2019 Annual Report
Total Page:16
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ANNUAL REPORT 2019 Who we are INTERSERVE IS ONE OF THE WORLD’S FOREMOST SUPPORT SERVICES, CONSTRUCTION AND EQUIPMENT COMPANIES. WE OFFER FACILITIES MANAGEMENT AND FRONTLINE SERVICES; ADVICE, DESIGN AND CONSTRUCTION SERVICES; AND EQUIPMENT PROVISION TO PUBLIC AND PRIVATE SECTOR CLIENTS IN MORE THAN 40 COUNTRIES. WE ARE A LEADER IN DEVELOPING AND DELIVERING DESIRABLE OUTCOMES FOR OUR CLIENTS AND A GREAT PLACE TO WORK FOR OUR PEOPLE. HEADQUARTERED IN THE UK, WE HAVE CONSOLIDATED REVENUES OF £2.2 BILLION AND A WORKFORCE OF MORE THAN 38,000 PEOPLE WORLDWIDE. Interserve’s origins date back to 1884 when two brothers, Edmund and Augustus Hughes, formed London and Tilbury Lighterage Company Limited, which specialised in transferring cargo between vessels. Interserve now provides innovative and compelling solutions to complex challenges, delivered with rigorous operational discipline. This helps to create improved customer and public services for the end-user and adds value to local economies. Following the appointment of Alan Lovell as Chairman of the Company in July 2019, the Board reviewed the Group’s strategic direction and implemented a new operating structure for its three operating divisions, thus positioning the Group for medium-term, sustainable growth across each area. Details of this restructure are outlined in the Chairman's Statement on page 3 and in the Group restructuring section on page 16. This Annual Report, and accompanying Financial Statements, describes how Interserve Group creates value and explains how our business strategies will take advantage of the opportunities available in the markets we serve. It also provides information on how we manage risk and gives a comprehensive report on the Group’s activities during the financial year. Overview Strategic Report GovernanceDirectors’ Report Financial Statements Contents Overview Strategic Report Financial Statements Our divisions 2 Results in summary 5 Independent auditor’s report 40 Chairman’s statement 3 Performance 6 Consolidated financial statements 42 Significant post-balance sheet events 7 Notes to the consolidated financial statements 48 Operational review 8 Company financial statements 101 Social responsibility and sustainability 11 Notes to the Company financial statements 103 Stakeholder engagement 14 Related undertakings 113 Group restructuring 16 Section 172 statement 19 Principal risks and uncertainties 24 Financial review 32 Directors’ Report 37 FOR FURTHER INFORMATION: www.interserve.com 01 OVERVIEW Our divisions The sale of Interserve Support Services to Mitie Group plc completed on 30 November 2020. Please see note on page 7 (significant post-balance sheet events) explaining the presentation of these accounts. Prior to completion of the sale to Mitie Group plc, the Group was organised into three operating divisions, as set out below: Support Services Construction Equipment Services Manages and delivers outsourced Designs and constructs buildings and RMD Kwikform (RMDK) provides operational activities, including facilities infrastructure, including mechanical and engineering solutions in the specialist field management, citizen services and training electrical services to customers across a of temporary structures needed to deliver and employment services, across a range range of target markets in both the public major infrastructure and building projects. of markets in both the public and private and private sectors in the UK and the RMDK designs, hires and sells formwork, sectors, predominantly in the UK and the Middle East. falsework and shoring solutions to the Middle East. construction industry. The division will continue to leverage The division will continue to focus on its strong geographical coverage, sector It is one of the global market leaders and positioning Interserve as a tier-one partner expertise and proven capabilities to create its engineers solve complex problems to the public and private sector in the value for clients. Activities are focused in for customers through the application of delivery of integrated support services. key sectors, including: healthcare; defence world-class design and logistics capabilities, Support Services is also laying the and security; justice; education; highways; backed by technology and an extensive foundations for operational standardisation water; and local government. fleet of specialist equipment. across the division in order to drive efficiencies. RMDK’s markets are driven by the structural growth in global infrastructure spend and wider construction market spend. Alongside the UK, RMDK will continue to focus on its major international markets of Australia, India and the UAE. 02 OVERVIEW Chairman’s statement Alan Lovell Chairman My comments will cover the principal events of 2019 as well as certain significant events in 2020: the COVID-19 pandemic, attacks by cyber-criminals which impacted the Company and parts of the Group and the recently completed transaction with Mitie Group plc for the sale of our Support Services business which completed on 30 November 2020. I joined Interserve as Chairman in July 2019 shortly after Interserve had gone through its transition from a UK listed company to a privately held one. My initial thoughts on joining Interserve remain that, despite its challenges, the Group has a highly capable and committed workforce who deliver vital services daily to both the public and private sectors we serve. From the Executive Team to the thousands of colleagues on the frontline, their commitment and fortitude has been exemplary. This is more true than ever in the face of the unprecedented challenges we have faced in 2020. DELEVERAGING Following the EGM on 15th March 2019, when shareholders voted against the deleveraging plans, the Interserve Plc Board and Executive Team executed a well-prepared pre-pack administration over the course of that weekend, which ensured continuity of services for all our public and private sector clients. The actions taken by the Company’s leadership at this time not only ensured the delivery of critical services but also ensured the continuity of the Group and its employees. Our ten primary lenders became shareholders of Interserve Group Limited, the new holding company, following the administration. I would like to thank my predecessor Glyn Barker and Debbie White, Chief Executive Officer, for their significant contribution during this time, leading Interserve Plc through one of the most challenging periods in its history. BOARD AND GOVERNANCE As you would expect, the composition of the Board of Interserve Group Limited has changed significantly since the administration of Interserve Plc Glyn Barker decided to step down as Chairman in June 2019, and we announced in November 2019 that Debbie White had also decided to retire as Chief Executive Officer, leaving the Company at the end of December 2019. 03 OVERVIEW Chairman’s statement continued Before I joined, Russell King retired as the Senior Independent The Construction division under the leadership of Paul Gandy has Director and Gareth Edwards, Anne Fahy and Nick Salmon stood made strong progress with its new strategy and we are already down from their roles as Non-Executive Directors. seeing the benefits of this translate into project wins in the education and healthcare sectors; nearly all the challenging legacy We welcomed Mark Morris as Chief Financial Officer in September projects which adversely impacted us in 2019 have been closed out. 2019, replacing Mark Whiteling. Mark also joined the Board of Interserve Group Limited. We were subject to a significant and sustained cyber-attack in May 2020 which caused considerable distress to the To support the new operating model for Interserve Group Company’s operations, already impacted by COVID-19. The swift Limited which was announced in November 2019, Ken Hanna was implementation of the Group’s Crisis Response plan alongside the appointed as Chairman of RMD Kwikform and Nicholas Pollard outstanding support from the UK’s National Cyber Security Centre became Chairman of the Construction division. Both joined the and the National Crime Agency ensured that we navigated this Interserve Group Limited Board. without major impacts to our customers despite the operational challenges it caused. At the end of November 2020, the RMD In addition, Martyn Everett and Elizabeth Holden were appointed Kwikform business, which had not been affected by the May as Non-Executive Directors to the Board of Interserve Group cyber-attack, was subject to a separate and much more limited Limited. cyber-attack which caused some disruption to RMD Kwikform’s normal operations. Again, the Group’s Crisis Response was swiftly SENIOR MANAGEMENT CHANGES implemented and the impact was contained. Further information There were three senior management changes in the year. on the cyber-attacks is included on page 7. Jonathan Refoy joined in January 2019 as Group Corporate Affairs Director. Paul Gandy joined our Construction division as its Overall, the Group’s orderbook remains strong and I am pleased Managing Director in October 2019 and John Lambert succeeded with our robust trading performance, particularly that we have Sally Cabrini as Group Human Resource Director in December 2019. continued to win new work and contract renewals despite In addition, Lynn Mawdsley was appointed as Managing Director of COVID-19 and the cyber-attack. the Support Services division with effect from 1 January 2020. At a time when there is serious concern about the long term social PERFORMANCE