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REG-Jarvis PLC Annual Financial Report - Part 2
Released: 14/07/2009
Part 2 : For preceding part double-click [nRn1N5989V]
on major projects abroad in countries such as Saudi Arabia, Austria and Egypt.
In February 2009 a major contractor in Saudi Arabia took delivery of six OTMs -
two ballast cleaners, a dynamic track stabiliser, a switch and crossing tamper,
a ballast regulator and a Tramm - for work on several major projects between
Riyadh and Dammam. Fastline put together a comprehensive service package with
training and support including two technicians aiding with the familiarisation
of the machines.
Small Plant
Small Plant continued to perform well with turnover improving leading to
improved operating margins. This was primarily due to higher volumes from Rail
activity in the first half and cost efficiencies.
However, Small Plant will not been immune from the effects of Network Rail's
announcement regarding reduction in track renewals over the next year. The team
spent much of the final quarter downsizing its operations to ensure the business
is the right size for the anticipated reduction in workload.
Meanwhile, the Small Plant contract with Metronet continued to grow during the
period with revenue up on the previous year. The London depot established at
Acton to supply Metronet was relocated to new larger premises at Chiswick and
the business has invested in extending its product range to support the
contract.
The provision of Permaquip Scissor Lifts to Network Rail sites has increased
over the year. Fastline track side lighting continues to illuminate sites every
weekend of the year for external customers as well as the internal market. A
total of 554 kilometres of lighting was erected in the year, an average of 470
metres per shift.
Specialist Plant
The track renewals system, Slinger(R), whilst performing well was not utilised
as much as anticipated especially in the final quarter as rail volumes reduced.
Whilst volumes were slightly down on the previous year there was still an 11 per
cent increase on the utilisation from 2006-07. In total 221,000 sleepers were
laid (88,400 concrete and 132,600 steel), which equates to around 140 kilometres
of track.
The track renewals system, Slinger(R), delivered 1,028 shifts on worksites
across the UK. As well as completing work for most of the major contractors the
track renewals system, Slinger(R), was utilised on major projects for Jarvis
Rail including the Airdrie-Bathgate Rail Link, Trent Valley Four Track, A09,
Rugby station, Lugton Loop and the Wolds Coast.
The team is now focused on working with Rail to deliver the accelerated track
renewal programme.
Fastline Transport
Fastline Transport has continued to maintain its position as the operator of the
UK's largest fleet of welfare vehicles. The specialist welfare vehicle,
Crewmaster(R), has remained the most popular in the fleet and is successfully
developing its customer base outside the rail industry.
However, the business was affected by Network Rail's decision to reduce track
renewals volumes in 2009-10 which led to the Company cancelling its plans to
order new vehicles in the final quarter.
Internal revenues for the year have been impacted by the Group-wide drive for
efficiencies which has resulted in a drop in the overall fleet number. The team
has been focussed on assisting the Group to operate its fleet of vehicles in a
safer and more economical manner.
Operating Review
Freight
Overview of Activities in the Business
Fastline Freight is the trading name of the Group's Freight business, which
operates as a division of Fastline Limited. Its results are included in the
Plant segment for reporting purposes. As the Freight business accounts for less
than ten per cent of the Group's total turnover, loss and total assets, it is
not reported as a separate business segment in note 2 of these financial
statements.
Bulk Haulage
In May 2008 Fastline Freight entered the bulk haulage sector with the successful
start up of its major contract hauling coal for E.ON UK plc (E.ON), one of the
UK's leading power and gas companies. This contract, which was initially for
five years and worth in the region of £40m, has so far performed in line with
expectations.
The business currently operates five Class 66 locomotives and 94 coal hopper
wagons on this contract and is now hauling coal on behalf of E.ON from Daw Mill,
Immingham, Liverpool, Bristol and Avonmouth to Ratcliffe-on-Soar and Ironbridge
power stations.
Attention has been paid to further improving efficiency and productivity the
results of which have been most notable in planning where effective utilisation
levels were improved from 72.7 per cent to 89.4 per cent in the final quarter.
Over the year the service has performed well above the industry average
achieving an impressive 99.99 per cent reliability of trains run/planned and
punctuality of 95 per cent.
This together with Fastline's innovative approach to supporting the customer as
it responds to competitive pressures, has resulted in E.ON extending the
contract from its initial expiry in April 2013 to 31 December 2015. This has
given Fastline the confidence to order additional equipment. The successful
launch and phased roll out of the contract this year marks a major milestone for
the Freight business.
The service offered to power generation companies has been enhanced and extended
in the year to include solution design, change management, and execution of
customer bespoke solutions. Our expectation is that there will continue to be a
demand for an ever broadening range of integrated services and Fastline
Freight's strong management.
Container Services
In contrast to the bulk haulage business the container freight business, which
operated out of Thamesport, was severely impacted by the reduction in imports as
a result of the current global economic situation, the effects of which became
more apparent in the second half of the year. With no material prospect of
improvement in the container market in 2009-10 the company withdrew from this
activity in March 2009.
Safety
Freight once again achieved a remarkable AFR of 0.00 for the year, managing to
provide all its services without a RIDDOR reportable accident, highlighting the
emphasis placed on safety across the business. Given the high priority placed on
safety by E.ON the team continues to work alongside them to ensure their safety
objectives and targets are met.
Operating Review
Accommodation Services
Overview of Activities in the Business
The Group's Accommodation Services business includes Jarvis Accommodation
Services Limited (JAS), Jarvis Training Management Limited, Jarvis Construction
(UK) Limited and seven individual Special Purpose Companies. These carry out the
Group's facilities management and training activities for both internal and
external customers. The construction division is largely inactive although there
is one remaining construction issue outstanding which has been fully provided
for.
The rationalisation of the business has been finalised this year with one
further disposal taking place and is now focussed on continuing the improvements
made to date with the emphasis on enhancing performance.
Facilities Management (FM)
The management team has restructured the business in its drive to improve
service and safety, as well as reduce costs and establish an overhead
appropriate for the size of the business. Financial and commercial performance
has improved over the period and cash collection - both current and aged - has
once again been a priority. Outstanding debtors are now in line with a business
of this type and size and improvements have been made to the procurement
process. Many of the contracts have now reached their first benchmarking dates
providing the business with the opportunity to further improve performance. This
focus will continue throughout 2009-10.
With the disposal of the Bishop Auckland contract the business now comprises of
24 contracts. These contracts cover the management and provision of services at
46 properties including schools, hospitals, fire stations, military buildings
and council offices as well as the management of services on behalf of National
Express and the British Antarctic Survey.
Training Management
This business provides both bespoke and nationally recognised qualifications and
partners with Local Authorities to provide the service as well as providing
training for JAS.
Safety
Safety remains of paramount importance and work has been undertaken to increase
the Health and Safety and Environmental profile across the business. Particular
focus going forward in the FM business will be on Carbon Reduction Commitment.
Biographies
Executive Chairman
Steven Norris (64)
Executive Chairman and Chairman of the Nomination Committee
Steven entered Parliament in 1983 and was Minister for Transport from 1992 to
1996. He is a former Director General of the Road Haulage Association. He is
Chairman of AMT-Sybex Group and of Saferoad BLG Ltd and a non executive director
of IT IS Holdings plc, Speedcheck Services Ltd, Ardmore Construction Ltd and
Byrne Estates Ltd. He is also a Member of the Boards of Transport for London and
the London Development Agency. Steven is President of ITS UK, a Patron of the
Campaign for Better Transport and a Vice President of the Institute of Advanced
Motorists. He is a Companion of the Institution of Civil Engineers, a Fellow of
the Chartered Institute of Logistics and Transport and Fellow of the Institution
of Highways and Transportation. He is Chairman of the Nomination Committee.
Executive Directors
Richard Entwistle (56)
Chief Executive
Richard has an Engineering degree from Leicester University and is a chartered
Civil Engineer. Much of his early career was spent with Shephard Hill Civil
Engineering Ltd, a company acquired by Jarvis in 1990. He left the Group in 1994
to join Balfour Beatty where he spent two years developing their fledgling
Highway Maintenance business before joining Amey plc in 1996 to manage the rail
business which had been acquired as part of rail privatisation. He joined the
main Board of Amey plc in 1997 with the responsibility for both Amey Rail and
Amey Highways (and latterly Tube Lines). Richard joined Jarvis as Chief
Operating Officer with responsibility for the Group's core operations and was
appointed Chief Executive in June 2006.
John O'Kane (51)
Group Finance Director
John is a fellow of the Institute of Chartered Accountants in Ireland and has a
degree in Economics and Finance from the University of Ulster. He joined Jarvis
after a brief spell as Group Finance Director at Eco-Bat Technologies Limited.
Previously he was Group Finance Director of both Peterhouse Group plc and Kelda
Group plc. John has also previously held senior management roles with ICI and
Samsung Electronics in the UK and KPMG in South Africa. John was appointed to
the Board as Group Finance Director in April 2006.
Non-Executive Directors
Elizabeth Filkin (68)
Senior Independent Non-Executive Director
Educated at Birmingham University, Elizabeth spent her early career as a
lecturer and community worker before becoming Chief Executive of the National
Association of Citizens Advice Bureau. In 1988 she became Deputy Chief Executive
of the London Docklands Development Corporation, a post she held until 1992. In
1993 she was appointed Adjudicator for the Inland Revenue, and consequently for
Customs and Excise and the DSS Contributions Agency in the UK and Northern
Ireland. In 1999, Elizabeth became Parliamentary Standards Commissioner, a role
she held until 2002. A former member of the Audit Commission, she is Chairman of
Annington Homes plc. Elizabeth was appointed to the Board in August 2003. She is
the Senior Independent Director and a member of the Audit, Remuneration and
Nomination Committees.
Prof. Brian Mellitt (69)
Non-Executive Director and Chairman of the Remuneration Committee
Brian is Non-Executive Chairman of Building Research Establishment Limited. He
is Past President of the Institution of Electrical Engineers. Additionally, he
has acted as Rail Adviser to N M Rothschild and Sons Limited for international
railway restructuring projects. He has previously held positions as Professor of
Electrical Engineering at the University of Birmingham and Director of
Engineering for London Underground Limited; from 1995 to 1999 he was the
Director of Engineering and Production and a main Board member for Railtrack
plc. Brian was appointed to the Jarvis Board in October 2002. He is a member of
the Audit and Nomination Committees and is Chairman of the Remuneration
Committee.
Christopher Rew (61)
Non-Executive Director and Chairman of the Audit Committee
Chris is a Chartered Accountant and was formerly a partner at RSM Robson Rhodes
until April 2004, where he was the partner in charge of Market Sectors. Chris
was also an audit and advisory partner at the firm with a wide range of clients.
He was appointed to the Jarvis Board in May 2004. Chris chairs the Audit
Committee and is a member of the Remuneration and Nomination Committees.
Key Management
Executive Team
Mark Akinlade (41)
Group Company Secretary and General Counsel
Mark has an honours degree in Law and is a practising Solicitor. He started his
legal career in London's West End in 1993 and joined the Group's legal team from
private practice in June 2003. During his years in private practice he acted for
a variety of corporate, commercial and insurance clients in connection with
their business affairs, dispute management and commercial property interests. He
has been Group Company Secretary and General Counsel since May 2007.
Kjell Karlsen (51)
Group Commercial Director
Kjell has a business degree from Syracuse University in the US and has, besides
positions in finance, held senior international management positions in the
fields of procurement, marketing and contracts with companies such as Price
Waterhouse, United Technologies, Champion Spark Plug Company, ABB and
Bombardier. He joined Jarvis as Chief Financial Officer in March 2005 after
having worked in several European countries and in Asia. He was appointed Group
Commercial Director in April 2006.
Stuart Laird (56)
Chief Operating Officer
Stuart's earlier career was in construction including 3 years in the Middle East
and senior appointments with various construction organisations. In 1993, when
Director of Operations for Tarmac subsidiary Schal International he successfully
developed Tarmac Facilities Management. In 1997 Stuart joined the Building and
Property Group, a venture capitalist backed public sector FM business. He joined
their main board in 1998 and was instrumental in the Group's strategic
development and eventual sale to Interserve. Following the integration of the
business and a post acquisition lock in, Stuart joined Jarvis in 2003 as part of
the JAS management team and in April 2008 Stuart was appointed as Chief
Operating Officer of the Group. In this role he has concentrated on the
continued improvement of Health and Safety performance and restructuring the
management team at the same time as preparing for the opportunities in future
years.
John Snowdon (61)
Managing Director of Jarvis Rail and Fastline (Plant and Transport)
John's career in mechanical engineering started in the gypsum industry. In 1974
he joined Laing working on major construction projects overseas. In 1983 he
joined the UK construction arm of Laing and was primarily involved in the
building of four sections of the M25 and later set up its UK plant hire
business. From 1986 to 1990 John was responsible for the delivery of a major
highway project in Jordan. On his return to the UK he joined Amey as Managing
Director of its fleet business. Following the Group's acquisition by Ferrovial
in 2003 John played a major role in the restructuring of Amey and the
integration of a number of Ferrovial international businesses. In 2007 John
joined Jarvis as Managing Director of Fastline Plant. In April 2009 his role was
extended when John became Managing Director of Jarvis Rail and Fastline, taking
up the day to day operational responsibilities for the Rail as well as Plant
business.
Richard Thornton (55)
Group Director Engineering and HSQE
Richard has an honours degree in Civil Engineering and before joining Jarvis in
1998 he spent over 25 years in the rail industry, holding a number of senior
positions in track and structures maintenance and renewal, as well as contract
management within British Rail and the newly-privatised railway industry. He is
a Chartered Engineer and is a Fellow of the Institution of Civil Engineers. He
was appointed as Chief Civil Engineer Jarvis Rail in 2000, Engineering Director
in 2004 and became Group Director Engineering and HSQE in December 2006. He
represents the Railway Infrastructure Contractors on a number of industry
bodies.
Bernard Westbrook (62)
Group Human Resources Director
Bernard is a qualified and seasoned personnel professional. Prior to joining the
Jarvis Group in 1997 he spent over 30 years in the railway industry, holding a
number of senior posts in the personnel function of various engineering,
operational, corporate and subsidiary business divisions of the former British
Railways Board. As Group Personnel Director of British Rail Infrastructure
Services, he was heavily involved in the railway privatisation process. Bernard
is currently a member of the CBI's Education & Skills Committee and Chair of the
CBI's Employment Panel.
Corporate Governance Statement
Statement of Compliance with the Combined Code
This report explains the Board's application of the principles contained within
the Combined Code on Corporate Governance issued by the Financial Reporting
Council in 2006 (the 'Combined Code'). The Board is committed to the principles
and provisions contained in the Combined Code and believes that the Company
throughout the period to 31 March 2009, and to the date of signature of this
statement, complied with the principles and provisions set out in Section 1 of
the Combined Code and the Preamble to the Combined Code.
The Board
The Board as a whole is responsible for the management of the Company and takes
decisions on a range of issues across the Group. Should Directors recognise a
potential conflict of interest in relation to any given issue the Company has
procedures in place to ensure that the Board's powers to authorise such
conflicts are operated effectively and in accordance with its Articles of
Association. These procedures have been complied with during the year.
Certain commercial matters are delegated to a Committee of any two or more
Directors. All matters considered in this way are submitted for ratification at
the next regular Board meeting. The Board has delegated certain authority to its
Audit, Nomination and Remuneration Committees, details of which are included
later in this report and whose terms of reference are available on the Company's
website and have been made available throughout the year.
Management of day-to-day operations is delegated to the Chief Executive and to
an Operational Executive Committee comprising the Chief Executive, the Group
Finance Director and the Executive Team.
The Chairman
Steven Norris has been Executive Chairman since September 2005, having
previously held the position of Non-Executive Chairman. He was identified as
independent on his appointment to the Board. In addition to his ownership of
Park Place Communications, a consultancy specialising in transport and
environment matters, his other commitments include a number of directorships,
some of a charitable nature. During the year under review Steven Norris's
external commitments have increased as a result of his appointment to the boards
of the London Development Agency and Transport for London.
There is a written division of responsibilities between the Chairman and the
Chief Executive. The Chairman is responsible for the effective operation of the
Board's proceedings and the management of the relationship between Executive and
Non-Executive Directors and the Chief Executive is responsible for the Group's
operations.
Approximately quarterly, the Chairman meets with the Non-Executive Directors
without the Executive Directors being present.
Directors
Details of the composition of the Board during the period are set out in the
Directors' Report on page 29 and biographical details of each Director appear on
page 14. As the Board consists of the Executive Chairman, two Executive
Directors and three Non-Executive Directors (all of whom are deemed independent
by the Board), the ratio of Non-Executive Directors to Executive Directors
during the year has been 1:1. The Group intends to maintain the ratio of at
least one half of the Directors, excluding the Chairman, being independent
Non-Executives and maintains under review the balance of skills currently
available amongst the Non-Executive Board members. Elizabeth Filkin is the
Senior Independent Director. There were no changes to the composition of the
Board during the year. None of the Executive Directors hold Non-Executive
directorships in FTSE 100 companies.
All Directors are appointed for a specific term and are subject to
re-appointment by the Company at the first Annual General Meeting (AGM) after
their appointment by the Board and every three years thereafter. Biographical
material, together with an explanation of why the Board recommends the
re-appointment of a Director, is given to Shareholders prior to the AGM.
The Group Company Secretary and General Counsel ensures that Directors not only
receive a suitable induction to the Board and any training they consider
necessary on appointment, but also that they receive any ongoing training, which
they require. Briefings on the Group's operations and site visits are arranged
as appropriate. The Group Company Secretary and General Counsel also ensures the
timely flow of information and provision of sufficient resources to the Board
and its Committees.
Directors' attendance at Board and Board Committee meetings during the year is
shown in the table below. The figures include attendance at Committee meetings
by Executive Directors, who periodically attended by invitation.
Director Board Audit Committee Nomination Committee Remuneration Committee
Number 24 5 1 4
of Meetings held
R Entwistle 24 4 - 2
E Filkin 24 5 1 4
B Mellitt 23 5 - 4
S Norris 24 4 1 2
J O' Kane 23 4 - -
C J Rew 23 5 1 4
1 In addition to the above the Board met as a Committee on
one further occasion during the year to approve the change
of location of the Company's Register of Members.
2 The number of Board meetings increased during the year
primarily as a result of the need to consider Network
Rail's decision to defer a significant amount of its
expenditure for enhancement projects and track renewals.
Any Director may, if necessary, seek independent external advice at the
Company's expense and has access to the Group Company Secretary and General
Counsel for his advice and services and to procure such independent advice if
requested. Any concerns which a Director may have about the running of the
Company, or a proposed action, are recorded in the Board minutes. If any such
concerns arise and are not addressed, a Non-Executive Director would be able to
provide a written statement to the Chairman setting out the basis of such
concern.
Performance Evaluation
A performance evaluation review was undertaken during the period. Interviews
with each Board member, structured in accordance with a template in
questionnaire form, were conducted by an external facilitator. The Non-Executive
Directors, led by the Senior Independent Director, were responsible for the
performance evaluation of the Chairman, taking into account the views of
Executive Directors. The resultant reports were considered by the Board and
adopted.
Audit Committee
The members of the Audit Committee throughout the year were Chris Rew (Chairman
of the Committee), Elizabeth Filkin and Brian Mellitt, all independent
Non-Executive Directors. All other Directors are entitled to attend the
Committee's meetings, which are also attended by the Group Company Secretary and
General Counsel, Head of Group Internal Audit and a number of nominated senior
specialist staff. The Group Company Secretary and General Counsel or his deputy
is the Secretary to the Committee.
Chris Rew, a Chartered Accountant, is considered by the Board to have the
necessary and relevant financial experience for his role as Chairman. Elizabeth
Filkin, being a former member of the Audit Commission, also brings invaluable
experience as does Brian Mellitt from his extensive business experience.
During the year the Committee met formally on five occasions and undertook the
following activities:
- reviewed the Group's financial statements for the year ended
31 March 2008 and for the half year ended 10 October 2008
ensuring that appropriate accounting policies and compliance
procedures were in place;
- agreed the scope and nature of the Group's external audit
and considered the resultant reports agreeing follow-up
actions;
- considered the ratio of audit and non-audit fees paid to the
Group's external auditors, the level of non-audit
expenditure, and the external auditors' ongoing
independence;
- considered and approved the programme of work of the Group's
Internal Audit function;
- reviewed reports relating to the work of the Group's
Internal Audit function;
- evaluated the effectiveness of the Group's systems of
internal control and risk management (see Internal Controls
below); and
- reviewed and approved amendments to the Group's Delegated
Authority procedure, finance manuals and whistleblower
policy.
The whistleblower policy was updated during the year to ensure it continued to
operate effectively and is discussed in further detail in the Corporate Social
Responsibility report on page 20.
In addition to the formal meetings the Non-Executive Directors met on more than
one occasion during the year without the presence of the Executive Directors and
held part of the meeting with the external auditors to review the Group's
financial statements without the presence of other parties. The Chairman of the
Committee also met regularly throughout the year with the Head of Group Internal
Audit.
In 2008 the Audit Committee undertook a facilitated self-assessment of its
effectiveness. A further self-assessment has not been undertaken during the year
under review. The Committee has nonetheless progressed the course of action
agreed in 2008 to address the areas of improvement identified at that time and
to build on its existing strengths.
Audit Committee minutes and reports are provided to all Board members.
Nomination Committee
The members of the Nomination Committee throughout the year were Steven Norris
(Chairman of the Committee), Elizabeth Filkin, Brian Mellitt and Chris Rew, all
save the Chairman being independent Non-Executive Directors. Richard Entwistle,
the Group's Chief Executive may attend by invitation.
The Nomination Committee is responsible for:
- identifying and nominating for the approval of the Board
suitable candidates to fill Board vacancies;
- undertaking succession planning for the Board and senior
management; and
- making recommendations to the Board regarding the re
-appointment of all Directors.
The Committee only met once during the year to 31 March 2009 as it was not
called upon to make any changes to the Board. Succession planning was also
discussed in the course of Board meetings or in meetings between the Executive
Chairman and the Non-Executive Directors. At meetings where discussion on the
appointment of a Nomination Committee member takes place, the candidate absents
themselves from the discussions.
When considering suitable candidates for the Board the Committee takes account
of the skills, knowledge and experience required on the Board before commencing
a search based on objective criteria. The Group Company Secretary and General
Counsel acts as Secretary to the Committee and the Group Human Resources
Director reviews the experience and qualifications of candidates to enable the
Committee to assess issues of independence, time commitment, succession and
Board balance.
Independent external advice is sought and external search consultants are used
by the Committee to ensure that a wide range of candidates is considered when
appointments are being considered.
Remuneration Committee
The work of the Remuneration Committee and the Group's compliance with the
Combined Code in relation to Directors' remuneration is given in the Directors'
Remuneration Report on pages 24 to 27.
Shareholder Communications
The Company welcomes and encourages constructive Shareholder dialogue.
The AGM affords all shareholders the opportunity to meet and question Directors.
The Chairmen of the Audit, Nomination and Remuneration Committees are also
available to answer questions regarding the work of their Committees. Private
investors are encouraged to attend the AGM and other General Meetings or, if
they cannot, to vote by proxy. Outside of this forum Shareholders are kept
informed of developments through the release of news via the regulatory
information services and press releases are made available on the Company's
website.
The Chairman, Chief Executive and Group Finance Director meet with institutional
shareholders, their representative bodies and analysts on an ad hoc basis.
Details of these meetings are reported to the Board. The Chairman, the
Non-Executive Directors and the Group Company Secretary and General Counsel are
also made available to meet with representatives of investor protection bodies
and the views of these bodies are also reported to the Board.
Additionally, at each regular meeting, the Board receives a report from the
Group Company Secretary and General Counsel on the relative share price
performance of the Company, movements in institutional shareholdings and reports
on the beneficial holders of the share capital. Consideration is also given to
information on the issues and concerns of the investment community.
Internal Control
The Board acknowledges that it is responsible for the Group's system of internal
controls and for monitoring its effectiveness.
The Board has supplied a written delegation of matters to its Committees as
outlined above but retains the responsibility for setting the overall strategy,
approving annual budgets, authorising significant investments and disposals,
approving significant contracts outside the ordinary course of business and
setting Treasury and borrowing policy.
There has been a process for identifying, evaluating and managing significant
risks (both financial and non-financial) throughout the year to 31 March 2009
and up to the date of approval of the financial statements for that year. This
has included the following:
- updating and clarifying the Delegated Authorities at
Board level;
- revising and reissuing the Whistleblower Policy;
- reviewing and updating of the Control Self Assessment
Questionnaires; and
- reviewing the Risk Management Process.
The internal control system is monitored through review visits from the Group's
Internal Audit Department, which acts under the overall control and direction of
the Audit Committee.
The Board receives and reviews frequent reports on performance against budget,
strategic planning, operational issues, risk management and the ongoing process
improvements being developed in the business. The quality of each report is
subject to critical review by both the Board and the Audit Committee. As a
result the review of internal control throughout the period has exceeded the
annual review minimum recommended by the Combined Code.
The system comprises principally:
- a risk identification, evaluation and management process;
- clear delegations and limits of authority;
- clear authorisation and review procedures;
- independent internal audits;
- regular review by the Board of risk registers;
- regular review by the Audit Committee of internal and
external audit reports;
- regular divisional Monthly Operating Review meetings
attended by the Group's senior management;
- regular contract review meetings at a senior level;
- monthly reporting of results against budget and forecast,
with variances explained;
- process of Control Self Assessment of key finance controls;
- regular reviews of tax matters;
- an annual review of the insurance programme;
- reviews, at least annually, of pensions exposures and risks;
- monthly reports on disputes and litigation;
- a Whistleblower Policy;
- a Nominations Committee to consider Board appointments and
succession planning; and
- monthly reports on health, safety, quality management and
environmental matters.
However the Group's system of internal control can only provide reasonable, not
absolute, assurance against material misstatement or loss as it is designed to
manage rather than eliminate the risk of failure to achieve business
objectives.
Evaluation of Business Risks
During each of the last four financial years we have reviewed our risk
identification, evaluation and reporting processes by surveying the Board and
senior management. The latest survey revealed that progress has been made in a
number of areas. These include improvements to the identification of safety
risks and the strengthening of the Group Internal Audit team during the year.
However, there remains further work to be done to improve and develop the way
that external risk factors are mitigated against and to further enhance the risk
management process as a whole. The Board continues to ensure that risk
identification and evaluation are embedded within the operational processes of
the business.
Throughout the year business risk continued to be formally considered in the
Monthly Operating Review meetings of each division. Key issues identified during
these meetings are consolidated and any significant issues are reported to and
addressed by the Board and the Audit Committee. A review of this process has
identified areas for improvement; these modifications will be rolled out in the
forthcoming financial year.
In the previous financial year the risk management process was enhanced through
the development and implementation of a programme of Control Self Assessments. A
recent review identified areas that could be improved in the self-assessment
questionnaires and these changes were incorporated during the year.
The Board confirms that the ongoing process for identifying, evaluating and
managing significant risks (both financial and non-financial) faced by the Group
accords with the Turnbull Guidance for Directors 'Internal Control: Guidance for
Directors on the Combined Code' and has been in place for the period under
review and up to the date of approval of the Annual Report. This is regularly
reviewed by the Board.
Insured Risks
The Group obtains comprehensive insurance cover for its operations, including
cover for third party liability, employers' liability and material damage.
Network Rail has continued to provide an industry-wide third party legal
liability insurance scheme for all infrastructure and associated work to the
level of £155m as required by the Office of Rail Regulation. The Group's Rail
and railway related Plant operations continue to benefit from this cover. The
Group maintains separate third party liability insurance up to £155m for its
Freight operation and all other work is covered to a level of £60m. Directors
and Officers of the Company and its subsidiaries have the benefit of a Directors
and Officers Liability insurance policy which provides appropriate cover in
respect of legal actions brought against the Directors.
Internal Audit
The Group Internal Audit function provides an independent mechanism for
monitoring and reviewing internal control effectiveness across the Group. The
Head of Internal Audit reports directly to the Audit Committee and attends all
Audit Committee meetings. The terms of reference for the function continue to be
supported by the Audit Committee, with the main focus being the assessment of
the internal control environment. Group Internal Audit continues to develop risk
assurance within the business risk review process. Audit Committee approval is
required for any change in the appointment of the Head of Internal Audit. The
annual audit plan for the period ended 31 March 2010 was developed and agreed by
the Audit Committee during the year under review.
Group Internal Audit reviews are carried out independently to assess the
adequacy and effectiveness of internal controls over the key risks faced by the
business and reports of its findings are presented to management, the Executive
Directors and the Audit Committee. Follow up reviews are also conducted to check
on the implementation of the recommendations of these reports.
Group Internal Audit also advises on best practice in the design and application
of internal controls on key business projects and on policy and procedural
change.
This statement has been approved by the Board and is signed on its behalf by:
Mark Akinlade
Secretary
13 July 2009
Corporate Social Responsibility
Corporate Social Responsibility Framework
At Jarvis plc we are committed to achieving long-term profitable growth through
our various business activities. In pursuing our economic goals we are conscious
of the wide range of stakeholders with whom we interact and of the impact our
operations may have on the wider community and environment. We work hard to
ensure, therefore, that these interactions and impacts are underpinned by a set
of behaviours and codes of internal governance designed to ensure that we act in
a responsible and sustainable manner.
Our Principles
To achieve this the Company operates within a framework of 9 Principles which
define the way we do business across the Group. These Principles, which address
both compliance and aspiration, are summarised in the table below and set the
standards we strive to achieve. They define what is acceptable business
behaviour, guide us in what is not, and form a fundamental part of the way we do
business.
Our Principles
1. Corporate Governance and Accountability
We will be accountable, promote Shareholder value, and
operate transparently and to a high standard of corporate
responsibility, to deliver our long-term commitments.
2. Integrity and Ethics
We will be ethical, lawful, transparent and honest, in our
business operations.
3. Employees
We will promote a diverse, committed, and well-trained
workforce that recognises the rights of all employees.
4. Business Partnerships
We believe partnerships are a fundamentally important way to
do good, successful and meaningful business.
5. Supply Chain Responsibility
Our supply chains are important, so we will work to support
suppliers and subcontractors that want to work with us to
improve the way we do business. We will stop working with
those that do not.
6. Community Engagement
We will work with and in our communities as part of the
service we deliver to support their growth and development.
7. Continuous Improvement in Health and Safety
Safety is our number one priority for employees, users and
subcontractors. We insist on the same level of commitment to
safety from our subcontractors and suppliers. We will do all
we reasonably can to design, build and manage safe projects
and services.
8. Our Ecological Footprint
We view continuous improvement in our environmental
performance as an integral part of the services and
facilities that we deliver. We will do this in accordance
with recognised environmental management systems.
9. Innovation and Risks Review
We will use innovation and robust risk management tools to
reduce risk, promote opportunities and improve the services
and products that we deliver to our customers and users.
Progress Against Principle 1
The Group has continued to strive hard to deliver Shareholder value in what has
been a period of economic uncertainty unprecedented in recent times. The efforts
of all those within the Group who have enabled it to deliver the pre-tax profit,
before exceptional items, reported in the financial statements bear witness to
its determination to meet its objective of delivering the sustained and
consistent performance Shareholders seek. During times of economic uncertainty
it is more important than ever that these efforts are underpinned by the
stringent levels of corporate governance and the culture of accountability and
transparency the Group has continued to promote throughout the year. Full
details of the Company's Corporate Governance activities are given in the
Corporate Governance Statement on pages 16 to 19.
Progress Against Principle 2
The Board continues to maintain and promote integrity, ethics and transparency
in the Group's dealings with all its stakeholders. An important mechanism
through which breaches of policy or significant shortfalls in standards can be
brought to its attention is the Group's whistleblower policy. The policy
provides employees and others with a confidential route (including a telephone
hotline and independent email address) through which concerns about financial
and other matters can be raised with Non-Executive members of the Board in the
event that normal channels prove insufficient or inappropriate. It has continued
to operate throughout the year and since the last report steps have been taken
to update the policy to ensure it is still fit for purpose and to raise its
profile amongst employees via the Group's intranet site, team briefing process
and local notice boards.
Progress Against Principle 3
Our employees remain key to the success of our business. The need to downsize
our operation in the latter part of the year as described in the Chairman's
Statement has therefore been particularly painful and it is with sadness that
these events have necessitated the loss of jobs across the Group. In carrying
out this difficult process we have nonetheless recognised the rights of
employees and ensured that due process has been followed. Despite the
difficulties that many have had to face our employees have continued to
demonstrate commitment and professionalism throughout. Our policies to prevent
discrimination on the basis of disability, gender, age, sexual orientation
marital status, ethnicity or religious belief and to encourage diversity and
opportunity have remained in place throughout the year. We have also continued
to operate training, retraining and further development programmes to ensure
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