and fi nancial statements 2014

Registered Offi ce Contents Page 18C Meridian East Meridian Business Park Chairman’s review ...... 5 Leicester LE19 1WZ Strategic report ...... 7 Telephone: 0845 155 2700 Facsimile: 0116 281 9860 Directors and Advisers...... 15 Registered number: 394532 (England and Wales) Directors’ report...... 18 Bankers The Royal Bank of Scotland Group plc. Corporate Governance...... 21 Corporate & Institutional Banking Audit Committee report ...... 25 135 Bishopsgate London Remuneration Committee report ...... 29 EC2M 3UR Auditors Directors’ responsibility statement ...... 32 Deloitte LLP 2 New Street Square Independent auditors’ report ...... 33 London EC4A 3BZ Income statement ...... 35

Solicitors Statement of comprehensive income ...... 36 Michelmores LLP Woodwater House Balance sheet ...... 37 Pynes Hill Exeter EX2 5WR Cash fl ow statement...... 38

Taylor Wessing LLP Notes to the fi nancial statements...... 39 5 New Street Square London EC4A 3TW

www.remploy.co.uk 3 During the year Remploy Employment “Services found 18,562 jobs for disabled and disadvantaged people. 4 Annual Report and fi nancial statements 2013 ” Chairman’s Review

During 2013/14 Remploy successfully undertook the fi nal stages of its transformation from an organisation which provided employment in its own factories to an organisation focused solely on supporting disabled people to secure and retain jobs in open employment.

Ian Russell, Chairman

By 31 December 2013, the continued to develop a range (Enterprise Businesses) of £3.8 remaining factories were sold or of new products and services million (2013: £1.0 million). closed. Several new businesses for employers to assist them in employing former Remploy employing more disabled people. These results also include a employees emerged from the provision of £7.6 million (2013: transformation. Remploy Employment Services £51.3 million) for the remaining also delivered other commercial costs of transforming Remploy The confi dence resulting contracts including a Workplace primarily for transition support from this transformation was Mental Health Support Service and property exit. This has been refl ected in the announcement for the Government’s Access fully funded by the Department by the Minister of State for to Work programme and of Work and Pensions (DWP) Employment on 22 July 2014 employment support for ex- and the funding received offset of the commencement of a service personnel and other against the cost in the Income Commercial Process with the aim uniformed personnel with Statement. of securing the exit of Remploy’s disabilities or health conditions. Employment Services from Employees Government ownership by March Financial Results 2015. I would like to thank all of Revenue from continuing our employees who worked Employment operations increased by 12% in hard to provide, secure the year. Grant-in-Aid recognised and retain employment for Services in the year was £45.2 million with disabled people, whilst at the an additional £41.5 million of same time transforming our In 2013/14 Remploy’s pension scheme defi cit funding, organisation. Working with great Employment Services delivered representing £21.5 million for professionalism and showing the Government’s Work Choice 2013/14 and £20.0m paid outstanding commitment, they employment programme early for 2014/15 (2012/13 enabled Remploy to maintain for disabled people, and £61.3 million and £nil pensions business as usual during a most provided specialist support as funding). diffi cult time. a sub-contractor to several Prime providers on the Work The Company’s subsequent I am grateful to my colleagues Programme. During the year, profi t before tax from continuing on the board and in executive Employment Services found operations of £19.2 million and senior management for the 18,562 jobs for disabled and (2013: loss of £20.3 million) expertise and diligence they bring disadvantaged people and excludes discontinued operations to Remploy.

www.remploy.co.uk 5 Chairman’s Review (continued)

I would particularly like to Outlook The transformation of our extend my personal thanks business from a factory-based to Tim Matthews whose fi ve Under our new Chief Executive set of operations to one focused year term of offi ce as Chief Beth Carruthers, who was on helping individuals fulfi l their Executive came to an end in appointed on 1 January 2014, aspirations for careers in open December 2013. Tim guided the Remploy’s mission remains employment provides a platform organisation through a period focused on helping to transform for growth and an exciting future of unprecedented change with the lives of disabled people and for Remploy’s Employment wisdom and patience. I would those experiencing complex Services as a fully commercial also like to record my thanks barriers to work by providing organisation operating outside of to Nigel Hopkins, Remploy’s sustainable employment government ownership. Executive Director of Finance, opportunities. Beth joined who left the company in Remploy in 2000 and has led the September 2013. Nigel joined development of the Employment Remploy in 2004 and over the Services business. It is estimated years his advice and counsel that by March 2015, Remploy’s have been invaluable. Employment Services will have supported more than 100,000 Ian Russell CBE disabled and disadvantaged people into work since 2010. Chairman

6 Annual Report and fi nancial statements 2014 Strategic Report

The Directors Results and Textiles, Furniture, Marine Textiles, Packaging and CCTV businesses present the Performance through either a sale of the Strategic Report The latest fi gures show that business or closure. As a result for the Company there are 259,000 more disabled of the sale or closure of these people in employment in Great businesses, a further 1,693 for the year ended Britain than one year ago (3.07m employees left the Company 31 March 2014. in Q3 2014 up from 2.81m in Q3 during the year. During the year, 2013) – with the largest recorded the average number of staff The Directors in Q3 year on year employment rate employed in the discontinued preparing this increase in the last decade. businesses was 527 (2013: 1,804). The exit through the sale Strategic Report, During the year, the Employment or closure of these factory and have complied Services division operating through service businesses completed the national delivery of the Work the transformation of Remploy with s414C of the Choice programme, as a sub- from an organisation providing Companies Act 2006. contractor to Prime contractors employment in its own factories under the Work Programme and and service operations to one through the delivery of other focused entirely on supporting Review of the contracts placed 18,562 (2013: disabled and other people with Business 17,835) people with a disability or complex barriers to work to secure other complex barriers to work into and maintain jobs with mainstream The Company is a provider of mainstream employment. Remploy employers through its Employment services that transform the lives remains the largest provider of Services division. of disabled people by increasing jobs for people under the Work A comprehensive 18 month the number of sustainable Choice programme. In addition guaranteed, People Help and employment opportunities and to developing new products and Support Package is in place assisting people with a disability services to assist and support for disabled people affected or other complex barriers to work people into work, the Company by the exit of Remploy factory into employment and supporting also continued to develop and businesses. Latest fi gures show them when in employment. The introduce programmes designed that 1,245 former Remploy Company is a private company to assist organisations in recruiting disabled workers (over 80 per without share capital and is limited disabled people and sustaining cent) of the 1,507 people who by Guarantee of the Secretary of their employment. were made redundant and had State for Work and Pensions. In The process of transformation been supported by a Personal addition to revenues generated of the Company continued Case Worker were in work and/ from its own commercial activities, during the year with the sale or or had accessed Work Choice the Company receives Grant-in- closure of the remaining factory support. A total of 1058 jobs have aid from the Government to fund and service businesses in the been found for disabled former its operations. Enterprise Business division. employees and 774 are in work. During the year, the Company exited the Automotive, Automotive Total revenue for the year from Textiles, E-Cycle, Frontline continuing operations was www.remploy.co.uk 7 Strategic Report (continued)

£60.2m (2013: £38.3m). Total for past service costs arising from is measured in purely fi nancial revenue comprised revenues pension scheme amendments terms. Remploy also considers its from commercial contracts in and net fi nance costs of £13.2m social impact to be very important Employment Services of £15.0m (2013: £6.6m). and it measures this using a (2013: £13.4m) and Grant-in- Social Return on Investment Note 6 to the fi nancial statements aid of £45.2m (2013: £24.9m). (SROI) model. This takes a provides a schedule setting out During the year, revenue from the more holistic approach in not how the operating Grant-in- discontinued operations of the only measuring hard outcomes, aid from continuing operations Enterprise Businesses reduced but looking at what effects the of £45.2m (2013: £24.9m) to £54.4m (2013: £96.9m) as a Company’s services have on all its and the pension funding result of the sale or closure of the stakeholders, the community and contribution received of £41.5m factory and service businesses the environment. The Company’s was consumed in funding the during the year. Social Return on Investment Employment Services business performance is collated and During the year, the Company (£34.1m), central and support calculated by an accredited SROI recognised Grant-in-aid from the services (£9.2m), transition costs practitioner. During the year, the Government of £45.2m (2013: (£19.3m) and pension past Company’s SROI analysis shows £24.9m) to support ongoing service costs (£4.9m), and which that Remploy delivered a positive operations and £10.5m (2013: generated the profi t before tax impact of £2.51 in social benefi t £36.4m) to support discontinued from continuing operations of for every £1 invested. operations. The Company also £19.2m (2013: £20.3m loss). The received funding of £41.5m transition costs of £19.3m (2013: (2013: Nil) from the Secretary of £2.5m) mainly relate to business Future Developments State for Work and Pensions to and property estate closure costs. contribute to funding the pension and Business The Company incurred a total scheme defi cit. Of the £41.5m of Environment corporation tax charge during pension funding received, £21.5m the year of £3.9m (2013: credit related to the 2013/14 fi nancial The Government commissioned £4.8m), made up of a current tax year and £20.0m represented an the Sayce Review in December charge of £0.1m (2013: £0.1m) early payment of the 2014/15 2010 to examine and make and a deferred tax charge of funding contribution. recommendations on specialist £3.8m (2013: credit £4.9m). employment support for Before movements on pensions The corporation tax charge disabled people, including and net fi nance costs, the refl ects corporation tax charged the work of Remploy. At the Company made an operating at 20% on the profi t generated time the Sayce Review was loss of £4.2m (2013: £1.1m) from ordinary activities by both commissioned Remploy operated on continuing operations. Profi t continuing and discontinued 54 manufacturing and services before tax from continuing operations less £2.2m of brought businesses employing disabled operations was £19.2m (2013: forward losses utilised in the people directly, as well as £20.3m loss). The Profi t before period. fi nding jobs in open, mainstream tax from continuing operations employment for disabled people The Company recognises that refl ects the pension scheme and supporting them to sustain its business is not just that of an funding received of £41.5m less those jobs. economic entity whose success a £4.9m (2013: £12.6m) charge 08 Annual Report and fi nancial statements 2014 Sayce reported on 9 June 2011, disabled people in fi nding and delivers and which is currently and a period of consultation remaining in employment. It is funded by Grant-in-aid. was launched on 11 July 2011. anticipated that an investor will Accordingly, the Government will Following the consultation period acquire a signifi cant stake in have a contractual arrangement on 7 March 2012, the Government the business (“ES Newco”) and with ES Newco to continue announced that it was accepting invest in its continued growth national delivery of Work Choice in full the recommendations of the and development, outside of from April 2015, for a period of 3 Sayce Review in that Government Government control and with years. funding should not be used to the freedom and fl exibility for It is anticipated that other subsidise organisations such as the business to continue to grow commercial contracts operated by Remploy but should be used to and help even more people with the existing Employment Services maximise the number of disabled disabilities and other complex division will transfer to ES Newco people in open employment. This barriers to work to fi nd and sustain along with certain operating decision led to the programme to open employment. assets and liabilities, as well as sell or close the 54 factories in The Board and the Government is employees who will transfer to the Enterprise Business division. aiming to complete the transaction ES Newco under the Transfer This process began in 2012/13 to exit Employment Services from of Undertakings (Protection of and was completed during the Government ownership by March Employment) Regulations 2006 year ended 31 March 2014. 2015. Upon exit the ES Newco (“TUPE”) for those contracts, When the Government announced will be one that: operations and business support its decision, it also stated that it functions and processes that will would consider, in conjunction J continues to deliver a national vest as part of the process. with the Remploy Board, whether Work Choice contract; the Employment Services division J continues to deliver Remploy’s Upon the establishment of should be freed from Government mission to transform the ES Newco, and subject to ownership such that it would be lives of disabled people negotiations with the successful able to have a sustainable future and those experiencing bidder on the assets and operating in the private sector. complex barriers to work infrastructure that will transfer by providing sustainable under the process, the Company Following completion of the employment opportunities; may retain certain assets and transformation programme and liabilities, including pension involving the Enterprise liabilities up to the date of exit. Businesses, on 22 July 2014, J establishes the existing The Company will be reliant on and on the recommendation Employment Services continued Grant-in-aid funding of the Remploy Board, the business, including its assets under the Secretary of State’s Government announced that and operating infrastructure guarantee in order to fund the it was launching a commercial as a private sector commercial run-off of any assets and liabilities process for Employment Services business. that may remain with the Company to exit Government ownership. Critical to achieving an exit in following the exit. The objective is for it to exit as a accordance with the established sustainable independent specialist success criteria will be continuity Whilst the Board and the disability employment service of the existing national Work Government anticipate an exit provider and continue to support Choice contract that Remploy being completed by March 2015, www.remploy.co.uk 09 Strategic Report (continued)

it is recognised that it may not be In addition to the Government’s J Manage Work Choice delivery completed by that date or an exit commitment to fund any ongoing within the annual Work Choice may not be achieved. In the event or residual trading or other Grant-in-aid funding allocation; of either of these circumstances liabilities of the Company through J Achieve annual target Work arising, the Government has given the fi nancial year ending 31 Choice disabled job outcomes; an undertaking to the Company March 2016, it has given an J Achieve annual target for Work that it will continue to fund the undertaking that if the Company Choice job retentions; Company’s national delivery of is closed down (whether through J Achieve annual target for total Work Choice in the fi nancial a managed exit or solvent disabled job outcomes; year ending 31 March 2016 and liquidation) it will provide suffi cient fund all other ongoing or residual funding to ensure that any net J Achieve annual target for trading and other liabilities of defi cit of liabilities, including the commercial contract revenue the Company, including pension costs of any advisors or liquidators, and net contract contribution obligations under the defi cit arising will be met in full. (non Work Choice); and repayment plan, during the J Achieve employee diversity fi nancial year then ended. Key Performance goals and objectives. In relation to the funding and Indicators run-off of any assets and Principle Risks and liabilities that may remain with the The Company has made Uncertainties Company following an exit, the signifi cant progress throughout Main Agreement between the the year, both in terms of its The Board has identifi ed Company and the Secretary of strategic transformation and the following potential risks State provides for the following in development process and also and uncertainties that could paragraph 12.3 “Upon a winding- in the operational performance have a material impact on the up of the Company following of its continuing operations. The Company’s performance and termination of this Agreement, Board monitors the performance future development and has put the Company will use its best and progress of the Company by in place internal processes and endeavours to ensure that the reference to the following Key controls which are designed to Secretary of State is consulted Performance Indicators: mitigate each risk. These risks on an orderly winding-up of the J Manage the business to deliver and uncertainties are identifi ed Company. Provided that the fi nancial performance to in a Strategic Risk Framework Secretary of State’s proposals annual budget; which is monitored by both the Audit Committee and the for an orderly winding-up are J Manage the continuing Board. The Company’s results implemented by the Company business within the total and performance could also be (to the extent that it is able to annual operational Grant-in-aid impacted by other factors and the do so), the Secretary of State funding allocation; shall pay to the Company by risks identifi ed below should not J Manage the transformation way of a grant a sum equal to be regarded as a complete and programme within the total the net defi cit (being the excess comprehensive statement of all annual Grant-in-aid funding of liabilities over the proceeds of the risks and uncertainties facing allocated to the programme; realisation of assets) incurred by the Company. the Company.”

10 Annual Report and fi nancial statements 2014 Type of risk Risk Risk description Internal Processes and Controls Strategic Future funding The Government’s spending Working with Government constrained by plans post 2015 and other shareholder Government announcements and actions Working capital management shareholder constraining future funding Continuous review of short-term and liquidity and the impact on liquidity Remploy as a going concern Continual analysis of borrowing and (see Note 2 in the fi nancial customer credit requirements statements) Structural reorganisation opportunities Strategic Following the Government’s Effectively defi ne the criteria upon development announcement to exit which a new private sector investor/ Remploy’s Employment Services owner will be determined division from the public sector Working with DWP and other and move it into the private Government departments on a robust sector in line with the Sayce and competitive commercial process Review recommendations, the Set out a compelling vision and consequences of the failure investment case for Remploy’s of the commercial process to Employment Services division achieve an exit or of a change refl ecting economic and social in policy that could lead to outcomes the division remaining in Engage with the market generally and Government ownership potential private sector investors to make the investment case Working with legal, fi nancial and other professional advisors to secure an exit on the most attractive terms and consistent with the established success criteria European The Company generates Monitoring of UK/EU developments Union Funding funding from EU sources in the run up to the UK general (e.g. European Social Fund) election in May 2015 and in the which could be at risk if the event of a EU renegotiations and/or UK exits the EU following a a referendum potential referendum or any Developing alternative commercial renegotiations of the UK’s strategies to replace any potential participation in the EU leads to lost EU funding less EU funding being made available for such programmes Commercial Competitive Remploy is dependent on key Investment in products and services pressures contracts and relationships, Investment in sales and marketing and failing including Government Ongoing focus on new business to capture departments and other development strategies and plans or losing public sector agencies as Investment and development of profi table well as private sector clients management information systems and cash to generate sales and fulfi l and processes generative contractual commitments Monitoring and maximising candidate business fl ow from referring partners Key client and supplier contract performance monitoring and appraisal

www.remploy.co.uk 11 Strategic Report (continued)

Type of risk Risk Risk description Internal Processes and Controls Delay in the Any delay in the divestment Refer to strategic development risk divestment of the division may lead to a above. In the event of a delay or a of Remploy’s requirement for more funding failure to divest: Employment for Remploy. Contracting Ongoing discussions with Services partners may not renew or Government on future funding division or let new contracts to Remploy requirements a failure to pending clarity on the potential Ongoing dialogue with clients and divest the divestment outcome key commercial and referral partners division Ongoing consultations and communications with employees and unions Future DWP is reviewing its Specialist Ongoing discussions with DWP and changes in Disability Employment Policy other key stakeholders Government and this may lead to change Monitoring and assessment of contracting in the way that it commissions commercial risk strategy on and lets contracts in Welfare to Infl uence DWP thinking and policy Welfare to Work, Work Choice and other development Work, Work key contracts that Remploy Choice engages in and other employment support services contracts Operational Recruitment Remploy relies on highly Provide a stimulating, challenging and and retention skilled and motivated staff to rewarding employment environment of key staff achieve its mission and meet Maintain and develop competitive its commitments to clients remuneration and incentive packages and candidates. The inability Identify and develop talent to recruit and/or the loss of Effective succession planning key staff will inhibit Remploy’s Provide opportunities for personal achievement of its mission and career enhancement and its key business objectives development

Adverse Remploy operates a complex Regular monitoring of Government economic, business which is subject to policy development, particularly in political uncertainty and change arising Welfare to Work and employment and legal from these factors, in particular services strategy environments Government policy Working closely with key stakeholders in the public sector, charities, other third sector service providers and key opinion formers and thought leaders Reviews with legal and other independent professional advisors 12 Annual Report and fi nancial statements 2014 Type of risk Risk Risk description Internal Processes and Controls Technological Remploy’s operational business Ensure Remploy has the appropriate development model is based on a national current and emerging technology network of offi ces and fi eld based systems and processes to based advisers supported by maximise fulfi lment of job vacancies technology based systems and for disabled people processes such as the Case Manage the existing property estate Management system. Ongoing to ensure current and future capacity technological development may is optimised lead to the offi ce/fi eld based Ensure current offi ces meet rigorous network becoming redundant operational and fi nancial performance or to an over capacity leading to criteria structural change to the current Subject planned new offi ce openings business model to rigorous operational and fi nancial scrutiny Legal and An increase in the number of Working closely with independent other claims claims received from former legal advisors resulting from employees and the risk of Developing and articulating robust the Remploy losing claims as a result of the defences to various claims transformation sale or closure of Remploy’s Identifying and implementing effective and factory business, the potential claims mitigation strategies restructuring outcomes of which and values process have not yet been determined Reputation Remploy relies on its reputation Regular review of staff policies in delivering in delivering equal opportunities & procedures related to Equality equal and diversity across its own of Opportunity including Equal opportunities business and in fulfi lling its Opportunities, Anti Bullying and and diversity mission and key business Harassment, Health, Wellbeing both in objectives & Safety, Corporate Social itself and in Responsibility (CSR) & Safeguarding Remploy’s Policies dealings Risk identifi cation & mitigation with clients, through annual Diversity Report candidates to Remploy Board, monthly Board and other key progress report on Company aim to stakeholders be an exemplar employer of disabled people Quarterly CSR steering group meetings, Quarterly review of employee and candidate equalities data with a particular focus on mental health and learning disability data, Quarterly Equalities review of recruitment with recruitment agency partners Quarterly Equalities review with Trade Unions of ongoing HR cases Regular Equalities review of any candidate complaints. Regular consultation with our internal Disability Forum on ways of continuously improving Company approach to disability and employment www.remploy.co.uk 13 Strategic Report (continued)

Type of risk Risk Risk description Internal Processes and Controls Financial Financial and Remploy, as both a Non Risk identifi cation and mitigation business Departmental Public Body and measures maintained and control a legal corporate entity subject continuously developed to the Companies Act must Robust fi nancial internal control ensure that appropriate and environment robust general business and Internal Audit function fi nancial controls are in place Management controls, including and operating effectively at all authority levels times Directors annual confi rmations Detailed and ongoing fi nancial budgeting and forecasting External audit recommendations on the internal control environment Management and Director training and development Annual Board performance and effectiveness reviews Pension Remploy operates Defi ned Effective liaison and management scheme Benefi t and Defi ned between Remploy and key changes Contribution pension schemes stakeholders including DWP, Trustees and scheme for the benefi t of its employees and the Secretary of State Guarantee funding and scheme members. (see Note 2) Changes in pension legislation Monitoring of pension scheme asset and/or in funding requirements values and liabilities including actuarial assumptions Working closely with Trustees and employed and the scheme other independent professional defi cit assumptions may advisors negatively impact Remploy’s Taking appropriate steps and fi nancial position and ability to measures to minimise pension risk fund and liabilities

The Board confi rms that both it and the Audit Committee has reviewed, and maintains under review, the effectiveness of the Company’s internal controls and processes and that there are ongoing management processes for identifying, evaluating and managing the signifi cant risks and uncertainties faced by the Company. Approved by the Board and signed on its behalf by:

Alexandra Owen Executive Director, Finance 24 October 2014

14 Annual Report and fi nancial statements 2014 Directors and Advisors

Ian Russell CBE* Tim Matthews Chairman Chief Executive (aged 61) (aged 63) Ian joined the Company as Non- (Left the Company on 31 December executive Chairman in January 2013) 2007. In addition to chairing Tim joined the Company as Chief Remploy, Ian is also Non-executive Chairman of Executive on 1 October 2008. In his last role Tim Johnston Press and Advanced Power. He is a was Senior Vice President of global consulting Non-executive Director of British Polythene, the engineering and project management company, Mercantile Investment Trust, HICL Infrastructure Parsons Brinckerhoff Inc. Tim had previously been Ltd, and the British Assets Trust, and adviser to the Managing Director of Parsons Brinckerhoff Ltd. Clyde Bergemann Power Group. Previously, Ian was He has had several high profi le jobs in the public Chief Executive of Scottish Power and prior to that sector, including Chief Executive of the Highways he worked for HSBC and Mars. Agency from November 2000 to October 2003 and Chief Executive of Guys and St Thomas’ NHS Hospital Trust from March 1993 to November 2000.

Beth Carruthers Chief Executive (aged 47) Alexandra Owen FCA Beth joined Remploy in 2000 and Executive Director, Finance has led the development of the Employment Service business. (aged 39) Her early career was spent in the private sector in (Appointed 20 August 2014) Retail, Catering, Manufacturing and Utilities. Her Alexandra joined the Company responsibilities focused on HR and Training and in August 2014 as Finance Director. Formerly included accountability for the UK and overseas. Head of Financial Services and Reporting at Beth holds a degree in Education from Glasgow United Learning, a large group of charities in the University where she developed a particular interest Education sector looking after both Academies and in Special Educational Needs. Independent Schools. Alexandra had previously held roles at Invu Plc and Saffery Champness Chartered Accountants. Alexandra is a Chartered Accountant with many years’ experience in both publically and privately funded organisations.

www.remploy.co.uk 15 Directors and Advisors (continued)

Nigel Hopkins Ian Thornley** Executive Director, Non-executive Director Finance and Strategy (aged 56) (aged 56) Ian was appointed to the Board (Left the Company on 30 September as Non-executive Director in May 2013) 2006. He is also the founder Nigel joined the company as Finance Director in and Managing Director of Staffi ng Partners, a May 2004. Formerly Director of Administration corporate fi nance consultancy specialising in with Comau Estil, Nigel previously held posts with the recruitment and staffi ng sector. A Chartered Laporte, United Technologies, Coopers & Lybrand Accountant, Ian joined Northwest Airlines in 1992, and Ernst & Young. Nigel is a trustee of Skills holding a number of senior management posts CFA, part of Instructus. with responsibility for operations in Europe, the Middle East and Africa. He joined a US-listed support services business in 1998 as Corporate Development Director before being appointed Managing Director of Right4Staff Limited, one of Joe Mann MBE* its UK subsidiaries. Ian led a management buy- Non-executive Director out of Right4Staff in 2002, serving as its CEO until October 2005. Ian is the co-founder and (aged 62) Chairman of Composites People and Chairman Joe was appointed to the Board of Logical Resources Recruitment Group, two as Non-executive Director in May independent specialist recruitment businesses. 2006. Joe was Deputy General Secretary of the Community Trade Union, with specifi c responsibility for politics, the regions, voluntary sector and external affairs. From 1997 until 2010, Joe was a member of the LP National Policy Forum and various Policy Commissions, Kate Nash OBE* and was a member of the Labour Party National Non-executive Director Executive Committee from 2003 to 2009. Joe (aged 51) has been President of the Executive Committee Kate was appointed to the Board of the General Federation of Trade Unions. From as Non-executive Director in 2007. 1995 to 2000 Joe was General Secretary of the Kate is a freelance Disability National League of The Blind and Disabled, during Consultant having 20 years’ experience in which time he was appointed to the Government’s working strategically to effect long-term attitudinal Disability Rights Task Force. and major social systems change in relation to disabled people. She works closely with Post Offi ce Ltd, KPMG and BT. In addition, Kate runs an independent hub of best practice in the establishment of Employee Networks, across sector strands. She chaired the merger between Radar, Disability Alliance and NCIL.

16 Annual Report and fi nancial statements 2014 Ian Black* ** Jo Munns Non-executive Director Secretary (aged 60) (aged 46) (Appointed 1 April 2014) Ian was appointed to the Board as Non-executive Director in Jo Munns joined Remploy in November 2007. Ian has worked in various 2001 and has held a number business sectors with roles including IT, Quality, of roles including National Operations Manager, Marketing Services and most signifi cantly as a Head of Specialist Services and Director of Social commercially orientated HR Director and Change Enterprise and Director of Strategy and Business Leader. Previously, Ian spent 10 years working at Change. Previously Jo worked in the Recruitment BAT and Rothmans International as a senior HR and Automotive Industries in operations and Director and executive board member. Ian has technical sales roles with Caterpillar (UK) from held senior management positions in other leading 1997 to 2001, Henkel and W R Grace between organisations, including NCR and AT&T. In addition 1990 and 1997. to his position with Remploy, he is currently a Director of OFE, BSH and Arch Management Consultants where he advises boards on subjects such as organisational development, remuneration, Mary Goldsbrough governance and performance management. Ian is also a Non-executive Director at MLCSL and IFR. Secretary (aged 52) (Left the Company on 31 March 2014) Mary, a solicitor, joined the John Osmond** Company in 2009 as Employment Lawyer. Previously, she held positions with Non-executive Director Shakespeare Putsman LLP, Sears plc. and the (aged 62) Burton Group. John was appointed to the Board as Non-executive Director in October 2011. His 35 years’ experience in the Information Technology and Services Industry encompasses senior management positions in alliance management, strategy, transformation consultancy, programme and risk management. His most recent position for IBM was as the Director leading the alliance between IBM and Cisco across Europe, Middle East and Africa, * Member of the Remuneration Committee one of IBM’s largest global business partnerships. In addition to his position with Remploy, John is ** Member of the Audit Committee a Governor of the Westminster Foundation for Democracy, a Director of the Compaid Trust - a Kent based charity supporting disabled people - and a Justice of the Peace. www.remploy.co.uk 17 Directors’ Report

The Directors Environmental the fi nancial statements. The Chairman’s Report refers present their 69th matters to signifi cant developments annual report on We recognise that our factory impacting on the future of the businesses had an impact on the Company. Refer to note 2 of the affairs of the environment through some of the fi nancial statements for further details on the Directors’ our factory operations, offi ces, Company, together assessment of the going concern transport and other business assumption. with the fi nancial activities. We are committed to statements and ensuring that, where practical, any adverse impact on the Financial risk auditors’ report environment from our activities management for the year ended is being minimised. Most of our business sites are ISO 14001 objectives and 31 March 2014. approved. Our goal is to reduce policies The Corporate waste as much as possible at its source and otherwise to reuse or Details for risks along with Governance recycle as much as is technically actions taken by the Directors and practically possible. have been presented in note 21 statement set out on of the fi nancial statements. pages 21 to 24 form Health and safety Dividends part of this report. The Company has continued to maintain its efforts to ensure The Company is limited by guarantee and has no share Principal activities improvement in our safety and health performance. In the year capital and therefore does not pay dividends. Remploy Limited is a private 2013/2014 we reported one company as defi ned by the accident under RIDDOR to the Companies Act 2006, limited by HSE. This represents a real drop Directors guarantee, without share capital. assisted by the closure of the Refer to the Corporate factories during the year. The Company was incorporated Governance report on pages in 1945 with the principal 21 to 24, and the Directors and objective of providing training Going concern Advisors report on pages 15 to and employment for registered 17. severely disabled persons under In accordance with their The Company has made special conditions. responsibilities as Directors, the Directors have considered the qualifying third-party indemnity appropriateness of the going provisions for the benefi t of concern basis for the preparation its Directors which were made of the fi nancial statements during the year and remain in and they continue to adopt the force at the date of this report. going concern basis in preparing

18 Annual Report and fi nancial statements 2014 Information security At the end of the year 478 Senior managers attend functional disabled people (2013: 2,171 team meetings and key training The Directors recognise their disabled people) were employed courses, which support the formal responsibilities under the in Remploy’s own businesses. feedback process. Data Protection Act to ensure The reduction in disabled people that personal and commercial Involvement of the recognised employed at Remploy is a result trade unions takes place through information is protected against of the factory closures which internal and external threats, a working together partnership, represent reduction in total which includes openly sharing loss or misuse. The Company employees. In addition, during the has established a data forum information and joint working at a year to 31 March 2014 Remploy national level on learning, health to facilitate and manage this found 18,562 jobs in mainstream risk and has introduced specifi c and safety and the organisational employment for disabled people challenges that face Remploy. compliance checks into its and those experiencing complex internal audit and security barriers to work (2013: 17,835 programmes. jobs). Pension fund During the relevant period, Personal data Employee assets of the fund were vested related incidents in the Board of Trustees which involvement comprises an independent There was one personal data Involving all people is an important trustee director, Mr. Robert related incident in 2013/14 part of how Remploy operates. Gravill representing the Trustee reported to the Information One of Remploy’s values is Corporation Limited appointed Commissioner, (none were openness. This means not only by the Board of Remploy reported in 2012/13). The demonstrating openness through Limited, and also comprising Information Commissioner communication but also being four trustee directors appointed considers the action taken by the open to new ideas and feedback. by the Executive Directors of Company reduces the likelihood the Company and four trustee A structured communication of any further incidents. directors elected by the members. plan ensures that two-way A trustee report was made communication takes place on available to all members during Employees and key issues at local, business and the year. Funds are managed organisational level. A variety of employment of independently on behalf of the methods are used from team and Scheme to whom they report site briefi ngs to newsletters and disabled persons each quarter and comprised at conference calls. The aim of the Company is to 31 March 2014 by Schroder maximise the number of disabled Communication is seen as an Investment Management Limited, and disadvantaged people in important part of any manager’s Legal and General Investment employment in two main ways: role and training is taking place to Management Limited, Pimco ensure everyone has the required Funds plc., Permal Group LLC, J through supporting people to skills. Remploy employees have Insight Investment Management gain employment with other access to an enhanced intranet (Global) Limited, AllBlue Limited employers; and and this was used extensively by and Stenham Asset Management J previously in our all employees. There is continued Inc. manufacturing businesses. investment in IT training to ensure that people have the appropriate skills. www.remploy.co.uk 19 Directors’ Report (continued)

The Scheme actuary confi rmed of pensionable earnings per any relevant audit information at the last formal actuarial annum (excluding the cost of and to establish that the valuation on 31 March 2013 that providing the death-in-service Company’s auditor is aware of the Scheme showed a defi cit lump sum benefi ts). The employee that information. of £129 million. In June 2014, contribution rate remains at 7%. This confi rmation is given the Trustees and the Company For the fi nancial year 2013/14 and should be interpreted in agreed to spread the payments to the Employer’s standard accordance with the provisions reduce the defi cit in the scheme contribution rate has reduced to of s418 of the Companies Act over a twelve year period. In 14.4%. 2006. March 2014 the Company made an early payment of £20 million to Deloitte LLP has expressed their the pension defi cit. The Company Auditor willingness to continue in offi ce made additional contributions Each of the Directors at the date as auditor and a resolution to of £25.8 million in March 2011 of approval of this report confi rms reappoint them will be proposed £21.5 million in April 2011 and that: at the forthcoming Board meeting. £21.5 million in March 2012. The J so far as the Director is Approved by the Board actuarial valuation on 31 March aware, there is no relevant and signed on its behalf 2014 performed in accordance audit information of which the with IAS 19 resulted in a defi cit by: Company’s auditor is unaware; of £226.2 million (2013: £341.1 and million) (note 24). J the Director has taken all the The Employer’s standard steps that he/she ought to contribution rate required to cover Alexandra Owen have taken as a director to future benefi ts on an ongoing Executive Director, Finance make himself/herself aware of basis was calculated at 14.7% 24 October 2014

Remploy’s ‘Be the Change’ volunteering initiative provides practical support to charities and community-based organisations 20 Annual Report and fi nancial statements 2014 Corporate Governance

Compliance DWP. The Chief Executive The areas for assessment and Non-executive Directors continue to be: The Company is committed are appointed by the DWP in J to the principles of corporate assessment and performance consultation with the Chairman. improvement; governance contained in the Other Executive Directors are UK Corporate Governance code appointed by the Chairman. In J clarity of purpose; that was issued in 2012 by the the case of Board appointments J tasks, code of practice and Financial Reporting Council (‘the a committee comprising decision-making; Code’). Executive and Non-executive J skills, contribution and The Company has complied Directors is constituted for each composition; throughout the year ended 31 appointment. Details of the terms March 2014 with the provisions and conditions of appointment of J building and management of as set out in section 1 of the the Non-Executive Directors are agendas; Code including both main available upon written request J content, format, relevance of principles and the supporting from the Company Secretary at information and presentations; principles, insofar as they are the Company’s registered offi ce. and appropriate to Remploy under The Board is responsible for J engagement, tone and style to Government objectives for Non- setting Company strategy, maximise effectiveness. Departmental Public Bodies, and approval of major capital except as noted below. The expenditure, for senior Issues arising from the self Company offers a fi ve-year management appointments and assessment evaluation are service contract, although the establishment and monitoring presented to the Board by the terminable on six months’ notice, of internal controls. It reviews Chairman and an action plan is to its Chief Executive. The the strategic direction of the developed and maintained to Company feels this departure Company and the operating ensure continuous improvement is appropriate given that the results in line with targets set in the operation of the Board Chief Executive is appointed by by the DWP in the Annual and its Committees and in the the Department for Work and Performance Agreement. It performance of the Directors. Pensions (DWP). monitors the progress of the Company towards the Board Committees Board of Directors achievement of budgets and plans. The Board has had for The Board of Directors (the many years a supporting ‘Board’) and their membership committee structure in line of Board Committees is shown Board performance with the proposals of the below and comprise a Non- evaluation Cadbury Committee on the executive Chairman, a Chief Financial Aspects of Corporate Executive plus one Executive and A process of self assessment Governance. Membership of fi ve independent Non-executive evaluation of the Board, its the committees is set out in the Directors. Appointments to Committees and Directors takes Directors and Advisers section the Board are advertised. The place every year. and in the Audit committee Chairman is appointed by the Report and Remuneration Committee Report. www.remploy.co.uk 21 Corporate Governance (continued)

Remuneration DWP with regard to the Chief the Chairman. Other Executive Executive. Further details can Directors are appointed by the Committee be found in the Remuneration Chairman. In all cases a special The Remuneration Committee Committee report section. committee comprising Executive is chaired by Mr Ian Black and The Remuneration Committee and Non-executive Directors is includes two other Non-executive also undertakes the work of constituted for each appointment. Directors. The Committee a Nominations Committee. Details of the terms of reference reviews salaries and targets Appointments to the Board of the Remuneration Committee for performance related pay are advertised. The Chairman are available upon written request for Executive Directors and and Chief Executive and Non- from the Company Secretary at senior managers and makes executive Directors are appointed the Company’s registered offi ce. recommendations to the by the DWP in consultation with Remuneration/ Audit Nomination Attendance at meetings during the year Board Committee Committee meetings meetings meetings Number of Meetings 9 4 3 Ian Russell CBE 9 - 3 Beth Carruthers 2 - - Tim Matthews 7 - 3 Nigel Hopkins 6 2 - Ian Thornley 9 4 - Joe Mann MBE 8 - 3 Kate Nash 8 - 3 Ian Black 8 3 3 John Osmond 9 4 -

Remploy Executive Offi cer. Her role is to advise the J adequate accounting, audit Board and she is responsible for and information systems exist The management of the business the duties set out in the Non- to achieve proper fi nancial within the annual operational plan Departmental Public Bodies management and control and strategic plan is delegated to Accounting Offi cer memorandum. performance information and the Executive Directors. She is responsible for assuring value for money and effi ciency Parliament that: improvements; and Accounting Offi cer J there is due propriety and J appropriate standards are The Chief Executive, Mrs Beth regularity in the use of maintained and fi nancial Carruthers, is designated in the resources provided to the considerations are taken fully Agreement with the Secretary Company by the Secretary of into account by the Board at all of State as the Accounting State; stages in framing and reaching decisions, and their execution. 22 Annual Report and fi nancial statements 2014 Internal controls The Directors acknowledge that they have overall responsibility for the Company’s system of internal control, including suitable monitoring procedures and for reviewing its effectiveness. The system of control is designed to ensure the maintenance of need to enhance continuously J reporting on internal fi nancial proper accounting records and the system of internal control controls and procedures by the reliability of the fi nancial and risk management. This is Internal Audit. information used within the reviewed regularly by the Board Remploy has an Internal business or for publication, but and accords with the Turnbull Audit function which operates any such system can only provide guidance. The Board confi rms to standards defi ned in the reasonable and not absolute that necessary actions are being Government’s Internal Audit assurance against misstatement taken to remedy any signifi cant Manual. The work of the Internal or loss. The Directors make weaknesses identifi ed. Audit Department is informed commercial decisions on risk The Company’s internal by an analysis of the risk to within a managed framework and fi nancial control and monitoring which the Company is exposed against a formal procedures and procedures include: and the annual internal audit ethics policy. J clear responsibilities on the plans are based on this analysis. The Board has implemented part of line and fi nancial The internal audit approach is in full the Turnbull guidance management for the reviewed and endorsed by the (2005), Internal Control; maintenance of good fi nancial Audit Committee and internal Guidance for Directors on The controls and the production of audit plans are approved by the Combined Code. A review of accurate and timely fi nancial Executive Directors. An annual the risk management process management information; report is issued by the Internal for signifi cant risks was Audit Manager on internal J the control of key fi nancial undertaken and is set out in audit activity, which includes risks through clearly laid down the risk management policy an independent opinion on the authorisation levels and proper document which comprises adequacy and effectiveness of segregation of accounting procedures, strategies and review the system of internal fi nancial duties; processes. Procedures and control. implementation are set around J detailed monthly budgeting The Board, with the assistance an extensive Strategic Risk and reporting of trading of the Audit Committee, has Framework which has been in results, balance sheets and reviewed the effectiveness of place all year and is reviewed cash fl ows, with regular review the system of internal controls regularly by the Executive and by management of variances for the period covered by the the Audit Committee. In addition, from budgets; and fi nancial statements. This review the Board and management are takes into account the work of keeping under active review the the Internal Audit Department,

www.remploy.co.uk 23 Corporate Governance (continued)

the Executive Directors who have Related party responsibility for the development and maintenance of the control transactions framework and the comments Remploy Limited is a Non- of the external auditor in their Departmental Public Body management letter and other sponsored by the Secretary reports. All recommendations to of State for the Department improve controls are considered for Work and Pensions. and followed up as appropriate. During the year Remploy Limited entered into normal Business ethics arm’s length contractor relationships with As an executive Non- Jobcentre Plus and other Departmental Public Body associated agencies which (NDPB) Remploy complies with are a part of the Department the Government’s requirement for Work and Pensions, including to have in place a code of best Work Choice and Access to these Government Departments practice for employees. The Work Mental Health. Information are not considered to meet the Code of Business Ethics draws regarding these arrangements defi nition of a related party as heavily on the Government’s has been disclosed in note 25 of set out in IAS 24 Related Party Model Code and its underlying the fi nancial statements. principles and it covers key Disclosures. Remploy Limited has had a business issues which are number of material transactions appropriate for a commercial with other Government By order of the Board. Company. Departments and other central At Remploy, we believe in greater government bodies which arose inclusion and equality for disabled in the normal course of trading. people through sustainable Most of these transactions employment. This belief shapes have been with the Ministry of our passion and commitment to Defence and the Home Offi ce. equip disabled people with the No further information has been Jo Munns skills and confi dence they need provided on these transactions Company Secretary to build enduring careers. as, in the Directors’ opinion, 24 October 2014

24 Annual Report and fi nancial statements 2014 Audit Committee Report

Summary of the unless expressly addressed account relevant guidance by the Board itself, the regarding the provision of role of the Audit Company’s internal control and non-audit services by the Committee risk management systems; external audit fi rm and to report to the Board, identifying The Audit Committee is J monitoring and reviewing the effectiveness of the any matters in respect of appointed by the Board from which it considers that action the Non-executive Directors Company’s internal audit function; or improvement is needed, and of the Company. The Audit making recommendations as Committee’s terms of reference J making recommendations to to the steps to be taken; include all matters indicated by the Board, for their approval in J the Disclosure and Transparency the Annual General Meeting reviewing the effectiveness of Rule 7.1 and the UK Corporate in relation to the appointment, the Company’s whistle blowing Governance Code. The terms re-appointment and removal procedures, particularly that of reference are considered of the external auditor and the arrangements are in place annually by the Audit Committee approval of the remuneration for the proportionate and and are then referred to the and terms of engagement of independent investigation Board for approval. the external auditor; of such matters and for appropriate follow-up actions; The Audit Committee is J reviewing and monitoring and responsible for: the external auditor’s J reviewing and monitoring J independence and objectivity monitoring the integrity of information security controls the fi nancial statements of and the effectiveness of the audit process, taking into and information security the Company and any formal incidents. announcements relating consideration relevant UK to the Company’s fi nancial professional and regulatory The Audit Committee is required performance and reviewing requirements; to report its fi ndings to the Board, signifi cant fi nancial reporting J developing and implementing identify any matters in respect judgements contained therein; a policy on the engagement of of which it considers that action or improvement is needed, and J reviewing the Company’s the external auditor to supply non-audit services, taking into make recommendations as to the internal fi nancial controls and, steps to be taken. Composition of the Audit Committee The members of the Audit Committee in the year were: Name Date of Appointment Mr I Thornley (Chairman)* 2007

Mr I Black 2010 Mr J Osmond 2011

*A Member of the Institute of Chartered Accountants of Scotland.

www.remploy.co.uk 25 Audit Committee Report (continued)

Membership of the Audit business, including the main Meetings Committee is reviewed by the business and fi nancial dynamics Chairman of the Committee and risks. New Committee The Audit Committee is required and the Company Chairman, members also meet some of to meet at least four times a who is not a member of the the Company’s staff. Ongoing year and has an agenda linked Audit Committee, at regular training includes attendance to events in the Company’s intervals and they recommend at formal conferences, internal fi nancial calendar. The agenda new appointments to the Company seminars and briefi ngs is predominantly cyclical and is Nominations Committee for by external advisers. therefore approved by the Audit Committee Chairman on behalf of onward recommendation to the The Board expects the Audit Board. Appointments are for a his or her fellow members. Each Committee members to have an Audit Committee member has period of three years and are understanding of: extendable by no more than the right to require reports on one additional three-year period. J the principles of, contents matters of interest in addition to The Committee is normally of, and developments in the cyclical items. comprised of three independent fi nancial reporting including The Audit Committee invites Non-executive Directors with the applicable accounting the Chief Executive, Finance a minimum of two members standards and statements of Director, Heads of Finance, at any time. Two members recommended practice; Internal Audit and Risk Control constitute a quorum. The Audit J key aspects of the Company’s Manager, Information Systems Committee structure requires operations including corporate Director, senior representatives the inclusion of one fi nancially policies, company fi nancing, of the external auditor and qualifi ed member (as recognised products and systems, senior representatives of the by the Consultative Committee of information security and Department for Work and Accountancy Bodies) and has at internal control; Pensions to attend all of its least one member that has recent meetings in full, although it J matters that infl uence or and relevant fi nancial experience. reserves the right to request any distort the presentation of Currently, the Audit Committee of these individuals to withdraw. accounts and key fi gures; Chairman fulfi ls this requirement. Where members are unable to All Audit Committee members are J the principles of, and attend meetings they are advised expected to be fi nancially literate. developments in Company law, of the matters to be discussed in sector specifi c laws and other The Company provides an advance of the meeting and given relevant corporate legislation; induction programme for new the opportunity to provide their Audit Committee members and J the role of internal and views to the Chairman or another ongoing training to enable all external auditing and risk Non-executive Director who is a of the Committee members management; member of the Audit Committee. Other senior management are to carry out their duties. The J the regulatory framework for invited to present such reports induction programme covers the the Company’s businesses; as are required to enable the role of the Audit Committee, its and terms of reference and expected Committee to discharge its duties. J time commitment by members environmental and social and an overview of the group’s responsibility best practices.

26 Annual Report and fi nancial statements 2014 Overview of the the audit of the 2013/14 audit. The policy assigns oversight actions taken by the accounts; responsibility for monitoring the J undertaken an evaluation independence, objectivity and Audit Committee to of the performance of the compliance with ethical and Internal Audit function; regulatory requirements to the discharge its duties Audit Committee and day-to- J Since the previous Report of agreed a programme of work day responsibility to the Finance the Audit Committee, the Audit for the Company’s Internal Director. The policy states that Committee has: Audit function; the external auditor is jointly J responsible to the Board and the J reviewed the fi nancial undertaken an assessment of Audit Committee and that the statements to the 2013/14 the qualifi cation, expertise and Audit Committee is the primary annual reports and accounts. resources and independence contact. As part of this review the of the external auditor and Committee received a report the effectiveness of the The Company’s policy on external from the external auditor on audit process. This included audit sets out the categories of their audit of the annual report consideration of a report non-audit services which the and accounts; on the audit fi rm’s own external auditor will and will not quality control procedures be allowed to provide to the J reviewed the fi nancial impact and the audit fi rm’s annual Company, subject to de minimis of the Remploy Transition transparency report; levels and Audit Committee Programme on the Company J Chairman approval in emergency accounts; received reports from the Internal Audit and situations. J considered the output from Risk Manager on the To fulfi l its responsibility the Company-wide process work undertaken by the regarding the independence of used to identify, evaluate and Internal Audit function and the external auditor, the Audit mitigate risks; management responses to Committee reviewed: J reviewed the effectiveness proposals made in the audit J the external auditor’s plan for of the Company’s internal reports issued by the Internal the current year, noting the controls and disclosures Audit function during the year; role of the senior statutory made in the annual report and J reviewed whistle blowing audit partner, who signs the accounts on this matter; procedures and actions taken; audit report and approves any J reviewed and agreed the and changes in the key external scope of the audit work to be J reviewed information security audit team; undertaken by the external controls and information J the arrangements for day-to- auditor; security incidents. day management of the audit J reviewed recommendations in relationship; the external auditor’s report External Auditor J a report from the external relating to the effectiveness of auditor describing their controls across the Company. The Audit Committee is responsible for the development, arrangements to identify, J agreed the fees to be paid implementation and monitoring of report and manage any to the external auditor for the Company’s policy on external confl icts of interest; and www.remploy.co.uk 27 Audit Committee Report (continued)

J the overall extent of non- Internal Audit and Overview audit services provided by the external auditor, in addition to Risk function As a result of its work during the year, the Audit Committee their case-by-case approval The Audit Committee is required has concluded that it has of the provision of non-audit to assist the Board to fulfi l its acted in accordance with its services by the external responsibilities relating to the terms of reference and has auditor. adequacy of the resourcing ensured the independence and and plans of the Internal Audit To assess the effectiveness of objectivity of the external auditor. function. To fulfi l these duties, the the external auditor, the Audit The Chairman of the Audit Committee reviewed: Committee reviewed: Committee will be available at J the arrangements for J Internal Audit’s terms of Board meetings to answer any ensuring the external auditor’s reference, reporting lines questions about the work of the independence and objectivity; and access to the Audit Committee. Committee and all members of J the external auditor’s fulfi lment the Board; of the agreed audit plan and Approval J variations from the plan; Internal Audit’s plans and its This report was approved by the achievement of the planned J the robustness and Audit Committee and signed on activity; perceptiveness of the external its behalf by: auditor in their handling of J the results of key audits and the key accounting and audit other signifi cant fi ndings, the judgements; and adequacy of management’s response and the timeliness of J the content of the external resolution; auditor’s observations on Ian Thornley internal control. J the statistics on staff numbers, qualifi cations and experience Chairman of the Audit The Committee has considered and timeliness of reporting; Committee the likelihood of a withdrawal and of the auditor from the market 24 October 2014 and noted that there are no J the level and nature of non- contractual obligations to restrict audit activity performed by the choice of external auditor. Internal Audit. As a consequence of its The Company’s Whistle blowing satisfaction with the results of Policy contains arrangements the activities outlined above, for the Company Internal Audit the Audit Committee has and Risk Manger to receive, recommended to the Board that in confi dence, complaints on the external auditor, Deloitte LLP accounting, risk issues, internal is re-appointed. controls, auditing issues and related matters for reporting to the Audit Committee as appropriate.

28 Annual Report and fi nancial statements 2014 Remuneration Committee Report

Composition Performance Incentive Payments The Company has a Remuneration Committee The Chairman and Non-executive Directors do which, from 1 April 2013 to 31 March 2014 was not participate in a performance-related incentive chaired by Mr. Ian Black. The Committee also scheme and as such do not receive a performance includes the Non-executive Directors, Mr. Joe payment. A performance-related incentive Mann MBE, Miss Kate Nash OBE and Mr. Ian payment is payable to Executive Directors based Russell CBE, Chairman of the Company. Other on the Performance and Resources Agreement. attendees included Mr. Tim Matthews, Chief The terms are based on a recommendation from Executive (to the end of December 2013) Mrs the Committee and agreed with the Secretary of Beth Carruthers (effective 1st January 2014) and State in consultation with the Chairman of the Mrs. Jean Cabena, Director Human Resources. Company. The standard performance incentive Representatives of the Department for Work and range is now 0% to a maximum of 20% of salary Pensions are also invited to attend. and is discretionary. All performance incentive payments are now subject to maximum caps in Remuneration policy line with Government policy on public sector pay. The Committee aims to ensure that remuneration Pensions offered is competitive and designed to attract, The Company operates defi ned benefi t and retain and motivate Executive Directors and senior defi ned contributions pension schemes. For managers. The Committee works within its Terms the defi ned benefi t scheme, retirement benefi ts of Reference, the Government policy guidelines are based on fi nal remuneration and length and business performance. The Remuneration of service and are funded through a separate Committee also undertakes the work of a trustee-administered scheme. The scheme Nominations Committee (see the Corporate is contributory with members paying 7% of Governance report for further information). The salary. The Company pays contributions to the main components of remuneration are: scheme based on the recommendations of the independent actuary who carries out a valuation Basic salaries of the scheme every three years. The Chairman, Chief Executive and all Non- executive Directors are appointed by the Service contracts Secretary of State for Work and Pensions. The The Chief Executive is normally appointed for a Chief Executive and Non-executive Directors fi xed period of fi ve years which is terminable on salaries are reviewed annually by the Secretary six months’ notice by the Secretary of State. This of State. Basic salaries for Executive Directors contract can be renewed subject to the agreement are considered by the Committee taking into of the Secretary of State. Executive Directors account the performance of the individual and the are appointed by the Chairman of the Company. Company and also Government guidance. The Their contracts have no fi xed period and are Chairman has elected not to receive a salary. As terminable on six months’ notice by the Company. prescribed by Treasury Pay Remit Guidance the The Chairman’s term of offi ce is fi ve years and Executive Directors of the business received a 1% Non-executive Directors are normally appointed salary increase in 2013/14. The Non-executive for a period of three years. These contracts are Directors did not receive any increase. terminable by the Secretary of State with three months’ notice period and are renewable. www.remploy.co.uk 29 Remuneration Committee Report (continued)

Service contracts (continued) The status of appointments as at 31 March 2014 is as follows Compensation Date of service if early contract Unexpired term Notice period termination

I Russell CBE January 2012 34 months None None E Carruthers January 2014 21 months** 6 months Per contract terms I Thornley May 2009 24 months* None None J Mann MBE May 2009 8 months None None K Nash OBE November 2010 8 months None None I Black November 2010 24 months* None None J Osmond October 2011 24 months* None None

*Mr Thornley, Mr Black and Mr Osmond have been granted an extension to their terms of offi ce to March 2016. ** Mrs Carruthers’ contract is renewable. The dates of service contracts for Non-executive Directors above are from the second normal extension period and the unexpired terms refl ect currently agreed extension dates.

Audited information Directors’ emoluments Total emoluments in the year were: 2014 2013 £000 £000 Remuneration excluding costs of pension and life assurance schemes 289 358 Costs of pensions and life assurance scheme contributions 13 17 Supplementation of pensions paid to former Directors in the year 108 108

All emoluments paid to present and past Directors are in connection with the management of the affairs of the Company.

30 Annual Report and fi nancial statements 2014 Directors’ emoluments (continued) Details of emoluments and pensions are as follows: Salary Performance Benefi ts Pension Accrued Increase in Total Years of pension service Incentive contributions Pension related Payment benefi ts 2014 2013 2014 2013 2014 2013 2014 2013 2014 2014 2013 2014 2013 No £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 I Russell ------CBE T Matthews 116.6* 150.0 17.5* 15.0 11.2* 15.0 - - - 145.3* 180.0 5.3 E Carruthers 31.3* 0.5* 4.6* 21.7* 7.8* - 65.9* - 0.3 N Hopkins 62.3* 113.8 12.5* 12.5 6.9* 13.4 8.4* 16.7 23.9* 63.7* 18.9 177.7* 175.3 9.4 J Mann 7.7 7.7 ------7. 7 7. 7 - MBE I Thornley 7.7 7.7 ------7. 7 7. 7 - K Nash 7.7 7.7 ------7. 7 7. 7 - OBE I Black 7.7 7.7 ------7. 7 7. 7 - J Osmond 7.7 7.7 ------7. 7 7. 7 -

Total 248.7 302.3 30.0 27.5 18.6 28.4 13.0 16.7 45.6* 71.5* 18.9 427.4 393.8

*These fi gures represent part-year payments. Notes: Approval Mrs Carruthers’ term of offi ce commenced 1st This report was approved by the Board of Directors January 2014. Mr Matthews’ term of offi ce on 24 October 2014 and signed on its behalf by: ended on the 31st December 2013, he received a payment of £48.6k. Mr Hopkins’ term of offi ce ended on the 30th September 2013, he received a payment of £67.9k. The accrued pension fi gure is calculated on a Ian Black similar basis to the Pension Input Amount used for assessing member benefi ts against the Annual Non-executive Director Allowance for tax purposes, but using a factor of 20 rather than 16. This replaces the previous approach, which looked at the change in the transfer value amount over the year. The Company supplements the pensions of past Directors and other past employees on an annual basis. The amount payable in the year in respect of past Directors was £108,000 (2013: £108,000). www.remploy.co.uk 31 Directors’ Responsibilities Statement

The directors are responsible for preparing the J provide additional disclosures when compliance Annual Report and the fi nancial statements in with the specifi c requirements in IFRSs are accordance with applicable law and regulations. insuffi cient to enable users to understand the J Company law requires the Directors to prepare impact of particular transactions, other events fi nancial statements for each fi nancial year. and conditions on the entity’s fi nancial position Under that law the directors are required and fi nancial performance; and to prepare the group fi nancial statements J make an assessment of the company’s ability to in accordance with International Financial continue as a going concern. Reporting Standards (IFRSs) as adopted by The directors are responsible for keeping the European Union and have also chosen adequate accounting records that are suffi cient to to prepare the parent company fi nancial show and explain the company’s transactions and statements under IFRSs as adopted by the disclose with reasonable accuracy at any time the EU. Under company law the directors must not fi nancial position of the company and to enable approve the accounts unless they are satisfi ed them to ensure that the fi nancial statements that they give a true and fair view of the state comply with the Companies Act 2006. They are of affairs of the Company and of the profi t or also responsible for safeguarding the assets of the loss of the company for that period. In preparing company and hence for taking reasonable steps these fi nancial statements, International for the prevention and detection of fraud and other Accounting Standard 1 requires that directors: irregularities. The directors are responsible for the properly select and apply accounting policies; maintenance and integrity of the corporate and J present information, including accounting fi nancial information included on the company’s policies, in a manner that provides relevant, website. Legislation in the United Kingdom reliable, comparable and understandable governing the preparation and dissemination of information; fi nancial statements may differ from legislation in other jurisdictions.

Responsibility statement By Order of the Board We confi rm to the best of our knowledge: J the management report, which is incorporated J the fi nancial statements, prepared in into the directors’ report, includes a fair review accordance with International Financial of the development and performance of the Reporting Standards, as adopted by the business and the position of the company and EU give a true and fair view of the assets, the undertakings included in the consolidation liabilities, fi nancial position and profi t or loss of taken as a whole, together with a description the company and the undertakings included in of the principal risks and uncertainties that the consolidation taken as a whole; and they face.

Ian Russell CBE Alexandra Owen

32 Annual Report and fi nancial statements 2014 Independent Auditors’ Report

We have audited the fi nancial statements of Remploy Limited for the year ended 31 March 2014 which comprise the Income Statement, the Statement of Comprehensive Income, the Balance Sheet, the Cash Flow Statement and the related notes 1 to 26. The fi nancial reporting framework that has been applied in their preparation is applicable law and International Financial Seven disabled job seekers moved back into work thanks to Reporting Standards (IFRSs) as a partnership between Remploy and Diam, a multi-national adopted by the European Union. company with a factory in Loughborough, Leicestershire. This report is made solely to the Company’s members, as a body, responsible for the preparation whether caused by fraud or error. in accordance with Chapter 3 of of the fi nancial statements This includes an assessment Part 16 of the Companies Act and for being satisfi ed that of: whether the accounting 2006. Our audit work has been they give a true and fair view. policies are appropriate to the undertaken so that we might Our responsibility is to audit Company’s circumstances and state to the Company’s members and express an opinion on have been consistently applied those matters we are required the fi nancial statements in and adequately disclosed; the to state to them in an auditors’ accordance with applicable law reasonableness of signifi cant report and for no other purpose. and International Standards on accounting estimates made by To the fullest extent permitted Auditing (UK and Ireland). Those the Directors; and the overall by law, we do not accept or standards require us to comply presentation of the fi nancial assume responsibility to anyone with the Auditing Practices statements. In addition, we other than the Company and the Board’s Ethical Standards for read all the fi nancial and Company’s members as a body, Auditors. non-fi nancial information in for our audit work, for this report, the annual report to identify or for the opinions we have material inconsistencies with formed. Scope of an audit the audited fi nancial statements, and to identify any information of the fi nancial that is apparently materially statements incorrect based on, or materially Respective inconsistent with, the knowledge responsibilities An audit involves obtaining acquired by us in the course evidence about the amounts of Directors and of performing the audit. If we and disclosures in the fi nancial become aware of any apparent auditors statements suffi cient to give material misstatements or reasonable assurance that the As explained more fully in the inconsistencies we consider the fi nancial statements are free implications for our report. Directors’ Responsibilities from material misstatement, Statement, the Directors are www.remploy.co.uk 33 Independent Auditors’ Report (continued)

Opinion on Matters on which Other matters fi nancial statements we are required to In our opinion the part of the Directors’ Remuneration Report In our opinion the fi nancial report by exception to be audited has been properly statements: We have nothing to report in prepared in accordance with the J give a true and fair view of the respect of the following matters provision of the Companies Act state of the Company’s affairs where the Companies Act 2006 2006 that would have applied as at 31 March 2014 and requires us to report to you if, in were the Company a quoted of its profi t for the year then our opinion: company. ended; J adequate accounting records Although not required to do so, J have been properly prepared have not been kept, or returns the Directors have voluntarily in accordance with IFRSs adequate for our audit have chosen to make a corporate as adopted by the European not been received from governance statement detailing Union; and branches not visited by us; or the extent of their compliance J have been prepared in J the fi nancial statements with the UK Corporate accordance with the are not in agreement with Governance code issued in 2012 requirements of the the accounting records and by the FRC. We reviewed: Companies Act 2006. returns; or J the directors’ report in relation J certain disclosures of to going concern; Opinion on other Directors’ remuneration J the part of the Corporate matters prescribed specifi ed by law are not made; Governance Statement or relating to the Company’s by the Companies J we have not received all the compliance with the nine Act 2006 information and explanations provisions of the UK we require for our audit. Corporate Governance Code In our opinion the information specifi ed for our review; and given in the Strategic Report J certain elements of the report and the Directors’ Report for to shareholders by the Board the fi nancial year for which the of Directors’ remuneration. fi nancial statements are prepared is consistent with the fi nancial statements.

Jonathan Dodworth (Senior Statutory Auditor) For and on behalf of Deloitte LLP Chartered Accountants and Statutory Auditor Birmingham, United Kingdom 4 November 2014

34 Annual Report and fi nancial statements 2014 Income Statement Year ended 31 March 2014

Note 2014 2013 Total Restated £000 £000 Continuing operations Revenue 6 14,986 13,439

Grant-in-Aid: Operational support 5 45,167 24,894 Total revenue 60,153 38,333

Staff costs 10 (24,349) (23,999) Operating charges (19,390) (9,938) Depreciation 13 (1,273) (2,929) Transition Programme Expenses 6 (19,292) (2,519)

Loss on sale of property, plant and equipment (43) (71) Operating (loss)/profi t before pension movements 7 (4,194) (1,123)

Past service cost and gain/(loss) due to scheme amendment 24 (4,867) (12,616) Funding from Secretary of State; pension scheme defi cit 41,500 - Finance income 11 128 212 Finance costs 11 (13,345) (6,781)

Profi t before tax 19,222 (20,308)

Income tax credit/(expense) 12 (3,973) 4,773 Profi t for the year from continuing operations 15,249 (15,535)

Profi t/(loss) for the year from discontinued operations 9 3,824 983

Profi t/(loss) for the year 19,073 (14,550)

The fi gures for 2013 have been restated with discontinued operations comparatives being moved below profi t/ (loss) for the year from continuing operations (N9), and with restated pensions as a result of the adoption of changes in IAS 19 Revised (N24) and tax (N12). The notes on pages 39 to 73 are an integral part of these fi nancial statements.

www.remploy.co.uk 35 Statement of Comprehensive Income - Year ended 31 March 2014

2014 2013 £000 £000

Actuarial Profi t/(loss) on defi ned benefi t scheme b/f 83,150 (66,561) Net loss recognised directly in reserves 83,150 (66,561)

Profi t/(loss) for year 19,073 (14,550)

Total comprehensive Profi t/(loss) for the year 102,223 (81,111)

The notes on pages 39 to 73 are an integral part of these fi nancial statements.

36 Annual Report and fi nancial statements 2014 Balance Sheet As at 31 March 2014

2014 2013 Note £000 restated £000 Non-current assets Property, plant and equipment 13 1,307 10,238 Current assets Inventory 14 - 2,640 Trade and other receivables 15 7,888 39,087 Cash and cash equivalents 17 18,604 49,684 Assets held for sale 16 5,127 7,915 Deferred tax assets 12 1,031 4,945 32,650 104,271 Total assets 33,958 114,509 Current liabilities Trade and other payables 19 (34,380) (58,151) Curent tax liabilities 12 (59) - Provisions 23 (10,136) (54,290) (44,575) (112,441) Net current liabilities (11,924) (8,170) Non-current liabilities Retirement benefi t obligation 24 (226,225) (341,133) Total liabilities (270,800) (453,574) Net liabilities (236,842) (339,065) Reserves Funded by the Secretary of State for the Department for Work and Pensions 5 (236,842) (339,065)

The notes on pages 39 to 73 are an integral part of these fi nancial statements. These fi nancial statements of Remploy Ltd, registered number 394532 were approved by the Board of Directors on 24 October 2014. Signed on behalf of the Board of Directors

Ian Russell CBE Beth Carruthers Alexandra Owen Chairman Chief Executive Executive Director, Finance (Accounting Offi cer)

www.remploy.co.uk 37 Cash Flow Statement Year ended 31 March 2014

2014 2013 Notes £000 £000

Profi t/(loss) for the year 19,073 (14,550) Adjustments for:

Depreciation on property, plant and equipment 13 1,988 3,763 Loss on disposals 3,079 3,832 Interest received (128) (212) Adjustments for stock and debtors - (1,221) Impairment of property plant and equipment 13 178 1,232 Other PPE adjustments (2,167) 1,926 Deferred tax asset 3,914 (4,945) Retirement benefi t scheme adjustment (31,754) 8,624 Operating cash fl ows before movement in working capital (5,817) (1,551)

Decrease in inventories 2,640 1,877 Decrease in trade and other receivables 31,199 13,926 Increase in trade and other payables (23,713) (18,028) Increase in provisions for other liabilities and charges (44,154) (30,661)

Net cash from operating activities (39,845) (34,437) Investing activities

Proceeds of disposal of P&E 10,297 4,045 Interest received 128 212 Currency movement (371) 22 Purchase of Property P&E 13 (1,289) (438)

Net cash used in investing activities 8,765 3,841

Net (decrease)/increase in cash and cash equivalents (31,080) (30,596)

Cash or cash equivalents at 1 April 17 49,684 80,280

Cash or cash equivalents at 31 March 17 18,604 49,684

Retirement benefi t scheme adjustment includes cash contributions from the Company of £49.9 million (2013: £10.9 million) made during the year (note 24). The notes on pages 39 to 73 are an integral part of these fi nancial statements. 38 Annual Report and fi nancial statements 2014 Notes to the fi nancial statements

1. General information 2. Adoption of new and Remploy Limited (“the Company”) is a Company revised standards incorporated in Great Britain under the Companies Act 2006. The address of the registered offi ce is Basis of accounting given in the Directors and Advisers section. The fi nancial statements have been prepared in These fi nancial statements are presented in accordance with International Financial Reporting Pounds Sterling because that is the currency of Standards (IFRSs) which have been adopted by the primary economic environment in which the the European Union, and therefore the fi nancial Company operates. statements comply with Article 4 of the EU IAS Regulation. Liability of members The fi nancial statements have been prepared on The Company is limited by guarantee and has the historical cost basis, except for certain items no share capital. The members of the Company which are measured at fair value as required by are the Directors who have each undertaken to IFRS. The principal accounting policies adopted contribute to the assets of the Company in the are set out below. The accounting policies event of the same being wound up during the time adopted are consistent with those of the previous he or she is a member or within one year after he fi nancial year. or she ceases to be a member, such amount as may be required not to exceed one pound. Refer Standards and interpretations in issue, to note 5. not yet adopted The main agreement between the Company and At the date of authorisation of these fi nancial the Secretary of State for the Department for statements, the following Standards and Work and Pensions (DWP) provides the following Interpretations which have not been applied in in paragraph 12.3: these fi nancial statements were in issue but have “Upon a winding-up of the Company not yet come into effect: following termination of this Agreement, – IAS 19R the Company will use its best endeavours (July 2014) Employee Benefi ts to ensure that the Secretary of State is consulted on an orderly winding-up of the – IFRS 9 Company. Provided that the Secretary of (January 2015) Financial Instruments State’s proposals for an orderly winding- – IAS 16 up are implemented by the Company (January 2016) Property, Plant and Equipment (to the extent that it is able to do so), – IAS 27 the Secretary of State shall pay to the (January 2014) Separate Financial Statements Company by way of a grant a sum equal to the net defi cit (being the excess of – IAS 32 liabilities over the proceeds of realisation (January 2014) Financial Instruments: of assets) incurred by the Company.” Presentation – IAS 36 (January 2014) Impairment of Assets

www.remploy.co.uk 39 Notes to the fi nancial statements

2. Adoption of new and Going concern revised standards (continued) The company made a profi t before tax of £23.0 million in 2013/14 (2013: loss of £19.3 million), The Directors are currently unable to assess the and has net current liabilities of £11.9 million effect on the fi nancial statements of the Company (2013: £8.2 million). The Company is reliant on of the adoption of IAS 19R and IFRS 9 which funding from the DWP and the Directors have is a new standard which enhances the ability received a letter from the DWP confi rming on- of users of fi nancial information to understand going support in the form of Grant-in-aid and that the accounting of fi nancial assets and reduces it will fund the pension’s defi cit. In addition, the complexity. IFRS 9 uses a single approach to Company has an overdraft facility of £5 million determine whether a fi nancial asset is measured which is on a rolling basis and guaranteed by the at amortised cost or fair value, replacing the DWP. many different rules in IAS 39. IAS19R is not expected to materially impact the balance sheet The Directors have prepared cash fl ow forecasts position; the primary impact is expected to relate on the basis of this support and current business to the classifi cation of items within the income plans for the foreseeable future including the statement and the split between profi ts and other changes to Remploy referred to in the Chairman’s comprehensive income. These standards are Report to assess the going concern assumption. effective for accounting periods commencing The cash fl ow forecasts show that Company is on or after 1 January 2015 and therefore the expected to operate within the approved funding Company has not commenced its evaluation of from the DWP. the impact on the Company’s reported profi t or After making enquiries the Directors have a net assets. reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

40 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

Leasing 3. Signifi cant accounting policies Leases are classifi ed as fi nance leases whenever Revenue recognition the terms of the lease transfer substantially all the Revenue is measured at the fair value of risks and rewards of ownership to the lessee. All the consideration received or receivable and other leases are classifi ed as operating leases. represents amounts receivable for goods and Following on from the transition program, all of the services provided in the normal course of remaining properties are classifi ed as short-term business, net of discounts and VAT. leases and accounted for as operating leases. Sales of services and products are recognised Assets held under fi nance leases are recognised when goods and services are delivered and title as assets of the Company at their fair value or, if has passed. lower, at the present value of the minimum lease payments, each determined at the inception of the Sales of services rendered in relation to lease. The corresponding liability to the lessor is recruitment services are accrued to delivery of included in the balance sheet as a fi nance lease service, except where part of the contract is paid obligation. Lease payments are apportioned on the basis of a service fee which is accounted between fi nance charges and reduction of the for on a straight-line basis. lease obligation so as to achieve a constant rate Revenue in respect of funding is recognised when of interest on the remaining balance of the liability. the service has been performed and meets the Finance charges are charged directly against criteria for collection as set out in the funding income, unless they are directly attributable agreement. to qualifying assets, in which case they are Interest income is accrued by reference to the capitalised in accordance with the Company’s principal outstanding and at the effective interest general policy on borrowing costs. rate applicable, which is the rate that exactly Rentals payable under operating leases are discounts estimated future cash receipts through charged to income on a straight-line basis over the expected life of the fi nancial asset to that the term of the relevant lease. asset’s net carrying amount. Benefi ts received and receivable as an incentive Borrowing costs to enter into an operating lease are also spread on a straight-line basis over the lease term. Borrowing costs are recognised in profi t or loss in the period in which they are incurred.

www.remploy.co.uk 41 Notes to the fi nancial statements

3. Signifi cant accounting policies Retirement benefi t costs (continued) Payments to defi ned contribution retirement benefi t schemes are charged as an expense as Foreign currencies they fall due. In preparing the fi nancial statements of the For defi ned benefi t schemes, the cost of providing Company, transactions in currencies other than benefi ts is calculated in accordance with IAS 19, the entity’s functional currency are recorded at with actuarial valuations being carried out at each the rates of exchange prevailing on the dates balance sheet date. Actuarial gains and losses of the transactions. At each balance sheet are recognised in full in the period in which they date, monetary assets and liabilities that are occur. They are recognised outside of the income denominated in foreign currencies are retranslated statement and presented in the statement of at the rates prevailing on the balance sheet date. comprehensive income. Exchange differences arising on the settlement Past service cost is recognised immediately to the of monetary items, and on the retranslation of extent that the benefi ts are already vested, and monetary items, are included as a profi t or loss for otherwise is amortised on a straight-line basis the period. over the average period until the benefi ts become vested. Government Grant-in-Aid The retirement benefi t obligation recognised in Government grants that become receivable as the balance sheet represents the present value compensation for expenses or losses already of the defi ned benefi t obligation as adjusted for incurred or for the purpose of giving immediate unrecognised past service cost, and as reduced fi nancial support to the entity with no future by the fair value of scheme assets. Any assets related costs are recognised as income or resulting from this calculation are limited to past matched against the specifi c costs which they service cost plus the present value of available relate to in the period in which they become refunds and reductions in future contributions to receivable. Other grants are recognised as income the scheme. over the periods necessary to match them with the related costs for which they are intended to Taxation compensate, on a systematic basis. Grant in aid The tax expense represents the deferred tax is drawn down from the DWP as required by way recognised. of monthly funding requests, and is accounted Taxable profi t differs from net profi t as reported for in accordance with IAS 20 “accounting for in the income statement because it excludes Government Grants”. items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

42 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

Deferred tax is the tax expected to be payable or of assets are offset against the cost of the asset recoverable on differences between the carrying and amortised over the life of the asset. amounts of assets and liabilities in the fi nancial Freehold land is not depreciated. statements and the corresponding tax bases used in the computation of taxable profi t and is Fixtures and equipment are stated at cost less accounted for using the balance sheet liability accumulated depreciation and any recognised method. impairment loss. Deferred tax liabilities are generally recognised Depreciation is charged so as to write off the for all taxable temporary differences and deferred cost or valuation of assets, other than land and tax assets are recognised to the extent that it properties under construction, over their estimated is probable that taxable profi ts will be available useful lives, using the straight-line method, on the against which deductible temporary differences following bases: can be utilised. Freehold buildings The carrying amount of deferred tax assets 50 years is reviewed at each balance sheet date and Leasehold land and buildings reduced to the extent it is no longer probable that Period of lease or 50 years whichever shorter suffi cient taxable profi ts will be available to allow Fixtures and equipment all or part of the asset to be recovered. Between 2 and 10 years Deferred tax is calculated at the tax rates that are Assets held under fi nance leases are depreciated expected to apply in the period when the liability over their expected useful lives on the same basis is settled or the assets is realised. Deferred tax as owned assets or, where shorter, over the term is charged or credited in the income statement, of the relevant lease. except when it relates to items charged or credited directly to equity. Deferred tax assets The assets’ residual values and useful lives are and liabilities are offset when there is a legally reviewed and adjusted, if appropriate, at each enforceable right to set off current tax assets balance sheet date. against current tax liabilities. The gain or loss arising on the disposal or Property, plant and equipment retirement of an asset is determined as the difference between the net sales proceeds Property, plant and equipment are stated at cost and the carrying amount of the asset and is less accumulated depreciation and any recognised recognised in the income statement. impairment loss. Cost includes professional fees and, for qualifying assets, borrowing costs capitalised in accordance with the Company’s accounting policy. Depreciation of these assets, on the same basis as other property assets, commences when the assets are ready for their intended use. Grants received to fund acquisition

www.remploy.co.uk 43 Notes to the fi nancial statements

3. Signifi cant accounting policies immediately, unless the relevant asset is carried at a revalued amount, in which case the reversal (continued) of the impairment loss is treated as a revaluation increase. Impairment of tangible assets Assets held for sale At each balance sheet date, the Company reviews the carrying amounts of its tangible assets to Assets classifi ed as held for sale are measured at determine whether there is any indication that the lower of carrying amount and fair value less those assets have suffered an impairment loss. If costs to sell. any such indication exists, the recoverable amount Assets are classifi ed as held for sale if their of the asset is estimated in order to determine the carrying amount will be recovered through a extent of the impairment loss (if any). sale transaction rather than through continuing Recoverable amount is the higher of fair value use. The condition is regarded as met only less costs to sell and value in use. In assessing when the sale is highly probable and the asset value in use, the estimated future cash fl ows are is available for immediate sale in its present discounted to their present value using a pre- condition. Management must be committed to tax discount rate that refl ects current market the sale which should be expected to qualify for assessments of the time value of money and the recognition as a completed sale within one year risks specifi c to the asset for which the estimates from the date of classifi cation. of future cash fl ows have not been adjusted. Inventories If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying Inventories are stated at the lower of cost and net amount of the asset is reduced to its recoverable realisable value. Costs comprise direct materials amount. An impairment loss is recognised as an and, where applicable, direct labour costs and expense immediately, unless the relevant asset those overheads that have been incurred in is carried at a revalued amount, in which case bringing the inventories to their present location the impairment loss is treated as a revaluation and condition. Net realisable value represents the decrease. estimated selling price less all estimated costs of completion and costs to be incurred in marketing, Where an impairment loss subsequently reverses, selling and distribution. the carrying amount of the asset is increased to the revised estimate of its recoverable amount, Financial instruments but so that the increased carrying amount does Financial assets and fi nancial liabilities are not exceed the carrying amount that would have recognised on the Company’s balance sheet when been determined had no impairment loss been the Company becomes a party to the contractual recognised for the asset in prior years. A reversal provisions of the instrument. of an impairment loss is recognised as income

44 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

Financial assets economic conditions that correlate with default on receivables. Loan and receivables The carrying amount of a fi nancial asset is Trade receivables, loans and others receivables reduced by the impairment loss directly for all that have fi xed or determinable payments that are fi nancial assets with the exceptions of trade not quoted in an active market are classifi ed as receivables, where the carrying amount is reduced loans and receivables. Loans and receivables are through the use of an allowance account. When measured at amortised cost using the effective a trade receivable is considered uncollectible, interest method, less any impairment. Interest it is written off against the allowance account. income is recognised by applying the effective Subsequent recoveries of amounts previously interest rate, except for short-term receivables written off are credited against the allowance when the recognition of interest would be account. Changes in the carrying amount of the immaterial. allowance account are recognised in the income Impairment of fi nancial assets statement. Appropriate allowances for estimated Cash and cash equivalents irrecoverable amounts are recognised in the Cash and cash equivalents comprise cash on hand income statement when there is objective and demand deposits and other short-term highly- evidence that the asset is impaired. The liquid investments that are readily convertible to allowance recognised is measured as the a known amount of cash and are subject to an difference between the asset’s carrying amount insignifi cant risk of changes in value. and the present value of estimated future cash Derecognition of fi nancial assets fl ows discounted at the effective interest rate computed at initial recognition. The Company derecognises a fi nancial asset only when the contractual rights to the cash fl ows For certain categories of fi nancial assets, such from the asset expire; or it transfers the fi nancial as trade receivables, assets that are assessed asset and substantially all the risks and rewards of not to be impaired individually are subsequently ownership of the asset to another entity. assessed for impairment on a collective basis. Objective evidence of impairment for a portfolio Financial liabilities of receivables could include the Company’s past experience of collecting payments, an Financial liabilities are classifi ed according to the increase in the number of delayed payments in substance of the contractual arrangement entered the portfolio past the average credit period, as into. well as observable changes in national or local

www.remploy.co.uk 45 Notes to the fi nancial statements

Bank borrowings 4. Critical accounting judgements Interest-bearing bank loans and overdrafts are and key sources of estimation recorded at the proceeds received, net of direct uncertainty issue costs. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for on an accrual’s Critical judgements in applying the basis in the income statement using the effective Company’s accounting policies interest rate method and are added to the carrying amount of the instrument to the extent that they In the process of applying the Company’s are not settled in the period in which they arise. accounting policies, which are described in note 3, the Directors have made the following Trade payables judgements, estimates and assumptions about Trade payables are initially measured at fair value, the carrying value of assets and liabilities that net of transaction costs and are subsequently are not readily apparent from other sources. The measured at amortised cost, using the effective estimates and associated assumptions are based interest rate method, with interest expense on historical experience and other factors that recognised on an effective yield basis. are considered to be relevant. Actual results may Derecognition of fi nancial liabilities differ from these estimates. The estimates and underlying assumptions are The Company derecognises fi nancial liabilities reviewed on an on-going basis. Revisions to when, and only when, the Company’s obligations accounting estimates are recognised in the period are discharged, cancelled or they expire. in which the estimate is revised if the revision Provisions affects only that period or in the period of the revision and future periods if the revision affects Provisions are recognised when the Company both current and future periods. has a present obligation as a result of a past event, and it is probable that the Company will be Impairment of fi xed assets required to settle that obligation. Provisions are The Directors have performed an impairment measured at the Directors’ best estimate of the review of the carrying value of fi xed assets as expenditure required to settle the obligation at required under IAS 36 Impairment of Assets. the reporting date, and are discounted to present The land and buildings were revalued to market value where the effect is material. Provisions are value at the IFRS transition date, all properties made for legal costs in respect of expected costs were either disposed of or held for sale at the and for estimated damages where it is judged balance sheet date. probable that damages will be payable. Provision for old and obsolete inventory All inventory was either sold or disposed of in the year.

46 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

Impairment of receivables Defi ned benefi t obligation The Directors have reviewed the trade receivables The Company operates a defi ned benefi t to assess the need for a provision for the scheme. The retirement benefi t obligation impairment of receivables. In determining whether recorded is based on actuarial assumptions, an impairment loss should be recorded in the including discount rates, infl ation and mortality income statement, the Directors have made rates. The assumptions are based on current judgements based on prior experience and the market conditions, historical information and current economic environment. consultation with and input from actuaries. The Accordingly, a provision for the impairment of Directors review the assumptions annually. If they receivables is made where there is an identifi ed change, or actual experience is different from the loss event, or condition which, based on previous assumptions, the retirement benefi t obligation will experience and the current economic environment, be adjusted accordingly. is evidence of a reduction in the recoverability of Impairment of assets held for sale the cash fl ow. The Directors have performed an analysis of the Self insurance fair value less cost to sell of land and buildings The Company has provided for partial self- classifi ed as assets held for sale as required insurance arrangements in respect of employers under IFRS 5 Non-current Assets Held for Sale liability based on estimates received from and Discontinued Operations. The Directors have independent claims administrators. The Company used either agreed selling price or independent has also included an estimate of claims incurred valuations performed to determine the fair value of but not recorded. This has been based on the assets held for sale. The cost to sell these assets historical lead time in days between the accident has been estimated by the Directors based on the and the claim being reported. The Company has complexity of the asset to be sold and an estimate been fully insured for this risk since 1 April 2013. of the legal and other related expenses to be incurred.

www.remploy.co.uk 47 Notes to the fi nancial statements

5. Financial agreement with the DWP

The Company has entered into agreements with the DWP under which: 1. Grant-in-Aid and loans have been received (secured by fi xed and fl oating charges on Remploy Limited’s assets) to fi nance the purchase of fi xed assets; and 2. Grant-in-Aid has been received in respect of: (a) forecast cash requirements from operations; (b) forecast changes in working capital; and (c) funding for pension scheme defi cit. Surplus Grant-in-Aid for (a) above has been allocated as payables owing to the DWP under the terms of the 1996 DWP/Remploy Agreement (see note 19). The movements in the reserve account during the year were as follows: In line with Treasury guidelines, the Company is required to disclose the notional cost of capital. The notional interest would have been a charge of £6.1 million for the year (2013: £6.6 million) at 2.2 % (2013: 2.2%) based on an average capital employed.

2014 2013 Reserves £000 £000 Balance b/f (339,065) (257,953)

Grant in Aid funding received for ongoing operations 45,167 24,894 funding received for discontinued operations 10,500 36,412 funding received pensions 41,500 - Net results before Grant-in-aid received (78,094) (75,858)

Transfer from income statement 19,073 (14,551) Transfer from statement of comprehensive loss 83,150 (66,561) Balance at 31 March (236,842) (339,065)

48 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

6. Business segments IFRS 8 Operating Segments IFRS 8 requires operating segments to be identifi ed on the basis of internal reports about components of the Company that are regularly reviewed by the Chief Executive to allocate resources to the segments and to assess their performance. Products and services from which reportable segments derive their revenue Information regarding the Group’s operating segments is reported below.

2014 £000 2013 £000 External Inter-segment External Inter-segment Revenue sales sales sales sales

Employment Services 14,986 - 13,439 333 Income statement total revenue from Continuing Operations 14,986 - 13,439 333 Discontinued Operations 54,412 380 96,890 2,711

69,398 380 110,329 3,044

The inter-segment sales are internal sales between business segments, which eliminate at Company level. Inter-segment sales are all priced on an arm’s length basis.

2014 2013 Profi t before tax from continuing operations £000 £000 Revenue from Secretary of State-GIA 45,167 24,894 Employment Services (34,094) (28,159) Central and support services (9,191) (1,908) Transition (19,293) (2,519) Pensions 36,633 (12,616) 19,222 (20,308)

2014 2013 Capital Expenditure £000 £000 Discontinued Operations - 217 Employment Services 268 221 Central and support services 1,021 - 1,289 438

www.remploy.co.uk 49 Notes to the fi nancial statements

2014 2013 Assets £000 £000 Discontinued Operations 841 15,458 Employment Services 4,842 5,460 Central and support services 28,274 93,591 33,957 114,509

2014 2013 Liabilities £000 £000 Discontinued Operations (1,986) (11,028) Employment Services (10,591) (10,091) Central and support services (31,998) (91,322) Pensions (226,225) (341,133) (270,800) (453,574)

2014 2013 Impairment of non-current assets £000 £000 Central and support services 124 2,024 124 6,119

2014 2013 Impairment on Property, Plant and Equipment £000 £000 Discontinued Operations - 155 Employment Services 178 - Central and support services - 1,077 178 1,232

50 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

7. Operating (loss)

The operating (loss) from continuing operations has been arrived at after charging/ (crediting) the following: 2013 2014 Restated £000 £000 continuing discontinued continuing discontinued operations operations operations operations

Net foreign exchange losses/ (profi ts) 1 369 (160) 138 Research and development costs - 140 - 456 Depreciation of property, plant and equipment 1,728 260 3,002 761 Impairment of other fi xed assets 178 - 1,077 155 Impairment of assets held for sale 124 - 2,024 - Gain on disposal of property, plant and equipment 43 - 71 30 Movement on provision for impairment of trade receivables (89) (656) 663 (356) Release of provision for retentions on commercial contracts (1,260) - - - Modernisation programme costs - - 2,519 - Transition programme costs 19,293 - - -

The Company held grant funding at of £38,326 at 1 April 2013 from the Big Lottery Fund. Further funds of £125,700 were received in the year. This was fully expended in accordance with the agreement by 21 March 2014. The costs in the year were categorised as follows; 2014 £000 Staff Costs 94 Operating Costs 70 8. Auditors’ remuneration

2014 2013 Audit services £000 £000 Fees payable to the Company's auditors for the audit of the Company’s annual accounts 150 217 Other Audits services 13 20

Non-audit services Tax services 223 189 386 426 The movement in fees refl ects a reduction in work as a result of the Remploy transition programme. www.remploy.co.uk 51 Notes to the fi nancial statements

9. Discontinued operations

2014 2013 £000 £000 Revenue 54,412 96,890 Grant-in-aid 10,500 36,412

Total revenue 64,912 133,302 Materials (41,456) (71,243) Staff costs (12,145) (39,361) Operating charges (6,857) (20,785) Depreciation (260) (761) Loss on sale of property, plant and equipment - (31)

Operating profi t 4,194 1,121

Finance costs (370) (138)

Profi t before tax 3,824 983

Profi t for the year 3,824 983

The net cash fl ows relating to discontinued operations were operating activities £7,834,000 (2013: £4,087,000), and investing activities £(365,000) (2013: £(346,000)).

10. Staff costs

The average monthly number of employees (including executive Directors) was as set out in table below:

2014 2013 Discontinued operations 527 1,804 Employment Services 1,122 1,017 Corporate and support services 62 106 1,711 2,927

52 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

In addition the Company found 18,562 (2013: 17,835) jobs in mainstream employment for disabled people and those experiencing complex barriers to work. The aggregate payroll costs were as follows: 2014 2014 2013 2013 £000 £000 £000 £000 ongoing discontinued ongoing discontinued Wages and Salaries 22,264 11,415 21,624 37,192 Social Security Costs 2,085 729 2,375 2,169 24,349 12,145 23,999 39,361

11. Finance income and costs

2014 2013 £000 £000 Finance income Bank income receivable on cash and cash equivalents 128 212 Finance costs Interest costs on pension scheme 36,050 34,718 Expected return on pension scheme assets (22,763) (22,446) Net pension scheme costs 13,287 12,272 Interest paid 58 (123) Total Finance costs 13,345 6,781

The 2013 comparatives have been restated due to adoption of changes in “IAS19 Revised”.

www.remploy.co.uk 53 Notes to the fi nancial statements

12. Taxation

2014 2013 £000 £000 Current tax Current year charge 59 - Prior year adjustment - 172 Deferred tax debit/(credit) 3,914 (4,945) Total tax charge 3,973 4,773

Profi t/(loss) from continuing operations 19,221 (20,307) Profi t/(loss) from discontinued operations 3,824 983

Total profi t/(loss) from operations 23,045 (19,324) Income tax expense calculated at 20% (2013: 24%) 4,609 (4,638) Prior year adjustment - 172 Effect of expenses that are not deductible in determining taxable profi t 988 2,051 Timing differences on which no deferred tax is recognised 764 (4,265) Accelerated capital allowances on which no deferred tax is recognised (165) (40) b/f losses utilised in period (2,223) - loss in period not utilised - 1,947 Income tax expense/(credit) recognised in the income statement 3,973 (4,773) Deferred tax assets at 21% (2013: 23%) Pensions defi cit 1,031 4,945

2014 2013 Unrecognised deferred tax assets £000 £000 Pension defi cit 49,952 73,516 Tax losses – trade - 1,866 Tax losses – capital 1,082 2,389 Fixed assets timing differences 2,210 3,166 Other temporary differences 568 2,501 53,812 83,438

The deferred tax asset recognised in the current year tax above is at 21% (2013:23%). The unrecognised tax assets are at 20% (2013: 23%). The Directors have recognised deferred tax assets on the basis that the generation of taxable profi t in the foreseeable future is not probable other than for the pension contributions for which funding will be received within the next 12 months.

54 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

13. Property, plant and equipment

Land and Plant and Assets under buildings machinery Other construction Total Note £000 £000 £000 £000 £000 Cost As at 1 April 2012 55,717 26,629 20,827 1,729 104,902 Transfers from WIP 107 - - (107) - Additions - 208 231 - 438 Disposals (4,209) (11,920) (744) (1,523) (18,396) Reclassifi ed as held for sale (27,412) - - (71) (27,483) As at 31 March 2013 24,203 14,916 20,313 29 59,461 Transfers (6,048) - 6,077 (29) - Additions 1,076 - 35 179 1,290 Disposals (6,253) (14,916) (18,017) - (39,186) Reclassifi ed as held for sale (12,978) - - - (12,978) As at 31 March 2014 - - 8,408 179 8,587 Accumulated depreciation and impairment As at 1 April 2012 (31,179) (24,200) (18,311) - (73,689) Charge for the year 7 (1,862) (734) (1,167) - (3,763) Impairment loss 7 (929) (303) - - (1,232) Elimination on disposals 1,601 10,943 685 - 13,229 Assets reclassifi ed as held for sale 16,231 - - - 16,231 As at 31 March 2013 (16,138) (14,294) (18,792) - (49,224) Transfers 5,091 - (5,091) - - Charge for the year 7 (1,046) (254) (687) - (1,987) Impairment loss 7 (178) - (178) Elimination on disposals 5,405 14,548 17,468 - 37,421 Assets reclassifi ed as held for sale 6,688 - - 6,688 As at 31 March 2014 - - (7,280) - (7,280)

Net book value As at 31 March 2014 - - 1,128 179 1,307 As at 31st March 2013 8,065 622 1,522 29 10,238

Only assets for ongoing operations remain at 31 March 2014, except for assets held for resale. Included within the above net book values are current-year impairment provisions of £178,000 (2013: £523,000) for other assets. At 31 March 2014, the Company had not entered into any contractual commitments for the acquisition of property, plant and equipment. (2013: £Nil). www.remploy.co.uk 55 Notes to the fi nancial statements

14. Inventories

2014 2013 £000 £000 Raw materials - 1,940 Work in Progress - 131 Finished Goods - 569 - 2,640

15. Trade and other receivables

2014 2013 £’000 £’000 Trade receivables 4,906 12,905 Provision for impairment of trade receivables (91) (837) Provision for credit notes (496) (480) Net trade receivables 4,319 11,588 Other receivables 1,118 1,234 Corporation tax - 1,688 Accrued GIA income - 20,149 Prepayments 2,451 4,427 7,888 39,087

Accrued GIA income represents agreed funding from the DWP for outstanding Remploy transition programme costs. The average credit period taken on sales of goods and services is 50 days (2013: 49 days). Management have taken into account the current economic environment and performed a detailed analysis of the recoverability of trade receivables and made provisions as considered appropriate. Before accepting any new customer, the Company assesses the potential customer’s credit quality and defi nes credit limits by customer. Credit limits attributed to customers are reviewed on an on-going basis if active but also annually with the Board approval for all accounts with an increase in credit limit of £1,000,000 and above. There are no customers who represent more than 25% (2013: nil) of the total balance of trade receivables.

56 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

2014 2013 Ageing of past due but not impaired receivables £000 £000 Up to 6 months 228 138 6-12 months 2 169 Over 12 months 67 26 Total 297 333

The Company has not provided for the above trade receivables as there has not been a signifi cant change in credit quality and the amounts are still considered recoverable. The Company does not hold any collateral over these balances. The average age of these receivables is 61 days (2013: 125 days).

2014 2013 Provision for Impairment of receivables £000 £000 As at 1st April (837) (529) Impairment losses recognised 479 (433) Amount written off as uncollectible 267 125 As at 31st March (91) (837)

In determining the recoverability of a trade receivable the Company considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. The concentration of credit risk is limited due to the customer base being large and unrelated. Accordingly, the Directors believe that no further provision is required in excess of the allowance for doubtful debts. Included in the provision for impairment of receivables are individually impaired trade receivables with a balance of £86,000 (2013: £204,000) which represents any accounts currently in legal dispute or receivership. A 100% provision is held for any accounts in liquidation.

2014 2013 Ageing of impaired receivables £000 £000 Up to 6 months - 524 6-12 months 21 340 Over 12 months 88 134 Total 109 998

No receivables have been renegotiated in the current or prior year. The Directors consider that the carrying amount of trade and other receivables approximates to their fair value.

www.remploy.co.uk 57 Notes to the fi nancial statements

16. Assets classifi ed as held for sale

The assets held for sale represents land and buildings which the Company expects to sell within the next 12 months. Net book value Impairment Net carrying £000 £000 value £000

As at 1 April 2013 14,033 (6,118) 7,915 Added during year 6,290 (3,145) 3,145 Disposed during Year (11,150) 5,217 (5,933)

9,173 (4,046) 5,127

17. Cash and cash equivalents

Cash and cash equivalents comprise cash held by the Company and short-term bank deposits with an original maturity of three months or less. The carrying amount of these assets approximates to their fair value. 2014 2013 £000 £000

Cash in hand and at bank 18,604 49,684

18. Obligations under fi nance leases

The Company did not lease any fi xtures or equipment under fi nance leases for the year ended 31 March 2014.

58 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

19. Trade and other payables

GIA represents amounts received from the DWP for the excess of expenditure over income (see note 5) technically repayable under the terms of the 1996 Agreement between Remploy and the DWP. 2014 2013 £000 £000

Trade payables 3,497 8,397 Accrued expenses 2,969 4,848 Employment payables 3,193 4,889 Social security and other taxes 810 (3) Grant in Aid (GIA) 19,520 33,887 Deferred income 2,058 3,744 Other payables 2,333 2,391

34,380 58,151

Trade payables and accrued expenses principally comprise amounts outstanding for trade purchases and ongoing costs. The average credit period taken for trade purchases is 65 days (2013; 54 days). Employment payables relate to costs of staff including salary-related costs. The Company generally does not pay any interest to its trade suppliers for the fi rst 60 days from the date of the invoice. Thereafter, interest is charged on the outstanding balances at various interest rates. The Company has fi nancial risk management policies in place to ensure that all payables are paid within the credit timeframe. The Directors consider that the carrying amount of trade payables and other payables approximates to their fair value.

20. Bank facilities

The average effective interest rate on the bank overdraft for the year approximated to 1.5 % per annum (2013: 1.5%). The Directors estimate the fair value of the Company’s borrowings to approximate to the book value. At 31 March 2014 the Company had a £3.7 million (2013: £13.7 million) committed borrowing facility in respect of which all conditions precedent had been met.

www.remploy.co.uk 59 Notes to the fi nancial statements

21. Financial instruments Capital risk management The Company’s objectives when managing (a) Financial risk management grants-in-aid are to safeguard the Company’s The Company has exposures to the following risks ability to continue as a going concern in order for from its use of fi nancial instruments: the Company to meet its objectives of providing training and employment of disabled persons with J Capital risk management; complex barriers to work. J Credit risk; The Company is a private Company as defi ned by J Liquidity risk; and the Companies Act 2006, limited by guarantee, without share capital and therefore meets its J Cash fl ow and interest rate risk. capital requirements by way of funding from the This note presents information about the DWP. The details of grants-in-aid movements and Company’s exposure to each of the above risks, the purpose for which these are received have the Company’s management of the grants-in- been provided in note 5. aid provided by the DWP, and the Company’s The capital structure of the Company consists of a objectives, policies and procedures for measuring bank overdraft presented in note 20, cash and cash and managing risk. equivalents presented in note 17 and reserves The Board of Directors has overall responsibility for which are funded by the DWP presented in note 5. the establishment and oversight of the Company’s risk management framework. The Board has put in (b) Categories of fi nancial instruments place policies that have been established to identify Details of the signifi cant accounting policies and analyse risks faced by the Company, to set and methods adopted, including the criteria appropriate risk limits and controls and to monitor for recognition, the basis of measurement and risks and adherence to limits. The Board is assisted the basis on which income and expenses are in its oversight role by Internal Audit function, who recognised, in respect of each class of fi nancial undertake both regular and ad hoc reviews of risk asset and fi nancial liability are disclosed in note 3 management controls and procedures, the results to the fi nancial statements. of which are reported to the Audit Committee. (c) Credit risk management The Company’s principal fi nancial assets are bank balances, cash and trade and other receivables, which represent the Company’s maximum exposure to credit risk in relation to fi nancial assets. The Company’s credit risk is primarily attributable to its trade and other receivables. The amounts presented in the balance sheet are net of allowances for doubtful receivables, estimated by the Company’s management based on prior experience and their assessment of the current economic environment.

60 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

(d) Liquidity risk management Liquidity risk is the risk that the Company will not be able to meet its fi nancial obligations as they fall due. In order to maintain liquidity to ensure that suffi cient funds are available for on-going operations and future developments, the Company agrees an annual funding plan with the DWP. The Company continues to operate within the agreed funding envelope. The Company manages liquidity risk by maintaining adequate banking facilities with Government approved banks and reserve borrowing facilities, by continuously monitoring forecast and actual cash fl ows and matching the maturity profi les of fi nancial assets and liabilities. Included in note 20 is a summary of an additional undrawn bank borrowing facility that the Company has at its disposal to further reduce liquidity risk. The table below has been drawn up based on the contractual maturities of the fi nancial assets including interest that will be earned on those assets except where the Company anticipates that the cash fl ow will occur in a different period and fi nancial liabilities have been presented based on the earliest date on which the Company can settle the debt.

2014 2013 Note £000 £000 Financial assets Trade and other receivables trade receivables 15 4,319 11,588 accrued income 15 - 20,149 other receivables 15 1,118 1,234 Cash and cash equivalents 17 18,604 49,684

24,041 82,655 Financial liabilities Trade and other payables trade payables 19 3,497 8,397 employment payables 19 3,193 4,889 social security and other taxes 19 810 (3) accrued expenses 19 2,969 4,847 other payables 19 21,853 36,277 Current tax liability 12 59 -

32,381 54,407

www.remploy.co.uk 61 Notes to the fi nancial statements

Carrying Contractual Due less Between amount cash fl ow than one year 1 and 2 years £000 £000 £000 £000 As at March 2014 Financial assets Trade and other receivables trade receivables 4,319 4,319 4,319 - accrued income - - - - other receivables 1,118 1,118 1,118 - Cash and cash equivalents 18,604 18,604 18,604 - 24,041 24,041 24,041 - Financial liabilities Trade and other receivables trade payables 3,497 3,497 3,497 - employment payables 3,193 3,193 3,193 - social security and other taxes 810 810 810 - accrued expenses 2,969 2,969 2,969 - other payables 21,853 21,853 21,853 - Current tax liability 59 59 59 - 32,381 32,381 32,381 - As at March 2013 Financial assets Trade and other receivables trade receivables 11,588 11,588 11,588 - accrued income 20,149 20,149 20,149 - other receivables 1,234 1,234 1,234 - Cash and cash equivalents 49,684 49,684 49,684 - 82,655 82,655 82,655 - Financial liabilities Trade and other payables trade payables 8,397 8,397 8,396 - employment payables 4,889 4,889 4,889 - social security and other taxes (3) (3) (3) - accrued expenses 4,847 4,847 4,848 - other payables 36,277 36,277 36,277 - 54,407 54,407 54,407 -

62 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

(e) Cash fl ow and interest rate risk management The Company has no signifi cant interest bearing assets, the Company’s income and operating cash fl ows are substantially independent of changes in market interest rates. The Company’s interest rate arises from bank overdraft borrowing and fi nance leases. The interest arising on the bank overdraft is a fl oating interest rate and therefore exposes the Company to cash fl ow and interest rate risk. The interest arising on fi nance leases is a fi xed interest rate. Management prepares regular cash fl ow forecasts to minimise the use of the bank overdraft facility. As the bank overdraft facility is only used towards the year end, the Directors do not consider this risk to be material. (f) Foreign currency risk management The Company undertakes certain transactions denominated in foreign currencies. Hence, exposures to exchange rate fl uctuation arise. Exchange rate exposures are managed by the central fi nance function. The carrying amounts of the Company’s foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows: Monetary assets 2014 2013 Foreign currency risk £000 £000 Euro - 2,171 US Dollar - 917 - 3,088

Foreign currency sensitivity analysis The Company is no longer exposed to foreign currency risk as those operations are now discontinued. (g) Fair value of fi nancial instruments The fair value is defi ned as the amount at which a fi nancial instrument could be exchanged in an arm’s length transaction between informed and willing parties and is calculated by reference to market rates discounted to current value. The fair values of fi nancial assets and fi nancial liabilities are determined as follows; J The fair values of fi nancial assets and fi nancial liabilities with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices (includes listed redeemable notes, bills of exchange, debentures and perpetual notes). J The fair values of other fi nancial assets and fi nancial liabilities (excluding derivative instruments) are determined in accordance with generally accepted pricing models based on discounted cash fl ow analysis using prices from observable current market transactions and dealer quotes for similar instruments.

www.remploy.co.uk 63 Notes to the fi nancial statements

21. Financial instruments (continued)

J The fair values of derivative instruments are calculated using quoted prices. Where such prices are not available, a discounted cash fl ow analysis is performed using the applicable yield curve for the duration of the instruments for non-optional derivatives, and option pricing models for optional derivatives. Foreign currency forward contracts are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contracts. Interest rate swaps are measured at the present value of future cash fl ows estimated and discounted based on the applicable yield curves derived from quoted interest rates. The Directors consider that the carrying amounts of fi nancial assets and fi nancial liabilities recorded at amortised cost in the fi nancial statements approximate to their fair values due to the short maturity of the instruments or because they bear interest at rates approximate to the market.

22. Operating leases

The majority of the operating lease commitments relate to property. Other lease arrangements relate to vehicles and plant and equipment. 2014 2013 £000 £000 Lease expenses under operating leases recognised in profi t for the year: Plant and Machinery 531 957 Other 4,906 5,258 5,437 6,215 Total of future minimum lease payments under non-cancellable operating leases for each of the following periods: Within one year 3,608 5,811 Between two and fi ve years 9,113 14,220 More than fi ve years 5,396 15,818 18,117 35,849

64 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

23. Provisions

Redundancy and other Onerous contracts payments to employees and contract cancellation Total £000 £000 £000 As at 1 April 2013 27,618 26,672 54,290 Additional provision 792 10,403 11,195 Provision released (2,001) - (2,001) Utilised (25,322) (28,026) (53,348) As at 31st March 2014 1,087 9,049 10,136

24. Retirement benefi t schemes

The Company operates defi ned benefi t and defi ned contribution pension schemes. The schemes’ funds are administered by trustees and are independent of the Company’s fi nances. Defi ned contribution scheme The Company made contributions of £379,000 (2013: £232,000) to the defi ned contribution scheme. There are no amounts owed to this pension scheme by the Company at the year end (2013: £nil). Defi ned benefi t scheme The Company’s defi ned benefi t scheme is the “Remploy limited Pension and Assurance Scheme” which is a funded fi nal salary pensions scheme. The scheme is trustee administered and is a separate legal entity. The scheme exposes the Company to actuarial risks such as longevity risk, currency risk, infl ation risk, interest risk and market (investment) risk. The most recent full actuarial valuation of the scheme was carried out at 31 March 2013 by Barnett Waddingham LLP. For the purposes of the fi nancial statements Barnett Waddingham have also prepared calculations under IAS19 of the assets and liabilities of the pension scheme as at 31 March 2014.

www.remploy.co.uk 65 Notes to the fi nancial statements

24. Retirement benefi t schemes (continued) Defi ned contribution arrangements.

2014 2013 Key assumptions Discount rate * 4.5% 4.2% Salary increase 2.6% 4.3% Infl ation (RPI) 3.4% 3.4% Infl ation (CPI) 2.6% 2.6%

Pre and post-retirement mortality table – 2013 Remploy specifi c table based on Remploy experience between 2000 and 2006 with allowance for improvements in life expectancy in line with medium cohort projections subject to a minimum rate of improvement of 1.5% per annum. Pre and post-retirement mortality table – 2014 Remploy specifi c table based on Remploy experience between 2007 and 2012 with allowance for improvements in life expectancy in line with CMI 2012 projections to a minimum rate of improvement of 1.5% per annum.

* The discount rate used above is based with reference to AA-rated corporate bonds at year end.

66 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

Under the adopted mortality tables, the projected life expectancy assumed for those aged 65 is as follows: 2014 2013 Currently Currently Currently Currently aged 45 aged 65 aged 45 aged 65 Male 22.7 19.7 21.8 18.9 Female 25.8 22.7 21.7 19

Amounts recognised in the income statement in respect of the defi ned benefi t scheme are as follows: 2013 2014 Restated Included in profi t before tax £000 £000 Current service cost 9,694 11,148 Past service cost 1,973 1,468 Net Interest cost 13,287 12,272 Total pension cost 24,954 24,888

The 2013 comparatives have been restated due to the adoption of changes in IAS 19 Revised. Actuarial gains amounting to £83,150,000 (2013: losses of £66,561,000) have been reported in the statement of comprehensive income refl ecting the reduction in the discount rate assumed, changes to the assumed retirement age and lower asset returns offset by an experience gain. The cumulative recognised losses are £116,733,000. The amount included in the balance sheet arising from the Company’s obligations in respect of its defi ned retirement benefi t scheme is as follows: 2013 2014 Restated £000 £000 Present value of funded obligations 836,294 797,898 Present value of unfunded obligations - 91,562 Fair value of scheme assets (610,069) (548,327) Retirement benefi ts obligation 226,225 341,133

www.remploy.co.uk 67 Notes to the fi nancial statements

24. Retirement benefi t schemes (continued)

Movements in the present value of defi ned benefi t obligations were as follows: 2014 2013 £000 £000 As at 1 April 872,455 760,893 Current service cost 9,694 11,148 Interest on defi ned benefi t scheme liabilities 36,050 34,718 Scheme amendments 1,973 1,468 Net remeasurement gains due to experience (17,562) (1,071) Net remeasurement (gains)/losses due to fi nancial assumption changes (50,437) 90,175 Net remeasurement gains due to demographic assumptions (4,651) - Contributions from scheme members 1,900 3,382 Benefi ts paid (30,501) (28,278) Age-related rebates - 20 As at 31 March 818,921 872,455 Money purchase – deferred members 5,160 4,378 Additional Voluntary Contributions 12,213 12,626 As at 31 March 836,294 889,459

68 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

Movements in the fair value of scheme assets were as follows: 2013 2014 Restated £000 £000 As at 1 April 531,322 494,945 Interest income on plan assets 17,300 27,814 Return on scheme assets excluding interest income 22,763 22,543 Contributions from sponsoring Company 49,912 10,896 Contributions from scheme members 1,900 3,382 Benefi ts paid (30,501) (28,278) Age-related rebates - 20 As at 31 March 592,696 531,322 Money purchase – deferred members 5,160 4,378 Additional Voluntary Contributions 12,213 12,626 As at 31 March 610,069 548,326

The overall expected rate of return has been calculated by Barnett Waddingham LLP, independent actuaries, based on assets held at 31 March 2014. The Company regularly makes ex-gratia payments to increase pensions in payment for the effects of infl ation in accordance with the pension provisions generally applying to public service employees. These additional payments are not separately funded. A liability in respect of the present value of these unfunded obligations has been recognised within the pension scheme liabilities. During the year the Company made any additional contributions to the pension scheme of £41,500,000 (2013: £Nil). An additional £2,052,000 (2013: £715,465) was paid in respect of ex-gratia increases to pensions in payment.

www.remploy.co.uk 69 Notes to the fi nancial statements

24. Retirement benefi t schemes (continued) History of movements The historical movement in defi ned benefi t pension schemes assets and liabilities are as follows: 2014 2013 2012 2011 2010 £000 £000 £000 £000 £000 Present value of defi ned benefi t obligations 836,294 889,460 778,108 646,783 634,548

Fair value of scheme assets Equity instruments (229,730) (202,810) (176,330 (186,107) (210,921) Debt instruments (102,244) (101,125) (92,119) (104,487) (121,567) Property (50,265) (45,124) (44,828) (43,026) (40,123) Other assets (227,830) (199,267) (198,883) (135,386) (46,694)

Retirement benefi t obligation 226,225 341,134 265,948 177,777 215,243

Net remeasurement (gains) losses due to; Experience (17,562) (1,071) 878 (5,002) (6,774) Demographic assumption changes (4,651) Financial assumption changes (50,437) 90,175 130,956 (16,452) 146,151 Return on scheme assets excluding interest income (17,300) (27,911) 18,536 6,249 (77,925)

70 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

The fair value of plan assets by class of asset and the asset category is as follows: 2014 2013 Fair value of assets £000 £000 Equity instruments 229,730 202,810 Debt instruments 102,244 101,125 Property 50,265 45,124 Other assets 227,830 199,267 As at 31 March 610,069 548,326

2014 2013 Asset Categories % % UK Equities 3.1 3.0 Overseas Equities 34.6 34.0 Bonds 16.8 19.0 Property 8.2 8.0 Gilts 10.5 11.0 Hedge Funds 18.0 16.0 Cash/net current assets 3.8 3.0 Insurance policies 2.2 3.0 AVC Investments 2.0 2.0 Money purchase assets 0.8 1.0 Total 100 100

Expected contributions The estimated amount of contributions expected to be paid to the scheme by the Company during the year beginning 1 April 2014 is £6.6 million. This amount consists of £2.9 million to meet the cost of providing future benefi ts in the fi nal salary section and £2.2 million to cover the cost of the supplementation to pensions in payment and £1.5 million towards eliminating the defi cit.

www.remploy.co.uk 71 Notes to the fi nancial statements

25. Related parties

Transactions with related parties during the current or prior year are set out below:

Transactions with the Department for Work and Pensions (DWP) Please refer to note 5 for details of the relationship with the DWP. Other than the grants-in-aid disclosed in note 5, the Company has the following transactions with DWP:

2014 2013 £000 £000 Revenue 2,176 2,947

Other than accrued income related to Grant in Aid, the Company has the following balance with the DWP 2014 2013 £000 £000 Amount owed by DWP 523 354

Remuneration of key management personnel The remuneration of the key management personnel (excluding Directors) of the Company is set out below in aggregate for each one of the categories specifi ed in IAS 24 Related Parties’ Disclosures. Further information about the remuneration of individual Directors is provided in the audited part of the Directors’ remuneration report.

2014 2013 £000 £000 Short-term employee benefi ts 404 437 Post-retirement benefi ts 46 50 Total Benefi ts 450 487

72 Annual Report and fi nancial statements 2014 Year ended 31 March 2014

26. Contingent liabilities

In the normal course of business the Company receives Employment Tribunal Claims from employees. In recent months, the number of claims has increased, but at this stage the Company is unable to assess the potential value of these claims, or likelihood of success in defending them. A provision has been made at the balance sheet date for the potential legal costs of defending these claims.

www.remploy.co.uk 73 More than 150 Remploy candidates have been recruited by Marks & Spencer to work at its distribution centre in Castle Donington, Leicestershire, since it opened in 2013.

Malkit Bahia from Derby was the 100th successful candidate. “Remploy told me all about M&S and what they look for in their employees,” said Malkit, who has a mild learning disability.

Now established in his new role as a warehouse operative, Malkit added: “It’s fantastic working here. Everyone helps each other and there are so many opportunities to progress.”

Malkit was recruited via the Marks & Start Logistics employability scheme, which provides disabled candidates with a four week training and work placement programme.

74 Annual Report and fi nancial statements 2014 Tony Hammett from Worcester landed his dream job after being unemployed for more than 10 years.

The former engineer is working as a barman at the Postal Order pub in Worcester, thanks to a partnership between Remploy and J D Wetherspoon.

Tony has had epilepsy since childhood and frequently suffered seizures in the street. Passers-by would often ignore his plight, mistakenly thinking he was drunk.

Years of depression led to Tony becoming a virtual recluse until he was eventually referred to Remploy’s branch in Worcester.

“Remploy was fantastic for me,” said Tony. “They helped me set achievable goals and showed it was possible to get back to work even after such a long time without a job.”

“I need candidates who are enthusiastic and comfortable around people – and that’s just what Remploy provide,” added Rob Deeming, manager of the Postal Order Remploy Limited Remploy House 18c Meridian East Meridian Business Park Leicester LE19 1WZ Telephone: 0845 155 2700 If you require this information in an alternative format or language please Email: [email protected] contact [email protected] www.remploy.co.uk or call 0845 155 2700

Our Mission To transform the lives of disabled people and those with complex barriers to work by providing sustainable employment opportunities.