Hyder Consulting PLC Annual Report 2012
Hyder Consulting PLC Annual Report 2012
Hyder Consulting PLC Annual Report 2012
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<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong><br />
<strong>Annual</strong> <strong>Report</strong> <strong>2012</strong>
Cover image: West Gate Bridge, Australia.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong>
Contents<br />
1<br />
10<br />
13<br />
13<br />
32<br />
35<br />
Company<br />
Overview<br />
Chairman’s<br />
Statement<br />
Directors’<br />
<strong>Report</strong><br />
Business<br />
Review<br />
Directors and<br />
Advisors<br />
Corporate<br />
Governance<br />
42<br />
59<br />
64<br />
72<br />
73<br />
117<br />
Corporate Social<br />
Responsibility<br />
General<br />
Information and<br />
Disclosures<br />
Directors’<br />
Remuneration<br />
<strong>Report</strong><br />
Independent<br />
Auditors’<br />
<strong>Report</strong><br />
Consolidated<br />
Financial<br />
Statements and<br />
Notes<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong><br />
(Company) Financial<br />
Statements<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong>
Our strategy<br />
Our aim is to be the trusted<br />
partner of valued clients<br />
creating exceptional solutions<br />
worldwide.<br />
Overview:<br />
Our strategy is to offer core services to<br />
key clients; operating in geographies<br />
where market dynamics, our long<br />
established track record, and our<br />
professional expertise differentiate us<br />
from our competitors.<br />
We are differentiated through our<br />
ability to provide technical excellence<br />
from design teams located local to<br />
and remote from the client. By taking<br />
advantage of our common business<br />
systems, we can rapidly mobilise<br />
tailored design teams and collaborate<br />
geographically to solve client needs<br />
across our multinational network.<br />
We operate three design excellence<br />
centres to support our client facing<br />
operations in our five regions: a<br />
long-established design centre in<br />
the Philippines which undertakes<br />
the design of highways and property<br />
projects, a centre in India for the<br />
design of utility and rail projects, and<br />
a third centre in Bulgaria opened in<br />
2011 to support our German business.<br />
These centres now employ over 300<br />
people (8% of group headcount) and<br />
Our vision is to be the next<br />
evolution in design and<br />
engineering consultancy.<br />
provide access to a pool of qualified<br />
engineering resources at a lower cost<br />
than in certain of our end markets.<br />
We anticipate further growth in these<br />
design excellence centres in the year<br />
ahead.<br />
We want to expand both organically<br />
and through strategic acquisitions<br />
which will enhance our professional<br />
expertise and competitiveness in core<br />
markets and sectors. During the year<br />
we have completed three strategic<br />
acquisitions in attractive markets<br />
and geographies: ESR Technology, an<br />
energy business in the UK, the SAK<br />
infrastructure business in Saudi Arabia,<br />
and GW Engineers in Australia which<br />
operates in the resources sector.<br />
Our strategy is underpinned by our<br />
determination to achieve a common<br />
culture and shared values with our<br />
people, clients and the communities in<br />
which we operate.<br />
By adhering to a common strategy and<br />
clear direction across the group, <strong>Hyder</strong><br />
is now well positioned in its chosen<br />
markets with selected key clients.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 1
Our strategy continued<br />
Who we are:<br />
<strong>Hyder</strong> is a leading multinational design and<br />
engineering consultancy offering infrastructure,<br />
property, and environmental solutions.<br />
As one of the world’s longest established<br />
engineering consultancies, with a 150 year<br />
heritage, we have created landmark designs<br />
across the globe including the Sydney Harbour<br />
Bridge, the Cairo wastewater scheme and<br />
London’s Tower Bridge amongst many others.<br />
Whilst our history dates back more than 150<br />
years, in recent years we have designed the<br />
world’s tallest building, Burj Khalifa, Australia’s<br />
Go Between Bridge, Qatar’s Capital Market<br />
Tower, Frankfurt Airport’s new runway, Taiwan’s<br />
high speed rail network, and undertaken<br />
landscaping work on the ‘greening’ of Hong<br />
Kong.<br />
Client facing market<br />
Design excellence centre<br />
2 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
UK<br />
Bulgaria<br />
Middle East<br />
Germany<br />
Where we operate:<br />
We have client facing offices in our five regional<br />
centres; the UK, Germany, the Middle East, Asia<br />
and Australia. We have been operating as a<br />
multinational for over a century outside the UK<br />
with more than 100 years experience in China,<br />
80 years in Germany, 70 years in Australia and 50<br />
years in the Middle East.<br />
We also operate three design excellence centres<br />
to support our client facing operations in the<br />
five regions: a long-established design centre in<br />
the Philippines which undertakes the design of<br />
highways and property projects, a centre in India<br />
for the design of utility and rail projects, and a<br />
third centre in Bulgaria opened in 2011 to support<br />
our German business.<br />
These design excellence centres provide the group<br />
with access to a pool of qualified engineering<br />
resources.<br />
India<br />
Australia<br />
Asia<br />
Philippines
Our markets:<br />
Our extensive regional and local expertise is currently managed through four sectors; transport, utilities,<br />
property, and environment. We are investing both organically and through acquisition in building skills<br />
and capabilities in two new emerging sectors: energy and resources.<br />
Our market sectors are underpinned by four strong global growth drivers –<br />
• urbanisation, including rural populations in Asia<br />
• mass transit, with increased investment in rail/metro schemes<br />
• climate change, driving low carbon design<br />
• water and power scarcity.<br />
We strive to utilise our understanding and expertise of these sectors and create innovative solutions<br />
for the social and commercial benefit of our clients in line with their priorities. Our approach also<br />
encompasses the highest quality standards and a continuous drive for technical excellence.<br />
Property<br />
Utilities<br />
Energy<br />
Transport<br />
Environment<br />
Resources<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 3
Our strategy continued<br />
Our structure:<br />
Our business is managed regionally through locally based and empowered management teams who not only<br />
understand their local culture and markets, but also have insights into client pressures and opportunities.<br />
Our five regions are led by managing directors who are all local to their respective regions benefiting from<br />
local knowledge, client relationships and experience. Each regional managing director sits on the group<br />
executive board. The executive board also comprises the chief executive, group finance director, commercial<br />
and major bids director, group technical director and the human resources and communications director.<br />
4 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Our people:<br />
We want to combine the professional<br />
expertise and multi-disciplinary<br />
experience of our people from across the<br />
group. <strong>Hyder</strong>’s people are empowered<br />
to provide a comprehensive range of<br />
planning, engineering, environmental and<br />
management consultancy services.<br />
As a reflection of our multinational<br />
approach, we employ local qualified staff<br />
together with a mix of international experts.<br />
Our people are motivated to enhance their<br />
careers by working on projects around the<br />
world, and to share their expertise across<br />
sectors. We invest in coaching, training<br />
and personal development for our people,<br />
and strive to work together to achieve high<br />
levels of performance and engagement.
Our client-centred approach:<br />
We view our clients as valued partners and<br />
seek to build trust and develop partnershipstyle<br />
relationships with key clients. We strive<br />
to differentiate our services in three ways:<br />
• tailoring our services and<br />
implementation to meet the specialist<br />
needs of our key clients – striving for<br />
excellence as defined by them and not<br />
by us<br />
• developing unique skills, design tools<br />
and capabilities to enhance<br />
the commercial advantage of our key<br />
clients<br />
• we seek from within the group new<br />
ideas and solutions to problems faced by<br />
our clients.<br />
Our investment of company resources to grow<br />
our market position, order book and revenue<br />
is a reflection of the proactive approach we<br />
take to client development in both existing<br />
and targeted new key client accounts.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 5
Our strategy continued<br />
Our strategy is underpinned by our corporate values:<br />
Client focus<br />
we differentiate through our<br />
tailored skills and depth of<br />
client understanding.<br />
Excellence<br />
we strive for excellence,<br />
recognising that excellence<br />
is defined by our clients.<br />
People<br />
we create the environment<br />
for people to realise their full<br />
potential.<br />
6 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Responsibility<br />
we take responsibility for our<br />
performance and for safety.<br />
Trust<br />
we build and retain relationships<br />
of trust with our clients,<br />
colleagues and business partners.<br />
Teamwork<br />
we work together as a team for<br />
the group not just the individual.
Awards - received in the year<br />
We have won more awards this year, including the following:<br />
• The Queen’s Award for Enterprise: International Trade<br />
2011<br />
• The Hong Kong Institute of Landscape Architects:<br />
Merit Award for project - Siu Sai Wan Complex, Hong<br />
Kong<br />
• ROSPA Gold Medal Award 2011: Our ninth gold medal<br />
for our sustained achievement in health and safety<br />
performance in the UK<br />
• Engineers Australia (Queensland Division): Project<br />
infrastructure over $50 million - Go Between Bridge<br />
• The Construction Week Architect Awards 2011: Highly<br />
commended for sustainable design of the year - The Palm<br />
Jumeirah, Dubai, UAE<br />
• SAI Global OHS Systems Awards: OHS Systems<br />
Excellence Australia<br />
• The Big Project Award 2011: Best Water Conservation<br />
Initiative - Winner, “Luftkissendüker Pforzheim”<br />
• 10th Tien-Yow Jeme Award 2011: Winner, Lai Chi Ko<br />
Viaduct (section of the Tsing Sha Highway)<br />
• FTSE4Good Index Series: Certificate of Membership,<br />
meeting globally recognised standards of responsible<br />
business practice<br />
• Engineers Australia (Queensland Division): Project<br />
management - Go Between Bridge<br />
• Thames Water 2011 Award for Excellence: Health &<br />
Safety performance<br />
• Designer of Excellence: Forte Land Real Estate,<br />
Jonathan King (ACLA)<br />
• CEEQUAL: Whole project award ‘Excellent’ 81.6% - M40<br />
Junction 15 Improvement Scheme<br />
• Consult Australia Awards for Excellence: Transport<br />
and Civil - West Gate Freeway Alliance, Certificate of<br />
recognition<br />
• Kempen/SNS SRI Universe: Commended, for our<br />
business ethics, social performance and environmental<br />
performance<br />
• Consult Australia Awards for Excellence: APP Client of<br />
choice - Winner<br />
• Chartered Institute of Logistics and Transport: Young<br />
professional of the year - Laura Norman<br />
• Constructing Excellence in Wales: Project of the year -<br />
A40 Penblewin to Slebech Park Improvements<br />
• Consult Australia Awards for Excellence: Building<br />
Services - Cochlear Global HQ Silver Award (highest in<br />
the category)<br />
• German Society for Trenchless Technology GSTT:<br />
Outstanding projects - Winner, innovative infrastructure<br />
project “Luftkissendüker Pforzheim” (in consortium with<br />
Sonntag Bau)<br />
• CEEQUAL: Interim client and outline design award<br />
‘Excellent’ 87.3% - A477 St Clears to Red Roses<br />
Improvement<br />
• RTPI Cymru Planning Awards - Commendation: RCT<br />
Homes Open Spaces Project<br />
• National Rail Awards: Project of the year- North<br />
London Railway Infrastructure Project (TfL and<br />
Network Rail accepted the award <strong>Hyder</strong> was the<br />
supplier to Carillion)<br />
• IHT ‘Large Highway and Transportation project<br />
2011’: M40 - J15 project<br />
• Young consultant of the year ACE/NCE Awards<br />
2011: Outstanding achievement - Pete Harrison a<br />
finalist (NW Bicester eco-development)<br />
• CEEQUAL Award: Achieved ‘Excellent’ 79.3% - A2<br />
Maydown to city of Derry Airport<br />
• Michelmores and Western Morning News<br />
Commercial Property Awards: Project of the year -<br />
South Devon College<br />
• Construction only Award: Lee Valley White Water<br />
Canoe Centre<br />
• CEEQUAL: CQA179 - A2 Maydown to City of Derry<br />
Airport<br />
Stratford Mine, Australia<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 7
Key Performance Indicators<br />
Inner West<br />
Busway,<br />
Australia<br />
8 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011 change<br />
Order book (£m) 362.8 312.3 16.2%<br />
Revenue (£m) 277.3 290.3 (4.5%)<br />
Adjusted operating profit* (£m) 21.0 20.3 3.4%<br />
Adjusted operating profit margin* (%) 7.6 7.0 8.6%<br />
Adjusted net operating margin* (%) 8.7 8.1 7.4%<br />
Profit before tax (£m) 17.6 18.2 (3.3%)<br />
Adjusted diluted EPS* (p) 44.34 43.34 2.3%<br />
Dividend per share (p) 9.0 7.75 16.1%<br />
Net cash (£m) 15.6 13.1 19.1%<br />
*Adjusted numbers exclude amortisation of acquired intangibles, acquisition costs and exceptional items
Regional Key Performance Indicators<br />
Employee numbers<br />
Revenue (£m) Adjusted operating profit *(£m)<br />
<strong>2012</strong> 2011 <strong>2012</strong> 2011<br />
Australia 90.2 91.8 13.8 13.9<br />
Asia 22.1 22.2 0.9 0.5<br />
Middle East 63.8 65.5 3.9 2.6<br />
UK 75.0 87.2 4.0 5.5<br />
Germany 26.2 23.6 1.5 1.1<br />
*Adjusted numbers exclude amortisation of acquired intangibles, acquisition costs and exceptional items<br />
UK Germany Asia<br />
Middle<br />
East<br />
Australia<br />
31 March <strong>2012</strong> 1,084 404 457 1,110 719<br />
31 March 2011 1,139 366 433 1,026 733<br />
Average <strong>2012</strong> 1,118 405 442 1,036 670<br />
Average 2011 1,204 371 436 1,072 776<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 9
Results<br />
The order book increased substantially to £362.8m (2011:<br />
£312.3m) following a number of large and important contract<br />
awards in the second half year. Approximately 60% of the<br />
current year’s forecast revenue is in the order book.<br />
Revenue amounted to £277.3m (2011: £290.3m); net revenue,<br />
after deduction of sub-consultant costs, was £241.8m (2011:<br />
£251.4m).<br />
Adjusted operating profit was £21.0m (2011: £20.3m), after<br />
absorbing £1.5m of redundancy costs (2011: £2.9m), and after<br />
foreign currency translation gains of £0.9m. The adjusted net<br />
operating profit margin grew to 8.7% (2011: 8.1%). During<br />
the year exceptional costs of £1.5m were incurred (2011: £Nil)<br />
in relation to (i) vacant properties in the UK (£1.3m) and (ii)<br />
the closure of the UK defined benefit scheme to future accrual<br />
(£0.2m). Operating profit was £17.1m (2011: £18.2m).<br />
Adjusted profit before tax rose to £21.6m (2011: £20.3m).<br />
Profit before tax was £17.6m (2011: £18.2m).<br />
Adjusted diluted earnings per share increased to 44.34p (2011:<br />
43.34p). Diluted earnings per share were 35.96p (2011: 38.63p).<br />
Funding<br />
At 31 March <strong>2012</strong> the group had net cash of £15.6m (2011:<br />
£13.1m). Cash balances at the year end amounted to<br />
£23.2m with unutilised facilities of £45.8m.<br />
10 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Chairman’s Statement<br />
“I am pleased to report<br />
another good set of<br />
results in what have been<br />
mixed market conditions.”<br />
Operating cash flow was £15.6m (2011: £19.2m), after<br />
making contributions of £3.9m towards the pension deficit<br />
(2011: £3.0m). Cash conversion for the year was 76% before<br />
accounting for these contributions, reflecting the greater<br />
working capital requirements of the Middle East operations<br />
where our order book has grown significantly.<br />
The UK pension scheme was closed to future accrual on 30<br />
April 2011. At 31 March <strong>2012</strong> the deficit had reduced to<br />
£16.3m (2011: £17.3m).<br />
We look to expand both organically and through strategic<br />
acquisitions which will enhance our professional expertise<br />
and competitiveness in core markets and sectors. We<br />
completed three acquisitions during the year at a net<br />
cost of £2.5m; ESR Technology, a specialist energy, water<br />
and space consultant operating in the UK and Abu Dhabi;<br />
SAK infrastructure consultants in Saudi Arabia; and GW<br />
Engineers, a resources consultancy in Australia. All three are<br />
performing well.<br />
Dividend<br />
Sir Alan Thomas, Chairman<br />
In recognition of the group’s financial performance, the<br />
board proposes an increase in the final dividend to 7.00p per<br />
share (2011: 6.00p). The full year dividend amounts to 9.00p<br />
per share (2011: 7.75p), an increase of 16.1% this year and<br />
a doubling over the last three years. The full year dividend<br />
is covered 4.9 times by adjusted diluted earnings per share<br />
(2011: 5.6 times).
Operating highlights<br />
Asia-Pacific<br />
Regional revenues were £112.2m (2011: £114.0m);<br />
adjusted operating profits were £14.7m (2011:<br />
£14.4m).<br />
In Australia, our transport division performed well in the<br />
second half. We have secured significant new highway<br />
and rail contracts, and continued to work successfully on<br />
a number of Alliance contracts. Our commercial property<br />
division completed work on the Sydney Centrepoint<br />
development which was opened during the year; market<br />
conditions remain subdued and competitive. We have grown<br />
our resources business organically and acquired a local<br />
resources consultancy, GW Engineers. We are confident of<br />
good growth in this market in the coming year. In China and<br />
Vietnam we have invested in growing our geographical and<br />
market presence, including the opening of a new office in<br />
Chongqing, China.<br />
Middle East<br />
Revenue was £63.8m (2011: £65.5m); adjusted<br />
operating profits increased by 50.0% to £3.9m<br />
(2011: £2.6m).<br />
Results have improved as work begins on new contracts and<br />
our investment in key clients comes to fruition. In Qatar we<br />
have secured important projects with Ashghal, Kahramaa and<br />
Qatar Metro as part of the country’s 2030 infrastructure<br />
development goals and in preparation for the 2022 FIFA<br />
World Cup. In Saudi Arabia we have recently completed<br />
the acquisition of SAK, building our market presence and<br />
increasing our exposure to the growing infrastructure<br />
market there. We have already started benefitting from<br />
this increased presence in the Kingdom through the recent<br />
award of a three year advisory commission from Jeddah<br />
Municipality. Elsewhere we have undertaken major utilities<br />
projects including Step Tunnel in Abu Dhabi and Muharraq<br />
waste water treatment works in Bahrain.<br />
Europe<br />
Westfield<br />
Shopping,<br />
Sydney,<br />
Australia<br />
Revenue was £101.2m (2011: £110.8m); adjusted<br />
operating profits were £5.5m (2011: £6.6m).<br />
In the UK we have grown our rail business in a competitive<br />
market and have been appointed designers on London<br />
Bridge station, undertaken further work for Crossrail, and<br />
implemented platform extension works for Network Rail.<br />
The highways market has been particularly challenging<br />
with lower workload which affected utilisation rates.<br />
More recently we have won a number of projects with the<br />
Highways Agency under framework agreements. Results in<br />
the utilities sector have improved as workload has built up<br />
during the AMP5 programme. In Germany results are ahead<br />
of last year, with Ingenieur Consult, and our industrial<br />
property business performing ahead of expectations.<br />
Dubai Yacht<br />
Club, CMA Tower,<br />
Emirates Towers,<br />
Middle East<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 11
Chairman’s Statement continued<br />
M25, UK<br />
People<br />
We now employ 3,774 people across our regions, an increase<br />
of 2.1% on the previous year. We have increased headcount<br />
in the Middle East by 8.2% as our workload there has grown,<br />
offset by a reduction in numbers in the challenging UK<br />
market.<br />
After a period of restructuring we have given particular<br />
attention to the training and development of our people<br />
and, where practical, provide them with opportunities<br />
to gain experience in different geographies and sectors,<br />
thereby strengthening the skills base and widening<br />
opportunity.<br />
Northparkes<br />
Mine and<br />
Stratford Mine,<br />
Australia<br />
12 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Outlook<br />
The large proportion of our revenues and profits earned<br />
overseas has enabled the group to perform well in mixed market<br />
conditions. <strong>Hyder</strong>’s strong order book, balance sheet and<br />
prospective opportunities give us confidence for the year ahead.<br />
I would like to express our appreciation to our clients for<br />
their confidence in us and to thank every member of <strong>Hyder</strong>’s<br />
staff for their efforts and for their contribution to another<br />
year of strong results.<br />
Sir Alan Thomas<br />
Chairman<br />
13 June <strong>2012</strong>
Directors’<br />
<strong>Report</strong><br />
Business<br />
Review<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 13
Directors’ <strong>Report</strong> Business Review continued<br />
<strong>Hyder</strong> is a leading<br />
multinational design and<br />
engineering consultancy<br />
with a 150 year heritage.<br />
Our business is managed<br />
through three primary regions:<br />
Asia-Pacific (Australia and<br />
Asia), the Middle East, and<br />
Europe (UK and Germany).<br />
14 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Fraport,<br />
Frankfurt,<br />
Germany
Asia-Pacific<br />
Regional revenues were £112.3m (2011: £114.0m) and<br />
adjusted operating profit £14.7m (2011: £14.4m), although<br />
the latter was 5.4% lower on a constant currency basis after<br />
absorbing £0.5m of redundancy costs.<br />
Australia<br />
Our results improved in the second half year following the<br />
award of infrastructure projects which had previously been<br />
delayed as a result of state elections and the effect of the<br />
Queensland flooding.<br />
Our transport division has performed particularly well in<br />
the second half following major project wins including two<br />
sections of the Pacific Highway upgrade; from Titenbar<br />
to Ewingsdale, and Oxsley to Kempsey, and the Southern<br />
Expressway in Adelaide. We have continued to work on<br />
Alliance contracts for the M80 motorway in Victoria, and<br />
the Hunter Expressway in New South Wales which have<br />
again contributed to the good results. The Westgate<br />
Freeway Upgrade Alliance in Melbourne, completed in the<br />
last financial year, was awarded the Australian construction<br />
achievement award. We have invested in developing our rail<br />
business and recently started work on a significant regional<br />
rail link project in Melbourne.<br />
In the property sector we successfully completed our work<br />
on the Eclipse Tower and Centrepoint Tower in Sydney, and<br />
the Hilton Hotel on the Gold Coast. We have secured new<br />
work on the Eastland’s shopping centre in Melbourne and<br />
the Fiona Stanley hospital in Perth. Though the private<br />
property sector remains subdued, the division is working<br />
with clients in the resources sector, completing several<br />
townships and mining camps for Alpha Coal, among others.<br />
Our utilities business has grown and we are now working<br />
on projects across Australia. We have won important new<br />
projects in the Queensland coal seam gas sector.<br />
Following recent project awards our forward order book has<br />
increased to £58.1m, up 21.8% from £47.7m the previous year.<br />
This combined with the recent acquisition of GW Engineers in<br />
the resources sector positions us well for the year ahead.<br />
Asia<br />
In Hong Kong, we have secured further Greening Master Plan<br />
projects in the New Territories, and a framework contract for<br />
the Hong Kong housing association. In mainland China our<br />
revenue has grown, and we have invested in growing our market<br />
presence opening a new office in Chongqing during the year.<br />
Major projects:<br />
• Regional Rail Link package E, Australia<br />
• Southern Expressway, Adelaide, Australia<br />
• Pacific Highway Upgrade, Oxley highway to Kempsey,<br />
Australia<br />
• Titenbar to Ewingsdale Upgrade, Australia<br />
• Kenya North coal seam gas projects, Australia<br />
• Eastland’s shopping centre, Melbourne, Australia<br />
• Fiona Stanley hospital, Perth, Australia<br />
• Alpha Coal village and rail camps design, Australia<br />
• Greening Master lans, New Territories, Hong Kong<br />
• Hong Kong Housing Authority slope maintenance term<br />
consultancy, Hong Kong<br />
<strong>2012</strong> 2011<br />
Australia Asia Total Australia Asia Total<br />
Revenue (£m) 90.2 22.1 112.3 91.8 22.2 114.0<br />
Adjusted operating<br />
profit (£m) 13.8 0.9 14.7 13.9 0.5 14.4<br />
Margin 15.3% 4.1% 13.1% 15.1% 2.3% 12.6%<br />
Order book (£m) 58.1 34.5 92.6 47.7 29.7 77.4<br />
People 719 457 1,176 733 433 1,166<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 15
Directors’ <strong>Report</strong> Business Review continued<br />
Middle East<br />
Regional revenues were £63.8m (2011: £65.5m), up 0.3%<br />
on a constant currency basis. Adjusted operating profits<br />
increased 50.0% to £3.9m (2011: £2.6m), after absorbing<br />
£0.3m of redundancy costs.<br />
We have opened new and larger offices in Qatar and Saudi<br />
Arabia, which are investing heavily in new infrastructure<br />
programmes for our key clients. This investment temporarily<br />
suppressed margins, but led to improved profitability in<br />
the second half, and our order book increased by 34.1% to<br />
£135.2m (2011: £100.8m). In the second half of the year,<br />
we were awarded a number of large new contracts in Qatar<br />
with Ashghal, to undertake all infrastructure design and<br />
supervision services for a 75 square kilometre area north<br />
of Doha over the next five years, and with Kahramaa,<br />
to design a number of mega reservoirs to increase the<br />
security of water supply. In Saudi Arabia, following the<br />
recent acquisition of SAK, we have recently secured a<br />
framework contract with Jeddah Municipality to provide<br />
engineering consultancy services for the next three years.<br />
The acquisition is integrating well and providing new<br />
opportunities for the group in the Kingdom.<br />
16 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
Revenue (£m) 63.8 65.5<br />
Adjusted operating profit (£m) 3.9 2.6<br />
Margin 6.1% 4.0%<br />
Order book (£m) 135.2 100.8<br />
People 1,110 1,026<br />
We have grown our rail expertise in the region during the<br />
year and particularly in Qatar as the country develops new<br />
schemes in advance of the 2022 FIFA World Cup. We are<br />
currently working on a number of tender design packages for<br />
Qatar Metro.<br />
Working capital in the region has increased slightly over the<br />
year due to slower payment terms with public sector clients<br />
on new contracts in Qatar and Saudi Arabia. We have<br />
received £7.9m from a client in Qatar subsequent to the year<br />
end, and made good progress in resolving delayed contract<br />
settlements in the region.<br />
Major projects:<br />
• Ashghal contract 2, Qatar<br />
• Kahramaa mega reservoirs, Qatar<br />
• Qatar Metro tender design, Qatar<br />
• Qatar Integrated Rail Programme, Qatar<br />
• Bright Start Resort, Dubai<br />
• Hydraulic network modelling, Abu Dhabi<br />
• Jeddah municipality engineering consultancy services<br />
framework, Saudi Arabia<br />
Scada Automation<br />
of Treated Sewage<br />
Effluent (TSE)<br />
System, Qatar<br />
Abu Dhabi Sewerage<br />
Scheme, UAE
Europe<br />
Regional revenues were 8.7% lower at £101.2m (2011:<br />
£110.8m). Adjusted operating profits were £5.5m (2011:<br />
£6.6m), 16.7% lower reflecting the challenging market<br />
conditions in the UK.<br />
UK<br />
In the UK, we have performed well in what has been a<br />
competitive rail market, winning new contracts with<br />
Crossrail, TfL, Network Rail, and for London Bridge station<br />
with Costain. In the highways sector whilst we had<br />
secured new frameworks with the Highways Agency at the<br />
end of the prior year, workload was slow in the first half<br />
which affected utilisation rates. Later in the year we won<br />
a number of commissions under framework agreements<br />
including design works on the managed motorway delivery<br />
hub and site assurance works.<br />
We have been appointed sole provider of consultancy<br />
services to British Waterways under a framework agreement.<br />
This supplements our work in the water sector, notably on<br />
AMP5 frameworks with South West Water, Thames Water<br />
and Severn Trent Water. In addition, we have continued to<br />
support Thames Water in damage assessment and mitigation<br />
measures relating to those assets critical to the supply of<br />
energy and water-related utilities which will be affected<br />
by Crossrail’s tunnels and stations, and by the proposed<br />
Thames Tunnel. We are continuing to support major Thames<br />
Tideway upgrade projects at Crossness and Beckton sewage<br />
treatment works. Our profile in the utilities sector continues<br />
to grow as a result of these important project awards.<br />
In the property and environment sectors, the market<br />
has been subdued, although we have been appointed to<br />
frameworks in both existing and new market segments,<br />
including with the National Grid. Planning applications were<br />
approved on substantial Infrastructure Planning Commission<br />
and urban regeneration schemes, which will provide good<br />
future workload.<br />
Germany<br />
Operating profits improved, and we carried out assignments<br />
for a number of <strong>Hyder</strong>’s key accounts including Siemens,<br />
BMW, Hochtief and Deutsche Bahn, the latter on the ICE<br />
high speed rail, section 21. Our international presence is<br />
giving us opportunities to work with these clients outside<br />
Germany, for example in Qatar and in China, and in the<br />
rail sector more widely. Our property division performed<br />
particularly well during the year and Ingenieur Consult,<br />
which we acquired last year, was integrated successfully and<br />
performed ahead of our expectations.<br />
Major projects:<br />
• London Bridge station, UK<br />
• British Waterways engineering term contract, UK<br />
• Sussex train lengthening package 3, UK<br />
• Managed motorway delivery hub, UK<br />
• Traffic management technology framework, UK<br />
• Crossrail Thames Water delivery partner, UK<br />
• ICE high speed rail, section 21, Germany<br />
<strong>2012</strong> 2011<br />
UK Germany Total UK Germany Total<br />
Revenue (£m) 75.0 26.2 101.2 87.2 23.6 110.8<br />
Adjusted operating<br />
profit (£m) 4.0 1.5 5.5 5.5 1.1 6.6<br />
Margin 5.3% 5.7% 5.4% 6.3% 4.7% 6.0%<br />
Order book (£m) 106.2 28.8 135.0 98.9 35.2 134.1<br />
People 1,084 404 1,488 1,139 366 1,505<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 17
On the right track: Crossrail<br />
In September 2009, a multi-disciplinary team led<br />
by <strong>Hyder</strong> <strong>Consulting</strong> were appointed by Crossrail to<br />
design two major infrastructure schemes that will<br />
serve one of the busiest areas in East London. The<br />
Crossrail project is the largest civil engineering<br />
project in Europe and the largest single addition to<br />
the London transport network for over 50 years.<br />
Benefits<br />
These significant contracts for the design of a new rail station<br />
at Whitechapel will provide connections for Crossrail, London<br />
Underground and the London Overground services. Not only<br />
will this project contribute to improving Britain’s railway<br />
infrastructure, but it also reaffirms the success of our strategy<br />
of partnering with key clients in our core market sectors. Our<br />
hands-on approach and close working relationships with our<br />
client and project teams naturally develops strong and positive<br />
business relationships.<br />
Once complete, Crossrail will promote vital links to meet the needs<br />
of people and businesses throughout the South East and London’s<br />
financial and business centre in particular. As the largest civil<br />
engineering project in Europe, <strong>Hyder</strong>’s association with this world<br />
class project and upgrade to London’s Transport System provides<br />
invaluable career-defining experience for our people.<br />
Achievement and outcomes<br />
Whitechapel station is one of six major underground stations in<br />
the central underground section of the Crossrail scheme. It is a<br />
busy interchange between the recently upgraded and extended<br />
London Overground, the Hammersmith & City, District and<br />
London Underground lines. The station is situated in a vibrant<br />
and growing local community, close to the newly extended<br />
Royal London Hospital. Connection to the Crossrail scheme has<br />
led to major improvements to Whitechapel station area as the<br />
project is seen as being a catalyst for urban regeneration along<br />
Whitechapel Road.<br />
18 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Capital value: £240M<br />
Client: Crossrail<br />
Scope: Station design (including new<br />
concourse connecting all London<br />
Underground and Overground lines, fit<br />
out of two new 240m platforms and two<br />
30m deep shafts) and management of<br />
interfaces, adapting RIBA C+ scheme<br />
design to RIBA F ready for tender.<br />
The Crossrail team identified an opportunity to redesign the<br />
station to achieve a simplified layout, redesigning it entirely to<br />
make the passenger routes more direct thus improving customer<br />
experience. This meant a smaller station footprint with more of<br />
the passenger flow being above ground, resulting in a smoother<br />
flowing station. Substantial cost savings – potentially of up to<br />
13% of the initial construction cost estimate were achieved.<br />
The development of this option and the production of the final<br />
design were completed within the original programme. This<br />
change not only produced a better station layout but it saved<br />
the client in excess of £60m.<br />
The integrated client, delivery partner and design team’s<br />
excellence, expertise and innovation were demonstrated by<br />
their teamwork and strong grasp of the key issues at an early<br />
stage in the design process. Post contract award, <strong>Hyder</strong> worked<br />
with Crossrail’s delivery partners to further explore ideas and<br />
agree design improvements.<br />
When Crossrail opens, Whitechapel station will become<br />
an important transport hub connecting the new line to the<br />
District, Hammersmith & City lines as well as the new London<br />
Overground line.<br />
Even before on site work commenced on the<br />
project, the following awards had been won:<br />
• Crossrail award for Value for Money<br />
• Crossrail award for Value for Safety<br />
• Fire Safety Engineering Award - 2011 Fire Excellence<br />
Critical success factors<br />
Meeting the obligations of the Crossrail Act and requirements of<br />
planning authorities is essential to the success of the scheme,<br />
particularly during and after construction. The potential impacts on<br />
local residents living in apartments overlooking the station and the<br />
nearby Swanlea School have heavily influenced the design. With<br />
utility diversions and enabling works to be carried out in a highly<br />
constrained inner-city location, this is a complex and demanding<br />
project.
People and Culture<br />
- nurturing talent for<br />
outperformance<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 19
Directors’ <strong>Report</strong> Business Review continued<br />
Our people philosophy<br />
• We strive to attract and retain highly<br />
talented people who have the<br />
necessary aptitude and development<br />
potential.<br />
• We aim to create a professional<br />
environment for staff which meets the<br />
highest international standards and in<br />
which they will thrive and grow.<br />
• We value an individual’s ability to work<br />
in multiple international environments, to<br />
work collaboratively and to adapt rapidly<br />
to new environments and demands.<br />
• We aim to provide professional training<br />
in client care, project execution,<br />
relevant new technologies and<br />
commercial management.<br />
• We attach the highest importance to<br />
personal integrity, mutual respect and<br />
the proper recognition of individual and<br />
team performance.<br />
• We will continue to develop a strong<br />
cadre of senior consultants who have<br />
specialist know-how in our targeted<br />
sectors and who are able to develop<br />
close and productive client relationships.<br />
20 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Encouraging employee<br />
mobility<br />
By actively encouraging the movement of our<br />
people between regions, we can mobilise specialist<br />
talent to resource projects whilst also offering our<br />
people international experience, development of<br />
their skills base and work on prestigious, crossdiscipline<br />
projects.<br />
Employee training and<br />
development<br />
We directly invest approximately 1% of annual revenues in<br />
training, and significant amounts of time are also dedicated<br />
to on the job technical training and coaching from peers.<br />
Over the last year we have introduced the <strong>Hyder</strong> Learning<br />
Academy as a comprehensive response to providing support<br />
for the training and career progression of our people. The<br />
Learning Academy is designed for staff in all career streams<br />
and grades, and offers a structured learning curriculum<br />
which allows people to take an independent approach to<br />
their own learning based around their current role and<br />
desired career pathway. The curriculum is divided into four<br />
main areas of learning:<br />
• building or refreshing professional and technical skills<br />
• building commercial business skills and acumen<br />
• developing client relationship skills<br />
• developing personal impact.
<strong>Hyder</strong> group induction<br />
A comprehensive corporate induction programme<br />
to assist new staff in understanding the <strong>Hyder</strong><br />
culture and strategy. The induction also covers<br />
the business plan, our systems, formal and<br />
informal networks, policies and the support tools<br />
available to help people succeed in their job.<br />
Apprenticeship programme<br />
We are developing future leaders of tomorrow<br />
apprenticeship programmes providing talented<br />
people (who are otherwise not able to attend<br />
university) with an opportunity to build a<br />
professional engineering career. <strong>Hyder</strong> UK received<br />
the first Greater London Authority Responsible<br />
Procurement Award for ‘Skills and Employment’ and<br />
an award from a London college for ‘Outstanding<br />
support to Apprentices’. There are currently 64<br />
apprentices and students employed across the<br />
group.<br />
Graduate and professional<br />
development programmes<br />
<strong>Hyder</strong>’s Graduate Development Programme guides<br />
graduates through their first three years at <strong>Hyder</strong><br />
and provides interactive and structured training<br />
plans to develop relevant business acumen when<br />
they achieve chartered status. There are currently<br />
182 staff undertaking our graduate programmes.<br />
For other more experienced staff, we ensure they<br />
are not only extended in their particular field,<br />
but receive professional skills and leadership<br />
training through a combination of challenging<br />
assignments, coaching and career mentoring.<br />
Project management<br />
We run comprehensive project management<br />
training for our project managers in order to share<br />
best practice and lessons learned on our major<br />
projects. Training includes planning, risk, value,<br />
collaboration, client feedback and negotiation<br />
skills. 200 of our people completed project<br />
management training throughout the year.<br />
Accelerated skills<br />
development programmes<br />
These programmes are designed to accelerate the<br />
development of skills and competencies of our<br />
highly talented professionals, preparing them for<br />
future senior professional and leadership roles.<br />
50 of our top people have already taken part in<br />
comprehensive action learning programmes with<br />
more scheduled for <strong>2012</strong>-13.<br />
Professional networks and<br />
development<br />
Our people are encouraged to join professional<br />
associations and groups to facilitate chartered<br />
engineer status, and provide development and<br />
networking opportunities.<br />
Our Professional Excellence Groups have been<br />
set up to provide support and collaboration<br />
between technical experts. These and the other<br />
informal networks throughout the company,<br />
mean our people can become involved in local<br />
or international client opportunities and ideas<br />
exchanges that foster innovation and excellence.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 21
Directors’ <strong>Report</strong> Business Review continued<br />
Remuneration, recruitment and<br />
managing for performance<br />
We aim to fairly incentivise, reward and recognise our<br />
people based on their performance and contribution to<br />
<strong>Hyder</strong>. We undertake research in our local marketplaces to<br />
inform our remuneration strategy, taking into consideration<br />
industry benchmarks, as well as regional economic and<br />
business forecasts. In addition to salary, we also offer<br />
comprehensive benefits, performance-related bonuses for<br />
senior roles, share incentive plans and employee recognition<br />
programmes.<br />
Our Professional Development Review process is designed<br />
to ensure all our people have clear objectives which align<br />
with <strong>Hyder</strong>’s corporate objectives. In addition, everyone<br />
has tailored personal and professional development plans to<br />
enable them to grow and develop in their careers. Published<br />
position descriptions and job competencies help staff<br />
identify the qualities and capabilities that are required<br />
to take the next step in their careers. As a result of this<br />
approach to managing for performance, our people have<br />
indicated in this year’s engagement survey that they know<br />
what is expected of them in their role (93% favourable<br />
response) and they also believe that their work helps <strong>Hyder</strong><br />
achieve its objectives (97% favourable).<br />
Positive engagement and action<br />
in Corporate Social Responsibility<br />
<strong>Hyder</strong>’s people are strongly committed to Corporate Social<br />
Responsibility (CSR). They have been resourceful in many<br />
of its manifestations such as sustainable design, reducing<br />
waste, conserving resources and by volunteering their<br />
expertise to charitable activities that directly and positively<br />
influence the local communities in which they operate. This<br />
commitment and resourcefulness has been recognised by the<br />
FTSE4Good Index. Following a review of our CSR <strong>Report</strong>, our<br />
<strong>Annual</strong> <strong>Report</strong> and our website, <strong>Hyder</strong> has now been included<br />
in the index of companies deemed to have met globally<br />
recognised corporate responsibility standards. This will make<br />
it easier for ethical funds and investors to find suitable stock<br />
that align with their investment criteria in the area of CSR.<br />
More information is outlined in our CSR report.<br />
22 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Communications<br />
We aim to provide opportunities for staff to get involved in<br />
and have a voice on matters of concern to them. In response<br />
to feedback, we have improved and increased the channels<br />
via which we communicate and consult with our people. We<br />
encourage one-on-one communication between employees<br />
and line managers and offer individuals the chance to make<br />
their views known through feedback at regular presentations<br />
by senior managers. Other communication channels include<br />
office and team meetings, intranet, weekly and monthly<br />
staff bulletins or newsletters, topical podcasts, the chief<br />
executive ‘Ask Ivor’ page, and our CSR ideas forum.<br />
Upholding diversity and equal<br />
opportunities<br />
<strong>Hyder</strong> is an equal opportunities employer and has a diverse,<br />
multinational and multi-disciplined workforce. Individuals<br />
are assessed on the basis of the job requirements, their<br />
relevant aptitudes, skills and abilities, and their ability<br />
to uphold <strong>Hyder</strong>‘s values. We aspire to best practice in<br />
equal opportunities and anti-discrimination wherever we<br />
operate. Local legislation prescribes minimum standards<br />
which we follow and, where appropriate, seek to surpass.<br />
<strong>Hyder</strong>’s diversity and inclusion policy underlines the<br />
group’s commitment to promoting diversity and inclusion<br />
in all areas of recruitment, training and promotion, and<br />
to ensuring equality of opportunity and elimination of<br />
discrimination.<br />
We expect high standards of conduct from our people and<br />
have introduced group-wide education on the policies<br />
we have set for conduct and business ethics. We monitor<br />
understanding of these policies and compliance with the<br />
group’s equal opportunity policy, which offers equality of<br />
opportunity and support for disabled members of staff.<br />
We are committed to giving full and fair consideration to<br />
applications for employment made by disabled persons, and<br />
to encourage the training, career development, promotion<br />
and involvement in the workplace of disabled persons.<br />
Where applicable, we offer retraining to disabled staff to<br />
ensure that they can continue to perform work appropriate<br />
to their aptitudes and abilities.
Taking the highway:<br />
The Hunter Expressway<br />
The Hunter Expressway is currently the largest<br />
road project underway in New South Wales,<br />
Australia. The AUD1.7 billion project will form part<br />
of a new bypass route that will benefit regional<br />
and long haul traffic.<br />
The Expressway involves the construction of a 40 kilometre dual<br />
carriageway to be built under two contracts; the eastern and<br />
western packages. <strong>Hyder</strong> forms part of the Hunter Expressway<br />
Alliance - along with the state government’s Roads and Maritime<br />
Services (RMS), Thiess and Parsons Brinckerhoff – which will<br />
deliver the eastern section. This section is 13 kilometres long and<br />
includes building three viaducts through the rugged terrain of the<br />
Sugarloaf Range.<br />
Critical success factors<br />
<strong>Hyder</strong>’s expertise, combined with the proactive approach adopted<br />
by all alliance partners, enabled the team to successfully address<br />
technical, constructability and environmental requirements in the<br />
design.<br />
As an example, approximately two kilometres of viaduct through<br />
the Sugarloaf Range were originally designed to be built using<br />
the incremental launch method. However, by reverting to a<br />
balanced cantilever approach, bridge span lengths could be<br />
increased and environmental benefit brought to the Aboriginal<br />
cultural heritage and flora in the area.<br />
Client: Roads and<br />
Maritime Services (RMS)<br />
Contract value:<br />
AUD30M (<strong>Hyder</strong>)<br />
Services: Complex bridge<br />
and highways designs, civil<br />
structures and geotechnical<br />
engineering.<br />
Managing the remedial treatment to old mine workings in the<br />
area was a major technical risk for the client and the future<br />
operation of the expressway. The client’s decision to engage the<br />
Alliance team to develop a solution was validated when the team<br />
delivered one under time and budget.<br />
Benefits<br />
When complete, the project will provide a new route between the<br />
west of Newcastle and urban growth centres in the Lower Hunter,<br />
cutting travel times between Newcastle and Branxton by up to<br />
28 minutes, and improving efficiency of the highway network<br />
between Sydney, Newcastle and Brisbane.<br />
Results and achievements<br />
Working alongside the alliance partners, including two key clients<br />
(RMS and Thiess), <strong>Hyder</strong> has showcased technical excellence,<br />
reinforced value through design solutions and strengthened<br />
relationships.<br />
The project is an impressive embodiment of <strong>Hyder</strong>’s core values<br />
- trust, teamwork and excellence. Complex geological issues,<br />
sensitive cultural areas and the imposition of strict vegetation<br />
clearing limits were overcome with innovative thinking and<br />
best practice engineering, facilitated through a collaborative<br />
alliancing approach.<br />
<strong>Hyder</strong> continues to provide site-based design support during the<br />
construction phase, and the project is on track to meet its target<br />
completion date in 2013.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 23
24 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Financial<br />
Review
Financial Review<br />
The group’s geographic diversity has enabled us to report<br />
another good set of financial results, in what have been<br />
mixed market conditions. Our Australian business has<br />
continued to perform well and benefited from the strength<br />
of the Australian dollar. In the Middle East our results have<br />
improved as new projects have been secured, following<br />
our investments in Qatar and Saudi Arabia. The UK, and<br />
particularly the highways sector has been challenging,<br />
however our results have held up well and we are now well<br />
positioned for the year ahead.<br />
Cash balances have improved in spite of the current liquidity<br />
pressures, and more onerous payment terms that exist<br />
with public sector clients in the Middle East, where we<br />
are growing. At the year end our net cash balances were<br />
£15.6m, up from £13.1m the year before.<br />
Revenue and profit<br />
Revenue for the year was £277.3m (2011: £290.3m), 4.5%<br />
lower. Net revenue, after deduction of sub-consultant<br />
costs, was 3.8% lower at £241.8m (2011: £251.4m). On a<br />
constant currency basis revenue and net revenue decreased<br />
by 6.1% and 5.5% respectively. The reduction in revenue is<br />
principally due to the challenging market conditions in the<br />
UK, and particularly the highways market.<br />
In presenting the group’s adjusted profit below,<br />
amortisation of acquired assets, acquisition costs and<br />
exceptional items have been excluded as the directors<br />
believe that this assists with understanding the underlying<br />
performance of the group:<br />
<strong>2012</strong><br />
£’000<br />
2011<br />
£’000<br />
Change<br />
%<br />
Operating profit 17,070 18,156 (6.0%)<br />
Add back:<br />
Amortisation on<br />
acquired intangibles<br />
and acquisition costs<br />
2,462 2,147 14.7%<br />
Exceptional items 1,499 - -<br />
Adjusted operating<br />
profit<br />
21,031 20,303 3.6%<br />
Net finance costs<br />
Net pension interest<br />
(353) (443) (20.3%)<br />
income 929 466 99.4%<br />
Adjusted profit before<br />
taxation 21,607 20,326 6.3%<br />
Adjusted operating profit increased 3.6% to £21.0m (2011:<br />
£20.3m). The adjusted operating margin on net revenue<br />
increased to 8.7% from 8.1%.<br />
Redundancy costs of £1.5m (2011: £2.9m) have been<br />
absorbed within adjusted operating profit following actions<br />
to more closely align our resource levels with the mix of<br />
projected workload. The redundancy costs were primarily<br />
incurred in the UK (£0.6m), Australia (£0.5m), and the<br />
Middle East (£0.3m). Foreign exchange gains of £0.9m have<br />
been recognised within operating profit from translation of<br />
overseas profits, largely in Australia.<br />
Adjusted profit before taxation increased 6.3% to £21.6m<br />
(2011: £20.3m).<br />
Exceptional items<br />
Exceptional items incurred in the current year relate to UK<br />
vacant properties (£1.3m) and costs related to the closure<br />
of the UK defined benefit pension scheme to future accrual<br />
(£0.2m). The vacant property costs in the UK comprise<br />
rental costs for the remaining life of the lease where due<br />
to structural changes the offices are no longer required for<br />
future use. The exceptional cost taken in the current year<br />
will lead to overhead savings in future years. In order to<br />
reduce the rate of growth of the UK defined benefit scheme’s<br />
liabilities, and the volatility of the deficit, the scheme<br />
was closed to future benefit accrual on 30 April 2011. This<br />
resulted in closure costs of £0.2m being incurred. There<br />
were no exceptional items in the prior year.<br />
Taxation<br />
The taxation charge for the year was £3.7m (2011: £3.3m),<br />
equating to a tax rate of 21.1% (2011: 18.1%). The tax rate<br />
on adjusted profit before tax was 20.5% (2011: 17.9%).<br />
The increase in the tax rate is a result of a change in the<br />
mix of the group’s profits, with more of the group’s profit<br />
being earned in higher rate jurisdictions. The current rate<br />
is lower than the UK rate of 26% reflecting research and<br />
development tax credits in both Australia and the UK, and<br />
lower tax rates in the Middle East.<br />
Earnings per share<br />
Basic earnings per share amounted to 36.48p (2011: 39.29p);<br />
diluted earnings per share was 35.96p (2011: 38.63p). The<br />
weighted average number of ordinary shares during the year<br />
was 38.2m (2011: 37.9m), reflecting the shares issued to<br />
satisfy options exercised during the year offset by shares<br />
purchased by the company’s employee benefit trust. After<br />
adjusting for the amortisation of acquired intangibles,<br />
acquisition costs and exceptional items, fully diluted<br />
earnings per share increased by 2.3% to 44.34p (2011:<br />
43.34p).<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 25
Directors’ <strong>Report</strong> Business Review continued<br />
Dividends<br />
In recognition of the group’s financial performance, the<br />
board has proposed a 16.1% increase in the full year<br />
dividend to 9.0p (2011: 7.75p). A final dividend of 7.0p per<br />
share (2011: 6.0p) is proposed for the year to 31 March <strong>2012</strong><br />
which, if approved by the shareholders, will be paid on 10<br />
August <strong>2012</strong> to shareholders on the register at 13 July <strong>2012</strong>.<br />
The full year dividend is covered 4.9 times by adjusted fully<br />
diluted earnings per share (2011: 5.6 times).<br />
Acquisitions<br />
In the current financial year the group made three<br />
acquisitions for cash consideration of £3.1m; ESR, a specialist<br />
energy, water and space consultant operating in the UK<br />
and Abu Dhabi; SAK infrastructure consultants in Saudi<br />
Arabia (£1.1m); and GW Engineers, a resources consultancy<br />
in Australia (£2.0m). Further contingent consideration of<br />
£2.6m may be payable in relation to the acquisition of GW<br />
Engineers dependent on business performance.<br />
The charge for amortisation of acquired intangibles was<br />
£1.8m (2011: £2.1m). In the current year £0.7m (2011: £Nil)<br />
of costs were incurred in relation to legal and due diligence<br />
fees on completed acquisitions.<br />
Goodwill on acquired businesses is carried forward at cost,<br />
and reviewed annually for impairment. There has been no<br />
impairment to the carrying value of goodwill this financial<br />
year and details of the assumptions used in the calculations<br />
are shown in note 8.<br />
Capital structure<br />
During the year the company issued 94,250 10p ordinary<br />
shares in relation to exercised share options. As at 31 March<br />
<strong>2012</strong> there were 38,634,530 (2011: 38,540,280) fully paid<br />
10p ordinary shares in issue.<br />
During the year to 31 March <strong>2012</strong> shareholders’ equity<br />
increased by 6.8% to £86.9m (2011: £81.4m) primarily<br />
reflecting retained earnings for the year.<br />
Shareholder return<br />
At 31 March <strong>2012</strong> the net asset value per share was 225p<br />
(2011: 211p). The closing share price on 31 March <strong>2012</strong><br />
was 414p per share (2011: 362p); market capitalisation was<br />
£159.9m (2011: £139.5m).<br />
26 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Financing<br />
At the year end the group had net cash balances of £15.6m<br />
(2011: £13.1m). Cash balances increased to £23.2m (2011:<br />
£22.2m) and total borrowings reduced to £7.6m (2011: £9.1m)<br />
providing substantial headroom against available facilities.<br />
The group’s principal committed banking facilities totalling<br />
£47.6m are with HSBC and Barclays in the UK which include<br />
revolving credit facilities of £22.5m and £18.0m expiring in<br />
December 2015 and February 2013 respectively, and other<br />
long term facilities of £7.1m. In addition the group has<br />
access to a number of overseas and on demand facilities<br />
of a further £5.3m, and leasing facilities of £0.5m. Total<br />
facilities amount to £53.4m, all of which are unsecured.<br />
Under the terms of its principal banking facilities the group<br />
is required to operate within certain financial covenants.<br />
In line with market practice these are related to net debt,<br />
EBITDA, debt service costs and interest cover. The group<br />
had significant headroom within all of these covenants<br />
throughout the year.<br />
The net finance costs of the group, before pension interest<br />
income, amounted to £0.4m (2011: £0.4m). Pension interest<br />
income amounted to £0.9m (2011: £0.5m) and is discussed<br />
in further detail below.<br />
Cash flow<br />
Net cash was £15.6m at 31 March <strong>2012</strong> (2011: £13.1m) the<br />
movement is shown below:<br />
<strong>2012</strong><br />
£m<br />
2011<br />
£m<br />
Net cash 1 April 13.1 3.6<br />
EBITDA 25.8 25.5<br />
Working capital<br />
movements<br />
(5.9) (2.6)<br />
Other movements (0.4) (0.7)<br />
Cash from operations<br />
before pension deficit<br />
contributions<br />
19.5 22.2<br />
Pension deficit<br />
contributions<br />
(3.9) (3.0)<br />
Cash from operations 15.6 19.2<br />
Interest (0.5) (0.3)<br />
Tax (4.5) (4.5)<br />
Acquisitions (2.5) (0.4)<br />
Capital expenditure (net) (2.2) (2.2)<br />
Dividend (3.0) (2.4)<br />
FX / Other (0.4) 0.1<br />
Net cash 31 March 15.6 13.1
Cash generated from operations before pension deficit<br />
contributions of £3.9m (2011: £3.0m) was £19.5m (2011:<br />
£22.2m). The proportion of EBITDA converted into operating<br />
cash flow in the year was 76% (2011: 87%).<br />
The working capital outflow amounted to £5.9m during the<br />
year (2011: £2.6m), principally due to settlement of prior<br />
year payables, accruals and liabilities acquired. Underlying<br />
trade debtor and work in progress balances reduced by<br />
£4.0m, before inclusion of acquired balances of £1.8m,<br />
largely in the UK and Europe offset by an increase in the<br />
Middle East due to slow contract settlements. We have<br />
received £7.9m from a client in Qatar subsequent to the year<br />
end, and made good progress in resolving delayed contract<br />
settlements in the region.<br />
Tax payments in the year, principally in Australia, amounted<br />
to £4.5m (2011: £4.5m). Cash consideration paid for<br />
acquisitions was £3.1m (2011: £1.1m) with cash balances<br />
acquired of £0.6m (2011: £0.7m).<br />
Post employment benefits<br />
The group operates both defined benefit and defined<br />
contribution schemes as detailed in note 26.<br />
The principal defined benefit scheme is the AGPS, for which<br />
the sponsoring employer is <strong>Hyder</strong> <strong>Consulting</strong> (UK) Limited.<br />
There are no group guarantees in place in relation to the<br />
AGPS. Following a consultation period with members the<br />
scheme’s trustees consented to close the scheme to future<br />
accrual with effect from 30 April 2011.<br />
The gross deficit in the scheme at 31 March <strong>2012</strong> reduced<br />
to £16.3m (2011: £17.3m); the deficit net of deferred<br />
tax reduced to £13.1m (2011: £13.5m). The reduction in<br />
the deficit reflects better than expected asset returns<br />
and deficit contributions of £3.9m in the year, offset by<br />
actuarial losses due to reduced discount rates. A triennial<br />
valuation of the scheme as at 1 April 2011 has recently been<br />
concluded. Fixed contributions for the current year will<br />
amount to £1.8m; in the next two years fixed contributions<br />
increase by £0.1m per annum; increased by RPI plus 1%<br />
thereafter. Contingent contributions may become payable<br />
annually up to a cap of £0.7m, dependent on the cash<br />
performance of the UK business.<br />
The Bearing Active<br />
Preload system for<br />
use on Alphasat,<br />
and Europe’s<br />
EDRS satellite<br />
communications<br />
constellation, ESR<br />
Technology, UK<br />
The main assumptions in valuing the deficit are disclosed in<br />
note 26. The sensitivities of the AGPS scheme liabilities to<br />
changes in these assumptions are shown below:<br />
Assumption Change in assumption Indicative effect<br />
on scheme<br />
liabilities<br />
Discount rate Increase / decrease Decrease /<br />
by 0.5% increase by 9%<br />
Rate of inflation Increase / decrease Decrease /<br />
by 0.5% increase by 6%<br />
Longevity Increase by 1 year Increase by 2-3%<br />
The group also operates certain overseas post employment<br />
benefit schemes, which principally relate to benefits payable<br />
to staff when they leave in the Middle East which have been<br />
actuarially valued for the first time this year. Net liabilities<br />
in relation to overseas and annuitants schemes increased<br />
to £7.9m (2011: £6.7m) as a result of ongoing service costs,<br />
a reduction in discount rates and the acquisition of SAK<br />
during the year.<br />
The net finance income for pension schemes amounted to<br />
£0.9m in the year (2011: £0.5m). In 2013 this is anticipated<br />
to reduce to £0.7m. The application of the changes to IAS<br />
19, ‘Employee Benefits’, from 2014 will affect the pension<br />
financing charge; if the change were applied in 2013 this<br />
would result in a pro-forma pension financing charge of<br />
approximately £1.0m.<br />
Principal risks and uncertainties<br />
The group is broadly based, both internationally and across<br />
market sectors, which provides considerable resilience to<br />
and mitigates against economic and political risks. The<br />
group’s risks are regularly monitored by the board. Risk<br />
management and internal control systems provide a means<br />
of identifying, evaluating and managing the significant<br />
risks facing the group. These systems can only mitigate risk<br />
rather than eliminate it completely.<br />
The group’s principal risks have been identified as follows:<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 27
Directors’ <strong>Report</strong> Business Review continued<br />
RISK MITIGATION<br />
Changes in market conditions<br />
The group’s business environment is competitive<br />
and we recognise that the actions of<br />
competitors or potential competitors may affect<br />
our business.<br />
Challenging market conditions can arise due to<br />
changes in social, economic or political factors,<br />
as well as increased competition.<br />
Contracts may be secured at lower margins,<br />
or the order book could decrease as fewer<br />
opportunities are secured. Cash generation<br />
could be affected and lower staff utilisation<br />
could result in reduced profitability.<br />
Management of projects<br />
Managing clients’ and our own projects is core<br />
to our business.<br />
Inadequate project management could lead<br />
to financial loss, increased risk of contractual<br />
disputes and claims and reputational damage.<br />
Contractual disputes and claims<br />
Disputes and claims can arise if we do not meet<br />
our contractual commitments, and where project<br />
solutions are inadequate or do not perform as<br />
intended.<br />
Disputes and claims could result in material<br />
settlements against the group, damage to our<br />
client relationships and limit our ability to<br />
secure future contracts.<br />
Recruitment, utilisation and retention of key<br />
staff<br />
Failure to attract and retain high quality staff<br />
will constrain the ability of the group to win<br />
contracts and grow the business. It could<br />
increase the risk of contractual disputes and<br />
claims.<br />
28 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
• Our strategy of service differentiation, key client<br />
management and international growth has enabled the<br />
group to avoid being dependent on individual markets,<br />
sectors or clients.<br />
• The international spread and sector diversity of the group<br />
provides protection against market changes in specific<br />
geographies or sectors.<br />
• The development of our design excellence centres in India,<br />
the Philippines and Bulgaria provides additional flexibility<br />
to respond to local market movements.<br />
• The group also recognises that its competitiveness is<br />
enhanced by the recruitment and retention of key staff<br />
members (see below).<br />
• We operate established bid processes to manage<br />
profitability and mitigate risks.<br />
• Technical and project reviews are undertaken regularly; the<br />
group’s internal systems and controls facilitate this process.<br />
• Regular project management training is provided and the<br />
group ensures that appropriately technically skilled staff<br />
are used on projects.<br />
• Established project and technical review procedures are in<br />
place to minimise any potential exposure.<br />
• Should disputes arise they are dealt with at a local level<br />
wherever possible, to protect and enhance our relationship<br />
with clients and suppliers. Where this is not possible<br />
disputes are escalated to regional or group management for<br />
resolution as swiftly as possible.<br />
• Arbitration or mediation services are used where possible.<br />
• A global insurance programme, at commercially acceptable<br />
rates, is maintained with appropriate limits of indemnity.<br />
• The group aims to offer competitive compensation<br />
packages to give it the opportunity to recruit and retain<br />
people of sufficient calibre.<br />
• We ensure that our staff obtain appropriate and relevant<br />
experience to develop further, which assists with their<br />
retention.<br />
• The human resources function plays a central role in<br />
succession planning, staff development and recruitment<br />
and staff retention strategies.<br />
• We regularly monitor our forward order book against our<br />
resource levels and plan accordingly in order to maximise<br />
staff utilisation rates.<br />
• We regularly review utilisation rates throughout our<br />
business and monitor them against pre-set targets taking<br />
prompt action where appropriate.
RISK MITIGATION<br />
Management of working capital, particularly in the<br />
Middle East<br />
The majority of costs, including payroll, are paid before<br />
fees are settled by clients. It may take us longer to get<br />
paid than we anticipated through poor payment terms,<br />
late invoicing or poor collection of debts.<br />
Insufficient working capital could constrain growth<br />
and lead to increased use of banking facilities with<br />
the resultant costs. In the extreme we may breach our<br />
banking covenants.<br />
Defined benefit pension schemes<br />
The group’s main defined benefit pension scheme, the<br />
AGPS, has a deficit.<br />
The deficit is exposed to risk of changes in interest<br />
rates and asset values, as well as inflation and the life<br />
expectancy of the members. The cash cost of funding<br />
the existing deficit could increase in the future.<br />
Crisis event/business continuity<br />
A crisis event or business continuity issue could lead to<br />
a loss of staff and/or interruption to service delivery.<br />
We rely on our IT and office infrastructure in order to<br />
operate.<br />
The loss of IT systems, or being unable to access offices,<br />
could affect our performance.<br />
Health and safety<br />
The construction industry entails significant health and<br />
safety risks.<br />
There is a consequent risk to staff and clients, and also a<br />
risk of reputational damage to the group.<br />
• We develop and maintain close working relationships<br />
with clients and seek advance payments where<br />
possible.<br />
• Global cash requirement forecasts are regularly<br />
prepared and debt and work in progress levels with<br />
clients are monitored.<br />
• Cash management performance indicators are<br />
reviewed regularly at project, sector and regional<br />
level and have helped to develop a strong cash<br />
culture within the group.<br />
• The group maintains strong relationships with its<br />
principal bankers. The group currently has £41m of<br />
committed facility headroom.<br />
• The AGPS closed to new members in 2001 and future<br />
benefit accrual ceased in April 2011.<br />
• The group maintains a good relationship with the<br />
trustees and a revised funding plan has been agreed<br />
following the triennial valuation on 1 April 2011.<br />
• Disaster recovery plans are in place and are reviewed<br />
regularly.<br />
• The group’s IT networks and core business systems<br />
are maintained and supported to provide assurance<br />
on data integrity and minimise the risk of data loss.<br />
• Where systems are identified as critical to the<br />
business their performance, resilience and security is<br />
reviewed regularly in order to provide assurance as<br />
to availability.<br />
• Health and safety is an essential element of all<br />
<strong>Hyder</strong>’s operations.<br />
• As a group we are committed to conducting our<br />
activities in such a way as to ensure the health and<br />
safety of our staff and anyone who may be affected<br />
by our operations.<br />
• We will comply with all relevant legislation and<br />
aim continually to improve our health and safety<br />
performance; all staff are expected to contribute to<br />
this goal.<br />
Kurt-Wabbel-<br />
Stadion, Germany<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 29
Directors’ <strong>Report</strong> Business Review continued<br />
RISK MITIGATION<br />
Foreign exchange movements<br />
The group reports its results in sterling, however only<br />
approximately 30% of the group’s revenue is generated<br />
in sterling. The remaining balance is generated in<br />
Australia, the Middle East, Germany, China and Hong<br />
Kong where revenue is normally denominated in the<br />
relevant local currency.<br />
Significant movements in foreign exchange rates will<br />
affect the sterling profits reported by the group and the<br />
value of assets and liabilities denominated in foreign<br />
currencies on the balance sheet.<br />
Global regulatory environment and business conduct<br />
The group operates in many jurisdictions and is subject<br />
to a wide range of rules and regulations, including the<br />
UK Bribery Act. Non-compliance could have significant<br />
consequences for our operations or reputation.<br />
Ivor Catto<br />
Chief Executive<br />
13 June <strong>2012</strong><br />
Russell Down<br />
Group Finance Director<br />
13 June <strong>2012</strong><br />
Hilton<br />
Hotel,<br />
Surfers<br />
Paradise,<br />
Australia<br />
30 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
• Established procedures exist to monitor foreign<br />
exchange risks in accordance with policies set by the<br />
board. A summary of the group’s key risk exposures<br />
and the use of derivative and financial instruments<br />
are given in note 15.<br />
• The revenue and costs of our international<br />
operations generally arise in the same currency and<br />
therefore the exposure to exchange fluctuations is<br />
not usually significant and consequently not hedged.<br />
• Where a mismatch does exist it is generally priced<br />
for in our customer contracts.<br />
• Most of our overseas operations maintain local<br />
currency overdraft and bonding facilities, which<br />
provide partial mitigation against balance sheet risk.<br />
• In spite of fluctuations in exchange rates which<br />
occur from time to time, it is not considered<br />
necessary to hedge the net investment in overseas<br />
subsidiaries at this time.<br />
• Regional management review their operations<br />
regularly including ethics, employment practices, and<br />
health and safety to ensure they have appropriate<br />
controls to monitor and prevent potential breaches<br />
of group policies and local legislation.<br />
• The group maintains a global ethical business<br />
code and has provided training on identifying and<br />
preventing bribery.
Alba Water<br />
Transmission,<br />
Bahrain<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 31
Directors and Advisors<br />
Directors<br />
Sir Alan Thomas Chairman<br />
Ivor Catto Chief Executive<br />
Russell Down Group Finance Director<br />
Jeffrey Hume Non-Executive Director<br />
Paul Withers Non-Executive Director<br />
Company Secretary<br />
Neil Hunt<br />
Registered office<br />
29 Bressenden Place, London, SW1E 5DZ, UK<br />
Company registration number<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> is registered in England and<br />
Wales with company number 768087<br />
Auditors<br />
PricewaterhouseCoopers LLP<br />
1 Embankment Place, London, WC2N 6RH, UK<br />
Solicitors<br />
Wragge & Co LLP<br />
55 Colmore Row, Birmingham, B3 2AS, UK<br />
32 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
The <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> Board<br />
Registrars<br />
Capita Registrars Limited<br />
Northern House, Woodsome Park, Fenay Bridge, Huddersfield,<br />
HD8 0LA, UK<br />
Brokers<br />
Numis Securities Limited<br />
10 Paternoster Square, London, EC4M 7LT, UK<br />
Financial Advisors<br />
Investec Bank plc<br />
2 Gresham Street, London, EC2V 7QP, UK<br />
Principal Bankers<br />
HSBC Bank plc<br />
70 Pall Mall, London, SW1Y 5EZ, UK<br />
Head Office<br />
29 Bressenden Place, London SW1E 5DZ, UK<br />
Telephone: 020 3014 9000<br />
www.hyderconsulting.com
Directors’ Biographies<br />
Sir Alan Thomas Chairman<br />
Sir Alan was previously President and CEO of Raytheon Europe International;<br />
Head of the British Government’s Defence Export Services Organisation (DESO);<br />
CEO of Data Logic; a Director of Powergen plc; Chairman of Three Valleys Water<br />
plc; Chairman of Global Design Technologies LLC; a Senior Industrial Advisor to<br />
the Water Regulator; a Member of the Engineering Council; and Chairman of the<br />
University of Westminster. He is a Chartered Engineer, Chartered Management<br />
Accountant and an Hon DSc.<br />
Russell Down Group Finance Director<br />
Ivor Catto Chief Executive<br />
Mr Down was appointed as Group Finance Director in December 2008. He<br />
joined the group in 1997 as Finance Director for the Middle East region,<br />
based in Dubai, and subsequently held the roles of Group Financial Controller<br />
and Group Head of Finance and Development. He is a Fellow of the Institute<br />
of Chartered Accountants in England and Wales, having qualified with KPMG.<br />
Jeffrey Hume Non-Executive Director<br />
Mr Catto was appointed as Chief Executive in December 2008. Prior<br />
to joining <strong>Hyder</strong>, Mr Catto was a member of the Executive Board of<br />
WS Atkins plc and previously held roles at Scottish Power plc and<br />
Babtie Group. He is a Chartered Engineer, a Fellow of the Institution<br />
of Mechanical Engineers, and a graduate of Harvard Business School’s<br />
Advanced Management Program.<br />
Paul Withers Non-Executive Director<br />
Mr Hume was appointed as a Non-Executive Director in May 2007. He is also<br />
a Non-Executive Director of Dover Harbour Board, Moat Homes Limited and<br />
a member of the London Stock Exchange’s Primary Markets Group. He is a<br />
Fellow of the Institute of Chartered Accountants in England and Wales and of<br />
the Association of Corporate Treasurers. He is a former Group Finance Director<br />
of TDG plc, AWG plc, Alfred McAlpine plc and Howden Group plc.<br />
Mr Withers was appointed as a Non-Executive Director in September<br />
2006. He is also a Non-Executive Director of Premier Farnell plc and<br />
Devro plc and was a Group Managing Director of BPB plc between 2001<br />
and 2006. He is a Chartered Engineer and a graduate of the Sloan<br />
Fellowship programme of the London Business School.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 33
34 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Northparkes<br />
Mine, Australia
Directors’<br />
<strong>Report</strong><br />
Corporate<br />
Governance<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 35
Chairman’s introduction<br />
I am pleased to introduce <strong>Hyder</strong> <strong>Consulting</strong>’s <strong>2012</strong> Corporate<br />
Governance <strong>Report</strong>.<br />
I would like to affirm at the outset that <strong>Hyder</strong> <strong>Consulting</strong><br />
is committed to maintaining high standards of corporate<br />
governance and that its board fully supports the principles<br />
of the UK Corporate Governance Code (“Code”) as they apply<br />
to the company. The Code can be found on the FRC website<br />
(www.frc.org.uk).<br />
The report below and the Directors Remuneration <strong>Report</strong><br />
(see pages 64 to 71) provide a detailed commentary on<br />
the activities of the board and its committees throughout<br />
the year and together explain how we have applied the<br />
principles of good governance as detailed in the Code. I<br />
can also confirm that the company has complied with the<br />
provisions of the Code relevant to smaller listed companies<br />
throughout the year.<br />
We are conscious of our responsibility to maintain a balance<br />
of skills, experience and knowledge on the board and its<br />
committees in order to manage the company and execute<br />
its strategy successfully. We believe that our small and<br />
very experienced board has discharged this responsibility<br />
effectively during the past year. Looking ahead, and in<br />
view of the proportion of our business in Asia-Pacific, we<br />
began a search for a new non-executive director who has<br />
substantial experience of the region and who may be based<br />
there. An appointment will also refresh the board, increase<br />
its diversity, and help enable orderly board and committee<br />
succession.<br />
The Code does not require the board members of smaller<br />
companies to submit to annual re-election; however the<br />
board is proposing for the first time to offer all its members<br />
for re-election at the forthcoming AGM.<br />
Sir Alan Thomas<br />
Chairman<br />
Directors and the board<br />
As at the date of this report the board comprises the<br />
chairman, two executive directors and two independent<br />
non-executive directors. A list of the individual directors,<br />
their biographies and other significant commitments are to<br />
be found on pages 32 and 33.<br />
As recommended by the Code the roles of the chairman<br />
and chief executive are held separately and there is a clear<br />
division of responsibilities between each position.<br />
The senior independent director (“SID”) is Jeffrey Hume who<br />
succeeded Paul Withers in this role on 6 May 2011. It is the<br />
board’s current intention that the role is held on a two year<br />
rotation.<br />
The board’s primary responsibility is to its shareholders for<br />
the group’s financial and operational performance whilst<br />
36 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
fulfilling its obligations to its clients, to its staff and to the<br />
communities it serves. Its task is to provide entrepreneurial<br />
leadership, to formulate an effective competitive strategy<br />
and to execute it successfully.<br />
Whilst the board has delegated the normal operational<br />
management to the chief executive, the board has a formal<br />
schedule of matters that are specifically reserved for its<br />
decision. The schedule is reviewed annually and updated as<br />
necessary and includes the following matters: setting the<br />
group strategy and direction, results and financial reporting,<br />
company dividends, corporate governance arrangements,<br />
group policies, approval of material contracts, approval of<br />
changes to the capital structure of the company, internal<br />
controls and risk management systems and approval of<br />
acquisitions and divestments.<br />
Under the guidance of the chairman, board meetings operate<br />
to a standing agenda ensuring that financial, operational,<br />
strategic and other matters requiring regular periodic<br />
review are given sufficient time for debate and scrutiny. The<br />
chairman is responsible for ensuring that adequate time is<br />
available for discussion of all agenda items, in particular<br />
strategic issues, and there are regularly scheduled reviews<br />
of the company’s strategy. The chairman holds meetings<br />
from time to time as he considers appropriate with the nonexecutive<br />
directors without the executive directors present.<br />
Several such meetings were held during the year.<br />
On appointment, directors receive an induction tailored to<br />
their needs taking into account their previous experience.<br />
This includes financial and business information about the<br />
group, information about the role of each director and the<br />
board as a whole and the matters reserved to it, the terms<br />
of reference of and the powers delegated to the board<br />
committees. The induction also includes access to senior<br />
management and office visits to help the new directors<br />
familiarise themselves and gain an understanding and<br />
appreciation of the group’s business.<br />
The annual schedule of board meetings provides for certain<br />
meetings to be held at different group offices, both within<br />
the UK and overseas. Two meetings are scheduled jointly<br />
with the executive board which greatly assists in the<br />
relationship and understanding between the board and the<br />
group’s senior executives as well as the board’s knowledge<br />
of the group’s international operations. The chairman makes<br />
regular visits overseas to meet clients and staff and the<br />
board as a whole makes bi-annual visits to group offices, to<br />
meet with local senior management and staff and to receive<br />
presentations on the local business. These visits greatly<br />
assist directors’ ability to keep in touch with the pressures,<br />
priorities and opportunities in the group.<br />
The company provides the necessary training and resources<br />
for developing and updating the directors’ knowledge and<br />
capabilities, including briefings from external advisors<br />
where necessary.<br />
The directors have access to the advice and services of the<br />
company secretary and are empowered to take independent<br />
professional advice in the furtherance of their duties at the
company’s expense as appropriate. No such independent<br />
professional advice was sought during the year. The<br />
company secretary also provides advice and support to<br />
each of the board’s committees and to the chairman on all<br />
corporate governance matters.<br />
The number of formal scheduled board and committee<br />
meetings held and attended by directors during the year<br />
was as follows:<br />
Board Audit Nomination Remuneration<br />
Scheduled Meetings 10 3 1 4<br />
Sir Alan Thomas (N) 10 - 1 -<br />
Ivor Catto 10 - - -<br />
Russell Down 10 - - -<br />
Jeffrey Hume (A,N,R) 10 3 1 4<br />
Paul Withers (A,N,R) 10 3 1 4<br />
Notes:<br />
(A) audit committee, (N) nomination committee, (R) remuneration<br />
committee.<br />
In addition to the formal scheduled meetings, additional<br />
ad hoc board and committee meetings were held during the<br />
year to consider time critical matters.<br />
Evaluations<br />
A formal performance evaluation is carried out annually for<br />
the board, the audit committee, the nomination committee<br />
and the remuneration committee. Each director completes<br />
a board evaluation questionnaire in a form consistent with<br />
previous years to allow comparative analysis, the results<br />
of which are collated by the company secretary, reviewed<br />
by the chairman and a summary of the principal findings<br />
is presented to and discussed at the board. The board also<br />
evaluates each of the board committees.<br />
Overall, the evaluation process concluded that the board<br />
and its committees were working effectively. The main<br />
area for consideration identified from this year’s evaluation<br />
process related to deepening further the non-executives’<br />
understanding of markets and sectors in which the<br />
group operates, especially in the Asia-Pacific region. The<br />
initiatives we have taken are explained elsewhere in this<br />
section.<br />
The chairman reviewed the performance and development<br />
needs of each of the executive and the non-executive<br />
directors taking into account the views of the other<br />
directors. The non-executive directors’ performance<br />
evaluations also addressed their capabilities, time<br />
commitment and effectiveness in their role and the pattern<br />
of their future service. The performance of the chairman was<br />
reviewed by the independent non-executive directors led<br />
by Jeffrey Hume as the SID, having taken into account the<br />
views of the executive directors.<br />
Independence<br />
In compliance with the requirements of the Code, the board<br />
considered the independence of each of Jeffrey Hume and<br />
Paul Withers who served during the year as non-executive<br />
directors.<br />
After careful consideration, the board determined that they<br />
were free from any business or other relationship that could<br />
materially interfere with their respective judgement and<br />
that they had each demonstrated the required degree of<br />
independence, both in character and judgement, taking into<br />
account all the relevant circumstances.<br />
Election and re-election<br />
The board has determined that all directors should retire<br />
annually at the AGM and where eligible, seek re-election.<br />
All directors will therefore be subject to annual re-election<br />
at the <strong>2012</strong> annual general meeting (“<strong>2012</strong> AGM”). This will<br />
also satisfy the requirements of the company’s articles of<br />
association regarding retirement of directors by rotation.<br />
All executive directors’ service contracts and letters of<br />
appointment for the chairman and the non-executive<br />
directors are available for inspection by shareholders during<br />
normal business hours at the company’s registered office<br />
address and will also be available for inspection at the <strong>2012</strong><br />
AGM.<br />
Non-executive directors are appointed for an initial term<br />
of three years, which are capable of extension for up to a<br />
further two, three-year terms. Each of the current nonexecutive<br />
directors is in their second three year term.<br />
Following review and on the recommendation of the<br />
nomination committee, the board agreed to extend Paul<br />
Withers’ term to expire at the AGM in 2013. He will continue<br />
as chairman of the remuneration committee and a member<br />
of both the audit committee and nomination committee.<br />
Subject to any further extension, Jeffrey Hume’s current<br />
term expires in May 2013.<br />
Insurance<br />
The company maintains an appropriate level of directors<br />
and officers insurance in respect of legal actions against the<br />
directors.<br />
Board committees<br />
The board has formally delegated specific responsibilities to<br />
three committees of the board, namely: audit, nomination<br />
and remuneration. Each committee operates under written<br />
terms of reference which clearly outline its authority<br />
and duties. The terms of reference are reviewed annually<br />
and copies are available on the company’s website www.<br />
hyderconsulting.com.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 37
Directors’ <strong>Report</strong> Corporate Governance continued<br />
Audit committee<br />
During the year the audit committee comprised the two<br />
independent non-executive directors and had three formally<br />
scheduled meetings. The external auditors attended two of<br />
the three meetings. The chairman, chief executive, group<br />
finance director, group financial controller and the head of<br />
internal audit attend meetings by invitation. The committee<br />
takes the opportunity to seek the views of the external and<br />
internal auditors without any executives present at least<br />
twice a year.<br />
Appointments to the committee are made by the board,<br />
on the recommendation of the nomination committee.<br />
Appointments are for a period of three years, subject to<br />
extension by up to two additional three-year periods.<br />
The audit committee is chaired by Jeffrey Hume and the<br />
board has satisfied itself that he has the necessary recent<br />
and relevant financial experience required by the Code.<br />
During the year the committee’s activities included:<br />
i. a review of the draft <strong>Annual</strong> <strong>Report</strong> and Financial<br />
Statements and 2011 half year report concentrating<br />
on the main areas of judgement; reviewing the<br />
report of the external auditors on their audit of the<br />
<strong>Annual</strong> <strong>Report</strong> and their review of the half<br />
year report;<br />
38 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
ii. considering the external auditors’ plan for the year<br />
and their scope of work and proposed<br />
fees; evaluating their effectiveness, objectivity and<br />
independence; reviewing their terms of engagement;<br />
making a recommendation to the board for their<br />
reappointment; and the approval of their fees;<br />
iii. reviewing the company’s policy for the external<br />
auditors providing non-audit services;<br />
iv. reviewing the company’s treasury, and anti-fraud<br />
policies, its ethical business code, and the procedures<br />
and policy for whistleblowing;<br />
v. reviewing the role and effectiveness of the internal<br />
audit function and reviewing its proposed annual audit<br />
plan;<br />
vi. receiving and considering reports from the internal<br />
audit function on compliance with group systems and<br />
controls and management responses to those reports;<br />
vii. receiving and considering reports on changes to the<br />
group’s risk register and management of key risks;<br />
viii. receiving and considering an annual report on the internal<br />
controls for managing risks operated by the group;<br />
ix. reviewing the company’s accounting policies; and<br />
x. reviewing the committee’s terms of reference.<br />
The internal audit function operates to an agreed annual<br />
programme of reviews of the internal control system,
usiness processes and compliance with company systems<br />
and procedures across the group. The reports seek to identify<br />
any control weaknesses and make recommendations for<br />
improvement. Audit committee members receive copies of<br />
the reports or executive summaries and the head of internal<br />
audit attends audit committee meetings and is available to<br />
answer any questions on the content or recommendations<br />
within reports.<br />
In order to safeguard the objectivity and independence of<br />
the external auditors, the company has a policy regulating<br />
their provision of non-audit services. The policy is reviewed<br />
annually by the audit committee. The policy categorises<br />
services into three types by reference to the nature of the<br />
work: those that are authorised; those that are subject to<br />
specific pre-approval; and those that are prohibited. In the<br />
first category the approvals required escalate by reference<br />
to the proposed fee, from local management, to the group<br />
finance director and ultimately to the audit committee. In<br />
the second category the approvals are structured as between<br />
the group finance director and the audit committee. Audit<br />
and non-audit fees paid or payable to the auditors in the<br />
year under review are set out on page 85. Having considered<br />
the nature and extent of non-audit fees in the year, the<br />
committee is satisfied that these did not compromise the<br />
auditors’ objectivity or independence.<br />
The auditors were originally appointed in March 2002 and<br />
have been annually re-appointed by shareholders at each<br />
annual general meeting since then. To preserve auditor<br />
independence the lead audit partner is periodically changed<br />
and was last changed following the audit in 2011.<br />
MTR, Wong Chuk<br />
Hang, Hong Kong<br />
Nomination committee<br />
The nomination committee comprised the chairman, who<br />
chairs the committee, and the two independent nonexecutive<br />
directors. In addition to the formal scheduled<br />
meeting, the committee held several informal meetings on<br />
board composition during the year.<br />
The committee’s activities include reviewing the structure,<br />
size and composition of the board and board succession.<br />
The committee supervises the recruitment process for all<br />
potential appointments to the board, agreeing the person<br />
specification, selecting any external recruitment consultants,<br />
considering all candidates whether internal or put forward by<br />
external consultants, and (following interviewing shortlisted<br />
candidates) making recommendations to the board for<br />
appointment. In selecting candidates the committee gives<br />
due regard to the benefits of diversity (see below). All<br />
recommendations made by the committee are made on<br />
merit against objective criteria. The committee manages<br />
the selection process for all board appointments in a<br />
formal, rigorous and transparent manner and in accordance<br />
with the procedure detailed above. The committee also<br />
makes recommendations to the board in respect of the<br />
reappointment of each director at the AGM.<br />
The annual review of the structure, size and composition<br />
of the board by the committee concluded that the board<br />
remained well balanced and was operating effectively. The<br />
committee was satisfied that the current board members had<br />
the necessary range of skills, experience and qualifications<br />
and acknowledged the value of adding further Asia-Pacific<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 39
Directors’ <strong>Report</strong> Corporate Governance continued<br />
experience. No individual or small group dominated the<br />
board’s decision-making process.<br />
The committee has made positive recommendations to the<br />
board in respect of each of the directors who are standing<br />
for reappointment at the <strong>2012</strong> AGM recognising the valuable<br />
skills, knowledge and experience each bring to the overall<br />
effectiveness of the board.<br />
Under the Companies Act 2006 each director has a duty to<br />
avoid a situation in which he has, or can have, a direct or<br />
indirect interest that conflicts, or possibly may conflict,<br />
with the interest of the company. This duty is not infringed<br />
if the situation cannot reasonably be regarded as likely to<br />
give rise to a conflict or if the conflict has been authorised<br />
by the board. The company’s articles of association allow<br />
un-conflicted directors to authorise conflict situations<br />
in appropriate circumstances. The company has a<br />
procedure for the disclosure of any such conflicts and, if<br />
appropriate, authorisation of the same. The procedure<br />
permits any authorisation to be granted subject to terms<br />
or conditions. The nomination committee also reviews any<br />
potential conflict of interest for any prospective director<br />
and all continuing authorisations annually and makes<br />
recommendations to the board. Authorisations may be varied<br />
or revoked at any time.<br />
The company maintains a register of any conflicts of interest<br />
of a director including the date of grant of the authorisation<br />
and any limitations or terms and conditions that apply.<br />
Diversity<br />
The group is an equal opportunities employer committed<br />
to promoting diversity and inclusion in the workplace at all<br />
levels and strives to build an open climate in which all staff<br />
are treated fairly, with dignity and respect. Group policy is<br />
to treat both members of staff and job applicants on the<br />
basis of individual merit, qualifications and competence.<br />
Access to all aspects of employment and promotion is on<br />
the basis of fulfilling the job requirement and demonstrating<br />
the required abilities and competencies related to the job.<br />
The board recognises the importance of diversity in the<br />
boardroom and the valuable contribution to the group’s<br />
overall performance that diversity across backgrounds,<br />
experience, knowledge, skills and gender can bring.<br />
In making new board appointments the board will seek<br />
to select individuals who are best able to meet the<br />
requirements of the required role and improve the overall<br />
diversity of the board.<br />
The nomination committee will have regard to diversity<br />
when reviewing the composition of the board, managing the<br />
recruitment process and making recommendations in respect<br />
of any new board appointments.<br />
40 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
The board will monitor its success in improving board<br />
diversity as part of the annual evaluation process.<br />
Remuneration committee<br />
During the year the remuneration committee comprised the<br />
two independent non-executive directors and was chaired<br />
by Paul Withers.<br />
A report on the activities of the remuneration committee<br />
and the executive directors’ remuneration is set out on<br />
pages 64 to 71.<br />
Internal controls<br />
The board has overall responsibility for the group’s system<br />
of internal control and for reviewing its effectiveness. The<br />
group’s internal control system provides an ongoing process<br />
for identifying, evaluating and managing the significant<br />
risks faced by the group in accordance with the Code.<br />
However, the system is designed to mitigate risk rather<br />
than eliminate it and can only provide reasonable and not<br />
absolute assurance against material misstatement or loss.<br />
The key features of the system of internal control, which<br />
continued to operate throughout the year, are as follows:<br />
• Comprehensive financial planning and reporting to<br />
group-wide accounting policies and procedures,<br />
including a detailed annual budget, which is approved<br />
by the board, monthly regional reporting against<br />
budget and reforecast, and against group-wide key<br />
performance indicators.<br />
• Monthly regional reviews of performance and risks by<br />
the chief executive and group finance director.<br />
• Established procedures and controls within the group<br />
IT systems designed to protect the security of group<br />
data and provide disaster recovery arrangements in all<br />
regions with regular reviews and updates.<br />
• Board reviews for all acquisitions, investments and<br />
significant capital expenditure.<br />
• Established procedures for managing treasury activities<br />
and risks.<br />
• Maintenance of the ISO 9001 registration across the<br />
group, together with ISO 14001, BS OHSAS 18001<br />
and AS/NZS-4801 registrations in different regions<br />
within the group, drive the relevant business processes<br />
including regular checks, reviews, approvals and audits.<br />
• Procedures for escalation of material risks from the<br />
region through the executive management to the<br />
board.<br />
• Monthly review and reporting on health and safety<br />
matters across the group.
• Established group-wide systems and processes for<br />
providing services, which include the requirement for<br />
bid reviews, technical reviews and project reviews.<br />
• Maintenance and regular review by regional<br />
management teams of operational risk registers and<br />
periodic review by the board of the group strategic risk<br />
register and individual strategic risks to identify and<br />
quantify risks and determine and monitor mitigation<br />
strategies.<br />
• Internal audit which reviews and tests different aspects<br />
of the group’s internal control and risk management<br />
systems and processes following a programme agreed<br />
with the audit committee.<br />
During the course of the year the audit committee reviewed<br />
the effectiveness of the internal control systems. Areas<br />
identified for improvement have been actioned.<br />
Share capital<br />
Information about the share capital of the company is<br />
included on page 60 of the section headed “General<br />
Information and Disclosures”.<br />
Financial reporting process<br />
The group has well documented accounting policies and<br />
procedures for use by all group entities in the preparation<br />
and submission of monthly financial reports and the<br />
submission of financial statements for half year and year<br />
end consolidation. The policies are well established and<br />
operated by all group entities and require compliance<br />
with the company’s internal controls and risk management<br />
processes. The policies have been developed to comply<br />
with International Financial <strong>Report</strong>ing Standards and<br />
are regularly reviewed and updated as necessary. The<br />
procedures detail the additional disclosures and information<br />
required for inclusion in half year and year end group<br />
financial statements and report.<br />
All group entities use a common accounting system,<br />
facilitating consolidation of group results and minimising<br />
risks of transferring financial information across systems.<br />
The consolidated financial statements are prepared by the<br />
group finance team under the direction of the group finance<br />
director. During preparation all significant judgments<br />
made by group entities and other risks associated with the<br />
preparation of the consolidated accounts are reviewed and<br />
challenged where necessary by the group finance team and<br />
group finance director before consideration by the audit<br />
committee.<br />
All financial information published by the company is<br />
subject to approval by the audit committee.<br />
Relations with shareholders<br />
The board recognises the importance of maintaining good<br />
communications with current and potential shareholders.<br />
The chief executive and group finance director have a<br />
programme for dialogue and presentations to shareholders,<br />
institutions, brokers and the media which include those<br />
around the announcement of the full and half year results of<br />
the <strong>Hyder</strong> group. The chairman and SID meet institutional<br />
shareholders from time to time and are readily available to<br />
do so if requested. The board receives regular feedback from<br />
institutional investors, external analysts’ reports and market<br />
and shareholder analysis. This information and feedback<br />
from directors’ meetings with shareholders ensures all<br />
directors develop their understanding and appreciation of<br />
the views of current and potential shareholders.<br />
The company’s website www.hyderconsulting.com provides<br />
regularly updated information in relation to the group’s<br />
activities and financial performance, which is also available<br />
via the regulatory information services.<br />
Shareholders are given at least 20 working days’ notice of<br />
the AGM and are encouraged by the chairman on behalf<br />
of the board to attend each AGM. Save in exceptional<br />
circumstances all directors attend the AGM and this provides<br />
an opportunity for all shareholders, both private and<br />
institutional, to meet and ask questions of the directors.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 41
Directors’<br />
<strong>Report</strong><br />
Corporate Social<br />
Responsibility<br />
Clarissa before she started<br />
at the Tondo School (PCF)<br />
42 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Clarissa at the<br />
Tondo School
Introduction from Ivor Catto<br />
Corporate Social Responsibility (CSR) is fundamental to<br />
how we operate as a business. We take responsibility<br />
for the effect our work has on the environment and our<br />
stakeholders: our people, clients, communities, suppliers,<br />
partners and investors. Our overarching goal with CSR is to<br />
assist the wider communities in which we work to meet their<br />
social, economical and environmental needs.<br />
Our strategy<br />
Our strategy is to build strong and enduring client<br />
relationships in those markets and sectors where we<br />
have demonstrable competitive advantage. We aim for<br />
continuous improvement to enhance our performance and<br />
incorporate CSR principles into our everyday operations<br />
across the group as well decision making processes and<br />
responsible business practices.<br />
Our mission<br />
In all we do we aim to be a trusted partner of valued clients<br />
– creating exceptional solutions. Developing innovative<br />
sustainable solutions is an integral part of this approach,<br />
alongside our donations and ‘in kind’ support to charities<br />
where we offer our technical skills and knowledge.<br />
Recognition<br />
In April <strong>2012</strong> <strong>Hyder</strong> met the inclusion criteria for<br />
the FTSE4Good Index series achieving an overall ESG<br />
(environment, social and governance practices) of four<br />
out of five. The ratings use the FTSE4Good Index’s<br />
inclusion criteria as a framework to assign ESG scores to<br />
approximately 24,000 companies globally, and provide<br />
objective ESG risk and performance data for investors. Our<br />
FTSE4Good accreditation recognises the integration of our<br />
CSR policies within our business practices.<br />
<strong>Hyder</strong> also holds a sustainability rating award as a<br />
constituent of the Kempen Sense Fund/SNS SRI Sustainable<br />
Universe. With a commendation for our environment,<br />
social and governance practices, we received particular<br />
recognition for our “human capital development”, an area<br />
in which <strong>Hyder</strong> is considered as quite progressive. Our<br />
commendation is based on the provision of opportunities<br />
for all employees to develop their professional skills and<br />
leadership competencies through a combination of job<br />
experiences, skills coaching and career mentoring next to<br />
their technical training. This also includes our community<br />
involvement and participation in community development<br />
programmes.<br />
Charities<br />
As part of our CSR objective of donating time and expertise<br />
to charitable work, we have supported and encouraged<br />
our people to provide practical assistance to a number of<br />
charities. These include the following:<br />
• WaterAid Australia<br />
• WaterAid UK<br />
• Sowers International (East Asia)<br />
• Ingenieur Ohne Grenzen (Germany)<br />
• International Federation of Red Cross and Red Crescent<br />
Societies (India and the Philippines)<br />
• The Philippine Community Fund – Tondo School (Manila,<br />
Philippines)<br />
The content of this report reflects some of our CSR<br />
highlights and achievements over the last year.<br />
We have utilised the company intranet to communicate<br />
charity-related activities and to measure and monitor our<br />
collective progress. This has resulted across the year in<br />
4,800 hours of time devoted to charitable work and in many<br />
cases significant time commitment from dedicated teams in<br />
each of our regions. As well as directly funding £55,000 to<br />
the nominated charities listed above, an additional £35,500<br />
has been raised by staff for other charities located around<br />
the globe.<br />
Sustainability<br />
We promote sustainability as a guiding principle through<br />
all our operations and have introduced a new Sustainability<br />
Framework. This framework includes standards for<br />
implementing a sustainable approach to business and<br />
project development, in order to achieve social, economic<br />
and environmental targets and benefits.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 43
Directors’ <strong>Report</strong> Corporate Social Responsibility continued<br />
We acknowledge that real commitment to corporate<br />
sustainability can enhance our competitive edge by<br />
providing innovation and award winning sustainable design<br />
for our clients. Maintaining professional excellence and<br />
promoting sustainable projects have been an important<br />
theme throughout the year.<br />
Achievements<br />
Last year our objectives related to achieving sustainable<br />
practices across all our operations. Through the efforts of<br />
our people working in partnership with local communities<br />
and charities, specific achievements are as follows:<br />
• As a group our staff donated £35,500 in addition to<br />
<strong>Hyder</strong>’s corporate donation of £55,000 for charities<br />
and communities in and around the regions in which<br />
we operate, and devoted more than 4,800 hours of<br />
employee time to providing expertise and skills to<br />
charities and important causes;<br />
• In collaboration with one of our six charities, we<br />
created a dedicated CSR blog space and forum where<br />
<strong>Hyder</strong> people can collaborate across the group, provide<br />
valuable input to CSR initiatives, and brainstorm<br />
on innovative solutions to some of the many CSR<br />
challenges facing our business, clients, and the<br />
communities in which we operate;<br />
• We worked across the group to share knowledge and<br />
expertise in sustainability and apply this in our projects<br />
and work practices to the advantage of clients and<br />
communities in which we operate;<br />
44 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
• To date in excess of 90% of <strong>Hyder</strong> staff have<br />
participated in training associated with our ethical<br />
business code which includes anti-corruption. Our<br />
ethical business code is available to suppliers of<br />
services to <strong>Hyder</strong> on our website;<br />
• Our UK ‘Green Team’ has expanded to bring together<br />
Facilities, Procurement and Knowledge Management to<br />
more effectively reduce our carbon footprint. As part<br />
of this, we run regular staff competitions, seeking ideas<br />
for local and UK-wide initiatives;<br />
• We met last year’s objective to reduce our carbon<br />
footprint by 5% including our use of indirect/direct<br />
energy.<br />
The content of this report reflects some of our CSR<br />
highlights and achievements over the last year. By following<br />
industry principles that define report content, we are<br />
ensuring the quality of information is communicated openly<br />
and clearly, thereby demonstrating our accountability to<br />
internal and external stakeholders.<br />
Ivor Catto<br />
Chief Executive<br />
13 June <strong>2012</strong><br />
Australia<br />
supports<br />
WaterAid
Our Corporate Social Responsibility Policy<br />
<strong>Hyder</strong>’s vision is to be the next evolution in engineering consultancy. We are<br />
committed to running our business in an ethical and responsible manner. We apply<br />
the principles of sustainability to all our business operations.<br />
Our clients<br />
From our advisory and design work through to the<br />
management of major projects, we strive to create innovative<br />
solutions for our clients that achieve environmental, social<br />
and economic benefits for society.<br />
Our people<br />
We aim to be an employer of choice in our industry by<br />
embracing diversity and fostering an open and inclusive<br />
learning culture. The group health and safety policy reinforces<br />
our commitment in this area and demonstrates that people’s<br />
wellbeing is of paramount importance.<br />
Our suppliers and partners<br />
We collaborate with our key suppliers, treat them fairly and,<br />
where appropriate, support them in developing their own<br />
practices around social responsibility.<br />
Our investors<br />
<strong>Hyder</strong> offers investors an opportunity for responsible<br />
investment, founded on our ethical approach to doing<br />
business for over 150 years.<br />
Governance<br />
We take an executive board overview of CSR and have<br />
appointed an executive board member, Misti Melville, as our<br />
CSR representative for the group. Throughout the year, Misti<br />
reports on <strong>Hyder</strong>’s performance at the executive board and<br />
is also involved in structuring the agenda at a regional and<br />
group level for a consistent approach to sustainability across<br />
the organisation.<br />
<strong>Hyder</strong>’s environmental experts and CSR representatives<br />
have been involved in shaping this report, with continued<br />
dialogue through the year on the development of our CSR<br />
agenda.<br />
Local communities<br />
We support our people’s enthusiasm for helping local<br />
communities and contributing their expertise towards<br />
charitable work, educational and community programmes<br />
such as ending child labour.<br />
Professional communities<br />
We are keen to promote our people’s involvement and<br />
participation in professional institutions and bodies. We play<br />
an active role in developing and implementing best practice<br />
and facilitating professional collaboration in all our technical<br />
fields.<br />
The environment<br />
We work to minimise the environmental impact of our<br />
own operations and those of the projects in which we are<br />
involved. We continuously aim for more efficient use of<br />
resources (such as energy), to help reduce greenhouse gas<br />
emissions and mitigate climate change.<br />
The board of <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> is responsible for<br />
communicating this policy, approving actions to be<br />
implemented, ensuring the necessary resources are made<br />
available, and for reviewing progress. Implementation is<br />
overseen by <strong>Hyder</strong>’s executive board.<br />
<strong>Hyder</strong> undertakes Corporate<br />
Social Responsibility index<br />
benchmarking<br />
Following the benchmarking exercise last year, we<br />
set ourselves the objective of undertaking CSR index<br />
benchmarking again this year across the group to assess our<br />
CSR strategy, workplace and community management and<br />
environmental and social impact.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 45
Directors’ <strong>Report</strong> Corporate Social Responsibility continued<br />
Our strengths against the benchmark<br />
<strong>Hyder</strong>’s performance this year again highlighted the quality<br />
of our strategy against benchmark comparators in key areas,<br />
scoring above average in the following areas:<br />
• Corporate strategy<br />
• Integration<br />
• Community management<br />
• Environmental management<br />
• Marketplace management<br />
• Climate change<br />
• Waste management<br />
• Resource use<br />
• Corporate wellness and engagement<br />
• Employee development<br />
The results of the benchmark confirmed that <strong>Hyder</strong>’s CSR<br />
values are a core aspect of our corporate strategy. Key social<br />
and environmental principles are in place to recognise risks<br />
and opportunities in our operations and project work. More<br />
importantly, we effectively demonstrated the leadership<br />
responsibilities and commitment within the business to<br />
drive responsible business practices.<br />
We improved our stakeholder engagement through engaging<br />
our charity partners from a development perspective<br />
and supporting their operations with our expertise. Our<br />
commitment to partner with our staff, maintain a dialogue<br />
of regular updates, interactive tools and volunteer<br />
opportunities also supported this strategy.<br />
The various health and safety management programmes<br />
integrated within our corporate culture is highlighted as an<br />
organised and coordinated operation, supported by various<br />
staff wellbeing initiatives focussed on raising awareness<br />
about safety risks.<br />
Areas for improvement<br />
<strong>Hyder</strong> seeks to improve its benchmark score; therefore our<br />
CSR objectives for the next year will focus on:<br />
• Improving the process of setting up suppliers, giving<br />
performance feedback and where possible encouraging<br />
partnerships and increasing the practice of knowledge<br />
sharing.<br />
• Standardising our local supplier due diligence processes<br />
by including clear guidelines and the consideration of<br />
environmental and social factors on a project by project<br />
basis.<br />
46 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Opportunities for <strong>Hyder</strong><br />
Our commitment to operate in a socially and ethically<br />
responsible way naturally leads us to seek to improve our<br />
stakeholder engagement. As a result, we will encourage<br />
dialogue with both our internal and external stakeholders to<br />
discuss their needs and goals around environmental issues,<br />
while supporting them in their engagement and business<br />
plans. By actively promoting and sharing our experience<br />
in training and development, we aim to inspire our charity<br />
partners and other stakeholders to develop their own best<br />
practice and CSR agenda.<br />
Over the course of the next two years, we aim to reduce<br />
any adverse effect we have on the environment as a<br />
group and will support this by taking the lead from the<br />
UK and Australia regions by identifying an appropriate<br />
environmental management system in those regions<br />
(Germany, Asia and the Middle East) which are not yet<br />
ISO14001 accredited.<br />
10:10<br />
<strong>Hyder</strong> signs up for the 10:10<br />
campaign with teams in the UK<br />
pledging to reduce their individual<br />
and collective carbon footprints by:<br />
• making journeys using public transport that<br />
would otherwise have been by private car<br />
• wearing an extra layer of clothing so heating<br />
could be turned off at home<br />
• using energy-saving light bulbs<br />
• signing up to the car-share programme<br />
• turning off mobile phones, monitors and<br />
docking stations at the end of each day<br />
• opting to use internet communication tools<br />
for meetings to save on transportation costs<br />
• reducing food waste.<br />
This year the <strong>Hyder</strong> UK region’s mission is to<br />
spread the word and act as a catalyst for action<br />
that collectively makes a difference. As a<br />
result a large number of staff and the UK senior<br />
management team signed up to the pledge. We<br />
are proud of the role <strong>Hyder</strong> UK has played in such<br />
an important campaign and are keen to enhance<br />
our performance in next year’s campaign with<br />
other regions also joining in the challenge.
A radical rethink to sustainable<br />
outcomes<br />
<strong>Hyder</strong> will begin to implement the ‘<strong>Hyder</strong> Heartbeat’, a<br />
common sustainability assessment method for rating projects<br />
throughout the planning process, across our regions from<br />
<strong>2012</strong>. The objective of the <strong>Hyder</strong> Heartbeat is to formalise<br />
the identification of sustainable practices early on in the<br />
project. This differs with the more traditional approach of<br />
‘scoring’ sustainable outcomes following a project.<br />
In utilising the <strong>Hyder</strong> Heartbeat, <strong>Hyder</strong> has developed an<br />
approach that quantifies and records what sustainable<br />
designs are implemented in projects. This allows the data<br />
gathered and the lessons learnt from each project to be<br />
accumulated, recorded and taken forward to the next project.<br />
The many benefits of our <strong>Hyder</strong> Heartbeat include:<br />
• achieving more sustainable outcomes for the client and<br />
community as well as continuous improvements to the<br />
project and future projects;<br />
• as information is shared, we are able to save time and<br />
costs for the client;<br />
• maximising supply chain development, local<br />
employment, education and training in the community;<br />
• developing a database of the best sustainable outcomes<br />
for a given climatic region.<br />
An innovative approach<br />
We know from the positive response to <strong>Hyder</strong>’s CSR agenda<br />
that our people feel strongly about CSR. In particular, they<br />
are keen to utilise their technical and leadership expertise<br />
to enrich communities around the world and create positive<br />
legacies for future generations.<br />
<strong>Hyder</strong> has been looking at where we can further innovate in<br />
CSR by creating an internal professional network. This is a<br />
forum where <strong>Hyder</strong> people collaborate across the group on<br />
CSR related issues. The forum is an opportunity for everyone<br />
to provide valuable input, and brainstorm on innovative<br />
solutions to some of the many CSR challenges facing our<br />
charities, clients, and the communities in which we operate.<br />
Energy posters designed for <strong>Hyder</strong> offices by children of staff members<br />
We are further developing this concept in <strong>2012</strong>-13 so that<br />
our sponsored charities are encouraged to ask questions and<br />
collaborate with our people on solutions to the many issues<br />
they are facing.<br />
Bright ideas from the next<br />
generation<br />
Engaging and educating children on the environmental<br />
benefits of saving energy has been part of our agenda for the<br />
Tondo School. This year we also organised a competition with<br />
the children (aged six to 12) of our staff members and asked<br />
them to showcase their bright ideas around carbon saving.<br />
These ideas were translated into themed posters displayed<br />
around our offices to encourage staff to remember the 10:10<br />
pledge to cut carbon in the offices, on site and even at home.<br />
Wellbeing by Design<br />
The Wellbeing by Design programme<br />
continues to nurture a safety culture<br />
within the Australian region and has<br />
resulted in a reduction in incidents.<br />
<strong>Hyder</strong> has trained champions for ‘Safety Management<br />
Tasks’ (tasks we have identified that promote health,<br />
wellbeing and safety in our workplace) so they can<br />
share vital safety information within the business. We<br />
have also launched a Wellbeing calendar where we list<br />
monthly activities for staff, centred on improving their<br />
wellbeing and increasing knowledge around health and<br />
lifestyle. Our staff participate in challenging activities<br />
including pedometer challenges to encourage exercise<br />
and healthy lifestyle.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 47
Directors’ <strong>Report</strong> Corporate Social Responsibility continued<br />
Performance against our 2011-12<br />
targets<br />
Partnering with our charities<br />
In the last year, <strong>Hyder</strong> has committed its time, expertise<br />
and donated £55,000 directly to our six nominated charities.<br />
Our positive approach to engagement has been well received<br />
by our people as well as the charities. This has resulted<br />
in more than one hour per employee of time devoted to<br />
charitable work as well as an additional £35,500 raised by<br />
our staff and provided to charities and communities in and<br />
around the regions in which we operate.<br />
• WaterAid UK and WaterAid Australia:<br />
We have supported WaterAid’s objective to deliver safe<br />
water and sanitation to some of the world’s poorest<br />
communities. Both our UK and Australian regions<br />
have also supported WaterAid communities through<br />
significant volunteer work. For example, three highly<br />
motivated staff raised AUD2,500 for WaterAid by each<br />
undertaking their first Olympic-standard Triathlon.<br />
<strong>Hyder</strong> matched their fundraising dollar for dollar,<br />
raising a total of AUD5,000 for the charity. In the UK<br />
we have also appointed a dedicated WaterAid charity<br />
representative, who promotes the ways in which we<br />
can support WaterAid as well as build relationships<br />
with the charity. Both regions look forward to another<br />
year of exciting new opportunities to contribute to<br />
fundraising initiatives and to promote awareness for<br />
this important cause.<br />
• Sowers International:<br />
We believe that education is a powerful tool in helping<br />
the poor become more self-reliant hence our support<br />
of the educational development of poverty-stricken<br />
areas in China. Through various programmes, Sowers<br />
International support and plan the reconstruction<br />
of school buildings, provide education subsidies and<br />
also teacher training. This year, we sponsored five<br />
<strong>Hyder</strong> engineers from Hong Kong to help with the<br />
construction of several schools in a poverty-stricken<br />
area of the Guizhou Province, China:<br />
- Lixi Village Memorial Chan Hong Li SA-PH Primary<br />
School;<br />
- Paiguai Village SA-PH Primary School; and<br />
- Xiaoxi Village Kellogg-HKUST 2007 SA-PH Primary<br />
School<br />
<strong>Hyder</strong>’s staff also supported the charity through<br />
volunteer work – for example, taking part in a<br />
walkathon, a seven day cycle marathon along<br />
the legendary Silk Road, and a child sponsorship<br />
programme.<br />
48 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
• Ingenieur Ohne Grenzen (Engineers without<br />
Borders):<br />
<strong>Hyder</strong>’s donation is sponsoring the supply of water for a<br />
newly built school in Kadjebi, Ghana. The success of this<br />
school project has led to a subsequent project to build<br />
a school that benefits from renewable energy and green<br />
technology in Cameroon. Our staff are also engaged in<br />
monthly cake sales and office barbeques in our German<br />
offices to help raise money towards supporting a<br />
community in Tanzania.<br />
• International Federation of Red Cross and Red<br />
Crescent Societies:<br />
Our office in the Philippines was awarded a Platinum<br />
Plaque of Appreciation, the second in two years, in<br />
recognition of our assistance to the Philippine National<br />
Red Cross. As well as financial support, <strong>Hyder</strong> also<br />
donated 46 Red Cross disaster recovery kits to the East<br />
Rembo Elementary School in Makati City. Our pledge<br />
to increase voluntary aid saw 18 <strong>Hyder</strong> staff giving up<br />
their weekend to help build new homes for those who<br />
lost everything in the Ondoy disaster, a devastating<br />
typhoon which wiped out whole communities in<br />
the region. In Bangalore, <strong>Hyder</strong> donated disability<br />
equipment worth £3,000 to the Indian Red Cross<br />
Society Karnataka Branch in order to provide muchneeded<br />
help to the disadvantaged in the community.<br />
• Philippine Community Fund (Tondo School):<br />
Three years ago after several local engineering firms<br />
rejected a request for help, <strong>Hyder</strong> stepped in to support<br />
the Philippine Community Fund (PCF) build a school<br />
for over 1,000 local children living and working on the<br />
toxic Smokey Mountain dumpsite in Manila. Last year,<br />
as the Tondo School officially opened its doors to local<br />
children, <strong>Hyder</strong> pledged further expertise to the school<br />
as well as donating £25,000 to the school. Our donation<br />
covered the operating costs involved in educating a<br />
class of 35 students for the year, including all daily<br />
supplies; daily meals; teachers’ salaries; transportation;<br />
health checks and a field trip.<br />
<strong>Hyder</strong> people are very involved with the Tondo School<br />
and local community. Throughout the year, offices<br />
across the group purchased Winning Over Waste (WOW)<br />
recycled gifts, whilst some staff donated old school<br />
uniforms and equipment in the ‘Collect for a Cause’<br />
campaign. Some dedicated staff also ran in a charity<br />
marathon - raising £3,000 for PCF.<br />
The most notable success in the year was the<br />
sponsorship by the company of two volunteers (both<br />
staff members) to live and work in Manila for three<br />
weeks supporting the school on the frontline. Read more<br />
about their experience in the case study on page 49.<br />
Case stud
Katy and<br />
Sarah (<strong>Hyder</strong><br />
employees)<br />
at the Tondo<br />
School<br />
Tondo School<br />
Supporting the communities in which we<br />
work and helping to end child labour.<br />
We realise that there is much more to do in supporting<br />
our charities than donating funds. Last year, as we<br />
strengthened our alliance with PCF, it was clear that <strong>Hyder</strong>’s<br />
time and expertise was just as valuable, if not more so,<br />
than financial support. We asked for volunteers to travel<br />
to Manila in the Philippines, to support the school <strong>Hyder</strong><br />
helped to design and construct to witness first-hand the<br />
challenges of keeping the school running.<br />
Katy Roper (Ecologist) and Sarah Woodget (Geoarcheologist)<br />
both <strong>Hyder</strong> employees spent three weeks with the children<br />
and teachers of the Tondo School, teaching and organising<br />
practical lessons, chaperoning school trips and helping<br />
in the day to day running of the school. Sarah and Katy<br />
volunteered to share their skills and knowledge and bring<br />
back key learning to <strong>Hyder</strong> colleagues, they explain their<br />
experiences here:<br />
<strong>Hyder</strong> takes a big leap to actively support under privileged<br />
communities<br />
According to PCF, it is not common practice for corporate<br />
sponsors like <strong>Hyder</strong> to send staff out to volunteer at Tondo.<br />
Our presence in the school, around the children and visiting<br />
the dumpsite, was seen an opportunity for the charity to show<br />
outsiders what day-to-day life is really like for the children<br />
and their families living on the dumpsite and in the adjacent<br />
graveyard.<br />
What we hadn’t appreciated until we were in Tondo is how<br />
incredibly difficult it is to implement anything on the ground.<br />
What can seem like a very simple idea to us, for example<br />
composting leftovers from the school kitchen, represents an<br />
almost insurmountable hurdle. Because people have so little<br />
money and live so close to the breadline, they have very<br />
different priorities from ours. For example, they rely on food<br />
scraps we would think of as waste to feed their families and<br />
animals.<br />
Focused on what matters<br />
The main priority for PCF is the children. However, in order to<br />
provide an adequate education that will give the children some<br />
hope of being able to escape their situation, it is necessary<br />
to provide at least some financial incentive so the school can<br />
obtain good teachers and social workers, and a variety of other<br />
staff who keep the school going. It is a constant balancing<br />
act for PCF - fundraising, improving the quality of life for the<br />
families and volunteers, and maintaining the focus on the<br />
children.<br />
Before we went, we had a number of lofty ideas for ‘projects’<br />
to teach the students. Once we were there, implementing<br />
these were fraught with difficulty, and we discovered that you<br />
often feel that you haven’t achieved as much as you would<br />
like. Working in the Philippines presents all kinds of challenges<br />
which add to the difficulties of charity work – working through<br />
the red tape for example. What we did learn, however, is that<br />
just being there trying to help, is what really matters and<br />
makes a difference to the local community.<br />
What organisations like <strong>Hyder</strong> can do to help<br />
Obviously, the most important thing is raising and donating<br />
money! Seeing first hand why that money is needed and what<br />
it goes towards is very important in enabling this knowledge<br />
to be shared throughout the company, inspiring people to<br />
make a difference themselves and get involved. Fortunately,<br />
<strong>Hyder</strong> provides good encouragement and support for staff<br />
undertaking CSR activities and we’ve seen just how much of an<br />
impact this makes to these communities.<br />
Keeping our <strong>Hyder</strong> blog up to date while we were away kept all<br />
our colleagues across <strong>Hyder</strong> informed about our efforts. It was<br />
great to have so much positive feedback, people were obviously<br />
proud to be working for a company who were prepared to send<br />
volunteers out to really make a difference. It was encouraging<br />
to hear that we had inspired more staff to sponsor Tondo<br />
children as a direct result of reading about our experiences.<br />
Whilst people pay £20 a month to sponsor a child, it actually<br />
costs PCF over £60 a month. This is why continuing to recruit<br />
sponsors, volunteer and make financial donations is so critical.<br />
To find out more about PCF, or if you are interested in<br />
helping the Tondo School, please contact Nana Berchie<br />
(nana.berchie@hyderconsulting.com) or go to PCF’s website<br />
(www.p-c-f.org).<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 49
Directors’ <strong>Report</strong> Corporate Social Responsibility continued<br />
Tondo School, building,<br />
wash area and canteen<br />
Excellence for our clients:<br />
sustainability and preserving the<br />
environment<br />
At <strong>Hyder</strong> we know that sustainability is increasingly an<br />
important driver for many of our clients. Sustainability<br />
in design is not about the consideration of specialist<br />
‘optional extras’; it is the use of our skills and innovation<br />
to create good-quality designs which make the best use of<br />
resources and add value over the life of a scheme. Through<br />
our projects we aim to help our clients enhance their<br />
communities from a social and economic perspective and<br />
preserve or improve the environment.<br />
Sustainability wins: The Enzdüker water<br />
project awarded twice<br />
As part of a recent contract win of a water project by<br />
50 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
PCF handmade<br />
recycled<br />
jewellery made<br />
in the Tondo<br />
School<br />
Katy and Sarah<br />
teach a class<br />
at the Tondo<br />
School<br />
the city of Pforzheim, south of Germany, <strong>Hyder</strong> has been<br />
commissioned to improve and modernise the city’s drainage<br />
system. This project called on our team of water experts<br />
to develop an efficient concept using air-cushioned culvert<br />
technology, implemented only eight times previously in<br />
Europe.<br />
The main objectives of the project are to increase the<br />
hydraulic capacity of the city’s wastewater systems,<br />
improve environmental management by minimising polluted<br />
water entering the Enz and Nagold rivers, and reconstruct<br />
defective sections of the 100-year-old sewer system.<br />
<strong>Hyder</strong> has been widely recognised for our innovative<br />
approach and the positive impact created for the<br />
environment. The Enzdüker project won the 2011 German<br />
Society for Trenchless Technology (GSTT) gold medal and the<br />
award for “Best Water Conservation Project” in the 2011 Big<br />
Project + BGreen Awards.
Conceptual Master Planning: Linyi Tusu<br />
Island<br />
Tusu Island is the biggest island on river Fang of Linyi<br />
city, China, a highly significant part of the Linyi eco<br />
city wetland system. <strong>Hyder</strong>/ACLA has been appointed to<br />
prepare a conceptual master plan to develop the island<br />
and surrounding area as a comprehensive ecotourism<br />
destination. Our design features a diverse and accessible<br />
waterfront environment and ecologically sound development<br />
with tourism and cultural industry as its principal drivers<br />
for economic growth. The overall vision is to integrate the<br />
development with the local eco system to create a vibrant<br />
and environmentally sustainable destination to live, work<br />
and play.<br />
Sustainable project of the year award: A40<br />
carriageway<br />
<strong>Hyder</strong> often works as part of an integrated team to improve<br />
the sustainability of projects. The A40 Penblewin-Slebech<br />
Park scheme is one such example, where our ecologists<br />
have worked in a long-standing partnership with Costain<br />
and Atkins. The team were awarded the ‘Project of the Year<br />
Award’ from Constructing Excellence Wales and the judges’<br />
cited:<br />
“The project team demonstrated unrivalled best practice<br />
and partnership in the design and build of this new format<br />
carriageway ... Its approach to major environmental issues<br />
and its commitment and enthusiasm in relation to the<br />
surrounding community ... was exemplified by over 600 site<br />
visits hosted for members of the public and others. It has<br />
set new highways engineering standards in Wales”.<br />
Hong Kong Greening Master Plan<br />
After working successfully on the first four phases of the<br />
Greening Master Plan (GMP) for Hong Kong, <strong>Hyder</strong>/ACLA has<br />
now been awarded the fifth phase. The GMP is the single<br />
largest landscape and urban improvement project ever<br />
awarded by the Hong Kong Government. The master plan<br />
will realise the aspirations of Hong Kong residents for an<br />
improved quality of life and a better living environment. The<br />
before and after images show what a difference this master<br />
plan makes to the community and environment.<br />
Before... ... After<br />
CSR on the agenda<br />
<strong>Hyder</strong>’s senior management team is<br />
showing the way:<br />
Sustainability and issues related to the environment are<br />
now standard agenda items at <strong>Hyder</strong> UK management<br />
meetings. Critical issues and progress are regularly<br />
communicated to staff supported by articles in internal<br />
newsletters, on the intranet and posters to keep staff<br />
well informed.<br />
Our commitment to partnership<br />
CSR is ingrained in all aspects of our work. We recognise<br />
that <strong>Hyder</strong>’s expertise can make an important contribution<br />
to society and a positive difference to the communities in<br />
which we operate.<br />
Supporting our people<br />
We believe in investing in our staff’s careers, supporting<br />
their professional development and giving them the tools<br />
and training they need to become caring citizens wherever<br />
they work. We encourage <strong>Hyder</strong> people to work closely with<br />
communities in which we operate. We recognise that there<br />
are differences between our regions not only in legislation<br />
but also with local customs and values. However, all our<br />
staff are expected to meet strict guidelines around business<br />
ethics and conduct.<br />
Partnership with our clients<br />
A central objective of our work is to contribute to the<br />
realisation of long-term environmental, social and economic<br />
benefits for our clients and their communities, and to<br />
incorporate sustainable practices effectively into our<br />
activities.<br />
Landscape<br />
design,<br />
planning and<br />
greening,<br />
Hong Kong<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 51
Directors’ <strong>Report</strong> Corporate Social Responsibility continued<br />
Working with our suppliers<br />
We strive to maintain sustainable economic, environmental<br />
and social practices in every aspect of our work and<br />
encourage our suppliers to do the same. Through our<br />
procurement policy, we actively manage the environmental<br />
and social consequences of our operations. <strong>Hyder</strong> undertakes<br />
responsible procurement and where possible, uses suppliers<br />
based within the country of operation, to contribute to the<br />
local economy and community. Every individual involved in<br />
purchasing and supply management processes, endeavours<br />
to ensure that our purchasing activities are accountable<br />
and auditable, economically effective, as well as ethically,<br />
environmentally and socially responsible.<br />
Our investors<br />
We are committed to the highest levels of ethical behaviour.<br />
Last year we reviewed and updated our corporate Ethical<br />
Business Code and ensured clear understanding of our<br />
policy through the introduction of targeted training and<br />
communications programmes.<br />
Supporting education<br />
<strong>Hyder</strong> does not participate in nor support child labour<br />
under any circumstances. We work with our community<br />
and charity partners to actively support the development,<br />
education and welfare of children and their families in<br />
several countries, particularly the Philippines where we have<br />
designed the Tondo School and donate money to sponsor a<br />
whole class for a year.<br />
Cycling for<br />
Education,<br />
Silk Road,<br />
Sowers<br />
Charity<br />
52 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Sharing our expertise<br />
We actively participate in professional<br />
communities, sharing our expertise and<br />
best practice. Here are some examples<br />
from last year:<br />
• Discussion paper, ‘Climate Change Adaptation<br />
Planning – Building Chinese Capacity’, presented at<br />
the China-Australia Building for Strategic Planning<br />
in Climate Change conference: Brad Searle and Sam<br />
Pollard;<br />
• Article in Young Engineer’s Australia newsletter,<br />
‘Nuclear Power Station Design’, the paper provided<br />
understanding on the structure of nuclear plants<br />
and steps taken to secure a site after a natural<br />
disaster such as in Japan: Elizabeth Smolinska;<br />
• Discussion paper, ‘Waste management overview of<br />
New Zealand’, written in the Chartered Institution<br />
of Wastes Management Journal (UK). Also<br />
presented at the Zero Waste 2011 Conference:<br />
Victoria Bond.<br />
<strong>Hyder</strong> supports<br />
education in rural<br />
China<br />
School canteen<br />
of Lixi Village<br />
Memorial Chan<br />
Hong Li SA-PH<br />
Primary School,<br />
Guizhou Province
Improving our economic,<br />
environmental and social<br />
performance<br />
We publish our corporate approach to social, environmental<br />
and economic considerations as part of our objective to<br />
communicate our accountability to internal and external<br />
stakeholders and to ensure consistency with the industry<br />
standard.<br />
Tracking our environmental performance<br />
Materials<br />
used<br />
Direct energy<br />
consumption<br />
by primary<br />
energy source<br />
Indirect<br />
energy<br />
consumption<br />
by primary<br />
source<br />
As a consultancy, <strong>Hyder</strong>’s principal<br />
material used is paper. Across the group<br />
101,582.6 kgs of paper was consumed<br />
which equates to 10.2 reams of paper<br />
per employee through the reporting<br />
period.<br />
<strong>Hyder</strong> uses natural gas in some of our<br />
offices. Use through the reporting<br />
period totals 4,098 GJ. This represents<br />
a decrease of 39.6% over the previous<br />
reporting period. The decrease in gas<br />
use is attributable to two main reasons:<br />
1. In previous reports <strong>Hyder</strong> has<br />
assumed a gas use figure for<br />
Germany based on the financial<br />
value of the bills received. This<br />
year we were able to extract the<br />
usage data directly. Gas use was<br />
over 60% lower than previous<br />
assumptions.<br />
2. Office consolidation over the past<br />
year and better use of available<br />
space in <strong>Hyder</strong> UK offices has added<br />
to the reduction in gas use with a<br />
UK decrease of 40%.<br />
Electricity is used in all <strong>Hyder</strong> offices.<br />
Usage amounts to 16,173 GJ per annum<br />
across the group, which assuming<br />
all electricity purchased comes from<br />
fossil fuel stations running at 40%<br />
efficiency, corresponds to 40,432.5<br />
GJ of primary energy. This usage<br />
corresponds to a reduction of 12.3%<br />
over the previous reporting period. As<br />
well as greater awareness of the need<br />
to reduce electricity use in our offices,<br />
this decrease also shows the results of<br />
better use and consolidation of office<br />
space including some office closures.<br />
Total direct<br />
and indirect<br />
green-house<br />
gas emissions<br />
by weight<br />
Other<br />
relevant<br />
indirect<br />
green-house<br />
gas emissions<br />
by weight<br />
Direct and indirect greenhouse<br />
emissions related to <strong>Hyder</strong>’s energy<br />
consumption total 3,310.8 TCO2 through<br />
the reporting period, which corresponds<br />
to 0.87 TCO2 per employee. Total output<br />
represents a decrease of 25.3% on the<br />
previous reporting period. Output per<br />
employee shows a decrease of 27.4%.<br />
This reduction is the result of the<br />
combination of decrease in direct and<br />
indirect energy use as explained above.<br />
Indirect greenhouse gas emissions are<br />
calculated for <strong>Hyder</strong> using air travel<br />
only. Greenhouse gas emissions arising<br />
from business related air travel totals<br />
2,108.2 TCO2 which corresponds to 0.56<br />
TCO2 per employee. This represents an<br />
increase of 28.8% and 25.5% over the<br />
figures reported for 2011-12.<br />
The air travel requirements of<br />
the business are driven by client<br />
requirements, the increase in travel is<br />
down to:<br />
• Increased travel from Germany<br />
to the Middle East in relation to<br />
specific projects including the Doha<br />
Metro and Siemens project in Saudi<br />
Arabia, as well as the establishment<br />
of a Global Excellence Centre in<br />
Sofia, Bulgaria.<br />
• Greater travel from all regions to<br />
Global Excellence Centres in Manila<br />
and Bangalore to support client<br />
projects.<br />
• An increase in travel from within<br />
Asia to support the growth in<br />
China.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 53
Directors’ <strong>Report</strong> Corporate Social Responsibility continued<br />
Data<br />
Notes: Basis for calculations<br />
Headcount is the average rolling headcount number for the reporting<br />
period (April 1 2011 – March 31 <strong>2012</strong>).<br />
Energy use<br />
Data for the UK is based on figures from <strong>Hyder</strong> offices at Bristol, Cardiff,<br />
Exeter, Guildford, Plymouth, Stroud and Warrington and extrapolated<br />
to cover a full 12 months (where data was not available) and total UK<br />
headcount.<br />
Middle East data has been extrapolated to cover a full 12 month period<br />
where some data was not available. Middle East region also includes<br />
Manila operations.<br />
Conversion factors taken from the UK Department for Environment,<br />
Food and Rural Affairs (DEFRA) and also International Energy Agency<br />
publication – CO2 emissions from fuel combustion 2011 edition.<br />
Air travel<br />
Conversion factors have been sourced from DEFRA.<br />
Safety culture at <strong>Hyder</strong><br />
We are committed to providing a high level of health<br />
and safety (H&S) for all staff, clients and stakeholders<br />
throughout all our regions. We have been awarded another<br />
Royal Society for the Prevention of Accidents (RoSPA)<br />
Gold Medal, reflecting our achievement in obtaining nine<br />
consecutive RoSPA Gold Awards in the UK.<br />
<strong>Hyder</strong>’s award for Systems Excellence and our Occupational<br />
Health and Safety management system in Australia, is<br />
a reflection of our business policy in rolling out good<br />
practice from our more established regions to other regions<br />
developing their own Health and Safety management<br />
system.<br />
54 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Energy Air Travel Total<br />
TCO 2 TCO 2 / person TCO 2 TCO 2 / person TCO2 TCO2 / person<br />
Australia 881.4 1.21 717.9 1.00 1,599.3 2.21<br />
Asia 283.5 0.57 239.8 0.52 523.3 1.09<br />
Middle East 880.8 0.82 593.2 0.53 682.0 1.35<br />
UK 1,018.7 0.91 391.5 0.36 1,410.2 1.27<br />
Germany 246.4 0.64 165.9 0.43 412.3 1.07<br />
TOTALS 3,310.8 0.87 2,108.3 0.55 5,419.1 1.43<br />
Change on 2011 (25.3%) (27.6%) 28.8% 25.2% (10.7%) (13.2%)<br />
The introduction of a new group induction programme<br />
ensures every employee is inducted into our H&S<br />
management system which lays out the procedure for taking<br />
responsibility for the individual’s safety as well as the safety<br />
of their colleagues’.<br />
This year our injury rates and number of incidents were<br />
reduced significantly, with only the Middle East region<br />
recording safety incidents.<br />
Injury Rate<br />
(IR)*<br />
Lost Day<br />
Rate (LDR)<br />
No. of<br />
incidents<br />
Australia - - -<br />
Asia - - -<br />
Middle East 179 - 1<br />
UK - - -<br />
Germany - - -<br />
*Notes: Basis for calculations<br />
IR = No. of incidents x 200,000/number of staff and LDR = number of lost<br />
days x 200,000/number of hours worked (days are work days, factor of<br />
200,000 used to derive injury rate). Refer to company overview for total<br />
workforce breakdown by region. The above figures do not include minor<br />
injuries.<br />
Knowledge sharing<br />
<strong>Hyder</strong> embraces modern technology to minimise the carbon<br />
footprint of our travel; our latest BIM (building information<br />
modelling) models for example, can be shared on multiple<br />
screens around the globe in real time during OCS conference<br />
calls. This use of VOIP technology is blended with highly<br />
skilled teams on the ground, so sharing our knowledge has<br />
never been easier or more sustainable.
Next year’s CSR objectives<br />
Donating and supporting our charities<br />
In <strong>2012</strong>, we will support the following seven charities<br />
through donations totalling £55,000 and by providing our<br />
people’s skills and expertise to assist with their projects. We<br />
will also continue to support the Tondo School by donating<br />
£25,000 of the total charitable donations, towards the<br />
sponsorship of a class as well as other Tondo School-related<br />
projects.<br />
Region Charity<br />
Australia WaterAid Australia<br />
Asia Sowers International & Habitat for<br />
Humanity (HfH)<br />
Middle East Shafallah Centre for Children with<br />
Special Needs<br />
UK WaterAid UK<br />
Germany Ingenieur Ohne Grenzen<br />
The<br />
Philippines<br />
India Red Cross<br />
The Philippine Community Fund<br />
(Tondo School)<br />
Our objective is to increase our people’s engagement with<br />
our charities through direct involvement with each of the<br />
charities, a minimum of one hour per person. We also aim<br />
to generate and implement one initiative per charity via the<br />
CSR forum.<br />
Maintaining and sharing CSR best practice<br />
We are committed to upholding CSR best practice across<br />
<strong>Hyder</strong>. Our best practice objectives are as follows:<br />
• To review and refresh our existing Approved Supplier<br />
Database (ASD), and develop a supply chain risk<br />
assessment process, which improves our ability to<br />
demonstrate knowledge and expertise and performance<br />
feedback for our suppliers.<br />
• To develop initially in the UK, a comprehensive Project<br />
Environment Assessment framework that supports our<br />
project due diligence and strategic decision making<br />
process.<br />
• To further develop our Environmental Management<br />
System in each region, which will lead us to implement<br />
a structure suitable to obtaining ISO14001 within two<br />
years in Germany, Asia and the Middle East, following<br />
the UK and Australia’s example having already been<br />
accredited.<br />
• To further promote our CSR activities and support for<br />
our chosen charities through our CSR network and<br />
business forum, with an opportunity to measure staff<br />
response and business initiatives.<br />
• To empower staff to suggest, support and where<br />
appropriate implement sustainable practices across all<br />
our office locations, measured by a target of one new<br />
sustainable practice per office by the year end.<br />
• To monitor and report on social employment status<br />
(equality, diversity and inclusion).<br />
• To continually innovate and deliver sustainable<br />
designs, we aim to introduce concepts within the <strong>Hyder</strong><br />
Heartbeat into all regions.<br />
• To undertake Corporate Social Responsibility Index<br />
benchmarking by completing an industry benchmarking<br />
report.<br />
• To comply with industry sustainability reporting<br />
standards in <strong>Hyder</strong>’s CSR reporting through the Global<br />
<strong>Report</strong>ing Initiative’s (GRI).<br />
Patrick James,<br />
Principal site<br />
ecologist inspects<br />
a tree for potential<br />
bat roosts<br />
Doormouse<br />
from Strawberry<br />
Banks, voluntary<br />
monitoring<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 55
Directors’ <strong>Report</strong> Corporate Social Responsibility continued<br />
Improving our environmental performance<br />
• To continue to reduce our carbon footprint through<br />
our ‘carbon profile’ for the vehicle fleet in each region,<br />
improvements to be phased in over the next three to<br />
four years as leases are renewed.<br />
• To implement a more consistent approach for capturing<br />
data and benchmark our performance as measured in<br />
<strong>2012</strong>-13 industry benchmarking.<br />
• To appoint a suitable individual to be the Regional<br />
Environmental Management Advisor (REMA) in each<br />
region, each REMA reporting directly to their Regional<br />
Board.<br />
• To set region-specific targets for environmental<br />
performance.<br />
56 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Training and awareness<br />
‘Tree Planting’ day, <strong>Hyder</strong><br />
works with the Red Cross and<br />
local Philippine Army Platoon<br />
<strong>Hyder</strong> donates disaster<br />
recovery kits<br />
Building new homes for<br />
Typhoon Ondoy victims,<br />
Philippines<br />
• To further cultivate our stakeholder engagement around<br />
environmental issues, we will develop a stakeholder<br />
communication and engagement plan, from which we<br />
will develop an annual survey with our stakeholders to<br />
analyse our activities and improvement outcomes.<br />
• To encourage knowledge-sharing with our charity<br />
partners and stakeholders we will offer training places<br />
where suitable and extend our training programmes<br />
to include relevant business practices. Our target is to<br />
offer one training programme to each charity partner a<br />
year.<br />
• To increase awareness of reducing child labour by<br />
offering partners and clients the opportunity to learn<br />
about and donate to the charitable Tondo School.<br />
<strong>Hyder</strong> donates<br />
medical supplies<br />
and equipment<br />
through the Red<br />
Cross Society,<br />
India
Our performance against 2011-12 objectives<br />
Last year’s CSR objectives Targets<br />
met<br />
We reviewed our approach for capturing data �<br />
Reduced our carbon footprint by 5% �<br />
We began a review of our procurement processes and actions in our other regions �<br />
Further developed our environmental management system in the UK and Australia �<br />
We undertook CSR Index benchmarking �<br />
Our CSR report complied with industry reporting standards �<br />
Regular promotion of <strong>Hyder</strong>’s CSR activities to our staff and the wider community �<br />
In excess of 90% of staff participated in training associated with our ethical business code �<br />
We developed a group sustainability policy framework for our clients and project work �<br />
We produce an annual CSR report to demonstrate our commitment and progress towards becoming a more environmentally and socially<br />
responsible business. We recognise the resultant benefits for our clients, our people and for the communities in which we work and this report<br />
is written primarily for them. Unless otherwise stated, figures in this report relate to the 2011-12 reporting year and cover all the group’s<br />
operations. Our report has been written within the GRI sustainability reporting framework, disclosing outcomes and results within the 2011-12<br />
reporting period.<br />
Donating employee time,<br />
Philippines<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 57
Improving the scenery: Hong<br />
Kong Greening Master Plan<br />
The Hong Kong Greening Master Plans (GMPs)<br />
differ from most landscape design projects. Where<br />
other landscape design projects attempt to ‘retrofit’<br />
an existing infrastructure that is in many instances<br />
hostile to greening and jammed with conflicting<br />
demands for limited available space - the GMP project<br />
seeks to define the greening framework of an area<br />
and its particular needs. The GMPs project provide a<br />
guide to the planning, design and implementation of<br />
greening works, to achieve extensive, consistent and<br />
sustainable greening works.<br />
To date, <strong>Hyder</strong> has been commissioned on six GMP assignments<br />
in Hong Kong. The majority of new greening we have proposed<br />
has been carried out on government land, mainly consisting of<br />
wide footpath areas, road medians and traffic islands.<br />
Benefits<br />
• trees will bring substantial benefits, enhancing the quality<br />
of urban environment and uplifting the aesthetic quality of<br />
the urban fabric<br />
• efficiently brings people closer to nature<br />
• educational value and health benefits<br />
• positive psychological benefits for the community<br />
• cultural value and financial value.<br />
Results and achievements<br />
Despite uniquely challenging physical constraints and public<br />
pressures, the GMPs have successfully resulted in the planting of<br />
25,160 trees and 5,295,000 shrubs in the urban areas to date,<br />
58 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Before After<br />
of which 23,910 trees and 4,995,000 shrubs were planted under<br />
<strong>Hyder</strong> contracts.<br />
The planting has been well received by the public largely<br />
because of the dramatic local environmental improvements<br />
brought about by the implementation of the GMPs. It is this<br />
social and psychological impact of the greening, and the<br />
localized shading and cooling effects that are the preeminent<br />
benefits.<br />
Critical success factors<br />
GIS Data Management – A Geographic Information System<br />
(GIS) integrates hardware, software, and data for capturing,<br />
managing, analyzing and displaying all forms of geographically<br />
referenced information. We have been able to consolidate<br />
our wealth of experience as well as introduce our new and<br />
innovative mobile GIS system. Handheld iPAD units integrate<br />
more closely the actual on-site conditions with the design<br />
drawings, capturing and processing more accurately the vast<br />
amounts of data collected.<br />
Client: Civil Engineering and<br />
Development Building, The Government<br />
of the Hong Kong Special Administrative<br />
Region<br />
Period: 2005-ongoing<br />
Services: Investigation, feasibility study,<br />
master planning and detail design.
Directors’ <strong>Report</strong><br />
General Information<br />
and Disclosures<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 59
Business Review<br />
The company is the holding company for the <strong>Hyder</strong><br />
<strong>Consulting</strong> group of companies. Detailed information on the<br />
group’s principal activities and the other information which<br />
meets the requirements of the business review as required<br />
by section 417 of the Companies Act 2006 and which should<br />
be treated as forming part of this report by reference are<br />
to be found in the Business Review and in the Chairman’s<br />
Statement at pages 10 to 30 of this <strong>Annual</strong> <strong>Report</strong>.<br />
Results and dividends<br />
The results include those of <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> and its<br />
subsidiaries for the financial year ended 31 March <strong>2012</strong><br />
and are set out in the Financial Statements on pages 73 to<br />
116. The profit before taxation amounted to £17.6m (2011:<br />
£18.2m). Profit after taxation was £13.9m (2011: £14.9m).<br />
The directors recommend a final dividend for the year to<br />
31 March <strong>2012</strong> of 7.00p per share (2011: 6.00p), to bring<br />
the total for the year to 9.00p (2011: 7.75p), an increase of<br />
16.1% over last year. The full year dividend is covered 4.9<br />
times by adjusted fully diluted earnings per share (2011: 5.6<br />
times). The dividend, if approved by the shareholders, will<br />
be paid on 10 August <strong>2012</strong> to shareholders on the register<br />
on 13 July <strong>2012</strong>.<br />
Dividend waivers<br />
A dividend waiver is currently in operation in respect of<br />
all shares held by EES Trustees International Limited, the<br />
trustee of the <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> Employee Benefit Trust.<br />
The trustee does not exercise its right to vote in respect of<br />
any of the shares held by it. As at 13 June <strong>2012</strong> the trust<br />
held 801,976 shares in the company (2.1% of the issued<br />
share capital).<br />
Directors and their interests<br />
Details of the directors of the company are given on page 32<br />
and 33.<br />
Details of directors’ interests in shares of the company are<br />
included in the Directors’ Remuneration <strong>Report</strong> on page 69.<br />
There were no significant contracts subsisting during or<br />
at the end of the year with the company or any of its<br />
subsidiaries in which any director is, or was, materially<br />
interested, other than the service contracts and letters<br />
of appointment referred to on page 68 of the Directors’<br />
Remuneration <strong>Report</strong>.<br />
Corporate responsibility<br />
The company’s Corporate Social Responsibility <strong>Report</strong> for<br />
the year has been incorporated into this <strong>Annual</strong> <strong>Report</strong> and<br />
Financial Statements on pages 42 to 57.<br />
60 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Share capital<br />
The company’s share capital comprises a single class of ordinary<br />
shares of 10p each and as at 31 March <strong>2012</strong> there were in issue<br />
38,634,530 (2011: 38,540,280) fully paid ordinary shares.<br />
Throughout the year, the ordinary shares were listed on the<br />
official list of the UK Listing Authority and remain so at the date<br />
of this report. There are no specific restrictions on the size of<br />
a shareholding or on the transfer of shares (apart from where<br />
a share is not fully paid up). The directors are not aware of any<br />
agreements between holders of the company’s ordinary shares<br />
which may result in restrictions on the transfer of shares or on<br />
voting rights.<br />
Directors’ powers in relation to allotment<br />
and buy-back of shares<br />
The powers of the directors to issue or buyback shares in<br />
the company are restricted to those approved each year at<br />
the company’s AGM or, if any intervening need arises for<br />
shareholders to grant any additional powers, those approved<br />
in a general meeting specifically convened for that purpose.<br />
The company did not buyback any of its shares in the<br />
financial period under review or to 13 June <strong>2012</strong>.<br />
Rights attaching to shares<br />
General<br />
The rights attaching to the ordinary shares are set out<br />
in the company’s articles of association. The articles<br />
of association may only be amended or replaced with<br />
the approval of the company’s shareholders by a special<br />
resolution at a general meeting of the shareholders.<br />
A shareholder whose name appears on the register of<br />
members may choose whether their shares are evidenced by<br />
share certificates (i.e. are held in certificated form) or held<br />
in electronic form in CREST (i.e. un-certificated).<br />
If the company is wound up the liquidator may, with the<br />
sanction of a special resolution of the company, and<br />
any other sanction required by law, divide among the<br />
shareholders (excluding any shareholder holding shares<br />
as treasury shares) the whole or any part of the assets of<br />
the company. He may, for such purposes, set such value<br />
as he deems fair upon any property to be divided and may<br />
determine how such division shall be carried out as between<br />
the shareholders. The liquidator may also transfer the whole<br />
or any part of such assets to trustees to be held on trust for<br />
the benefit of the shareholders, but no shareholder shall be<br />
compelled to accept any assets on which there is a liability.<br />
Votes at general meetings<br />
Subject to the restrictions set out below, a shareholder<br />
is entitled to attend (or appoint another person as his<br />
representative to attend i.e. proxy) and to exercise all or<br />
any of his rights to speak and vote at any general meeting
of the company. A shareholder may also appoint more than<br />
one representative. A representative need not also be a<br />
member of the company.<br />
To be valid, any form of proxy sent by a shareholder to<br />
the company or, where permitted, any proxy registered<br />
electronically in relation to any general meeting must be<br />
received at the address provided in the notice not later than<br />
48 hours before the time fixed for holding the meeting (or<br />
any adjourned meeting).<br />
Subject to any special terms regarding voting upon which<br />
any shares may for the time being be held, upon a show<br />
of hands every shareholder (or his representative) who is<br />
present in person at the general meeting shall have one vote<br />
and upon a poll every shareholder (or his representative)<br />
present in person shall have one vote for every share held<br />
by him on each resolution put to the meeting, save that, if<br />
a shareholder appoints more than one representative, the<br />
representatives appointed by that shareholder shall have<br />
only one vote between them and, if they purport to vote in<br />
different ways, their vote shall not be counted.<br />
If a person fails to give the company any information<br />
requested by a notice served on him under section 793 of<br />
the Companies Act 2006 (which gives public companies<br />
the power to require information to be supplied in respect<br />
of a person’s interests in the company’s shares) then the<br />
company may, not earlier than 21 days later, and after<br />
warning that person, serve a disenfranchisement notice<br />
on the registered holder of the shares or shares in respect<br />
of which the section 793 notice was given. Unless the<br />
information required by the notice is given within 14 days,<br />
the holder will not be entitled to receive notice of any<br />
general meeting or attend any such meeting and shall not<br />
be entitled to exercise, either personally or by proxy, the<br />
votes attaching to such share or shares in respect of which<br />
the disenfranchisement notice has been given unless and<br />
until the information required by the section 793 notice has<br />
been provided.<br />
Proceedings at general meetings<br />
At every general meeting each resolution shall be decided<br />
in the first instance on a show of hands unless on, or before,<br />
the declaration of the result of the show of hands, a poll<br />
is demanded by (a) the chairman of the meeting, (b) at<br />
least five shareholders present in person or by proxy having<br />
the right to vote on the resolution, (c) a shareholder or<br />
shareholders present in person or by proxy representing<br />
in aggregate not less than one-tenth of the total voting<br />
rights of all the shareholders having the right to vote on<br />
the resolution, or (d) a shareholder or shareholders present<br />
in person or by proxy holding shares conferring the right<br />
to vote on the resolution on which an aggregate sum has<br />
been paid up equal to not less than one-tenth of the total<br />
sum paid up on all the shares conferring that right. On a<br />
poll, every shareholder (or his representative) present at the<br />
meeting has one vote for every ordinary share in respect of<br />
which he is the registered holder, save that, if a shareholder<br />
appoints more than one representative, the representatives<br />
appointed by that shareholder shall have only one vote<br />
between them.<br />
Modification of rights<br />
If at any time the capital of the company is divided into<br />
different classes of shares, the rights attached to any class<br />
may be modified, abrogated or varied either (a) with the<br />
consent of the holders of three-fourths in nominal value of<br />
the issued shares of that class (excluding any shares of that<br />
class held as treasury shares) or (b) with the sanction of a<br />
special resolution passed at a separate general meeting of<br />
the holders of shares of that class.<br />
Appointment and removal of directors<br />
Directors may be appointed by shareholders (by ordinary<br />
resolution at a general meeting) or by the board. Any<br />
director appointed by the board may only hold office until<br />
the date of the next AGM, at which time the director must<br />
stand for election by shareholders.<br />
The articles of association require one-third of the directors<br />
to retire by rotation at each AGM. The directors to retire<br />
are selected by reference to those who have been in office<br />
longest since their election or last re-election. Any director<br />
who has been in office for more than three years since<br />
their election or last re-election must offer themselves for<br />
re-election at the next AGM. The board has determined that<br />
going forward all directors should retire and where eligible,<br />
seek re-election annually at the AGM. This will also more<br />
than satisfy the retirement by rotation requirements of the<br />
articles of association.<br />
The company may by ordinary resolution remove any<br />
director before the expiration of his period of office.<br />
Amendments to the company’s articles of<br />
association<br />
The company’s articles of association may be amended by<br />
way of a special resolution at a general meeting of the<br />
shareholders.<br />
Substantial shareholdings<br />
As at 8 June <strong>2012</strong>, the company had, in accordance with the<br />
Disclosure Rules and the Transparency Rules of the Financial<br />
Services Authority, been advised of the following notifiable<br />
interests in the shares of the Company which exceeded the<br />
3% notification threshold:<br />
Shareholding Percentage<br />
BlackRock Inc<br />
JP Morgan Asset<br />
Management<br />
2,260,120 5.85%<br />
Holdings Inc<br />
T Rowe Price<br />
2,184,017 5.65%<br />
Associates Inc<br />
Legal and General<br />
2,062,165 5.33%<br />
Group <strong>PLC</strong> 1,260,871 3.26%<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 61
Directors’ <strong>Report</strong> General Information and Disclosures continued<br />
<strong>Annual</strong> general meeting<br />
The notice of the <strong>2012</strong> AGM to be held on 2 August <strong>2012</strong><br />
and an explanation of the resolutions proposed are set out<br />
in the separate circular sent to those shareholders who have<br />
opted to continue receiving paper communications, which<br />
is also available to other shareholders and the public on our<br />
website at www.hyderconsulting.com.<br />
Policy on the payment of suppliers<br />
It is the group’s policy to seek to agree terms of payment<br />
with suppliers when agreeing the terms of a transaction and<br />
to abide by those agreed terms of payment. Where payment<br />
terms are not negotiated and agreed the company and<br />
group endeavour to adhere to suppliers’ standard terms. The<br />
average payment period was 53 days (2011: 57 days) and the<br />
ratio of amounts owed to trade creditors at the end of the<br />
year to the aggregate amounts invoiced by suppliers during<br />
the year was 15% (2011: 16%).<br />
Financial instruments<br />
As at 31 March <strong>2012</strong> the group had a number of financial<br />
instruments, and disclosures for these items can be found in<br />
note 15 to the Financial Statements on pages 96 to 100. The<br />
group’s approach to financial risk management can be found<br />
on page 96.<br />
Research and development<br />
The group strives to develop and implement innovative<br />
technical solutions for its clients. In the year this has<br />
resulted in research and development tax credits in the UK<br />
and Australia, which have contributed to the group’s current<br />
low tax rate.<br />
The group’s global intranet, community interest groups and<br />
databases help our people to identify, develop and share<br />
these technical advancements.<br />
Charitable and political donations<br />
During the year donations made for charitable purposes<br />
amounted to £55,000 (2011: £55,083). No political<br />
donations were made during the year (2011: nil).<br />
Employment practices and policies<br />
Details of the company’s employment practices and policies<br />
are set out in the business review on pages 20 to 22.<br />
62 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Health and safety<br />
We believe that the wellbeing of our people is of paramount<br />
importance. Our commitment to health and safety is<br />
demonstrated by our group health and safety policy, with its<br />
supporting framework and reporting structure. This is further<br />
enhanced by the appointment of regional health and safety<br />
staff, and locally based systems in all of our geographies.<br />
Safe working practices are emphasised throughout the group.<br />
We provide health and safety services to clients in all sectors<br />
under the Construction (Design and Management) Regulations<br />
in the UK.<br />
Significant agreements<br />
Under section 416 of the Companies Act 2006, the company<br />
is required to identify significant agreements that take<br />
effect, alter or terminate upon a change of control of the<br />
company following a takeover bid and the effects of any such<br />
contracts. The group’s principal banking facilities contain<br />
provisions which allow the relevant bank to terminate its<br />
facility and demand repayment of all sums due to it under<br />
the facility either on a change of control of the company or<br />
alternatively on an application being made for a delisting of<br />
the company’s shares following such a change of control.<br />
The group’s share schemes also contain provisions relating<br />
to the vesting of awards/options in the event of a change of<br />
control of the company.<br />
Post balance sheet events<br />
There are no post balance sheet events that require<br />
disclosure in this <strong>Annual</strong> <strong>Report</strong>.<br />
Statement of directors’ responsibilities<br />
The directors, as listed on page 32, are responsible for<br />
preparing the <strong>Annual</strong> <strong>Report</strong> and the group and the company<br />
Financial Statements in accordance with applicable law and<br />
regulations.<br />
Company law requires the directors to prepare financial<br />
statements for each financial year. Under that law the<br />
directors have prepared the group Financial Statements in<br />
accordance with International Financial <strong>Report</strong>ing Standards<br />
(IFRS) as adopted by the European Union and the company<br />
Financial Statements in accordance with applicable law and<br />
United Kingdom accounting standards (United Kingdom<br />
Generally Accepted Accounting Practice (UK GAAP)). Under<br />
company law the directors must not approve the group and<br />
company Financial Statements unless they are satisfied that<br />
they give a true and fair view of the state of affairs of the<br />
group and the company and of the profit or loss of the group<br />
and the company for that period.
In preparing those Financial Statements, the directors are<br />
required to:<br />
• select suitable accounting policies and then apply them<br />
consistently;<br />
• make judgements and estimates that are reasonable<br />
and prudent;<br />
• state that the group Financial Statements comply with<br />
IFRS as adopted by the European Union and with regard<br />
to the company’s Financial Statements that applicable<br />
United Kingdom accounting standards have been<br />
followed, subject to any material departures disclosed and<br />
explained in the respective Financial Statements; and<br />
• prepare the group and company Financial Statements<br />
on the going concern basis unless it is inappropriate<br />
to presume that the group will continue in business, in<br />
which case there should be supporting assumptions or<br />
qualifications as necessary.<br />
The directors are responsible for keeping adequate<br />
accounting records that are sufficient to show and explain<br />
the company’s transactions and disclose with reasonable<br />
accuracy at any time the financial position of the company<br />
and the group and enable them to ensure that the Financial<br />
Statements and the Directors Remuneration <strong>Report</strong> comply<br />
with the Companies Act 2006 and, as regards group<br />
Financial Statements, Article 4 of the IAS Regulation. They<br />
are also responsible for safeguarding the assets of the group<br />
and the company and for taking reasonable steps for the<br />
prevention and detection of fraud and other irregularities.<br />
The directors are responsible for the maintenance and<br />
integrity of the corporate and financial information included<br />
on the company’s website. Legislation in the United<br />
Kingdom governing the preparation and dissemination of<br />
Financial Statements may differ from legislation in other<br />
jurisdictions.<br />
The directors confirm that, to the best of their knowledge:<br />
(a) the group and the company’s Financial Statements<br />
in this <strong>Annual</strong> <strong>Report</strong>, which have been prepared in<br />
accordance with IFRS and UK GAAP respectively, give<br />
a true and fair view of the assets, liabilities, financial<br />
position and profit or loss of the group and the<br />
company taken as a whole; and<br />
(b) the management report (which comprises the<br />
Chairman’s Statement and the Directors’ <strong>Report</strong>)<br />
includes a fair review of the development and<br />
performance of the business and the position of the<br />
group and the company taken as a whole, together with<br />
a description of the principal risks and uncertainties<br />
that they face.<br />
Going Concern<br />
After making enquiries, the directors have a reasonable<br />
expectation that the company and the group have adequate<br />
resources to continue in operational existence for the<br />
foreseeable future and therefore continue to adopt the<br />
going concern basis in preparing the Financial Statements.<br />
Auditors<br />
PricewaterhouseCoopers LLP has indicated its willingness<br />
to continue as independent auditors to the group and a<br />
resolution for its reappointment will be proposed at the<br />
<strong>2012</strong> AGM.<br />
Disclosure of information to Auditors<br />
In accordance with section 418 of the Companies Act 2006<br />
each of the directors, as listed on page 32, confirms that,<br />
so far as he is aware, there is no relevant audit information,<br />
that is, information needed by the company’s auditors<br />
in connection with preparing their report, of which the<br />
company’s auditors are unaware, and that he has taken all<br />
steps that he ought to have taken (as detailed in section<br />
418) in order to make himself aware of any relevant audit<br />
information and to establish that the company’s auditors are<br />
aware of that information. This confirmation is given and<br />
should be interpreted in accordance with section 418 of the<br />
Companies Act 2006.<br />
Cautionary statement<br />
This <strong>Annual</strong> <strong>Report</strong> and Financial Statements has<br />
been prepared solely for the benefit of the company’s<br />
shareholders, as a body. The company, the directors and<br />
employees accept no responsibility to any other person<br />
for anything contained in them. They may contain certain<br />
forward-looking statements with respect to the financial<br />
condition, performance, results, strategy and objectives,<br />
operations and businesses of the group. By their nature,<br />
these statements involve uncertainty because they relate<br />
to future events and circumstances which are beyond<br />
the group’s control. As a result the group’s actual future<br />
financial condition, performance and results may differ<br />
materially from the plans or expectations expressed or<br />
implied within any forward-looking statement. Any forwardlooking<br />
statement reflects knowledge and information<br />
available at the date of preparation of this <strong>Annual</strong> <strong>Report</strong><br />
and Financial Statements and the company assumes<br />
no obligation to update or revise any forward-looking<br />
statement, resulting from new information, future events<br />
or otherwise. Nothing in this <strong>Annual</strong> <strong>Report</strong> and Financial<br />
Statements should be construed as a profit forecast.<br />
This Directors’ <strong>Report</strong> (including the content of the<br />
Chairman’s Statement which is deemed incorporated<br />
into this report by this reference) has been drawn up<br />
and presented in accordance with and in reliance upon<br />
applicable English company law and the liabilities of the<br />
directors in connection with this report shall be subject to<br />
the limitations and restrictions provided by such law.<br />
By order of the board<br />
Neil Hunt<br />
Company Secretary<br />
13 June <strong>2012</strong><br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 63
64 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Directors’<br />
Remuneration<br />
<strong>Report</strong>
This report has been prepared by the remuneration<br />
committee and has been approved by the board. Not all of<br />
the information in this report is required to be audited and<br />
the information is not covered by the auditors’ report unless<br />
otherwise indicated. A resolution will be proposed at the<br />
<strong>2012</strong> AGM inviting shareholders to approve this report.<br />
Committee membership and meetings<br />
The remuneration committee comprises non-executive<br />
members of the board of directors with written terms of<br />
reference, which are available on the company’s website<br />
www.hyderconsulting.com. Members who served on the<br />
committee during the year were Paul Withers, its chairman,<br />
and Jeffrey Hume both of whom the board has determined<br />
are independent.<br />
The committee has responsibility for setting the<br />
remuneration policy and remuneration packages of the<br />
chairman, the executive directors, the company secretary<br />
and senior executives below the board who report to the<br />
chief executive. This includes assessing awards under annual<br />
incentive schemes, establishing performance targets for<br />
future annual incentive schemes, and the grant of options<br />
under the company’s share schemes.<br />
The committee met four times during the year covered by<br />
this report. The chairman, chief executive, group finance<br />
director and group HR and communications director attend the<br />
meetings by invitation as appropriate. No director is present<br />
when a decision relating to their own remuneration is made.<br />
During the year the committee engaged New Bridge Street<br />
(part of Aon plc) to advise on executive director remuneration,<br />
and retained Deloitte LLP to advise in respect of the <strong>Hyder</strong><br />
<strong>Consulting</strong> Long Term Incentive Plan 2006 (“LTIP”). New<br />
Bridge Street did not provide any other services to the<br />
company during the year. Deloitte LLP was retained by the<br />
company during the year to provide tax advice.<br />
Remuneration policy<br />
The company’s remuneration policy is intended to motivate,<br />
retain and attract high calibre executives by rewarding them<br />
with an appropriate and competitive salary and benefits<br />
package that is linked to both individual and business<br />
performance, is closely aligned with executing the group’s<br />
business strategy and enhancing shareholder value, and<br />
takes into account the market for executives in similar roles<br />
in similarly-sized companies and those operating in the<br />
same sector. This policy was applied during the year and<br />
will, subject to regular review, be applied during the current<br />
and future years.<br />
Remuneration information<br />
The main elements of the remuneration packages agreed<br />
by the committee for the executive directors in the year<br />
are: base salary, short-term incentives through an annual<br />
performance related bonus, long-term incentives through<br />
awards under the LTIP, pension, permanent health insurance,<br />
and life assurance benefits.<br />
The committee keeps under review the structure and<br />
weighting of the different elements of the executives<br />
package to incentivise an entrepreneurial approach without<br />
promoting excessive risk. The committee is satisfied that<br />
the packages are appropriately balanced between fixed and<br />
performance related remuneration. Short-term incentives<br />
provided through annual bonuses do not exceed 100% of<br />
base salary. Targets for both short-term and long-term<br />
incentives, whilst stretching, are not set at levels which the<br />
committee considers requires excessive risk taking.<br />
The executive directors’ remuneration is reviewed annually<br />
by the committee in March with changes effective from<br />
1 April. In conducting the review the committee has<br />
regard to the individual’s responsibility and performance;<br />
current remuneration trends; remuneration information<br />
for executive directors of a comparable status employed<br />
by comparable companies; and the reward structures and<br />
increases in pay for group staff as a whole. The committee<br />
also monitors and approves changes to the remuneration of<br />
the group’s executive board.<br />
Following the March <strong>2012</strong> review, the committee determined<br />
that with effect from 1 April <strong>2012</strong>, Ivor Catto’s base salary<br />
be increased to £350,200 p.a. (2011: £340,000) and Russell<br />
Down’s to £216,000 p.a. (2011: £201,000). The percentage<br />
increase in Ivor Catto’s salary was lower than the average<br />
percentage increase across the group. The increase in<br />
Russell Down’s salary (7.46%) recognised his continued<br />
development and strong performance in the role and brings<br />
his salary closer in line with the market.<br />
Short term incentives – annual performance<br />
bonus<br />
Bonus entitlement is related to the performance of the<br />
chief executive or the group finance director as appropriate<br />
and the performance of the group and is determined by<br />
the committee. The bonus is paid in June in respect of<br />
performance in the financial period ended on the previous<br />
31 March.<br />
The maximum bonus potential of Ivor Catto and Russell<br />
Down during the year covered by this report was 100%<br />
and 75% of base salary respectively. Bonus payments are<br />
not pensionable and are not subject to any guaranteed<br />
minimum.<br />
The committee continues to set bonus targets around<br />
business specific measures. Eighty per cent of the bonus<br />
opportunity in 2011-12 was based on a pre-agreed adjusted<br />
profit before tax target (“PBT”), with that measure also<br />
being subject to cash conversion targets where a significant<br />
portion of the bonus would be lost if targets were not<br />
met. This element of the bonus would vest between 90%<br />
and 110% of the PBT target on a straight line basis, with<br />
an entry threshold of 30% of the opportunity at 90% of<br />
the target. The remaining 20% of the bonus opportunity<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 65
Directors’ <strong>Report</strong> Directors’ Remuneration <strong>Report</strong> continued<br />
was dependent upon the achievement of other longer-term<br />
strategic objectives. The bonus scheme for the current year<br />
will operate on a similar basis.<br />
The committee reviewed performance against the bonus<br />
targets for the year covered by this report and after making<br />
adjustments in accordance with the scheme to remove the<br />
effect of translation foreign exchange gains, the committee<br />
resolved to pay bonuses to Ivor Catto and Russell Down<br />
based on 71.86% of their respective bonus potential,<br />
equivalent to 71.86% and 53.90%, respectively of their<br />
base salaries. The amounts are detailed in the table of<br />
remuneration on page 69. The PBT component was based<br />
on a PBT target for the period of £20.3m and an actual PBT<br />
(adjusted as above) of £20.4m.<br />
Retirement benefits<br />
Ivor Catto and Russell Down participate in one of the<br />
company’s stakeholder pension schemes. The company<br />
pays 12.5% of base salary by way of contribution to the<br />
scheme. The scheme is approved by HM Revenue & Customs<br />
and is not a contracted-out scheme for the purposes of the<br />
Pension Schemes Act 1993.<br />
Russell Down is a deferred member of the defined benefit AGPS.<br />
Other benefits<br />
Other benefits for executive directors include entitlement<br />
to a non-contributory private healthcare scheme for the<br />
executive, his spouse and dependent children, a permanent<br />
health insurance scheme and life assurance or payments in<br />
lieu of each.<br />
Executive directors are entitled to a car and payment of its<br />
operating expenses (or an equivalent car allowance).<br />
Share option scheme and long term<br />
incentive plan<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> 2006 Long Term Incentive<br />
Plan (“LTIP”)<br />
The LTIP is divided into two parts: Part A and Part B.<br />
Executive directors can participate only in Part B.<br />
Awards under the LTIP are discretionary and the committee’s<br />
current policy is to use the LTIP for incentivising and<br />
retaining senior members of staff. Awards are considered<br />
annually and under Part A are subject to a maximum annual<br />
award of 100% of the base salary and allowances and under<br />
Part B are subject to a maximum annual award of 100%<br />
of base salary, other than in the first year of appointment<br />
where the maximum is 200%.<br />
66 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
During the year covered by this report, the committee<br />
approved awards under Part A of the LTIP to 29 senior<br />
members of staff. The awards were made on the basis<br />
of the staff member’s performance and contribution to<br />
the business and comprised a deferred award (40%) and<br />
performance based award (60%) of shares by way of nilcost<br />
options. The deferred share award will be capable<br />
of exercise in the event the individual is employed by<br />
the group on the third anniversary of the award. The<br />
performance share award will be capable of exercise on the<br />
third anniversary of the date of grant if the individual is<br />
still employed by the group and the performance condition<br />
has been satisfied. The performance condition is based<br />
on growth in EPS over the three year performance period<br />
and provides for the award to vest in accordance with a<br />
sliding scale based around the earnings per share target.<br />
No consideration is payable on the grant or exercise of the<br />
options. The committee considers that this is an appropriate<br />
basis for awards to senior staff members who are not<br />
members of the board. Russell Down is the only executive<br />
director holding current awards under part A of the LTIP<br />
(see page 70). These were granted during his employment<br />
with the group prior to joining the board.<br />
The total number of shares which were the subject of awards<br />
under Part A of the LTIP during the year was 167,844,<br />
bringing the total number of shares the subject of current<br />
awards under Part A of the LTIP at 31 March <strong>2012</strong> to<br />
559,314.<br />
During the year the committee approved awards under Part<br />
B of the LTIP to the executive directors as detailed on page<br />
71 in the form of nil-cost options. The options are capable<br />
of exercise three years after the date of grant provided<br />
the performance conditions have been satisfied and the<br />
participant is still employed by the group. The performance<br />
period is 1 April 2011 to 31 March 2014. No consideration is<br />
payable on the grant or exercise of the options.<br />
Prior to any award the committee reviews performance<br />
targets to ensure they remain appropriate and are<br />
demanding and stretching in the context of the prospects<br />
of the company and the prevailing economic environment.<br />
Following this review the committee determined that the<br />
performance conditions used for the awards in the year<br />
ended 31 March 2011 remained appropriate for the awards<br />
made to the executive directors during the year ended 31<br />
March <strong>2012</strong>, which were structured as follows:<br />
Vesting of the first half of the award is subject to<br />
achievement of a performance target based on the<br />
compound annual growth in the company’s EPS compared to<br />
growth in the RPI over the three-year performance period.
The EPS target is set out in the table below:<br />
Compound annual<br />
EPS growth over the<br />
performance period<br />
Vesting % of 50% of the<br />
shares the subject of the<br />
award<br />
RPI+12.5% p.a. 100%<br />
RPI+2.5% to RPI+12.5% 25% to 100% (pro-rated)<br />
RPI+2.5% p.a. 25%<br />
Less than RPI+2.5% p.a. 0%<br />
EPS will be measured based on the diluted earnings<br />
per ordinary share reported in the company’s financial<br />
statements adjusted to remove the effect of any significant<br />
non-recurring items and amortisation of acquired<br />
intangibles and acquisition costs.<br />
Vesting of the second half of the award is subject to<br />
achievement of a performance target based on total<br />
shareholder return (“TSR”) on the company’s shares over<br />
a three-year performance period relative to the TSR<br />
performance of companies within the Business Support<br />
Services sub sector within the FTSE Small Cap Support<br />
Services Index (the “Index”) as at the beginning of that<br />
performance period.<br />
The TSR target is set out in the table below:<br />
TSR performance when<br />
measured against the<br />
companies comprised<br />
in the Index over the<br />
performance period<br />
Vesting % of 50% of the<br />
shares the subject of the<br />
award<br />
Upper 20% 100%<br />
Median to upper 20% 25% to 100% (pro-rated)<br />
Median 25%<br />
Below median 0%<br />
TSR is measured based on the changes in share value over<br />
the performance period and the value of any dividends<br />
received during that period (on the basis that dividends are<br />
re-invested in shares of the relevant company on the exdividend<br />
date). A three-month averaging period is applied at<br />
the beginning and end of the performance period.<br />
The committee considers that performance targets based on<br />
a combination of EPS and TSR remain the most appropriate<br />
measures for awards made to executive directors under the<br />
LTIP as they provide a clear line of sight for the executive<br />
directors and a direct alignment with shareholders’<br />
interests. EPS rewards any significant increase in earnings<br />
across the period and TSR rewards good relative stock<br />
market performance. These measures will be retained for<br />
LTIP awards this year although, as indicated earlier, the<br />
committee will consider the EPS targets prior to any award<br />
to ensure they remain appropriate.<br />
In accordance with the rules of the LTIP and terms of the<br />
awards, in the event of exercise the options are satisfied<br />
by way of a transfer of existing shares. The company has<br />
funded the <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> Employee Benefit Trust<br />
(“EBT”) which has acquired company shares for this purpose.<br />
As at 13 June <strong>2012</strong> the EBT held 801,976 ordinary shares in<br />
the capital of the company through its trustee: EES Trustees<br />
International Limited.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> Executive Share<br />
Option Scheme 2002 (the “ESOS”)<br />
The ESOS was approved by the company on 21 October 2002.<br />
Part A of the ESOS is HM Revenue & Customs approved<br />
and restricts the granting of options up to £30,000 per<br />
person. Part B of the ESOS is unapproved. The grant of<br />
all share options under the ESOS is at the discretion of<br />
the committee. The exercise of options is subject to the<br />
satisfaction of performance conditions, as determined from<br />
time to time by the committee and imposed at the time of<br />
grant, which to date have been based on EPS growth above<br />
the RPI over a three year period.<br />
During the year covered by this report no new options over<br />
shares were granted under the ESOS as the LTIP is currently<br />
the principal vehicle through which share based incentives<br />
are awarded. The total number of options granted over<br />
shares under the ESOS is 1,733,750 with options outstanding<br />
at 31 March <strong>2012</strong> of 390,500 (representing 1.00% of the<br />
enlarged issued share capital). Russell Down is the only<br />
director holding current awards under the ESOS (see page<br />
70). These were granted during his employment with the<br />
group prior to his joining the board. There are currently no<br />
plans to grant executive directors further options under the<br />
ESOS.<br />
The company’s policy on executive shareholding requires all<br />
executive directors and certain other senior executives to<br />
retain a percentage of any shares acquired by reason of their<br />
exercising any company share options until a shareholding<br />
of a prescribed value is reached. For the executive directors<br />
the targeted value of holding equates to their annual base<br />
salary. Once reached the shareholding is then required to<br />
be maintained. No options have been exercised by the<br />
executive directors since the introduction of the policy. The<br />
number of shares held by each executive director is shown<br />
on page 69.<br />
Directors’ service contracts and letters of<br />
appointment<br />
The company’s general policy on service agreements is<br />
that notice periods should not exceed 12 months and that<br />
compensation payable on termination should not exceed 12<br />
months’ remuneration.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 67
Directors’ <strong>Report</strong> Directors’ Remuneration <strong>Report</strong> continued<br />
Executive directors<br />
Each of the executive directors who served during the year<br />
had a rolling 12 month contract, with a 12 month notice<br />
period due from either employer or director.<br />
The service contracts for Ivor Catto (dated 24 June 2009)<br />
and Russell Down (dated 2 December 2008) allow the<br />
company to make a payment of 12 months’ base salary<br />
in lieu of the 12 month notice period and do not contain<br />
provisions entitling the executive director to terminate his<br />
contract or receive damages in the event of a change of<br />
control of the company.<br />
Chairman and non-executive directors<br />
The company’s general policy on chairman and nonexecutive<br />
director appointments is that notice periods<br />
should not exceed three months. Sir Alan Thomas’ contract<br />
(dated 27 September 2002) is terminable in writing by either<br />
party giving 12 months’ notice. Paul Withers’ and Jeffrey<br />
Hume’s appointments are terminable on one months’ notice.<br />
Subject to early termination or renewal they currently expire<br />
at the 2013 AGM and on 30 April 2013 respectively.<br />
The board determines the remuneration of the chairman<br />
(on the recommendation of the remuneration committee)<br />
and the other non-executive directors having regard to<br />
the level of fees paid by other comparable FTSE companies<br />
and the limits set out in the articles of association. The<br />
relevant director is not present during the discussion of his<br />
remuneration package. The chairman and the other nonexecutive<br />
directors are not entitled to pensions, annual<br />
bonuses or any similar payments other than expenses<br />
properly incurred in connection with the performance of<br />
their duties. Fees were not reviewed during the year under<br />
review. Following a subsequent review the Chairman’s and<br />
the non-executive directors’ fees have been increased from<br />
£80,000p.a. to £90,000p.a. and £33,000p.a. to £37,000p.a.<br />
respectively. The increases are effective from 1 June <strong>2012</strong>.<br />
These fees have not been increased since 1 October 2009<br />
and will be the subject of annual review each March in<br />
future years.<br />
68 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Performance graph<br />
The performance graph below shows the company’s total<br />
shareholder return compared to the FTSE All-Share Index.<br />
The FTSE All-Share Index has been selected as a comparison<br />
as it represents a more stable comparative figure than other<br />
potential indices. Total shareholder return is the return<br />
that shareholders would receive if they acquired a notional<br />
number of shares and reinvested dividends on those shares<br />
over a period of time.<br />
£140<br />
£120<br />
£100<br />
£80<br />
£60<br />
£40<br />
£20<br />
£0<br />
Mar 07<br />
Return on £100 worth of shares in <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> against FTSE<br />
All Share Index<br />
Mar 08<br />
Mar 09<br />
The total shareholder return provided by the company for<br />
the five-year period to 31 March <strong>2012</strong> of 96% compares to<br />
the total shareholder return provided by the FTSE All-Share<br />
Index of 108.88%.<br />
Mar 10<br />
FTSE All-Share<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong><br />
Mar 11<br />
Mar 12
Auditable information<br />
The following information has been audited by the group’s external auditors, PricewaterhouseCoopers LLP.<br />
Directors’ shareholdings<br />
The beneficial interests of the directors (including their connected persons) in the share capital of the company at the<br />
beginning and end of the financial year are set out below:<br />
31 March <strong>2012</strong> 31 March 2011<br />
Sir Alan Thomas 876,780 876,780<br />
Ivor Catto 76,795 76,795<br />
Russell Down 23,389 23,389<br />
Paul Withers 50,000 50,000<br />
Jeffrey Hume 10,000 10,000<br />
There have been no changes in the directors’ beneficial interests during the period from the end of the financial year on 31<br />
March <strong>2012</strong> to 13 June <strong>2012</strong>.<br />
Directors’ emoluments and compensation<br />
Basic<br />
salary<br />
paid or<br />
receivable<br />
£’000<br />
Fees<br />
£’000<br />
Bonus<br />
£’000<br />
Benefits<br />
in kind<br />
£’000<br />
Total<br />
<strong>2012</strong><br />
£’000<br />
Total<br />
2011<br />
£’000<br />
Pension contributions<br />
Executive directors<br />
Ivor Catto 340 - 244 16 600 498 42 39<br />
Russell Down<br />
Chairman<br />
201 - 108 12 321 288 25 25<br />
Sir Alan Thomas<br />
Non-Executive directors<br />
- 80 - 2 82 82 - -<br />
Paul Withers - 33 - - 33 33 - -<br />
Jeffrey Hume - 33 - - 33 33 - -<br />
541 146 352 30 1,069 934 67 64<br />
Notes:<br />
Russell Down participated during the year in a salary sacrifice arrangement in respect of voluntary contributions he made to the company’s<br />
stakeholder scheme. Under the arrangement his voluntary contribution is met by the company in return for an equal reduction in his<br />
contractual pay. This affords the company and the individual savings on National Insurance contributions.<br />
Russell Down’s salary is shown before the salary sacrifice. Pension contributions shown are those made by the company outside of the<br />
salary sacrifice arrangement.<br />
Benefits in kind are calculated in terms of UK taxable values. For executive directors they comprise: a non-contributory private healthcare<br />
scheme, a permanent health insurance scheme, life assurance and a company car or car allowance.<br />
<strong>2012</strong><br />
£’000<br />
2011<br />
£’000<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 69
Directors’ <strong>Report</strong> Directors’ Remuneration <strong>Report</strong> continued<br />
Directors’ share options<br />
The following options were held by directors as at 13 June <strong>2012</strong>:<br />
Director Scheme Award<br />
Date<br />
Executive<br />
Ivor Catto LTIP (B)<br />
LTIP (B)<br />
LTIP (B)<br />
LTIP (B)<br />
Notes<br />
11/12/08<br />
19/06/09<br />
16/06/10<br />
15/06/11<br />
Share price<br />
The share price at the close of the market on 31 March <strong>2012</strong> was 414p.<br />
The high for the year was 447.5p and the low was 305p.<br />
Executive share option scheme (“ESOS”)<br />
Options granted under the ESOS are ordinarily exercisable between the<br />
third and tenth anniversary of grant. The maximum duration of the option<br />
is 10 years.<br />
Performance criteria for 2004, 2005 and 2006 grants:<br />
The option is exercisable if during the three year performance period,<br />
commencing 1 April in the year of award, there has been an increase<br />
in EPS that in aggregate equates to a compound annual growth rate of<br />
at least RPI+10% for each year of the relevant performance period. The<br />
performance conditions have all been satisfied.<br />
Long Term Incentive Plan – Part A (“LTIP (A)”)<br />
Performance criteria for 2007 grant:<br />
Fifty per cent of the award is exercisable if the employee remains in group<br />
employment on the third anniversary of the award date i.e. 15 June 2010.<br />
This element is now exercisable. The remaining 50% is exercisable if<br />
the average annual adjusted EPS for the three-year performance period,<br />
commencing 1 April 2007, calculated as a percentage of the target EPS of<br />
41.53p is as follows:<br />
70 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Market<br />
price at<br />
Award<br />
Date<br />
(p)<br />
155.84<br />
152.75<br />
295.00<br />
403.60<br />
Exercise<br />
Price<br />
Nil<br />
Nil<br />
Nil<br />
Nil<br />
Number<br />
of<br />
Shares<br />
at 1<br />
April<br />
2011<br />
388,106<br />
46,546<br />
105,084<br />
-<br />
Granted<br />
in the<br />
year<br />
-<br />
-<br />
-<br />
84,235<br />
Lapsed<br />
in the<br />
year*<br />
118,354<br />
-<br />
-<br />
-<br />
Number<br />
of Shares<br />
Exercised<br />
-<br />
-<br />
-<br />
-<br />
Number<br />
of Shares<br />
at 31<br />
March<br />
<strong>2012</strong><br />
269,752<br />
46,546<br />
105,084<br />
84,235<br />
Total 539,736 84,253 118,354 - 505,617<br />
Russell<br />
Down<br />
LTIP (A)<br />
LTIP (A)<br />
LTIP (B)<br />
LTIP (B)<br />
LTIP (B)<br />
LTIP (B)<br />
ESOS<br />
ESOS<br />
ESOS<br />
15/06/07<br />
18/07/08<br />
11/12/08<br />
19/06/09<br />
16/06/10<br />
15/06/11<br />
03/08/04<br />
10/06/05<br />
30/06/06<br />
525.00<br />
348.50<br />
155.84<br />
152.75<br />
295.00<br />
403.60<br />
139.50<br />
194.00<br />
256.25<br />
Nil<br />
Nil<br />
Nil<br />
Nil<br />
Nil<br />
Nil<br />
139.50<br />
194.00<br />
256.25<br />
2,666<br />
7,000<br />
106,416<br />
25,525<br />
66,101<br />
-<br />
5,000<br />
10,000<br />
10,000<br />
-<br />
-<br />
-<br />
-<br />
-<br />
49,798<br />
-<br />
-<br />
-<br />
-<br />
711<br />
32,453<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
-<br />
2,666<br />
6,289<br />
73,963<br />
25,525<br />
66,101<br />
49,798<br />
5,000<br />
10,000<br />
10,000<br />
Total 232,708 49,798 33,164 - 249,342<br />
* The proportion of the performance element of the 2008 LTIP share options lapsed on 18th July 2011.<br />
Percentage of target EPS<br />
achieved<br />
Vesting % of 50% of the award<br />
90% or less 0%<br />
91% to 110% 0% to 100% on a straight line basis<br />
110% and above 100%<br />
The minimum threshold EPS target was not achieved and that element<br />
lapsed on 15 June 2010.<br />
Performance criteria for 2008 grant:<br />
Fifty per cent of the award is exercisable if the employee remains in<br />
group employment on the third anniversary of the award date i.e.18 July<br />
2011. This element is now exercisable. The remaining 50% is subject to<br />
achievement of a performance target based on the compound annual<br />
growth in EPS compared to growth in RPI over the three-year performance<br />
period, commencing 1 April 2008. The EPS target is set out in the table<br />
below:<br />
Compound annual EPS growth<br />
over the performance period<br />
Earliest<br />
Vesting<br />
date<br />
11/12/11<br />
19/06/12<br />
16/06/13<br />
15/06/14<br />
15/06/10<br />
18/07/11<br />
11/12/11<br />
19/06/12<br />
16/06/13<br />
15/06/14<br />
03/08/07<br />
10/06/08<br />
30/06/09<br />
Share<br />
Price at<br />
vesting<br />
date<br />
(p)<br />
370.00<br />
-<br />
-<br />
-<br />
295.00<br />
415.00<br />
370.00<br />
-<br />
-<br />
-<br />
510.00<br />
375.00<br />
155.00<br />
Vesting % of 50% of the award<br />
RPI+12.5% p.a. 100%<br />
RPI+5% to RPI+12.5% p.a. 25% to 100% (pro-rated)<br />
RPI+5% p.a. 25%<br />
Less than RPI+5% p.a. 0%<br />
Period<br />
Exercisable<br />
End<br />
10/12/18<br />
18/06/19<br />
15/06/20<br />
14/06/21<br />
14/06/17<br />
17/07/18<br />
10/12/18<br />
18/06/19<br />
15/06/20<br />
14/06/21<br />
02/08/14<br />
09/06/15<br />
18/06/19<br />
Compound annual EPS growth in excess of RPI across the performance<br />
period (adjusted to take account of changes in accounting policies during<br />
the performance period) was 10.5%, which resulted in 79.68% of that<br />
element being capable of exercise.
Notes continued<br />
Long Term Incentive Plan – Part B (“LTIP (B)”)<br />
Performance criteria for 2008 grant:<br />
Fifty per cent of the award is exercisable based on the compounded annual<br />
growth in the company’s EPS for the three-year performance period, as<br />
compared to growth in RPI as follows:<br />
Compounded annual EPS growth<br />
over the performance period<br />
Vesting % of 50% of the award<br />
RPI+15% p.a. 100%<br />
RPI+5% p.a. to RPI+15% p.a. 25% to 100% (pro-rated)<br />
RPI+5% p.a. 25%<br />
Less than RPI+5% p.a. 0%<br />
Director’s pension benefits<br />
Accrued pension<br />
31 March <strong>2012</strong><br />
£’000<br />
Transfer value<br />
31 March <strong>2012</strong><br />
£’000<br />
Fifty per cent of the award is exercisable based on a TSR performance<br />
condition. The terms of the performance condition are summarised on<br />
page 67 of this report.<br />
Compound annual EPS growth in excess of RPI across the performance<br />
period (adjusted to take account of changes in accounting policies during<br />
the performance period) was 10.5%, which resulted in 66.01% of that<br />
element being capable of exercise. The company was positioned fifth out<br />
of fourteen companies for the purposes of the TSR condition resulting in<br />
73% of that element of the award being capable of exercise.<br />
Performance criteria for 2009, 2010 and 2011 grants:<br />
The performance criteria for the awards made under Part B of the LTIP<br />
in 2009 and 2010 are the same as those for the awards made in 2011 as<br />
detailed at page 67 of this report.<br />
Russell Down remained a deferred member of the Acer Group Pension Scheme (“AGPS”), which is a defined benefit scheme,<br />
throughout the year. The following sets out the change in his accrued pension entitlements and benefits in the AGPS,<br />
together with the cash equivalent transfer value (“transfer value”), calculated in a manner consistent with “Retirement<br />
Benefit Scheme Transfer Values (GN11)” published by the Institute of Actuaries and the Faculty of Actuaries.<br />
Increase in<br />
accrued pension<br />
£’000<br />
Increase in<br />
transfer value<br />
less director’s<br />
contribution<br />
£’000<br />
Accrued pension<br />
31 March 2011<br />
£’000<br />
Transfer value 31<br />
March 2011<br />
£’000<br />
Executive<br />
Russell Down 20 174 1 52 19 122<br />
Notes:<br />
Russell Down became a deferred member of the AGPS on appointment to the board on 11th December 2008.<br />
Approved on behalf of the board<br />
Paul Withers<br />
Chairman of the Remuneration Committee<br />
13 June <strong>2012</strong><br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 71
Independent Auditors’ <strong>Report</strong> to The Members<br />
of <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong><br />
We have audited the group Financial Statements of <strong>Hyder</strong> <strong>Consulting</strong><br />
<strong>PLC</strong> for the year ended 31 March <strong>2012</strong> which comprise the consolidated<br />
income statement, the consolidated statement of comprehensive<br />
income, the consolidated balance sheet, the consolidated cash flow<br />
statement, the consolidated statement of changes in equity, the<br />
accounting policies and the related notes. The financial reporting<br />
framework that has been applied in their preparation is applicable law<br />
and International Financial <strong>Report</strong>ing Standards (IFRSs) as adopted by<br />
the European Union.<br />
Respective responsibilities of directors and auditors<br />
As explained more fully in the Directors’ Responsibilities Statement<br />
set out on pages 62 and 63, the directors are responsible for the<br />
preparation of the group Financial Statements and for being satisfied<br />
that they give a true and fair view. Our responsibility is to audit and<br />
express an opinion on the group Financial Statements in accordance<br />
with applicable law and International Standards on Auditing (UK and<br />
Ireland). Those standards require us to comply with the Auditing<br />
Practices Board’s Ethical Standards for Auditors.<br />
This report, including the opinions, has been prepared for and only for<br />
the company’s members as a body in accordance with Chapter 3 of Part<br />
16 of the Companies Act 2006 and for no other purpose. We do not,<br />
in giving these opinions, accept or assume responsibility for any other<br />
purpose or to any other person to whom this report is shown or into<br />
whose hands it may come save where expressly agreed by our prior<br />
consent in writing.<br />
Scope of the audit of the Financial Statements<br />
An audit involves obtaining evidence about the amounts and<br />
disclosures in the Financial Statements sufficient to give reasonable<br />
assurance that the Financial Statements are free from material<br />
misstatement, whether caused by fraud or error. This includes an<br />
assessment of: whether the accounting policies are appropriate to<br />
the group’s circumstances and have been consistently applied and<br />
adequately disclosed; the reasonableness of significant accounting<br />
estimates made by the directors; and the overall presentation of<br />
the Financial Statements. In addition, we read all the financial and<br />
non-financial information in the <strong>Annual</strong> <strong>Report</strong> to identify material<br />
inconsistencies with the audited Financial Statements. If we become<br />
aware of any apparent material misstatements or inconsistencies we<br />
consider the implications for our report.<br />
Opinion on Financial Statements<br />
In our opinion the group Financial Statements:<br />
• give a true and fair view of the state of the group’s affairs as at<br />
31 March <strong>2012</strong> and of its profit and cash flows for the year then<br />
ended;<br />
• have been properly prepared in accordance with IFRSs as adopted<br />
by the European Union; and<br />
• have been prepared in accordance with the requirements of the<br />
Companies Act 2006 and Article 4 of the IAS Regulation.<br />
72 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Opinion on other matters prescribed by the Companies Act 2006<br />
In our opinion:<br />
• the information given in the Directors’ <strong>Report</strong> for the financial<br />
year for which the group Financial Statements are prepared is<br />
consistent with the group Financial Statements.<br />
Matters on which we are required to report by exception<br />
We have nothing to report in respect of the following:<br />
Under the Companies Act 2006 we are required to report to you if, in<br />
our opinion:<br />
• certain disclosures of directors’ remuneration specified by law are<br />
not made; or<br />
• we have not received all the information and explanations we<br />
require for our audit.<br />
Under the Listing Rules we are required to review:<br />
• the directors’ statement, set out on page 63, in relation to going<br />
concern;<br />
• the part of the Corporate Governance Statement relating to<br />
the company’s compliance with the nine provisions of the UK<br />
Corporate Governance Code specified for our review; and<br />
• certain elements of the report to shareholders by the board on<br />
directors’ remuneration.<br />
Other matters<br />
We have reported separately on the parent company Financial<br />
Statements of <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> for the year ended 31 March <strong>2012</strong><br />
and on the information in the Directors’ Remuneration <strong>Report</strong> that is<br />
described as having been audited.<br />
Bowker Andrews (Senior Statutory Auditor)<br />
for and on behalf of PricewaterhouseCoopers LLP<br />
Chartered Accountants and Statutory Auditors<br />
London<br />
13 June <strong>2012</strong>
Consolidated<br />
Financial<br />
Statements<br />
& Notes<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 73
CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH <strong>2012</strong><br />
74 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
Note £’000 £’000<br />
Revenue 2(a) 277,309 290,297<br />
Net operating costs 3 (260,239) (272,141)<br />
Operating profit 2(b) 17,070 18,156<br />
Finance costs 4 (847) (910)<br />
Finance income 4 1,423 933<br />
Profit before tax 17,646 18,179<br />
Analysed as:<br />
Adjusted profit before tax 21,607 20,326<br />
Amortisation of acquired intangibles and acquisition costs (2,462) (2,147)<br />
Exceptional items (1,499) -<br />
Profit before tax 17,646 18,179<br />
Taxation 5 (3,723) (3,297)<br />
Profit for the year 13,923 14,882<br />
Profit/(loss) attributable to:<br />
Equity holders of the parent 13,933 14,882<br />
Non-controlling interests (10) -<br />
13,923 14,882<br />
Earnings per share (p)<br />
Basic 6(c) 36.48 39.29<br />
Diluted 6(c) 35.96 38.63<br />
The adjusted earnings per share figures are shown in note 6(d).<br />
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Profit for the year 13,923 14,882<br />
Other comprehensive (expense)/income for the year<br />
Foreign exchange movements (1,342) (1,795)<br />
Cash flow hedges (48) 133<br />
Actuarial (loss)/gain on defined benefit pension schemes (4,507) 2,705<br />
Total other comprehensive (expense)/income for the year (5,897) 1,043<br />
Total comprehensive income for the year 8,026 15,925<br />
Attributable to:<br />
Equity holders of the parent 8,034 15,925<br />
Non-controlling interests (8) -<br />
All balances are shown net of tax. 8,026 15,925<br />
The effect of tax on the balances shown is disclosed in note 5.
CONSOLIDATED BALANCE SHEET AS AT 31 MARCH <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
Note £’000 £’000<br />
Assets<br />
Non-current assets<br />
Goodwill 8 36,082 30,485<br />
Intangible assets 9 7,045 8,585<br />
Property, plant and equipment 10 7,106 7,550<br />
Deferred tax assets 17 10,373 10,079<br />
60,606 56,699<br />
Current assets<br />
Trade and other receivables 11 118,165 111,747<br />
Corporation tax recoverable 179 602<br />
Cash and cash equivalents 12 23,218 22,220<br />
141,562 134,569<br />
Liabilities<br />
Current liabilities<br />
Borrowings 13 (1,018) (1,469)<br />
Trade and other payables 14 (67,660) (64,816)<br />
Current tax liabilities (3,372) (4,469)<br />
Provisions 16 (3,958) (4,201)<br />
(76,008) (74,955)<br />
Net current assets 65,554 59,614<br />
Non-current liabilities<br />
Borrowings 13 (6,557) (7,655)<br />
Post employment benefits 26 (24,235) (23,954)<br />
Provisions 16 (1,254) (619)<br />
Deferred tax liabilities 17 (950) (731)<br />
Other non-current liabilities 18 (5,892) (1,988)<br />
(38,888) (34,947)<br />
Net assets 87,272 81,366<br />
Equity<br />
Called up ordinary share capital 19 3,863 3,854<br />
Share premium 21 29,789 29,589<br />
Retained earnings 43,646 36,606<br />
Other reserves 22 9,583 11,317<br />
Equity attributable to equity holders of the parent 86,881 81,366<br />
Non-controlling interests 391 -<br />
Total equity 87,272 81,366<br />
The Financial Statements on pages 74 to 116 were approved by the board of directors and were signed on its behalf by:<br />
Ivor Catto<br />
Chief Executive<br />
13 June <strong>2012</strong><br />
Russell Down<br />
Group Finance Director<br />
13 June <strong>2012</strong><br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 75
CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH <strong>2012</strong><br />
76 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
Note £’000 £’000<br />
Cash flows from operating activities<br />
Cash generated from operations 23(a) 15,630 19,164<br />
Net finance costs (527) (319)<br />
Tax paid (4,501) (4,522)<br />
Net cash generated from operating activities 10,602 14,323<br />
Cash flows from investing activities<br />
Acquisition of subsidiaries (net of cash acquired) (2,536) (440)<br />
Proceeds from disposal of property, plant and equipment (incl. software) 107 229<br />
Purchase of property, plant and equipment (incl. software) (2,268) (2,382)<br />
Net cash used in investing activities (4,697) (2,593)<br />
Cash flows from financing activities<br />
Proceeds on issue of shares 209 325<br />
Shares issued to non-controlling interests 50 -<br />
Employee trust purchase of own shares (361) (559)<br />
Repayments of obligations under finance leases (837) (995)<br />
Net movement on borrowings (891) (7,680)<br />
Dividends paid 7 (3,027) (2,358)<br />
Net cash used in financing activities (4,857) (11,267)<br />
Net increase in cash and cash equivalents 1,048 463<br />
Cash and cash equivalents at 1 April 22,220 21,399<br />
Effects of exchange rate fluctuations (50) 358<br />
Cash and cash equivalents at 31 March 23,218 22,220<br />
Reconciliation of net cash<br />
<strong>2012</strong> 2011<br />
Note £’000 £’000<br />
Net increase in cash and cash equivalents 1,048 463<br />
Decrease in debt 1,555 8,675<br />
Effect of exchange rate changes (56) 325<br />
Change in net cash during the year 2,547 9,463<br />
Net cash at 1 April 13,096 3,633<br />
Net cash at 31 March 23(b) 15,643 13,096
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH <strong>2012</strong><br />
Non-<br />
Share Share Retained Other controlling Total<br />
capital premium earnings reserves Total interests equity<br />
Note £’000 £’000 £’000 £’000 £’000 £’000 £’000<br />
At 1 April 2010 3,837 29,281 21,059 13,442 67,619 - 67,619<br />
Profit for the year - - 14,882 - 14,882 - 14,882<br />
Foreign exchange movements 22 - - - (1,795) (1,795) - (1,795)<br />
Cash flow hedges 22 - - - 133 133 - 133<br />
Actuarial gain on post employment benefit schemes - - 2,705 - 2,705 - 2,705<br />
New shares issued 19 17 - - - 17 - 17<br />
Premium on new shares issued 21 - 308 - - 308 - 308<br />
Dividends paid 7 - - (2,358) - (2,358) - (2,358)<br />
Share based payments 25 - - 414 - 414 - 414<br />
Employee trust purchase of own shares 22 - - - (559) (559) - (559)<br />
Transfer of own shares from EBT 22 - - (96) 96 - - -<br />
Non-controlling interests acquired - - - - - - -<br />
At 31 March 2011 3,854 29,589 36,606 11,317 81,366 - 81,366<br />
Profit for the year - - 13,933 - 13,933 (10) 13,923<br />
Foreign exchange movements 22 - - - (1,344) (1,344) 2 (1,342)<br />
Cash flow hedges 22 - - - (48) (48) - (48)<br />
Actuarial loss on post employment benefit schemes - - (4,507) - (4,507) - (4,507)<br />
New shares issued 19 9 - - - 9 - 9<br />
Premium on new shares issued 21 - 200 - - 200 - 200<br />
Dividends paid 7 - - (3,027) - (3,027) - (3,027)<br />
Share based payments 25 - - 660 - 660 - 660<br />
Employee trust purchase of own shares 22 - - - (361) (361) - (361)<br />
Transfer of own shares from EBT 22 - - (19) 19 - - -<br />
Non-controlling interests acquired - - - - - 399 399<br />
At 31 March <strong>2012</strong> 3,863 29,789 43,646 9,583 86,881 391 87,272<br />
All balances are shown net of tax. The effect of tax on the balances shown is disclosed in note 5.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 77
1. PRINCIPAL ACCOUNTING POLICIES<br />
The group’s Financial Statements have been prepared in accordance<br />
with International Financial <strong>Report</strong>ing Standards (IFRS) and IFRIC<br />
interpretations endorsed by the European Union (EU) and with those<br />
parts of the Companies Act 2006 applicable to companies reporting<br />
under IFRS.<br />
The consolidated Financial Statements are prepared on a going<br />
concern basis under the historical cost convention, as modified by<br />
the valuation of intangible assets acquired in business combinations,<br />
financial instruments and pension assets and liabilities which are<br />
measured at fair value.<br />
The principal accounting policies set out below have been used in<br />
preparation of the Financial Statements. These policies have been<br />
consistently applied to the presented information unless stated<br />
otherwise.<br />
Basis of preparation<br />
The Financial Statements have been prepared in accordance with<br />
IFRS that are applicable as at 31 March <strong>2012</strong>. IFRS are subject to<br />
amendment or interpretation by the International Accounting<br />
Standards Board and there is an ongoing process of review and<br />
endorsement by the EU.<br />
The preparation of the Financial Statements in conformity with<br />
IFRS requires the use of estimates and assumptions that affect the<br />
reported amounts of assets and liabilities at the date of the Financial<br />
Statements and the reported amounts of revenues and expenses<br />
during the reported year. Although these estimates are based on<br />
management’s best knowledge of the amount, event or actions, actual<br />
results ultimately may differ from those estimates.<br />
At the date of approval of these Financial Statements, the following<br />
Standards and Interpretations which have not been applied were in<br />
issue but not yet effective:<br />
IAS 12<br />
(amended 2010) – Deferred Tax: Recovery of Underlying Assets<br />
IAS 19<br />
(revised 2011) – Employee Benefits<br />
IAS 27<br />
(revised 2011) – Separate Financial Statements<br />
IAS 28<br />
(revised 2011) – Investments in Associates and Joint Ventures<br />
IFRS 9 – Financial Instruments<br />
IFRS 10 – Consolidated Financial Statements<br />
IFRS 11 – Joint Arrangements<br />
IFRS 12 – Disclosure of Interest in Other Entities<br />
IFRS 13 – Fair Value Measurement<br />
Improvements to IFRSs (2011)<br />
78 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
The directors anticipate that the adoption of these Standard and<br />
Interpretations in future periods will have no material impact on the<br />
Financial Statements of the group, except for:<br />
• IAS 19 was amended in June 2011. The impact on the group will be<br />
to replace interest cost and expected return on plan assets with a<br />
net interest amount that is calculated by applying the discount<br />
rate to the net defined benefit liability. This standard is effective<br />
for accounting periods commencing on or after 1 January 2013 and<br />
so will be applied in the year ending 31 March 2014, with the prior<br />
year being restated. The impact of this change on the net finance<br />
costs for the year ending 31 March 2013 is expected to be an<br />
additional interest cost of £1.7m.<br />
• IFRS 9 addresses the classification, measurement and recognition<br />
of financial assets and financial liabilities. This standard is<br />
effective for accounting periodscommencing on or after 1 January<br />
2015 and therefore the group has not commenced its evaluation of<br />
the impact on the Financial Statements.<br />
• IFRS 11 is a new standard, replacing the existing rules set out in<br />
IAS 31, ‘Interest in Joint Ventures’. Under IFRS 11 joint control is<br />
defined as the contractually agreed sharing of control of an<br />
arrangement which exists only when the decisions about the<br />
relevant activities require the unanimous consent of the parties<br />
that share control. IFRS 11 defines two forms of joint<br />
arrangements (joint operations and joint ventures). The group<br />
expects its arrangements under joint control to be classed as joint<br />
operations and we will therefore continue to consolidate our share<br />
of these arrangements. This standard is effective for accounting<br />
periods commencing on or after 1 January 2013.<br />
Basis of consolidation<br />
The group Financial Statements comprise a consolidation of the<br />
Financial Statements of <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> (the company) and all<br />
its subsidiary undertakings (together ‘the group’), and include the<br />
group’s share of profits or losses and net assets of associated<br />
undertakings and the group’s share of its joint ventures. The Financial<br />
Statements of each company in the group are prepared to 31<br />
March <strong>2012</strong>. Intra-group transactions and balances have been<br />
eliminated on consolidation.<br />
A subsidiary is an entity controlled, either directly or indirectly, by<br />
the company, where control is the power to govern the financial and<br />
operating policies of the entity so as to obtain benefit from its<br />
activities. Where necessary, adjustments are made to the Financial<br />
Statements of subsidiaries to bring the accounting policies used<br />
into line with those used by the company and the group. Noncontrolling<br />
interests represent the portion of comprehensive income<br />
and equity in subsidiaries that is not attributable to the parent<br />
company shareholders and is presented separately from parent<br />
shareholders’ equity in the consolidated balance sheet.<br />
In accordance with IAS 31 the group accounts for joint ventures under<br />
the proportionate consolidation method. The group’s share of joint<br />
ventures’ assets, liabilities and results are included from the date on<br />
which the group acquires an interest in the joint venture.
1. PRINCIPAL ACCOUNTING POLICIES continued<br />
The results, assets and liabilities of joint ventures are stated in<br />
accordance with group accounting policies. Where joint ventures<br />
adopt different accounting policies to the group, their reported results<br />
are restated so as to comply with the group’s accounting policies.<br />
Where joint ventures have a different accounting date to that of<br />
the group, results and net assets are based upon management<br />
accounts for the relevant period.<br />
Segmental reporting<br />
Operating segments are reported in a manner consistent with the<br />
internal reporting provided to the board (the chief operating decision<br />
maker) which is responsible for allocating resources and assessing<br />
performance of the operating segments.<br />
Reflecting the group’s management and internal reporting structure,<br />
segmental information is presented within the Financial Statements<br />
in respect of geographical segments. The group manages its business<br />
internationally with operations in three main geographical regions,<br />
Asia-Pacific, the Middle East, and Europe. The UK is the home country<br />
of the parent. Inter-segment revenue relates to contracts priced on an<br />
arm’s length basis.<br />
The group’s revenue is derived from the provision of engineering<br />
consultancy services.<br />
Revenue recognition<br />
Revenue is stated net of sales tax and is recognised only when the<br />
outcome of the transaction can be measured reliably and it is probable<br />
that the economic benefits will flow to the group. Any loss on a<br />
contract is recognised as soon as it is foreseen.<br />
Where fee income is determined by time charged, revenue represents<br />
the amount of services provided during the period. Revenue on long<br />
term contracts is recognised according to the stage of completion<br />
at the period end date and the terms of the contract including those<br />
in relation to variations. The stage of completion is based upon a<br />
review of the contract progress and the proportion of costs incurred<br />
for work performed compared to the estimated total cost of the<br />
contract after making a prudent allowance for uncertainties.<br />
Goodwill<br />
Goodwill carried at cost less any accumulated impairment losses, is<br />
not amortised and is tested at least annually for impairment, at cash<br />
generating unit level. If the recoverable amount of goodwill is less<br />
than the carrying value, an impairment loss is recognised immediately<br />
in the income statement. Goodwill recognised under UK GAAP prior to<br />
1 April 2004, the transition date to IFRS, is stated at net book value<br />
at this date under the exemption permitted by IFRS 1.<br />
Property, plant and equipment<br />
Property, plant and equipment is carried at historical cost less<br />
accumulated depreciation.<br />
Depreciation is calculated so as to write off the cost of the property,<br />
plant and equipment, less the estimated residual value including<br />
estimated selling costs, over the estimated useful life on a straight<br />
line basis as follows:<br />
Freehold buildings – 40 years<br />
Property, plant and equipment – 2 to 5 years<br />
Leased assets<br />
Leasing arrangements which transfer substantially all the risks and<br />
rewards of ownership of an asset to the group are classified as finance<br />
leases. All other leases are classified as operating leases.<br />
Assets held under finance leases are included within property, plant<br />
and equipment. The asset is initially measured at fair value, or if<br />
lower, the present value of the minimum lease payments. A<br />
corresponding liability is recognised within obligations under finance<br />
leases. The assets are either depreciated using the same method as<br />
similar property, plant and equipment, or the length of the lease,<br />
whichever is shorter.<br />
Leasing payments are treated as consisting of a capital element and<br />
finance costs, the capital element reducing the obligation to the<br />
lessor and the finance charges being written off to the income<br />
statement over the period of the lease in reducing amounts in relation<br />
to the written down amount.<br />
Rental costs arising under operating leases are charged to the income<br />
statement in the period to which they relate.<br />
Lease incentives received are amortised over the life of the full lease<br />
term on a straight line basis.<br />
Intangible assets<br />
Intangible assets acquired are capitalised at cost and those identified<br />
in a business combination are capitalised at fair value as at the<br />
date of acquisition. Following initial recognition, the carrying<br />
amount of an intangible asset is its cost less any accumulated<br />
amortisation and any accumulated impairment provisions. Useful lives<br />
of intangible assets are assessed on acquisition to be either indefinite<br />
or finite. Amortisation is charged as appropriate on those intangibles<br />
with finite lives, while those with indefinite lives are tested for<br />
impairment. Computer software that does not form part of property,<br />
plant and equipment is recognised separately as an intangible asset.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 79
1. PRINCIPAL ACCOUNTING POLICIES continued<br />
Amortisation is provided in line with the expected benefit derived<br />
from each asset over its expected useful life. The amortisation rates<br />
applicable are as follows:<br />
Brand names – 5 years<br />
Customer contracts and relationships – 1 to 15 years<br />
Computer software – 3 to 8 years<br />
Impairment<br />
Goodwill is reviewed annually for impairment. Reviews of other<br />
intangible assets and property, plant and equipment are conducted<br />
where there is an indication of impairment on an annual basis to<br />
determine whether the carrying value of the assets may be<br />
irrecoverable. If any such indication exists, the recoverable amount<br />
of the asset is calculated as the greater of value in use or fair value<br />
less costs to sell, where the value in use is calculated as the present<br />
value of future cash flows resulting from the asset’s continued use and<br />
eventual disposal. This value is compared to the carrying value of the<br />
asset with any resultant loss recorded as a charge in the income<br />
statement. A summary of the key assumptions used is set out in note 8.<br />
Dividends<br />
Final dividends payable are recognised as a liability in the accounting<br />
period they are approved by the company’s shareholders. Interim<br />
dividends are recognised in the period that they are paid.<br />
Trade receivables<br />
Trade receivables are recognised initially at fair value and at amortised<br />
cost thereafter, based on amounts invoiced less a provision for<br />
impairment.<br />
Trade receivables include amounts recoverable on contracts, which<br />
are stated at cost plus attributable profit to the extent that such<br />
profit is reasonably certain and after making provision for any<br />
foreseeable losses in completing contracts, less payments on account<br />
received. Cost comprises the direct costs of providing the service,<br />
together with directly attributable overheads. Payments on account<br />
represent the excess of amounts billed over that earned and are<br />
included separately within trade and other payables.<br />
Cash and cash equivalents<br />
In the consolidated cash flow statement, cash and cash equivalents<br />
consist of cash at banks and in hand and short term bank deposits.<br />
The amounts are carried at cost in the balance sheet. Bank deposits<br />
have a maturity date of less than three months from the date the<br />
deposit was made.<br />
Post employment benefit costs<br />
Payments to defined contribution pension schemes are charged as an<br />
expense to the income statement as they fall due.<br />
80 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
For defined benefit pension schemes and similar arrangements, the<br />
obligation is calculated by independent actuaries using the Projected<br />
Unit Credit Method. Actuarial gains and losses, which represent<br />
differences between the expected and actual return on the plan<br />
assets and the effect of changes in the actuarial assumptions, are<br />
recognised in full in the period in which they occur in the statement<br />
of comprehensive income.<br />
The defined post employment benefit obligation recognised in the<br />
balance sheet comprises the total for each plan of the present value<br />
of the benefit obligation using a discount rate determined by market<br />
yields on high quality corporate bonds, less the fair values of the<br />
scheme assets at the year end date.<br />
Current and past service costs, together with settlements and<br />
curtailments, are charged to operating profit.<br />
Foreign currency translation<br />
At each period end date, monetary assets and liabilities that are<br />
denominated in foreign currencies are retranslated at the rates<br />
prevailing on that date.<br />
Transactions denominated in foreign currencies are translated<br />
into sterling at the exchange rate ruling on the date of the<br />
transaction. Monetary assets and liabilities denominated in foreign<br />
currencies are retranslated at the exchange rate ruling on the period<br />
end date. Currency translation differences are recognised in the<br />
income statement.<br />
On consolidation, the balance sheets of the group’s overseas<br />
operations are translated at exchange rates prevailing at the period<br />
end date. Any gains or losses arising on translation of opening<br />
and closing reserves are accounted for in the statement of<br />
comprehensive income. Income and expense items are translated at<br />
the average exchange rates for the period.<br />
Trade payables<br />
Trade payables are obligations to pay for goods or services that have<br />
been acquired in the ordinary course of business from suppliers. Trade<br />
payables are classified as current liabilities if payment is due within<br />
one year or less. If not, they are presented as non-current liabilities.<br />
Trade payables are recognised initially at fair value and subsequently<br />
measured at amortised cost using the effective interest method.<br />
Borrowings<br />
All loans and borrowings are initially recognised at cost being the<br />
net fair value of the consideration received plus transaction costs<br />
that are directly attributable to the issue of the borrowing. After<br />
initial recognition, interest bearing loans and borrowings are<br />
subsequently measured at amortised cost using the effective interest<br />
method.
1. PRINCIPAL ACCOUNTING POLICIES continued<br />
Borrowing costs are recognised as an expense in the period in which<br />
they are incurred, except to the extent that they are directly<br />
attributable to the acquisition, construction or production of a<br />
qualifying asset. Fees paid on the establishment of loan facilities<br />
have been deferred and amortised where there is no evidence that it is<br />
probable that some or all of the facility will be drawn down. The<br />
fees are amortised over the period of the facility to which they<br />
relate.<br />
Derivative financial instruments<br />
The group’s global coverage exposes it to a variety of financial risks,<br />
such as liquidity, foreign exchange and interest rate risks. A risk<br />
management programme is in place that seeks to limit the adverse<br />
effect of these risk factors on the financial performance of the<br />
group. Where appropriate the group enters into interest rate and<br />
currency instruments in order to hedge against the effects of future<br />
interest and exchange rate fluctuations, in line with the group’s<br />
treasury policy.<br />
Derivative financial instruments utilised by the group during the year<br />
included interest rate swaps, forward foreign exchange contracts and<br />
forward foreign exchange options.<br />
Hedges are classified as follows:<br />
Fair value hedges – instruments that mitigate<br />
exposure to changes in the fair value of<br />
recognised assets or liabilities<br />
Cash flow hedges – instruments that mitigate exposure to<br />
cash flow fluctuations from a<br />
risk associated to recognised assets or<br />
liabilities, or for a forecast transaction<br />
For cash flow hedges, the element of the gain or loss that is<br />
determined to be an effective hedge is recognised in equity, with any<br />
ineffective portion recognised in the group’s income statement.<br />
Any gains or losses arising from fluctuations in the fair value of<br />
derivative financial instruments not designated as hedges are<br />
recognised immediately in the group’s income statement. The fair<br />
value of interest rate and foreign currency hedges are based on the<br />
market price of comparable financial instruments at the year end date.<br />
The fair value of short term deposits, loans and bank overdrafts with a<br />
maturity of less than one year have been assumed to approximate to<br />
their book value.<br />
Provisions<br />
Provisions are recognised in the balance sheet when the group has a<br />
legal or constructive obligation as a result of a past event and it is<br />
probable that an outflow of resources will be required to settle this<br />
obligation and a reliable estimate of this obligation can be made. The<br />
following material provisions are currently held by the group:<br />
Vacant properties<br />
Provisions are made based on the estimated net present value of<br />
future rental payments less sublease income where properties are<br />
vacant, using independent professional advice and the region’s<br />
weighted average cost of capital.<br />
Professional indemnity claims including excesses<br />
Excesses are provided for on professional indemnity insurance<br />
claims at the point these are notifiable to its insurers. Amounts<br />
provided are based on estimates derived by applying percentage<br />
probabilities to the expected outcome of the claim. Claims<br />
deemed to have a low chance of success are not provided for.<br />
The amounts provided against specific indemnity claims are<br />
necessarily judgemental and reviewed regularly in light of known<br />
circumstances.<br />
Share based payments<br />
Equity settled share based incentives are provided to employees under<br />
the <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> Executive Share Option Scheme 2002 and<br />
the <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> 2006 Long Term Incentive Plan. Equity<br />
settled share based payments are measured at fair value at the date of<br />
grant. The fair value determined at the grant date is expensed on a<br />
straight line basis over the vesting period, based on the group’s<br />
estimate of shares that will eventually vest.<br />
Fair value for options with non-market performance conditions is<br />
measured by using the Black Scholes option pricing model which the<br />
directors believe to be the most suitable calculation technique. The<br />
expected life used in the model is based on management’s best<br />
estimate taking account of employees’ behaviour. Options with<br />
market-related performance conditions are measured using the Monte<br />
Carlo model.<br />
Taxation<br />
The income tax expense represents the sum of the tax currently<br />
payable and deferred tax.<br />
The tax currently payable is based on the estimated taxable profit for<br />
the year. Taxable profit differs from net profit as reported in the<br />
income statement because it excludes items of income or expense that<br />
are taxable or deductible in other financial years and it further<br />
excludes items that are never taxable or deductible. The group’s<br />
liability for current tax is calculated using the tax rates that have<br />
been enacted in each jurisdiction as at the year end date.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 81
1. PRINCIPAL ACCOUNTING POLICIES continued<br />
Deferred tax is recognised in respect of temporary differences that<br />
have originated but not reversed at the year end date. Deferred tax is<br />
measured on a non-discounted basis using tax rates (and laws) that<br />
have been enacted or substantially enacted by the year end date and<br />
are expected to apply when the related deferred tax asset is realised<br />
or the deferred tax liability is settled.<br />
A deferred tax asset is recognised only when it is probable that<br />
sufficient taxable profits will be available against which the temporary<br />
differences can be recovered.<br />
Acquisition costs<br />
Acquisition related costs are expensed through the consolidated<br />
income statement and included within ‘amortisation of acquired<br />
intangibles and acquisition costs’.<br />
Exceptional items<br />
Exceptional items are transactions that are unusual in size or<br />
nature. The directors consider that such transactions should be<br />
separately disclosed in order to allow the user of the Financial<br />
Statements to better understand the underlying performance of the<br />
group.<br />
Employee Benefit Trust<br />
The company’s EBT is a separately administered discretionary trust for<br />
the benefit of employees. The assets of the EBT comprise shares in<br />
the company. The assets, liabilities, income and costs of the EBT are<br />
consolidated in the Financial Statements. The investment in own<br />
shares is treated as a deduction in shareholders’ funds.<br />
Key assumptions and estimates<br />
In producing the Financial Statements, the group has to make<br />
judgements, assumptions and estimates that directly affect the<br />
reported amounts of revenues and expenses, assets and liabilities,<br />
and the disclosure of contingent liabilities. The directors base their<br />
key assumptions and estimates on historical experience and various<br />
reasonable assumptions based upon the circumstances. The<br />
result forms the basis for making judgements regarding the<br />
carrying value of assets and liabilities that may not be readily<br />
available from other sources. Under different assumptions<br />
or circumstances, actual results may be different to these estimates.<br />
Significant judgements<br />
The preparation of the Financial Statements requires the group to<br />
make estimates and judgements in relation to the valuation of<br />
revenues, costs, assets and liabilities. Actual results may be different<br />
from those which had been estimated, which could have a consequent<br />
effect on the reported results.<br />
82 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
The estimates and judgements which management consider may have<br />
the most significant impact on the Financial Statements are<br />
described below:<br />
• Revenue recognition: the group believes that the most<br />
significant judgement is made in relation to the recognition<br />
of revenue and the assessment of contract progress which<br />
determines the proportion of contract work completed. Work<br />
in progress is valued and carried forward based on the revenue<br />
recognised less amounts billed. Consequently the calculation<br />
of the percentage of contract completion affects the valuation<br />
of revenue and work in progress. The group has established<br />
procedures to ensure that contracts and forecasts are reviewed<br />
regularly.<br />
• Trade receivables: balances due from clients are held on<br />
the balance sheet at invoiced amounts less a provision for<br />
impairment. The group exercises judgement in setting receivables<br />
provisions, particularly in relation to amounts due in the Middle<br />
East, utilising its substantial market and client knowledge.<br />
• Goodwill: the group assesses acquired goodwill for impairment<br />
in accordance with its accounting policies and the assumptions<br />
detailed in note 8. The value in use calculations performed use<br />
estimates relating to future predicted cash flows expected from<br />
the cash generating units (CGUs). The group uses a CGU specific<br />
weighted average cost of capital as the basis of the discount<br />
rate for these calculations. In addition, the calculations are<br />
performed using a discount rate increased by 1% and growth<br />
rates reduced by 1% to identify the level of headroom available<br />
in the calculation.<br />
• Intangible assets: judgement is exercised in relation to<br />
the valuation of intangible assets from acquired businesses,<br />
including brand names, order book and customer relationships,<br />
and their expected useful lives. The group utilises its market<br />
knowledge and specialist valuation tools in order to identify the<br />
appropriate valuation for the acquired assets.<br />
• Post employment benefits: the actuarial valuation of benefits<br />
is carried out based on a number of assumptions, including those<br />
related to discount rates, mortality rates and inflation. The<br />
assumptions are set by the group using the services of qualified<br />
actuaries and using available market data. The assumptions are<br />
disclosed in note 26.<br />
• Deferred tax: the valuation of deferred assets is dependent on<br />
assumptions related to future profitability. The group reviews<br />
profit forecasts for the affected businesses in order to ascertain<br />
the value of the asset to be carried forward.
2. SEGMENTAL ANALYSIS BY LOCATION OF OPERATIONS<br />
Operating segments are reported in a manner consistent with the internal reporting provided to the board (the chief operating decision maker),<br />
which is responsible for allocating resources and assessing performance of the operating segments.<br />
Reflecting the group’s management and internal reporting structure, segmental information is presented within the Financial Statements in respect<br />
of geographical segments. The group manages its business internationally with operations in three main geographical regions, Asia-Pacific, the<br />
Middle East, and Europe. The UK is the home country of the parent. Inter-segment revenue relates to contracts priced on an arm’s length basis.<br />
The group’s revenue is derived from the provision of engineering consultancy services.<br />
(a) Segment revenue<br />
Year ended 31 March <strong>2012</strong> Year ended 31 March 2011<br />
Total Revenue from Total Revenue from<br />
segment Inter-segment external segment Inter-segment external<br />
revenue revenue customers revenue revenue customers<br />
£’000 £’000 £’000 £’000 £’000 £’000<br />
Australia 91,301 (1,123) 90,178 92,102 (338) 91,764<br />
Asia 22,336 (277) 22,059 22,721 (466) 22,255<br />
Asia-Pacific 113,637 (1,400) 112,237 114,823 (804) 114,019<br />
Middle East 67,362 (3,525) 63,837 66,716 (1,229) 65,487<br />
UK 75,985 (945) 75,040 87,799 (604) 87,195<br />
Germany 26,273 (78) 26,195 23,626 (30) 23,596<br />
Europe 102,258 (1,023) 101,235 111,425 (634) 110,791<br />
(b) Segment results<br />
283,257 (5,948) 277,309 292,964 (2,667) 290,297<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Australia 13,821 13,912<br />
Asia 889 547<br />
Asia-Pacific 14,710 14,459<br />
Middle East 3,882 2,605<br />
UK 3,981 5,460<br />
Germany 1,545 1,105<br />
Europe 5,526 6,565<br />
Corporate overheads (3,087) (3,326)<br />
Adjusted operating profit 21,031 20,303<br />
Amortisation of acquired intangibles (1,781) (2,147)<br />
Acquisition costs (681) -<br />
(2,462) (2,147)<br />
Exceptional items<br />
UK vacant property costs (1,349) -<br />
UK AGPS closure costs (150) -<br />
(1,499) -<br />
Operating profit 17,070 18,156<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 83
2. SEGMENTAL ANALYSIS BY LOCATION OF OPERATIONS continued<br />
(c) Other profit and loss disclosures<br />
84 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Year ended 31 March <strong>2012</strong> Year ended 31 March 2011<br />
Amortisation of Amortisaion of<br />
Amortisation of acquired Amortisation of acquired<br />
Depreciation software intangibles Depreciation software intangibles<br />
£’000 £’000 £’000 £’000 £’000 £’000<br />
Australia 1,298 288 53 1,363 296 190<br />
Asia 238 170 79 270 176 166<br />
Asia-Pacific 1,536 458 132 1,633 472 356<br />
Middle East 435 571 625 797 574 941<br />
UK 697 437 555 639 474 386<br />
Germany 383 256 469 404 235 464<br />
Europe 1,080 693 1,024 1,043 709 850<br />
(d) Total assets<br />
3,051 1,722 1,781 3,473 1,755 2,147<br />
31 March 31 March<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Australia 50,922 40,718<br />
Asia 19,345 18,249<br />
Asia-Pacific 70,267 58,967<br />
Middle East 65,462 55,459<br />
UK 42,177 46,512<br />
Germany 24,262 30,330<br />
Europe 66,439 76,842<br />
202,168 191,268
3. NET OPERATING COSTS<br />
The following expenses/(income) have been included in arriving at operating profit:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Employee costs (excluding interest on pension costs) 169,005 178,280<br />
Sub-consultant costs 35,540 38,924<br />
Depreciation of property, plant and equipment<br />
- Owned assets 2,323 2,537<br />
- Under finance leases 728 936<br />
Operating lease rentals payable<br />
- Plant and machinery 4,044 3,640<br />
- Property 6,220 6,498<br />
Amortisation of intangible assets<br />
- Software 1,722 1,755<br />
- Business combinations 1,781 2,147<br />
Acquisition costs 681 -<br />
Loss on disposal of property, plant and equipment 9 680<br />
Other operating expenses 37,525 37,138<br />
Other operating income (890) (524)<br />
Net foreign exchange loss 82 149<br />
Fair value gain on financial instruments (30) (19)<br />
Exceptional items 1,499 -<br />
Net operating costs 260,239 272,141<br />
Services provided by the group’s auditor and network firms<br />
During the year the group (including its overseas subsidiaries) obtained the following services<br />
from the group’s auditor at costs as detailed below:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Fees payable to the company’s auditor for the audit of the parent company and<br />
consolidated Financial Statements 102 92<br />
Fees payable to the company’s auditor and its associates for other services:<br />
- The audit of company’s subsidiaries pursuant to legislation 328 338<br />
- Tax services 86 75<br />
- Due diligence on acquisitions 25 -<br />
- IT reviews 23 37<br />
Other services not covered above 20 8<br />
584 550<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 85
4. NET FINANCE INCOME<br />
86 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Bank borrowings (474) (463)<br />
Finance leases (63) (89)<br />
Interest rate financial instruments (151) (234)<br />
Amortisation of arrangement fees (18) -<br />
Unwinding of discounts on provisions and other liabilities (141) (124)<br />
Finance costs (847) (910)<br />
Investment income 285 467<br />
Interest received on settlement of contracts 133 -<br />
Unwinding of discounts on trade receivables 76 -<br />
Net finance income on post employment benefit schemes 929 466<br />
Finance income 1,423 933<br />
Net finance income 576 23
5. TAXATION<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Current tax<br />
Current year 4,435 4,842<br />
Adjustment in respect of prior years (639) (141)<br />
Total current tax 3,796 4,701<br />
Deferred tax<br />
Current year 1,279 (1,611)<br />
Adjustment in respect of prior years (1,025) 497<br />
Adjustment to deferred tax attributable to change in rate (327) (290)<br />
Total deferred tax (73) (1,404)<br />
Total tax 3,723 3,297<br />
The tax rate of 21.1% for the year (2011: 18.1%) is lower than the standard rate of corporation tax in the UK of 26% (2011: 28%). The differences<br />
are explained below:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Profit before tax 17,646 18,179<br />
Tax at UK effective rate of 26% (2011: 28%) 4,587 5,090<br />
Adjustments to tax in respect of prior years (1,664) 356<br />
Effect of different tax rates of subsidiaries operations in other jurisdictions (378) (71)<br />
Effect of expenses not deductible for tax 1,025 288<br />
Effect of research and development tax credits (833) (1,811)<br />
Effect of movement on deferred tax assets not recognised 649 (648)<br />
Irrecoverable overseas tax 664 383<br />
Effect on deferred tax balances due to change in UK corporate tax rate to 26% (effective 1 April 2011) (327) (290)<br />
Total tax 3,723 3,297<br />
Tax on items charged to other comprehensive (expense)/income<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Deferred tax (credit)/charge in respect of actuarial (loss)/gain on defined benefit pension (263) 2,126<br />
Factors that may affect future tax charges<br />
(263) 2,126<br />
The Finance Act 2011 included legislation to reduce the main rate of corporation tax from 26% to 25% from 1 April <strong>2012</strong>. In addition further<br />
reductions were announced in the March <strong>2012</strong> Budget Statement. A resolution passed by Parliament on 26 March <strong>2012</strong> reduced the main rate of<br />
corporation tax to 24% from 1 April <strong>2012</strong>. The reduction from 26% to 24% has been reflected in these Financial Statements.<br />
The proposed reductions of the main rate of corporation tax by 1% per annum to 22% by 1 April 2014 are expected to be enacted separately each<br />
year. The overall effect of the further changes from 24% to 22%, if these applied to the deferred tax balance at the balance sheet date, would be<br />
to reduce the deferred tax asset by £0.5m (being £0.3m in 2013 and £0.2m in 2014).<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 87
6. EARNINGS PER SHARE<br />
(a) Number of shares<br />
88 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
Weighted average number of shares in issue 38,195,119 37,876,301<br />
Effect of dilution<br />
Share options 551,891 645,467<br />
Weighted average shares (diluted) 38,747,010 38,521,768<br />
(b) Earnings used in the calculation of earnings per share<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Profit attributable to equity shareholders 13,933 14,882<br />
Add back amortisation of acquired intangibles and acquisition costs 2,462 2,147<br />
Add back exceptional items 1,499 -<br />
Less tax on adjusted items (712) (333)<br />
Adjusted earnings 17,182 16,696<br />
(c) Earnings per share<br />
<strong>2012</strong> 2011<br />
p p<br />
Basic earnings per share 36.48 39.29<br />
Add back amortisation of acquired intangibles and acquisition costs 6.45 5.67<br />
Add back exceptional items 3.92 -<br />
Less tax on adjusted items (1.86) (0.88)<br />
Adjusted basic earnings per share 44.99 44.08<br />
<strong>2012</strong> 2011<br />
p p<br />
Diluted earnings per share 35.96 38.63<br />
Add back amortisation of acquired intangibles and acquisition costs 6.35 5.57<br />
Add back exceptional items 3.87 -<br />
Less tax on adjusted items (1.84) (0.86)<br />
Adjusted diluted earnings per share 44.34 43.34
7. DIVIDENDS<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Dividends charged to equity in the year 3,027 2,358<br />
Equity - per ordinary 10p share<br />
Final dividend paid (p) 6.00 4.50<br />
Interim dividend paid (p) 2.00 1.75<br />
As at 31 March <strong>2012</strong>, the employee benefit trust had an agreement in place to waive dividends on 801,976 ordinary shares (2011: 710,719). This<br />
arrangement reduced the dividends paid in the year by £59,000 (2011: £45,000).<br />
The directors are proposing a final dividend of 7.00p per share (2011: 6.00p). In accordance with IFRS the dividend has not been recognised in the<br />
Financial Statements but if approved by shareholders will be paid on 10 August <strong>2012</strong> to shareholders on the register as at 13 July <strong>2012</strong>.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 89
8. GOODWILL<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Cost<br />
At 1 April 30,485 31,242<br />
Exchange adjustments (345) (227)<br />
Amendments to fair value of consideration - (530)<br />
Additions 5,942 -<br />
Cost and net book amount at 31 March 36,082 30,485<br />
The amendments to fair value of consideration reflect adjustments made in the prior year in relation to the estimated values assigned to<br />
contingent consideration. The carrying value of goodwill by cash generating unit (CGU) is as follows:<br />
90 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Australia 10,874 6,888<br />
Asia 4,782 4,757<br />
Asia-Pacific 15,656 11,645<br />
Middle East 7,940 6,376<br />
UK 6,437 6,101<br />
Germany 6,049 6,363<br />
Europe 12,486 12,464<br />
36,082 30,485<br />
The group tests goodwill annually for impairment, or more frequently where indicators of impairment become apparent. Based on the assumptions<br />
detailed below, no impairment to the group’s goodwill was identified.<br />
As at 31 March <strong>2012</strong>, the value of goodwill acquired was tested for impairment using the following key assumptions based on long term market<br />
trends, market data and management experience and expectations:<br />
Discount rate<br />
A pre tax discount rate of between 9.7% and 14.1% (2011: between 10.8% and 15.2%) was applied, which was calculated using the group’s pre<br />
tax Weighted Average Cost of Capital (WACC) adjusted for the forecast level of gearing, and market conditions and risks specific to each CGU. The<br />
WACC was calculated using the Capital Asset Pricing Model derived from long term industry and market data.<br />
Future cash flows<br />
The most recent three year financial forecast, combined with an appropriate growth rate for an extrapolated period of two years, has been assumed<br />
for the purposes of impairment testing. The growth rates used incorporate the expected recovery in underlying performance of each CGU following<br />
the recent challenging economic conditions. Budgeted and extrapolated cash flows are reflective of the risks inherent in each CGU. Margins are<br />
based on the latest forecasts and are consistent with the directors’ future expectations.<br />
Actual future cash flows may differ significantly from these estimates, due to the effect of changes in market conditions or to subsequent<br />
decisions on the use of the assets. These differences may have a material impact on the asset values, and impairment calculations reported in<br />
future periods.<br />
The short term compound growth rates assumed in the value in use calculations were in the range 5% to 20% per annum (2011: 3% to 27% per<br />
annum). The long term growth rates applied in perpetuity to each CGU were between 1.3% and 2.5% per annum (2011: 2.5% per annum).<br />
Sensitivity analysis<br />
The group has conducted a sensitivity analysis on the impairment test of each CGU’s carrying value. The following sensitivities were applied to<br />
identify CGUs where an impairment may arise: an increase of 1 percentage point to the discount rate and a reduction of the growth rate; previous<br />
operating performance is also considered in the context of determining future cash flows. The Asian CGU was identified as having the potential<br />
to be impaired. The carrying value of the goodwill allocated to the Asian CGU was £4.8m (2011: £4.8m), with the impairment test indicating<br />
headroom of £1.6m; cash flows were discounted at 10.2%; and an average growth rate of 20% per annum assumed to determine the value in use.<br />
Increasing the discount rate by 1% or reducing the growth rate by 1% does not result in an impairment. Reducing the average growth rate by 2%<br />
would remove the remaining headroom.
9. INTANGIBLE ASSETS<br />
Customer<br />
contracts and Computer<br />
Brand names relationships software Total<br />
£’000 £’000 £’000 £’000<br />
Cost or valuation<br />
At 1 April 2010 1,726 14,986 11,397 28,109<br />
Exchange adjustments - (161) (37) (198)<br />
Additions - separately acquired - - 1,077 1,077<br />
Acquisitions - 588 29 617<br />
Disposals - - (99) (99)<br />
At 31 March 2011 1,726 15,413 12,367 29,506<br />
Exchange adjustments (18) (139) (124) (281)<br />
Additions - separately acquired - - 760 760<br />
Acquisitions - 1,275 10 1,285<br />
Disposals - - (408) (408)<br />
At 31 March <strong>2012</strong> 1,708 16,549 12,605 30,862<br />
Accumulated amortisation<br />
At 1 April 2010 (1,175) (10,290) (5,655) (17,120)<br />
Exchange adjustments (12) 27 1 16<br />
Charge for the year (335) (1,812) (1,755) (3,902)<br />
Disposals - - 85 85<br />
At 31 March 2011 (1,522) (12,075) (7,324) (20,921)<br />
Exchange adjustments 13 86 101 200<br />
Charge for the year (143) (1,638) (1,722) (3,503)<br />
Disposals - - 407 407<br />
At 31 March <strong>2012</strong> (1,652) (13,627) (8,538) (23,817)<br />
Net book amount:<br />
At 31 March <strong>2012</strong> 56 2,922 4,067 7,045<br />
At 31 March 2011 204 3,338 5,043 8,585<br />
There are no intangible assets with indefinite lives. Amortisation is provided in line with the expected benefit derived from each asset over its<br />
expected useful life, and charged to net operating costs.<br />
The following useful lives have been determined for the intangible assets carried in the balance sheet:<br />
Brand names - 5 years<br />
Customer contracts and relationships - 1 to 15 years<br />
Computer software - 3 to 8 years<br />
An element of historic acquisition consideration has been allocated to brand names that have been retained by the group for future marketing<br />
purposes.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 91
10. PROPERTY, PLANT AND EQUIPMENT<br />
Freehold land<br />
Property,<br />
plant and<br />
and buildings equipment Total<br />
£’000 £’000 £’000<br />
Cost or valuation<br />
At 1 April 2010 6,315 23,695 30,010<br />
Exchange adjustments (55) 99 44<br />
Additions - separately acquired - 1,305 1,305<br />
Acquisitions - 98 98<br />
Disposals - (2,064) (2,064)<br />
At 31 March 2011 6,260 23,133 29,393<br />
Exchange adjustments (425) (229) (654)<br />
Additions - separately acquired - 1,902 1,902<br />
Acquisitions - 995 995<br />
Disposals - (1,111) (1,111)<br />
At 31 March <strong>2012</strong> 5,835 24,690 30,525<br />
Accumulated depreciation<br />
At 1 April 2010 (3,663) (15,891) (19,554)<br />
Exchange adjustments 32 (17) 15<br />
Charge for the year (72) (3,401) (3,473)<br />
Disposals - 1,169 1,169<br />
At 31 March 2011 (3,703) (18,140) (21,843)<br />
Exchange adjustments 278 201 479<br />
Charge for the year (73) (2,978) (3,051)<br />
Disposals - 996 996<br />
At 31 March <strong>2012</strong> (3,498) (19,921) (23,419)<br />
Net book amount:<br />
At 31 March <strong>2012</strong> 2,337 4,769 7,106<br />
At 31 March 2011 2,557 4,993 7,550<br />
Assets held under finance leases have the following net book amount:<br />
92 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Cost 3,211 3,358<br />
Accumulated depreciation (2,758) (2,112)<br />
Net book amount 453 1,246<br />
Assets held under finance leases are vehicles, office equipment and fit-out. Depreciation is charged to net operating costs.
11. TRADE AND OTHER RECEIVABLES<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Trade receivables 74,171 72,581<br />
Less: Provision for impairment of receivables (11,345) (14,520)<br />
Trade receivables - net of provisions 62,826 58,061<br />
Amounts recoverable on contracts 45,210 45,369<br />
Other receivables 6,998 5,416<br />
Prepayments and accrued income 3,131 2,901<br />
118,165 111,747<br />
The group experiences its maximum exposure to credit risk in relation to its principal financial assets, comprising trade and other receivables,<br />
amounts recoverable on contracts, and cash and cash equivalents. A provision is made for potential impairment of receivables, based on prior<br />
experience and an assessment of market conditions. The board believes there is currently no further credit risk provision required in excess of the<br />
provision for impairment of receivables.<br />
Amounts due from the group’s joint arrangements are included as trade and other receivables. Additional information regarding these amounts is<br />
included in note 29.<br />
Book values of receivables approximate their fair values.<br />
As of 31 March <strong>2012</strong>, trade receivables of £35.0m (2011: £28.6m) were past due but not impaired. The ageing analysis of these trade receivables<br />
from date of issue is as follows:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Greater than 180 days 12,152 13,127<br />
Between 120 days and 180 days 3,178 3,646<br />
Between 90 days and 120 days 1,693 1,863<br />
Between 60 days and 90 days 2,581 3,194<br />
Greater than 60 days 19,604 21,830<br />
Between 30 days and 60 days 15,385 6,763<br />
Less than 30 days - -<br />
34,989 28,593<br />
Of the balance between 30 and 60 days past due, £7.9m related to one outstanding debtor and has been paid since the balance sheet date.<br />
The carrying amount of the group’s trade receivables are denominated in the following currencies:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Sterling 10,713 11,924<br />
UAE Dirham 14,335 17,987<br />
Euro 5,797 8,117<br />
Australian Dollar 13,546 10,178<br />
Hong Kong Dollar 2,487 2,696<br />
United States Dollar 1,458 841<br />
Bahrain Dinar 1,219 1,541<br />
Qatari Rial 11,280 3,015<br />
Chinese Yuan 1,523 1,434<br />
Other 468 328<br />
Total 62,826 58,061<br />
Of the Qatari Rial trade receivable balance, £7.9m related to one debtor; this amount has been paid since the balance sheet date.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 93
11. TRADE AND OTHER RECEIVABLES continued<br />
The allocation of the provision for impairment of receivables according to the date of issue of invoice is as follows:<br />
12. CASH AND CASH EQUIVALENTS<br />
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<strong>2012</strong> 2011<br />
£’000 £’000<br />
Greater than 180 days 11,038 14,037<br />
Between 120 days and 180 days 165 233<br />
Between 90 days and 120 days 29 201<br />
Between 60 days and 90 days 18 45<br />
Between 30 days and 60 days 95 4<br />
Less than 30 days - -<br />
The movement in the provision is analysed below:<br />
11,345 14,520<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
At 1 April 14,520 17,266<br />
Exchange differences 5 (566)<br />
On acquisition of subsidiaries 43 -<br />
Provision made 4,757 5,662<br />
Released (3,066) (5,520)<br />
Utilised (4,914) (2,322)<br />
11,345 14,520<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Cash at bank and in hand 22,175 19,319<br />
Short term bank deposits 1,043 2,901<br />
23,218 22,220<br />
The above includes restricted cash of £3.0m (2011: £2.5m), primarily related to the group’s captive cell insurance arrangement and cash covered<br />
guarantees.
13. FINANCIAL LIABILITIES - BORROWINGS<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Current<br />
Bank loans 759 887<br />
Obligations under finance leases 259 582<br />
1,018 1,469<br />
Non-current<br />
Bank loans 6,338 7,100<br />
Obligations under finance leases 219 555<br />
6,557 7,655<br />
Bank loans are all unsecured and bear interest at a margin over LIBOR or foreign equivalents appropriate to the country in which the borrowing is<br />
incurred. In line with the group’s treasury policy, the group has entered into a number of interest rate swaps in the UK.<br />
14. TRADE AND OTHER PAYABLES<br />
<strong>2012</strong> 2011<br />
Note £’000 £’000<br />
Trade payables 15 11,950 12,898<br />
Payments in advance on contracts 28,507 21,687<br />
Other tax and social security payable 15 5,217 5,985<br />
Other payables 11,735 11,895<br />
Accruals 9,608 11,721<br />
Lease incentives 276 213<br />
Derivative financial instruments 15 117 152<br />
Contingent consideration 15 250 265<br />
67,660 64,816<br />
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15. FINANCIAL INSTRUMENTS<br />
The group’s worldwide operations and debt financing arrangements<br />
expose it to a variety of risks, such as foreign currency, interest rate,<br />
credit and liquidity risks. These risks are monitored by the board on<br />
a periodic basis and a group treasury policy and risk management<br />
controls are in place for managing these risks. A group risk register is<br />
maintained and reviewed by the group risk manager, who in turn leads<br />
the risk management programme within the business.<br />
The group’s financial instruments comprise cash, bank loans and<br />
overdrafts, certain payables, and contingent consideration on<br />
acquisitions, together with various items arising directly from<br />
operations. An explanation of the group’s objectives, policies and<br />
strategies for the use of derivatives and other financial instruments<br />
to manage and control the risks of the group is set out in the Business<br />
Review on page 28 to 30.<br />
Foreign currency risk<br />
With approximately 75% of the group’s revenue generated in<br />
currencies other than sterling, the group’s balance sheet and income<br />
statement can be affected by movements in exchange rates. The<br />
revenue and costs of overseas operations normally arise in the same<br />
currency and consequently the exposure to exchange differences<br />
is not normally significant and consequently not hedged. Overseas<br />
operations maintain local currency overdraft and bonding facilities,<br />
which provide partial mitigation against balance sheet risk. The group<br />
enters into forward foreign exchange contracts in order to hedge<br />
intercompany cash flows.<br />
The group has £20.2m (2011: £18.2m) of cash and cash equivalents at<br />
the year end held in bank accounts which is immediately available for<br />
use.<br />
At 31 March <strong>2012</strong>, if sterling had weakened or strengthened by 10%, a<br />
reasonably possible change, against the Euro with all other variables<br />
held constant, post-tax profit for the year would have been £0.1m<br />
(2011: £0.1m) higher or lower respectively.<br />
At 31 March <strong>2012</strong>, if sterling had weakened or strengthened by 10%<br />
against the UAE Dirham with all other variables held constant, posttax<br />
profit for the year would have been £0.1m (2011: £0.2m) higher or<br />
lower respectively.<br />
At 31 March <strong>2012</strong>, if sterling had weakened or strengthened by 10%<br />
against the Australian Dollar with all other variables held constant,<br />
post-tax profit for the year would have been £0.9m (2011: £1.2m)<br />
higher or lower respectively.<br />
Interest rate risk<br />
The group holds a number of bank facilities that are primarily floating<br />
rate in nature. In 2005, in order to fund special contributions and the<br />
incentive payments made to transferring members of the AGPS the<br />
group negotiated an unsecured floating rate loan facility. Given the<br />
long term nature of this loan the group elected to partially mitigate<br />
this risk through an interest rate swap.<br />
At 31 March <strong>2012</strong> the group had no other significant hedge<br />
arrangements in place. It is the group’s policy where necessary to<br />
96 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
enter into interest rate instruments and currency options in order<br />
to hedge against the effects of future interest and exchange rate<br />
fluctuations. Surplus funds are invested on short term deposits for<br />
varying periods of up to three months depending on the immediate<br />
cash requirements of the group and interest rates available.<br />
At 31 March <strong>2012</strong>, if interest rates on financial instruments had<br />
decreased or increased by 2%, a reasonably possible change, with all<br />
other variables held constant, post tax profit for the year would have<br />
been £0.01m (2011: £0.01m) higher or lower respectively.<br />
Liquidity risk<br />
The group has a policy of maintaining a blend of short and long term<br />
committed facilities designed to ensure there are sufficient funds<br />
available for operations. To manage working capital and funding<br />
requirements the group has two principal revolving credit facilities<br />
in the UK, with HSBC (£22.5m) and Barclays (£18m) which expire in<br />
December 2015 and February 2013 respectively, a £1.5m overdraft<br />
with HSBC in the UK and other working capital facilities through local<br />
relationship banks in the countries that we operate in. In order to<br />
fund special contributions to the AGPS and incentive payments to<br />
members, who accepted the offer to transfer their liabilities out of the<br />
AGPS, the group has 10 year term facilities totalling £7.1m with HSBC<br />
in the UK. All of the above facilities are unsecured. Total committed<br />
facilities amount to £48.1m, including £0.5m of finance leases.<br />
Credit risk<br />
The group’s main exposure is on amounts due from customers and<br />
is reported under the relevant balance sheet heading. In line with<br />
group policy, where possible, appropriate credit checks are performed<br />
on new customers to identify potential risks. The group recognises<br />
the increased credit risk in the current economic climate, and seeks<br />
to mitigate this through strong client relationships and advance<br />
payments. There are no significant credit risks associated with the<br />
other balances reported as financial instruments and the group does<br />
not utilise derivatives to manage its credit risk. The counterparties<br />
for cash and cash equivalents are limited to financial institutions<br />
with an AA credit rating or better, except for immaterial balances in<br />
jurisdictions where there is no alternative.<br />
Fair values<br />
The fair value of financial assets and liabilities of the group are not<br />
considered to be materially different to their reported book value.<br />
Hedging activities<br />
At 31 March <strong>2012</strong> the group had a hedging arrangement in place being<br />
an interest rate swap fixed at a rate of 5.1% against a portion of a<br />
variable rate loan with a principal amount of £3.5m (2011: £5.0m).
15. FINANCIAL INSTRUMENTS continued<br />
Fair value estimation<br />
Effective 1 April 2010, the group adopted the amendment to IFRS 7 for financial instruments that are measured in the balance sheet at fair value.<br />
This requires disclosure of fair value measurements by level, based on the fair value measurement hierarchy below:<br />
– Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1).<br />
– Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is,<br />
as prices) or indirectly (that is, derived from prices) (level 2).<br />
– Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).<br />
The only financial assets or liabilities that are measured at fair value by the group are the derivative financial instruments recorded as level 2<br />
liabilities below.<br />
Liquidity risk of financial liabilities<br />
The following tables set out the contractual maturity of the undiscounted cash flows of the group’s financial liabilities.<br />
Weighted<br />
average period Weighted More Total<br />
for which rate is average Within 1 to 2 2 to 5 than 5 carrying<br />
fixed interest rate 1 year years years years amount<br />
Months % £’000 £’000 £’000 £’000 £’000<br />
Fixed rate:<br />
Bank loans 6 6.59 46 - - - 46<br />
Finance leases 28 6.60 283 93 93 61 530<br />
329 93 93 61 576<br />
Floating rate:<br />
Bank loans 713 715 2,137 3,486 7,051<br />
713 715 2,137 3,486 7,051<br />
Non-interest bearing:<br />
Trade payables 11,950 - - - 11,950<br />
Other tax and social security payable 5,217 - - - 5,217<br />
Derivative financial instruments (level 2) 117 82 145 37 381<br />
Deferred and contingent consideration 250 2,594 - - 2,844<br />
Total 18,576 3,484 2,375 3,584 28,019<br />
Obligations under finance leases fall due as follows: More Total<br />
Within 1 to 2 2 to 5 than 5 carrying<br />
1 year years years years amount<br />
£’000 £’000 £’000 £’000 £’000<br />
Finance leases 283 93 93 61 530<br />
Less future interest charges (24) (16) (12) - (52)<br />
Present value of finance lease obligations 259 77 81 61 478<br />
Interest on fixed rate financial instruments is fixed until maturity, while interest on floating rate financial instruments is repriced at intervals of<br />
less than one year.<br />
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15. FINANCIAL INSTRUMENTS continued<br />
The effect of interest rate swaps is to modify the amount and interest rates of bank loans as below:<br />
98 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Weighted More Total<br />
average Within 1 to 2 2 to 5 than 5 carrying<br />
interest rate 1 year years years years amount<br />
% £’000 £’000 £’000 £’000 £’000<br />
Fixed rate 5.1 401 240 675 626 1,942<br />
Floating rate - 358 475 1,462 2,860 5,155<br />
Bank loans after hedging 759 715 2,137 3,486 7,097<br />
Interest rate risk of financial instruments<br />
The following table sets out the group’s interest bearing financial instruments, modified for the effect of interest rate swaps, which are<br />
denominated in the following currencies:<br />
Cash and Derivative<br />
cash financial Fixed Floating<br />
equivalents instruments rate rate Total<br />
£’000 £’000 £’000 £’000 £’000<br />
Sterling 5,464 (369) (1,944) (5,155) (2,004)<br />
UAE Dirham 2,478 - - - 2,478<br />
Euro 1,902 - (33) - 1,869<br />
Australian Dollar 10,056 - (440) - 9,616<br />
Hong Kong Dollar 526 - (3) - 523<br />
Chinese Yuan 1,631 - - - 1,631<br />
Other 1,161 - - - 1,161<br />
Total 23,218 (369) (2,420) (5,155) 15,274<br />
The cash at bank and in hand balance includes £3.0m (2011: £2.5m), primarily related to the group’s captive cell insurance arrangements and cash<br />
covered guarantees, which is restricted and not available to the group for general use.<br />
Foreign currency risk<br />
The table in note 11 shows the extent to which group companies<br />
have trade receivables in currencies other than the group’s functional<br />
currency. Any foreign exchange gain or loss in relation to the<br />
translation of these assets and liabilities was taken directly to the<br />
income statement during the year.<br />
Available borrowing facilities<br />
The group has £45.8m of undrawn borrowing facilities, as at 31 March<br />
<strong>2012</strong>. Of this amount £40.5m relates to the two revolving credit<br />
facilities in the UK of £22.5m and £18.0m, which were undrawn and<br />
expire in December 2015 and February 2013 respectively. £5.3m<br />
relates to uncommitted facilities in various jurisdictions which are<br />
repayable on demand. All these facilities are unsecured and incur<br />
commitment fees at market rates.<br />
Capital management<br />
The group’s objectives when managing capital are to safeguard the<br />
group’s ability to continue as a going concern in order to provide<br />
returns for shareholders and benefits for other stakeholders and to<br />
maintain an optimal capital structure to reduce the cost of capital.<br />
In order to maintain or adjust the capital structure, the group may<br />
adjust the amount of dividends paid to shareholders, return capital to<br />
shareholders, issue new shares or sell assets to reduce debt.<br />
The group monitors capital on the basis of the gearing ratio which is<br />
calculated as net cash/debt divided by total capital, and net cash/<br />
debt divided by earnings before interest, taxation, depreciation and<br />
amortisation (adjusted EBITDA). Net cash/debt is defined as total<br />
cash and cash equivalents less borrowings. Total capital is calculated<br />
as shareholders’ equity less net cash. At 31 March <strong>2012</strong> shareholders<br />
equity was £86.9m (2011: £81.4m) and net cash was £15.6m (2011:<br />
£13.1m) giving total capital of £71.3m (2011: £68.3m). The group<br />
operates well within its banking covenants which are disclosed in the<br />
Financial Review.
15. FINANCIAL INSTRUMENTS - DISCLOSURES RELATING TO MARCH 2011<br />
Liquidity risk of financial liabilities<br />
The following tables set out the contractual maturity of the undiscounted cash flows of the group’s financial liabilities.<br />
Weighted<br />
average period Weighted More Total<br />
for which rate is average Within 1 to 2 2 to 5 than 5 carrying<br />
fixed interest rate 1 year years years years amount<br />
Months % £’000 £’000 £’000 £’000 £’000<br />
Fixed rate:<br />
Bank loans 11 6.67 175 46 4 - 225<br />
Finance leases 11 5.66 637 260 178 223 1,298<br />
812 306 182 223 1,523<br />
Floating rate:<br />
Bank loans and overdrafts 712 713 2,137 4,200 7,762<br />
712 713 2,137 4,200 7,762<br />
Non-interest bearing:<br />
Trade payables 12,898 - - - 12,898<br />
Other tax and social security payable 5,985 - - - 5,985<br />
Derivative financial instruments (level 2) 155 87 108 23 373<br />
Contingent consideration 265 - - - 265<br />
Total 20,827 1,106 2,427 4,446 28,806<br />
Obligations under finance leases fall due as follows:<br />
More Total<br />
Within 1 to 2 2 to 5 than carrying<br />
1 year years years 5 years amount<br />
£’000 £’000 £’000 £’000 £’000<br />
Finance leases 637 260 178 223 1,298<br />
Less future interest charges (55) (25) (49) (32) (161)<br />
Present value of finance lease obligations 582 235 129 191 1,137<br />
Interest on fixed rate financial instruments is fixed until maturity, while interest on floating rate financial instruments is repriced at intervals of<br />
less than one year.<br />
The effect of interest rate swaps is to modify the amount and interest rates of bank loans as below:<br />
Weighted More Total<br />
average Within 1 to 2 2 to 5 than 5 carrying<br />
interest rate 1 year years years years amount<br />
% £’000 £’000 £’000 £’000 £’000<br />
Fixed rate 5.1 562 369 726 791 2,448<br />
Floating rate - 325 390 1,415 3,409 5,539<br />
Bank loans after hedging 887 759 2,141 4,200 7,987<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 99
15. FINANCIAL INSTRUMENTS - DISCLOSURES RELATING TO MARCH 2011 continued<br />
Interest rate risk of financial instruments<br />
The following table sets out the group’s interest bearing financial instruments, modified for the effect of interest rate swaps, which are<br />
denominated in the following currencies:<br />
100 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Cash and Derivative<br />
cash financial Fixed Floating<br />
equivalents instruments rate rate Total<br />
£’000 £’000 £’000 £’000 £’000<br />
Sterling 4,427 (352) (2,506) (5,539) (3,970)<br />
UAE Dirham 2,356 - - - 2,356<br />
Euro 1,747 - (182) - 1,565<br />
Australian Dollar 10,327 - (870) - 9,457<br />
Hong Kong Dollar 119 - (27) - 92<br />
Chinese Yuan 966 - - - 966<br />
Other 2,278 - - - 2,278<br />
Total 22,220 (352) (3,585) (5,539) 12,744<br />
The cash at bank and in hand balance includes £2.5m, predominantly held by the group’s captive cell insurance arrangement, which is restricted<br />
and not available to the group for general use.
16. PROVISIONS<br />
Professional<br />
indemnity Vacant<br />
insurance property Total<br />
£’000 £’000 £’000<br />
At 1 April 2011 3,484 1,336 4,820<br />
Exchange adjustments 2 6 8<br />
Charged to the income statement 177 1,761 1,938<br />
Released to the income statement (373) (306) (679)<br />
Utilised (375) (581) (956)<br />
Unwinding of discount - 81 81<br />
At 31 March <strong>2012</strong> 2,915 2,297 5,212<br />
At 31 March <strong>2012</strong><br />
Current liabilities 2,915 1,043 3,958<br />
Non-current liabilities - 1,254 1,254<br />
2,915 2,297 5,212<br />
At 31 March 2011<br />
Current liabilities 3,484 717 4,201<br />
Non-current liabilities - 619 619<br />
Professional indemnity insurance<br />
3,484 1,336 4,820<br />
The provision reflects management’s estimate of the likely cost of claims including professional indemnity insurance excesses and has been<br />
provided in accordance with group policy. These provisions will be carried forward until the claims to which they relate are agreed and amounts<br />
utilised or released as appropriate.<br />
Vacant property<br />
The provision represents the estimated net present value of future rentals where properties are vacant. These provisions will be utilised up until<br />
such time as the vacant properties are re-let (when the requirement for a provision will be reassessed), or the lease terminates, whichever occurs<br />
earlier. The maximum period covered by these provisions is 7 years. £1.3m of the charge for the year has been recorded as an exceptional item.<br />
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17. DEFERRED TAX<br />
Deferred tax is calculated in full on temporary differences under the liability method using the appropriate statutory tax rates in each jurisdiction.<br />
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<strong>2012</strong> 2011<br />
£’000 £’000<br />
At 1 April 9,348 9,820<br />
Exchange adjustments (7) 250<br />
Credit to the income statement 73 1,404<br />
Credit/(charge) to other comprehensive income for the year 263 (2,126)<br />
Acquisitions (254) -<br />
At 31 March 9,423 9,348<br />
Comprising:<br />
Deferred tax assets 10,373 10,079<br />
Deferred tax liabilties (950) (731)<br />
9,423 9,348<br />
Deferred tax assets have been recognised in respect of tax losses and other temporary differences where it is probable that these assets will be<br />
recovered in the foreseeable future. A deferred tax asset has been recognised in respect of the defined benefit pension deficits in the UK and<br />
Germany, based on the expected taxable profits of these businesses.<br />
Deferred tax assets of £6.2m (2011: £5.2m) have not been recognised in respect of losses amounting to £29.8m (2011: £26.0m) as it is not<br />
probable that there will be future taxable profits within the entities against which the losses can be utilised.<br />
Deferred tax liabilities of £0.1m (2011: £0.1m) have not been recognised for the withholding and other taxes which would be payable on the<br />
unremitted earnings of certain overseas subsidiaries, as no tax is expected to be payable in the foreseeable future.<br />
Deferred tax assets and liabilities are only offset where there is a legally enforceable right of offset and there is an intention to settle the balances<br />
net. The movements in deferred tax assets and liabilities (prior to the offsetting of balances within the same jurisdiction as permitted by IAS 12)<br />
‘Income Taxes’ during the period are shown below:<br />
Other short<br />
Amounts Post Accelerated term<br />
Intangible recoverable employment tax timing<br />
assets on contracts benefits depreciation differences Losses Total<br />
Deferred tax £’000 £’000 £’000 £’000 £’000 £’000 £’000<br />
At 1 April 2011 (488) 91 4,052 1,343 2,745 1,605 9,348<br />
Credit/(charge) to the income statement:<br />
Current year 255 (62) (860) 79 (339) (25) (952)<br />
Adjustment in respect of prior years 31 (7) - 3 463 535 1,025<br />
286 (69) (860) 82 124 510 73<br />
Credit to other comprehensive income:<br />
Current year - - 263 - - - 263<br />
- - 263 - - - 263<br />
Acquisitions (254) - - - - - (254)<br />
Exchange adjustments 16 58 (2) 2 (7) (74) (7)<br />
At 31 March <strong>2012</strong> (440) 80 3,453 1,427 2,862 2,041 9,423
17. DEFERRED TAX continued<br />
Other short<br />
Amounts Post Accelerated term<br />
Intangible recoverable employment tax timing<br />
assets on contracts benefits depreciation differences Losses Total<br />
Deferred tax £’000 £’000 £’000 £’000 £’000 £’000 £’000<br />
At 1 April 2010 (838) (1,035) 5,711 865 3,420 1,697 9,820<br />
Credit/(charge) to the income statement:<br />
Current year 338 854 467 468 (54) (172) 1,901<br />
Adjustment in respect of prior years - 196 - 9 (800) 98 (497)<br />
338 1,050 467 477 (854) (74) 1,404<br />
Charge to other comprehensive income:<br />
Current year - - (2,126) - - - (2,126)<br />
(2,126) - - - (2,126)<br />
Exchange adjustments 12 76 - 1 179 (18) 250<br />
At 31 March 2011 (488) 91 4,052 1,343 2,745 1,605 9,348<br />
18. OTHER NON-CURRENT LIABILITIES<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Other payables 3,046 1,788<br />
Deferred and contingent consideration 2,594 -<br />
Derivative financial instruments 252 200<br />
19. CALLED UP ORDINARY SHARE CAPITAL<br />
5,892 1,988<br />
Issued and fully paid: Shares £’000<br />
At 1 April 2010 38,370,320 3,837<br />
Issued in relation to exercised share options 169,960 17<br />
At 31 March 2011 38,540,280 3,854<br />
Issued in relation to exercised share options 94,250 9<br />
At 31 March <strong>2012</strong> 38,634,530 3,863<br />
During the year, options were exercised on 7,000 shares at 87.5p, 21,000 shares at 139.5p, 25,000 shares at 194.0p, 15,000 shares at 256.3p, 5,000<br />
shares at 254.8p, and 21,250 shares at 348.5p. The total consideration for these shares was £0.2m.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 103
20. SHARE BASED PAYMENTS<br />
Share options<br />
Set out below are summaries of options granted under <strong>Hyder</strong> group schemes:<br />
As at 31 March <strong>2012</strong><br />
Awards Awards Awards<br />
Exercise outstanding Granted Exercised Forfeited outstanding exercisable<br />
price Fair value Number of at 31 during the during the during the at 31 at 31<br />
Scheme Award date (p) (p) employees March 2011 year year year March <strong>2012</strong> March <strong>2012</strong><br />
ESOS 19-Jun-03 87.5 35.5 4 32,000 - (7,000) (5,000) 20,000 20,000<br />
ESOS 03-Aug-04 139.5 57.1 14 70,000 - (21,000) (1,000) 48,000 48,000<br />
ESOS 10-Jun-05 194.0 76.4 11 115,000 - (25,000) - 90,000 90,000<br />
ESOS 30-Jun-06 256.3 99.1 16 135,000 - (15,000) - 120,000 120,000<br />
ESOS 03-Jul-06 254.8 98.9 - 5,000 - (5,000) - - -<br />
ESOS 15-Jun-07 525.0 139.0 3 17,500 - - (7,000) 10,500 10,500<br />
ESOS 18-Jul-08 348.5 71.0 15 127,500 - (21,250) (4,250) 102,000 102,000<br />
LTIP (A) 15-Jun-07 Nil 505.9 2 5,332 - - - 5,332 5,332<br />
LTIP (A) 18-Jul-08 Nil 337.7 3 28,000 - (6,289) (2,844) 18,867 18,867<br />
LTIP (A) 19-Jun-09 Nil 139.8 17 203,534 - - (6,756) 196,778 -<br />
LTIP (A) 16-Jun-10 Nil 277.5 21 176,058 - (2,454) (3,111) 170,493 -<br />
LTIP (A) 15-Jun-11 Nil 381.0 29 - 167,844 - - 167,844 -<br />
LTIP (B) 11-Dec-08 Nil 150.7 2 494,522 - - (150,807) 343,715 343,715<br />
LTIP (B) 19-Jun-09 Nil 139.8 2 72,071 - - - 72,071 -<br />
LTIP (B) 16-Jun-10 Nil 241.8 2 171,185 - - - 171,185 -<br />
LTIP (B) 15-Jun-11 Nil 253.0 2 - 134,033 - - 134,033 -<br />
104 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
1,652,702 301,877 (102,993) (180,768) 1,670,818 758,414<br />
Weighted average exercise/transfer price (p) 75.25 - 203.08 31.72 58.48 128.84<br />
The group recognised total expenses of £0.7m related to share based payment transactions (2011: £0.4m).<br />
The weighted average outstanding period until expiry on outstanding awards at 31 March <strong>2012</strong> is 6.94 years.<br />
As at 31 March 2011<br />
Awards Awards Awards<br />
Exercise outstanding Granted Exercised Forfeited outstanding exercisable<br />
price Fair value Number of at 31 during the during the during the at 31 at 31<br />
Scheme Award date (p) (p) employees March 2010 year year year March 2011 March 2011<br />
ESOS 19-Jun-03 87.5 35.5 7 49,400 - (17,400) - 32,000 32,000<br />
ESOS 03-Aug-04 139.5 57.1 22 112,000 - (42,000) - 70,000 70,000<br />
ESOS 10-Jun-05 194.0 76.4 14 175,000 - (60,000) - 115,000 115,000<br />
ESOS 30-Jun-06 256.3 99.1 18 195,000 - (45,000) (15,000) 135,000 135,000<br />
ESOS 03-Jul-06 254.8 98.9 1 5,000 - - - 5,000 5,000<br />
ESOS 15-Jun-07 525.0 139.0 5 115,500 - - (98,000) 17,500 17,500<br />
ESOS 18-Jul-08 348.5 71.0 20 182,750 - (5,560) (49,690) 127,500 -<br />
LTIP (A) 24-Aug-06 Nil 302.4 - 22,893 - (22,893) - - -<br />
LTIP (A) 15-Jun-07 Nil 505.9 2 35,916 - (13,380) (17,204) 5,332 5,332<br />
LTIP (A) 18-Jul-08 Nil 337.7 4 55,500 - (12,500) (15,000) 28,000 -<br />
LTIP (A) 19-Jun-09 Nil 139.8 18 255,629 - (2,267) (49,828) 203,534 -<br />
LTIP (A) 16-Jun-10 Nil 277.5 23 - 180,661 - (4,603) 176,058 481<br />
LTIP (B) 11-Dec-08 Nil 150.7 2 494,522 - - - 494,522 -<br />
LTIP (B) 19-Jun-09 Nil 139.8 2 72,071 - - - 72,071 -<br />
LTIP (B) 16-Jun-10 Nil 241.8 2 - 171,185 - - 171,185 -<br />
1,771,181 351,846 (221,000) (249,325) 1,652,702 380,313<br />
Weighted average exercise/transfer price (p) 129.55 - 147.02 291.23 75.25 210.17<br />
No options expired during the periods covered by the above tables.
20. SHARE BASED PAYMENTS continued<br />
The fair value of share options with non-market performance conditions has been calculated using the Black Scholes option pricing model. The fair<br />
value of options with market-related performance conditions are measured using the Monte Carlo model. Expected volatility was determined by<br />
calculating the historical volatility of the group’s share price over a period prior to grant date equal in length to the vesting period, which equates<br />
to a three-year share price history (2011: three-year share price history). The risk free rate of return was assumed to be the yield to maturity on a<br />
UK gilt strip with the term to maturity equal to the expected life of the option. The expected dividend yield is an estimate of the dividend yield<br />
at the date of grant for the duration of the option’s life.<br />
The assumptions used in the valuation model are as follows:<br />
LTIP - LTIP -<br />
EPS conditions TSR conditions<br />
Jun 11 Jun 11<br />
Risk free rate of return 1.31% 1.30%<br />
Dividend yield 1.92% 2.00%<br />
Share price volatility 68.82% -<br />
Peer group volatility - 50.00%<br />
Vesting period 3 years 3 years<br />
Expected life 7 years 7 years<br />
Share price at grant date 403.63p 410.00p<br />
21. SHARE PREMIUM ACCOUNT<br />
Issued and fully paid:<br />
At 1 April 2010 29,281<br />
Premium on ordinary shares issued during the year 308<br />
At 31 March 2011 29,589<br />
Premium on ordinary shares issued during the year 200<br />
At 31 March <strong>2012</strong> 29,789<br />
£’000<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 105
22. OTHER RESERVES<br />
106 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Capital Cash flow<br />
redemption Translation hedge Own<br />
reserve reserve reserve shares Total<br />
£’000 £’000 £’000 £’000 £’000<br />
At 1 April 2010 80 14,889 (488) (1,039) 13,442<br />
Cash flow hedges recognised - - 133 - 133<br />
Employee trust purchase of own shares - - - (559) (559)<br />
Transfer of own shares from EBT - - - 96 96<br />
Exchange adjustments - (1,795) - - (1,795)<br />
At 31 March 2011 80 13,094 (355) (1,502) 11,317<br />
Cash flow hedges recognised - - (48) - (48)<br />
Employee trust purchase of own shares - - - (361) (361)<br />
Transfer of own shares from EBT - - - 19 19<br />
Exchange adjustments - (1,344) - - (1,344)<br />
At 31 March <strong>2012</strong> 80 11,750 (403) (1,844) 9,583<br />
The capital redemption reserve is not distributable.<br />
The translation reserve consists of cumulative gains and losses arising on the translation of overseas operations.<br />
The cash flow hedge reserve includes the fair value of hedging derivatives where such instruments are designated and effective as hedges of future<br />
cash flows.<br />
Own shares represent 801,976 shares (2011: 710,719 shares) held in the Employee Benefit Trust (EBT) for use in satisfying obligations under the<br />
Long Term Incentive Plan (LTIP). As at 31 March <strong>2012</strong>, the EBT had an agreement in place to waive dividends on all shares held.
23. NOTES TO THE CONSOLIDATED CASH FLOW STATEMENT<br />
(a) Cash flows from operating activities<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Profit for the financial year 13,923 14,882<br />
Adjustments for:<br />
Tax 3,723 3,297<br />
Depreciation 3,051 3,473<br />
Amortisation - software 1,722 1,755<br />
Amortisation - acquisitions 1,781 2,147<br />
Acquisition costs 681 -<br />
Exceptional items 1,499 -<br />
Interest receivable (1,423) (933)<br />
Interest payable and similar charges 847 910<br />
EBITDA 25,804 25,531<br />
Profit on disposal of property, plant and equipment 9 680<br />
Fair value gain on financial instruments (30) (19)<br />
Share option costs 660 414<br />
Decrease in provisions (960) (920)<br />
Decrease in post employment benefits (13) (898)<br />
Deficit contributions to the AGPS defined benefit pension scheme (3,919) (3,030)<br />
Changes in working capital:<br />
(Increase)/decrease in trade and other receivables (3,841) 6,531<br />
Decrease in trade and other payables (2,080) (9,125)<br />
Cash generated from operations 15,630 19,164<br />
(b) Reconciliation of movement in net cash<br />
At 1 April Non-cash Exchange At 31 March<br />
2011 Cash flow movement movement <strong>2012</strong><br />
£’000 £’000 £’000 £’000 £’000<br />
Cash at bank 22,220 1,048 - (50) 23,218<br />
Debt due within 1 year (887) 891 (762) (1) (759)<br />
Debt due after 1 year (7,100) - 762 - (6,338)<br />
Finance leases due within 1 year (582) 837 (507) (7) (259)<br />
Finance leases due after 1 year (555) - 334 2 (219)<br />
Total debt (9,124) 1,728 (173) (6) (7,575)<br />
Net cash 13,096 2,776 (173) (56) 15,643<br />
The cash at bank balance includes £3.0m (2011: £2.5m) that is restricted and not available to the group for general use.<br />
Net non-cash movements comprise £173,000 of finance leases acquired with ESR Technology Limited.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 107
24. ACQUISITIONS<br />
The group purchased two companies, and the business and assets of a third company during the year for a total potential consideration of £5.8m.<br />
The purchases have been accounted for as business combinations. Had these acquisitions completed on the first day of the financial year, group<br />
revenues for the year would have been £283.7m and group adjusted operating profit would have been £21.3m.<br />
Percentage<br />
Date of Location of of equity<br />
acquisition operation acquired<br />
ESR Technology Limited 23 June 2011 UK 100%<br />
SAK Engineering Consultants 15 February <strong>2012</strong> Saudi Arabia 70%<br />
GW Engineers Limited 1 March <strong>2012</strong> Australia 100%<br />
The acquisitions have contributed the following revenue and adjusted operating profit:<br />
Adjusted<br />
operating<br />
Revenue profit/(loss)<br />
£’000 £’000<br />
ESR Technology Limited 5,420 144<br />
SAK Engineering Consultants 175 (13)<br />
GW Engineers Limited 526 (22)<br />
Details of the provisional fair value of assets and liabilities, goodwill and intangible assets are as follows:<br />
ESR Technology Limited Fair value<br />
adjustment Total<br />
£’000 £’000 £’000<br />
Intangible assets 10 977 987<br />
Property, plant and equipment 772 (46) 726<br />
Trade and other receivables 2,099 - 2,099<br />
Corporation tax recoverable 3 - 3<br />
Cash and cash equivalents 305 - 305<br />
Trade and other payables (2,305) (757) (3,062)<br />
Payments in advance on contracts (1,043) 75 (968)<br />
Deferred tax liabilities - (254) (254)<br />
Borrowings (173) - (173)<br />
Net liabilities acquired (332) (5) (337)<br />
Goodwill 337<br />
Gross consideration (cash) -<br />
Fair value adjustments comprise the recognition of intangible assets related to contracts and customer relationships acquired; a write down in the<br />
value of property, plant and equipment; an increase in the accrual for dilapidations in respect of leased properties; the application of our revenue<br />
recognition policy; and a deferred tax liability in respect of the intangible assets.<br />
108 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
-
24. ACQUISITIONS continued<br />
SAK Engineering Consultants Fair value<br />
adjustment Total<br />
£’000 £’000 £’000<br />
Intangible assets - 298 298<br />
Property, plant and equipment 30 - 30<br />
Trade and other receivables 10 - 10<br />
Amounts recoverable on contracts 51 - 51<br />
Trade and other payables (42) - (42)<br />
Post employment benefits (372) - (372)<br />
Net liabilities acquired (323) 298 (25)<br />
Non-controlling interest acquired (349)<br />
Goodwill 1,537<br />
Gross consideration (cash) 1,163<br />
Fair value adjustments comprise the recognition of intangible assets related to contracts and customer relationships acquired.<br />
GW Engineers Limited Fair value<br />
adjustment Total<br />
£’000 £’000 £’000<br />
Property, plant and equipment 438 (199) 239<br />
Trade and other receivables 990 - 990<br />
Amounts recoverable on contracts 51 55 106<br />
Cash and cash equivalents 294 - 294<br />
Trade and other payables (1,035) - (1,035)<br />
Net assets acquired 738 (144) 594<br />
Goodwill 4,010<br />
Consideration<br />
Cash consideration 1,972<br />
Contingent consideration 2,632<br />
Gross consideration 4,604<br />
Fair value adjustments comprise a write down in the value of property, plant and equipment and the application of our revenue recognition policy.<br />
Adjustments are provisional and may be revised.<br />
The cash flows arising from all acquisitions are as follows:<br />
Cash consideration 3,135<br />
Cash acquired (599)<br />
Net cash outflow 2,536<br />
Subsequent to the acquisition of Ingenieur Consult Technische Gesamptplanung Dresden (IC Dresden) on 1 January 2011, a fair value adjustment of<br />
£58,343 was made to reflect a revaluation of the amounts recoverable on contracts at acquisition. This has resulted in an increase to goodwill.<br />
1,163<br />
4,604<br />
Total<br />
£’000<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 109
25. EMPLOYEE COSTS<br />
(a) Employee costs<br />
110 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Salaries and benefits 149,053 156,552<br />
Redundancy costs 1,502 2,925<br />
Social security costs 9,198 8,972<br />
Pension costs 7,663 8,951<br />
Share based payment expense 660 414<br />
(b) Aggregate cost of persons discharging managerial responsibility remuneration<br />
168,076 177,814<br />
Salaries and benefits 2,541 2,449<br />
Pension costs 149 98<br />
Share based payment expense 485 291<br />
3,175 2,838<br />
The group has identified 10 persons (2011: 11) discharging managerial responsibility during the course of the year, comprising the <strong>Hyder</strong> <strong>Consulting</strong><br />
<strong>PLC</strong> directors and the regional managing directors. Full details of the <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> directors’ remuneration can be found in the Directors’<br />
Remuneration <strong>Report</strong> on page 69.<br />
(c) Average monthly numbers of employees during the year (including executive directors)<br />
<strong>2012</strong> 2011<br />
Number Number<br />
Technical 3,192 3,360<br />
Administration (including executive directors) 479 499<br />
As at 31 March <strong>2012</strong> the group had 3,774 employees (2011: 3,697) including 2 executive directors (2011: 2).<br />
(d) Average monthly numbers of employees during the year (including executive directors) by geography<br />
3,671 3,859<br />
<strong>2012</strong> 2011<br />
Number Number<br />
Australia 670 776<br />
Asia 442 436<br />
Asia-Pacific 1,112 1,212<br />
Middle East 1,036 1,072<br />
UK 1,118 1,204<br />
Germany 405 371<br />
Europe 1,523 1,575<br />
3,671 3,859
26. POST EMPLOYMENT BENEFITS<br />
Employees of the group participate in a number of pension schemes both in the UK and overseas. The assets of each pension scheme are held<br />
separately from the assets of the group and are administered by trustees.<br />
<strong>Hyder</strong> <strong>Consulting</strong> (UK) Limited is the principal employer of the Acer Group Pension Scheme (AGPS), a defined benefit scheme. The pension cost for<br />
the AGPS has been assessed in accordance with actuarial advice, using the projected unit method. For this purpose the main actuarial assumptions<br />
used are based on a discount rate of 4.7% (2011: 5.5%) per annum, investment return of 6.2% (2011: 7.3%) per annum, and increases to pensions<br />
in payment of 2.45% (2011: 2.55%), 3.15% (2011: 3.4%) and 2.15% (2011: 2.2%) per annum for increases in line with the RPI capped at 3%, 5%<br />
and 2.5% respectively. A full actuarial valuation of the AGPS was carried out as at 1 April 2011 and updated to 31 March <strong>2012</strong> by a qualified<br />
independent actuary. The contributions made to the scheme in the year were £4.0m (2011: £4.5m). The scheme was closed to future benefit<br />
accrual on 30 April 2011.<br />
The post retirement mortality assumption incorporates a scheme specific base table and an allowance for future improvements in mortality rates<br />
from 2004 onwards in line with the 2010 Continuous Mortality Investigation with a long term improvement rate of 1.5% and a 100% convergence<br />
rate.<br />
Audit fees for the AGPS amounted to £10,108 for the year (2011: £10,080).<br />
The key assumptions and the sensitivities of the AGPS liabilities to changes in these assumptions are shown below.<br />
Assumption Change in assumption Indicative effect on scheme liabilities<br />
Discount rate Increase/decrease by 0.5% Decrease/increase by 9%<br />
Rate of inflation Increase/decrease by 0.5% Increase/decrease by 6%<br />
Longevity Increase by 1 year Increase by 2-3%<br />
During the year contributions were made to the <strong>Hyder</strong> <strong>Consulting</strong> (UK) Limited Group Personal Pension Plan, a defined contribution scheme.<br />
Post employment benefit schemes are also maintained in Germany and the Middle East, and there is a small unfunded annuitants scheme in the UK.<br />
The most significant of these is the requirement in certain Gulf States to pay terminal gratuities to employees based on the length of service when<br />
they leave the employment of the group. During the year, this scheme was valued by an actuary for the first time. The main assumptions used for<br />
this valuation were a discount rate of 4.0% per annum, salary increases of between 1.0% and 2.0% per annum, and an average remaining service<br />
period of between 6 and 25 years.<br />
The group’s net liabilities in respect of post employment benefits comprise the following:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
AGPS 16,305 17,267<br />
Overseas and unfunded annuitants schemes 7,930 6,687<br />
24,235 23,954<br />
Pension costs are as follows:<br />
<strong>2012</strong> 2011<br />
Net operating costs:<br />
Defined contribution schemes:<br />
£’000 £’000<br />
- UK 3,461 2,361<br />
- Overseas<br />
Defined benefit schemes:<br />
4,090 4,269<br />
- AGPS 57 1,500<br />
- Overseas and unfunded annuitants schemes 984 1,287<br />
Net finance income:<br />
Defined benefit schemes:<br />
8,592 9,417<br />
- AGPS (1,214) (524)<br />
- Overseas and unfunded annuitants schemes 285 58<br />
(929) (466)<br />
7,663 8,951<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 111
26. POST EMPLOYMENT BENEFITS continued<br />
AGPS scheme<br />
The key assumptions used were: <strong>2012</strong> 2011<br />
Rate of increase in salaries n/a 3.20%<br />
Rate of increase to pensions in payment:<br />
- Index linked pensions with max 3% per annum increases 2.45% 2.55%<br />
- Other index linked pension 3.15% 3.40%<br />
Discount rate 4.70% 5.50%<br />
Inflation assumptions (RPI) 3.30% 3.60%<br />
Inflation assumptions (CPI) 2.30% 3.00%<br />
Longevity at age 65 for current pensioners<br />
- Men 23.2 years 23.3 years<br />
- Women 24.9 years 25.3 years<br />
Longevity at age 65 for future pensioners<br />
- Men 25.4 years 25.4 years<br />
- Women 27.4 years 27.2 years<br />
The assets in the scheme and the expected rates of return were:<br />
112 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Long-term rate of Value at Long-term rate of Value at<br />
return expected 31 March return expected at 31 March<br />
at 31 March <strong>2012</strong> <strong>2012</strong> 31 March 2011 2011<br />
% per annum £’000 % per annum £’000<br />
Equity like assets 7.10 87,869 8.15 79,777<br />
Bond like assets 4.30 40,153 5.35 34,342<br />
Cash 0.50 514 0.50 621<br />
Total market value of assets 128,536 114,740<br />
Present value of scheme liabilities (144,841) (132,007)<br />
Deficit in the scheme (16,305) (17,267)<br />
Related deferred tax asset 3,233 3,809<br />
Net pension deficit (13,072) (13,458)<br />
Amounts recognised in the income statement in respect of the AGPS scheme are as follows:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Current service costs (112) (1,500)<br />
Past service costs (521) -<br />
Pension scheme settlements and curtailments 576 -<br />
Notional interest on pension liability (7,122) (7,071)<br />
Expected return on scheme assets 8,336 7,595<br />
1,157 (976)
26. POST EMPLOYMENT BENEFITS continued<br />
Movements in the present value of AGPS scheme obligations are as follows:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
At 1 April 132,007 127,570<br />
Current service costs 112 1,500<br />
Past service costs 521 -<br />
Notional interest on pension liability 7,122 7,071<br />
Curtailments (576) -<br />
Actuarial loss/(gain) 10,766 (12)<br />
Contributions by plan participants 7 95<br />
Benefits paid from plan (5,118) (4,217)<br />
At 31 March 144,841 132,007<br />
Movements in the fair value of AGPS scheme assets are as follows:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
At 1 April 114,740 101,772<br />
Expected return on plan assets 8,336 7,595<br />
Contributions by employers 4,031 4,530<br />
Actuarial gain 6,540 4,965<br />
Contributions by plan participants 7 95<br />
Benefits paid from plan (5,118) (4,217)<br />
At 31 March 128,536 114,740<br />
Actual return on scheme assets was £14,876,000 (2011: £12,560,000).<br />
History of experience gains and losses:<br />
<strong>2012</strong> 2011 2010 2009 2008<br />
£’000 £’000 £’000 £’000 £’000<br />
Fair value of scheme assets 128,536 114,740 101,772 75,714 87,530<br />
Present value of scheme obligations (144,841) (132,007) (127,570) (102,239) (110,694)<br />
Deficit in the scheme (16,305) (17,267) (25,798) (26,525) (23,164)<br />
Experience adjustments on scheme assets<br />
Amount (£’000) 6,540 4,965 17,886 (18,909) 3,448<br />
Percentage of scheme assets 5% 4% 18% (25%) 4%<br />
Experience adjustments on scheme liabilities<br />
Amount (£’000) (10,766) 12 (21,318) 13,037 2,102<br />
Percentage of scheme liabilities 7% 0% 17% (13%) 2%<br />
The estimated amount of contributions expected to be paid into the AGPS during the year ended 31 March 2013 is £1.8m.<br />
At the date of the last funding valuation (1 April 2011), the AGPS held assets to the value of £114.1m. This represented a funding level of 86% of<br />
the AGPS’ accrued liabilities at that date (1 April 2008: 73%).<br />
Cumulative actuarial losses recognised since 1 April 2004 were £18,086,000.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 113
26. POST EMPLOYMENT BENEFITS continued<br />
Other post employment benefit schemes<br />
Amounts recognised in the income statement in respect of the overseas and unfunded annuitants employee benefit schemes are as follows:<br />
114 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Current service costs (984) (1,287)<br />
Notional interest on pension liability (287) (61)<br />
Expected return on scheme assets 2 3<br />
Movements in the present value of overseas and unfunded annuitants scheme obligations were as follows:<br />
(1,269) (1,345)<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
At 1 April 7,011 8,031<br />
Exchange adjustments (19) (349)<br />
Pension liability acquired 372 -<br />
Current service costs 984 1,287<br />
Notional interest on pension liability 287 61<br />
Actuarial loss 544 146<br />
Benefits paid from plan (942) (2,165)<br />
At 31 March 8,237 7,011<br />
Movements in the fair value of overseas assets were as follows:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
At 1 April 324 302<br />
Exchange adjustments (19) (1)<br />
Expected return on plan assets 2 3<br />
Contributions by employers - 20<br />
At 31 March 307 324
27. OPERATING LEASE COMMITMENTS - MINIMUM LEASE PAYMENTS<br />
At 31 March <strong>2012</strong>, the group’s total remaining commitments as lessee under non-cancellable operating leases for certain of its office properties<br />
and vehicles, plant and equipment were as follows:<br />
Vehicles, Vehicles,<br />
plant and plant and<br />
Property equipment Property equipment<br />
<strong>2012</strong> <strong>2012</strong> 2011 2011<br />
£’000 £’000 £’000 £’000<br />
Rental payable:<br />
In one year or less 5,583 2,999 6,746 2,872<br />
In more than one year but no more than two 3,869 2,182 4,512 1,701<br />
In more than two years but no more than five 6,940 2,982 7,638 2,250<br />
Greater than five years 2,588 - 3,756 -<br />
18,980 8,163 22,652 6,823<br />
Where the group has vacated a property prior to the end of the lease term, the group will attempt to sublease such vacant space on short term<br />
lets. The sublease rental income for the year to 31 March <strong>2012</strong> was £225,000 (2011: £202,000). The minimum rent receivable under noncancellable<br />
operating leases is as follows:<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Rental receivable:<br />
In one year or less 189 196<br />
In more than one year but no more than two 162 115<br />
In more than two years but no more than five 326 139<br />
Greater than five years 29 60<br />
28. CONTINGENT LIABILITIES<br />
706 510<br />
The group maintains professional indemnity insurance against claims for professional negligence which in the ordinary course of business have<br />
been, or may in the future be, received. The directors assess each claim and make provision for legal and settlement costs where, on the basis of<br />
advice received, it is considered that a liability may exist.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> and various group companies have entered into tender bonds, performance bonds, and advance payment bonds supporting<br />
project requirements and certain other bonds and guarantees in the ordinary course of business. The group’s liabilities under performance<br />
guarantees are only limited to the extent of the underlying contracts. The directors do not consider any provision is necessary in respect of<br />
guarantees and bonds.<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 115
29. RELATED PARTY TRANSACTIONS<br />
The group has entered into transactions on an arm’s length basis with related parties, mostly jointly controlled operations, during the year.<br />
Transactions relating to sales of consulting services to these jointly controlled operations amounted to £41.8m (2011: £49.9m).<br />
Net amounts due from these jointly controlled operations amounted to £10.0m (2011: £8.3m), and are included within trade and other receivables<br />
(note 11), as the group utilises these arrangements primarily as special purpose billing vehicles on project related ventures with our partners. A<br />
listing of significant jointly controlled operations is set out below:<br />
Country of incorporation/<br />
Legal status region of operation<br />
Hunter Expressway Alliance Unincorporated Asia-Pacific<br />
Tulla-Sydney Freeway Alliance Unincorporated Asia-Pacific<br />
Airport Link Teaming Arrangement Unincorporated Asia-Pacific<br />
<strong>Hyder</strong>-Arup-Black & Veatch JV* Incorporated Asia-Pacific<br />
Aurecon-<strong>Hyder</strong> JV Unincorporated Asia-Pacific<br />
Sapphire to Woolgoolga Teaming Arrangement Unincorporated Asia-Pacific<br />
<strong>Hyder</strong> Meinhardt JV Unincorporated Asia-Pacific<br />
Airport Berlin-Brandenburg Consult Unincorporated Europe<br />
<strong>Hyder</strong> <strong>Consulting</strong> Middle East Limited & WS Atkins & Partners Overseas Unincorporated Middle East<br />
<strong>Hyder</strong> Halcrow JV Unincorporated UK<br />
Faber Maunsell <strong>Hyder</strong> JV Unincorporated UK<br />
* The group holds a 40% interest in the jointly controlled operation’s ordinary share capital.<br />
Unincorporated jointly controlled operations are normally operated from the relevant <strong>Hyder</strong> regional office.<br />
30. PRINCIPAL GROUP UNDERTAKINGS<br />
The following principal subsidiaries are consolidated within the group results:<br />
116 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Country of Direct Indirect<br />
incorporation shareholding shareholding<br />
% %<br />
<strong>Hyder</strong> <strong>Consulting</strong> Holdings Limited England and Wales 100<br />
<strong>Hyder</strong> <strong>Consulting</strong> Group Limited England and Wales 100<br />
<strong>Hyder</strong> Germany GmbH Germany 100<br />
<strong>Hyder</strong> <strong>Consulting</strong> Limited Hong Kong 100<br />
<strong>Hyder</strong> <strong>Consulting</strong> Middle East Limited Guernsey 100<br />
<strong>Hyder</strong> <strong>Consulting</strong> Europe Limited England and Wales 100<br />
<strong>Hyder</strong> <strong>Consulting</strong> (UK) Limited England and Wales 100<br />
<strong>Hyder</strong> <strong>Consulting</strong> Overseas Holdings Limited England and Wales 100<br />
<strong>Hyder</strong> <strong>Consulting</strong> Holdings Pty Limited Australia 100<br />
The group’s interest in principal subsidiaries entirely comprises ordinary equity shares. The group owns 100% of the preference shares in the <strong>Hyder</strong><br />
cell within HSBC Insurance PCC Limited, a Guernsey registered company.
HYDER CONSULTING <strong>PLC</strong> (COMPANY) FINANCIAL STATEMENTS<br />
Contents Page<br />
Independent Auditors’ <strong>Report</strong> 118<br />
Balance Sheet 119<br />
Reconciliation of Movement in Shareholders’ Funds 119<br />
Notes to the Financial Statements 120<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 117
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF HYDER CONSULTING <strong>PLC</strong> LIMITED<br />
We have audited the parent company Financial Statements of <strong>Hyder</strong><br />
<strong>Consulting</strong> <strong>PLC</strong> for the year ended 31 March <strong>2012</strong> which comprise the<br />
balance sheet, the reconciliation of movements in shareholders’ funds<br />
and the related notes. The financial reporting framework that has been<br />
applied in their preparation is applicable law and United Kingdom<br />
Accounting Standards (United Kingdom Generally Accepted Accounting<br />
Practice).<br />
Respective responsibilities of directors and auditors<br />
As explained more fully in the Directors’ Responsibilities Statement<br />
set out on pages 62 and 63, the directors are responsible for the<br />
preparation of the parent company Financial Statements and for<br />
being satisfied that they give a true and fair view. Our responsibility<br />
is to audit and express an opinion on the parent company Financial<br />
Statements in accordance with applicable law and International<br />
Standards on Auditing (UK and Ireland). Those standards require us<br />
to comply with the Auditing Practices Board’s Ethical Standards for<br />
Auditors.<br />
This report, including the opinions, has been prepared for and only for<br />
the company’s members as a body in accordance with Chapter 3 of Part<br />
16 of the Companies Act 2006 and for no other purpose. We do not,<br />
in giving these opinions, accept or assume responsibility for any other<br />
purpose or to any other person to whom this report is shown or into<br />
whose hands it may come save where expressly agreed by our prior<br />
consent in writing.<br />
Scope of the audit of the Financial Statements<br />
An audit involves obtaining evidence about the amounts and<br />
disclosures in the Financial Statements sufficient to give reasonable<br />
assurance that the Financial Statements are free from material<br />
misstatement, whether caused by fraud or error. This includes an<br />
assessment of: whether the accounting policies are appropriate to the<br />
parent company’s circumstances and have been consistently applied<br />
and adequately disclosed; the reasonableness of significant accounting<br />
estimates made by the directors; and the overall presentation of<br />
the Financial Statements. In addition, we read all the financial and<br />
non-financial information in the <strong>Annual</strong> <strong>Report</strong> to identify material<br />
inconsistencies with the audited Financial Statements. If we become<br />
aware of any apparent material misstatements or inconsistencies we<br />
consider the implications for our report.<br />
Opinion on Financial Statements<br />
In our opinion the Financial Statements:<br />
- give a true and fair view of the state of the company’s affairs as<br />
at 31 March <strong>2012</strong>;<br />
- have been properly prepared in accordance with United Kingdom<br />
Generally Accepted Accounting Practice; and<br />
- have been prepared in accordance with the requirements of the<br />
Companies Act 2006.<br />
118 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Opinion on other matters prescribed by the Companies Act 2006<br />
In our opinion:<br />
- the part of the Directors’ Remuneration <strong>Report</strong> to be audited has<br />
been properly prepared in accordance with the Companies Act<br />
2006; and<br />
- the information given in the Directors’ <strong>Report</strong> for the financial<br />
year for which the parent company Financial Statements are<br />
prepared is consistent with the parent company Financial<br />
Statements.<br />
Matters on which we are required to report by exception<br />
We have nothing to report in respect of the following matters where<br />
the Companies Act 2006 requires us to report to you if, in our opinion:<br />
- adequate accounting records have not been kept by the<br />
company, or returns adequate for our audit have not been<br />
received from branches not visited by us; or<br />
- the parent company Financial Statements and the part of the<br />
Directors’ Remuneration <strong>Report</strong> to be audited are not in<br />
agreement with the accounting records and returns; or<br />
- certain disclosures of directors’ remuneration specified by law<br />
are not made; or<br />
- we have not received all the information and explanations we<br />
require for our audit.<br />
Other matter<br />
We have reported separately on the group Financial Statements of<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> for the year ended 31 March <strong>2012</strong>.<br />
Bowker Andrews (Senior Statutory Auditor)<br />
for and on behalf of PricewaterhouseCoopers LLP<br />
Chartered Accountants and Statutory Auditors<br />
London<br />
13 June <strong>2012</strong>
BALANCE SHEET AS AT 31 MARCH <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
Note £’000 £’000<br />
Fixed assets<br />
Tangible assets 2 6 -<br />
Investments 3 14,676 14,676<br />
14,682 14,676<br />
Current assets<br />
Debtors 4 23,389 23,890<br />
Cash at bank and in hand 4,033 5,599<br />
27,422 29,489<br />
Current liabilities<br />
Creditors 5 (659) (444)<br />
Net current assets 26,763 29,045<br />
Total net assets 41,445 43,721<br />
Capital and reserves<br />
Called up share capital 6 3,863 3,854<br />
Share premium account 7 29,789 29,589<br />
Other reserves 8 (1,764) (1,422)<br />
Retained earnings 9 9,557 11,700<br />
Total shareholders’ funds 41,445 43,721<br />
The Financial Statements on pages 119 to 125 were approved by the board of directors and were signed on its behalf by:<br />
Ivor Catto<br />
Chief Executive<br />
13 June <strong>2012</strong><br />
Russell Down<br />
Group Finance Director<br />
13 June <strong>2012</strong><br />
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS’ FUNDS FOR THE YEAR ENDED 31 MARCH <strong>2012</strong><br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Profit for the year 243 6,382<br />
Dividends (3,027) (2,358)<br />
(2,784) 4,024<br />
Issue of ordinary shares 9 17<br />
Premium on issue of ordinary shares 200 308<br />
Purchase of own shares (361) (559)<br />
Share based payments 660 414<br />
Net change in shareholders’ funds (2,276) 4,204<br />
Shareholders’ funds at 1 April 43,721 39,517<br />
Shareholders’ funds at 31 March 41,445 43,721<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 119
PRINCIPAL ACCOUNTING POLICIES<br />
The Financial Statements have been prepared in accordance with<br />
Accounting Standards applicable in the United Kingdom and comply<br />
with the Companies Act 2006. A summary of the principal accounting<br />
policies, which have been consistently applied, is set out below.<br />
Basis of accounting<br />
These Financial Statements have been prepared in accordance with the<br />
historical cost convention, except for the recognition of derivative<br />
financial instruments detailed below.<br />
No profit and loss account is presented for the company as permitted<br />
by Section 408 of the Companies Act 2006.<br />
Cash flow statement<br />
The company has taken the exemption under Financial <strong>Report</strong>ing<br />
Standard 1 (revised) not to prepare a cash flow statement as the<br />
company’s cash flows are included in the consolidated cash flow<br />
statement on page 76.<br />
Dividends<br />
Dividends payable are recognised as a liability in the accounting<br />
period they are approved by the company’s shareholders.<br />
Share based payments<br />
Equity settled share based incentives are provided to employees under<br />
the <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> executive Share Option Scheme 2002 and the<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> 2006 Long Term Incentive Plan. Equity settled<br />
share based payments are measured at fair value at the date of grant.<br />
The fair value determined at the grant date is expensed on a straight<br />
line basis over the vesting period, based on the group’s estimate of<br />
shares that will eventually vest.<br />
Fair value for options with non-market performance conditions is<br />
measured by using the Black Scholes option pricing model which<br />
the directors believe to be the most suitable calculation technique.<br />
The expected life used in the model is based on management’s best<br />
estimate taking account of employees’ behaviour. Options with<br />
market-related performance conditions are measured using the Monte<br />
Carlo model.<br />
Investments<br />
Long term investments held as fixed assets are stated at cost less<br />
amounts written off or provided to reflect impairment. Those held as<br />
current assets are stated at the lower of cost and net realisable value.<br />
Impairment<br />
Fixed asset investments are reviewed where there is an indication of<br />
impairment to determine whether the carrying value of the assets<br />
may be irrecoverable. If any such indication exists, the recoverable<br />
amount of the asset is calculated as the greater of value in use or fair<br />
value less costs to sell, where the value in use is calculated as the<br />
present value of future cash flows resulting from the asset’s continued<br />
use and eventual disposal. This value is compared to the carrying<br />
value of the asset with any resultant loss recorded as a charge in the<br />
income statement.<br />
Foreign currencies<br />
All exchange gains or losses on settlement or translation at closing<br />
rates of exchange of current monetary assets and liabilities are<br />
included in the determination of profit for the year.<br />
120 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Borrowing costs<br />
All loans and borrowings are initially recognised at cost being the net<br />
fair value of the consideration received plus transaction costs that<br />
are directly attributable to the issue of the borrowing. After initial<br />
recognition, interest bearing loans and borrowings are subsequently<br />
measured at amortised cost using the effective interest method. Fees<br />
paid on the establishment of loan facilities have been capitalised as a<br />
prepayment and amortised to the extent that there is no evidence that<br />
it is probable that some or all of the facility will be drawn down. The<br />
fees are amortised over the period of the facility to which it relates.<br />
Tangible assets<br />
Tangible fixed assets within the balance sheet are carried at historical<br />
cost less accumulated depreciation. Depreciation is calculated so<br />
as to write off the cost less the estimated residual value including<br />
estimated selling costs, over the expected useful life on a straight line<br />
basis as follows:<br />
Computer software - 5 years<br />
Financial instruments<br />
The company is exposed to a variety of financial risks, such as<br />
liquidity, foreign exchange and interest rate risks. A risk management<br />
programme is in place that seeks to limit the adverse effect of these<br />
risk factors on the financial performance of the company. Where<br />
appropriate the company enters into interest rate and currency<br />
instruments in order to hedge against the effects of future interest and<br />
exchange rate fluctuations, in line with the company’s treasury policy.<br />
Hedges are classified as follows:<br />
Fair value hedges - instruments that mitigate exposure to<br />
changes in the fair value of recognised assets<br />
or liabilities<br />
Cash flow hedges - instruments that mitigate exposure to cash<br />
flow fluctuations from a risk associated<br />
to recognised assets or liabilities, or for a<br />
forecast transaction<br />
The gains generated on foreign currency options are recognised on<br />
maturity of the underlying transaction in the profit and loss account.<br />
Foreign currency options that generate a loss lapse with no additional<br />
charge to the company’s profit and loss account.<br />
Any gains or losses arising from fluctuations in the fair value of<br />
derivative financial instruments are recognised immediately in the<br />
profit and loss account.<br />
The fair value of interest rate and foreign currency hedges are based<br />
on the market price of comparable financial instruments at the balance<br />
sheet date. The fair value of short term deposits, loans and bank<br />
overdrafts with a maturity of less than one year have been assumed to<br />
approximate to their book value.<br />
Deferred tax<br />
Deferred tax is provided on an undiscounted basis on all timing<br />
differences that have originated but not reversed at the balance sheet<br />
date except as referred to below. Amounts provided are calculated<br />
with reference to tax rates that are expected to apply in the periods<br />
in which the timing differences are expected to reverse, based on tax<br />
rates and laws that have been enacted or substantively enacted by the<br />
balance sheet date.<br />
Deferred tax assets are recognised only to the extent that it is considered<br />
more likely than not that there will be taxable profits from which the<br />
future reversal of the underlying timing differences can be deducted.
1. PROFIT AND LOSS ACCOUNT<br />
As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the company has not been included in these Financial<br />
Statements. The retained profit for the year dealt with in the Financial Statements of the company was £243,000 (2011: £6,382,000).<br />
2. TANGIBLE ASSETS<br />
Computer software <strong>2012</strong> 2011<br />
£’000 £’000<br />
Cost or valuation<br />
At 1 April - -<br />
Additions at cost 6 -<br />
At 31 March 6 -<br />
This asset is currently in the course of construction and as such no depreciation has been applied.<br />
3. INVESTMENTS<br />
<strong>2012</strong> 2011<br />
Interests in subsidiary undertakings £’000 £’000<br />
Cost or valuation<br />
At 1 April 14,676 14,676<br />
At 31 March 14,676 14,676<br />
4. DEBTORS<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Amounts falling due within one year:<br />
Amounts owed by group undertakings 23,112 23,888<br />
Prepayments and accrued income 277 2<br />
23,389 23,890<br />
Amounts owed by subsidiary undertakings include amounts related to financing the activities of <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> (group) and are repayable on<br />
demand.<br />
5. CREDITORS<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
Amounts falling due within one year:<br />
Amounts owed to group undertakings 353 151<br />
Other creditors 306 293<br />
659 444<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 121
6. CALLED UP SHARE CAPITAL<br />
Issued and fully paid<br />
122 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
Shares £’000<br />
At 1 April 2010 38,370,320 3,837<br />
Issued in relation to exercised share options 169,960 17<br />
At 31 March 2011 38,540,280 3,854<br />
Issued in relation to exercised share options 94,250 9<br />
At 31 March <strong>2012</strong> 38,634,530 3,863<br />
During the year, options were exercised on 7,000 shares at 87.5p, 21,000 shares at 139.5p, 25,000 shares at 194.0p, 15,000 shares at 256.3p, 5,000<br />
shares at 254.8p and 21,250 shares at 348.5p. The total consideration for these shares was £0.2m.<br />
7. SHARE PREMIUM ACCOUNT<br />
Issued and fully paid:<br />
At 1 April 2010 29,281<br />
Premium on ordinary shares issued during the year less expenses of issues 308<br />
At 31 March 2011 29,589<br />
Premium on ordinary shares issued during the year less expenses of issues 200<br />
At 31 March <strong>2012</strong> 29,789<br />
8. OTHER RESERVES<br />
£’000<br />
Capital<br />
redemption<br />
reserve Own Shares Total<br />
£’000 £’000 £’000<br />
At 1 April 2011 80 (1,502) (1,422)<br />
Purchase of own shares - (361) (361)<br />
Transfer of own shares from EBT - 19 19<br />
At 31 March <strong>2012</strong> 80 (1,844) (1,764)<br />
Own shares represent 801,976 shares (2011: 710,719 shares) held in the Employee Benefit Trust (EBT) for use in satisfying obligations under the<br />
Long Term Incentive Plan (LTIP). As at 31 March <strong>2012</strong>, the EBT had an agreement in place to waive dividends on all shares held.
9. PROFIT AND LOSS RESERVE<br />
<strong>2012</strong> 2011<br />
£’000 £’000<br />
At 1 April 11,700 7,358<br />
Profit for the year 243 6,382<br />
Share based payments 660 414<br />
Transfer of own shares from EBT (19) (96)<br />
Dividends paid (3,027) (2,358)<br />
At 31 March 9,557 11,700<br />
10. DIRECTORS AND EMPLOYEES<br />
(a) Staff costs<br />
There were no employees other than directors in the years ended 31 March <strong>2012</strong> and 31 March 2011.<br />
(b) Average monthly numbers of employees during the year (including directors)<br />
<strong>2012</strong> 2011<br />
Number Number<br />
Administration 5 5<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 123
11. SHARE BASED PAYMENTS<br />
Share options<br />
Set out below are summaries of options granted under <strong>Hyder</strong> group schemes:<br />
As at 31 March <strong>2012</strong><br />
Awards Awards Awards<br />
Exercise outstanding Granted Exercised Forfeited outstanding exercisable<br />
price Fair value Number of at 31 during the during the during the at 31 at 31<br />
Scheme Award date (p) (p) employees March 2011 year year year March <strong>2012</strong> March <strong>2012</strong><br />
ESOS 19-Jun-03 87.5 35.5 4 32,000 - (7,000) (5,000) 20,000 20,000<br />
ESOS 03-Aug-04 139.5 57.1 14 70,000 - (21,000) (1,000) 48,000 48,000<br />
ESOS 10-Jun-05 194.0 76.4 11 115,000 - (25,000) - 90,000 90,000<br />
ESOS 30-Jun-06 256.3 99.1 16 135,000 - (15,000) - 120,000 120,000<br />
ESOS 03-Jul-06 254.8 98.9 - 5,000 - (5,000) - - -<br />
ESOS 15-Jun-07 525.0 139.0 3 17,500 - - (7,000) 10,500 10,500<br />
ESOS 18-Jul-08 348.5 71.0 15 127,500 - (21,250) (4,250) 102,000 102,000<br />
LTIP (A) 15-Jun-07 Nil 505.9 2 5,332 - - - 5,332 5,332<br />
LTIP (A) 18-Jul-08 Nil 337.7 3 28,000 - (6,289) (2,844) 18,867 18,867<br />
LTIP (A) 19-Jun-09 Nil 139.8 17 203,534 - - (6,756) 196,778 -<br />
LTIP (A) 16-Jun-10 Nil 277.5 21 176,058 - (2,454) (3,111) 170,493 -<br />
LTIP (A) 15-Jun-11 Nil 381.0 29 - 167,844 - - 167,844 -<br />
LTIP (B) 11-Dec-08 Nil 150.7 2 494,522 - - (150,807) 343,715 343,715<br />
LTIP (B) 19-Jun-09 Nil 139.8 2 72,071 - - - 72,071 -<br />
LTIP (B) 16-Jun-10 Nil 241.8 2 171,185 - - - 171,185 -<br />
LTIP (B) 15-Jun-11 Nil 253.0 2 - 134,033 - - 134,033 -<br />
124 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
1,652,702 301,877 (102,993) (180,768) 1,670,818 758,414<br />
Weighted average exercise/transfer price (p) 75.25 - 203.08 31.72 58.48 128.84<br />
The group recognised total expenses of £0.7m related to share based payment transactions (2011: £0.4m).<br />
The weighted average outstanding period until expiry on outstanding awards at 31 March <strong>2012</strong> is 6.94 years.
11. SHARE BASED PAYMENTS continued<br />
As at 31 March 2011<br />
Awards Awards Awards<br />
Exercise outstanding Granted Exercised Forfeited outstanding exercisable<br />
price Fair value Number of at 31 during the during the during the at 31 at 31<br />
Scheme Award date (p) (p) employees March 2010 year year year March 2011 March 2011<br />
ESOS 19-Jun-03 87.5 35.5 7 49,400 - (17,400) - 32,000 32,000<br />
ESOS 03-Aug-04 139.5 57.1 22 112,000 - (42,000) - 70,000 70,000<br />
ESOS 10-Jun-05 194.0 76.4 14 175,000 - (60,000) - 115,000 115,000<br />
ESOS 30-Jun-06 256.3 99.1 18 195,000 - (45,000) (15,000) 135,000 135,000<br />
ESOS 03-Jul-06 254.8 98.9 1 5,000 - - - 5,000 5,000<br />
ESOS 15-Jun-07 525.0 139.0 5 115,500 - - (98,000) 17,500 17,500<br />
ESOS 18-Jul-08 348.5 71.0 20 182,750 - (5,560) (49,690) 127,500 -<br />
LTIP (A) 24-Aug-06 Nil 302.4 - 22,893 - (22,892) - - -<br />
LTIP (A) 15-Jun-07 Nil 505.9 2 35,916 - (13,380) (17,204) 5,332 5,332<br />
LTIP (A) 18-Jul-08 Nil 337.7 4 55,500 - (12,500) (15,000) 28,000 -<br />
LTIP (A) 19-Jun-09 Nil 139.8 18 255,629 - (2,267) (49,828) 203,534 -<br />
LTIP (A) 16-Jun-10 Nil 277.5 23 - 180,661 - (4,603) 176,058 481<br />
LTIP (B) 11-Dec-08 Nil 150.7 2 494,522 - - - 494,522 -<br />
LTIP (B) 19-Jun-09 Nil 139.8 2 72,071 - - - 72,071 -<br />
LTIP (B) 16-Jun-10 Nil 241.8 2 - 171,185 - - 171,185 -<br />
The fair value of share options with non-market performance conditions has been calculated using the Black Scholes option pricing model. The fair<br />
value of options with market-related performance conditions are measured using the Monte Carlo model. Expected volatility was determined by<br />
calculating the historical volatility of the group’s share price over a period prior to grant date equal in length to the vesting period, which equates<br />
to a three-year share price history (2011: three-year share price history). The risk free rate of return was assumed to be the yield to maturity on a<br />
UK gilt strip with the term to maturity equal to the expected life of the option. The expected dividend yield is an estimate of the dividend yield<br />
at the date of grant for the duration of the option’s life.<br />
The assumptions used in the valuation model are as follows:<br />
1,771,181 351,846 (220,999) (249,325) 1,652,702 380,313<br />
Weighted average exercise/transfer price (p) 129.55 - 147.02 291.23 75.25 210.17<br />
No options expired during the periods covered by the above tables.<br />
LTIP - LTIP -<br />
EPS conditions TSR conditions<br />
Jun 11 Jun 11<br />
Risk free rate of return 1.31% 1.30%<br />
Dividend yield 1.92% 2.00%<br />
Share price volatility 68.82% -<br />
Peer group volatility - 50.00%<br />
Vesting period 3 years 3 years<br />
Expected life 7 years 7 years<br />
Share price at grant date 403.6p 410.0p<br />
<strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong> 125
NON-STATUTORY INFORMATION - SUMMARY OF FIVE YEAR TRADING RESULTS (UNAUDITED)<br />
The following information is illustrative only and does not form part of the Financial Statements.<br />
Consolidated income statement<br />
126 <strong>Hyder</strong> <strong>Consulting</strong> <strong>PLC</strong> <strong>Annual</strong> <strong>Report</strong> <strong>2012</strong><br />
<strong>2012</strong> 2011 2010 2009 2008<br />
£’000 £’000 £’000 £’000 £’000<br />
Revenue 277,309 290,297 308,606 318,970 233,672<br />
Net revenue 241,769 251,373 266,922 269,903 196,907<br />
Adjusted operating profit 21,031 20,303 18,002 16,828 15,037<br />
Net finance income/(costs) 576 23 (1,710) (1,796) (667)<br />
Adjusted profit before tax 21,607 20,326 16,292 15,032 14,370<br />
Amortisation of acquired intangibles and acquisition costs (2,462) (2,147) (2,825) (3,241) (1,802)<br />
Exceptional items (1,499) - - (8,579) 180<br />
Profit before tax 17,646 18,179 13,467 3,212 12,748<br />
Adjusted net operating margin % 8.70 8.08 6.74 6.23 7.63<br />
Adjusted diluted earnings per share p 44.34 43.34 35.26 33.82 33.36<br />
Dividends per ordinary share p 9.00 7.75 6.00 4.50 3.00<br />
Consolidated balance sheet<br />
<strong>2012</strong> 2011 2010 2009 2008<br />
£’000 £’000 £’000 £’000 £’000<br />
Goodwill 36,082 30,485 31,242 33,082 31,649<br />
Intangible assets 7,045 8,585 10,989 13,646 13,803<br />
Property, plant and equipment 7,106 7,550 10,456 13,477 11,142<br />
Deferred tax assets 10,373 10,079 10,834 12,240 8,559<br />
Current assets 141,562 134,569 138,176 157,879 119,407<br />
202,168 191,268 201,697 230,324 184,560<br />
Current liabilities (76,008) (74,955) (82,093) (106,630) (71,781)<br />
Total assets less current liabilities 126,160 116,313 119,604 123,694 112,779<br />
Non-current liabilities (38,888) (34,947) (51,985) (64,844) (63,045)<br />
Net assets 87,272 81,366 67,619 58,850 49,734<br />
Net cash/(debt) £’000 15,643 13,096 3,633 (5,729) (11,125)<br />
Average number of employees 3,671 3,859 4,360 4,912 4,257
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