Annual Report and Accounts 2024
Hargreaves Services plc
Hargreaves Services plc – Annual Report and Accounts 2024
1. Strategic Report
1
About us
10
Chair’s Statement
12
Chief Executive’s Review
16
Financial Review
18
Audit & Risk Committee Report
20 Risk Management
26 Environmental, Social and Governance Report (including NFSIS Report)
2. Directors’ Report
40 Board of Directors
42 Directors’ Report
46 Corporate Governance
50 Remuneration Report
54 Statement of Directors’ Responsibilities in respect of the financial statements
3. Financial Statements
56 Independent Auditors’ Report
62 Consolidated Statement of Profit and Loss and Other Comprehensive Income
64 Group Balance Sheet
66 Group Statement of Changes in Equity
67 Group Cash Flow Statement
68 Notes (forming part of the Group financial statements)
108 Parent Company Balance Sheet
109 Parent Company Statement of Changes in Equity
110 Notes (forming part of the Company financial statements)
114 Alternative Performance Measure Glossary
115 Notice of Annual General Meeting – Hargreaves Services plc
121 Shareholder Information
Read more at www.hsgplc.co.uk
Hargreaves Services plc
Annual Report and Accounts 2024
EBITDA up
19.7% to £26.1m
up from £21.8m
Record profit for
Hargreaves Land
with UPBT
increasing
110.3% to £8.2m
from £3.9m
Full year
dividend of 36.0p
proposed
compared with
21.0p
1
2
3
Buy In of pension
scheme completed
March 2024 for
cash consideration
of £2.7m
4
Trading
•
Revenue of £211.1m (2023: £211.5m)
•
Underlying Profit before Tax of £16.9m (2023: £27.3m)
•
EBITDA* increased 19.7% to £26.1m (2023: £21.8m)
•
Basic underlying* EPS of 38.2p (2023: 86.3p)
Services
•
Revenue increased by 1.6% to £204.1m (2023: £200.9)
•
Services UPBT* of £11.4m compared to £12.3m in FY23. The prior year included several
non-recurring asset sales, which delivered a non-recurring profit of £3.2m.
•
Strong contract portfolio, growing to over 65 term and framework contracts, providing
visibility of 70% of next year’s expected revenue
Hargreaves
Land
•
Record profit for Hargreaves Land with UPBT* increasing 110.3% to £8.2m (2023: £3.9m)
•
First tranche of renewable energy land assets to brought to market post year end.
German
Joint venture
•
Trading performance down impacted by the wider German economy with the Group’s
share of Profit after Tax of £1.3m (2023: £15.5m)
•
Improved second half performance gives confidence going into new financial year
•
Increased cash receipt from HRMS of £7.8m (2023: £4.0m)
Balance
Sheet
•
Cash and cash equivalents of £22.7m (2023: £21.9m)
•
The buy-in of the pension scheme completed in March 2024 for a cash consideration
of £3.7m
Dividend
•
Full year dividend increased 71.4% to 36.0p per share (May 23: 21.0p)
Highlights of the Year
Notes:
*
Underlying Profit before Tax and EBITDA are defined in the Alternative Performance Measure Glossary.
Directors’ Report
Financial Statements
1
Strategic Report
About us
The value proposition of Hargreaves Services plc is
built on creating, delivering and realising value from
its three business pillars of Services, Hargreaves Land
and its investment in its German Joint Venture
Restored brownfield site – Westfield, Fife
2
Hargreaves Services plc
Annual Report and Accounts 2024
About Hargreaves
Hargreaves Services plc is a diversified
group covering infrastructure services
and land development.
Strategic Report
Directors’ Report
Financial Statements
3
Hargreaves Services plc
Annual Report and Accounts 2024
The Group is organized and managed in three pillars:
The Services business is a leading
partner for environmental and
infrastructure services, providing
critical support to the Energy,
Transportation, Environmental and
Water sectors.
We offer an extensive range of
complimentary services for a wide
range of industrial clients.
Holding over 65 term and framework
contracts and with over 70% of
budgeted revenue secured, the
Services business provides a solid and
reliable base for growth.
Land and property development
specialists, utilizing years of
experience to transform land into
usable and livable spaces.
Property and Land development team
focused on the identification and
development of strategic land
opportunities.
Our renewable energy land asset
portfolio enables generation of over
200 MW of wind generated power.
Our Joint Venture, based in Duisburg,
Germany recycles over 500kt of steel
waste each year into usable materials
for industrial use.
The trading business brings worldwide
expertise in the sourcing of essential
raw materials for use in a range of
industrial uses within Europe.
Services
Hargreaves Land
HRMS
About Hargreaves:
Services
Hargreaves Services plc
Annual Report and Accounts 2024
Core competencies
> Bulk logistics
> Specialist mechanical and electrical
engineering
> Land remediation
> Bulk materials handling
> Major earthworks
> Waste management solutions
> Quarrying and aggregate services
Number of employees:
1,346 (2023: 1,299)
Strong contractual position – over
65 term and framework contracts,
more than 70% of next year’s
budgeted revenue already secured.
Contracts largely resistant to
inflation due to escalation clauses
Outlook
Both revenue and margins remain strong
within Services. The comprehensive
contract bank provides the Group with a
strong platform for growth. Opportunities
exist across all market sectors and
particularly within Energy and
Environmental, as the world looks to
transition to lower carbon solutions,
Hargreaves Services is well positioned to
support this evolution.
Sectors
Energy,
Transportation,
Water,
Environmental
Market focus
Geography
UK, South Africa,
Hong Kong and
Malaysia
Operations at Hargreaves industrial Services, Hong Kong
4
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Strategic Report
Directors’ Report
5
Hargreaves Services plc
Annual Report and Accounts 2024
Our offering:
> Master Developer – managing large scale,
multi-phase projects delivering services plots
for residential and commercial development.
> Turnkey Project Delivery – pre let/forward
sold bespoke commercial developments for
end users and investors
> Planning Promotion – promotion of
greenfield land through the local plan process
and subsequent onward sale
> Renewables – identification and promotion of
renewables projects through the plan process
and subsequent letting to specialist
renewables asset developers
Pipeline
Residential planning allocated
5 sites (5,560 plots)
GDV £197m
Residential planning promotion
8 sites (3,075 plots)
GDV £130m
Commercial planning allocated
10 sites (538 acres)
GDV £770m
TOTAL GDV £1.1bn
About Hargreaves:
Hargreaves Land
Hargreaves Services plc
Annual Report and Accounts 2024
Our locations
Outlook
The pipeline for property development has
grown to over £1bn, demonstrating a significant
level of visibility in the planning promotion and
turnkey development space. The business
remains focused on adding to the pipeline with
high quality opportunities to create value.
Renewables values are resilient and the Board is
focused on the strategy of realizing the value for
shareholders once schemes reach generation
stage. The first tranche of renewables is nearly
ready to go to market, the size of this tranche is
likely to be in excess of £10m in value.
KEY SITES
UNITY
WESTFIELD
BLINDWELLS
DOUGLAS
VALLEY
RENEWABLES
2
4
4
Restored and developed mine site – Blindwells Edinburgh
6
Hargreaves Services plc
Annual Report and Accounts 2024
Renewables
11 schemes
including 3 wind farms, 6 access
agreements and 2 battery storage schemes.
Combined mid-point value of
£28m
generating almost
1,400MW
of green power.
Total of
216MW
currently generating on our land.
Renewables pipeline – further 10 schemes
with a total of
1,695MW
of potential energy.
Strategy to realise the
renewable energy asset portfolio once
schemes reach generation stage.
Strategic Report
Directors’ Report
Financial Statements
7
Hargreaves Services plc
Annual Report and Accounts 2024
About Hargreaves:
HRMS
Our Joint Venture, based in Duisburg,
Germany recycles over 500kt of steel waste
annually into usable materials for industrial use.
Hargreaves Services plc
Annual Report and Accounts 2024
HRMS has three well established income
streams of trading, carbon pulverization
plant and DK recycling. The trading
business was the original focus of the
company and is a strategic partner for
steel, foundry, lime, refractory and ceramics
industries across Europe. The team are
focused on the global procurement and
delivery of industrial raw materials into
these markets.
The carbon pulverization plant is designed
to produce up to 400,000 tonnes of
pulverized fuel each year.
This pulverized fuel is intended to replace
lignite, which is a highly polluting product.
Currently operating at 25% of capacity to
service the DK requirement.
DK Recycling is one of the world’s largest
recyclers of ferrous waste materials.
Processing over 500kt of steel waste per
year into 250kt of pig iron and 5kt of zinc
for use in foundries and over industrial
processes.
Operations at DK Recycling
8
Hargreaves Services plc
Annual Report and Accounts 2024
HRMS – Trading
Market leading trader in industrial
raw materials in Germany and
Northern Europe. Supplying solid
fuels, refractory minerals, pig iron
and ferro-alloys.
DK Recycling
One of the largest recyclers of ferrous waste materials
in the world, producing pig iron and zinc.
Carbon Pulverisation
Plant (CPP)
Producer of high quality pulverised
carbon to industries across Germany.
Pulverised carbon will replace the high
polluting brown lignite coal.
Strategic Report
Directors’ Report
Financial Statements
9
Hargreaves Services plc
Annual Report and Accounts 2024
Hargreaves Services plc
Annual Report and Accounts 2024
10
Introduction
I am pleased to be able to report another year
of good strategic progress and strong financial
performance, notwithstanding the contrasting
performance across our three business units,
Services, Hargreaves Land and HRMS. A record
year in Hargreaves Land and strong underlying
margin growth in Services was offset by a
significant decline in contribution from our
German joint venture, HRMS.
The Group remains focused on the realisation
and delivery of value to our shareholders, which
is applied to each of our businesses as follows:-
• Services – We concentrate on creating
and delivering growth through the
identification and successful tendering of
high-quality, robust contracts in areas of
core competence within the infrastructure
market.
• Hargreaves Land – Our medium-term
strategy to deliver value through the
realisation of capital employed within our
landmark Blindwells development near
Edinburgh and additional value creation
through the management and ultimate
disposal of the renewable energy land
asset portfolio, whilst also growing an
‘asset light’ active development business.
• HRMS – Our focus is on longer term
realisation whilst exploring certain accretive
initiatives. We have an agreement for a
minimum annual cash return target of £7m.
Strategic Projects
The Board outlined two areas of key focus in
the Annual Report and Accounts for the year
ended 31 May 2023. First, to realise value from
the Group’s renewable energy land assets
over the next five years. Second, to progress
the Buy-Out of the Group’s defined benefit
pension scheme. I am pleased to report
positive updates on both initiatives:
Renewable Energy Land Assets
During the year, the second wind farm
constructed on land within our portfolio
became operational. This means that land
owned by the Group is now helping to
support the generation and storage of over
200MW of installed capacity of renewable
electricity.
An updated independent valuation of the
Group’s near-term renewable energy land
assets was undertaken in July 2024 by Jones
Lang LaSalle Limited (“JLL”). The review has
placed a Market Value at Commissioning of
Development** of between £27.0m and
£28.8m (2023: £27.2m to £28.9m). These assets
are held in the Balance Sheet at a historic cost
of £7.4m (2023: £7.4m).
The Group remains committed to realising
value from these assets through their orderly
sale over the next three to four years. As a
result of several wind farms becoming
operational, including the wind farms at
Broken Cross and Dalquhandy, I can confirm
that we intend to bring the first tranche to
market within the current financial year. It is
anticipated that this tranche should be valued
in excess of £10m.
Pension Scheme Buy-In
I’m pleased to say that the Buy-In of the
pension scheme was executed in March 2024.
Not only has the Buy-In completed, but it was
done at a cost substantially lower than initially
envisaged. This involved a one-off payment
of £7.7m to the scheme, which allowed the
trustees to purchase an insurance policy to
cover the schemes liabilities. The payment of
£7.7m included a loan of £4.0m to the
scheme, which will be repaid to the Group
within two years.
This Buy-In has removed the need to pay
£1.8m in annual deficit reduction payments
from FY25 onwards, which has in turn allowed
the Board to increase the annual dividend for
shareholders.
Financial Results
Overall Group Underlying Profit before Tax
(“UPBT”)* was £16.9m (2023: £27.3m) for the
year ended 31 May 2024. The reduction is
due, in most part, to the challenges faced by
HRMS. HRMS did see an improved second
half of the year with more favourable,
although still uncertain, market conditions
resulting in increased volumes. There are
also early signs of improvement in gate-fees
and commodity pricing.
The record profit within Hargreaves Land of
£8.2m (2023: £3.9m) demonstrates the high
quality of our professional team and
underlying asset portfolio, which is all held at
historic cost. Whilst profit profiles can be
variable within this business, it is pleasing to
see this milestone achieved.
Chair’s Statement
Roger McDowell
Group Chair
The Group remains steadfast in its
core objective to create, realise and
deliver value for our shareholders.”
Our Balance Sheet remains free from bank debt
and now relieved of pension deficit contribution
requirements. This provides a solid and stable
foundation for the delivery of substantial value
for shareholders in the coming years.”
Strategic Report
Directors’ Report
11
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
We have also seen revenue and margin
growth within the underlying results of
Services, driven by growth within our
Earthworks and Environmental activities.
Basic earnings per share have decreased to
37.8p from 85.9p in the prior year, reflecting the
impact on the reduction in profit from HRMS.
Cash and leasing debt
On 31 May 2024 the Group held cash in the
bank of £22.7m (2023: £21.9m). The business
remains cash generative, predominantly
through the activities in Services and the
receipt of HRMS dividends. The overall cash
balance remains consistent with the prior year
due to the one-off payment of £7.7m
(inclusive of a £4m loan) made to the pension
scheme to ensure the buy-in was completed,
which has offset the underlying cash
generation from operations.
The Group’s debt relates solely to leasing debt
and hire purchase arrangements for the
acquisition of fixed assets. At the year end the
balance of the debt was £34.2m (2023:
£36.4m), the reduction reflects the net
repayments made in the year.
Dividend
The Group paid an interim dividend of 18.0p
(2023: 3.0p), which represented a six-fold
increase in the interim dividend. This significant
increase reflected the additional free cash flow
available following the buy-in of the pension
scheme, as well as the additional sustainable
cash returns from HRMS combined with a
move to increase the interim dividend to
represent 50% of the full year dividend.
The business has continued to trade well in
the second half of the year and the Board can
recommend a final dividend of 18.0p (2023:
6.0p) taking the full year dividend to 36.0p
(2023: 21.0p), representing an increase of 71%.
In the previous year, we paid an additional
dividend of 12.0p relating to cash received from
HRMS. No such additional dividend is proposed
as the impact of cash received from HRMS is
factored into the 36.0p full year dividend.
If approved at the Annual General Meeting,
the final dividend of 18.0p will be paid on 4
November 2024 to all shareholders on the
register at the close of business on 27
September 2024. The shares will become
ex-dividend on 26 September 2024.
Outlook
The Group remains steadfast in its core
objective to create, realise and deliver value
for our shareholders. Despite challenges faced
by HRMS, the notable improvement in the
second half of the year gives us confidence in
an improved contribution for the current
financial year. We are also excited to introduce
the first tranche of renewable energy land
assets to the market, marking the start of
substantial realisation events within this
business sector. The Services business
continues to demonstrate robust
performance, with over 70% of budgeted
revenue already secured and additional
opportunities emerging within the power,
water and infrastructure sectors.
Our Balance Sheet remains free from bank
debt and now relieved of pension deficit
contribution requirements. This provides a
solid and stable foundation for the delivery of
substantial value for shareholders in the
coming years.
Finally, I extend my sincere gratitude to all my
colleagues and all the members of the
Hargreaves team for their continuing hard
work and dedication. We look forward to the
future with confidence.
Roger McDowell
Group Chair
5 August 2024
* The basis of Underlying profit before tax is set out in the Alternative Performance Measures Glossary.
** Market Value at Commissioning of Development – represents the price at which the portfolio would change hands between a willing buyer and a willing seller, neither being under any
compulsion to buy or sell and both having reasonable knowledge of the relevant facts.
Hargreaves Services plc
Annual Report and Accounts 2024
12
Services
Revenue across the Services business has
grown by 1.6% to £204.1m (2023: £200.9m). The
HS2 contract remains the largest contract held
by the Group delivering revenue of £48.3m
(2023: £54.1m). It’s anticipated that there is a
further two years of work required on HS2 at a
similar run rate. The prior year activities at HS2
included substantial engineering project
works.
Services delivered an underlying profit before
tax of £11.4m compared to £12.3m in FY23. The
prior year included several non-recurring asset
sales, which delivered a non-recurring profit of
£3.2m. As such, the like for like PBT is £9.1m for
the year ended 31 May 2023. The Services
business has therefore delivered an underlying
growth of £2.3m representing a 25.3% year on
year improvement.
This improvement has been delivered, in the
most part, through the increased margin the
business has been able to recognise. Current
year net margin is 5.6%, which compares to
4.5% in the prior year. The margin growth
demonstrates the high quality of the contracts
the Group is entering into within the transport
and earthwork operations, combined with a
constant focus on contract efficiency.
Continued contract success
A core focus of the Services business is the
resilience and reliability of its contract base.
The business is focussed on securing term and
framework contracts with high quality
counterparties in areas of core competence.
During the year we have seen success in this
area, with the Services business signing several
new term and framework contracts.
These include a five-year framework contract for
Yorkshire Water delivering environmental handling
services and a three-year agreement with Stirling
Council to provide transportation services for their
waste recovery operations to name but two.
Additionally, the business has made great progress
at Sizewell C Nuclear Power Station, with additional
work secured on preparatory earthworks in
advance of any major works.
Furthermore, the Group has, for the third time
in a row, secured a five-year NEC Term Service
contract with CLP Power Hong Kong Ltd
(“CLP”) providing mechanical and electrical
engineering services within planned and
reactive maintenance operations. The award of
the contract is not only testament to the high
quality of service provision but also critical for
the ongoing development within Hong Kong
and the wider region, providing a stable
platform for growth in the area.
The Services Group now holds a strong
contract portfolio which has grown to over 65
term and framework contracts, many of which
contain escalation clauses to insulate the
Group from inflationary pressures, providing
the business with visibility of over 70% of
budgeted revenue heading into the new
financial year. This provides a stable base from
which to deliver reliable revenues and strong
margins helping underpin the cash generation
of the Group.
We note the recent announcement from
Tungsten West plc (“TW”) regarding the
successful award of the operating permit for
their Mineral Processing Facility at the tungsten
mine in Devon. The announcement also noted
that TW is well progressed with its latest
feasibility study. The completion of this study
will enable TW to undertake the capital raise
required to bring the project into production.
The Group remains party to an exclusive
long-term Mining Services Contract with TW,
which will commence should the project
move to production. A further £1m instalment
was received in July 2024, leaving a further
£4m to be received.
Chief Executive’s Review
Gordon Banham,
Group Chief Executive
£’m
Services
Hargreaves
Land
HRMS
Unallocated
Total
Revenue (2024)
204.1
7.0
-
-
211.1
Revenue (2023)
200.9
10.6
-
-
211.5
Underlying Profit/(Loss) before Tax* (2024)
11.4
8.2
1.3
(4.0)
16.9
Underlying Profit/(loss) before Tax* (2023)
12.3
3.9
15.5
(4.4)
27.3
* The basis of Underlying Profit Before Tax is set out in the Alternative Performance Measures glossary.
With a high level of secured revenue in Services,
clear visibility of transactions in Land and early
signs of a recovery in HRMS there are many
reasons to feel positive about the coming year.”
Strategic Report
Directors’ Report
13
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Hargreaves Land
Hargreaves Land has delivered a record profit
for the year of £8.2m (2023: £3.9m) which is
particularly pleasing to see amidst a backdrop
of uncertainty within the property market
more generally.
The business has benefited from significant
disposals, including the 8-acre site at
Westfield, which held an Energy from Waste
(“EfW”) plant lease, which was sold for
proceeds of £7.6m. Additionally, the business
completed the sale of 28 acres of land at
Maltby raising proceeds of £4.9m.
Revenue for Hargreaves Land of £7.0m (2023:
£10.6m) is lower than the prior year due to the
mix of sales. The land at Westfield, which was sold
in the year, was held as an Investment Property
and therefore is not recognised as revenue.
The Group’s largest project, Blindwells, has
continued to be impacted by some
uncertainty within the residential housing
market as we have seen house builders delay
purchases. The Group had anticipated a
material sale to Avant Homes to complete in
the second half of the year for a 20-acre site
generating proceeds of £18.5m. Whilst
contracts were exchanged, the completion
has not yet taken place and is now expected
to occur in the current financial year. The
longer-term prospects of the Blindwells site
remain positive, with high levels of interest in
the plots we have brought to market during
the year. Sale terms have been agreed on a
further two development parcels bringing the
total number of residential plots under offer
or contract to 708. We expect the site to
provide a substantial contribution in the
current financial year. The project continues
to represent a long-term, regular profit stream
for Hargreaves Land with approximately 100
acres remaining in phase 1. Following the
completion of phase 1, there is a second
phase, for which a further planning allocation
for up to an additional 1,500 homes is being
progressed on 135 acres owned by the Group.
Progress has continued at the Group’s other
multi-phase development sites, including
Westfield and Unity. Development works, which
were started in the previous financial year have
been completed at Westfield. There has been
substantial interest in the site from industrial
users and also for green energy storage.
At the start of FY24 demand for both
residential and commercial plots was very
subdued as rapidly rising interest rates and
wider macro-economic uncertainty weighed
on markets. This market fragility persisted into
the second half of the year but as conditions
stabilised and the medium-term outlook for
interest rates moderated we saw a return of
demand from house builders for serviced
residential land in quality locations although
values have yet to recover to levels seen at the
peak of the market.
Commercial demand has been much slower
to recover with increased construction costs
combining with weaker investment values
making scheme viability more challenging
and this has only partially been offset by
above inflation rental growth in many sectors.
Pipeline
As Hargreaves Land transitions to a lower-
capital model the long-term pipeline of
opportunities represents a key indicator of
performance and opportunity for the
business. We have seen significant progress in
the building of the pipeline over the last few
years. In the last twelve months alone, the
business has exchanged contracts on five
different schemes with a combined Gross
Development Value (“GDV”) of £210m.
Additionally, the pipeline includes a further
five schemes with an estimated combined
GDV of £70m, which have terms agreed prior
to exchange of contract.
The total estimated GDV of schemes on which
the Group has exchanged contracts is now
£1.1bn (2023: £940m). These schemes cover a
total of 1,600 acres and represent a mix of
residential and commercial developments.
These schemes represent long-term
opportunities and are expected to deliver a
minimum margin of 15% of GDV.
Pipeline Summary
Number
of sites
Residential
plots
Acres
Estimated
GDV
Residential (planning allocated)
5
5,560
763
£197m
Residential (planning promotion)
8
3,075
299
£130m
Commercial (planning allocated)
10
n/a
538
£770m
1,600
£1,097m
Renewables
Significant progress has been made within
the renewable energy asset portfolio in the
year. Two windfarms on land owned by the
Group are now operational and generating
clean electricity. A third is under construction
and due to become operational by 2026.
Option agreements were exchanged on a
fourth windfarm project at the end of FY24
which is targeted to be under construction
within the next five years. Of the six wind farm
projects that require access across our land
(“Access agreements”), two are fully
operational, two are under construction and
two are at pre-construction stage, having
secured planning and grid connections.
The recent independent valuation of the
Group’s near-term renewable energy land
assets of between £27.0m and £28.8m (2023:
£27.2m and £28.9m) reaffirms the inherent
value within these assets. The business
remains focussed on taking the first tranche
of operational schemes to market within the
coming financial year.
In addition to the well-established schemes
there has been a lot of progress regarding
new schemes on our land, including
substantial new battery storage
opportunities. The recent valuation covers
eleven schemes, many of which are in
operation, with a total MW output of
1,614MW. The Group has line of sight on a
pipeline of an additional ten schemes with
total output of 1,695MW which is not currently
included within the valuation due to
pre-planning or the long-term delivery
timescales currently envisaged.
Chief Executive’s Review continued
14
Hargreaves Services plc
Annual Report and Accounts 2024
HRMS
The Group’s share of post-tax profits from
HRMS was £1.3m (2023: £15.5m). This
represents a significant reduction in
contribution from the joint venture which can
be attributed to two main factors. First, a
reduction in trading volumes which has been
impacted by the German recession. Second,
the impact of commodity pricing on the steel
waste recycling process at DK.
The trading business has seen a return to
more normal conditions following a period of
two years during which volumes and pricing
were extremely strong. This area of the
business has seen traded volumes of 746kt,
which compares to 1,020kt in the previous
year. Additionally, average margin has been
squeezed to 5.7% (2023: 6.4%). Yet despite
this, the trading operation has delivered a
local PBT of £10.0m (2023: £24.5m).
The other aspect of HRMS is the steel waste
recycling operation, DK Recycling und
Roheisen GmbH (“DK”). This facility takes in
approximately 500kt of waste dusts from
around Europe and produces pig iron and
zinc for sale. In the current year DK has been
impacted by several pricing pressures.
1. Pig iron sales pricing is down, impacted by
the lack of any EU sanctions on pig iron
imported from Russian sources.
2. Coke pricing, which is a key fuel in the
process, has remained high impacted by
the embargo on Russian imports.
3. Zinc pricing is down on the prior year,
with the market price down as low as
$2,200 per tonne, compared to highs of
over $4,000 per tonne twelve months
earlier.
This has resulted in DK delivering a local loss
before tax of £7.4m (2023: £5.3m profit).
However, this masks a bit of a turnaround in
the second half of the year, which has seen
the business deliver a profit for the final six
months. This has been assisted by an
improvement in gate fees on dust brought on
site and a general improvement in pig iron
and zinc pricing since the turn of the year.
Looking forward, there are reasons to be more
positive about the coming financial year
within DK. Most notably the cost of coke has
been secured at lower prices, which will lead
to a substantial improvement in the DK
profitability. The higher gate fees recognised
in the second half of the year will be in place
for the whole of the new year. Finally, there
has been an improvement in pig iron pricing
as some modest sanctions on the importation
of Russian product begin to have an impact.
Despite the overall reduction in contribution
to PBT from the joint venture, I am pleased to
report that HRMS made a cash payment to
the Group of £7.8m during the year (2023:
£4.0m). The management team of HRMS have
agreed to maintain a minimum cash return to
the Group of £7m per annum. It is important
to note that this is not dependent on the
performance of DK. This will be funded out of
the ongoing profits of HRMS trading
operations as there is no requirement to
reinvest profits into working capital due to the
significant headroom on their banking facility.
During the year HRMS refinanced their
Balance Sheet and now hold a €76m asset
backed finance facility. One key aspect of this
new facility is that it no longer requires an
off-Balance Sheet guarantee from Hargreaves
Services plc. As such, the €10m guarantee that
was previously in place and recorded as a
contingent liability has been removed.
Summary
The Group has seen strong performances
within Services and Hargreaves Land and
reduced profitability within HRMS. With a high
level of secured revenue in Services, clear
visibility of transactions in Land and early signs
of a recovery in HRMS there are many reasons
to feel positive about the coming year.
The business has a strong, debt-free balance
sheet and we remain focus on creating,
delivering and realising value for our
shareholders.
Gordon Banham
Group Chief Executive
5 August 2024
Restored mine site, Dalquhandy Scotland
The Services Group now holds a strong
contract portfolio which has grown to
over 65 term and framework contracts,
providing a stable base from which to
deliver reliable revenues and strong
margins helping underpin the cash
generation of the Group.”
Strategic Report
Directors’ Report
Financial Statements
Hargreaves Services plc
Annual Report and Accounts 2024
15
16
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Review
Stephen Craigen
Chief Financial Officer
Results
Group revenue was £211.1m (2023: £211.5m) and
Underlying Profit before Tax* was £16.9m (2023:
£27.3m). Whilst top line revenue has remained
stable, we have seen a reduction in revenue
from Hargreaves Land due to the mix of assets
sold in the year. This has been offset by a 1.6%
growth in revenue within the Group’s Services
business. The reduction in underlying PBT is
almost entirely due to the significant reduction
in contribution from HRMS, as this business has
been affected by a recession in Germany and
the impact on commodity pricing, in particular
pig iron and coke. Gross profit margin has
improved to 20.5% (2023: 18.5%).
Net finance expense was £0.7m (2023: £1.0m).
This reflects the increase in interest receivable
on bank deposits and loans to joint ventures,
as a result of the increase in the Bank of
England base rate. This is offset by an increase
in interest payable on leasing debt, much of
which was acquired partway through the
prior year, which is due to the investment in
plant and machinery required to service the
HS2 earthworks contract.
The Group recorded £1.5m (2023: £16.3m) in
share of profits from joint ventures. £1.3m
(2023: £15.5m) of this was attributable to
HRMS, which is stated after tax. The reduction
in profits from HRMS has been outlined
above, the remaining profits from joint
ventures relate to the Unity joint venture, in
which profits have remained consistent.
This results in a consolidated profit before tax
of £16.7m (2023: £27.2m).
Taxation
The income tax charge for the year was
£4.5m (2023: £0.8m credit). This represents an
effective tax charge of 27% on consolidated
profits. The prior year credit of £0.8m was
heavily impacted by the level of investment in
plant and machinery which qualified for the
130% “super-deduction”.
In 2011, after taking professional advice, the
Group engaged in a disclosable tax planning
scheme relating to the leasing of assets, the
legality of which has been challenged by
HMRC. The Board has been advised that the
scheme was lawful. All cash relating to the
scheme has previously been paid to HMRC.
This matter was heard by the First Tier
Tribunal in June 2019 and a decision in favour
of HMRC was issued on 23 March 2020. This
decision was appealed at the Upper Tier
Tribunal in June 2022 where the decision
was overturned in favour of the taxpayers.
HMRC have recently appealed this
determination at a hearing in the Court of
Appeal which took place in May 2024. The
outcome of the Court of Appeal found in
favour of HMRC. The taxpayers intend to
appeal the decision to the Supreme Court.
The outcome of this appeal could take up to
two years to reach final resolution. The
Group does not carry any assets related to
this case and has provided for all associated
professional fees.
Net Assets
The net assets of the Group were
£192.1m (2023: £201.0m) and the net assets
per share was £5.86 (2023: £6.18). The
reduction in net assets is due to the
accounting impact of the pension scheme
Buy-In. The pension scheme was held as an
asset on the Balance Sheet in the prior year,
following the Buy-In there was a £12.4m
reduction in reserves as a result of changes in
actuarial assumptions.
Cash Flow
The profit after tax for the year of £12.2m
(2023: £27.9m) generated an EBITDA* of
£26.1m (2023: £21.8m), which results from the
improved profitability of the Services
business. Depreciation for the year was
£16.2m (2023: £14.6m) which increased by
11.0% due to the investment in plant and
machinery in the prior year to support the
various earthworks contracts.
The Group received gross proceeds of
£8.2m (2023: £6.9m) for the sale of fixed assets
and invested £3.3m (2023: £9.3m) into capital
items. This includes £7.9m (2023: £5.7m)
received from the sale of Investment
Properties. The Group invested £0.5m into an
acquisition, McLeod Construction Materials
Limited, in June 2023 to supplement the
aggregates offering of the Services business.
The increase in leasing debt part way through
the prior year, due to the acquisition of plant and
machinery required for the earthworks
contracts, has resulted in capital repayments on
leasing debt increasing to £17.4m (2023: £12.7m).
The profit after tax for the
year generated a 19.7%
increase in EBITDA, which
results from the improved
profitability of the
Services business.’’
Strategic Report
Directors’ Report
17
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Dividends totalling £11.8m (2023: £6.7) were
paid in the year. The Group received a
payment of £7.8m (2023: £4.0m) from HRMS
reflecting the new annual rate of cash return
from the joint venture.
Banking Facilities
As of 31 May 2024 the Group had cash in hand
of £22.7m (2023: £21.9m). In addition to the
cash reserves, the Group also had access to a
£17m invoice discounting facility with
Santander which was undrawn at the year end.
This facility provides the Group with
additional flexibility to deal with any
short-term working capital fluctuations. The
Group’s assets are not covered by any
debenture and the invoice discounting facility
has no associated covenants. This facility was
reduced to £12m at 31 July 2024 and is in
place until 31 October 2025.
Going Concern
The Group has material assets and financial
resources at its disposal together with robust
risk management and capital allocation
processes. The Group holds £22.7m of cash
resources and has the availability of a further
£12m invoice discounting facility which is
committed at this level for a period of
15 months from July 2024 and expires on
31 October 2025. This provides the Board
with confidence that the Group has
appropriate liquidity to meet any foreseeable
cash requirements. A rigorous process of
reviewing cash flow forecasts and testing for
a range of challenging downside sensitivities
has been undertaken. Only remedies to
these downsides which are entirely within
the Group’s control have been assumed to
be achievable mitigations to those
sensitivities. Therefore, and after making
appropriate enquiries, including reviewing
budgets and strategic plans, the Directors
have a reasonable expectation that the
Company and the Group have adequate
resources to continue in operational
existence for the foreseeable future.
Accordingly, the Board continues to adopt
the going concern basis in preparing the
Annual Report and Financial Statements.
Pensions
The Group has the obligation to fund two
defined benefit pension schemes and an
unfunded concessionary fuel scheme, all of
which are closed to new members and are
related to the former mining operations at
Maltby Colliery.
During the year the Group made
contributions to the defined benefit pension
schemes of £5.3m (2023: £2.4m). This is made
up of £1.6m of routine monthly deficit
reduction payments up until the point at
which the Group made a one-off £7.7m
payment, which included a £4m loan to allow
the Trustees to “Buy-in” the scheme. The
Buy-in involves the Trustees using the assets
of the scheme to purchase an insurance
policy which will cover the future liability.
As a result of the Buy-in, all of the scheme’s
liabilities are now matched with annuities
which has removed the scheme’s investment
and funding risks. As a consequence, there
has been a £7.2m reduction in the retirement
benefit asset, resulting in a year end asset
balance of £1.3m (2023: £8.5m). This asset
balance will reduce to nil following the
buy-out.
Regarding the concessionary fuel scheme, the
Group made contributions of £0.1m (2023:
£0.1m) and recognises a liability on the
Balance Sheet of £3.0m (2023: £2.9m).
Dividends
The Board is recommending a final dividend
of 18.0p (2023: 6.0p) per share bringing the
total for the year to 36.0p (2023: 9.0p),
reflecting a full year increase of 300%.
In the prior year, the Board paid an additional
dividend of 12.0p relating to cash received
from HRMS. No such additional dividend is
proposed in the current year, the Board
believe the equivalent value is included
within the full year dividend noted above.
Share Capital
At 31 May 2024, there were 33,138,756 (2023:
33,138,756) ordinary shares of 10p each in issue
of which the Company held 332,401 (2023:
611,118) in treasury. During the year, there were
278,717 (2023: nil) shares released from treasury
to satisfy the exercise of share options.
Stephen Craigen
Chief Financial Officer
5 August 2024
* EBITDA and Underlying Profit before Tax is defined within the Alternative Performance Measures glossary.
Key Performance Indicators
The Group has established a number of
Key Performance Indicators (“KPIs”)
which are used to measure its
performance in a number of areas.
These include some non-financial
measures which reflect the Board’s
emphasis on health and safety.
The KPIs for the Services business
include:
• Underlying profit before tax against
budget
• Return on capital employed against
budget
• Average working capital against
budget
• Lost time accident ratios against
annually determined minimum
targets
• “Near Miss” reporting
The KPIs for the Hargreaves Land
business include:
• Underlying profit before tax against
budget
• Cash performance against budget
• Return on capital employed against
individual project targets
Group level KPIs include:
• Underlying profit before tax against
budget
• Cash at bank (exclusive of leasing
debt) against budget
• Lost time accident ratios against
annually determined minimum
targets
The Group achieved all of its KPIs in the
year ended 31 May 2024 with the
exception of the lost time accident ratio.
Similar challenging KPIs have been set for
the year ending 31 May 2025.
18
Hargreaves Services plc
Annual Report and Accounts 2024
On behalf of the Audit & Risk Committee I am
pleased to present the Committee’s Report for
the year ended 31 May 2024.
Membership of the Committee
The Committee consists of the four Non-
executive Directors and is chaired by myself as
the Senior Independent Director. The Board
believes that the Committee members have
the skills, qualifications and experience to
discharge their duties in accordance with the
Committee’s terms of reference and have
appropriate knowledge and experience in the
sectors within which the Group operates.
Committee Meeting Schedule
The Committee met on four occasions during
the year with all members at the time in
attendance. The Chief Financial Officer attends
Committee meetings by invitation to ensure
that the Committee is fully informed of all
material matters within the Group. The external
auditor attended two of the meetings and, for
part of one of those meetings, the external
auditor met with the Committee without any
of the Executive Directors being present.
For the financial year ending 31 May 2025, the
Committee intends to continue with its
programme of four meetings to be held during
the year ensuring the work of the Committee is
evenly spread, particularly with respect to Risk
Management and internal audit.
Terms of Reference of the Committee
The Committee is established by and is
responsible to the Board. It has written terms of
reference, which are available for review at:
www.hsgplc.co.uk. The terms of reference are
formally reviewed annually to ensure that they
meet the Board’s expectations of the
Committee’s remit.
The Committee is responsible for reviewing a
wide range of financial reporting and related
matters including the interim and annual
financial statements before their submission to
the Board. In particular, the Committee is
required to consider all critical accounting
policies and practices adopted by the Group,
and any significant areas of judgement that
could materially impact reported results. The
Committee provides a forum for reporting by
the Group’s external auditor, and advises the
Board on the appointment, independence and
objectivity of the external auditor and on their
remuneration both for statutory audit and
non-audit work. It also discusses and agrees
the nature, scope, planning and timing of the
statutory audit with the external auditor.
The Committee is also responsible for
monitoring the internal controls that are
operated by management to ensure the
integrity of the information reported to the
shareholders. An internal audit function, which
reports directly to the Chair of the Audit & Risk
Committee, supports the Committee in this
process. The Committee reviews the
appropriateness of the annual internal audit
programme for the Group and ensures that the
internal audit function is adequately sponsored
and resourced.
Additionally, the Committee receives reports on,
and is responsible for, reviewing the Group’s
arrangements and processes which exist for
employees and others to raise concerns over
possible wrongdoing in financial reporting or
other matters. This work includes reviewing the
Group’s systems for the prevention and
detection of fraud and bribery and considering
any matters arising under the General Data
Protection Regulations or any whistleblowing
matters which are reported. The Committee
also receives reports on all litigation which the
Group is engaged with either as plaintiff or
defendant and recommends actions in respect
of such to the Board.
The Group’s ESG Working Group is chaired by
one of the business unit managing directors
and includes members from every business
within Hargreaves. It reports quarterly to the
Committee. The Committee is responsible for
reviewing the Group’s ESG report and
recommending it to the Board.
External Auditor
The external auditor provides the Audit & Risk
Committee with information about its internal
procedures for maintaining independence and
the rotation of personnel engaged on the audit,
including the audit partner. After considering
this information, the Committee is satisfied that
the external auditor is independent.
Any non-audit services to be provided by the
external auditor which exceed £50,000 in cost
must be approved by the Committee in
advance. During the financial year, there were
£12,000 (2023: £9,000) of non-audit services
provided by PricewaterhouseCoopers LLP and
its network firms to the Group. The Committee
is satisfied that the provision of these services
has not compromised the external auditor’s
independence.
After due and careful enquiry and after
reviewing the external auditor’s Report to the
Audit Committee and discussing the findings
with the auditor, the Committee is satisfied
that the scope of the audit was appropriate
and that all significant accounting judgements
exercised by management had been suitably
challenged and tested including, but not
limited to, the matters referred to in the Audit
Report. The Committee recommended to the
Board that in their opinion the audit had been
carried out effectively and that the report of
the external auditor be accepted.
Audit & Risk Committee Report
Nigel Halkes FCA,
Chair of the Audit & Risk Committee
The Audit & Risk Committee is
responsible for reviewing
financial reporting matters and
monitoring internal controls
and key corporate risks
Strategic Report
Directors’ Report
19
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
In accordance with best practice, the
Committee held a private session with the
external auditor without executive
management present.
The Committee has recommended to the
Board that PricewaterhouseCoopers LLP be
proposed for re-election as auditor at the
forthcoming Annual General Meeting.
Internal Audit
Before the start of each financial year, the
Committee agrees a programme of work for
the internal audit function. The programme is
designed to test the effectiveness of the
internal control systems and seeks to
recommend improvements to processes,
covering key financial and other controls which
the Committee recognises are important in
ensuring the integrity of the Group’s
operations, as well as its financial reporting.
The programme includes self-assessment
questionnaires, detailed testing of processes
and the review of appropriate documentation.
The use of computer aided audit techniques to
monitor transactional data using the Group’s
existing management information systems
also continue to be developed and monitored,
improving the efficiency, scope and
effectiveness of the internal audit function.
The internal audit function maintains the Audit
Universe which has been adopted as the
governing document in setting the scope and
frequency of internal audit work across the
Group. Each audit area is cross-referenced to
the related corporate risk to ensure an
integrated and targeted approach to the
annual internal audit programme.
The 2023/24 programme was approved by the
Committee and completed in full. Key audits
completed during the year included a review
of the Authorisations & Approvals Mandate,
Contract Management assessments, GDPR
compliance and Regulatory & Legislative
compliance.
The 2024/25 programme will again include
cyclical reviews of compliance with the
Approvals and Authorisations Mandate, key
financial controls and various regulatory
requirements. Assurance will also be provided
around the tendering and contract
management framework in the Services
business.
Risk Management
The internal audit function reports quarterly to
the Committee on the key risks identified by
the Board as being so material that they need
to be regularly monitored as to whether those
risks have increased or decreased during the
period and what remedial actions may need to
be taken to counter them. Risk registers at a
business unit level are reviewed on a quarterly
basis, with any material changes being
escalated to the Board. The Risk Management
report which follows this report sets out these
risks and the steps the Group has taken to
mitigate them.
Going Concern Basis of Accounting
The Group has material assets and financial
resources at its disposal together with robust
risk management and capital allocation
processes. The Group’s cash flow model
prepared as part of the annual budget and
five-year plan process was subjected to a
number of stress tests. These included
measuring the impact of the deferral of certain
specific anticipated revenues (for example in
Hargreaves Land) alongside other more
general sensitivity tests related to fluctuations
in revenue. These assumptions and sensitivities
were subjected to thorough analysis and
review by the external auditor. The Committee
questioned both management and the
external auditor on the assumptions and
testing they had applied and were satisfied to
recommend to the Board that the going
concern basis of accounting remains
appropriate.
The Audit & Risk Committee Report was
approved by the Board on 5th August 2024
and signed on its behalf by:
Nigel Halkes FCA
Chair of the Audit & Risk Committee
5 August 2024
Activities of the Committee
During the year, the Committee’s principal activities comprised:
> Reviewing and approving the internal audit programme for the year and monitoring the
progress and outcome of that, including reviewing reports from the internal auditor;
> Receiving quarterly reports from the ESG Working Group, considering and recommending
to the Board proposals for actions, targets and metrics to be adopted to illustrate the
Group’s response to climate change including for reporting in compliance with the
requirements of the Task Force on Climate-related Financial Disclosures;
> Reviewing the Quarterly Risk Report and recommending appropriate actions and
responses to the Board;
> Receiving quarterly reports on legal actions with which the Group is concerned;
> Receiving reports on any whistleblowing matters;
> Reviewing and approving changes in the Group’s internal control policies and procedures;
> Reviewing the Group’s procedures in respect of GDPR;
> Reviewing the draft interim financial statements;
> Reviewing and approving the audit plan proposed by the external auditor;
> Reviewing the draft annual report and financial statements for the year ended 31 May 2024
and recommending their approval to the Board including:
• Considering the accounting policies adopted for the preparation of the financial statements;
• Considering the key accounting estimates and judgements used in their preparation
including but not restricted to construction contract revenue and assets, dilapidation
provisions, contract provisions, post-retirement employee benefits, measurement of
recoverable amounts of cash-generating units (“CGUs”), valuation of land and the
treatment of joint ventures;
• Considering the assumptions used to support the adoption of the going concern basis
of accounting;
• Considering the Risk Management section of the annual report and in particular its
completeness and relevance to the financial statements;
• Reviewing the ESG report included in the annual report.
20
Hargreaves Services plc
Annual Report and Accounts 2024
The Group is exposed to a number of risks,
which it must assess, manage and control in
the ordinary course of business in the interest
of all stakeholders to deliver shareholder
value. It is accepted that some risks may never
be entirely eliminated. The Board recognises
that it is essential to have robust risk
management systems and practices in place
to identify, assess and prioritise the mitigation
of risks affecting the Group.
Safety, Health and the Environment
The Board has identified that the risk of a
material incident in the areas of Safety, Health
and the Environment (“SHE”) is a particularly
significant area and, as such, the Board
continues to receive a detailed monthly report
from the Group Head of Health & Safety.
The Board’s vision is to maintain an
environment where all its employees,
contractors and third parties experience zero
harm as a result of its activities. To achieve
this, the Group takes a proactive approach
and is committed to achieving the highest
standards of safety and health management
and the minimisation of any adverse
environmental impacts.
The Board ensures that the Health and Safety
of employees, customers and the public are at
the forefront of all Group activities. The Group
Chief Executive, supported by both internal
and external competent and experienced
advisers, is charged with overall responsibility.
All businesses have formulated and
implemented SHE management arrangements
consisting of competent staff along with
policies, procedures and objectives to meet
both legislative and best practice
requirements. SHE performance and delivery is
ingrained in the operational delivery and
day-to-day activities and not seen as a bolt on
to each business. Where appropriate the
management procedures are externally
certified to internationally recognised
standards including ISO 45001 and ISO 14001.
Alongside management systems and legal
compliance, the Group recognises the
benefits that effective leadership and the
setting of clear expectations has upon
workplace behaviour. Therefore, the Group
has visible performance metrics, which are
communicated at all levels throughout the
organisation and are designed to enable the
early identification of adverse trends and the
development of suitable intervention and
improvement measures. The Board carries out
annual random site visits each year to see SHE
processes at first hand and to emphasise to
employees the importance the Board places
on SHE activities. The past year the Board
visited the land remediation activities in
Scotland and the Group’s residential site at
Blindwells. The Board was satisfied that the
safety culture of the Group is well embedded
into these operations.
The year ended 31 May 2024 was a year with
seven lost time incidents reported (2023: three),
including a particularly serious incident at one
of our aggregate operations. As a result of this
incident the Group is undertaking a full review
of its policies and procedures to further
minimise the likelihood of any such incident
occurring in the future. The aim of the Board is
to continuously push to reduce and remove
lost time incidents wherever possible.
Insurance
The Group has worked closely with its risk
advisers, Marsh Limited, to develop processes
and reporting in respect of motor and other
liability claims. This has resulted in the Group
having greater insight in respect of ongoing
claims, historic claims and claims trends.
Learnings and best practice taken from this
has resulted in an improved understanding of
risk in relation to the Group’s operational
activities and a reduction in the number of
incidents and associated claims.
Corporate Risks
The Board undertakes a full annual review of
the Group’s risk profile and strategic approach
to risk. A condensed high-level Risk Register,
which identifies key areas of corporate risk
which the Board has determined are the most
critical, has been reviewed and updated to
reflect the Group’s current risk profile. These
areas of risk have been selected on the basis
that a material adverse event in any one of
them could potentially either:
• prevent the Group from achieving its
financial or operational objectives or
• cause material loss or damage to the
Group’s assets or reputation.
The Committee has introduced a new
method of visualising risk throughout the
Group, via ‘Risk Webs’. Risk Webs have been
incorporated within the Corporate and
Business Unit Risk Registers. The webs provide
the Board and senior management a relative
visual representation of Inherent Risk, Residual
Risk, Minimum Risk and Risk Appetite. The
webs are used as a tool to highlight where
additional focus is required to reduce residual
risk to an acceptable level.
The identified areas of risk are monitored,
reviewed and investigated as necessary by
the internal audit function. The Audit & Risk
Committee receives a written report on these
risks every quarter, including a commentary
which notes any material changes which have
been identified. This report assesses whether
each area has increased or decreased in the
level of risk and where necessary corrective
actions are implemented.
Risk Management
The Board retains overall responsibility for the
identification, assessment and mitigation of risk
throughout the Group.
Strategic Report
Directors’ Report
21
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
The areas of critical corporate risk which have
been identified are as follows:
> Fraud
> Regulatory & Legislative Compliance
> Health & Safety
> Failure of a Material Business Unit
> Contractual Risk
> IT Security
> Environmental
> Recruitment & Retention of Key Executives
and Skilled Employees
> Liquidity & Credit Risk
The Audit & Risk Committee has considered an
assessment of the risks which the Group may
face as a result of climate change but at this
stage does not assess those risks as material.
Each business unit within the Group has
carried out a climate change risk assessment
process and that is embedded into each
business unit’s general risk register. Any risks
identified will have mitigation procedures
implemented where appropriate.
The below graphic provides an overview of the
identified critical corporate risks relative to
each other. The blue line represents ‘Inherent
Risk’ (the level of risk without controls or
mitigation in place), and the orange line
represents ‘Current Residual Risk’ (the level of
risk remaining after risk treatment):
Risk Register Framework
Principle risks identified
within the Corporate
Risk Register feed into
individual Business Unit
Registers.
Risk based internal audits assess
the risk landscape of individual
functions within business units,
which helps move the risk profile
of Business Unit Risk Registers.
Corporate Risk Register
Business Unit Risk Registers
Internal Audits
Risks identified within
individual Business Unit
Risk Registers aid the
Internal Audit plan
Significant changes ot Business
Unit Risk Registers are reflected
within the Corporate Risk Register.
Acquiring and retaining
appropriately skilled
individuals in Key
strategic roles
Compliance with
regulagtory and
legislative obligations
Failure of a material
business unit
Acceptance and
management of sales
contracts
Safeguarding of corporate
assets (inc fraud)
IT disruption and data
compromise
Liquidity and credit
Environmental
Inherent risk
Current residual risk
Key
Internal audit and risk management are intrinsically linked, shown within the below graphic:
22
Hargreaves Services plc
Annual Report and Accounts 2024
Risk Management continued
A table describing the key risks and the mitigations in place throughout the Group to protect against them is set out below, including the movement
of risk since the end of the previous financial year.
Fraud
Regulatory and Legislative Compliance
Health and Safety
Description
Description
Description
In the course of its operations, the Group is
exposed to fraud risks from a number of
internal and external sources.
Failure of the Group or a business within the
Group to comply with its applicable
regulatory and legislative obligations, resulting
in financial, reputational, and potentially
criminal implications for the Group or its
responsible employees.
The heath and safety of our employees and all
other stakeholders who interact with the
operations of the Group is of paramount
importance. Failure to maintain a high safety
standard could result in serious injury to an
individual. Whist this would have a significant
impact on the individual impacted by the
accident there are additional impacts on the
Group, including lost time, lower productivity,
repetitional damage and financial impact
from fines or insurance costs amongst others.
Mitigation
Mitigation
Mitigation
• Fraud risk management policy is in place
across the Group.
• Fraud risk awareness training has been
rolled out across the Group.
• Fraud risk is discussed regularly in the Audit
& Risk Committee with both internal and
external audit.
• The Group has many controls and
procedures in place to limit the risk of
fraud. These controls include, but are not
limited to, detailed Authorisation and
Approvals Mandates, system automated
controls, whistleblower procedures, code
of conduct, segregation of duties on
particular processes and periodic Internal
Audit reviews.
• Appropriate and specialist management
systems are in place across the Group to
ensure compliance with our obligations.
• Competent and appropriately skilled
individuals hold key roles in assuring our
compliance to our regulatory and
legislative obligations.
• Memberships to relevant trade bodies
provides access to proposed regulatory
changes and helps to highlight any issues,
allowing for early planning and appropriate
representation.
• Experienced head of Health and Safety
installed within the Group, providing clear
best practice and guidance to the
businesses operations.
• Step Back Speak Up culture, if something
does not look or feel right all employees
are encouraged to stop their activity and
raise their concerns.
• Clear Health and Safety policies and
procedures are in place across the Group.
• Implementation of high quality after
technology on our plant and equipment to
minimise the impact of human error.
Overall Change During the Year
Overall Change During the Year
Overall Change During the Year
No material changes during FY24.
No material changes during FY24.
Newly disclosed risk – previously included
within Regulatory and Legislative Compliance.
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23
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Failure of a Material Business Unit
Contractual Risk
Description
Description
The Board assesses that the failure of HRMS in particular would create a
material risk to the Group. HRMS is a key supplier of specialist raw materials
to major European customers in the steel, foundry, smelting, ferroalloy,
sugar, limestone, insulation, refractory and ceramic industries. HRMS owns
a material steel waste recycling business and has invested in a carbon
pulverisation plant, however this has not yet achieved critical mass. HRMS is
independently funded from the Group, however HRMS holds substantial
monies in respect of undistributed profits and loans. HRMS is exposed to
the movements in certain commodity prices which can be variable, and
which could cause material fluctuations in profits. The Group’s share of
HRMS’ profits represents a material contribution to the Group profit
before tax.
HRMS has agreed to pay an annual dividend of a minimum of £7m per
annum to the Group, the failure to pay this would represent an increased
pressure on the Group cash flow.
Multiple businesses of the Group enter into and manage diverse and
complex contracts as part of their core operations. Bad planning,
agreement to onerous terms, ineffective management and delivering
services outside of the Group’s core competencies could all erode the
value of the contract and increase the risk exposure to the Group.
Attached to the risk surrounding contracts are the potential financial and
reputational impacts on the resolution of defective works and warranty
claims following contract completion.
Mitigation
Mitigation
• The Group’s investment in HRMS is governed by a shareholders’
agreement which provides a series of protective rights to the Group
including controls over the approval of budgets, the granting of
security and business activities.
• The agreement provides step in rights to the Group in the event of a
material breach of the agreement.
• The Group Chief Executive is a member of the Board of HRMS which
meets each month.
• Monthly financial information is submitted to the Group and subject
to review by the Chief Financial Officer, this includes monthly and
year-to-date results, cash flow forecasting, banking covenants and
facility headroom information, as well as details on stock levels and
associated data.
• HRMS mitigates against its exposure to commodity prices by both
hedging forward sales positions and ensuring that it does not enter
into open trading positions so that purchases of commodities are
back to back with secured sales.
• Delegated Authority Mandates in place throughout the Group
requiring appropriate levels of senior personnel to approve contracts.
• Requirement for legal review of all potential contracts which meet the
agreed criteria, detailed within the Delegated Authority Mandates.
• Recruitment and employment of suitably qualified and competent
personnel at all levels to undertake works to minimise risk relating to
defective works and associated warranty claims.
• Targeting of contracts where the scope of work fits the core
competencies of available resources.
• Contracts have specific risk registers, which are prepared at tender
stage and maintained throughout the progress of the contract. These
registers highlight the potential risks inherent in a particular contract
as well as the controls required to mitigate them. They form a critical
part of the management of the contract and are updated regularly
throughout.
Overall Change During the Year
Overall Change During the Year
Decrease in inherent risk during FY24 has reduced the overall exposure of
the Group to HRMS by around 10%. Additionally, new local financing
arrangements with HRMS no longer include a parental guarantee (2023:
€10m).
No material changes during FY24.
24
Hargreaves Services plc
Annual Report and Accounts 2024
Risk Management continued
IT Security
Environmental
Description
Description
There is an ever increasing reliance on the stability and security of the IT
network for delivering day-to-day operations, whilst the volume and
types of data held within it increases. This reliance on IT increases the
potential for sophisticated cyber-attacks to target the Group’s computer
systems, infrastructure, networks and personal devices with the intention
of paralysing operations for an immeasurable amount of time, carrying
material financial and reputational implications for the Group.
There are inherent environmental risks within some of the Group’s
operations. If not properly managed, these risks could result in
environmental contamination with disruption to business, financial costs
and loss of reputation.
Mitigation
Mitigation
• The Group has a dedicated IT function, with a high degree of skill and
experience in maintaining and monitoring the IT infrastructure.
• A risk-based IT strategy is in place focusing on four strategic initiatives:
technology and innovation, compliance, culture and education and
delivery.
• Third party hosting of core business applications with a full business
continuity and disaster recovery infrastructure as well as regular tiered
backup solutions.
• Mobile device management applied to all company devices to
protect network and data via mobile platforms.
• A “zero-trust” philosophy with regard to system access.
• Full Checkpoint security application in place to cover our end-points,
VPN connectivity and access to cloud platforms.
• Global leading email security application presides over all email traffic,
protecting against all targeted threats, phishing, malware and URL
protection.
• Full user security awareness programme with regular training videos
rolled out to all users across the Group.
• Provision of clear guidance on the environmental standards which the
Group’s operations must adhere to.
• Compliance with laws, regulations and industry best practice is a
priority across the business.
• Environmental management strategies are in place at all applicable
sites.
• The ESG Group sets the tone for the Group’s approach to minimise the
impact of activities on the environment, through the setting and
monitoring of targets.
Overall Change During the Year
Overall Change During the Year
No material changes during FY24.
No material changes during FY24.
Strategic Report
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25
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Nigel Halkes
Chair of the Audit & Risk Committee
5 August 2024
Recruitment and Retention of
Key Executives and Skilled Employees
Liquidity and Credit Risk
Description
Description
Key executives, senior management and skilled employees possess the
industry knowledge and experience, without which, our strategic
objectives may not be achieved. If the Group is unable to recruit or retain
both key executives and skilled employees, this could adversely affect
the Group both operationally and financially.
The failure of the Group to maintain access to liquidity could result in a
material adverse financial impact for the Group. The Group needs to ensure
that sufficient liquid funds are available to meet its contractual demands
and wider operational uncertainties, either through available cash reserves
or external funding capacity. The Group has put in place a limited invoice
discounting facility which provides working capital flexibility in addition to
the Group’s cash reserves. The Group is not dependent on bank
borrowings. The Group’s trading relationships require contract and credit
exposures to specific customers that are material to the results of the
Group, sometimes over a long period. Credit risk arises from the possibility
that customers may not be able to pay their debts.
Mitigation
Mitigation
• The provision of remuneration and terms of employment that are
competitive in the market.
• Identification of key strategic roles across the Group.
• Succession planning for these identified key strategic roles.
• Supporting employees through the Employee Assistance Programme,
retail discount schemes and other initiatives.
• Provision of Mental Health first aiders to identify and provide first line
treatment to employees.
• Whilst the Group is in a positive cash position, it maintains strong
relationships with prospective lenders and seeks to put in place
appropriate finance facilities aligned to both the short and medium-
term requirements of the business with sufficient flexibility to manage
liquidity fluctuations within reasonable parameters.
• Short and medium-term cash flow forecasting is in place across the
Group, ranging from daily cash flow forecasting to five-year planning
together with the annual in-depth going concern review.
• The Group regularly assesses the financial reliability of customers.
• The Credit Control function closely monitors and chases any overdue
debts and the majority of the Group’s trade receivables are due for
payment within 45 days.
• The Group remains vigilant to monitoring and controlling
counterparty exposures that are material to the results of the Group.
All such exposures are carefully considered before contractual
commitments are made to take account of the risks presented by the
contract or relationship, the returns available and the opportunities
that are, or are not, available to mitigate that exposure.
• Authorisation of credit limits is restricted to a limited number of
individuals, with the input of third-party credit scoring.
• A robust capital expenditure procedure is in place Group-wide to
control investment in illiquid assets.
Overall Change During the Year
Overall Change During the Year
No material changes during FY24.
No material changes during FY24.
Environmental, Social and Governance Report
During the year the Group has continued to develop our strategic approach to Environmental, Social and
Governance (“ESG”) issues. The Board is aware of the potential impact of our activities on the environment and
remains committed to reporting its ESG performance. The Group is aware of and strives to support the 17 United
Nations Sustainable Development Goals (”UNSDGs”) wherever the business intersects with these targets.
Environmental
Monitors and reports
how the Company
controls its impact on
the environment.
Social
Examines how the
Company manages its
relationship with
employees, suppliers
and communities.
Governance
Controls and monitors
how the Company deals
with its leadership,
internal controls and
shareholders.
Highlights FY24
> Completion and publication of the Group’s
first Net Zero Transition strategy. Setting a
clear path for delivering net zero carbon from
operation by 2050 in line with the UK
Government targets.
> The Group’s CSR fund allocated over £50k for
community initiatives championed by our
employees.
> The Group achieved a Silver rating from the
Supply Chain Sustainability School building on
the bronze award achieved in the previous
year.
> Planted over 78,000 trees on land owned by
the Group. These trees have the ability to
extract 1,680kg of carbon per year.
Focus for FY25
> Further development of environmental
metrics and targets, to allow for real time
monitoring of progress against the Group’s
new Net Zero Plan.
> Focus on a data driven solution to identify,
measure and report the Social Value impact of
the Group in line with the TOMS framework.
> Apply for and achieve a gold award from the
Supply Chain Sustainability School.
> Achieve PAS2080 accreditation, which is
focused on carbon reduction in the built
environment, for our Earthworks operations.
26
Hargreaves Services plc
Annual Report and Accounts 2024
Restored mine site, Dalquhandy Scotland
The well-established ESG Working Group (‘ESG
Group’), which is chaired by one of the business
unit Managing Directors, meets at least
quarterly to discuss risks and opportunities
which climate change presents as well as the
impact the Group’s undertakings has on society
and the communities in which it operates.
The ESG Group includes representatives from all
areas of the business ensuring that there is
appropriate representation in the discussions.
The ESG Group reports quarterly to the Audit &
Risk Committee, which ensures Board level
engagement and facilitates continued
awareness of the Group’s ESG activities at the
highest level. The Audit & Risk Committee
believe that this broad representation within
the ESG Group is key to delivering optimal
solutions to the challenges and opportunities
faced and ensures that consideration of
environmental, social and governance issues
are incorporated into each business unit’s
approach when tendering for new business
opportunities. This level of representation is
also essential to ensure the “buy-in” of wider
stakeholders.
The main focus for the ESG Group in the year
has been the development of the Group Net
Zero Plan. We are delighted to confirm the
publication of the Group’s Net Zero Plan, which
is available on our website. Our plan details a
clear strategy to achieve net zero emissions
from corporate activities by 2030 and net zero
from all operations by 2050. Moreover, it
demonstrates how we are pioneering
sustainable earthworks for infrastructure and
facilitating renewable energy developments
across the UK.
Along with various in-house online training,
including Anti-Corruption & Bribery and
Information Security, all employees are required
to complete online ESG Awareness training.
This training highlights the areas Hargreaves is
focussing on to reduce fuel and water usage,
waste, and increase levels of recycling.
Additionally, the course advises how employees
can make small changes in their homes, and
the workplace, which can make a meaningful
contribution to improving the environment.
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Financial Statements
27
Hargreaves Services plc
Annual Report and Accounts 2024
Environmental, Social and Governance Report continued
Environmental
The ESG Group continues to implement robust measuring
systems and appropriate goal setting, tracking and
reporting in line with relevant legislation.
Each Business Unit undertakes climate change risk assessments of the impact
and potential opportunities of climate change and embeds these results
into their risk registers. These assessments focus on possible impacts
within the next five years, which is Hargreaves’ usual planning
cycle. Following these assessments, the applicable Group
policies are reviewed and amended, where appropriate, in
conjunction with the Group General Counsel.
Net Zero Plan
The development and publication of the
Group’s Net Zero Plan (“the Plan”) represents
a significant step forward in the
development of the Group’s carbon strategy.
The Plan was developed by the ESG Group
taking into account feedback from around
the business and from the Board. The Plan
sets a clear path to how Hargreaves can
achieve Net Zero by 2050 by breaking down
emissions created by our operations into
manageable segments. Each segment is
considered individually, with its own Net
Zero target date.
We are proud to have been awarded an ESG
A rating by Integrum ESG following an
independent assessment in January 2023.
Our rating was calculated based on an
analysis of procedures in areas of
governance, sustainability and impact. An A
rating indicates a ‘very good’ overall
approach to ensuring a company acts in line
with expected standards for ESG matters.
2050
2040
Net Zero
Corporate Activities
Net Zero
Cars and Vans
Net Zero
HGV
Net Zero
Maintenance,
Construction and
Infrastructure
Net Zero
Plant
2035
2030
Hargreaves Services plc
Annual Report and Accounts 2024
28
Strategic Report
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29
Hargreaves Services plc
Annual Report and Accounts 2024
Target
Prepare a Sustainability
Framework supported by
management plans for carbon,
waste and energy to align with
the UK Government’s goal of
achieving Net Zero Carbon by
2050
ACHIEVED
The Group’s Net Zero Plan has
been completed and published,
demonstrating the commitment
the Group has to the
Government’s Net Zero by 2050
target.
Target
To attain a Silver Level Rating in
the Supply Chain Sustainability
School
ACHIEVED
Silver level award achieved.
Target
To plant at least 40,000 trees on
the Group’s own land which
would equate to 5,000 tonnes
of carbon capture over the life
of those trees
ACHIEVED
The Group has planted 78,000
trees in the year. Nearly double
the original plan.
FY24 Targets
The Group had set three targets for the year just ended. The targets are as follows:
Environmental, Social and Governance Report continued
Hargreaves Sustainability Initiatives
Hargreaves Land
At Blindwells, our flagship residential site near
Edinburgh, we have installed a separate EV
Charging Point car park which is for residents
and other users who do not have a dedicated
charging point at their home. Hargreaves
Land also funded and constructed a private
residents’ car park and will retain ownership
with maintenance and operation in
partnership with MER.
Additionally at Blindwells, we are continuing
the development of significant amounts of
open space, including public parks, much of
which is structured landscaping and has
included the planting of 40,000 trees with
more to come as the development continues.
Our recently completed 191,000 sq ft industrial
unit at Unity, Doncaster, recently became the
first Hargreaves project to be delivered to
BREEAM ‘Very Good’ standard and EPC A rating.
Building Contractor, Caddick Construction, also
achieved full marks across the board in the
Considerate Constructors Scheme for respect
to the community, care for the environment
and valuing their workforce. The assessor citing
that “the project provides an extensive range of
examples of best practice for the industry for which
the team should be commended. Although in a
relatively discreet location, the social value team
appear to have built up some excellent
relationships with local charities and support
organisations, education organisations and
neighbours to the project. All the information
continues to be monitored effectively, including an
employment and skills plan. There are a number of
key elements to the environmental requirements,
all of which appear to be managed very effectively
using a series of trackers contained within the
Smartwaste, Aspects and Impacts and BREEAM
requirements. The use of temporary renewables
appears to reflect the innovative culture that
appears to prevail. Support for the supply chain
was evident with regards to both the sustainability
and the health and safety agendas.”
During the year, yet more wind farms have
come on stream utilising land owned by
Hargreaves to deliver clean energy into the
national grid. By the end of the year land
owned by Hargreaves is helping to enable
216 MW of renewable energy.
During FY24, the Group achieved
Silver status from the Supply Chain
Sustainability School (“SCSS”). The
training modules provided by the
SCSS increase levels of awareness
and collective buy-in from all staff
members in many areas such as
modern slavery, anti-bribery and
corruption, with particular focus on
mandatory modules for
procurement staff.
The Group’s power supply in the UK is now
provided using 25% nuclear and 75%
renewable energy, i.e. 100% non-carbon. In
addition, electric vehicle charging points have
been installed at our two main office-based
facilities in County Durham and Barnsley and
other major operational sites, including Unity
and Blindwells, and are now standard
installations in all of Hargreaves Land’s newly
constructed industrial buildings.
30
Hargreaves Services plc
Annual Report and Accounts 2024
Blindwells
Industrial
unit at Unity
delivered to
BREEAM
standard
Electric vehicle charging point at Blindwells
Services
Our earthworks operation continues to push
the boundaries of what is possible within
large scale earthworks operations. During the
year we have proudly received the brand new
23-tonne Volvo EC230 electric excavator,
Volvo EC’s first fully electric model in the
mid-sized excavator category. This
groundbreaking machine offers zero-exhaust
emissions and quiet operation, extending
these benefits to a wider range of large
earthworks applications. Powered by
lithium-ion batteries, the EC230 electric is
designed to operate for a full eight-hour
workday, with a quick one-hour recharge
during a break. We are proud to be the first
operator of this machine, making its debut in
the UK construction industry, this
environmentally friendly excavator will be
tested at Sizewell C on our earthworks
projects, underscoring our commitment to
sustainability.
Furthermore, the Group has ordered two
biomethane gas trucks to supplement the
fleet. Each of these trucks will save between
80 and 90 tonnes of carbon compared to a
traditional diesel-powered truck. It is
expected that they will be in operation before
the end of calendar year 2024.
Our land remediation team have improved
over 240 acres of land over the last twelve
months. This represents land that was
previously unable to support tree growth,
however, because of our activities the land
can now support forestry. To date our
in-house team have remediated
approximately 2,500 acres of land across five
former open-cast mining sites.
The waste solutions team have diverted over
4,000 tonnes of end-of-life tyres from entering
land fill through the use of tyre derived fuel.
Additionally, the same team have directly
prevented around 10,000 tonnes of
household waste from entering landfill
through our innovative recover and recycling
offerings.
The Group is actively engaged in advancing
sustainable earthworks, a commitment
prominently spearheaded by Managing
Director Niall Fraser. In close collaboration
with industry peers, Niall has been
instrumental in developing the first European
Standard on Sustainable Earthworks.
This collective initiative, aimed at enhancing
the sustainability of earthworks projects,
draws on best practices from across Europe
and is set to culminate in the publication of a
comprehensive new standard. The standard
will focus on environmentally friendly
methodologies and improved resource
management in earthworks, aligning with
Blackwell’s broader goals of reducing carbon
emissions and promoting ecological
responsibility in large-scale infrastructure
projects like HS2 and Sizewell C. Recently,
Blackwell presented talks on sustainable
earthworks at the Institution of Civil Engineers
and the British Geotechnical Association
lectures and meetings.
No significant environmental incidents were
reported in the year within the Group.
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Directors’ Report
31
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Our 23 tonne Volvo EC230 electric excavator
The above shows a substantial increase in
Scope 1 emissions which reflects the increase
in plant activity particularly within the
earthworks activities at HS2 and Sizewell C
Nuclear Power Station. The Group has seen a
substantial increase in the hours of plant
usage, with an 80% increase within
earthworks activities alone. This has affected
the emissions per employee metric due to the
relative impact of plant operatives compared
to other employees.
Total carbon emissions have reduced by over
55% since the year ended 31 May 2020, which
was the first year the Group reported under
the SECR framework.
The Group does not undertake carbon
offsetting, nor does it purchase trees on land
owned by third parties. The number of trees
planted and the associated offsetting
represents physical trees planted by the
Group on land owned by the Group. To date
this is a total of 171,450 trees.
Methodology
The Group follows ISO14064:1 standard for its
reporting and takes the operational control
approach to reporting. The conversion of
units of fuel used into tonnes of CO2e has
been calculated utilising the UK Government
Conversion Factors 2024.
Scope 1 emissions have been calculated by
taking the total number of litres of fuel used
in operations during the reporting period and
converting them to tonnes of CO2e using the
appropriate conversion factor.
Scope 2 emissions have been calculated by
taking the total kWh of electricity and gas
used at the Group’s premises during the
reporting period and converting them to
tonnes of CO2e using the appropriate
conversion factor.
Scope 3 emissions have been calculated by
taking the total litres of fuel purchased for
business travel as well as an estimate of
emissions for business flights and the
transmission and distribution impact of the
Group’s electricity usage.
The Group uses the emissions per employee
as the most meaningful intensity ratio as the
Group is predominantly a services operation.
The Board considers that the disclosures
above meet the requirements of the
Companies Act 2006 sections 414CA and
4141CB (2A) with the exclusion of paragraphs
414CB (2A) (e), (f), (g) and (h) as the Board
considers there to be no such material risks.
Environmental, Social and Governance Report continued
Hargreaves Sustainability Initiatives
Hargreaves Services plc
Annual Report and Accounts 2024
32
SECR
The Group’s Scope 1, 2 and 3 emission data is set out in the table below.
Total energy
usage (kWh)
2024
Total energy
usage (kWh)
2023
Change %
Tonnes of CO2e
2024
Tonnes of CO2e
2023
Change %
Scope 1 and 2 Global GHG emissions:
Combustion of fuels in operations and
services provided
873,187
671,376
+30.1%
21,856
16,749
+30.5%
Electricity, steam, heat and cooling for
own use
937,210
1,457,633
-35.7%
194
302
-35.8%
Total footprint
1,810,397
2,129,009
-15.0%
22,050
17,051
+29.3%
Emissions reported above per
employee
1,289
1,630
-20.9%
15.7
13.1
+19.8%
Scope 3
Business travel (air, rail and vehicles)
1,590,561
1,146,558
+38.7%
445
300
+48.3%
Electricity transmission distribution
-
-
17
26
-34.6%
Total Annual Gross Emissions
3,400,958
3,275,578
+3.8%
22,512
17,377
+29.6%
Green energy tariffs
(835,718)
(1,366,780)
-38.9%
(173)
(283)
-38.8%
Trees planted*
-
-
(1,715)
(400)
+328.8%
Total Annual Net Emissions
2,565,240
1,908,798
+34.4%
20,624
16,694
+23.5%
* based on an average of 10kg of CO2e captured per tree per annum
Carbon Innovation 8 Point Plan
In addition to the activities outlined in the roadmaps, as a Group we shall
deliver the following:
Strategic Report
Directors’ Report
Financial Statements
Hargreaves Services plc
Annual Report and Accounts 2024
33
Restored brownfield site – Westfield, Fife
Environmental, Social and Governance Report continued
Social
Employee Wellbeing
We remain committed to employee
wellbeing, from ensuring a satisfactory
work-life balance, through flexible working
and strict adherence to our rigorous policies,
to ensuring employees are actively
supported through our free of charge
Employee Assistance Programme (‘EAP’). The
EAP provides confidential 24/7 online and
telephone assistance, to support issues from
mental health and physical support to legal
and financial advice. In addition, the business
has access to 48 trained Mental Health First
Aiders - one for every 29 employees. These
individuals are the first point of contact for
an informal chat or to sign post employees
to the correct professional advice.
Safety at work
The Board recognises the critical role played
by our employees in achieving the strategic
objectives of the Group. We are committed
to the ongoing physical and mental
wellbeing of our colleagues. We are
committed to maintaining a safe and secure
working environment for all to ensure none
of our colleagues are injured during the
conduct of our operations. The safety
performance of the Group is the first point
on the Board agenda at each meeting.
Meanwhile, following an audit by NOSA, our
team in South Africa has been awarded a
Five Star rating for health and safety
management for the 7th consecutive time.
Our 2024 score of 97.66% is also an
improvement from our 2023 score of 96.73%.
Continuous Support
To help employees budget through the
ongoing cost of living crisis, our employees
benefit from generous discounts from high
street and online retailers via the Hargreaves
Rewards platform using their online account
or via an app.
In partnership with an external coaching
mentor, Hargreaves continues to support
potential and existing Line Managers by
delivering a Management Development
Programme aimed towards actions and
behaviours to improve team engagement
and business performance. Course modules
cover numerous topics, including customer
focus, effective communication,
engagement and inclusivity, and coaching
and mentoring. To date, 33 individuals have
successfully completed the course.
The charts below show the difference in
mean (average) hourly rate between men
and women. Within the Group, the main
areas of work are in logistics, production and
industrial services including material
handling and maintenance. The majority of
roles within these sectors are direct workers
i.e. labourers, drivers, machine operators,
shift work with irregular working patterns.
The mean gender pay gap was 20.4% (2023:
22.1%) The median gender pay gap was
16.9% (2023: 46.0%).
Hargreaves Services plc
Annual Report and Accounts 2024
34
Restored mine site, Dalquhandy Scotland
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Annual Report and Accounts 2024
20
18
16
14
12
10
8
6
4
2
0
Male
Female
£15.77
£18.99
6,000
5,000
4,000
3,000
2,000
1,000
0
Male
Female
£2,861
£4,893
20
15
10
5
0
Male
Female
£14.11
£16.50
6,000
5,000
4,000
3,000
2,000
1,000
0
Male
Female
£1,101
£823
Whilst the hourly rates are higher for males, the median bonus average is higher for females.
The percentage of females receiving a bonus was 58% (2023: 49%) which is also greater than the
percentage of males receiving a bonus which was 42% (2023: 39%).
The graphical information below illustrates the diverse nature of the Group, identifying the
ethnicity and gender split of our workforce. The number of individuals who have identified
themselves as disabled is 17.
Difference in Mean Hourly Rate
Bonus Pay - Mean
Difference in Median Hourly Rate
Bonus Pay - Median
Group Ethnicity Split
White British 62.41%
Asian 27.63%
Black African 2.42%
Not disclosed 5.41%
Black British 0.21%
Mixed Race 0.14%
White African 1.71%
Indian 0.07%
White Caribbean 0.00%
European 0.00%
Group Gender Split
89%
11%
Female
Male
35
Social Engagement and
Community Support
The Group continues to support local
communities, activities and events that
employees are actively involved with through
its Corporate Social Responsibility Fund (‘CSR
Fund’). During the current financial year, we
supported a total of 109 (2023: 76) events,
donations and initiatives across all areas of the
business. These include sponsorship of charity
golf days; sponsorship of adult and junior
sports teams; employee matched donations
of sponsored events; donations to community
events and foodbanks; donations to local
schools and nurseries; supplied charity events
with raffle prizes; donations in memory of an
employee or a family member; donations to
scout groups; sponsorship of local Christmas
trees; and sponsorship of local businesses and
attractions, some of which offer staff
discounts and benefits, such as Durham
Cathedral and Ushaw College.
In addition, we are also proud to have been
awarded Gold CSR Accreditation. The
accreditation is an effective way to benchmark
what the Group does with regard to social
responsibility. The process involves the collation,
measurement and reporting on a full range of
socially responsible activities. Accreditation also
provides a roadmap for planning future activity.
The application process records activity against
the four pillars of Social Responsibility -
environment, workplace, community and
philanthropy. Each pillar of Social Responsibility
is designed for a company to report their impact
on areas such as energy performance, recycling,
staff engagement, health and wellbeing,
community engagement and supporting local
and national charities. The accreditation is for
three years and a tree is planted, in our name, as
part of the Green Earth Appeal.
For the third consecutive year, we are proud
to sponsor the North East England Chamber
of Commerce Inspiring Female Awards.
During FY24 the Group sponsored and played
a role in judging the “Inspiring Female
(medium) Award”, which proved to be a
difficult decision given the depth of quality in
the area. The awards recognise the
inspirational and influential women across a
range of businesses in our region. In the
coming year, Hargreaves is sponsoring the
“Community & CSR Business” category.
Hargreaves has supported the development
of a new Scout facility in Fife. After a
devastating fire to their previous facility in
2019, the 4th Fife Cardenden Scout Group
received planning permission for a new hall in
2023. However, due to rising construction
costs were unable to fund the build.
Hargreaves Land and Westfield partner,
Brockwell Energy, joined forces to support the
project with a joint donation. The project is
due to commence shortly, and we look
forward to seeing the new Scout hut
completed.
Liam Readle – Hargreaves sponsors the
inspirational Liam Readle, son of Billy Readle,
Site Manager at Port of Tyne for Industrial
Services. Liam has cerebral palsy and began
wheelchair basketball at the age of 11 for local
club, Tees Valley Titans. During this time, he
had trials for Great Britain under 18s and
under 25s and went on to represent England
North in school games in 2017, where he
obtained a gold medal.
SMILE Centre – Andy Johnson, Head of Asset
Management for Hargreaves Land, pictured
with individuals from the Supportive
Multi-ability Inter-generational Life Experiences
Centre following our donation towards them
creating their new outdoor area.
Neighbourhood Community Beach Clean
Up and Food Angel – Recently, our staff in
Asia joined the client and other
subcontractors to conduct a clean up exercise
at the LKT beach area. Twenty members of
staff also helped prepare 2,200 lunchboxes for
those in need in the community.
Laybo’s Legacy – Sponsorship for a second
year of this suicide prevention charity
incorporated following the loss of someone
close to an employee.
Project40Seven – Donations helped to
support food collections for those in need in
the local community.
Environmental, Social and Governance Report continued
Social
36
Hargreaves Services plc
Annual Report and Accounts 2024
Hargreaves is committed to maintaining high
standards of corporate governance and has
adopted the Quoted Companies Alliance
Corporate Governance Code 2018 (‘QCA
Code’). The Company complies with each of
the ten principles of the QCA Code.
Around the Group, businesses hold various
accreditations including ISO45001, ISO9001,
ISO14001. During the year the Group have also
been successful in achieving ISO27001
accreditation. This demonstrates the
importance that the Group places on data
security across all of our activities. These
internationally recognised accreditations
underpin the high standards we continue to
achieve.
The Group’s HGV operations hold FORS
accreditation. This is a voluntary accreditation
scheme for fleet operators which aims to raise
the level of quality within fleet operations and
demonstrates which operators are achieving
exemplary levels of best practice, efficiency
and environmental protection.
During the year the Group has amended its
approach to risk identification and evaluation.
The risk-web approach, which is outlined in
detailed within the Audit and Risk Committee
Report, allows for a better visual representation
of risk. This allows the business to take a more
focused approach to the allocation of resource
to risk management, a key element to this is
the determination of risk appetite.
Further information on corporate governance,
including the role of the Main Board, Audit and
Risk Committee, Remuneration Committee
and Nomination Committee, is set out earlier in
this Annual Report.
Governance
Strategic Report
Directors’ Report
37
Financial Statements
Hargreaves Services plc
Annual Report and Accounts 2024
38
Hargreaves Services plc
Annual Report and Accounts 2024
Environmental, Social and Governance Report continued
Governance – NFSIS report
NFSIS Recommended disclosure
Actions taken
Governance
Describe the Board’s oversight of
climate-related risks and opportunities
• The Board has overall responsibility for the identification and management of all risks, including those
associated with climate change.
• The Group’s approach to risk identification, evaluation, management and mitigation is detailed within
the “Risk Management Report”
• The Board have recently approved the Group’s Net Zero Plan, which sets out a clean strategy to
decarbonise by 2050, including the key opportunities which will assist the Group in achieving this goal.
Describe management’s role in assessing
and managing climate-related risks and
opportunities
• The ESG Group is responsible for the identification of climate-related risks and opportunities.
• The ESG Group developed the Net Zero Plan and is responsible for the implantation of this plan.
• Each business unit, feeding into the ESG Group, has their own carbon reduction initiatives which are
being carried out on a tangible level.
Strategy
Describe the climate related risks and
opportunities the organisation has
identified over the short, medium and
long term.
• The recently published Net Zero Plan sets out many near-term and longer-term opportunities for the
reduction of carbon in our operations. This includes:
• Installation of half-hourly energy meters
• Trialling HVO fuel on our HGVs
• Trialling alternative fuels for our large plant fleet, including fully electric engines and longer-term
hydrogen power.
• Risks identified include:
• Reduction and ultimate phasing out by legislation of diesel as a fuel for plant and machinery
• Transition risk of moving from traditional fuels, such as diesel, to newer fuel sources (electric/
hydrogen) is reliant on third party providers
Describe the impact of climate-related
risks and opportunities on the
organisations business, strategy and
financial planning
• The purpose of the ESG Group is to continuously embed ESG into the businesses decision making process
• The development of the Group’s Net Zero Plan aligns with the wider strategic goals of the business
• The Group’s five year strategic plan incorporates ESG throughout
Describe the resilience of the
organisation’s strategy, taking into
consideration different climate-related
scenarios.
• The strategy is embedded throughout all levels of the business with the aim of the ESG Group
• The Group has carried out a climate-change risk assessment, which took into account numerous
scenarios, including increased summer and winter average temperatures, an increase in the sea-levels,
increase/decrease in annual rainfall amongst others. The Group did not identify any further material
risks which would manifest in the next five years.
Risk Management
Describe the organisation’s process for
identifying and assessing climate-
related risks
• The risk assessment process for climate-related risks forms part of the risk assessment process of all Group
risks. The details are set out within the Risk Management Report.
Describe the organisation’s process for
managing climate-related risks.
• The risk management process for climate-related risks forms part of the risk assessment process of all Group
risks. The details are set out within the Risk Management Report.
Describe how processes for identifying,
assessing and managing climate-
related risks are integrated into the
organisation’s overall risk management.
• The risk assessment process for climate-related risks forms part of the risk assessment process of all Group
risks. The details are set out within the Risk Management Report.
Metrics and targets
Disclose the metrics used by the
organisation to assess climate-related
risks and opportunities
• The Scope 1 and 2 carbon emissions, as measured by the SECR framework represent the key metrics by
which the Group measures its performance against carbon-related risks and opportunities.
• Details of scope 1 and 2 emissions can be found in the ESG Report
Disclose Scope 1, Scope 2 and, if
appropriate, Scope 3 greenhouse gas
(GHG) emissions
• Details of Scope 1 and 2 GHG emissions can be found in the ESG report.
• Scope 3 is measured for business travel only and is included within the ESG report.
Describe the targets used by the
organisation to manage climate-related
risks and opportunities and
performance against targets.
• The scope 1 and 2 emissions, as measured through the SECR framework, are regularly monitored through the
ESG Group.
Strategic Report
Directors’ Report
39
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Directors’ Report
In this section
40 Board of Directors
42 Directors’ Report
46 Corporate Governance
50 Remuneration Report
54 Statement of Directors’ Responsibilities
in respect of the financial statements
39
40
Hargreaves Services plc
Annual Report and Accounts 2024
Roger McDowell
(aged 69)
Non-Executive Chair
David Anderson
(aged 57)
Group Property Director
Nigel was appointed to the Board in
August 2015 and serves as Chair of
the Audit & Risk Committee. He is
also a member of the Remuneration
Committee. He is a Chartered
Accountant and was a partner at
Ernst & Young for 25 years, rising to
become Managing Partner of
Markets for the UK and Ireland,
responsible for the firm’s growth
strategy, key relationships, and
business development. He retired
from Ernst & Young at the end of
2013 to pursue a portfolio
non-executive career spanning the
public, private and charitable
sectors. Nigel is a Non-Executive
Director of Tribal Group plc and
a Trustee of the Hugo Halkes
Foundation. Nigel’s extensive
professional experience brings
rigour and insight to the Board
particularly with regard to financial
accounting and risk management.
Roger was appointed Chair of the
Company and the Nominations
Committee on 1 August 2018 after
joining the Board in May 2018. He is also
a member of the Remuneration and
Audit & Risk Committees. Roger spent
his executive career working in his
family’s business, pipeline products
distributor Oliver Ashworth. He was
Managing Director for eighteen years,
leading the business through dramatic
growth (from £1m to £100m turnover),
main market listing and ultimate sale to
St Gobain. Thereafter he has taken
on Chair or non-executive roles in
private equity backed and listed
businesses in a variety of sectors
including; engineering, manufacturing,
waste management, renewable energy,
financial services, IT, and telecoms.
Roger currently serves as Chair of
Avingtrans plc and Flowtech
Fluidpower plc. He is also a Non-
Executive Director of Tribal Group plc,
Proteome Sciences plc, British Smaller
Companies VCT2 PLC, Brand Architekts
Group plc and Koheilan Ltd. As can be
seen from the above, Roger has
extensive business management
experience in both executive and
non-executive roles which provides the
Board with relevant commercial and
governance experience. He also has
strong relationships with many of the
Company’s major shareholders, built up
over several years with a number of
companies.
Nick joined the Board in 2020
as Non-Executive Director and
currently serves as the Chair of the
Remuneration Committee. He has
been employed by Harwood Capital
LLP since 2019 after spending 5 years
at Gabelli Asset Management in New
York. He acted primarily as a
Research Analyst covering the
multi-industrial space and also
gained experience in Merger
Arbitrage strategies and marketing
Closed End Funds. He has a Bachelor
of Science Degree from Boston
College’s Carroll School of
Management. Nick is a Director of
Harwood Capital Management
Limited, Harwood Capital
Management (Gibraltar) Limited,
Growth Financial Services Limited,
62 Pont Street (Freehold) Ltd, Niox
Group Plc and North Atlantic
Investment Services Limited.
David joined the Board as Group
Property Director in November
2018. David joined from Henry Boot
Developments Limited, the principal
property development subsidiary of
Henry Boot PLC, where he had
served as a Director since 1996 and
as Managing Director since 2005. He
led the growth in revenue of that
business from less than £10m in
2005 to over £220m in 2017. David’s
25 years of experience and success
in the field of property development
brings the appropriate knowledge
and understanding of that market
necessary to assist the Group’s
growth in that business area.
Nigel Halkes
(aged 68)
Non-Executive Director
Nicholas Mills
(aged 34)
Non-Executive Director
Board of Directors
Strategic Report
Directors’ Report
41
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Gordon Banham
(aged 60)
Group Chief Executive
Chris Jones
(aged 58)
Non-Executive Director
David Hankin
(aged 42)
Company Secretary
Gordon was Managing Director of
his family firm, F Banham Limited,
until 1994 when he negotiated its
sale to Charrington Fuels and was
appointed as General Manager of
the combined businesses. On the
acquisition of Charringtons by the
CPL Group in 1995, he was made
Distribution Director responsible for
the enlarged group’s coal
distribution activities. Gordon joined
Hargreaves in 2001, subsequently
being appointed as Group Chief
Executive. He led the management
buyout of the Company in 2004 and
its subsequent flotation on the
London Stock Exchange the
following year. Gordon’s knowledge
of the Group and its various
business interests is unrivalled, and
he continues to have a detailed
involvement in all material matters
with which the Group is engaged.
Gordon is a Director of GB Holdings
(2021) Limited.
Stephen joined the Board in August
2023 as Director. He graduated from
the University of Newcastle-upon-
Tyne with a Masters degree in
Mathematics and Statistics. Stephen
is an experienced chartered
accountant having qualified whilst at
PwC.
Stephen joined Hargreaves in a
Group Finance role in 2013 and
progressed to Group Financial
Controller in 2017, a position he held
until his appointment to the Board
and, as such, has a deep
understanding of the Hargreaves
business model.
Stephen Craigen
(aged 40)
Chief Financial Officer
Chris joined the Board in April 2020.
He is a member of both the
Remuneration and Audit & Risk
Committee. He is a property
consultant and Chartered Surveyor
with over 30 years’ direct experience
working with a broad range of
organisations within the UK
investment and development
sectors of the commercial property
market. As a founding partner of his
investment practice - Christopher
Dee LLP, based in Manchester, he
has provided advice to private and
institutional clients on all aspects of
commercial property investment,
development, and funding work.
Chris is a Director of The Creative
Property Group Ltd and Doon Villa
Holdings Ltd.
David joined Hargreaves in 2016 and
was subsequently appointed as
Company Secretary in 2023.
David is a solicitor having qualified
with Watson Burton LLP in 2009.
Upon qualification, he moved to WSP
(formerly Parsons Brinckerhoff)
where he worked as in-house legal
counsel for the Europe, Middle East
and Africa region until joining
Hargreaves.
42
Hargreaves Services plc
Annual Report and Accounts 2024
Directors’ Report
The Directors present their Directors’ Report and Financial Statements for the year ended 31 May 2024.
Principal Activities
The principal activities of the Group during the year were the provision of haulage services, waste transportation, processing of minerals, mechanical
and electrical engineering, materials handling, the development and sale of land and specialist earthworks.
Results and Proposed Dividend
The profit for the year was £12,218,000 (2023: £27,926,000). Following the payment of an interim dividend of 18.0p per share on 4 April 2024, the
Directors recommend a final dividend for the year ended 31 May 2024 of 18.0p (2023: 6.0p) per share.
It is proposed that the final dividend will be paid on 4 November 2024 to shareholders on the register on 27 September 2024. The shares will become
ex-dividend on 26 September 2024. The proposed dividend has not been provided for in these financial statements as it was not declared and
approved before the year end.
Outlook
The current trading and outlook for the Group is disclosed within the Chair’s Statement above.
Financial Instruments
The financial risks faced by the Group and its policy in respect of these risks are set out in Note 27 of the financial statements.
Policy and Practice on Payment of Creditors
The Group does not operate a defined code of practice regarding payment to suppliers. The Group determines conditions of payment for its own
supply of goods and services. It is the Group’s policy that transactions are then settled in compliance with these legal or other contractual obligations
having regard to good commercial practice.
Directors
The Directors who held office during the year and to date are as follows:
Roger McDowell
Nigel Halkes
Christopher Jones
Nicholas Mills
Gordon Banham
David Anderson
John Samuel (resigned 9 August 2023)
Stephen Craigen (appointed 1 August 2023)
The names and biographical details of the Directors at the date of this Directors’ Report are given in the Board of Directors section of this Annual Report.
Roger McDowell took a temporary sabbatical break for personal reasons from 5 June 2023 and resumed his duties prior to the Annual General Meeting
on 25 October 2023. Nigel Halkes, the Senior Independent Director, assumed the Chair in Roger’s absence.
All Directors are required to retire by rotation every three years, in line with the Articles of Association. An evaluation of the performance of each Director
and of the Board is carried out annually and the performance of each continues to be effective and demonstrates commitment to the role. The Directors
required to retire by rotation at this year’s AGM are set out below.
The Company provides indemnities to each of its Directors in accordance with the provisions of the Company’s Articles of Association. Additional
information relating to Directors’ remuneration, service contracts and interests in the Company’s shares is given in the Remuneration Report.
The Directors who held office at the end of the financial year had the following interests in the shares of the Company according to the register
of Directors’ interests (audited):
Class of share
Number of shares at
end of year
Number of shares at
beginning of year
GB Holdings (2021) Limited (wholly owned by Gordon Banham)
Ordinary
2,759,910
2,646,825
Stephen Craigen
Ordinary
12,860
-
Roger McDowell
Ordinary
442,557
442,557
Nigel Halkes
Ordinary
5,000
5,000
Christopher Jones
Ordinary
79,369
79,369
Nicholas Mills*
Ordinary
10,000
–
David Anderson
Ordinary
105,617
58,100
* Nicholas Mills is an employee of Harwood Capital LLP, which owns 9,200,000 ordinary shares of the Company, being 28.26% of the issued share capital.
Strategic Report
Directors’ Report
43
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Details of Directors’ emoluments are set out in the Remuneration Report. All the Directors benefited from qualifying third-party indemnity provisions
in place during the year and at the date of this Directors’ Report.
Except as detailed in the Remuneration Report, according to the register of Directors’ interests, no rights to subscribe for shares in Group companies
were granted to any of the Directors or their immediate families or exercised by them during the financial year and up to the date of this Directors’
Report.
Retirement of Directors
In accordance with the Articles of Association one-third of Directors retire by rotation each year. The Directors retiring by rotation are Nigel Halkes,
Gordon Banham and David Anderson who being eligible, offer themselves for re-election.
Disclosable Interests
As at 2 August 2024, the Company had been notified of the following shareholders with 3% or more of the issued share capital of the Company:
Shareholder
Number of
ordinary shares
% of issued share
capital
Harwood Capital LLP
9,200,000
28.26%
Canaccord Genuity Group Inc
3,224,088
9.90%
GB Holdings (2021) Limited
2,759,910
8.41%
Downing LLP
1,275,347
3.89%
The above disclosures are in accordance with the last TR1 notification to the Company by shareholders.
Employees
Applications for employment by disabled persons are always fully considered. Employment policies are designed to provide opportunities
irrespective of colour, ethnic or national origin, nationality, sex, sexual orientation or marital status. In the event of employees becoming disabled
every effort is made, including appropriate training, to ensure that their employment with the Group continues. The Group engages, promotes and
trains staff based on their individual capabilities, experience and qualifications allowing all employees an equal opportunity for progression without
discrimination.
The Directors recognise the importance of good communications and good relations with employees. Regular meetings are held between the Chief
Executive and senior managers who cascade relevant information through their reporting systems. The Group intranet also provides regular
information to employees to inform them of developments within the Group. An employee e-newsletter is issued on a six-monthly basis to inform
individuals in relation to various topics around the Group including employee benefits, employee assistance programmes and human-interest stories.
Directors’ Section 172(1) Statement
The Board acknowledges its responsibility under section 172(1) of the Companies Act 2006 and sets out below the key processes and consideration
that demonstrate how the Directors promote the success of the Group. The below statement sets out the requirements of the Act, section 172(1), and
notes how the Directors discharge their duties.
As noted in the Corporate Governance Report, the Group is headed by an experienced and effective Board, which controls and leads the Group.
The Board meets at least ten times per year, receiving appropriate information from management on a timely basis, and making further detailed
enquiries where necessary to enable it to fully discharge its duties. Each decision that is made by the Directors is supported by papers which analyse
the possible outcomes so that an appropriate decision can be made based upon the likely impact on the performance and position of the Group.
This enables a decision to be made which best promotes the success of the Group and considers the impact on the wider stakeholder group.
Factors below are all considered during the decision-making process.
Likely consequences of any decisions in the long term
As part of the Board’s decision-making process, they are given access to management papers which set out the potential outcome of decisions. The
papers evaluate both the financial impact against forecast, as well as non-financial factors and how the decision fits with the strategy of the Group.
Through a well-designed system of internal reporting and control, the Board has devolved certain levels of autonomy to management to run and
develop the business of the Group.
The Group has an annual budget and five-year strategic plan which is reviewed regularly to benchmark performance and achievements against
its long-term strategy. Each year, the Board holds a session with each of the business unit Managing Directors and other senior management to
review and reconsider the strategy of each business unit. This includes consideration of market conditions and opportunities, investment
requirements and capital allocation, resource availability, the overhead cost base and margins. The Board then considers the outlook for the entire
Group and the opportunities to create, deliver and realise value for shareholders. The Board’s strategy remains unchanged and is focused on
delivering reliable and growing profits in its Services business whilst realising value out of Hargreaves Land through a move to a lower-capital
model. Furthermore, the strategy with regards to HRMS is to maximise the annual cash return to the Group to ultimately realise the balance sheet
value for shareholders.
44
Hargreaves Services plc
Annual Report and Accounts 2024
Interests of the Group’s employees
The Directors actively consider the interests of employees in all major decisions. The Board encourages feedback from employees through a regular
feedback questionnaire to improve the culture and working environment of the Group. The Group Chief Executive holds regular meetings with
senior managers both to keep them informed of Board decisions and shareholder feedback but also to gather views and input from the business
units. The senior managers then cascade that information down through the businesses through their reporting channels. Additionally, the Group’s
intranet and regular in house newsletter carry a range of statements and information updates which employees can access.
The Group also operates various LTIP schemes for the Directors and other senior employees based on performance criteria. The Board believes this
encourages employee engagement in promoting the success of the Group and in aligning the financial interests of the Executive Directors and other
senior employees with those of the shareholders.
The need to foster the Group’s business relationships with suppliers, customers and others
The Directors have identified the stakeholders of the Group and review regularly to ensure adequate communication and engagement is ongoing
with each stakeholder group. The Board recognises that the Group’s customers, suppliers and employees are crucial to its success. The Group has
established long-term relationships with key customers and suppliers and the Board encourages feedback from them to improve decision making.
For key customers and suppliers, appropriate due diligence is undertaken around their working practices and ethics as well as their financial stability
and viability.
One of our strategic priorities is our commitment to the highest practicable standards of health and safety, which has enabled us to secure and
maintain valuable contracts, as detailed in “Impact of the Group’s operations on the community and environment” below.
Impact of the Group’s operations on the community and environment
The Group takes its responsibility within the community and wider environment seriously. There are specific information channels in respect of health
& safety matters. The Group has a proactive approach to safety, health and the environment and is committed to the highest practicable standards of
safety and health management and the minimisation of adverse environmental impacts (as further detailed in the Environmental, Social and
Governance report and “Principle 8: Promote a corporate culture that is based on ethical values and behaviours” of the Corporate Governance
Report). The Group publishes its annual global emissions in compliance with the streamlined energy and carbon reporting (“SECR”) regulations
detailed in “Carbon emissions” below. Additionally, the Group maintains a Corporate Social Responsibility fund to support the charitable endeavours
of our stakeholders, including employees, in the local community. Further details can be found in the ESG Report.
The desirability of the Group maintaining a reputation for high standards of business conduct
The Group is committed to maintaining high standards of corporate governance and has adopted the Quoted Companies Alliance Corporate
Governance Code 2018 (“the QCA Code”). The Group’s approach in relation to complying with each of the ten principles of the QCA Code is set out
in the Corporate Governance Report.
To monitor and strengthen further Group compliance with corporate governance, the Board undertakes a self-assessment annual performance
review. The assessment provides an effective platform for reviewing performance and, over time, a greater focus has developed on particular
recommendations, which has prompted fruitful discussions among the Board and influenced its operation. The 2024 review has been carried out
with the Board focusing on those areas where one or more of the Directors had indicated a concern. In particular, the Board considered that Board
diversity is a key area for focus in the future. Additionally, the Directors have introduced a skills matrix to assess the abilities and capabilities of
the Board.
The Group has a strong ethical culture based upon its Code of Ethics which can be found on the Group’s website. The Group’s reputation is built on
its values as a Group, the values of its employees, and the collective commitment to acting at all times with integrity. Part of the work of the Audit &
Risk Committee involves reviewing the Group Whistleblowing Policy by which employees of the Group may, in confidence, raise concerns about
possible financial or other improprieties. Where there is a need to seek advice on particular issues, the Board will liaise with its lawyers and nominated
advisers to ensure the consideration of business conduct, and its reputation is maintained.
The need to act fairly between members of the Group
An important role of the Board is to represent and promote the interests of the Group’s shareholders as well as being accountable to them for the
performance and activities of the Group. The Board engages with its shareholders through presentations, conference calls, face-to-face meetings and
the Annual General Meeting. Following the announcement of the Group’s half-year and year-end results, presentations are made to analysts and
major shareholders to update them on progress and invite them to ask questions. The Board also uses online real time webcasting of its results
presentations which enables all interested parties, including private shareholders, to access information and to ask questions of Executive Directors.
The Board is updated on the latest shareholder information by the receipt of shareholder register movements, analyst reports and feedback from the
Group’s brokers and Financial PR Advisers following investor presentations after half-year and year-end results. The Board incorporates this feedback
into its decision-making processes. All Directors attended the Annual General Meeting in 2023 and engaged in discussion with the shareholders
present. The Group provides contact details on the investor relations page of its website and in the notice to the 2024 Annual General Meeting which
investors can use to contact the Group, giving equal access to all investors and potential investors.
Directors’ Report continued
Strategic Report
Directors’ Report
45
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Carbon Emissions
Information on carbon emissions in accordance with the SECR regulations is set out in the ESG report.
Purchase of Own Shares
The Directors are authorised to make market purchases of the Company’s own shares under an authority granted at the Annual General Meeting
held on 25 October 2023. The Directors will seek authority to make market purchases of up to fifteen per cent of the Company’s own shares at the
2024 Annual General Meeting (full details are available in the 2024 Notice of Annual General Meeting).
Approval to Issue Shares
The Directors will seek authority to allot up to a maximum aggregate nominal amount of £1,104,625 at the 2024 Annual General Meeting (full details
are available in the 2024 Notice of Annual General Meeting).
Disclosure of Information to Auditor
The Directors who held office at the date of approval of this Directors’ Report confirm that, so far as they are each aware, there is no relevant audit
information of which the Company’s auditor is unaware and each Director has taken all the steps that he ought to have taken as a Director to make
himself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
Independent Auditor
The Board proposes to reappoint PricewaterhouseCoopers LLP as auditor. Resolutions concerning their continued appointment and to authorise the
Audit & Risk Committee of the Board of Directors to agree their remuneration will be put to the forthcoming Annual General Meeting of the
Company (full details are available in the 2024 Notice of Annual General Meeting).
By order of the Board
David Hankin
Company Secretary
5 August 2024
46
Hargreaves Services plc
Annual Report and Accounts 2024
The Company is committed to maintaining high standards of corporate governance and has adopted the Quoted Companies Alliance Corporate
Governance Code 2018 (“the QCA Code”). The Company’s approach in relation to complying with each of the ten principles of the QCA Code is set
out below.
Deliver Growth
Principle 1: Establish a strategy and business model which promote long-term value for shareholders
The Board has established a strategy and business model which seek to promote long-term value for shareholders. This is set out in the Strategic Report
section of this Annual Report and follows the theme of Create, Deliver, Realise. Additionally, in Hargreaves Land, the Board is continuing with the strategy
to realise land which has rental income deriving from third party renewable energy assets progressively over the next few years, whilst strengthening
the pipeline of development projects. The risks to the Group posed by this transition have been evaluated by the Board and continue to be on a regular
basis. These risks and the Board’s views on the mitigations which balance them are set out in the Risk Management section of this report.
Principle 2: Seek to understand and meet shareholder needs and expectations
An important role of the Board is to represent and promote the interests of the Company’s shareholders as well as being accountable to them for the
performance and activities of the Group. The Board believes it is important to engage with its shareholders and aims to do this through
presentations, conference calls, face-to-face meetings and the Annual General Meeting. Following the announcement of the Group’s half-year and
year-end results, presentations are made to analysts and major shareholders to update them on progress and invite them to ask questions. The Board
has also introduced the use of online real time webcasting of its results presentations which enables all interested parties, including private
shareholders, to access information and to ask questions of Executive Directors. The Board is updated on the latest shareholder information by the
receipt of shareholder register movements, analyst reports and feedback from the Company’s brokers and Financial PR Advisers following investor
road shows after half-year and year-end results. All Directors attend the Annual General Meeting and engage in discussion with shareholders present.
The Company provides contact details on the investor relations page of its website which investors can use to contact the Company.
Principle 3: Take into account wider stakeholder and social responsibilities and their implications for long-term success
The Board recognises that the Group’s customers, suppliers and employees are crucial to its success. The Group has established long-term relationships
with key customers and suppliers and the Board encourages feedback from employees to improve the culture and working environment of the Group.
The Group Chief Executive holds regular meetings with senior managers both to keep them informed of Board decisions and shareholder feedback
but also to gather views and input from the business units. The senior managers then cascade that information down through the businesses through
their reporting channels. Additionally, the Group’s intranet and in house newsletter carry a range of statements and information updates which
employees can access. There are specific information channels in respect of health & safety matters. The Group has a proactive approach to safety,
health and the environment and is committed to the highest practicable standards of safety and health management and the minimisation of adverse
environmental impacts (as further detailed below at “Principle 8: Promote a corporate culture that is based on ethical values and behaviours”).
Principle 4: Embed effective risk management, considering both opportunities and threats, throughout the organisation
The Company’s approach to risk is set out within the Risk Management section of this Annual Report. The Board has devolved considerable levels of
autonomy to management to run and develop the business of the Group. The Board believes that a well-designed system of internal reporting and
control is necessary. The Board therefore continues to have overall responsibility to develop and strengthen internal controls. The Audit & Risk
Committee, on behalf of the Board, has the responsibility for reviewing internal controls. The system is designed to provide reasonable, but not
absolute, assurance that the assets of the Group are safeguarded, that proper accounting records are maintained, and that reliable financial
information is produced. All subsidiary undertakings are required to adhere to specified internal control procedures. The Audit & Risk Committee
receives regular reports on internal control. Monitoring of compliance with the Group’s system of internal control is undertaken by all levels of
management and the internal audit function. This is reinforced by the role fulfilled by the Audit & Risk Committee (as further detailed below at
“Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making by the Board”).
Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair
The Board
The Group is headed by an effective Board, which controls and leads the Group. The Board meets at least ten times per year, receiving appropriate
information from management on a timely basis, and making further detailed enquiries where necessary to enable it to fully discharge its duties.
The Directors attended the following meetings in the year ended 31 May 2024:
Attendance at meetings
Board
Audit & Risk
Committee
Remuneration
Committee
Nominations
Committee
Number of meetings
13
5
2
1
Gordon Banham
12 attended
n/a
n/a
1 attended
Nigel Halkes
13 attended
5 attended
2 attended
1 attended
John Samuel (resigned 9 August 2023)
3 attended
n/a
n/a
n/a
Stephen Craigen (appointed 1 August 2023)
11 attended
4 attended
n/a
n/a
Roger McDowell
8 attended
3 attended
2 attended
0 attended
David Anderson
13 attended
n/a
n/a
n/a
Christopher Jones
13 attended
5 attended
2 attended
1 attended
Nicholas Mills
13 attended
5 attended
2 attended
1 attended
Corporate Governance
Strategic Report
Directors’ Report
47
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
The Board is collectively responsible for the long-term success of the Group and has ultimate responsibility for the management, direction and
performance of the Group and its businesses. The Board is required to exercise objective judgement on all corporate matters and is accountable
to shareholders for the proper conduct of the business. All Directors have access to the advice and services of Group Legal Counsel who is also the
Company Secretary. The Company Secretary is responsible to the Board for ensuring that procedures are followed and for compliance with
applicable rules and regulations. There is a clearly defined division of responsibilities between the Chair and the Group Chief Executive. The Chair
is primarily responsible for the leadership and effective working of the Board. This is achieved by:
•
chairing Board meetings, setting the agendas in consultation with the Group Chief Executive and Company Secretary and encouraging the
Directors to participate actively in Board discussions;
•
leading the performance evaluation of the Board, its Committees and individual Directors;
•
promoting high standards of corporate governance;
•
ensuring timely and accurate distribution of information to the Directors and effective communication with shareholders;
•
periodically holding meetings with the Non-executive Directors without the Executive Directors present; and
•
establishing an effective working relationship with the Group Chief Executive by providing support and advice whilst respecting executive responsibility.
The Group Chief Executive is responsible for the executive management of the Group and for ensuring the implementation and execution of Board
strategy and policy within approved business plans, budgets and timescales. Further details of the composition of the Board and Director’s
attendance at Board and Committee meetings are set out in this Annual Report.
Non-executive Directors
Non-executive Directors bring a wide range of experience to the Group. The QCA Code states that the Board should have at least two independent
Non-executive Directors and that, since independence can easily be compromised, Non-executive Directors should not normally participate in
performance-related remuneration schemes. The Board currently has four Non-executive Directors including the Non-executive Chair. The
Non-executive Chair, Roger McDowell was a participant in the Company’s Long-Term Incentive Plan scheme entitled the Hargreaves Services plc
Share Option Scheme 2019, which was approved by shareholders at a general meeting of the Company on 22 January 2019. Roger McDowell has
exercised and retained ownership of all of the 112,557 shares which vested to him under that scheme. The Board considers that Nicholas Mills is
independent although he is employed by Harwood Capital LLP, which owns 28.26% of the shares in the Company. Whilst the Board considers that
Roger McDowell and Nicholas Mills are independent, in any event, the Board has two other independent Non-executive Directors.
Conflicts of Interest
The Articles of Association enable the Directors to authorise any situation in which a Director has an interest that conflicts or has the potential to
conflict with the Company’s and Group’s interests and which would otherwise be a breach of the Director’s duty under section 175 of the Companies
Act 2006. The Board has a formal system in place for Directors to declare such situations to be considered for authorisation by those Directors who have
no interest in the matter being considered. The Nominations Committee reviews conflicts of interests when considering new Board appointments.
Principle 6: Ensure that between them the Directors have the necessary up-to-date experience, skills and capabilities
Details of the Directors’ skills and experience are set out in Directors’ biography page within this Annual Report. The Directors bring a wide range of
expertise on issues related to operations, strategy and governance. The Board is satisfied that, between the Directors, it has an effective and
appropriate mix of skills and experience.
All newly appointed Directors receive a full, formal and tailored induction on joining the Board, including meetings with senior management and
advisers and visits to the Group’s operational locations. The Board calendar is planned to ensure that Directors are briefed on a wide range of topics
throughout the year and are given the opportunity to visit sites and discuss aspects of the business with employees. The Board recognises that the
Directors have a diverse range of experience and encourages them to attend external seminars and briefings that will assist them individually.
Directors have access to independent professional advice at the Group’s expense where they judge this to be necessary to discharge their
responsibilities as Directors. All Directors have access to the advice and services of the Company Secretary (who is a solicitor qualified in England
and Wales), who is responsible to the Board for ensuring compliance with Board procedures.
The Board has been advised by Jones Lang LaSalle Limited with regard to the valuation and planned realisation of its renewable energy land assets
and, additionally, is advised by its nominated adviser Singer Capital Markets.
Principle 7: Evaluate Board performance based on clear and relevant objectives, seeking continuous improvement
To further strengthen Group compliance, the Board undertakes annual performance reviews that review and measure its effectiveness and that of its
Committees. Each Board/Committee member completes an assessment, which provides numeric scoring against specific categories. Each Board/
Committee member also provides recommendations for improvement of the effectiveness of the Board/Committee. The assessments provide an
effective platform for reviewing performance and, over time, a greater focus has developed on particular recommendations, which has prompted
fruitful discussions among the Board and influenced its operation.
The criteria for effectiveness include assessing:
•
Key Board/Committee functions;
•
Board/Committee composition (including succession planning);
48
Hargreaves Services plc
Annual Report and Accounts 2024
Corporate Governance continued
•
External reporting and information flows;
•
Board/Committee culture;
•
Board/Committee information for meetings and the meetings themselves; and
•
Board development.
Following this year’s annual performance review, which was carried out using a self-assessment questionnaire, the Board debated categories where at
least one Director awarded a score of less than 2 out of 3 (where answers of “3” means good, “2” means acceptable and “1” means poor).
The 2024 review was carried out with the Board focusing on those areas where one or more of the Directors had indicated a concern. In particular,
the Board considered that diversity of Board composition is an area for focus in the future. Additionally, the Directors have introduced a skills matrix to
assess the abilities and capabilities of the Board.
Alongside the annual performance review, the Chair conducts an informal appraisal in respect of the Group Chief Executive and the Group Chief
Executive conducts appraisals in respect of the other Executive Directors. For details regarding succession planning and the process for senior
management appointments, please refer to the section entitled “Nominations Committee” (under the heading “Principle 9: Maintain governance
structures and processes that are fit for purpose and support good decision-making by the Board”) below.
Principle 8: Promote a corporate culture that is based on ethical values
Culture
The Company has a strong ethical culture based upon its Code of Ethics which can be found on the Company’s website. The Company’s reputation is
built on its values as a company, the values of its employees, and the collective commitment to acting at all times with integrity. Part of the work of
the Audit & Risk Committee involves reviewing the Group Whistleblowing Policy by which employees of the Group may, in confidence, raise concerns
about possible financial or other improprieties. The appropriateness of the Board’s corporate governance structures is reviewed as part of the Board
and Committee effectiveness process described above.
Compliance with Laws
The Group has systems in place designed to ensure compliance with all applicable laws and regulations and conformity with all relevant codes of
business practice. Compliance with the Bribery Act 2010 involves an Anti-Corruption Policy and a Group Whistleblowing Policy. Training is given to all
appropriate employees through the use of online tools to ensure that there is full understanding of the Bribery Act 2010 and competition law and
awareness of the consequences of not adhering to Group policies. The Group’s Whistleblowing Policy is used to encourage staff to raise concerns in
the knowledge that concerns raised in good faith will be taken seriously and investigated.
The Group has taken the appropriate steps to comply with the provisions of the Market Abuse Regulation and the Modern Slavery Act. The Group has
processes and policies to comply with the General Data Protection Regulation (“GDPR”) and wider information governance. The Group has a Data
Protection Officer who is responsible for: managing information governance; implementing the requirements of GDPR; and arranging for online
training to be given to appropriate employees.
Safety, Health and Environment
The Group has a proactive approach to safety, health and the environment and is committed to the highest practicable standards of safety and
health management and the minimisation of adverse environmental impacts. The Board ensures that health and safety issues for employees,
customers and the public are of foremost concern in all Group activities and ingrained in day-to-day activities. The Group Chief Executive is charged
with overall responsibility. The Group encourages both internal and external training through a formal network of full-time officers and Health and
Safety nominated “champions” at all levels. Statistical analysis is used to highlight any areas where additional training or improved working practices
would be beneficial, and positive action is promptly implemented. All business units have activity related safety management systems.
Environmental, Social and Governance
The Group has established a cross-business ESG Working Group to assess procedures, review methods and identify goals to enable balanced
judgements to be made going forward. The ESG Working Group also prepares reports required to comply with the requirements of the NFSIS. The
ESG Working Group’s findings form an integral part of financial reports and investor presentations. Further details can be found together within the
Environmental, Social and Governance report.
Principle 9: Maintain governance structures and processes that are fit for purpose and support good decision-making
by the Board
The Board
Please see details above at “Principle 5: Maintain the Board as a well-functioning, balanced team led by the Chair”. The Board has a schedule
of matters which are specifically reserved for its decision which can be viewed on the Company’s website.
Board Committees
The Board has three Committees that assist in the discharge of its responsibilities:
•
Remuneration;
•
Audit & Risk; and
•
Nominations.
Strategic Report
Directors’ Report
49
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Remuneration Committee
The Remuneration Committee, which is chaired by Nick Mills and comprises the Non-executive Directors, is responsible for making
recommendations to the Board on the Group’s framework of executive remuneration and its cost. The Committee determines the contract terms,
remuneration and other benefits for each of the Executive Directors, including performance-related bonus schemes, pension rights and
compensation payments. The Board itself determines the remuneration of the Non-executive Directors. Further details on the composition and work
of the Remuneration Committee are set out in the Remuneration Committee Report within this Annual Report. The Terms of Reference of the
Remuneration Committee can be viewed on the Company’s website.
Audit & Risk Committee
The Audit & Risk Committee, which is chaired by Nigel Halkes and comprises the Non-executive Directors, is responsible for reviewing a wide range of
financial reporting and related matters including the half-year and annual financial statements before their submission to the Board. The Committee
is required to focus in particular on critical accounting policies and practices adopted by the Group, and any significant areas of judgement that
materially impact reported results. It is also responsible for monitoring the internal controls that are operated by management to ensure the integrity
of the information reported to the shareholders. An internal audit function, which reports directly to the Chair of the Audit & Risk Committee,
supports the Audit & Risk Committee in this process. The Committee provides a forum for reporting by the Group’s external auditors, and advises the
Board on the appointment, independence and objectivity of the external auditors and on their remuneration both for statutory audit and non-audit
work. It also discusses the nature, scope and timing of the statutory audit with the external auditors. The Committee also reviews the appropriateness
of the annual internal audit programme for the Group and ensures that the business risk management and internal audit functions are adequately
sponsored and resourced. The ESG Working Group reports quarterly to the Committee. The Committee meetings are also attended, by invitation,
by the Chief Executive and Group Finance Director. The Committee meets not less than four times annually. Further details on the composition and
work of the Audit & Risk Committee are set out in the Audit & Risk Committee Report within this Annual Report. The Terms of Reference of the
Audit & Risk Committee can be viewed on the Company’s website.
Nominations Committee
The Nominations Committee, which is chaired by Roger McDowell, comprises the Non-executive Directors and the Group Chief Executive. The
Committee is responsible for reviewing the structure, size and composition of the Board when compared with its current composition. It makes
recommendations to the Board with regard to any changes and considers and reviews succession planning for Board Directors, taking into account
the challenges and opportunities facing the Group. It identifies and nominates for Board approval suitable candidates to fill Board vacancies as and
when they arise, and it keeps under review both the executive and non-executive leadership needs of the Company to enable the Group to compete
effectively in the marketplace. The Committee recommends as appropriate re-appointment of Non-executive Directors at the end of their specified
terms of office and oversees the re-election by shareholders of any Director under the “retirement by rotation” provisions in the Company’s Articles
of Association. The Terms of Reference of the Nominations Committee can be viewed on the Company’s website.
The performance of each of the Board Committees is reviewed annually by the Board.
All Directors have service agreements or letters of appointment and the details of their terms are set out in the Remuneration Report.
The Committee recognises the benefits to the Group of diversity in the workforce and in the composition of the Board itself. While the Company
will continue to make all appointments based on the best candidate for the role and without prejudicing its policy of appointing the most suitable
applicant for any role, it is aware of the desirability and benefits of diverse representation. In making senior appointments the Board will give
particular weight to addressing diversity in the constitution of senior management including directors.
Evolution of Governance Framework
The Board continuously monitors its composition and governance framework taking into account effectiveness and the Group’s strategy.
Principle 10: Communicate how the Company is governed and is performing by maintaining a dialogue with shareholders
and relevant stakeholders
In addition to this Annual Report, the Company’s website contains full information on the governance, management and activities of the Group and
features all presentations given by the Executive Directors to shareholders.
Approval
The Board approved the Corporate Governance Report on 5 August 2024.
Roger McDowell
Chair
5 August 2024
50
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Annual Report and Accounts 2024
Responsibilities and Role of the Remuneration Committee
The Committee’s principal function is to review and approve the remuneration of the Executive Directors. It also monitors the remuneration of the
Group’s senior managers. The remuneration strategy, policy and approach for all staff, is also reviewed annually by the Committee. The full Terms of
Reference of the Committee are available on the website.
The policy for the current and future financial years for the remuneration and incentivisation of the Executive Directors is as follows:
•
to ensure that individual rewards and incentives are aligned with the performance of the Company and the interests of shareholders;
•
to ensure that performance-related elements of remuneration constitute a material proportion of an executive’s remuneration package; and
•
to maintain a competitive remuneration package which enables the Company to attract, retain and motivate high-calibre executives.
The Committee reviews the Company’s executive remuneration arrangements and implements incentive arrangements to support the objective of
rewarding those individuals who deliver real and genuine shareholder value. In developing the arrangements, the Committee and its advisers
consider current market practice.
Membership of the Committee
The members of the Committee, which met on two occasions during the year, were:
Nicholas Mills
Christopher Jones
Nigel Halkes
Roger McDowell
All members of the Committee are Non-executive Directors and are recognised by the Board as capable of bringing independent judgement to bear.
The membership of the Committee has been unchanged. The Group Chief Executive is consulted and invited to attend meetings, when appropriate.
No Director is present when his own remuneration is discussed.
During the year the Committee reviewed and considered the proposed appointment of all new employees whose basic salary was in excess of
£120,000; annual pay rises and conditions of service for all employees earning over £120,000 per annum; bonus scheme arrangements; the vesting
and granting of options under the Company’s Long-Term Incentive Plans; the principles governing the Group’s annual pay review; and the
effectiveness of the Committee.
Components of Executive and Senior Management Remuneration
Basic Salary
This is a fixed cash sum, payable monthly. Salaries are reviewed annually by the Remuneration Committee in the light of individual performance,
experience in the role and market comparisons. Considering the current economic conditions prevalent in the UK, a cost-of-living increase of 3% was
awarded at 1 June 2024 to all UK employees other than the Directors following an increase of 5% at 1 June 2023. The Executive Directors received an
increase of 3% to their basic salaries as at 1 June 2023 and the Committee has granted them an increase of 3% at 1 June 2024. During the year, there
have been no changes to the benefits which the Executive Directors receive.
Remuneration Report
Nicholas Mills,
Chair of the Remuneration Committee
Strategic Report
Directors’ Report
51
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Annual Bonus
Executive Directors participate in an annual incentive bonus scheme linked to the actual achievement of a Group profit before tax target set by the
Committee. A deduction of 10% is made from any bonus earned if the Group Health & Safety target is not achieved. For the year ended 31 May 2024,
the Committee also set some specific cash targets for the Group which would have resulted in a further deduction of 10% of any bonus earned
should they not have been achieved. The total bonus which could have been earned was capped at 100% of salary in respect of the Chief Executive
and 75% in respect of the Chief Financial Officer and the Group Property Director. Bonuses do not count towards the calculation of pension
entitlement.
In respect of the Chief Executive and the Chief Financial Officer 0% of the bonus target for the financial year ended 31 May 2024 was achieved,
predominantly due to the performance of HRMS. 100% of the bonus was payable in respect of the Group Property Director due to the delivery of
result within Hargreaves Land and accordingly total bonuses amounting to £123,000 have been earned. Total bonuses of £859,000 were earned in
respect of the financial year ended 31 May 2023. Similar criteria have been set in respect of bonus arrangements for the financial year ending
31 May 2025.
Benefits in Kind and Pensions
In addition to basic salary, Executive Directors are entitled to the following benefits: paid holiday, company car or a cash allowance in lieu,
contributions to a personal pension plan and life assurance, private medical insurance and permanent health insurance. No Director has benefits
under any of the Group’s defined benefit pension schemes.
Long-Term Incentive Plans
From time to time, the Executive Directors and other senior employees have been invited to participate in Long-Term Incentive Plans (“LTIPs”),
whereby options to acquire ordinary shares in the Group are awarded subject to the achievement of various performance criteria. The Board believes
that such plans are an important element of overall executive remuneration and assist in aligning the financial interests of Executive Directors and
other senior employees with those of the shareholders.
At the Annual General Meeting held on 25 October 2023, shareholders approved the amended Hargreaves Services plc Executive Share Option
Scheme, under which all awards are now made. Details of this LTIP and awards made under it are set out below.
Non-executive Directors’ Remuneration
The Non-executive Chair’s basic salary was £87,344 per annum and other Non-executive Directors received a basic salary of £43,672 per annum.
These basic salaries will increase by 3% from 1 June 2024. Additionally, the Non-executive Directors excluding the Chair receive an additional
£2,750 per annum for chairing each Board Committee and N Halkes receives £2,750 for acting as Senior Independent Director.
Directors’ Remuneration for the Year ended 31 May 2024
The remuneration of the Directors who served during the period from 1 June 2023 to 31 May 2024 is disclosed within Note 6 of the financial
statements.
Directors’ Service Contracts and Letters of Appointment
The Directors have entered into service agreements and letters of appointment with the Company and the principal terms are as follows:
Date of latest agreement
Name
Position
Commencement of
period of office
Annual salary (£)
Notice period
3 September 2013
Gordon Banham
Group Chief Executive
23 February 2004
513,629
12 months
14 November 2018
David Anderson
Group Property Director
12 November 2018
245,665
6 months
1 August 2023
Stephen Craigen
Chief Financial Officer
1 August 2023
206,000
6 months
11 May 2018
Roger McDowell
Non-executive Chairman
11 May 2018
87,344
3 months
21 August 2015
Nigel Halkes
Non-executive Director
21 August 2015
49,337
3 months
1 April 2020
Christopher Jones
Non-executive Director
1 April 2020
45,088
3 months
9 September 2020
Nicholas Mills
Non-executive Director
9 September 2020
45,088
3 months
Non-executive Directors are not generally eligible to participate in any incentive plans, share option schemes or Company pension arrangements and
are not entitled to any payment in compensation for any early termination of their appointment.
Directors’ Share Options
No rights to subscribe for shares in Group companies were granted to any of the Directors or their immediate families, or exercised by them, during
the financial year and up to the date of this Directors’ Report except as set out below. At 31 May 2023, no Director holds any rights to subscribe for
shares in Group companies other than those related to options which have vested but have not yet been exercised.
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Annual Report and Accounts 2024
Long-Term Incentive Plan (“LTIP”)
The Hargreaves Services plc Executive Share Option Scheme
At the Annual General Meeting held on 25 October 2023, the amendment to the Hargreaves Services plc Executive Share Option Scheme (“the
Executive Share Option Scheme”), was approved by shareholders. The scheme contains performance criteria measuring both the Company’s own
Total Shareholder Return over a three-year period and the Group’s EPS growth excluding its interest in HRMS. It is envisaged that awards with a value
up to 50% of a recipient’s base salary will be made annually under the Executive Share Option Scheme to Executive Directors and other senior
management as determined by the Committee.
During the year ended 31 May 2024, a total of 210,606 (2023: 118,584) awards were made of which 56,314 (2023: 22,671) related to Executive Directors
as set out below:
Director
Date of grant
Exercise price
No. of options granted
Exercise period
David Anderson
30 October 2023
10p per share
31,041
1 Nov 2026 – 30 Oct 2028
Stephen Craigen
30 October 2023
10p per share
25,272
1 Nov 2026 – 30 Oct 2028
The performance parameters for the Executive Share Option Scheme are split into two parts:
1. 50% of the Option is based upon the Company’s performance (the “Company Performance Option”). Based on Total Shareholder Return (“TSR”)
over the three years to 30 October 2026. 0% of this element will vest for delivering TSR growth of 25% or less, which will increase on a linear basis
to 100% of this part of the award for delivering 85% TSR growth.
2. 50% of the Option is based upon the Company’s EPS Growth (the “EPS Growth Option”). EPS for this purpose is defined as the Group Continuing
EPS excluding EPS related to HRMS or the disposal of renewable energy land assets. 0% of this element of the award will vest for Compound
Annual Growth Rate (“CAGR”) of 15% or less between 31 May 2023 and 31 May 2026. This will rise on a linear basis to 100% of this part of the award
for a CAGR of 30% or greater.
No option shall be granted under the Executive Share Option Scheme on any date if, as a result, the total number of shares issued or issuable
pursuant to options and other rights granted under the Executive Share Option Scheme together with any other employee share scheme established
by the Company on or after Admission, would exceed 10% of the issued ordinary share capital of the Company on the date of grant.
Executive Share Option Scheme awards vesting and/or exercised in the year ended 31 May 2024
During the year, options awarded on 1 August 2020, totalling 179,224 shares partially vested in accordance with the performance criteria. 92.5% of the
performance criteria was achieved resulting in 13,442 options becoming lapsed. Of those shares that vested, 47,517 were exercised by David Anderson
on 29 August 2023, 59,132 were exercised by Gordon Banham on 21 December 2023. The remaining 59,132 options that were awarded to John
Samuel have not yet been exercised. John Samuel stepped down as Group Finance Director on 9 August 2023, John will retain the right to exercise
these options.
Furthermore, Gordon Banham exercised 24,249 options on 21 December 2023 relating to the Executive Share Option Scheme awarded on
13 December 2019.
On 2 August 2021 options totalling 41,611 shares and 22,292 were awarded to Gordon Banham and David Anderson respectively. Following
achievement of certain performance criteria on 2 August 2024 28,301 of these options vested in respect of Gordon Banham and 15,162 in respect
of David Anderson.
Outstanding Executive Share Option Scheme awards
Information within the table below relates to Directors who have served during the financial year ended 31 May 2024. The Board has previously
granted the following options to the Executive Directors:
Exercisable between
3 Aug 24 and 2 Aug 26
Exercisable between
2 Aug 25 and 1 Aug 27
Exercisable between
1 Nov 2026 and 30 Oct 2028
Gordon Banham
28,301
-
-
David Anderson
15,162
22,671
31,041
Stephen Craigen
-
10,932*
25,272
* Award was made on 1 August 2022, prior to Stephen Craigen’s appointment to the Board.
The Committee intends for the next issuance of the Executive Share Option Scheme to be in line with the previous iteration, however the TSR metric
will be amended so that 0% of the Company Performance Options will vest for three-year TSR growth of 30% or less and 100% for 75% or more.
Additionally, the EPS Growth Options will pay out 0% for three-year CAGR of 6% or less up to a maximum 100% for 15% or greater. The Committee
believes these amendments reflect the progress made to date under the existing schemes.
Remuneration Report continued
Strategic Report
Directors’ Report
53
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
The Hargreaves Services plc Share Option Scheme 2019
On 22 January 2019, shareholders in general meeting approved an LTIP scheme, the Hargreaves Services plc Share Option Scheme 2019 (“the Share
Option Scheme 2019”). The following awards were granted in the year ended 31 May 2019:
Director
Date of grant
Exercise price
No. of options granted
Exercise period
Roger McDowell
30 January 2019
10p per share
285,144
31 Jan 2022-30 Jan 2024
Gordon Banham
30 January 2019
10p per share
75,250
31 Jan 2022-30 Jan 2024
John Samuel
30 January 2019
10p per share
75,250
31 Jan 2022-30 Jan 2024
David Anderson
30 January 2019
10p per share
64,157
31 Jan 2022-30 Jan 2024
The Share Option Scheme 2019 required a minimum 35% Total Shareholder Return to be achieved over the three-year period ending on 31 July 2021
(“the Vesting Period”) from a base value of £3.515 (“Base Value”) before vesting could commence. 100% vesting occurred at an 85% Total Shareholder
Return over the above period from the Base Value. The rules of the Share Option Scheme 2019 allow participants to exercise options, to the extent
they have satisfied the performance conditions, after the expiry of the Vesting Period. An option lapses five years after the date of the grant, except
if the participant were to die, in which case the option lapses 12 months following death, whichever date is earlier. No disposal may be made of any
shares arising from the exercise of an option until five years after the date of grant other than to satisfy any tax liability arising on exercise. No further
options will be granted under the Share Option Scheme 2019.
During the year ended 31 May 2022, 167,586 of these options vested and were exercised with each director retaining ownership of the shares
following their exercise. John Samuel exercised 29,704 of these options in September 2023. There are no awards under this scheme outstanding
in respect of any director.
Ordinary shares issued pursuant to either the Executive Share Option Scheme or the Share Option Scheme 2019 scheme shall rank pari passu
in all respects with the ordinary shares already in issue.
Deferred Bonus Scheme
No awards under the Deferred Bonus Scheme were made and no outstanding awards were exercised during the year ended 31 May 2024. Stephen
Craigen was awarded 14,820 options under the Deferred Bonus Scheme J on 2 August 2021, which is due to vest on 2 August 2024. No other awards
under this scheme are outstanding in respect of any director. The Deferred Bonus Scheme is designed to allow awards to be made to Executive
Directors and eligible employees to attract and retain key members of staff. The awards under the Deferred Bonus Scheme are based on a
percentage of salary. This figure is then converted into a number of shares using the mid-closing price of a Hargreaves Services plc ordinary share on
the day preceding the award. Other than serving the retention period of three years from the date of award, the Deferred Bonus Scheme has no
performance criteria.
The Remuneration Committee Report was approved by the Board on 5 August 2024 and signed on its behalf by:
Nick Mills
Chair of the Remuneration Committee
5 August 2024
54
Hargreaves Services plc
Annual Report and Accounts 2024
Statement of Directors’ Responsibilities in respect
of the financial statements
The directors are responsible for preparing the Annual report and Accounts and the financial statements in accordance with applicable law and
regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group
financial statements in accordance with UK-adopted international accounting standards and the company financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced Disclosure
Framework”, and applicable law).
Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of
affairs of the group and company and of the profit or loss of the group for that period. In preparing the financial statements, the directors are
required to:
•
select suitable accounting policies and then apply them consistently;
•
state whether applicable UK-adopted international accounting standards have been followed for the group financial statements and United
Kingdom Accounting Standards, comprising FRS 101 have been followed for the company financial statements, subject to any material departures
disclosed and explained in the financial statements;
•
make judgements and accounting estimates that are reasonable and prudent; and
•
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the group and company will continue
in business.
The directors are responsible for safeguarding the assets of the group and company and hence for taking reasonable steps for the prevention and
detection of fraud and other irregularities.
The directors are also responsible for keeping adequate accounting records that are sufficient to show and explain the group’s and company’s
transactions and disclose with reasonable accuracy at any time the financial position of the group and company and enable them to ensure that the
financial statements comply with the Companies Act 2006.
The directors are responsible for the maintenance and integrity of the company’s website. Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors’ confirmations
In the case of each director in office at the date the directors’ report is approved:
•
so far as the director is aware, there is no relevant audit information of which the group’s and company’s auditors are unaware; and
•
they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and
to establish that the group’s and company’s auditors are aware of that information.
Directors’ Report
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
55
Financial Statements
In this section
56 Independent Auditors’ Report
62 Consolidated Statement of Profit and Loss and Other Comprehensive Income
64 Group Balance Sheet
66 Group Statement of Changes in Equity
67 Group Cash Flow Statement
68 Notes (forming part of the Group financial statements)
108 Parent Company Balance Sheet
109 Parent Company Statement of Changes in Equity
110 Notes (forming part of the Company financial statements)
114 Alternative Performance Measure Glossary
115 Notice of Annual General Meeting – Hargreaves Services plc
121 Shareholder Information
56
Hargreaves Services plc
Annual Report and Accounts 2024
Independent Auditors’ Report
to the members of Hargreaves Services plc
Report on the audit of the financial statements
Opinion
In our opinion:
• Hargreaves Services plc’s group financial statements and company
financial statements (the “financial statements”) give a true and fair
view of the state of the group’s and of the company’s affairs as at
31 May 2024 and of the group’s profit and the group’s cash flows for
the year then ended;
• the group financial statements have been properly prepared in
accordance with UK-adopted international accounting standards as
applied in accordance with the provisions of the Companies Act
2006;
• the company financial statements have been properly prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual
Report and Accounts (the “Annual Report”), which comprise: the Group
Balance Sheet and Parent Company Balance Sheet as at 31 May 2024;
the Consolidated Statement of Profit and Loss and Other
Comprehensive Income, the Group Statement of Changes in Equity,
the Parent Company Statement of Changes in Equity and the Group
Cash Flow Statement for the year then ended; and the notes to the
financial statements, comprising material accounting policy
information and other explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on
Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities
for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical
requirements that are relevant to our audit of the financial statements
in the UK, which includes the FRC’s Ethical Standard, as applicable to
listed entities, and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our audit approach
Overview
Audit scope
• The group is structured along four segments being Services,
Hargreaves Land and Hargreaves Raw Materials Services (‘HRMS’),
with the remaining areas of the group included in an Unallocated
segment. The group financial statements are a consolidation of the
111 reporting units within these four segments including the
group’s centralised functions.
• Given the significance of the components to the group’s revenue
and results, Hargreaves Industrial Services Limited and C.A.
Blackwell (Contracts) Limited were considered financially significant
components. Hargreaves Raw Material Services GmbH was also
considered a significant component on the basis of risk profile.
• For further coverage, Blackwell Earthmoving Limited, the bulk
haulage and minerals divisions of Hargreaves (UK) Services Limited,
DK Recycling und Roheisen GmbH and Hargreaves Industrial
Services (HK) Limited were included as full scope components.
Specific audit procedures were performed over certain financial
statement line items across a further 10 reporting units.
Key audit matters
• Risk of impairment to assets - Investments in subsidiary undertakings
(parent)
• Valuation of land inventory at Blindwells - Properties held for
development and resale (group)
• Judgement applied in respect of the HS2 Construction contract
- Contract revenue and associated Contract provisions (group)
Materiality
• Overall group materiality: £2,100,000 (2023: £2,114,000) based on 1%
of revenue.
• Overall company materiality: £1,713,000 (2023: £1,443,000) based on
1% of total assets.
• Performance materiality: £1,575,000 (2023: £1,585,500) (group) and
£1,284,000 (2023: £1,082,250) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed
the risks of material misstatement in the financial statements.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional
judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest
effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These
matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Strategic Report
Directors’ Report
57
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Key audit matter
How our audit addressed the key audit matter
Risk of impairment to assets - Investments in subsidiary undertakings (parent)
The parent company has investments in subsidiary undertakings of
£33.5 million (2023: £33.1 million). No impairment has been recorded by
management in the current year in respect of investments within
Hargreaves Services plc. There is a risk that these assets could be
overstated and impairment charges may be required. The
determination of whether or not these assets are impaired involves
subjective judgement and estimates about the future results and cash
flows of the business. On an annual basis, management considers if
there are any indicators of impairment, in particular whether the
investment is supported by underlying assets held in the subsidiary.
Where impairment indicators exist management calculates the
amount of headroom between the value in use of the parent
company’s Cash Generating Units (‘’CGUs’’) and their carrying value to
determine whether there is a potential impairment of the investments
held relating to those CGUs. The value in use of the CGU with respect
to investments in Hargreaves Services plc is dependent on a number of
key assumptions which include: - The forecast cash flows for the next
five years; - A long-term (terminal) growth rate applied beyond the end
of the five year forecast period. Unless using a terminal value was not
appropriate for that CGU in which case the cash flows were extended
to include the full finite life of the CGU; and- A discount rate applied to
the model. See the Accounting Estimates involving Judgements
section of note 1 within the Parent company financial statements for
disclosures of the related accounting policies, judgements and
estimates and note 4 of the Parent company financial statements for
detailed disclosures of the parent company’s investments.
We understood and evaluated management’s budgeting and
forecasting process. Upon obtaining the parent company’s impairment
analysis we tested the reasonableness of the key assumptions, including
the following: - Verifying the mathematical accuracy of the impairment
models and agreeing the carrying value of assets being assessed for
impairment to the balance sheet; - We challenged management’s
calculated weighted average cost of capital (WACC) used for discounting
future cash flows within the impairment and recoverability models,
utilising valuation experts to assess the cost of capital for the group and
comparable organisations; - We challenged management on the
reasonableness of cash flows in forecasts provided. Including
consideration of forecasted capital spend and approved budgets; - We
performed sensitivity analysis to ascertain the impact of reasonably
possible changes in key assumptions and to quantify the downside
changes needed before an impairment would be required at the CGU
level; and- We have reviewed the financial statements disclosures made
with respect to the sensitivity of the WACC, cash flows and growth rates
and we considered these to be appropriate. The recoverability of
investments in subsidiaries was also assessed by comparing the net asset
values of these subsidiaries against the carrying value of the investment
including consideration of the market capitalisation of the group. There
were no indications of impairment identified. Following the conclusion
of our procedures above, we are satisfied that no impairment is required.
Valuation of land inventory at Blindwells - Properties held for development and resale (group)
The group has properties held for development and resale in the Annual
Report and Accounts of £48.2m (2023: £38.9 million), and the majority of
this balance relates to land inventory held at Blindwells. No provision or
impairment has been recorded by management in the current year in
respect of these assets. The risk we have identified is that these assets
could be overstated and impairment charges may be required.
Properties held for development and resale are held at the lower of cost
and net realisable value. The determination of whether or not these
assets are impaired involves subjective judgement and estimates about
the future sales transactions and cash flows in respect of these assets. On
an annual basis, management estimates the expected future discounted
cashflows in respect of these assets and compares the amount to the
carrying value of the assets to determine whether there is a potential
impairment of properties held for development and resale. The value of
future cash flows is dependent on a number of key assumptions which
include:- The forecast cash inflows for the expected life of the
development including the associated timing of these; - The forecast
costs associated with the development including assumptions on
inflation; and- The discount rate applied to the model. See the
Accounting Estimates involving Judgements section of note 1 within the
Group financial statements for disclosures of the related accounting
policies, and note 17 for detailed disclosures on properties held for
development and resale in inventory.
We understood and evaluated management’s budgeting and
forecasting process. Upon obtaining the forecasts of management’s
estimate of future sales and costs to complete, we tested the
reasonableness of the key assumptions, including the following: -
Verifying the mathematical accuracy of future cash flows and agreeing
the carrying value of properties held for development and resale being
assessed for impairment to the balance sheet; - We challenged
management’s calculated weighted average cost of capital (WACC) used
for discounting future cash flows within the cash flow models, utilising
valuation experts to assess the cost of capital for the group and
comparable organisations; - We performed sensitivity analysis to
ascertain the impact of reasonably possible changes in key assumptions
and to quantify the downside changes needed before an impairment
would be required; - We traced the forecast financial information within
the model to recent sales data and challenged management to provide
support to corroborate revenue and support for expenditure. We also
considered the accuracy of previous forecasts and we consider that the
assumptions were supported by appropriate evidence; and - We have
reviewed the financial statements disclosures made in respect of these
balances and considered them to be appropriate. Following the
conclusion of our procedures above, we are satisfied that no impairment
is required. We also considered the disclosures made within the financial
statements and considered these to be appropriate.
58
Hargreaves Services plc
Annual Report and Accounts 2024
Key audit matter
How our audit addressed the key audit matter
Judgement applied in respect of the HS2 Construction contract - Contract revenue and associated Contract provisions (group)
The group recognised construction contract revenue on the HS2
contract by assessing the performance obligations under each contract
and determining the point at which those obligations have been
fulfilled. The group has control and review procedures in place to
regularly monitor and evaluate the estimates being made to ensure that
they are consistent and appropriate. In particular, management makes
judgements on the expected recoverability of value recorded in respect
of performance obligations which have been completed but not yet
agreed with the customer and on the likelihood of the entitlement to
any variable consideration. The contract contains key performance
indicators which determine the level of fee payable and management
estimates performance against these to decide the appropriate level of
variable consideration within the range contained in the contract.
Revenue against the contract in the year ended 31 May 2024 was £48.3m
(2023: £54.1m). The group has made provisions against contract assets
and for potential contract liabilities which require judgements to be
made regarding recoverable amounts and in respect of the margin
recognised. Contract provisions have been made against profits which
are subject to contract performance measurements which have not yet
been carried out. Such estimates can result in contract margins being
variable from period to period as judgments may change in the light of
changing facts and circumstances. See the Accounting Estimates
involving Judgements section of note 1 within the Group financial
statements for disclosures of the related accounting policies, note 2 for
detailed disclosures on revenue recognised and note 25 for detailed
disclosures on contract provisions in place at year end.
We understood and evaluated management’s process for estimating the
value of variable consideration within revenue, contract assets and
contract provisions. We considered both corroborating and
contradictory evidence for the amounts recognised which included the
following: - Review of the contract considering the key terms and the
ranges of fee level contained within the contract;- Agreement to source
documentation for both the contract income and associated costs to
determine the nature and permissibility of costs per the contracts; - We
agreed amounts received under the contract to certification from the
contractor and payment;- Critical assessment of the assumptions used
by management in order to determine the margin for recognition; -
Consideration of the current status of contract performance
measurement assessments;- Inquiry with the lead project manager for
the contracts to understand the status of current performance against
key performance indicators, the nature of ongoing discussions with
contractors and the current projections based on discussions to date;-
Conducted detailed testing of contract provisions, ascertaining the
rationale for the provision being held and vouching to support. We also
considered the completeness of the provisions held;- Conducted
sensitivity analysis over the ranges of variable consideration stipulated in
the contracts; and- In the context of the requirements of IFRS 15 we also
considered the appropriateness of revenue recognition. Following the
conclusion of our procedures noted above we are satisfied that the
recognition of revenue and contract provisions in relation to the
contracts are appropriate. We have also considered the disclosures of
critical accounting estimates made in the financial statements and
consider them to be appropriate.
Independent Auditors’ Report
to the members of Hargreaves Services plc continued
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the group and the
company, the accounting processes and controls, and the industry in
which they operate.
The group is structured along four segments being Services,
Hargreaves Land and Hargreaves Raw Materials Services (‘HRMS’), with
the remaining areas of the group included in an Unallocated segment.
The group financial statements are a consolidation of the 111 reporting
units within these four segments including the group’s centralised
functions.
We, as the group engagement team, audited all in scope components
based in the UK. The HRMS segment based overseas, being DK
Recycling und Roheisen GmbH and Hargreaves Raw Materials Services
GmbH, and part of the Services segment based overseas, being
Hargreaves Industrial Services (HK) Limited, have been audited by
component auditors. The group audit team supervised the direction
and execution of the audit procedures performed by the component
teams. Our involvement in their audit process, including meetings with
the component auditor, review of their reporting and supporting
working papers, together with the additional procedures performed at
group level, gave us the evidence required for our opinion on the
financial statements as a whole.
Given the significance of the components to the group’s revenue and
results, Hargreaves Industrial Services Limited and C.A. Blackwell
(Contracts) Limited were considered financially significant
components. Hargreaves Raw Material Services GmbH was also
considered a significant component on the basis of risk profile. For
further coverage, Blackwell Earthmoving Limited, the bulk haulage and
minerals divisions of Hargreaves (UK) Services Limited, DK Recycling
und Roheisen GmbH and Hargreaves Industrial Services (HK) Limited
were included as full scope components.
Specific audit procedures were performed over inventory, amounts
due from undertakings in which the group has a participating interest,
cash and cash equivalents, deferred tax assets, investment property,
retirement benefits obligations, trade and other payables, other
operating income, equity and contract assets across a further 10
reporting units. This, together with additional procedures performed
on the group’s centralised functions, gave us the evidence we needed
for our opinion on the group financial statements as a whole.
As a result of this scoping we obtained coverage of 90% of the group’s
external revenue and 89% of the group’s profit before tax.
The Company audit was performed by the Group audit team. The
Company is principally a holding Company and there are no branches
or other locations to be considered when scoping the audit. The
Company is audited on a stand-alone basis, and hence, testing has
been performed on all material financial statement line items.
Strategic Report
Directors’ Report
59
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
The impact of climate risk on our audit
As part of our audit we made enquiries of management to understand
the extent of the potential impact of climate risk on the group’s and
company’s financial statements, and we remained alert when
performing our audit procedures for any indicators of the impact of
climate risk. Our procedures did not identify any material impact as a
result of climate risk on the group’s and company’s financial
statements.
Materiality
The scope of our audit was influenced by our application of materiality.
We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of
our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in
evaluating the effect of misstatements, both individually and in
aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements - group
Financial statements - company
Overall materiality
£2,100,000 (2023: £2,114,000).
£1,713,000 (2023: £1,443,000).
How we determined it
1% of revenue
1% of total assets
Rationale for benchmark
applied
Based on the benchmarks used in the annual report,
we consider total revenue to be the most appropriate
benchmark as it provides a more stable measure year
on year than group profit before tax. Revenue is also
used by the shareholders in assessing the performance
and growth of the Group, and is a generally accepted
auditing benchmark.
We believe that total assets are considered to be more
appropriate as it is not a profit oriented company. The
parent company is a holding company only and
therefore total assets is deemed a generally accepted
auditing benchmark.
For each component in the scope of our group audit, we allocated a
materiality that is less than our overall group materiality. The range of
materiality allocated across components was between £423,000 and
£1 ,995,000. Certain components were audited to a local statutory
audit materiality that was also less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level
the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use
performance materiality in determining the scope of our audit and the
nature and extent of our testing of account balances, classes of
transactions and disclosures, for example in determining sample sizes.
Our performance materiality was 75% (2023: 75%) of overall materiality,
amounting to £1,575,000 (2023: £1,585,500) for the group financial
statements and £1,284,000 (2023: £1,082,250) for the company financial
statements.
In determining the performance materiality, we considered a number
of factors - the history of misstatements, risk assessment and
aggregation risk and the effectiveness of controls - and concluded that
an amount in the middle of our normal range was appropriate.
We agreed with those charged with governance that we would report
to them misstatements identified during our audit above £105,000
(group audit) (2023: £105,000) and £85,000 (company audit) (2023:
£68,000) as well as misstatements below those amounts that, in our
view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the
company’s ability to continue to adopt the going concern basis of
accounting included:
• We obtained and assessed management’s board report that details
the group’s assessment and conclusion with respect to their ability
to continue as a going concern;
• We evaluated the historical accuracy of the budgeting process to
assess the reliability of the data;
• We evaluated management’s board approved base case forecast
and downside scenarios, and challenged the adequacy and
appropriateness of the underlying assumptions, including the level
and period of reduction in revenue and timing of significant cash
receipts, and confirmed management’s mitigating action are within
their control and can be taken on a timely basis if needed;
• We reviewed the latest trading results for the year to date in FY25
and compared to management’s budget, FY24 actuals and revised
forecasts, and considered the impact of these actual results on the
future forecast period;
• We reviewed the mathematical integrity of management’s going
concern forecast models, where no exceptions were identified; and
• We reviewed the disclosures included within the Annual Report and
consider these to be appropriate.
Based on the work we have performed, we have not identified any
material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the group’s and the
company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are
authorised for issue.
In auditing the financial statements, we have concluded that the
directors’ use of the going concern basis of accounting in the
preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted,
this conclusion is not a guarantee as to the group’s and the company’s
ability to continue as a going concern.
60
Hargreaves Services plc
Annual Report and Accounts 2024
Our responsibilities and the responsibilities of the directors with
respect to going concern are described in the relevant sections of this
report.
Reporting on other information
The other information comprises all of the information in the Annual
Report other than the financial statements and our auditors’ report
thereon. The directors are responsible for the other information. Our
opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or,
except to the extent otherwise explicitly stated in this report, any form
of assurance thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the
financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If we identify an
apparent material inconsistency or material misstatement, we are
required to perform procedures to conclude whether there is a
material misstatement of the financial statements or a material
misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this
other information, we are required to report that fact. We have nothing
to report based on these responsibilities.
With respect to the Strategic report and Directors’ report, we also
considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on our work undertaken in the course of the audit, the
Companies Act 2006 requires us also to report certain opinions and
matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the
audit, the information given in the Strategic report and Directors’
report for the year ended 31 May 2024 is consistent with the financial
statements and has been prepared in accordance with applicable legal
requirements.
In light of the knowledge and understanding of the group and
company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic report
and Directors’ report.
Responsibilities for the financial statements and the
audit
Responsibilities of the directors for the financial statements
As explained more fully in the Statement of directors’ responsibilities in
respect of the financial statements, the directors are responsible for
the preparation of the financial statements in accordance with the
applicable framework and for being satisfied that they give a true and
fair view. The directors are also responsible for such internal control as
they determine is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
In preparing the financial statements, the directors are responsible for
assessing the group’s and the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the directors
either intend to liquidate the group or the company or to cease
operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that
includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the
basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with
laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in
respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud, is
detailed below.
Based on our understanding of the group and industry, we identified
that the principal risks of non-compliance with laws and regulations
related to health and safety regulations and environmental regulations,
and we considered the extent to which non-compliance might have a
material effect on the financial statements. We also considered those
laws and regulations that have a direct impact on the financial
statements such as AIM Rules for Companies, tax legislation and the
Companies Act 2006. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements
(including the risk of override of controls), and determined that the
principal risks were related to posting inappropriate journal entries to
manipulate reported results and management bias in accounting
estimates. The group engagement team shared this risk assessment
with the component auditors so that they could include appropriate
audit procedures in response to such risks in their work. Audit
procedures performed by the group engagement team and/or
component auditors included:
• Inquiries of management and those charged with governance
around actual and potential litigation claims;
• Reviewing minutes of meetings of those charged with governance;
• Reviewing financial statements disclosures and testing to
supporting documentation to assess compliance with applicable
laws and regulations;
• Reviewing legal expenditure in the year to identify potential
non-compliance with laws and regulations;
• Identifying and testing journal entries, in particular any journal
entries with unusual accounts combinations;
Independent Auditors’ Report
to the members of Hargreaves Services plc continued
Strategic Report
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61
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
• Challenging assumptions and judgements made by management in
their significant accounting estimates; and
• Reviewing the internal audit reports.
There are inherent limitations in the audit procedures described above.
We are less likely to become aware of instances of non-compliance
with laws and regulations that are not closely related to events and
transactions reflected in the financial statements. Also, the risk of not
detecting a material misstatement due to fraud is higher than the risk
of not detecting one resulting from error, as fraud may involve
deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of
certain transactions and balances, possibly using data auditing
techniques. However, it typically involves selecting a limited number of
items for testing, rather than testing complete populations. We will
often seek to target particular items for testing based on their size or
risk characteristics. In other cases, we will use audit sampling to enable
us to draw a conclusion about the population from which the sample
is selected.
A further description of our responsibilities for the audit of the financial
statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’
report.
Use of this report
This report, including the opinions, has been prepared for and only for the
company’s members as a body in accordance with Chapter 3 of Part 16 of
the Companies Act 2006 and for no other purpose. We do not, in giving
these opinions, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands it may
come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in
our opinion:
• we have not obtained all the information and explanations we
require for our audit; or
• adequate accounting records have not been kept by the company,
or returns adequate for our audit have not been received from
branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are
not made; or
• the company financial statements are not in agreement with the
accounting records and returns.
We have no exceptions to report arising from this responsibility.
Nicholas Cook (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Newcastle upon Tyne
5 August 2024
62
Hargreaves Services plc
Annual Report and Accounts 2024
Consolidated Statement of Profit and Loss
and Other Comprehensive Income
for the year ended 31 May 2024
Note
2024
£000
2023
£000
Revenue
2
211,146
211,459
Cost of sales
(167,763)
(172,402)
Gross profit
43,383
39,057
Other operating income
3
6,404
4,918
Administrative expenses
(33,920)
(32,178)
Operating profit
15,867
11,797
Analysed as:
Operating profit (before amortisation charges)
16,058
11,972
Amortisation of intangible assets
13
(191)
(175)
Operating profit
15,867
11,797
Finance income
7
2,078
1,612
Finance expense
7
(2,802)
(2,565)
Share of profit in joint ventures (net of tax)
14
1,533
16,311
Profit before tax
16,676
27,155
Taxation
8
(4,458)
771
Profit for the year
12,218
27,926
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Loss in defined benefit pension schemes
23
(12,377)
(4,645)
Tax recognised on items that will not be reclassified to profit or loss
8
3,094
1,161
Items that are or may be reclassified subsequently to profit or loss
Foreign exchange translation differences
(569)
1,130
Share of other comprehensive income of joint ventures, (net of tax)
14
167
1,912
Other comprehensive expense for the year, net of tax
(9,685)
(442)
Total comprehensive income for the year
2,533
27,484
Profit/(loss) attributable to:
Equity holders of the Company
12,278
27,915
Non-controlling interest
(60)
11
Profit for the year
12,218
27,926
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63
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Note
2024
£000
2023
£000
Total comprehensive income/(expense) attributable to:
Equity holders of the Company
2,593
27,473
Non-controlling interest
(60)
11
Total comprehensive income for the year
2,533
27,484
Basic earnings per share (pence)
9
37.78
85.85
Diluted earnings per share (pence)
9
37.00
84.13
Non-GAAP Measures
Basic underlying earnings per share (pence)*
9
38.22
86.28
Diluted underlying earnings per share (pence)*
9
37.43
84.55
*
See Alternative Performance Measures Glossary.
64
Hargreaves Services plc
Annual Report and Accounts 2024
Group Balance Sheet
at 31 May 2024
Group
Note
2024
£000
2023
£000
Non-current assets
Property, plant and equipment
10
9,415
10,861
Right-of-use assets
11
40,675
39,815
Investment property
12
14,829
14,074
Intangible assets including goodwill
13
6,048
5,685
Investments in joint ventures
14
61,988
74,282
Trade and other receivables
18
4,000
–
Deferred tax assets
16
11,323
14,753
Retirement benefit surplus
23
1,259
8,474
149,537
167,944
Current assets
Inventories
17
49,325
39,302
Trade and other receivables
18
70,905
71,609
Contract assets
19
6,425
5,114
Cash and cash equivalents
20
22,700
21,859
149,355
137,884
Total assets
298,892
305,828
Non-current liabilities
Other interest-bearing loans and borrowings
21
(15,884)
(20,839)
Retirement benefit obligations
23
(2,979)
(2,902)
Provisions
25
(15,290)
(4,120)
Deferred tax liabilities
16
–
(3,417)
(34,153)
(31,278)
Current liabilities
Other interest-bearing loans and borrowings
21
(18,270)
(15,511)
Trade and other payables
22
(48,383)
(47,427)
Provisions
25
(4,524)
(10,467)
Income tax liability
(1,466)
(154)
(72,643)
(73,559)
Total liabilities
(106,796)
(104,837)
Net assets
192,096
200,991
Strategic Report
Directors’ Report
65
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Group
Note
2024
£000
2023
£000
Equity attributable to equity holders of the Parent
Share capital
26
3,314
3,314
Share premium
26
73,990
73,972
Other reserves
26
211
211
Translation reserve
26
(1,258)
(689)
Merger reserve
26
1,022
1,022
Hedging reserve
26
318
318
Capital redemption reserve
26
1,530
1,530
Share-based payment reserve
26
2,730
2,388
Retained earnings
110,510
119,136
192,367
201,202
Non-controlling interest
(271)
(211)
Total equity
192,096
200,991
The notes on pages 68 to 107 form an integral part of these financial statements.
These financial statements on pages 62 to 107 were approved by the Board of Directors on 5 August 2024 and were signed on its behalf by:
Gordon Banham
Director
Registered number: 4952865
66
Hargreaves Services plc
Annual Report and Accounts 2024
Group (Note 26)
Share
capital
£000
Share
premium
£000
Translation
reserve
£000
Hedging
reserve
£000
Other
reserves
£000
Capital
redemption
reserve
£000
Merger
reserve
£000
Share-
based
payment
reserve
£000
Retained
earnings
£000
Total
Parent
equity
£000
Non-
controlling
interest
£000
Total equity
£000
At 1 June 2022
3,314 73,972
(1,819)
318
211
1,530
1,022
2,029 99,494 180,071
(222) 179,849
Total comprehensive
income/(expense) for
the year
Profit for the year
–
–
–
–
–
–
–
–
27,915
27,915
11
27,926
Other comprehensive
income/(expense)
–
–
1,130
–
–
–
–
–
(1,572)
(442)
–
(442)
Total comprehensive
income for the year
–
–
1,130
–
–
–
–
– 26,343
27,473
11
27,484
Transactions with
owners recorded
directly in equity
Equity-settled share-based
payment transactions
–
–
–
–
–
–
–
359
–
359
–
359
Dividends paid
–
–
–
–
–
–
–
–
(6,701)
(6,701)
–
(6,701)
Total contributions by
and distributions to
owners
–
–
–
–
–
–
–
359
(6,701)
(6,342)
–
(6,342)
At 31 May 2023 and
1 June 2023
3,314 73,972
(689)
318
211
1,530
1,022
2,388 119,136 201,202
(211) 200,991
Total comprehensive
income/(expense) for
the year
Profit/(Loss) for the year
–
–
–
–
–
–
–
–
12,278
12,278
(60)
12,218
Other comprehensive
expense
–
–
(569)
–
–
–
–
–
(9,116)
(9,685)
–
(9,685)
Total comprehensive
(expense)/income for
the year
–
–
(569)
–
–
–
–
–
3,162
2,593
(60)
2,533
Transactions with
owners recorded
directly in equity
Issue of shares
–
18
–
–
–
–
–
–
–
18
–
18
Equity-settled share-based
payment transactions
–
–
–
–
–
–
–
342
–
342
–
342
Dividends paid
–
–
–
–
–
–
–
–
(11,788)
(11,788)
–
(11,788)
Total contributions by
and distributions to
owners
–
18
–
–
–
–
–
342 (11,788) (11,428)
–
(11,428)
At 31 May 2024
3,314 73,990
(1,258)
318
211
1,530
1,022
2,730 110,510 192,367
(271) 192,096
Group Statement of Changes in Equity
for year ended 31 May 2024
Strategic Report
Directors’ Report
67
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Group
Note
2024
£000
Restated*
2023
£000
Cash flows from operating activities
Profit for the year
12,218
27,926
Adjustments for:
Depreciation of property, plant and equipment and right-of-use assets
10,11
16,212
14,570
Amortisation of intangible assets
13
191
175
Net finance expense
7
724
953
Share of profit in joint ventures (net of tax)
14
(1,533)
(16,311)
Profit on sale of property, plant and equipment, investment property and right-of-use assets
3
(6,204)
(4,718)
Equity-settled share-based payment expenses
24
342
359
Income tax expense/(credit)
8
4,458
(771)
Contributions to defined benefit pension schemes
23
(5,427)
(2,426)
Translation of non-controlling interest and investments
(217)
482
20,764
20,239
Change in inventories
(10,024)
(8,827)
Change in trade and other receivables*
1,777
11,620
Change in trade and other payables*
5,358
(8,517)
Change in provisions and employee benefits
5,226
2,713
23,101
17,228
Interest received
2,078
1,127
Interest paid
(2,548)
(2,192)
Income tax paid
(37)
(281)
Net cash inflow from operating activities*
22,594
15,882
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
219
6,565
Proceeds from sale of investment property
7,879
266
Proceeds from sale of right of use assets
115
81
Acquisition of property, plant and equipment
(2,254)
(3,442)
Acquisition of investment property
(1,040)
(5,783)
Acquisition of right of use assets
–
(85)
Payment for acquisition of subsidiaries, net of cash acquired
15
(500)
(1,447)
Dividend received from joint ventures
7,800
–
Repayment of loans due from joint ventures*
–
28,500
Drawdown of loans due from joint ventures*
(683)
(16,830)
Loan to pension scheme in relation to buy-in
(4,000)
–
Net cash inflow from investing activities*
7,536
7,825
Cash flows from financing activities
Principal elements of lease payments
21
(17,425)
(12,721)
Dividends paid
26
(11,788)
(6,701)
Drawdown of loans from joint ventures*
–
3,954
Net cash outflow from financing activities*
(29,213)
(15,468)
Net increase in cash and cash equivalents
917
8,239
Cash and cash equivalents at 1 June
21,859
13,773
Effect of exchange rate fluctuations on cash held
(76)
(153)
Cash and cash equivalents at 31 May
20
22,700
21,859
* Upon review of the prior year cash flow balances, it was identified that cash flow movements arising from movement in loans due from a joint venture should be recognised as
investing activities. It was also identified that cash flow movements arising from movement in loans due to a joint venture should be recognised as financing activities. As such
a representation of the prior year cashflow statement has been undertaken. The impact is a decrease in change in trade and other receivables of £11,670,000, a decrease in
change in trade and other payables of £3,954,000, an increase in change repayment of loans due from joint ventures of £28,500,000, a decrease in the drawdowns of loans from
joint ventures of £16,830,000 and an increase in drawdown of loans from joint ventures of £3,954,000. There is no impact on the balance sheet or statement of profit and loss.
Group Cash Flow Statement
for year ended 31 May 2024
68
Hargreaves Services plc
Annual Report and Accounts 2024
Notes
(forming part of the Group financial statements)
1 Accounting Policies
Hargreaves Services plc (the “Company”, “Parent Company”) is a public company limited by shares and incorporated, domiciled and registered in
England, UK.
The Group financial statements consolidate those of the Company and its subsidiaries (together referred to as the “Group”) and equity account the
Group’s interest in joint ventures.
The Group financial statements have been prepared and approved by the Directors in accordance with UK-adopted international accounting
standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The financial
statements are presented in Pounds Sterling since this is the currency in which the majority of the Group’s transactions are denominated.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these consolidated
financial statements.
The Group has represented the 31 May 2023 cash flow statement due to a review of the prior year movement in joint venture loan balances where it
was identified that they should be classified as investing and financing activities.
Accounting Estimates involving Judgements
The preparation of financial statements requires the Directors to make judgements, estimates and assumptions that may affect the application of
accounting policies and the reported amounts of assets and liabilities, and income and expenses. The estimates and associated assumptions are
based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the
basis of making the judgements about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates. The Board considers that the key areas requiring the use of estimates and judgements which may materially affect the
financial statements are:
a) Construction Contract Revenue and assets.
IFRS 15, Revenue from Contracts with Customers, applies to all revenue recognition, “Construction Contracts”, insofar as the Group carries out
construction contracts and represents a key area of judgement. Management must assess the performance obligations under each contract and
determine the point at which those obligations have been fulfilled, allocating the transaction price as necessary to each obligation. The estimates
and judgements which management must carry out to assess the total expected costs on a contract are also necessary under IFRS 15. The Group has
control and review procedures in place to monitor, and evaluate, regularly, the estimates being made to ensure that they are consistent and
appropriate. This includes reviewing the independent certification of the value of work done, the progress of work against contracted timescales and
the costs incurred against plan. In particular, management makes judgements on the expected recoverability of value recorded in respect of
performance obligations which have been completed but not yet agreed with the customer and on the likelihood of the entitlement to any variable
consideration. Certain contracts contain key performance indicators which determine the level of fee payable and management estimates
performance against these to decide the appropriate fee level within the range contained in the contract. Differences arising on the ultimate
completion of the contract and any unforeseen changes or events as the contract progresses may result in material changes to expected financial
outcomes. Construction contract revenue in the year ended 31 May 2024 was £63.2m (2023: £64.1m). When revenue recognised in respect of a
customer contract exceeds amounts received or receivable from the customer a contract asset is recognised. At 31 May 2024 this value was £6.4m
(2023: £5.1m).
b) Dilapidations Provision
In accordance with IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” the Board makes provisions for liabilities which exist but where
judgements have to be made as to the quantification of such liabilities.
The Group has entered into property leases which in turn have contractual obligations to restore the properties to their condition prior to the
commencement of the lease. The dilapidations provision, which is set out in Note 25, is based on third party assessments of the cost of the work
which has been carried out on behalf of the landlords or internal estimates where appropriate. Currently, the Board has no other evidence as to the
likely final cost of the dilapidations work. Significant judgements and estimates are involved in making this assessment and the amount and timing of
the associated cash flows. The final cost of the dilapidations works may vary materially from the amount of the provision. The carrying value of the
dilapidations provision at 31 May 2024 is £5.1m (2023: £5.1m).
c) Contract Provisions
The Group has made provisions against contract assets and for potential contract liabilities which require judgements to be made regarding
recoverable amounts and reasonably possible costs which may be incurred. The nature of these items, which is set out in Note 25, is such that their
timing and quantum is uncertain and so the Directors have made judgements based upon the facts as they are known at the date of this report.
Contract provisions have been made against profits which are subject to contract performance measurements which have not yet been carried out
by the client together with revenue which remains subject to cost verification. Provisions are also made where the Group has identified potential
warranty, defects or performance obligations. Such estimates can result in contract margins being variable from period to period as judgements may
change in the light of changing facts and circumstances. The view has been taken that all of these items could potentially occur within the next 12
months and so all of the provisions have been classified as current. The carrying value of contract provisions at 31 May 2024 is £12.0m (2023: £6.5m).
Strategic Report
Directors’ Report
69
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
d) Post Retirement Employee Benefits
The Group operates two funded defined benefit schemes and an unfunded concessionary fuel scheme. Independent actuaries calculate the Group’s
asset/liability in respect of these schemes. The actuaries make assumptions as to discount rates, salary escalations, net interest on scheme assets/
liabilities, future pension increases, mortality rates applicable to members and future rates of inflation. These assumptions are made under the Board’s
direction. The Board determines the appropriateness of these assumptions by benchmarking them against those used by other schemes and by
taking advice from the independent actuaries. If the actual experience of the schemes is different from the assumptions used, then the pension
asset/liability may differ from that shown in these financial statements. More information is given in Note 23 to these financial statements. The impact
of the equalisation of Guaranteed Minimum Pensions has been assessed to be negligible. During the year the Group bought-in the defined benefit
pension schemes, which has significantly reduced the level of uncertainty surrounding the future cashflows of the schemes and resulted in a material
movement in the value on the Balance Sheet. The balance of the defined benefit schemes in the balance sheet at 31 May 2024 is an asset of £1.3m
(2023: £8.5m). The balance of the concessionary fuel scheme in the balance sheet at 31 May 2024 is a liability of £3.0m (2023: £2.9m). This surplus in the
prior year was not realisable as the schemes were in deficit when measured in accordance with the statutory funding objective set out in the
Pensions Act.
The difference between the annuity purchase price and the defined benefit obligation covered by the policy has been accounted for in other
comprehensive income. The accounting treatment is based on the following considerations made by the Group:
• the employer is not relieved of primary responsibility for the obligation. The policy simply covers the benefit payments that continue to be
payable by the scheme;
• the contract is effectively an investment of the scheme; and
• the contract provides the option to convert the annuity into individual policies which would transfer the obligation to the insurer (known as a
“buy-out”). Whilst this course of action may be considered in future, this is not a requirement and a separate decision will be required before any
buy-out proceeds. There are currently no plans either by management or Trustees to convert the buy-in contract to individual policies. Following
the conclusion of this buy-in all of the scheme’s liabilities are now matched with annuities which has removed the scheme’s investment and
funding risks. As a consequence there has been a reduction in the retirement benefit asset in the Group accounts for the year ended 31 May 2024.
e) Measurement of the Recoverable Amounts of Cash-Generating Units (“CGUs”) Containing Goodwill, Intangible Assets and
Investments in Joint Ventures
In accordance with IAS 36 “Impairment of Assets”, the Board identifies appropriate CGUs and the allocation of goodwill to these units. The assessment
of impairment involves assumptions on the estimated future operating cash flows from these CGUs, the discount rate applied in the calculations and
the comparison of the cash flows to the carrying value of the goodwill and other intangible assets. These are key areas of judgement and include
significant accounting estimates. Management has assessed the sensitivity of carrying amounts of CGUs containing goodwill and/or intangible assets
to reasonably possible changes in key assumptions. More information on the assumptions used and the sensitivities applied are set out in Note 13 to
these financial statements.
f) Valuation of Land
Land held for development, including land in the course of development until legal completion of the sale of the asset, is carried at the lower of cost and
net realisable value. Investment properties are stated at cost less accumulated impairment. Investment properties are not remeasured to fair value at each
reporting date, however, a review for impairment is carried out at each reporting date, giving consideration to the fair value of the property. Regular
reviews are carried out to identify any impairment in the value of the land by comparing the total estimated selling prices less estimated selling expenses
against the book cost of the land plus estimated costs to complete. Net realisable value represents the estimated selling price (in the ordinary course of
business) less all estimated costs of completion and overheads. Valuations of site/phase work in progress are carried out at regular intervals and estimates
of the cost to complete a site/phase and estimates of anticipated revenues are required to enable a development profit to be determined. Management
are required to employ judgement in estimating the profitability of a site/phase and in assessing any impairment provisions which may be required.
Accounting Judgements
g) Treatment of Joint Ventures
Management have considered the level of control of each of the Group’s individual Joint Venture arrangements and are satisfied that the Group does not
have control, either through voting rights or other circumstances, of any of these arrangements. Tower Regeneration Limited is a joint venture between
the Group and a third party. The purpose of this joint venture was to enable the Group’s access to a surface mine in South Wales. The mine ceased to
operate in 2016 and restoration work is nearing completion. The Group is entitled to 35% of the profits from the operation. The strategic business
decisions of the joint venture are taken by both the Group and the third party equally. This is reflected in the requirement to have equal representation on
that Board of each investing party and the ownership of voting rights is split 50:50 between both parties.
Hargreaves Services Europe Limited (“HSEL”), is a material joint venture to the Group. HSEL owns 100% of Hargreaves Raw Materials Services GmbH
(“HRMS”) which is a key supplier of specialist raw materials to major European customers in various industries. This combined with the Group’s
historic expertise in production operations, materials handling, storage operations and logistics, marketing and technical support, creates an ideal
platform for HRMS to compete in the supply of speciality mineral products in Europe. HRMS owns 94.9% of DK Recycling und Roheisen GmbH
(“DK”) a recycler of steel waste material and a producer of pig iron and zinc. The Group is entitled to 86% of the consolidated profits of HSEL,
70
Hargreaves Services plc
Annual Report and Accounts 2024
Notes
(forming part of the Group financial statements) continued
however the Group does not exert control over the business. The Group holds 49.9% of the voting rights in HSEL, with the remainder being held
by the HRMS management team. One of the three Directors of HSEL is appointed by the Group. The Group does not have the power to change
these arrangements. A shareholder agreement is in place to provide the Group with safeguards designed to protect its investment; however, the
key strategic decisions affecting the operation and its financial results are not taken by the Group. In the event of a dispute between the Group
and the operation which could not be resolved, the operation would be subject to an orderly wind down. Whilst the voting rights demonstrate
significant influence, the Group does not control the operation and therefore the Board accounts for the investment as a joint venture.
Waystone Hargreaves Land LLP (“the Unity JV”) is a material joint venture between the Group and a third party. The purpose of this joint venture is to
develop land owned or controlled by each of the parties. The strategic business decisions of the joint venture are taken by the Board of the Unity JV. This
is reflected in the equal representation on that Board of each investing party and the ownership of voting rights is split 50:50 between both parties.
Measurement Convention
The financial statements are prepared on the historical cost basis except that derivative financial instruments and financial instruments classified as
fair value through the Statement of Profit and Loss are stated at their fair value.
Going Concern
The Group’s business activities, together with the factors likely to affect its future development performance and position are set out in the Strategic
Review. The financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the Financial Review. In addition,
Note 27 to the financial statements includes: the Group’s objectives, policies and processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities; and its exposure to credit risk and liquidity risk.
The Group’s financing is not dependent on bank borrowings. However, the Group has access to a £12m invoice discounting facility, which is currently
undrawn and will remain in place at this level until 31 October 2025. Notwithstanding that, a rigorous review of cash flow forecasts including testing
for a range of challenging downside sensitivities has been undertaken. Mitigating strategies to these sensitivities considered by the Board exclude
any remedies which are not entirely within the Group’s control. As a result, and after making appropriate enquiries including reviewing budgets and
strategic plans, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the Board continues to adopt the going concern basis in preparing the Annual Report and Financial Statements.
Basis of Consolidation
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and can affect those returns through its power over the entity. In assessing control, the Group takes into consideration
potential voting rights that are currently exercisable. The acquisition date is the date on which control is transferred to the acquirer. The financial
statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control
ceases. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the
non-controlling interests to have a deficit balance.
Change in Subsidiary Ownership and Loss of Control
Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Where the Group loses
control of a subsidiary, the assets and liabilities are derecognised along with any related non-controlling interest and other components of equity. Any
resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.
Application of the Equity Method to Joint Ventures
Joint ventures are accounted for using the equity method (equity accounted investees) and are initially recognised at cost, or fair value where cost is
lower than fair value at acquisition. The Group’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses.
The consolidated financial statements include the Group’s share of the total comprehensive income and equity movements of equity accounted
investees, from the date that significant influence or joint control commences, until the date that significant influence or joint control ceases. When
the Group’s share of losses exceeds its interest in an equity accounted investee, the Group’s carrying amount is reduced to £nil and recognition of
further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an
investee.
Transactions Eliminated on Consolidation
Intra-Group balances and transactions, and any unrealised income and expenses arising from intra-Group transactions, are eliminated. Unrealised
gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group’s interest in the
investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
1 Accounting Policies continued
Accounting Judgements continued
g) Treatment of joint ventures continued
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Financial Statements
Foreign Currency
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the foreign exchange rate ruling at the
date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are retranslated to the functional
currency at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate at the date of the transaction. Foreign exchange differences arising on translation are recognised in
the Income Statement except for differences arising on qualifying cashflow hedges which are recognised directly in other comprehensive income.
The assets and liabilities of foreign operations are translated into Pounds Sterling, the Group’s presentational currency, at the exchange rates ruling at
the balance sheet date. The revenues and expenses of foreign operations are translated at rates approximating to the foreign exchange rates ruling at
the dates of the transactions. Exchange differences arising from this translation of foreign operations are reported as an item of other comprehensive
income and accumulated in the translation reserve or non-controlling interest, as the case may be. When a foreign operation is disposed of, such that
control, joint control or significant influence is lost, the entire accumulated amount in the translation reserve, net of amounts previously attributed to
non-controlling interests, is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a
subsidiary that includes a foreign operation while still retaining control, the relevant proportion of the accumulated amount is reattributed to
non-controlling interests.
Classification of Financial Instruments Issued by the Group
Financial instruments issued by the Group are treated as equity (i.e., forming part of shareholders’ funds) only to the extent that they meet the
following two conditions:
• they include no contractual obligations upon the Group to deliver cash or other financial assets or to exchange financial assets or financial
liabilities with another party under conditions that are potentially unfavourable to the Group; and
• where the instrument will or may be settled in the Company’s own equity instruments, it is either a non-derivative that includes no obligation to
deliver a variable number of the Company’s own equity instruments or is a derivative that will be settled by the Company’s exchanging a fixed
amount of cash or other financial assets for a fixed number of its own equity instruments.
To the extent that this definition is not met, the proceeds of issue are classified as a financial liability. Where the instrument so classified takes the legal
form of the Company’s own shares, the amounts presented in these financial statements for called up share capital and share premium account
exclude amounts in relation to those shares.
Where a financial instrument that contains both equity and financial liability components exists these components are separated and accounted for
individually under the above policy. The finance cost on the financial liability component is correspondingly higher over the life of the instrument.
Finance payments associated with financial liabilities are dealt with as part of finance expenses. Finance payments associated with financial
instruments that are classified in equity are dividends and are recorded directly in equity.
Financial Instruments
Financial Assets
The Group classifies financial assets under the following measurement categories:
• Measured at amortised cost (non-derivative financial assets);
• Measured subsequently at fair value through either profit or loss or comprehensive income.
Recognition and derecognition
Regular way purchases and sales of financial assets are recognised on trade date, being the date on which the group commits to purchase or sell the
asset. Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the
group has transferred substantially all the risks and rewards of ownership.
At initial recognition, the group measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss
(FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are
expensed in profit or loss.
Non-derivative Financial Assets
Non-derivative financial assets include trade and other receivables and contract assets, as defined by IFRS 15. Neither of these two categories contain
a significant financing element and, as such, expected credit losses are measured under IFRS 9 using the simplified impairment approach. This
approach requires expected lifetime losses to be recognised upon the initial recognition of the asset.
At initial recognition, the Group measures a non-derivative financial asset at its fair value plus transaction costs that are directly attributable to the
acquisition of the financial asset. The Group subsequently measures trade and other receivables and contract receivables at amortised cost.
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Notes
(forming part of the Group financial statements) continued
1 Accounting Policies continued
Cash Flow Hedges
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a highly probable forecast transaction (for example,
interest payments, sales and purchases denominated in foreign currency, sale and purchase of commodities), changes in the fair value of the
derivative hedging instrument designated as a cash flow hedge are recognised directly in the hedging reserve to the extent that the hedge is
effective. Amounts deferred in equity are recognised in the Consolidated Statement of Comprehensive Income when the hedged item affects profit
or loss. To the extent that the hedge is ineffective, changes in fair value are recognised immediately in profit or loss.
Derivatives designated as hedging instruments are accounted for in line with the nature of the hedging arrangement. Derivatives are intended to be
highly effective in mitigating the above risks, and hedge accounting is adopted where the required hedge documentation is in place and the
relevant test criteria are met. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised
immediately in the Income Statement as part of financing costs. The Group continues to apply IAS 39 for the purposes of hedge accounting as
permitted under IFRS 9.
Non-Financial Assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment
loss is recognised whenever the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised
in the Income Statement. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated
to CGUs and then to reduce the carrying amount of the other assets in the unit on a pro rata basis. A CGU is the smallest identifiable group of assets
that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets.
Property, Plant and Equipment
Property, plant and equipment is stated at cost less accumulated depreciation and impairment losses. Where parts of an item of property, plant and
equipment have different useful economic lives, they are accounted for as separate items of property, plant and equipment.
Depreciation is charged to the Income Statement on a straight-line basis over the estimated useful economic lives of each part of an item of property,
plant and equipment. Freehold land is not depreciated. Depreciation rates are as follows:
Freehold buildings
–
2% to 4% p.a.
Leasehold improvements
–
15% p.a.
Motor vehicles and plant
–
10% to 33% p.a.
Furniture and equipment
–
25% p.a.
Fixtures and fittings
–
15% p.a.
Assets in the course of construction are not depreciated until they are brought into use.
Depreciation of right-of-use assets is based on the same categorisation as above.
Lease accounting policy
The Group has relied upon the exemption under IFRS 16 to exclude the impact of low-value leases and leases that are short-term in nature (defined
as leases with a term of 12 months or less). Costs on these leases are recognised on a straight-line basis as an operating expense within the income
statement. All other leases are accounted for in accordance with this policy.
The Group has various lease arrangements for properties (e.g. office buildings and storage facilities), vehicles, and other equipment including plant
and machinery. At the inception of a lease contract, the Group assesses whether the contract conveys the right to control the use of an identified
asset for a certain period of time and whether it obtains substantially all the economic benefits from the use of that asset, in exchange for
consideration. The Group recognises a lease liability and a corresponding right-of-use asset with respect to all such lease arrangements in which it is a
lessee.
A right-of-use asset is capitalised on the balance sheet at cost which comprises the present value of future lease payments determined at the
inception of the lease adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred in addition to
an estimate of costs to remove or restore the underlying asset. Where a lease incentive is receivable, the amount is offset against the right-of-use
asset at inception. Right-of-use assets are depreciated using the straight-line method over the shorter of the estimated life of the asset or the lease
term and are assessed in accordance with IAS 36 ‘Impairment of Assets’ to determine whether the asset is impaired and to account for any loss.
The lease liability is initially measured at the present value of lease payments as outlined above and is subsequently increased by the interest cost on
the lease liability and decreased by lease payments made. Lease payments comprise fixed lease rental payments only with the exception of property,
which also includes the associated fixed service charge. Lease liabilities are classified between current and non-current on the balance sheet.
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Financial Statements
The key estimate applied by management relates to the assessment of the incremental borrowing rate adopted by the Group to discount the future
lease rentals to present value in order to measure the lease liabilities. The weighted average rate applied by the Group at transition was 6.4%.
Sub leases
If an underlying asset is re-leased by the Company to a third party and the Company retains the primary obligation under the original lease, the
transaction is deemed to be a sublease. The Company continues to account for the original lease (the head lease) as a lessee and accounts for the
sublease as a lessor (intermediate lessor). When the head lease is a short-term lease, the sublease is classified as an operating lease. Otherwise, the
sublease is classified using the classification criteria applicable to Lessor Accounting in IFRS 16 by reference to the right-of-use asset in the head lease
(and not the underlying asset of the head lease).
After classification lessor accounting is applied to the sublease.
Where the Group also acts as lessor and substantially all the risks and rewards of ownership have passed to the lessee, the Group derecognises the
related equipment and recognises a receivable for the minimum lease payments discounted at a rate which reflects a constant periodic rate of return
over the life of the lease.
Investment Property
Investment properties are properties which are held with the intention to derive value from either rental income, for capital appreciation, or for both.
Investment properties are stated at cost less accumulated impairment. Investment properties are not remeasured to fair value at each reporting date,
however, a review for impairment is carried out at each reporting date, giving consideration to the fair value of the property. An impairment is
recognised when the fair value less costs to sell of the property is lower than the book value. Land is not depreciated. In accordance with IAS 40, an
investment property which is being sold is not reclassified as inventory but is treated as an investment property until it is derecognised.
All investment properties within the Group relate to Hargreaves Land.
Business Combinations
Subject to the transitional relief in IFRS 1, all business combinations are accounted for by applying the purchase method. Goodwill arises from the
acquisition of businesses and represents the difference between the cost of the acquisition and the fair value of the identifiable assets (including
other intangible assets), liabilities and contingent liabilities acquired. Identifiable intangibles are those which can be sold separately, or which arise
from legal rights regardless of whether those rights are separable.
Acquisitions on or After 1 June 2010
For acquisitions on or after 1 June 2010, the Group measures goodwill at the acquisition date as:
• the fair value of the consideration transferred; plus
• the recognised amount of any non-controlling interests in the acquiree; plus
• the fair value of the existing equity interest in the acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss. Costs related to the acquisition, other than those
associated with the issue of debt or equity securities, are expensed as incurred.
Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not
remeasured, and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are
recognised in profit or loss.
On the acquisition of a business, fair values are attributed to the identifiable assets, liabilities and contingent liabilities acquired, reflecting conditions
at the date of acquisition. Adjustments to fair values include those made to bring accounting policies into line with those of the Group. Provisional fair
values are finalised within 12 months of the business combination date and, where significant, are adjusted by restatement of the comparative period
in which the acquisition occurred.
On a transaction-by-transaction basis, the Group elects to measure non-controlling interests, which have both present ownership interests and are
entitled to a proportionate share of net assets of the acquiree in the event of liquidation, either at its fair value or at its proportionate interest in the
recognised amount of the identifiable net assets of the acquiree at the acquisition date. All other non-controlling interests are measured at their fair
value at the acquisition date.
Acquisitions Between 1 June 2006 and 1 June 2010
Goodwill arising on acquisitions that have occurred between 1 June 2006 and 1 June 2010 is capitalised and is subject to impairment review, both
annually and when there are indications the carrying value may not be recoverable. Negative goodwill arising on an acquisition is recognised
immediately in profit or loss.
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Notes
(forming part of the Group financial statements) continued
1 Accounting Policies continued
Business Combinations continued
Acquisitions and Disposals of Non-Controlling Interests
Acquisitions and disposals of non-controlling interests that do not result in a change of control are accounted for as transactions with owners in their
capacity as owners and therefore no goodwill is recognised as a result of such transactions. The adjustments to non-controlling interests are based
on a proportionate amount of the net assets of the subsidiary. Any difference between the price paid or received and the amount by which
non-controlling interests are adjusted is recognised directly in equity and attributed to the owners of the Parent.
Prior to the adoption of IAS 27 (2008), goodwill was recognised on the acquisition of non-controlling interests in a subsidiary, which represented the
excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of the transaction.
Intangible Assets and Goodwill
Goodwill is stated at cost less any accumulated impairment losses. Goodwill is allocated to CGUs and is not amortised but is tested annually for
impairment. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment in the
investee.
Other intangible assets that are acquired by the Group, which have finite useful economic lives, are stated at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised in profit and loss on a straight-line basis over the estimated useful lives of intangible
assets from the date that they are available for use. Customer contracts are amortised over five years, being the length of the contract.
Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is based on the weighted average method and includes expenditure incurred
in acquiring the inventories, production or conversion costs and other costs in bringing them to their existing location and condition. Work in
progress includes work to date on service contracts where project milestones have not yet been reached. Where necessary, provisions are made
against obsolete, defective or slow-moving inventories.
Properties Held for Development and Resale
Properties held for development and resale are included within inventories on the basis that their carrying value will be recovered principally through
sale in the ordinary course of business, rather than through continuing use within the Group. These assets are not available for immediate sale and
will be subject to further development before being available for sale. Properties held for development and resale are shown in the financial
statements at the lower of cost and net realisable value. Cost represents the acquisition price including legal and other professional costs associated
with the acquisition together with subsequent development costs net of amounts transferred to cost of sales. Net realisable value is the expected net
sales proceeds of the developed property.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the
Group’s cash management are included as a component of cash and cash equivalents for the purpose only of the Cash Flow Statement.
Trade and Other Payables
Trade and other payables are non-interest-bearing and are recognised initially at fair value. Subsequent to initial recognition they are measured at
amortised cost using the effective interest method.
Interest-Bearing Borrowings
Interest-bearing borrowings are recognised initially at fair value less attributable transactions costs. Subsequent to initial recognition, interest-bearing
borrowings are stated at amortised cost using the effective interest method.
Reversals of Impairment
An impairment loss in respect of goodwill is not reversed. In respect of other assets, an impairment loss is reversed when there is an indication that
the impairment loss may no longer exist and there has been a change in the estimates used to determine the recoverable amount. An impairment
loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation or amortisation, if no impairment loss had been recognised.
Employee Benefits
Defined Benefit Pension Plans
The Group operates a concessionary fuel retirement benefit scheme. In addition, following the acquisition of Maltby Colliery, the Group is a member
of two pension schemes providing benefits based on final pensionable pay. The assets of the schemes are held separately from those of the Group.
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Financial Statements
The retirement benefit scheme liabilities are calculated by a qualified actuary using the projected unit method. The concessionary fuel retirement
benefit schemes are unfunded retirement benefits and as such there are no assets in the schemes. The retirement benefit deficits are recognised in
full, the movement in the scheme deficits is split between operating charges, finance items and, in other comprehensive income, remeasurement
gains and losses.
The defined benefit pension schemes are funded retirement benefit schemes. Pension scheme assets are measured using market values. Pension
scheme liabilities are measured using a projected unit method and discounted at the current rate of return on a high-quality corporate bond of
equivalent term and currency to the liability. The pension scheme surplus (to the extent that it is recoverable) or deficit is recognised in full. The
movement in the scheme surplus/deficit is split between operating charges, finance items and, in other comprehensive income, remeasurement
gains and losses.
Defined Contribution Pension Plans
The Group operates a Group defined contribution personal pension scheme. The assets of the scheme are held separately from those of the Group in
an independently administered fund. The amount charged against profits represents the contributions payable to the scheme in respect of the
financial year. Obligations for contributions to defined contribution pension plans are recognised as an expense in the Income Statement as incurred.
Share-Based Payment Transactions
The Group operates a share option scheme for certain employees. The fair value of options granted is recognised as an employee expense with a
corresponding increase in equity. The fair value is measured at grant date and spread over the period during which the employees become
unconditionally entitled to the options. The fair value of the options granted is measured using an option valuation model, taking into account the
terms and conditions upon which the options were granted. The amount recognised as an expense is adjusted to reflect the actual number of share
options for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an
expense is based on the number of share options that do not meet the related service and non-market performance conditions at the vesting date.
Shares purchased by the Group are deducted from retained earnings at the total consideration paid or payable.
Revenue
Revenue is recognised when control over a product or service is transferred to the Group’s customer. The value attributed to revenue is measured
based on the consideration specified in the contract and excludes any amounts collected on behalf of third parties. In circumstances where
consideration is not clearly defined in the contract, the revenue is subject to variability. When revenue is variable, the Group estimates the amount of
consideration to be recovered. Revenue is only recognised to the extent that it is highly probable that a significant reversal in a future period will not
occur. When an amendment to an existing contract arises, the Group reviews the nature of the modification and whether or not it reflects a separate
or new performance obligation to be satisfied, or whether it is an amendment to an existing performance obligation. The Group does not adjust the
amount of consideration for the effects of a significant financing component when the Group expects, at the contract date, that the period between
when the Group transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less.
Revenue is measured excluding value added tax, for goods and services supplied to external customers in line with the fulfilment of contractual
performance obligations. All directly attributable expenses in respect of goods supplied and services provided are recognised in the Income
Statement in the period to which they relate. The Group does not expect to have any contracts where the period between the transfer of the
promised goods or services to the customer and payment by the customer exceeds one year. As a consequence, the Group does not adjust its
transaction price for the time value of money.
The Group’s activities cover a variety of disciplines, therefore, depending on the nature of the product or service delivered and the timing of when
control is passed onto the customer, the Group will account for revenue both over time and at a point in time. Where revenue is measured over time,
the Group uses the input method to measure progress of delivery.
Sales of Goods
Revenue is recognised at a point in time when delivery of the product has been made and title has passed to the customer. Revenue is recognised
on individual sales at a point in time when the conditions above have been met.
Revenue is measured at the invoiced price net of VAT and any discounts. If, as a separate transaction, the Company has entered into a derivative
contract to hedge the sale price, any gains or losses on that hedge instrument are also included in revenue at the same time as the hedged
transaction is recorded as revenue.
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Notes
(forming part of the Group financial statements) continued
1 Accounting Policies continued
Services
Revenue is recognised over time as contractual performance obligations are fulfilled. A proportion of sales are subject to long-term contracts,
typically on a cost-plus or similar basis. Typically, these contracts take the form of a continuing performance obligation. The revenue and profit on
such contracts is recognised (and invoiced) using the input method of measuring progress on completion of the performance obligation. Profit is
recognised in line with the recognition of revenue allocating costs to each separate performance obligation as appropriate. Any losses on contracts
are recognised in full immediately.
Construction Contract Revenue
When the outcome of individual contracts can be estimated reliably, contract revenue and costs are recognised as revenue and expenses
respectively over time by reference to the fulfilment of performance obligations using the input method of estimating progress of delivery at the
reporting date. Costs are recognised as incurred, and revenue is recognised using the input method. The costs of obtaining a contract are recognised
as an expense when incurred if the amortisation period of the asset that the Group otherwise would have recognised is one year or less. The stage of
completion of a contract is assessed by reference to completion of a physical proportion of the contract work. Revenue includes the initial amount
agreed in the contract plus any variations in contracted work, to the extent that it is probable that they will result in revenue and can be measured
reliably. Revenue includes an assessment of any variable consideration which may become receivable based upon relevant performance measures.
Variable consideration is included based on the expected value or most likely amount only to the extent that it is highly probable that there will not
be a significant reversal in the amount of cumulative revenue recognised. Provision is made for all known or expected losses on contracts as soon as
they are foreseen. These provisions are reviewed throughout the contract life and are adjusted as required. However, the nature of the risks on
contracts are such that is often not possible to resolve them until the end of the contract and therefore the provisions may not reverse until the
contract is concluded.
Rental Income
Rental income from property is recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives granted are
recognised as an integral part of the total rental income, over the term of the lease.
Property
Sales of freehold land and properties are recognised at a point in time upon legal completion.
Rebates
From time to time the Group may offer a rebate on the sale of goods. The rebate is recognised at the point of sale as a reduction in revenue recorded.
Should the rebate not become due then additional revenue is booked to reflect this at the point at which it becomes clear the rebate will not be
payable.
Contract Assets
Contract assets represent amounts for which the Group has an unconditional right to consideration in respect of unbilled revenue recognised at the
balance sheet date and comprises costs incurred plus attributable margin.
Contract Liabilities
Contract liabilities represent the obligation to transfer goods or services to a customer for which consideration has been received, or consideration is
due, from the customer.
Net Finance Costs
Net finance costs comprise interest payable, finance charges on leases and interest receivable on funds invested together with changes in the fair
values of interest rate swaps and foreign currency forward contracts recognised through the profit and loss and the net interest on the defined
benefit pension scheme liability. This is determined by applying the discount rate used to measure the defined benefit obligation at the beginning of
the year to the net defined benefit asset/liability.
Interest income and interest payable is recognised in the Income Statement as it accrues, using the effective interest method. Dividend income is
recognised in the Income Statement on the date the entity’s right to receive payment is established.
Taxation
Tax on the profit or loss for the period comprises both current and deferred tax. Tax is recognised in the Income Statement except to the extent that it
relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date,
and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
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Financial Statements
The following temporary differences are not provided for: the initial recognition of goodwill, the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that
they will probably not reverse in the foreseeable future.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be
utilised.
Provisions
A provision is recognised in the Balance Sheet when the Group has a present legal or constructive obligation as a result of a past event, that can be
reliably measured, and where it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material,
provisions are determined by discounting the expected, risk adjusted, future cash flows at a pre-tax risk-free rate. The effect is not deemed material
for any the Group’s provisions.
Restoration and Rehabilitation Costs
The previous mining, extraction and processing activities of the Group gave rise to obligations for site restoration. Restoration works can include site
decommissioning and dismantling and site and land rehabilitation. The extent of work required, and the associated costs are dependent on the
requirements of relevant authorities and the Group’s environmental policies.
An initial provision reflecting the current obligation for the cost of future site restoration is recognised at the commencement of the production
phase for all liabilities created through development of the surface mine. Production activities give rise to further restoration obligations and
provisions are made for these liabilities as they arise.
Restoration provisions are measured at the expected value of future cash flows. Significant judgements and estimates are involved in forming an
expectation of future activities and the amount and timing of the associated cash flows. Such expectations are based on existing planning
requirements and management’s future development plans which give rise to a constructive obligation.
Restoration provisions are adjusted for changes in estimates, which are accounted for as a change in the corresponding capitalised cost within
non-current assets, except where a reduction in the provision is greater than the unamortised capitalised cost of the related assets, in which case the
capitalised cost is reduced to £nil and the remaining adjustment is recognised in the Statement of Comprehensive Income. Changes to the
capitalised cost result in an adjustment to future amortisation and financial charges.
Given the significant judgements and estimates involved, adjustments to the estimated amount and timing of future restoration and rehabilitation
cash flows are a normal occurrence. Factors influencing those changes include but are not limited to: revisions to estimated reserves and site
operations; planning requirements and management’s development plans and changes in the estimated cost and scope of anticipated activities.
Adopted IFRSs Not Yet Applied
Certain new accounting standards and interpretations have been published that are not mandatory for 31 May 2024 reporting periods and have not
been early adopted by the Group. These standards are not expected to have a material impact on the entity in the current or future reporting periods
and on foreseeable future transactions.
2 Segmental Information
The following analysis by industry segment is presented in accordance with IFRS 8 on the basis of those segments whose operating results are
regularly reviewed by the Board of Directors (the Chief Operating Decision Maker as defined by IFRS 8) to assess performance and make strategic
decisions about allocation of resources.
The sectors distinguished as operating segments are Services, Hargreaves Land, Unallocated and HRMS.
• Services: Provides materials handling, mechanical and electrical engineering, land restoration, logistics and bulk earthworks into the energy,
environmental, infrastructure and industrial sectors.
• Hargreaves Land: The development and realisation of value from the land portfolio including rental income from investment properties and the
share of profit of the Unity joint venture.
• Unallocated: The corporate overhead contains the central functions that are not devolved to the individual business units.
• Hargreaves Raw Materials Services (“HRMS”): The Group’s share of its German joint venture, which includes Hargreaves Services Europe
Limited which is the parent company of HRMS and DK.
These segments are combinations of subsidiaries and joint ventures. They have separate management teams and provide different products and
services. The four operating segments are also reportable segments.
78
Hargreaves Services plc
Annual Report and Accounts 2024
Notes
(forming part of the Group financial statements) continued
2 Segmental Information continued
The segment results, as reported to the Board of Directors, are calculated under the principles of IFRS. Performance is measured on the basis of
underlying profit/(loss) before tax, which is reconciled to profit/(loss) before tax in the tables below:
Services
2024
£000
Hargreaves
Land
2024
£000
Unallocated
2024
£000
HRMS
2024
£000
Total
2024
£000
Revenue
Total revenue
206,857
7,036
–
–
213,893
Intra-segment revenue
(2,747)
–
–
–
(2,747)
Revenue from external customers
204,110
7,036
–
–
211,146
Operating profit/(loss) (before amortisation)
13,665
7,694
(5,301)
–
16,058
Share of profit in joint ventures (net of tax)
–
250
–
1,283
1,533
Net finance (expense)/income
(2,293)
207
1,362
–
(724)
Amortisation charge
(191)
–
–
–
(191)
Profit/(loss) before taxation
11,181
8,151
(3,939)
1,283
16,676
Taxation
(2,764)
(1,704)
10
–
(4,458)
Profit/(loss) after taxation
8,417
6,447
(3,929)
1,283
12,218
Depreciation charge
15,905
129
178
–
16,212
Capital expenditure
16,884
1,096
202
–
18,182
Net assets/(liabilities)
Segment assets
100,368
78,832
57,704
–
236,904
Segment liabilities
(95,327)
(5,389)
(6,080)
–
(106,796)
Segment net assets
5,041
73,443
51,624
–
130,108
Joint ventures
–
5,942
–
56,046
61,988
Total net assets
5,041
79,385
51,624
56,046
192,096
Unallocated net assets of £51.6m include cash and cash equivalents of £22.7m, deferred tax asset of £11.3m, amounts due from joint ventures of
£17.0m, a net pension liability of £1.7m and other corporate items (£2.3m asset).
Services
2023
£000
Hargreaves
Land
2023
£000
Unallocated
2023
£000
HRMS
2023
£000
Total
2023
£000
Revenue
Total revenue
202,958
10,608
–
–
213,566
Intra-segment revenue
(2,107)
–
–
–
(2,107)
Revenue from external customers
200,851
10,608
–
–
211,459
Operating profit/(loss) (before amortisation)
14,326
3,011
(5,365)
–
11,972
Share of profit in joint ventures (net of tax)
–
841
–
15,470
16,311
Net finance (expense)/income
(1,956)
44
959
–
(953)
Amortisation charge
(175)
–
–
–
(175)
Profit/(loss) before taxation
12,195
3,896
(4,406)
15,470
27,155
Taxation
(231)
629
373
–
771
Profit/(loss) after taxation
11,964
4,525
(4,033)
15,470
27,926
Depreciation charge
14,295
110
165
–
14,570
Capital expenditure
33,690
6,083
235
–
40,008
Net assets/(liabilities)
Segment assets
94,111
73,920
63,515
–
231,546
Segment liabilities
(85,028)
(6,623)
(13,186)
–
(104,837)
Segment net assets
9,083
67,297
50,329
–
126,709
Joint ventures
–
5,675
–
68,607
74,282
Total net assets
9,083
72,972
50,329
68,607
200,991
Strategic Report
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79
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Unallocated net assets of £50.3m include cash and cash equivalents of £21.9m, net deferred tax asset of £11.3m, amounts due from joint ventures of
£11.2m, amounts due to joint ventures of £4.1m, a net pension asset of £5.6m and other corporate items (£4.4m asset).
The following table analyses revenue by significant category:
2024
£000
2023
£000
Sale of goods
21,039
31,279
Provision of services
125,898
115,267
Rental Income
993
829
Construction contracts
63,216
64,084
211,146
211,459
The timing of revenue recognition is analysed as follows:
Services
2024
£000
Hargreaves
Land
2024
£000
Total
2024
£000
Over time
125,070
1,149
126,219
At a point in time
79,040
5,887
84,927
Revenue
204,110
7,036
211,146
Services
2023
£000
Hargreaves
Land
2023
£000
Total
2023
£000
Over time
112,382
2,364
114,746
At a point in time
88,469
8,244
96,713
Revenue
200,851
10,608
211,459
Geographical Information
2024
2023
Revenue
£000
Non-current
assets
£000
Revenue
£000
Non-current
assets
£000
UK
170,245
147,919
175,954
166,521
Europe
2,395
–
2,027
–
Hong Kong
34,701
991
29,916
825
Other overseas
3,805
627
3,562
598
211,146
149,537
211,459
167,944
3 Other Operating Income/(expense)
2024
£000
2023
£000
Profit on disposal of property, plant and equipment
120
4,475
Profit on disposal of investment property
6,167
260
Loss on disposal of right-of-use assets
(83)
(17)
Management charge for services provided
200
200
Total other operating income
6,404
4,918
4 Expenses and Auditors’ remuneration
The following items have been charged to the Statement of Profit and Loss:
2024
£000
2023
£000
Amortisation of other intangibles
191
175
Depreciation of property, plant and equipment owned
2,279
1,681
Depreciation of right-of-use assets
13,933
12,889
Interest payable on right-of-use leases
2,499
2,099
Expense relating to short-term leases
6,814
7,090
Expense relating to leases of low-value assets that are not shown above as short-term
875
1,351
80
Hargreaves Services plc
Annual Report and Accounts 2024
Notes
(forming part of the Group financial statements) continued
4 Expenses and Auditors’ remuneration continued
Auditors’ remuneration:
2024
£000
2023
£000
Audit of these financial statements
133
90
Amounts receivable by the Company’s auditor and its associates in respect of:
Audit of financial statements of subsidiaries of the Company
301
285
Audit of financial statements of joint ventures of the Company
42
235
Taxation compliance services
12
9
5 Staff Numbers and Costs
The average number of persons employed by the Group (including Directors) during the year, analysed by category, was as follows:
Number of employees Group
2024
2023
Directors and senior management
17
16
Administration
300
288
Production
1,091
1,057
1,408
1,361
The aggregate payroll costs of these persons were as follows:
Group
2024
£000
2023
£000
Wages and salaries
70,087
61,380
Share-based payments (see Note 24)
342
359
Social security costs
5,346
4,711
Contributions to defined contribution pension scheme (see Note 23)
2,327
1,921
Expenses of defined benefit pension schemes (see Note 23)
710
186
78,812
68,557
6 Directors’ Remuneration
2024
£000
2023
£000
Directors’ emoluments
1,981
2,192
Emoluments in lieu of Company pension contributions
196
214
2,177
2,406
The aggregate of emoluments and amounts receivable under long-term incentive schemes of the highest paid Director was £897,000 (2023:
£1,028,000), and £124,000 (2023: £121,000) was paid in lieu of Company pension contributions.
The detailed breakdown of the Directors’ total emoluments is as follows:
Salary/Fees
Bonus
Benefits
LTIPS
Total
Pension
2024
£000
2023
£000
2024
£000
2023
£000
2024
£000
2023
£000
2024
£000
2023
£000
2024
£000
2023
£000
2024
£000
2023
£000
Gordon Banham
514
499
–
484
45
45
338
–
897
1,028
124
121
John Samuel*
52
297
–
288
3
19
–
–
55
604
8
45
Stephen Craigen**
167
–
–
–
16
–
–
–
183
–
13
–
David Anderson
246
239
123
87
13
13
220
–
602
339
49
48
Roger McDowell
87
85
–
–
–
–
–
–
87
85
–
–
Nigel Halkes
64
48
–
–
–
–
–
–
64
48
–
–
Christopher Jones
47
44
–
–
–
–
–
–
47
44
1
–
Nicholas Mills
46
44
–
–
–
–
–
–
46
44
–
–
Total
1,223
1,256
123
859
77
77
558
–
1,981
2,192
195
214
* John Samuel stepped down as a Director on 9 August 2023.
** Stephen Craigen was appointed to the Board on 1 August 2023.
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81
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Annual Report and Accounts 2024
Financial Statements
Benefits in Kind and Pensions
In addition to basic salary, Executive Directors are entitled to the following benefits: paid holiday, company car or a cash allowance in lieu,
contributions to a personal pension plan and life assurance, private medical insurance and permanent health insurance. No Director has benefits
under any of the Group’s defined benefit pension schemes.
Number of Directors
2024
2023
The number of Directors who exercised share options was
2
–
The number of Directors in respect of whose services shares were received or receivable under long-term incentive
schemes was
3
3
At the balance sheet date no Directors hold rights to subscribe for shares in the Group as a result of options which have vested but have not yet been
exercised (2023: two Directors for a total of 78,302 shares).
All of the Directors benefited from qualifying third-party indemnity provisions.
During the year ended 31 May 2024, a total of 210,606 (2023: 118,584) awards were made of which 56,314 (2023: 22,671) related to Executive Directors
as set out below:
Director
Date of grant
Exercise price
No. of options granted
Exercise period
David Anderson
30 October 2023
10p per share
31,041
1 Nov 2026 – 30 Oct 2028
Stephen Craigen
30 October 2023
10p per share
25,272
1 Nov 2026 – 30 Oct 2028
Executive Share Option Scheme awards vesting and/or exercised in the year ended 31 May 2024
During the year, options awarded on 1 August 2020, totalling 179,224 shares partially vested in accordance with the performance criteria. 92.5% of the
performance criteria was achieved resulting in 13,442 options becoming lapsed. Of those shares that vested, 47,517 were exercised by David Anderson
on 29 August 2023, 59,132 were exercised by Gordon Banham on 21 December 2023. The remaining 59,132 options that were awarded to John
Samuel have not yet been exercised. John Samuel stepped down as Group Finance Director on 9 August 2023, John will retain the right to exercise
these options.
Furthermore, Gordon Banham exercised 24,249 options on 21 December 2023 relating to the Executive Share Option Scheme awarded on
13 December 2019.
On 2 August 2021 options totalling 41,611 shares and 22,292 were awarded to Gordon Banham and David Anderson respectively. Following
achievement of certain performance criteria on 2 August 2024 28,301 of these options vested in respect of Gordon Banham and15,162 in respect of
David Anderson.
Outstanding Executive Share Option Scheme awards
Information within the table below relates to Directors who have served during the financial year ended 31 May 2024. The Board has previously
granted the following options to the Executive Directors:
Exercisable between
3 Aug 24 and 2 Aug 26
Exercisable between
2 Aug 25 and 1 Aug 27
Exercisable between
1 Nov 2026 and 30 Oct 2028
Gordon Banham
28,301
–
–
David Anderson
15,162
22,671
31,041
Stephen Craigen
–
10,932*
25,272
* Award was made on 1 August 2022, prior to Stephen Craigen’s appointment to the Board.
The Hargreaves Services plc Share Option Scheme 2019
On 22 January 2019, shareholders in general meeting approved an LTIP scheme, the Hargreaves Services plc Share Option Scheme 2019 (“the Share
Option Scheme 2019”). The following awards were granted in the year ended 31 May 2019:
Director
Date of grant
Exercise price
No. of options granted
Exercise period
Roger McDowell
30 January 2019
10p per share
285,144
31 Jan 2022-30 Jan 2024
Gordon Banham
30 January 2019
10p per share
75,250
31 Jan 2022-30 Jan 2024
John Samuel
30 January 2019
10p per share
75,250
31 Jan 2022-30 Jan 2024
David Anderson
30 January 2019
10p per share
64,157
31 Jan 2022-30 Jan 2024
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Annual Report and Accounts 2024
Notes
(forming part of the Group financial statements) continued
6 Directors’ Remuneration continued
Outstanding Executive Share Option Scheme awards continued
The Share Option Scheme 2019 required a minimum 35% Total Shareholder Return to be achieved over the three-year period ending on 31 July 2021
(“the Vesting Period”) from a base value of £3.515 (“Base Value”) before vesting could commence. 100% vesting occurred at an 85% Total Shareholder
Return over the above period from the Base Value. The rules of the Share Option Scheme 2019 allow participants to exercise options, to the extent
they have satisfied the performance conditions, after the expiry of the Vesting Period. An option lapses five years after the date of the grant, except if
the participant were to die, in which case the option lapses 12 months following death, whichever date is earlier. No disposal may be made of any
shares arising from the exercise of an option until five years after the date of grant other than to satisfy any tax liability arising on exercise. No further
options will be granted under the Share Option Scheme 2019.
During the year ended 31 May 2022, 167,586 of these options vested and were exercised with each director retaining ownership of the shares
following their exercise. John Samuel exercised 29,704 of these options in September 2023. There are no awards under this scheme outstanding in
respect of any director.
Ordinary shares issued pursuant to either the Executive Share Option Scheme or the Share Option Scheme 2019 scheme shall rank pari passu in all
respects with the ordinary shares already in issue.
Deferred Bonus Scheme
No awards under the Deferred Bonus Scheme were made and no outstanding awards were exercised during the year ended 31 May 2024. Stephen
Craigen was awarded 14,820 options under the Deferred Bonus Scheme J on 2 August 2021, which is due to vest on 2 August 2024. No other awards
under this scheme are outstanding in respect of any director. The Deferred Bonus Scheme is designed to allow awards to be made to Executive Directors
and eligible employees to attract and retain key members of staff. The awards under the Deferred Bonus Scheme are based on a percentage of salary.
This figure is then converted into a number of shares using the mid-closing price of a Hargreaves Services plc ordinary share on the day preceding the
award. Other than serving the retention period of three years from the date of award, the Deferred Bonus Scheme has no performance criteria.
7 Finance Income and Expense
Recognised in Profit or Loss
2024
£000
2023
£000
Finance income
Bank interest receivable
594
415
Early settlement discount
80
94
Interest received from jointly controlled entities
1,036
805
Interest on defined benefit pension scheme obligation (see Note 23)
368
298
Total finance income
2,078
1,612
Finance expense
Total interest expense on financial liabilities measured at amortised cost
194
280
Interest payable on leases
2,499
2,099
Foreign exchange loss
109
186
Total finance expense
2,802
2,565
8 Taxation
Recognised in the Statement of Profit and Loss
2024
£000
2023
£000
Current tax
Current year
1,344
187
Adjustments for prior years
7
24
Current tax expense
1,351
211
Deferred tax
Origination and reversal of temporary timing differences
2,267
2,382
Adjustments for prior years
840
(3,364)
Deferred tax expense/(credit)
3,107
(982)
Tax expense/(credit) in Income Statement (excluding share of tax of equity accounted investees)
4,458
(771)
Strategic Report
Directors’ Report
83
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
The deferred tax adjustment in respect of prior years of £840,000 (2023: £3,364,000 credit) relates to the treatment of losses assumed to be unused in
the previous year, which were ultimately utilised.
Recognised in Other Comprehensive Income
2024
£000
2023
£000
Deferred tax credit
Remeasurements of defined benefit pension schemes
3,094
1,161
3,094
1,161
Reconciliation of Effective Tax Rate
2024
£000
2023
£000
Profit for the year
12,218
27,926
Total tax expense/(credit)
4,458
(771)
Profit before taxation
16,676
27,155
Tax using the UK corporation tax rate of 25.00% (2023: 20.00%)
4,169
5,431
Effect of tax rates in foreign jurisdictions
(249)
(159)
Tax effect of joint ventures
(321)
(3,100)
Changes in unrecognised tax losses
(49)
(616)
Non-deductible expenses
224
776
Other temporary trading differences
(163)
237
Adjustment in respect of previous periods
847
(3,340)
Effective total tax expense/(credit)
4,458
(771)
The UK corporation tax rate increased from 19% to 25% on 1 April 2023, therefore a blended rate of 20% was used in the prior year.
Factors That May Affect Future Current and Total Tax Charges
The corporate tax rate increased from 19% to 25% on 1 April 2023. There are no known changes planned for the rate of UK corporate tax. The deferred tax
balances at 31 May 2024 and 31 May 2023 have been calculated based on the rate substantively enacted at the balance sheet date of 25%.
9 Earnings per Share
The calculation of earnings per share (“EPS”) is based on the profit for the year attributable to equity holders and on the weighted average number of
shares in issue and ranking for dividend in the year.
2024
2023
Earnings
£000
EPS
Pence
DEPS
Pence
Earnings
£000
EPS
Pence
DEPS
Pence
Underlying earnings per share
12,361
38.22
37.43
28,066
86.28
84.55
Amortisation (net of tax)
(143)
(0.44)
(0.43)
(140)
(0.43)
(0.42)
Basic earnings per share
12,218
37.78
37.00
27,926
85.85
84.13
Weighted average number of shares
32,345
33,021
32,528
33,193
The calculation of weighted average number of shares includes the effect of own shares held of 332,401 (2023: 611,118).
The calculation of diluted earnings per share (“DEPS”) is based on the profit for the year and the weighted average number of ordinary shares in issue
in the year. The potentially dilutive effect of the share options outstanding (effect on weighted average number of shares) is 676,305 (2023: 665,549);
effect on basic earnings per ordinary share in the current year is 0.78p (2023: 1.72p). Effect on underlying earnings per ordinary share is 0.79p
(2023: 1.73p).
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10 Property, Plant and Equipment
Freehold land
and buildings
and leasehold
improvements
£000
Furniture and
equipment
£000
Motor
vehicles
and plant
£000
Fixtures
and fittings
£000
Total
£000
Cost
At 1 June 2022
11,304
3,581
22,784
410
38,079
Additions
320
1,561
1,556
5
3,442
Acquisitions (Note 15)
1,250
10
164
–
1,424
Disposals
(223)
(894)
(7,419)
(425)
(8,961)
Effect of movements in foreign exchange
1
5
(393)
10
(377)
At 31 May 2023
12,652
4,263
16,692
–
33,607
At 1 June 2023
12,652
4,263
16,692
–
33,607
Additions
67
358
1,829
–
2,254
Disposals
(193)
(15)
(929)
–
(1,137)
Transfers to investment property
(1,228)
–
–
–
(1,228)
Transfers to right of use assets
–
–
(125)
–
(125)
Effect of movements in foreign exchange
(2)
(28)
74
–
44
At 31 May 2024
11,296
4,578
17,541
–
33,415
Accumulated depreciation and impairment
At 1 June 2022
5,940
3,270
18,551
380
28,141
Depreciation
260
521
890
10
1,681
Disposals
(35)
(894)
(5,518)
(424)
(6,871)
Effect of movements in foreign exchange
–
(3)
(236)
34
(205)
At 31 May 2023
6,165
2,894
13,687
–
22,746
At 1 June 2023
6,165
2,894
13,687
–
22,746
Depreciation
246
679
1,354
–
2,279
Disposals
(184)
(15)
(839)
–
(1,038)
Transfer to right of use assets
–
–
(24)
–
(24)
Effect of movements in foreign exchange
–
(46)
83
–
37
At 31 May 2024
6,227
3,512
14,261
–
24,000
Net book value
At 1 June 2022
5,364
311
4,233
30
9,938
At 31 May 2023
6,487
1,369
3,005
–
10,861
At 31 May 2024
5,069
1,066
3,280
–
9,415
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
85
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
11 Right-of-Use Assets
Land and
buildings
£000
Motor vehicles
and plant
£000
Total
£000
Cost
At 1 June 2022
3,195
31,455
34,650
Additions
1,004
29,779
30,783
Disposals
(302)
(1,087)
(1,389)
Effect of movements in foreign exchange
(37)
4
(33)
At 31 May 2023
3,860
60,151
64,011
At 1 June 2023
3,860
60,151
64,011
Additions
5,825
9,063
14,888
Disposals
(2,530)
(1,931)
(4,461)
Transfer from fixed assets
–
125
125
Effect of movements in foreign exchange
(22)
22
–
At 31 May 2024
7,133
67,430
74,563
Accumulated depreciation and impairment
At 1 June 2022
2,184
10,404
12,588
Depreciation
733
12,156
12,889
Disposals
(248)
(1,042)
(1,290)
Effect of movements in foreign exchange
9
–
9
At 31 May 2023
2,678
21,518
24,196
At 1 June 2023
2,678
21,518
24,196
Depreciation
1,591
12,342
13,933
Disposals
(2,463)
(1,791)
(4,254)
Transfer from fixed assets
–
24
24
Effect of movements in foreign exchange
(14)
3
(11)
At 31 May 2024
1,792
32,096
33,888
Net book value
At 1 June 2022
1,011
21,051
22,062
At 31 May 2023
1,182
38,633
39,815
At 31 May 2024
5,341
35,334
40,675
The group leases various offices, warehouses, stores, equipment and vehicles.
Security
The Group’s ROU assets are used to secure some of its interest-bearing loans and borrowings (see Note 21).
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Annual Report and Accounts 2024
12 Investment Property
Group
At cost
2024
£000
2023
£000
At 1 June
14,074
8,298
Additions
1,040
5,783
Disposals
(1,513)
(7)
Transfer from fixed assets
1,228
–
At 31 May
14,829
14,074
In the year ended 31 May 2024, £1,228,000 (2023: £nil) of assets were transferred from fixed assets to investment property following a review.
The fair value of the Investment Properties is estimated by the Directors at £29,800,000 (2023: £29,600,000). The increase in the estimated fair value is
as a result of the Market Value Today as prepared by JLL.
13 Intangible Assets including Goodwill
Group
Goodwill
£000
Other
intangible
£000
Total
Cost
£000
Cost
At 1 June 2022
18,314
–
18,314
Acquisitions (Note 15)
–
1,036
1,036
At 31 May 2023
18,314
1,036
19,350
At 1 June 2023
18,314
1,036
19,350
Acquisitions (Note 15)
–
554
554
Disposals
(109)
–
(109)
At 31 May 2024
18,205
1,590
19,795
Accumulated amortisation and impairment
At 1 June 2022
13,490
–
13,490
Amortisation charge
–
175
175
At 31 May 2023
13,490
175
13,665
At 1 June 2023
13,490
175
13,665
Amortisation charge
–
191
191
Disposals
(109)
–
(109)
At 31 May 2024
13,381
366
13,747
Net book value
At 1 June 2022
4,824
–
4,824
At 31 May 2023
4,824
861
5,685
At 31 May 2024
4,824
1,224
6,048
The other intangible acquisition in the year ended 31 May 2024 relates to the acquisition of Mcleod Construction Materials Ltd and the mineral
property acquired with the business. This will be amortised as mineral is extracted and sold from the quarry.
The goodwill disposed in the year ended 31 May 2024 relates to the goodwill of companies of which have been disposed; DWL Engineering Services
Ltd and Eastgate Materials Handling Limited. The net book value of the goodwill disposed is nil.
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
87
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
The other intangible acquisition in the year ended 31 May 2023 relates to the acquisition of SBU Limited and its wholly owned subsidiary S&B Utilities
Limited and the framework positions acquired with that business. This will be amortised over a five-year period which is the length of the customer
contracts and frameworks acquired. See Note 15.
The Group does not have any internally generated intangible assets.
Impairment Testing
The intangible assets have been allocated to Cash-Generating Units or groups of CGUs as follows:
Goodwill
2024
£000
2023
£000
Hargreaves Industrial Services Limited
1,252
1,252
Specialist Earthworks
3,572
3,572
4,824
4,824
Other intangible
2024
£000
2023
£000
S&B Utilities Limited
670
861
Mcleod Construction Materials Ltd
554
–
1,224
861
The recoverable amounts of the above CGUs have been calculated with reference to their value in use. The key features of this calculation are shown
below:
Hargreaves Industrial Services Limited:
2024
2023
Period on which management approved forecasts are based
5 years
5 years
Discount rate
9.8%
11.4%
Specialist Earthworks:
2024
2023
Period on which management approved forecasts are based
10 years
10 years
Discount rate
9.8%
11.4%
S&B Utilities Limited:
2024
2023
Period on which management approved forecasts are based
5 years
5 years
Discount rate
9.8%
11.4%
Mcleod Construction Materials Ltd:
2024
2023
Period on which management approved forecasts are based
7 years
–
Discount rate
9.8%
–
In order to test goodwill for impairment the Group performs value in use calculations by preparing cash flow forecasts for each CGU derived from the
most recent financial budget and strategic plan approved by management going forward five years. This is with the exception of Specialist
Earthworks which is based on a 10-year financial budget due to the nature of the business, and Mcleod Construction Machinery which is based on a
7 year financial budget in line with the rights to the quarry and mineral extraction. An annual growth rate of 2% has been assumed after the relevant
forecast period in perpetuity. The Board considers that the assumptions of growth provide management with a conservative estimate against which
to compare the corresponding CGU carrying values. Sustaining maintenance capital expenditure in each CGU has been included in the calculations
but no cash flows relating to enhancement capital expenditure have been included. A post-tax discount rate of 9.8% (2023: 11.4%) has been used in
the first instance. The decrease in the discount rate is due to a decrease in the cost of equity and a reduction in the average leasing debt over the year.
For the year ended 31 May 2024 and 31 May 2023, each of the CGUs has substantial headroom under the annual impairment review, which remains
after allowing for reasonably possible changes in assumptions.
Other than changes to the discount rate, the key assumption which would impact the carrying value of goodwill is the margin generated by each
CGU. Whilst the sensitivities vary according to CGU, for a material impairment to take place the discount rate would have to increase to 29% (2023:
32%) or the assumed operating margins would have to decrease by more than 20% (2023: 30%) before any further impact on any single CGU.
88
Hargreaves Services plc
Annual Report and Accounts 2024
14 Investments in Subsidiaries and Joint Ventures
List of Registered Offices:
14.1 West Terrace, Esh Winning, Durham, DH7 9PT
14.2 Tower Colliery, Tirherbert Road, Rhigos, Aberdare, CF44 9UF
14.3 Böningerstraβe 29, 47051 Duisburg, Germany
14.4 Van Heetveldelei 178, 2100 Deurne, Antwerp, Belgium
14.5 Suite 2, Park House Earls Colne Business Park, Earls Colne, Colchester, Essex, England, CO6 2NS
14.6 Plac Rodla, 8/914, 70-419 Szczecin, Polska
14.7 Werthausser Str. 182, 47053 Duisburg, Germany
14.8 3 Nobel Boulavard, Cape Gate NE3, Vanderbijlpark, Gauteng, 1900
14.9 Lot 6.05, Level 6, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia
14.10 Room 1117-8, 11th Floor, Tuen Mun Central Square, N0.22 Hoi Wing Road, Tuen Mun, New Territories, HK
14.11 Cp House, Otterspool Way, Watford, Hertfordshire, England, WD25 8JJ
The Group has the following investments in subsidiaries and joint ventures at the end of the year:
Ownership
Address of
registered office
Class of shares
held
2024
2023
Subsidiary undertakings
Hargreaves (UK) Services Limited
14.1
Ordinary
100%
100%
The Monckton Coke & Chemical Company Limited*
14.1
Ordinary
100%
100%
Maltby Colliery Limited*
14.1
Ordinary
100%
100%
HE Contracts Limited*
14.1
Ordinary
100%
100%
Maxibrite Limited *
14.1
Ordinary
85.2%
85.2%
RocPower Limited *
14.1
Ordinary
85%
85%
Hargreaves Carbon Products NV
14.4
Ordinary
100%
100%
Hargreaves Industrial Services (HK) Limited
14.10
Ordinary
100%
100%
Access Services (HK) Limited
14.10
Ordinary
100%
100%
OCCW (St Ninians) Limited *
14.1
Ordinary
100%
100%
OCCW (Duncanziemere) Limited *
14.1
Ordinary
100%
100%
OCCW (Chalmerston) Limited *
14.1
Ordinary
100%
100%
OCCW (Netherton) Limited *
14.1
Ordinary
100%
100%
OCCW (Damside) Limited *
14.1
Ordinary
100%
100%
OCCW (Broken Cross) Limited *
14.1
Ordinary
100%
100%
OCCW (House of Water) Limited *
14.1
Ordinary
100%
100%
C. A. Blackwell (Contracts) Limited
14.1
Ordinary
100%
100%
Geofirma Soils Engineering Limited *
14.1
Ordinary
100%
100%
Renaissance Land Regeneration Limited *
14.1
Ordinary
100%
100%
Hargreaves Land (North) Limited*
14.1
Ordinary
100%
100%
Hargreaves Land (South) Limited*
14.1
Ordinary
100%
100%
Hargreaves Power Services (HK) Limited
14.10
Ordinary
100%
100%
SBU Limited*
14.1
Ordinary
100%
100%
S&B Utilities Limited*
14.1
Ordinary
100%
100%
Dalquhandy Windfarm SPV Limited*
14.1
Ordinary
100%
100%
Broken Cross Energy SPV Limited*
14.1
Ordinary
100%
100%
North Kyle Windfarm SPV Limited*
14.1
Ordinary
100%
100%
Kennoxhead SPV Limited*
14.1
Ordinary
100%
100%
Broken Cross Windfarm SPV Limited*
14.1
Ordinary
100%
100%
Westfield EFW SPV Limited*
14.1
Ordinary
100%
100%
Poniel Energy SPV Limited*
14.1
Ordinary
100%
100%
Killoch Energy SPV Limited*
14.1
Ordinary
100%
100%
Westfield Windfarm SPV Limited*
14.1
Ordinary
100%
100%
Westfield Solar SPV Limited*
14.1
Ordinary
100%
100%
Hargreaves Land Group Limited*
14.1
Ordinary
100%
100%
Mcleod Construction Materials Ltd*
14.1
Ordinary
100%
–
Hargreaves LD Limited*
14.1
Ordinary
100%
–
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
89
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Ownership
Address of
registered office
Class of shares
held
2024
2023
Hargreaves Environmental Services Limited*
14.1
Ordinary
100%
–
Hargreaves (UK) Limited
14.1
Ordinary
100%
100%
Hargreaves Industrial Services Limited
14.1
Ordinary
100%
100%
Forward Sound Limited*
14.1
Ordinary
100%
100%
Hargreaves Services (HK) Limited
14.10
Ordinary
100%
100%
Hargreaves Land Limited
14.1
Ordinary
100%
100%
H Technical Resources Limited*
14.1
Ordinary
100%
100%
Hargreaves Maltby Limited*
14.1
Ordinary
100%
100%
Hargreaves Property Ventures Limited
14.1
Ordinary
100%
100%
Hargreaves Services (Westfield) Limited*
14.1
Ordinary
100%
100%
Hargreaves Services (Castlebridge) Limited*
14.1
Ordinary
–
100%
Hargreaves Services (Blindwells) Limited
14.1
Ordinary
100%
100%
Hargreaves Services Forestry Limited*
14.1
Ordinary
100%
100%
Hargreaves Services South Africa (Pty) Ltd
14.8
Ordinary
100%
100%
C.A. Blackwell Group Limited*
14.1
Ordinary
100%
100%
Hargreaves Industrial Services Sdn Bhd
14.9
Ordinary
100%
100%
Hargreaves Pension Company Limited
14.1
Ordinary
100%
100%
Hargreaves Land Holdings Limited*
14.1
Ordinary
100%
100%
Blackwell Earthmoving Limited
14.5
Ordinary
100%
100%
Joint ventures
Tower Regeneration Limited
14.2
Ordinary
50%
50%
Tower Regeneration Leasing Limited *
14.2
Ordinary
50%
50%
Hargreaves Raw Material Services GmbH
14.3
Ordinary
49%
49%
Hargreaves Carbon Products Polska Sp. z o.o.
14.6
Ordinary
49%
49%
Carbon Action Ltd
14.1
Ordinary
50%
50%
Hargreaves Darlington Limited
14.1
Ordinary
–
50%
Waystone Hargreaves Land LLP
14.11
Ordinary
50%
50%
DK Recycling und Roheisen GmbH
14.7
Ordinary
47%
47%
Hargreaves-EWT Industrieservices GmbH
14.7
Ordinary
25%
25%
Hargreaves Services Europe Limited
14.1
Ordinary
49%
49%
Dormant companies
Tru-Green Limited*
14.1
Ordinary
100%
100%
Renaissance Land Management Limited*
14.1
Ordinary
100%
100%
517EPA Limited*
14.1
Ordinary
100%
100%
RocFuel Limited*
14.1
Ordinary
50.1%
50.1%
Squire Distribution Services Limited*
14.1
Ordinary
100%
100%
Har Transport Limited*
14.1
Ordinary
100%
100%
HS Transport Services Limited*
14.1
Ordinary
100%
100%
Premier Lime and Stone Company*
14.1
Ordinary
100%
100%
C.A. Blackwell (Plant) Limited*
14.1
Ordinary
100%
100%
HBR Limited*
14.1
Ordinary
100%
100%
Coal 4 Energy Limited*
14.1
Ordinary
100%
100%
Hargreaves Carbon Products Europe Limited*
14.1
Ordinary
100%
100%
Hargreaves Corporate Director Limited*
14.1
Ordinary
100%
100%
Hargreaves Industrial Products Limited*
14.1
Ordinary
100%
100%
HBLT Limited*
14.1
Ordinary
100%
100%
R Hanson & Son Limited*
14.1
Ordinary
100%
100%
HESOTT Limited*
14.1
Ordinary
100%
100%
* These UK subsidiaries are exempt from audit by virtue of s479A of the Companies Act 2006.
90
Hargreaves Services plc
Annual Report and Accounts 2024
The following solvent companies were liquidated during the year; Hargreaves Darlington Limited and Hargreaves Services (Castlebridge) Limited.
The following solvent companies were liquidated during the prior year; Hargreaves Mining India Private Limited, Hargreaves Services Wind Farm
(Damside) Limited, Hargreaves Services (Muir Dean) Limited, H Europe Limited, Mir Trade Services Limited, Metallurgical Supplies Limited and Eastgate
Materials Handling Limited.
Hargreaves Services plc acquired 100% of the share capital of Mcleod Construction Materials Ltd, Hargreaves LD Limited and Hargreaves
Environmental Services Limited in the year ended 31 May 2024.
Hargreaves Services plc acquired 100% of the share capital of SBU Limited, S&B Utilities Limited, Dalquhandy Windfarm SPV Limited, Broken Cross
Energy SPV Limited, North Kyle Windfarm SPV Limited, Kennoxhead SPV Limited, Broken Cross Windfarm SPV Limited, Westfield EFW SPV Limited,
Poniel Energy SPV Limited, Killoch Energy SPV Limited, Westfield Windfarm SPV Limited, Westfield Solar SPV Limited and Hargreaves Land Group
Limited in the year ended 31 May 2023.
Tower Regeneration Leasing Limited is a 100% owned subsidiary of Tower Regeneration Limited. Hargreaves Raw Material Services GmbH and
Hargreaves Carbon Products Polska Sp. z o.o. are both 100% owned subsidiaries of Hargreaves Services Europe Limited. DK Recycling und Roheisen
GmbH is a 94.9% owned subsidiary of Hargreaves Raw Materials Services GmbH. Hargreaves-EWT Industrieservices GmbH is 50% owned by
Hargreaves Raw Materials Services GmbH.
The Group’s share of post-acquisition total recognised profit or loss in the above jointly controlled entities for the year ended 31 May 2024 was a profit
of £1,533,000 (2023: £16,311,000).
Joint Ventures
Carrying amount of equity accounted investees:
Group
Tower
Regeneration
Limited
£000
Hargreaves
Services
Europe Limited
£000
Waystone
Hargreaves Land
LLP
£000
Interests
in immaterial
joint ventures
£000
Total
£000
At 1 June 2022
–
50,260
4,910
(74)
55,096
Group’s share of profit in joint ventures (net of tax)
–
15,470
841
–
16,311
Group’s share of other comprehensive income
–
1,912
–
–
1,912
Exchange differences
–
965
–
(2)
963
At 31 May 2023
–
68,607
5,751
(76)
74,282
Group
Tower
Regeneration
Limited
£000
Hargreaves
Services
Europe Limited
£000
Waystone
Hargreaves Land
LLP
£000
Interests
in immaterial
joint ventures
£000
Total
£000
At 1 June 2023
–
68,607
5,751
(76)
74,282
Group’s share of profit in joint ventures (net of tax)
–
1,283
250
–
1,533
Group’s share of other comprehensive income
–
167
–
–
167
Dividends declared
–
(13,685)
–
–
(13,685)
Exchange differences
–
(326)
–
17
(309)
At 31 May 2024
–
56,046
6,001
(59)
61,988
The Group recognised £167,000 (2023: £1,912,000) other comprehensive income which relates to the Group’s share of the actuarial gain on the
defined benefit pension scheme.
Group
Tower
Regeneration
Limited
£000
Hargreaves
Services
Europe Limited
£000
Waystone
Hargreaves Land
LLP
£000
Interests
in immaterial
joint ventures
£000
Total
£000
Hargreaves' share of net assets/(liabilities)
(8,014)
71,236
5,751
(76)
68,897
Amount not recognised
8,014
–
–
–
8,014
Non-distributable reserves
–
(2,629)
–
–
(2,629)
Investment at 31 May 2023
–
68,607
5,751
(76)
74,282
14 Investments in Subsidiaries and Joint Ventures continued
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
91
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Group
Tower
Regeneration
Limited
£000
Hargreaves
Services
Europe Limited
£000
Waystone
Hargreaves Land
LLP
£000
Interests
in immaterial
joint ventures
£000
Total
£000
Hargreaves' share of net assets/(liabilities)
(7,582)
59,270
6,001
(59)
57,630
Amount not recognised
7,582
–
–
–
7,582
Non-distributable reserves
–
(3,224)
–
–
(3,224)
Investment at 31 May 2024
–
56,046
6,001
(59)
61,988
The figures below are prepared under IFRS, all numbers are presented in £000s.
Tower Regeneration Limited
Waystone Hargreaves Land LLP
Hargreaves Services Europe Limited
At cost
2024
2023
2024
2023
2024
2023
Voting rights
50%
50%
50%
50%
49%
49%
Cash and cash equivalents
17
25
27
2,055
4,515
679
Other current assets
1,884
1,838
21,825
24,598
110,503
175,390
Total current assets
1,901
1,863
21,852
26,653
115,018
176,069
Non-current assets
4,127
4,025
–
–
64,925
65,171
Current liabilities
(26,730)
(27,973)
(10,026)
(15,152)
(96,162)
(133,611)
Non-current liabilities
(960)
(813)
–
–
(14,864)
(24,261)
Net (liabilities)/assets (100%)
(21,662)
(22,898)
11,826
11,501
68,917
83,368
Revenue
–
–
6,585
19,269
338,696
510,894
Other expenses
(271)
(1,291)
(5,595)
(17,406)
(327,126)
(473,262)
Depreciation and amortisation
–
–
–
–
(4,235)
(4,249)
Interest income
184
79
–
–
1,437
1,077
Interest expense
(1,839)
(1,612)
(490)
(181)
(6,289)
(4,598)
(Loss)/profit before tax
(1,926)
(2,824)
500
1,682
2,483
29,862
Income tax expense
–
–
–
–
(1,336)
(11,783)
Post tax (loss)/profit (100%)
(1,926)
(2,824)
500
1,682
1,147
18,079
HRMS, a wholly owned subsidiary of Hargreaves Services Europe Limited has a contingent liability in respect of possible fines or penalties arising from
certain trading transactions with a counterparty in Poland. When the matter came to the attention of the management of HRMS, they reported it
proactively to the Polish authorities from whom no response has yet been received. It is not possible to assess the likely quantum of any such fines or
penalties nor is it possible to determine whether any fines or penalties will be levied by the Polish authorities.
The total financial liabilities included in current liabilities is:
Tower Regeneration Limited £nil (2023: £nil);
Waystone Hargreaves Land LLP £nil (2023: £nil),
Hargreaves Services Europe Limited £49,390,000 (2023: £54,757,000) representing its borrowing base facility and term loans.
Included within current liabilities above and disclosed in Note 30 Related Parties are loans totalling £11.1m (2023: £11.2m) due from HRMS to
Hargreaves Services plc as well as a loan due to HRMS from Hargreaves Services plc of £nil (2023: £4.0m). Interest on the loans is currently charged at
1.7% over UK base rate.
Waystone Hargreaves Land LLP includes an amount of £2,491,000 (2023: £1,627,000) payable to Hargreaves Land North Limited, a wholly owned
subsidiary. This loan is repayable on demand. Tower Regeneration Limited includes an amount of £14,191,000 (2023: £14,275,000) within current
liabilities, which is due to Forward Sound Limited, a wholly owned subsidiary undertaking.
The Group also has a non-material interest in the following companies: Tower Regeneration Leasing Limited, MIR Trade Services Limited,
Carbon Action Limited and Hargreaves Darlington Limited.
92
Hargreaves Services plc
Annual Report and Accounts 2024
15 Acquisition of Subsidiaries
Acquisition of McLeod Construction Materials Ltd
On 30 June 2023, the Group acquired 100% of the share capital of McLeod Construction Materials Ltd for a total consideration of £500,001. The
consideration comprised an acquisition price of £1, along with a cash injection of £500,000 to pay off all remaining liabilities. The acquisition price of
£1 was settled in cash. The principal activity of McLeod Construction Materials Ltd is the quarrying of limestone and other aggregates. The company
holds a 10-year planning consent, of which 7 years is remaining, to rework and develop the Newlandside Quarry, in accordance with the remediation
scheme. Processing of the quarry began pre-acquisition and have extracted good quality materials, confirming the site is a proved reserve. The fair
value of the assets and liabilities at the date of acquisition was a net liability position of £54,000.
Acquisition of SBU Limited
On 7 July 2022, the Group acquired 100% of the share capital of SBU Limited, which owns 100% of S&B Utilities Limited for a total consideration of
£1,447,000. This consideration comprised an acquisition price of £760,000, along with a cash injection of £687,000 to pay off all bank loans and
mortgage balances. The acquisition price of £760,000 was settled partly in cash of £710,000 and £50,000 payable as contingent consideration.
The principal activity of these companies is the construction and maintenance of water assets. S&B Utilities Limited has long standing framework
contracts with Yorkshire Water and Severn Trent Services together with an appointment to a framework with Northumbrian Water which occurred
after the date of acquisition. The fair value of the assets and liabilities at the date of acquisition was a net asset position of £411,000.
McLeod
Construction
Materials Ltd
2024
£000
SBU Limited
2023
£000
ASSETS
Non-current assets
Property, plant and equipment
–
1,424
Deferred tax asset (Note 16)
–
50
–
1,474
Current assets
Trade and other receivables
70
1,922
70
1,922
LIABILITIES
Current liabilities
Trade and other payables
(124)
(2,985)
Net identifiable (liabilities)/assets
(54)
411
Net Purchase Consideration
500
1,447
Other intangibles on consolidation (Note 13)
554
1,036
Satisfied by:
Consideration paid
–
760
Cash injection
500
687
Net Purchase Consideration
500
1,447
In relation to the acquisition of SBU, £50,000 is held in escrow pending certain performance measurements. The fair value of this contingent payment
is estimated at £50,000. £25,000 of the payment is dependent on the financial outcome of one project, whilst the other £25,000 is dependent on
whether any claims arise for which the vendors have responsibility as they existed prior to the date of acquisition. Both amounts are expected to be
payable during the year ending 31 May 2025.
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
93
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
16 Deferred Tax Assets and Liabilities
Movement in Deferred Tax During the Year
31 May 2023
£000
Recognised
in income
£000
Recognised
in equity
£000
31 May 2024
£000
Property, plant and equipment
(2,024)
1,203
–
(821)
Employee benefits
(1,393)
(1,271)
3,094
430
Share-based payments
250
(63)
–
187
Tax value of loss carry-forwards recognised
14,432
(2,989)
–
11,443
Other temporary timing differences
71
13
–
84
Total
11,336
(3,107)
3,094
11,323
Deferred tax due in less than one year
3,130
Deferred tax due in more than one year
8,193
Movement in Deferred Tax During the Prior Year
31 May 2022
£000
Recognised
in income
£000
Recognised
in equity
£000
Recognised on
acquisition
£000
31 May 2023
£000
Property, plant and equipment
3,951
(5,946)
–
(29)
(2,024)
Employee benefits
(1,920)
(634)
1,161
–
(1,393)
Share-based payments
280
(30)
–
–
250
Tax value of loss carry-forwards recognised
6,777
7,576
–
79
14,432
Other temporary timing differences
55
16
–
–
71
Total
9,143
982
1,161
50
11,336
Deferred tax due in less than one year
3,216
Deferred tax due in more than one year
8,120
The Group has an unrecognised deferred tax asset of £50,000 relating to trading losses (2023: £2,466,000).
17 Inventories
Group
2024
£000
2023
£000
Raw materials and consumables
130
261
Finished goods
1,002
110
Properties held for development and resale
48,193
38,931
49,325
39,302
Changes in raw material and consumables, finished goods and properties held for development and resale recognised as cost of sales in the year
amounted to £3,653,000 (2023: £7,610,000).
The write-down of inventories to net realisable value was £nil (2023: £nil).
There were no reversals of previous write-downs in either the current or prior year.
94
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18 Trade and Other Receivables
Current
Non-Current
2024
£000
2023
£000
2024
£000
2023
£000
Trade receivables
21,342
20,103
–
–
Amounts due from undertakings in which the Group has a participating interest
31,479
28,750
–
–
Other receivables
1,565
5,844
4,000
–
Prepayments and accrued income
16,519
16,912
–
–
70,905
71,609
4,000
–
Included within other receivables is £4,000,000 (2023: £nil) expected to be recovered in more than 12 months. The balance relates to a £4.0m loan to
the pension scheme following the buy-in, which will be repaid to the Group within two years.
The Group has a variety of credit terms depending on the customer. These terms range from 30 to 90 days.
Amounts due from undertakings in which the Group has a participating interest are repayable on demand. Interest is charged at rates ranging
between 7% and 10%.
Trade receivables are shown net of an expected credit loss allowance of £253,000 (2023: £246,000) arising from the ordinary course of business,
as follows:
2024
£000
2023
£000
At 1 June
246
331
Provided during the year
132
79
Released
(114)
(14)
Utilised during the year
(11)
(150)
At 31 May
253
246
The expected credit loss allowance records impairment losses unless the Group is satisfied that no recovery of the amount owing is possible. At that
point the amounts considered irrecoverable are written off against the trade receivables directly. There is no expected credit loss in respect of other
receivables, prepayments and accrued income or amounts due from undertakings in which the Group has a participating interest.
The ageing of trade receivables was:
31 May 2024
Gross trade
receivables
£000
Expected credit
losses
£000
Net trade
receivables
£000
Not past due date
16,511
–
16,511
Past due date (0-90 days)
4,719
–
4,719
Past due date (over 90 days)
127
(15)
112
Individually impaired amounts
238
(238)
–
21,595
(253)
21,342
31 May 2023
Gross trade
receivables
£000
Expected credit
losses
£000
Net trade
receivables
£000
Not past due date
16,513
–
16,513
Past due date (0-90 days)
3,577
–
3,577
Past due date (over 90 days)
15
(2)
13
Individually impaired amounts
244
(244)
–
20,349
(246)
20,103
The maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
2024
£000
2023
£000
UK
18,952
16,846
Rest of the world
2,390
3,257
21,342
20,103
Further details on the Group’s exposure to credit and currency risks and impairment losses related to trade receivables are disclosed in Note 27.
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
95
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
19 Contract Assets
31 May 2024
2024
£000
At 1 June 2023
5,114
Transfers from contract assets recognised at the beginning of the year to receivables
(5,114)
Increase related to services provided in the year
6,425
At 31 May 2024
6,425
31 May 2023
2023
£000
At 1 June 2022
6,752
Transfers from contract assets recognised at the beginning of the year to receivables
(2,966)
Increase related to services provided in the year
1,328
At 31 May 2023
5,114
Aggregate costs incurred under open construction contracts and recognised profits, net of recognised losses, amounted to £144,146,000 (2023:
£157,267,000).
Progress billings and advances received from customers under open construction contracts amounted to £153,612,000 (2023: £157,339,000).
Contract assets include £183,000 (2023: £729,000) relating to retentions, of which £183,000 (2023: £177,000) are expected to be recovered in more
than 12 months.
20 Cash and Cash Equivalents
Group
2024
£000
2023
£000
Cash and cash equivalents per Balance Sheet
22,700
21,859
Cash and cash equivalents per Cash Flow Statement
22,700
21,859
The Group’s exposure to credit and currency risk related to cash and cash equivalents is disclosed in Note 27.
21 Other Interest-Bearing Loans and Borrowings
This note provides information about the contractual terms of the Group’s interest-bearing loans and borrowings, which are measured at amortised
cost. For more information about the Group’s exposure to interest rate and foreign currency risk, see Note 27.
Group
2024
£000
2023
£000
Non-current liabilities
Lease liabilities
15,884
20,839
Current liabilities
Current portion of lease liabilities
18,270
15,511
Terms and Debt Repayment Schedule
Currency
Nominal interest
rate
Year of
maturity
Face value
2024
£000
Carrying
amount
2024
£000
Face value
2023
£000
Carrying amount
2023
£000
Lease liabilities
Sterling
3.7%-7.6%
2024–2029
34,154
34,154
36,350
36,350
In accordance with the presentation requirements of IFRS 9, these liabilities have been classified according to the maturity date of the longest
permitted refinancing.
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Annual Report and Accounts 2024
21 Other Interest-Bearing Loans and Borrowings continued
Lease Liabilities
Lease liabilities are payable as follows:
Minimum lease
payments
2024
£000
Interest
2024
£000
Principal
2024
£000
Minimum lease
payments
2023
£000
Interest
2023
£000
Principal
2023
£000
Less than one year
20,174
(1,904)
18,270
17,459
(1,948)
15,511
Between one and five years
17,010
(1,126)
15,884
22,005
(1,166)
20,839
37,184
(3,030)
34,154
39,464
(3,114)
36,350
Changes in Liabilities from Financing Activities
Group
Lease
liabilities
£000
At 1 June 2022
18,371
Changes from financing cash flows
Principal elements of lease payments
(12,721)
Total changes from financing cash flows
(12,721)
Other changes
New leases
30,628
Interest expense
2,099
Interest paid
(2,027)
Total other changes
30,700
At 31 May 2023
36,350
Changes from financing cash flows
Principal elements of lease payments
(17,425)
Total changes from financing cash flows
(17,425)
Other changes
New leases
15,278
Interest expense
2,499
Interest paid
(2,548)
Total other changes
15,229
At 31 May 2024
34,154
22 Trade and Other Payables
Group
2024
£000
2023
£000
Trade payables
10,348
9,498
Amounts due to undertakings in which the Group has a participating interest
–
4,090
Other trade payables
1,852
2,220
Deferred income
5,274
1,440
Non-trade payables and accrued expenses
30,909
30,179
48,383
47,427
Amounts due to undertakings in which the Group has a participating interest are repayable on demand. Interest is charged at 1.7% above the Bank of
England base rate.
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
97
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
23 Pension Schemes and Other Retirement Benefits
Defined Contribution Scheme
The Group operates a Group personal pension scheme. The pension cost charge for the year represents contributions payable by the Group to the
employees’ funds and amounted to £2,327,000 (2023: £1,921,000). There were no outstanding or prepaid contributions, at either the beginning or end
of the financial year.
Defined Benefit Schemes
The Group acquired a concessionary fuel retirement benefit scheme and became responsible for two defined benefit schemes on the acquisition of
Maltby Colliery on 26 February 2007. The defined benefit schemes are part of two industry wide schemes which relate to the coal industry. Details of
these two schemes are consolidated in the tables below because the two schemes share the same characteristics and risks, and as such, the
disclosures have been aggregated. The Group is only liable for its own section of the scheme. Any deficit or surplus is not shared with other members
of the multi-employer scheme.
In common with most company pension schemes the Industry Wide Coal Staff Superannuation Scheme (“IWCSSS”) and Industry Wide Mineworkers
Pension Scheme (“IWMPS”) are both established as a trust under which the assets of the Scheme are held separately from those of the sponsoring
employers. The management of the Scheme is the responsibility of its trustee board, the Committee of Management, who are required to manage
the Scheme in accordance with its Deed and Rules. The Scheme is sectionalised so that each employer or group of associated employers has a
separate sub-fund within the Scheme. Each employer is liable for the benefits accrued by its member employees but has no liability for benefits
accrued in other employer sub-funds. This means that in practice each employer sub-fund effectively operates as a separate pension scheme.
The latest full actuarial valuation of these schemes was carried out at 31 December 2021 by AON Solutions UK Limited. The next triennial valuation is
due to be carried out as at 31 December 2024. The 31 December 2021 valuation of the IWCSSS showed a technical provisions deficit of £2.4m
(previously £6.4m) whilst the valuation of the IWMPS showed a technical provisions deficit of £2.6m (previously £2.8m). For accounting purposes
under IAS 19, actuaries use different assumptions than for the triennial valuation. The major difference relates to assumptions concerning the future
return on the growth assets portfolio. The December 2021 valuations have been used as the basis, adjusted for the requirements of IAS 19 to 31 May
2024 by a qualified independent actuary, to enable the Directors to account for the schemes as below.
The Trustees of the Industry Wide Coal Staff Superannuation Scheme (“IWCSSS”) and Industry Wide Mineworkers Pension Scheme (“IWMPS”)
purchased a bulk annuity in March 2024 to de-risk the defined benefit scheme obligation. The purchase of the bulk annuity was funded by the Group
and is also referred to as a “buy-in” of the liability.
The Group took the decision to fund the buy-in based on the following considerations:
• a buy-in will remove volatility of the scheme from the balance sheet of the Group, and no further contributions would be expected; and
• the buy-in will transfer the pension risk associated with the scheme to a third-party insurer. The only risk remaining will be the counterparty risk of
the insurer.
As a consequence there has been a reduction in the retirement benefit asset in the Group’s accounts for the year ended 31 May 2024.
2024
£000
2023
£000
Concessionary fuel scheme
Present value of unfunded defined benefit obligations
(2,979)
(2,902)
Defined benefit schemes
Present value of funded defined benefit obligations
(35,103)
(33,492)
Fair value of scheme assets
36,362
41,966
Retirement benefit obligation surplus
1,259
8,474
Total schemes net position
(1,720)
5,572
Movements in Present Value of Defined Benefit Obligation
2024
£000
2023
£000
At the beginning of the year
36,394
44,535
Interest cost
1,872
1,514
Remeasurement (gains)/losses:
– Changes in demographic assumptions
(238)
(376)
– Changes in financial assumptions
1,578
(11,564)
– Experience
803
3,700
Benefits paid
(2,327)
(1,415)
At the end of the year
38,082
36,394
98
Hargreaves Services plc
Annual Report and Accounts 2024
23 Pension Schemes and Other Retirement Benefits continued
Defined Benefit Schemes continued
Movements in the Fair Value of Scheme Assets
2024
£000
2023
£000
At the beginning of the year
41,966
52,214
Net interest on scheme assets
2,240
1,812
Remeasurement loss
(10,234)
(12,885)
Employer contributions
1,727
2,426
Employer buy in cash contribution
3,700
–
Benefits paid
(2,327)
(1,415)
Expenses paid
(710)
(186)
At the end of the year
36,362
41,966
Expense Recognised in the Income Statement
2024
£000
2023
£000
Expenses paid from schemes
710
186
Interest income on net defined benefit pension schemes
(368)
(298)
342
(112)
The expense is recognised in the following line items in the Income Statement:
2024
£000
2023
£000
Administrative expenses
710
186
Financial income
(368)
(298)
342
(112)
Remeasurement losses recognised directly in equity in the Statement of Other Comprehensive Income:
2024
£000
2023
£000
At 1 June
(6,072)
(1,427)
Recognised in the year
(12,377)
(4,645)
At 31 May
(18,449)
(6,072)
Scheme Assets
The fair value of the schemes’ assets, which are not intended to be realised in the short term and may be subject to significant change before they
are realised, were:
Fair value at
2024
£000
Fair value at
2023
£000
Insurance policy
35,103
–
Growth assets
3,230
16,843
Matching assets
–
24,333
Loan owed to company
(4,000)
Cash
2,029
790
36,362
41,966
The split between quoted and non-quoted assets:
Fair value at
2024
£000
Fair value at
2023
£000
Quoted assets
3,230
3,679
Non-quoted assets
33,132
38,287
36,362
41,966
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
99
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
The major assumptions used in this valuation were:
2024
2023
Rate of increase in deferred pensions
3.30%
3.25%
Rate of increase in pensions in payment
3.30%
3.05%
Discount rate applied to scheme liabilities
5.20%
5.25%
Inflation assumption RPI
3.30%
3.25%
Inflation assumption CPI
2.80%
2.70%
The assumptions used by the actuary and approved by the Board are chosen from a range of possible actuarial assumptions which, due to the
timescale covered, may not necessarily be borne out in practice. The inflation assumption has increased following the UK Government’s consultations
on Retail Price Index reforms and their likely impact. The discount rate assumption is derived from the AON GBP Select curve and is the same as that
used in setting the assumption at 31 May 2023.
The assumptions relating to longevity underlying the pension liabilities at the balance sheet date are based on the SAPS S3 actuarial tables with
scaling factors of 110% (2023: 116%) (IWCSSS) and 105% (2023: 111%) (IWMPS) and include an allowance for future improvements in longevity based on
the CMI 2021 projections with long-term improvement rate of 1% (2023: 1%) per annum. The same tables were used at 31 May 2023. The mortality
scaling factors have not been increased to reflect the negative outlook for mortality outcomes post Covid-19 (2023: 6%). The assumptions are
equivalent to expecting a 60-year-old to live for a number of years as follows:
IWMPS
Current pensioner aged 60: 22.8 years (male), 26.8 years (female), (2023: 23.0 years (male), 26.9 years (female)).
Future retiree upon reaching 60: 24.1 years (male), 28.1 years (female), (2023: 24.4 years (male), 28.2 years (female)).
IWCSSS
Current pensioner aged 60: 24.2 years (male), 27.2 years (female), (2023: 24.5 years (male), 27.3 years (female)).
Future retiree upon reaching 60: 25.5 years (male), 28.4 years (female) (2023: 25.7 years (male), 28.5 years (female)).
Risk exposure
Following the buy-in, the pension risk associated with the scheme has been transferred to a third-party insurer. The only risk remaining will be the
counterparty risk of the insurer.
Sensitivity Analysis
The Directors consider the discount rate, inflation rate and life expectancy assumptions to be the most significant actuarial assumptions and
therefore the only assumptions relevant for sensitivity analysis purposes. Reasonably possible changes at the reporting date to one of the actuarial
assumptions, holding other assumptions constant, would have increased/(decreased) the defined benefit obligation by the amounts shown below.
Any changes in assumptions on the defined benefit obligations would have an equal and opposite movement in the insurance buy-in asset.
2024
£000
2023
£000
Discount rate (1% increase)
(4,681)
(4,258)
Inflation (1% increase)
5,691
3,749
Life expectancy (1 year increase)
1,055
1,201
2024
£000
2023
£000
Discount rate (1% decrease)
5,715
5,204
Inflation (1% decrease)
(4,747)
(3,639)
Life expectancy (1 year decrease)
(1,317)
(1,175)
The above sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to
occur, and changes in some of the assumptions may be correlated. When calculating the sensitivity of the defined benefit obligation to significant
actuarial assumptions the same method (present value of the defined benefit obligations calculated with the projected unit credit method at the
end of the reporting period) has been applied as when calculating the defined benefit liability recognised in the balance sheet.
The methods and types of assumptions used in preparing the sensitivity analysis did not change compared to the prior period.
The Group expects to contribute approximately £135,000 to the defined benefit schemes in the next financial year, reflecting amounts due on the
concessionary fuel scheme.
The weighted average duration of the defined benefit obligation is 14 years (2023: 14 years).
100
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Annual Report and Accounts 2024
24 Employee Share Schemes
The Group has established two Executive Long-Term Incentive Plans only one of which is still in use, and a deferred bonus scheme. The terms and
conditions of the outstanding schemes are as follows, whereby all options are settled by physical delivery of shares:
Date of grant
Employees entitled
Number of
shares granted
Principal vesting conditions
Contractual life
Share option scheme
January 2019
January 2019
Directors
499,801
3 years’ service and Total Shareholder Return
of between 35% and 85%
3 years
Share option scheme
December 2019
December 2019
Directors
97,788
3 years’ service and 50% Absolute Total
Shareholder Return of between 35% and
85% and 50% Relative Total Shareholder
Return of between 35% and 85%
3 years
Deferred bonus scheme G
December 2019
Senior employees
74,470
3 years’ service
3 years
Share option scheme 2020
August 2020
Directors
179,224
3 years’ service and 50% Absolute Total
Shareholder Return of between 35% and
85% and 50% Relative Total Shareholder
Return of between 35% and 85%
3 years
Deferred bonus scheme H
August 2020
Senior employees
62,448
3 years’ service
3 years
Deferred bonus scheme I
October 2020
Senior employees
38,835
3 years’ service
3 years
Deferred bonus scheme J
August 2021
Senior employees
14,820
3 years’ service
3 years
Share option scheme 2021
August 2021
Directors and senior
employees
146,532
3 years’ service and 50% Absolute Total
Shareholder Return of between 25% and
100% and 50% Relative Total Shareholder
Return
3 years
Share option scheme 2022
August 2022
Directors and senior
employees
118,584
3 years’ service and 50% Absolute Total
Shareholder Return of between 25% and
100% and 50% Relative Total Shareholder
Return
3 years
Share option scheme 2023
October 2023
Directors and senior
employees
210,606
3 years’ service and 50% Absolute Total
Shareholder Return of between 25% and
85% and 50% EPS compound annual
growth of between 15% and 30%
3 years
Share Option Schemes
2024
Weighted
average exercise
price
2024
Number
of options
2023
Weighted
average exercise
price
2023
Number
of options
Outstanding at the beginning of the year
10p
522,542
10p
453,248
Granted during the year
10p
210,606
10p
118,584
Lapsed during the year
10p
(25,943)
10p
(49,290)
Exercised during the year
10p
(184,851)
10p
–
Outstanding at the end of the year
10p
522,354
10p
522,542
Exercisable at the end of the year
10p
59,132
10p
78,202
There were 210,606 options granted in the year with a weighted average exercise price of 10p per share. These options are not exercisable before
30 October 2026. There were 184,851 options exercised in the year with a weighted average market value of 457p.
Deferred Bonus Schemes
2024
Number
of options
2023
Number
of options
Outstanding at the beginning of the year
140,463
140,463
Exercised during the year
(93,866)
–
Outstanding at the end of the year
46,597
140,463
Exercisable at the end of the year
31,777
24,360
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
101
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
The options outstanding at 31 May 2024 have an exercise price of £nil and a weighted average contractual life of 1 month. There were no options
granted in the year. There were £93,866 options exercised in the year with a weighted average market value of 430p.
The fair value of services received in return for share options granted is measured by reference to the fair value of share options granted. The estimate
of the fair value of the services received in respect of the Deferred Bonus Schemes is measured based on the Black-Scholes model. The contractual
life of the option is used as an input into this model. A Monte Carlo model is used for all Share Option Schemes due to their more complex
measurement characteristics involving the market conditions noted above in relation to relative Total Shareholder Return (TSR) and absolute Total
Shareholder Return (TSR). For market based vesting conditions, such as the absolute TSR and relative TSR performance metrics, the probability of
meeting these metrics and the number of awards expected to vest is taken into account when calculating the estimated fair value.
The fair value of options and the assumptions used in these calculations for the options outstanding are as follows:
2019
January
Share option
scheme
2019
December
Share option
scheme
2019
Deferred
Bonus
Scheme G
2020
August
Share option
scheme
2020
Deferred
Bonus
Scheme H
2020
Deferred
Bonus
Scheme I
2021
Deferred
Bonus
Scheme J
2021
August
Share option
scheme
2022
August
Share option
scheme
2023
October
Share option
scheme
Fair value at grant
date
0.34
1.84
2.69
1.57
2.02
1.90
4.51
4.91
3.87
4.36
Exercise price
0.10
0.10
–
0.10
–
–
–
0.10
0.10
0.10
Share price
2.96
2.85
2.86
2.22
2.19
2.06
5.05
5.21
5.22
4.07
Expected volatility
29%
31%
31%
33%
31%
31%
40%
40%
44%
44%
Option life
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
3 years
Expected dividend
2.44%
2.53%
2.53%
2.03%
2.53%
2.53%
3.69%
3.69%
1.61%
5.16%
Risk-free rate
0.87%
0.55%
1.7%
0.00%
0.0%
0.0%
0.0%
0.11%
0.11%
4.47%
Volatility was calculated with reference to the Group’s daily share price volatility. The weighted average share price in the year was 471p (2023: 425p).
Share options outstanding at the end of the year have the following expiry date and exercise prices:
Options outstanding
Expiry date
Exercise price
2024
2023
Share option scheme January 2019
30 January 2024
10p
–
29,704
Share option scheme December 2019
13 December 2024
10p
–
48,498
Deferred Bonus Scheme G
13 December 2024
–
–
24,360
Share option scheme December 2020
5 August 2025
10p
59,132
179,224
Deferred Bonus Scheme H
5 August 2025
–
31,777
62,448
Deferred Bonus Scheme I
1 October 2025
–
–
38,835
Deferred Bonus Scheme J
3 August 2024
–
14,820
14,820
Share option scheme August 2021
3 August 2024
10p
146,532
146,532
Share option scheme August 2022
2 August 2025
10p
118,584
118,584
Share option scheme October 2023
30 October 2026
10p
198,106
–
568,951
663,005
Long-Term Incentive Plans and Deferred Bonus Schemes
The costs charged to the Income Statement relating to share-based payments were as follows:
2024
£000
2023
£000
Share options granted in 2020
–
27
Share options granted in 2021
24
114
Share options granted in 2022
154
154
Share options granted in 2023
77
64
Share options granted in 2024
87
–
342
359
102
Hargreaves Services plc
Annual Report and Accounts 2024
25 Provisions
Contract
provisions
£000
Restoration
provisions
£000
Dilapidations
provisions
£000
Insurance
provisions
£000
Other
provisions
£000
Total
provision
£000
At 1 June 2023
6,547
2,169
5,065
28
778
14,587
Provisions made during the year
5,541
44
939
–
480
7,004
Provisions utilised during the year
(97)
(591)
(868)
–
(162)
(1,718)
Provisions reversed
–
–
(59)
–
–
(59)
At 31 May 2024
11,991
1,622
5,077
28
1,096
19,814
Current
519
1,622
1,950
–
433
4,524
Non-Current
11,472
–
3,127
28
663
15,290
Provisions comprise:
1 The contract provisions have been made against profits which are subject to contract performance measurements which have not yet been
carried out by the client and other contracts where the Group has identified potential warranty, defects or performance obligations. Although
£519,000 of these obligations are expected to be completed in the next 12 months, the nature of such obligations may mean that they take longer
to be completed.
2 A £1,622,000 restoration provision relates to the obligation to restore certain sites now that surface mining operations have ceased. This obligation
is expected to be completed before 31 May 2025 although weather and operational conditions may mean that it takes longer to complete the
restoration works.
3. A £5,077,000 dilapidations provision relates to property leases where there are contractual obligations to restore the property to the condition prior
to the commencement of the lease. The dilapidations provision is based on a third party assessment of the cost of the work which has been
carried out on behalf of the landlord. Of this, £3,127,000 is expected to be completed after 31 May 2025.
4. The insurance provisions represent outstanding excess amounts for claims which have been made but not settled and where there is a reasonable
expectation of an economic outflow.
5. Other provisions relate to various trading related uncertainties that give rise to a potential economic outflow.
26 Capital and Reserves
Share Capital
Group and Company ordinary shares
2024
Number
2023
Number
In issue at 1 June and 31 May
33,138,756
33,138,756
2024
£000
2023
£000
Allotted, called up and fully paid
32,806,355 (2023: 32,527,638) ordinary shares of 10p each (excluding own shares held)
3,281
3,253
Own shares held of 10p each 332,401 (2023: 611,118)
33
61
3,314
3,314
The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings of
the Company.
At the year end the Group held 332,401 (2023: 611,118) within Treasury shares, representing own shares purchased as part of the Group’s share
buyback programme. These shares had a market value of £1.9m at 31 May 2024 (2023: £2.4m) and were purchased for an aggregate consideration of
£1.9m (2023: £3.5m).
Share Premium
The Share Premium represents the excess amount paid for share capital issued at prices higher than the nominal value.
Translation Reserve
The Translation Reserve comprises all foreign exchange differences arising since 1 June 2007, the transition date to Adopted IFRSs, from the translation
of the financial statements of foreign operations.
Hedging Reserve
The Hedging Reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments related to
hedged transactions that have not yet occurred.
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
103
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Share-based Payment Reserve
The Share-based Payment Reserve comprises the cumulative charge in relation to the Group’s long term incentive plans (Note 24). This reserve is
expected to move in line with the charge recognised in the Share-based Payment charge recognised in the Income Statement.
Other Reserves
Other Reserves, the Merger Reserve, and the Capital Redemption Reserve are historical reserves for which no movements are anticipated.
Dividends
The aggregate amount of dividends paid in the year comprises:
2024
£000
2023
£000
Final dividend paid in respect of prior year but not recognised as liabilities in that year (6.0p per share (2023: 5.6p))
1,961
1,822
Additional dividend paid in respect of the prior year (12.0p per share) (2023: 12.0p)
3,922
3,903
Interim dividend paid in respect of the current year (18.0p per share) (2023: 3.0p)
5,905
976
11,788
6,701
Proposed final dividend (18.0p per share (2023: 6.0p))
5,905
1,952
Proposed additional dividend (0p per share (2023: 12.0p))
–
3,883
5,905
5,835
The proposed dividends are not included in liabilities as they were not approved before the year end.
The Company has been advised that a technical issue has arisen in respect of the interim dividend of 18.0p per ordinary share paid by the Company
to shareholders on 4 April 2024 (the Interim Dividend). Although the Company had sufficient distributable profits to pay the Interim Dividend at the
payment date, the Company inadvertently failed to file at Companies House a copy of the interim accounts showing the requisite level of
distributable profits. This failure to file the interim accounts was a technical breach of the Companies Act 2006 and as such the payment of the interim
dividend was technically unlawful.
Since payment of the Interim Dividend was technically in breach of the procedures set out in the Companies Act 2006, the Company may have
claims against past and present shareholders who were recipients of the Interim Dividend to recover the amount paid by way of the dividend.
Similarly, the Company may have claims against those directors who participated in the meetings of the board of directors at which the decision was
taken to pay the Interim Dividend. It is clearly not the intention of the Company that any such claim should be made by the Company against either
its shareholders or its directors. This situation can be remedied by the shareholders passing a resolution which puts shareholders and directors into
the position in which they were always intended to be. The Company intends to propose such a resolution at the AGM to be held on 30 October
2024. There should be no effect on the tax treatment of the Interim Dividend for shareholders.
27 Financial Instruments
The Group’s principal financial instruments comprise short-term receivables and payables, bank loans and overdrafts, obligations under finance leases
and cash. The Group does not trade in financial instruments but uses derivative financial instruments in the form of forward rate agreements to help
manage its interest rate exposures. The main purpose of these financial instruments is to raise finance for the Group’s ongoing operations and to
manage its working capital requirements.
(a) Fair Values of Financial Assets and Financial Liabilities
Fair Value Hierarchy
The following hierarchy classifies each class of financial asset or liability depending on the valuation technique applied in determining its fair value:
Level 1:
The fair value is calculated based on quoted prices traded in active markets for identical assets or liabilities.
Level 2:
The fair value is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either
directly or indirectly. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.
Level 3:
The fair value is based on inputs for the asset or liability that are not based on observable market data (unobservable inputs).
All financial assets and financial liabilities are considered to be level 3.
The fair value of financial instruments held at fair value have been determined based on available market information at the balance sheet date.
The fair value of the options has been determined based upon the fair value of the assets and liabilities of the entities.
104
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Annual Report and Accounts 2024
27 Financial Instruments continued
(b) Credit Risk
Financial Risk Management
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations and
arises principally from the Group’s receivables from customers. The Group’s risk is influenced by the nature of its customers. New customers are
analysed for creditworthiness before the Group’s standard payment terms and conditions are offered and appropriate credit limits set.
Exposure to Credit Risk
The maximum Group exposure to credit risk at the balance sheet date was £64,811,000 (2023: £59,811,000) being the total of the carrying amount of
trade receivables, other receivables, contract assets and amounts due from undertakings in which the Group has a participating interest.
The allowance account for trade receivables is used to record impairment losses unless the Group is satisfied that no recovery of the amount owing is
possible; at that point the amounts considered irrecoverable are written off against the trade receivables directly. Further information on credit risk is
provided in Note 18.
(c) Liquidity Risk
Financial Risk Management
Liquidity risk is the risk that the Group will not be able to access the necessary funds to finance their operations. The Group finances operations
through a mix of short and medium-term facilities.
The Group manages its liquidity risk by monitoring existing facilities and cash flows against forecast requirements based on a rolling cash forecast.
The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the effect of netting
agreements:
2024
2023
Carrying
amount
£000
Contractual
cash flow
£000
1 year
or less
£000
1 to <2
years
£000
2 to <5
years
£000
5 years
and over
£000
Carrying
Amount
£000
Contractual
cash flow
£000
1 year
or less
£000
1 to <2
years
£000
2 to <5
years
£000
5 years
and over
£000
Non-derivative
financial liabilities
Lease liabilities
34,154
37,184
20,174 10,544
6,466
–
36,350
39,459
17,459
15,170
6,830
–
Trade and other payables
43,109
43,109
43,109
–
–
–
47,427
47,427
47,427
–
–
–
77,263
80,293
63,283 10,544
6,466
–
83,777
86,886
64,886
15,170
6,830
–
(d) Market Risk
Financial Risk Management
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value of its
holdings of financial instruments.
The Group is exposed to currency risk on sales and purchases that are denominated in a currency other than the respective functional currencies of
Group entities. The Group’s policy is to reduce currency exposures on sales and purchasing through forward foreign currency contracts. The Group
does not currently have any foreign currency contracts in place.
The Group is exposed to interest rate risk principally where its borrowings are at a variable interest rate. Levels of interest-bearing borrowings are
monitored to minimise the exposure to interest rate risk, when appropriate the Group will utilise interest rate swaps to mitigate the remaining risk.
Currently, the Group does not have any interest rate swaps in place.
The Group mitigates these risks wherever practicable, using measures including fixed price contracts, hedging instruments and “back-to- back”
purchase and sale agreements.
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
105
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Foreign Currency Risk
The Group’s exposure to foreign currency risk is as follows. This is based on the carrying amount for monetary financial instruments except derivatives
when it is based on notional amounts.
31 May 2024
Euro
£000
US Dollar
£000
Hong Kong
Dollar
£000
South African
Rand
£000
Malaysian
Ringgit
£000
Total
£000
Investment in joint ventures
56,046
–
–
–
–
56,046
Cash and cash equivalents
1
1
4,088
1,357
322
5,769
Trade receivables
–
–
2,390
–
–
2,390
Loans due from undertakings in which the
Group has a participating interest
11,088
–
–
–
–
11,088
Other receivables
755
–
78
38
–
871
Accrued income
–
–
4,820
336
9
5,165
Trade payables
–
–
(685)
(86)
–
(771)
Other trade payables
–
–
(9)
–
–
(9)
Non-trade payables and accrued expenses
(10)
–
(3,450)
(337)
(25)
(3,822)
Net exposure
67,880
1
7,232
1,308
306
76,727
The group has no future contracted sales or purchases denominated in a foreign currency at 31 May 2024.
31 May 2023
Euro
£000
US Dollar
£000
Hong Kong
Dollar
£000
South African
Rand
£000
Malaysian
Ringgit
£000
Total
£000
Investment in joint ventures
68,607
–
–
–
–
68,607
Cash and cash equivalents
3
2
2,283
744
412
3,444
Trade receivables
–
–
3,183
–
–
3,183
Loans due from undertakings in which the
Group has a participating interest
11,184
–
–
–
–
11,184
Other receivables
517
–
623
50
–
1,190
Accrued income
–
–
4,649
335
42
5,026
Trade payables
(125)
–
(1,221)
(133)
–
(1,479)
Other trade payables
–
–
(276)
–
–
(276)
Non-trade payables and accrued expenses
(17)
–
(3,290)
(222)
(25)
(3,554)
Net exposure
80,169
2
5,951
774
429
87,325
Sensitivity Analysis
A 10% weakening of the following currencies against the Pound Sterling at 31 May 2024 would have decreased equity and profit or loss by the
amounts shown below. This calculation assumes that the change occurred at the balance sheet date and had been applied to risk exposures existing
at that date.
This analysis assumes that all other variables, in particular other exchange rates and interest rates, remain constant. The analysis is performed on the
same basis for 2023.
Equity
Profit or loss
2024
£000
2023
£000
2024
£000
2023
£000
€
(6,171)
(7,288)
(1,075)
(1,028)
$
–
–
–
–
HKD
(657)
(541)
(657)
(541)
ZAR
(119)
(70)
(119)
(70)
MYR
(28)
(39)
(28)
(39)
A 10% strengthening of the above currencies against the Pound Sterling at 31 May 2024 would have had the equal but opposite effect on the above
currencies to the amounts shown above, on the basis that all other variables remain constant.
106
Hargreaves Services plc
Annual Report and Accounts 2024
27 Financial Instruments continued
Interest Rate Risk
Profile
At the balance sheet date, the interest rate profile of the Group’s interest-bearing financial instruments was:
Group
2024
£000
2023
£000
Fixed rate instruments
Financial liabilities
(34,154)
(36,350)
(34,154)
(36,350)
Variable rate instruments
Financial assets
22,700
21,859
22,700
21,859
Sensitivity Analysis
An increase of one basis point in interest rates throughout the period would have affected profit or loss by the amounts shown below. This
calculation assumes that the change occurred at all points in the period and had been applied to the average risk exposures throughout the period.
This analysis assumes that all other variables, in particular foreign currency rates, remain constant and considers the effect of financial instruments
with variable interest rates, financial instruments at fair value through profit and loss with fixed interest rates and the fixed rate element of interest rate
swaps. The analysis is performed on the same basis for 2023.
Group
2024
£000
2023
£000
Profit or loss
Increase/decrease
223
178
(e) Capital Management
The Group manages its capital to ensure that it will be able to continue as a going concern, whilst maximising the return to shareholders. The capital
structure of the Group consists of debt, which includes leasing related borrowings of £34,154,000 (2023: £36,350,000), cash and cash equivalents of
£22,700,000 (2023: £21,859,000), and equity attributable to equity holders of the Parent, comprising capital, reserves and retained earnings of
£192,096,000 (2023: £200,991,000).
The capital structure is reviewed regularly by the Directors. The Group’s policy is to maintain gearing at levels appropriate to the business. The
Directors take consideration of gearing determined as the proportion of net debt to total capital. It should be noted that the Directors review gearing
taking careful account of the working capital needs and flows of the business. The Group has access to an undrawn £17m invoice discounting facility
with Santander. This facility provides the Group with additional flexibility to deal with any short term working capital fluctuations. The Group’s assets
are not covered by any debenture and the invoice discounting facility has no associated covenants.
The Directors consider the allocation of capital delivered from asset realisation and cash flows from operations, taking into account the growth
opportunities and return on capital employed in each business unit.
28 Capital Commitments
At 31 May 2024, the Group had capital commitments totalling £nil (2023: £nil).
29 Contingencies
The Group and certain of its subsidiary undertakings have composite arrangements in connection with banking facilities. The Company acts as a
guarantor, or surety, for various subsidiary undertakings and joint ventures in banking and other agreements entered into by them in the normal
course of business.
The Group has performance bonds and guarantees in place in relation to various performance obligations under certain contracts. The total value of
these bonds at 31 May 2024 is £1.5m (2023: £1.6m).
In relation to HRMS, the Group no longer provides (2023: €10m or £8.6m) a guarantee in connection with the banking facilities of HRMS.
Notes
(forming part of the Group financial statements) continued
Strategic Report
Directors’ Report
107
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
In May 2024 a serious health and safety incident occurred at one of the Group’s operations. Both internal and external investigations remain ongoing.
Should a prosecution arise then a fine could be incurred. Because it is very early in the investigations, it is not yet possible to reliably quantify the
potential impact of any fine that might be imposed on the Group.
30 Related Parties
Identity of Related Parties with which the Group has Transacted
The Group have a related party relationship with their subsidiaries and joint ventures (Note 14) and its Directors. All related party transactions were
made on terms equivalent to those that prevail in arm’s length transactions only.
Other Related Party Transactions
Sales to
Purchases from
2024
£000
2023
£000
2024
£000
2023
£000
Joint ventures
Tower Regeneration Limited
235
138
–
–
Waystone Hargreaves Land LLP
137
136
–
–
Hargreaves Services Europe Limited
843
1,436
–
–
1,215
1,710
–
–
Interest received from
Interest paid to
2024
£000
2023
£000
2024
£000
2023
£000
Joint ventures
Hargreaves Services Europe Limited
859
800
165
125
Waystone Hargreaves Land LLP
167
–
–
–
1,026
800
165
125
Loan receivables outstanding
Trade receivables outstanding
2024
£000
2023
£000
2024
£000
2023
£000
Joint ventures
Tower Regeneration Limited
14,191
14,275
100
34
Carbon Action Limited
143
144
–
–
Waystone Hargreaves Land LLP
2,491
1,627
315
101
Hargreaves Services Europe Limited
11,088
11,184
3,151
1,385
27,913
27,230
3,566
1,520
Loan payables outstanding
Trade payables outstanding
2024
£000
2023
£000
2024
£000
2023
£000
Joint ventures
Hargreaves Services Europe Limited
–
3,954
–
136
–
3,954
–
136
Transactions with Key Management Personnel
The Directors are the key management personnel of the Group. Details of Directors’ remuneration, share options, pension benefits and other
non-cash benefits can be found in Note 6. In addition to this, the element of the share-based payment charge for the year that relates to key
management personnel is £132,000 (2023: £170,000) and the social security costs amounted to £207,000 (2023: £321,000). There are no other
post-employment or other long-term benefits.
31 Ultimate controlling party
The Company is listed on the Alternative Investment Market of the London Stock Exchange. Material shareholders are detailed within the Directors’
Report. There is no ultimate controlling party of the Group.
108
Hargreaves Services plc
Annual Report and Accounts 2024
Parent Company Balance Sheet
at 31 May 2024
Company
Note
2024
£000
2023
£000
Fixed assets
Investments in joint ventures
4
4,984
4,984
Investments in subsidiary undertakings
4
33,477
33,135
Deferred tax assets
6
38
–
38,499
38,119
Current assets
Trade and other receivables
5
116,358
95,582
Cash and cash equivalents
15,461
12,646
Income tax asset
1,081
–
132,900
108,228
Total assets
171,399
146,347
Current liabilities
Trade and other payables
7
(65,704)
(52,381)
Income tax liability
–
(81)
(65,704)
(52,462)
Total liabilities
(65,704)
(52,462)
Net assets
105,695
93,885
Share capital
8
3,314
3,314
Share premium
8
73,990
73,972
Merger reserve
8
1,022
1,022
Capital redemption reserve
8
1,530
1,530
Share-based payment reserve
8
2,730
2,388
Retained earnings
23,109
11,659
Total Equity
105,695
93,885
The Company’s profit after tax for the year was £23.2m (2023: £3.1m).
The notes on pages 110 to 113 form an integral part of these financial statements.
These financial statements on pages 108 to 113 were approved by the Board of Directors on 5 August 2024 and were signed on its behalf by:
Gordon Banham
Director
Registered number: 4952865
Strategic Report
Directors’ Report
109
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Company
Share
capital
£000
Share
premium
£000
Capital
redemption
reserve
£000
Merger
reserve
£000
Share-based
payment
reserve
£000
Retained
earnings
£000
Total Parent
equity
£000
At 31 May 2022 and 1 June 2022
3,314
73,972
1,530
1,022
2,029
15,258
97,125
Total comprehensive income for the year
Profit for the year
–
–
–
–
–
3,102
3,102
Total comprehensive income for the year
–
–
–
–
–
3,102
3,102
Transactions with owners recorded directly in equity
Equity-settled share-based payment transactions
–
–
–
–
359
–
359
Dividends paid
–
–
–
–
–
(6,701)
(6,701)
Total contributions by and distributions to owners
–
–
–
–
359
(6,701)
(6,342)
At 31 May 2023 and 1 June 2023
3,314
73,972
1,530
1,022
2,388
11,659
93,885
Total comprehensive income for the year
Profit for the year
–
–
–
–
–
23,238
23,238
Total comprehensive income for the year
–
–
–
–
–
23,238
23,238
Transactions with owners recorded directly in equity
Issue of shares
–
18
–
–
–
–
18
Equity-settled share-based payment transactions
–
–
–
–
342
–
342
Dividends paid
–
–
–
–
–
(11,788)
(11,788)
Total contributions by and distributions to owners
–
18
–
–
342
(11,788)
(11,428)
At 31 May 2024
3,314
73,990
1,530
1,022
2,730
23,109
105,695
Parent Company Statement of Changes in Equity
for year ended 31 May 2024
110
Hargreaves Services plc
Annual Report and Accounts 2024
Notes
(forming part of the Company financial statements)
1 Accounting Policies
Hargreaves Services plc (the “Company”, “Parent Company”) is a public company limited by shares and incorporated, domiciled and registered in
England, UK.
The Company’s principal activity is to act as a holding company for its subsidiaries. Parent Company financial statements present information about
the Company as a separate entity and not about the Group.
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently
applied to all years presented, unless otherwise stated.
Statement of compliance with FRS 101
These financial statements were prepared in accordance with Financial Reporting Standard 101, ‘Reduced Disclosure Framework’ (FRS 101). The
Company meets the definition of a qualifying entity under FRS 101, ‘Application of Financial Reporting Requirements’ as issued by the Financial
Reporting Council.
Basis of preparation
The Company has elected to adopt FRS 101 for the year ended 31 May 2024 for the first time. In preparing these financial statements, the Company
has applied the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the UK
(UK-adopted international accounting standards), but has made amendments where necessary in order to comply with the Companies Act 2006 and
to take advantage of FRS 101 disclosure exemptions. The Company has departed from consistent accounting policies with the Group as the Group
financial statements are prepared under UK-adopted international accounting standard and the Company Directors have taken the decision to
prepare the Company financial statements in accordance with FRS 101.
The Company financial statements for the year ending 31 May 2023 were prepared in accordance with UK-adopted international accounting
standards. No restatements were required for the comparative figures. None of the standards, interpretations and amendments effective for the first
time from 1 June 2023 have had a material effect on the financial statements.
Going Concern
The Company is the ultimate holding company to a group which is highly cash generative and has access to a £12m invoice discounting facility,
which is currently undrawn and will remain in place at this level until 31 October 2025. The Directors are, therefore, satisfied that the Company has
adequate resources to continue in operational existence for the foreseeable future. Further information on the Group’s going concern and ongoing
viability is provided in note 1 of the Group financial statements.
Accounting Estimates involving Judgements
The preparation of financial statements in conformity with FRS 101 requires the use of certain critical accounting estimates. It also requires
management to exercise its judgement in the process of applying the Company’s accounting policies. Due to the nature of the Company, we
consider investments in subsidiaries, investments in joint ventures and parent company intra-group balances to involve critical accounting estimates
or judgements made in the preparation of these financial statements.
a) Investments in Subsidiaries, Investments in Joint Ventures and Parent Company Intra-Group Balances
Management has considered the carrying value of the investment and performed an assessment for impairment indicators. The assessment of
impairment involves assumptions on the estimated future operating cash flows from these CGUs, the discount rate applied in the calculations and
the comparison of the cash flows to the carrying value of the investments. These are key areas of judgement and include significant accounting
estimates.
New standards, amendments and interpretations
For the latest amendments and interpretations, please refer to Note 1 in the Group financial statements.
Fixed asset investments in subsidiary undertakings
Fixed asset investments in subsidiary undertakings are recorded at cost less any provision for impairment.
Fixed asset investments in joint ventures
Joint ventures are accounted for using the equity method (equity accounted investees) and are initially recognised at cost, or fair value where cost is
lower than fair value at acquisition, net of any impairment losses.
Cash and Cash Equivalents
Cash and cash equivalents comprise cash balances and call deposits.
Strategic Report
Directors’ Report
111
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Trade receivables
Trade receivables for the Company refer to prepayments made for services performed in the ordinary course of business. Trade receivables are
recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade payables
are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Taxation
Tax on the profit or loss for the period comprises both current and deferred tax. Tax is recognised in the Income Statement except to the extent that it
relates to items recognised directly in equity, in which case it is recognised in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date,
and any adjustment to tax payable in respect of previous years.
Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the
carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.
The following temporary differences are not provided for: the initial recognition of goodwill, the initial recognition of assets or liabilities that affect
neither accounting nor taxable profit other than in a business combination, and differences relating to investments in subsidiaries to the extent that
they will probably not reverse in the foreseeable future.
A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be
utilised.
Share-Based Payment Transactions
Where the Company grants share-based payment awards over its own shares to the employees of its subsidiaries it recognises, in its individual
financial statements, an increase in the cost of investment in its subsidiaries equivalent to the equity-settled share-based payment charge recognised
in its consolidated financial statements with the corresponding credit being recognised directly in equity.
Related parties
In these financial statements, the Company has taken advantage of the following disclosure exemptions available under FRS 101:
• The requirement of paragraph 17 of IAS 24 ‘Related Party Transactions’; and
• The requirements in IAS 24 ‘Related Party Disclosures’ to disclose related party transactions entered into between two or more members of a
group, provided that any subsidiary which is party to the transaction is a wholly-owned by such a member.
2 Income Statement and Statement of Cash Flow Exemption
The Company has elected to take the exemption under section 408 of the Companies Act 2006 from presenting the Income Statement or a
Statement of Comprehensive Income for the Company. Total comprehensive income for the Company for the year was £23.2m (2023: £3.1m).
The Company has taken advantage of the disclosure exemptions under FRS 101 in relation to the requirements of IAS 7 ‘Statement of Cash Flows’.
3 Directors Remuneration
Details of the Company’s director’s remuneration are given in Note 6 of the Group financial statements.
The Company has no employees other than the Directors noted in Note 6 of the Group financial statements (2023: nil).
4 Investments in Subsidiaries and Joint Ventures
List of Registered Offices:
4.1 West Terrace, Esh Winning, Durham, DH7 9PT
4.2 Suite 2, Park House Earls Colne Business Park, Earls Colne, Colchester, Essex, England, CO6 2NS
4.3 3 Nobel Boulavard, Cape Gate NE3, Vanderbijlpark, Gauteng, 1900
4.4 Lot 6.05, Level 6, 8 First Avenue, Bandar Utama, 47800 Petaling Jaya, Selangor Darul Ehsan, Malaysia
4.5 Room 1117-8, 11th Floor, Tuen Mun Central Square, N0.22 Hoi Wing Road, Tuen Mun, New Territories, HK
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Annual Report and Accounts 2024
The Company have the following investments in subsidiaries and joint ventures at the end of the year:
Ownership
Address of
registered office
Class of shares
held
2024
2023
Company
Subsidiary undertakings
Hargreaves (UK) Limited
4.1
Ordinary
100%
100%
Hargreaves Industrial Services Limited
4.1
Ordinary
100%
100%
Forward Sound Limited*
4.1
Ordinary
100%
100%
Hargreaves Services (HK) Limited
4.5
Ordinary
100%
100%
Hargreaves Land Limited
4.1
Ordinary
100%
100%
H Technical Resources Limited*
4.1
Ordinary
100%
100%
Hargreaves Maltby Limited*
4.1
Ordinary
100%
100%
Hargreaves Property Ventures Limited
4.1
Ordinary
100%
100%
Hargreaves Services (Westfield) Limited*
4.1
Ordinary
100%
100%
Hargreaves Services (Castlebridge) Limited*
4.1
Ordinary
–
100%
Hargreaves Services (Blindwells) Limited
4.1
Ordinary
100%
100%
Hargreaves Services Forestry Limited*
4.1
Ordinary
100%
100%
Hargreaves Services South Africa (Pty) Ltd
4.3
Ordinary
100%
100%
C.A. Blackwell Group Limited*
4.1
Ordinary
100%
100%
Hargreaves Industrial Services Sdn Bhd
4.4
Ordinary
100%
100%
Hargreaves Pension Company Limited
4.1
Ordinary
100%
100%
Hargreaves Land Holdings Limited*
4.1
Ordinary
100%
100%
Blackwell Earthmoving Limited
4.2
Ordinary
100%
100%
Dormant
Coal 4 Energy Limited*
4.1
Ordinary
100%
100%
Hargreaves Carbon Products Europe Limited*
4.1
Ordinary
100%
100%
Hargreaves Corporate Director Limited*
4.1
Ordinary
100%
100%
Hargreaves Industrial Products Limited*
4.1
Ordinary
100%
100%
HBLT Limited*
4.1
Ordinary
100%
100%
R Hanson & Son Limited*
4.1
Ordinary
100%
100%
HESOTT Limited*
4.1
Ordinary
100%
100%
Joint ventures
Hargreaves Services Europe Limited
4.1
Ordinary
49%
49%
*
These UK subsidiaries are exempt from audit by virtue of s479A of the Companies Act 2006.
Company
Group
undertakings
£000
Joint
ventures
£000
Shares at cost and net book value
At 1 June 2022
31,358
4,984
Capital contribution arising on share options
359
–
Investment in Hargreaves Services South Africa (Pty) Ltd
1,418
–
At 31 May 2023
33,135
4,984
At 1 June 2023
33,135
4,984
Capital contribution arising on share options
342
–
At 31 May 2024
33,477
4,984
The capital contribution arising on share options is as a result of the share-based payment charge during the year.
Notes
(forming part of the Company financial statements) continued
4 Investments in Subsidiaries and Joint Ventures continued
Strategic Report
Directors’ Report
113
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Annual Report and Accounts 2024
Financial Statements
On 1 June 2022, Hargreaves Services South Africa (Pty) Ltd issued 101 ordinary shares of £1 each to Hargreaves Services plc, its parent company, at a
consideration of £14,040 per ordinary share. The consideration was satisfied by converting £1.4m of loan due by Hargreaves Services South Africa (Pty)
Ltd to Hargreaves Services plc into equity.
Further details of the Company’s investments in joint ventures are given in Note 14 of the Group Financial Statements.
5 Trade and other receivables
Company
2024
£000
2023
£000
Amounts due from Group undertakings
102,386
83,321
Amounts due from undertakings in which the Company has a participating interest
13,710
11,974
Other receivables
236
244
Prepayments and accrued income
26
43
116,358
95,582
Included within trade and other receivables is £nil (2023: £nil) expected to be recovered in more than 12 months.
Amounts due from Group undertakings to the Company are repayable on demand. No interest is charged on these balances.
Amounts due from undertakings in which the Company has a participating interest are repayable on demand. Interest is charged at rates ranging
between 7% and 10%.
6 Deferred tax asset
The Company has deferred tax assets of £38,000 (2023: £nil).
7 Trade and other payables
Company
2024
£000
2023
£000
Amounts due to Group undertakings
65,704
48,301
Amounts due to undertakings in which the Company has a participating interest
–
4,080
65,704
52,381
Amounts due to Group undertakings for the Company are repayable on demand. No interest is incurred on these balances.
Amounts due to undertakings in which the Company has a participating interest are repayable on demand. Interest is charged at 1.7% above the
Bank of England base rate.
8 Capital and reserves
Details of the Company’s capital and reserves are given in Note 26 of the Group Financial Statements.
9 Dividends
Details of the Company’s dividends are given in Note 26 of the Group Financial Statements.
10 Financial Instruments
The Company has taken advantage of the disclosure exemptions under ‘IFRS 7 financial instruments: Disclosure’ from presenting details and
sensitivities on its financial instruments.
11 Capital Commitments
At 31 May 2024, the Company had capital commitments totalling £nil (2023: £nil).
114
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Annual Report and Accounts 2024
Alternative Performance Measures Glossary
This report provides alternative performance measures (“APMs”), which are not defined or specified under the requirements of International Financial
Reporting Standards. The Board believes that these APMs provide readers with important additional information on the business.
Alternative Performance Measure
Definition and Purpose
Underlying profit before tax (“UPBT”)
Represents the profit before tax prior to amortisation of intangible assets, and, in accordance with
International Accounting Standards, includes the Group’s share of the post-tax profit of its German joint
venture. This measure is consistent with how the business measures performance and is reported to
the Board.
2024
£000
2023
£000
Profit before tax
16,676
27,155
Amortisation of intangible assets
191
175
Underlying Profit before Tax
16,867
27,330
Basic underlying earnings per share
Profit attributable to the equity holders of the Company prior to amortisation of intangible assets after
tax divided by the weighted average number of ordinary shares during the financial year adjusted for
the effects of any potentially dilutive options. See Note 9.
EBITDA
EBITDA is defined as profit before tax prior to charges for depreciation, amortisation and interest and
excludes the share of profit from joint ventures and gains and losses on the sale of fixed assets and
investment property.
2024
£’000
2023
£’000
Profit before tax
16,676
27,155
Depreciation
16,212
14,570
Amortisation of intangible assets
191
175
Net finance expense
724
953
Share of profit in joint ventures (net of tax)
(1,533)
(16,311)
Profit on sale of fixed assets and investment property
(6,204)
(4,718)
EBITDA
26,066
21,824
Net Asset Value per share
Represents the Net Asset value of the Group divided by the number of shares in issue less those shares
held in treasury. Calculated as follows:
2024
2023
Total shares in issue
33,138,756
33,138,756
Less shares in treasury
(332,401)
(611,118)
Shares for calculation
32,806,355
32,527,638
Net Asset Value per Balance Sheet
£192,096,000
£200,991,000
Net Asset Value per share
£5.86
£6.18
Strategic Report
Directors’ Report
115
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
NOTICE IS GIVEN that this year’s Annual General Meeting of Hargreaves Services plc (the Company) will be held at Prior’s Hall, Durham
Cathedral, Durham, DH1 3EH on 30 October 2024 at 11.00am to consider and, if thought fit, approve the following resolutions:
Ordinary Business
1.
To adopt and receive the Directors’ Report, the Strategic Report, the Directors’ Corporate Governance and Remuneration Reports, the Audit &
Risk Committee Report, the Auditor’s Report and the Financial Statements for the year ended 31 May 2024.
2.
To approve the Directors’ Corporate Governance and Remuneration Reports for the year ended 31 May 2024.
3.
To declare a final dividend for the year ended 31 May 2024 of 18 pence per ordinary share to bring the dividend for the year ended 31 May 2024 to
a total of 36 pence per ordinary share.
4.
To re-appoint Nigel Halkes as a director of the Company in accordance with article 34 of the Company’s Articles of Association, who offers himself
for re-appointment.
5.
To re-appoint Gordon Banham as a director of the Company in accordance with article 34 of the Company’s Articles of Association, who offers
himself for re-appointment.
6. To re-appoint David Anderson as a director of the Company in accordance with article 34 of the Company’s Articles of Association, who offers
himself for re-appointment.
7.
To re-appoint PricewaterhouseCoopers LLP as auditors of the Company to hold office from the conclusion of this meeting to the conclusion of
the next general meeting at which accounts are laid before the Company.
8. To authorise the Audit & Risk Committee of the board of directors to determine the remuneration of the auditors.
9.
To authorise the directors of the Company pursuant to section 551 of the Companies Act 2006 (the Act) generally and unconditionally to exercise
all the powers of the Company to allot shares in the Company and to grant rights to subscribe for, or to convert any security into such shares in
the Company:
9.1.
up to an aggregate nominal value of £1,104,625 (representing approximately one-third of the total ordinary share capital in issue (excluding
shares held in Treasury) as at 2 August 2024); and
9.2.
comprising equity securities (within the meaning of section 560 of the Act) up to an aggregate nominal amount of £2,209,250 (after
deducting from such amount any shares allotted under the authority conferred by virtue of resolution 9.1) in connection with or pursuant
to a pre-emptive offer,
provided that such authorities conferred by this resolution 9 shall expire on the earlier of the conclusion of the next Annual General Meeting of
the Company or the date falling six months after the end of the Company’s current financial year unless varied, revoked or renewed by the
Company in general meeting, save that the Company may at any time before such expiry make offers or agreements which would or might
require shares to be allotted or rights to be granted after such expiry and the directors may allot shares and grant rights pursuant to such offers or
agreements as if the relevant authorities conferred by this resolution 9 had not expired. These authorities shall be in substitution for all previous
authorities previously granted to the directors to allot shares and grant rights which are pursuant to this resolution 9 revoked but without
prejudice to any allotment or grant of rights made or entered into prior to the date of this resolution 9.
10. Subject to and conditional upon the passing of resolution 9 (and in substitution for all existing like powers granted to the directors of the
Company (to the extent they remain in force and unexercised)), the directors be and are empowered pursuant to sections 570 and 573 of the Act
to allot equity securities (as defined in section 560 of the Act) of the Company for cash:
10.1. pursuant to the authority conferred upon them by resolution 9.1 or where the allotment constitutes an allotment of equity securities by
virtue of section 560(3) of the Act, in each case:
10.1.1.
in connection with or pursuant to an offer of such securities by way of a pre-emptive offer; and
10.1.2.
(otherwise than pursuant to 10.1.1 above) up to an aggregate nominal value of £331,387.56 (representing approximately 10% of
the total ordinary share capital in issue (including shares held in Treasury) as at 2 August 2024); and
10.2. pursuant to the authority conferred upon them by resolution 9.2, in connection with or pursuant to a pre-emptive offer,
as if section 561(1) of the Act and sub-sections (1) – (6) of section 562 of the Act did not apply to any such allotment, and the powers given shall
expire on the earlier of the conclusion of the next Annual General Meeting of the Company or the date falling six months after the end of the
Company’s current financial year unless renewed or extended prior to such expiry, save that the directors of the Company may before such
expiry make offers or agreements which would or might require equity securities to be allotted after such expiry and the directors may allot
equity securities in pursuance of any such offer or agreement as if the power had not expired.
Special Business
11. To approve amendments to the Hargreaves Services plc Executive Share Option Scheme (the Scheme), the principal amendments of which are
set out in the explanatory notes below.
12. The Company be and is generally and unconditionally authorised for the purpose of section 701 of the Act to make market purchases (which in
this resolution shall have the meaning given to this term in section 693(4) of the Act) of its ordinary shares of 10 pence each in the capital of the
Company (Ordinary Shares) on the terms set out below:
12.1. the maximum aggregate number of Ordinary Shares authorised to be purchased by the Company pursuant to this resolution 12 is 4,920,953
(representing approximately 15% of the total ordinary share capital in issue (excluding shares held in Treasury) as at 2 August 2024); and
12.2. the minimum price which may be paid for each of those Ordinary Shares (exclusive of expenses) is 10 pence; and
Notice of Annual General Meeting – Hargreaves Services plc
(incorporated and registered in England and Wales under company number 4952865)
116
Hargreaves Services plc
Annual Report and Accounts 2024
12.3. the maximum price (exclusive of expenses) which may be paid for each of those Ordinary Shares is not more than the higher of: (i) 5%
above the average of the middle market quotations for Ordinary Shares (as derived from the Daily Official Lists of the London Stock
Exchange) for the five dealing days immediately preceding the date of purchase; and (ii) the price stipulated by European Commission-
adopted Regulatory Technical Standards pursuant to Article 5(6) of the Market Abuse Regulation, but so that this authority shall (unless
previously varied, revoked or renewed) expire on the earlier of the conclusion of the next Annual General Meeting of the Company or the
date falling six months after the end of the Company’s current financial year, save that the Company may before the expiry of this authority
conclude any contract for the purchase of its own shares pursuant to the authority conferred by this resolution 12 which contract would or
might be executed wholly or partially after the expiration of this authority as if the authority conferred by this resolution 12 had not expired.
13. To consider and, if thought fit, to pass the following resolution as a special resolution:
That:
13.1. the payment of the amount of 18 pence per ordinary share by way of interim dividend on 4 April 2024 (the “Interim Dividend”) and the
entry in the audited accounts of the Company for the year ended 31 May 2024 whereby distributable profits of the Company were
appropriated to the payment of the Interim Dividend, be and is hereby ratified and confirmed;
13.2. any and all claims which the Company may have in respect of the payment of the Interim Dividend against its shareholders who appeared
on the register of shareholders on the relevant record date be released with effect from 4 April 2024 and a deed of release in favour of such
shareholders be entered into by the Company in the form of the deed produced to the Meeting and signed by the Chairman for the
purposes of identification;
13.3. any distribution involved in the giving of any such release in relation to the Interim Dividend be made out of the profits appropriated to the
Interim Dividend as aforesaid by reference to a record date identical to the record date for the Interim Dividend; and
13.4. any and all claims which the Company has or may have against its directors (whether past, present or future) arising in connection with the
payment of the Interim Dividend be released and that a deed of release in favour of the directors of the Company be entered into by the
Company in the form of the deed produced to the Meeting and signed by the Chair for the purposes of identification.
5 August 2024
By order of the Board
David Hankin
Company Secretary
Registered Office:
West Terrace
Esh Winning
Durham
DH7 9PT
Registered in England and Wales No. 4952865
Notice of Annual General Meeting – Hargreaves Services plc
(incorporated and registered in England and Wales under company number 4952865) continued
Strategic Report
Directors’ Report
117
Hargreaves Services plc
Annual Report and Accounts 2024
Financial Statements
Notes
1.
This notice is the formal notification to members of the Company’s Annual General Meeting (the Meeting), its date, time and place and the
matters to be considered. If you are in doubt as to what action you should take you should consult an independent adviser.
2.
Resolutions 1 to 9 and resolution 11 will be proposed as ordinary resolutions. A simple majority (being more than 50%) of votes cast must be in
favour of each such resolution in order for it to be passed.
Resolutions 10, 12 and 13 will be proposed as special resolutions. A special resolution requires 75% or more of votes cast to be in favour of such
resolution in order for it to be passed.
All business proposed at the Meeting is ordinary business, pursuant to Article 24.1, save for resolutions 11 to 13. Pursuant to Regulation 41 of the
Uncertificated Securities Regulations 2001 (as amended), only those shareholders registered in the register of members of the Company at close
of business on 28 October 2024 as holders of ordinary shares of 10 pence each in the capital of the Company shall be entitled to attend and vote
at the Meeting in respect of the number of shares registered in their name at the time. Changes to entries in the register of members after close
of business on 28 October 2024 shall be disregarded in determining the rights of any person to attend and vote at the Meeting.
3.
If you are a member of the Company at the time set out in Note 2 above, you are entitled to appoint a proxy to exercise all or any of your rights to
attend and to speak and vote on your behalf at the Meeting. You can only appoint a proxy using the procedures set out in these notes and the
notes to the proxy form.
A shareholder may appoint more than one proxy in relation to the Meeting provided that each proxy is appointed to exercise the rights attached
to a different share or shares held by you. You may not appoint more than one proxy to exercise rights attached to any one share. A proxy need
not be a shareholder of the Company. A proxy form which may be used to make such appointment and give proxy instructions accompanies
this notice.
4.
To be valid any proxy form or other instrument appointing a proxy must be received by post or (during normal business hours only) by hand at
the office of the Registrars of the Company, Neville Registrars Limited, Neville House, Steelpark Road, Halesowen, West Midlands B62 8HD no later
than 11.00am on 28 October 2024.
5.
The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described in Notes 10-13 below) will not in itself
prevent a shareholder attending the Annual General Meeting and voting in person if he/she wishes to do so.
6. If a member appoints a proxy or proxies and then decides to attend the Annual General Meeting in person and vote using his poll card, then the
vote in person will override the proxy vote(s). If the vote in person is in respect of the member’s entire holding, then all proxy votes will be
disregarded. If, however, the member votes at the meeting in respect of less than the member’s entire holding, then if the member indicates on
his polling card that all proxies are to be disregarded, that shall be the case; but if the member does not specifically revoke proxies, then the vote
in person will be treated in the same way as if it were the last received proxy and earlier proxies will only be disregarded to the extent that to
count them would result in the number of votes being cast exceeding the member’s entire holding. If you do not have a proxy form and/or
believe that you should have one or if you require additional forms, please contact the Registrars of the Company, Neville Registrars Limited,
Neville House, Steelpark Road, Halesowen, West Midlands B62 8HD.
7.
To change your proxy instructions simply submit a new proxy appointment using the methods set out above. Note that the cut-off time for
receipt of proxy appointments (see Note 4 above) also applies in relation to amended instructions; any amended proxy appointment received
after the relevant cut-off time will be disregarded.
8. Where you have appointed a proxy using the hard-copy proxy form and would like to change the instructions using another hard-copy proxy
form, please contact Neville Registrars Limited, Neville House, Steelpark Road, Halesowen, West Midlands B62 8HD. If you submit more than one
valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take precedence.
9.
In order to revoke a proxy instruction, you will need to inform the Company by sending a signed hard copy notice clearly stating your intention
to revoke your proxy appointment to Neville Registrars. In the case of a member which is a company, the revocation notice must be executed
under its common seal or signed on its behalf by an officer of the company or an attorney for the company. Any power of attorney or any other
authority under which the revocation notice is signed (or a duly certified copy of such power or authority) must be included with the revocation
notice. The revocation notice must be received by Neville Registrars Limited, Neville House, Steelpark Road, Halesowen, West Midlands B62 8HD
no later than 11.00am on 28 October 2024. If you attempt to revoke your proxy appointment but the revocation is received after the time
specified then, subject to Note 7 above, your appointment will remain valid.
10. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the
procedures described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have
appointed voting service provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate
action on their behalf.
11. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a “CREST Proxy
Instruction”) must be properly authenticated in accordance with Euroclear UK & Ireland Limited’s (Euroclear) specifications, and must contain the
information required for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment
of a proxy or is an amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be
received by the issuer’s agent (ID 7RA11) by 11.00am on 28 October 2024. For this purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the
message by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means.
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Annual Report and Accounts 2024
12. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that Euroclear does not make available
special procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of
CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or
sponsored member, or has appointed (a) voting service provider(s), to procure that his CREST sponsor or voting service provider(s) take(s)) such
action as shall be necessary to ensure that a message is transmitted by means of the CREST system by any particular time. In this connection,
CREST members and, where applicable, their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST
Manual concerning practical limitations of the CREST system and timings.
13. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities
Regulations 2001 (as amended).
14. If a corporation is a member of the Company, it may by resolution of its directors or other governing body authorise one or more persons to act
as its representative or representatives at the Meeting and any such representative or representatives shall be entitled to exercise on behalf of the
corporation all the powers that the corporation could exercise if it were an individual member of the Company. Corporate representatives should
bring with them either an original or certified copy of the appropriate board resolution or an original letter confirming the appointment,
provided it is on the corporation’s letterhead and is signed by an authorised signatory and accompanied by evidence of the signatory’s authority.
15. As at 2 August 2024 (being the last business day prior to the publication of this Notice) the Company’s issued share capital consisted of 33,138,756
ordinary shares (332,401 of which are held in Treasury with no voting rights). Therefore, the total voting rights in the Company as at 2 August 2024
was 32,806,355.
16. The following documents will be available for inspection at the Company’s registered office at West Terrace, Esh Winning, Durham, DH7 9PT
during normal business hours on any week day (Saturdays and English public holidays excepted) from the date of this notice until the close of the
Meeting and at the place of that Meeting for at least 15 minutes prior to and during the Meeting:
•
copies of the service contracts for the Executive Directors of the Company;
•
copies of the letters of appointment of Non-Executive Directors of the Company; and
•
the form of deed of release in favour of shareholders and the form of the deed of release in favour of the directors of the Company, each as
referred to in resolution 0.
Explanatory Notes to the Notice of Annual General Meeting
The notes on the following pages explain the proposed resolutions.
Resolution 1: Accounts
The directors will present the Directors’ Report, the Strategic Report, the Directors’ Corporate Governance and Remuneration Reports, the Audit &
Risk Committee Report, the Auditor’s Report and the Financial Statements for the financial year ended 31 May 2024 to the meeting as required by law.
These financial statements on pages 62 to 107 of the Company’s Annual Report.
Resolution 2: Approval of the Directors’ Remuneration Report
Shareholders are asked to approve the Directors’ Remuneration Report for the financial year ended 31 May 2024 which is set out in full on pages 50 to 53
of the Company’s Annual Report. The vote is advisory and the directors’ entitlement to remuneration is not conditional upon this resolution being
passed.
Resolution 3: Final Dividend
The Board proposes a dividend for the financial year ended 31 May 2024 of 18 pence per ordinary share. If the meeting approves resolution 3, the
dividend will be paid on 4 November 2024 to shareholders on the register of members on 27 September 2024.
Resolutions 4, 5, and 6: Re-appointment of Directors
At each Annual General Meeting one-third of the directors for the time being (other than those appointed since the last Annual General Meeting) are
required to retire. If the number of relevant directors is not a multiple of three, the number nearest to one-third of directors, but not less than
one-third, must retire. Directors due to retire by rotation are those longest in office since their last re-election or re-appointment. A retiring director is
eligible for re-appointment. Nigel Halkes, Gordon Banham and David Anderson are offering themselves for re-appointment.
Brief biographical details of Nigel Halkes, Gordon Banham and David Anderson are set out on pages 40 and 41 of this document.
Resolutions 7 and 8: Re-appointment and Remuneration of Auditors
The Company is required to appoint auditors at each general meeting at which accounts are laid, to hold office until the next general meeting.
PricewaterhouseCoopers LLP are willing to be re-appointed for a year and resolution 7 proposes their appointment and, in accordance with standard
practice, resolution 8 authorises the Audit & Risk Committee of the board of directors of the Company to determine the level of the auditors’
remuneration.
Resolution 9: Renewal of Board’s Authority to Allot Shares
Resolution 9.1 grants the directors authority to allot relevant ordinary shares up to an aggregate nominal amount of £1,104,625 being approximately
one-third of the Company’s issued ordinary share capital (excluding shares held in Treasury) as at 2 August 2024.
Notice of Annual General Meeting – Hargreaves Services plc
(incorporated and registered in England and Wales under company number 4952865) continued
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Directors’ Report
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Financial Statements
In line with guidance issued by the Investment Association, resolution 9.2 grants the directors authority to allot ordinary shares in connection with
pre-emptive offers (including a rights issue) up to an aggregate nominal amount of £2,209,250 (representing 22,092,500 ordinary shares of 10 pence
each), as reduced by the nominal amount of any shares issued under resolution 9.1. This amount, before any such reduction, represents approximately
two-thirds of the Company’s issued ordinary share capital (excluding shares held in Treasury) as at 2 August 2024. Under a rights issue, ordinary
shareholders are invited to subscribe for further ordinary shares in proportion (as near as is practicable) to their holdings of shares in the Company and,
if they accept the invitation, their holding of shares is not diluted (and if they decline the offer then they can sell their “rights” in the market for value).
Guidelines issued by the Investment Association provide that an authority for directors to allot new shares up to an amount equal to one-third of the
existing share capital, such as that granted by resolution 9.1, will be regarded as routine. The Investment Association guidelines also state that an
authority for directors to allot a further amount equal to one-third of the existing issued share capital, such as that granted by resolution 9.2, will also
be regarded as routine as long as that additional authorisation applies only to pre-emptive offers.
It is not the directors’ current intention to exercise either of these authorities. The authorities granted by resolution 9 replace the existing authorities
to allot shares.
Resolution 10: General Disapplication of Statutory Pre-emption Rights
Resolution 10.1.1 grants the directors power to allot shares without first offering them to existing shareholders in proportion to their existing
shareholdings, where such offers are made in connection with or pursuant to a pre-emptive offer of shares.
Resolution 10.1.2 permits the directors to allot shares without first offering them to existing shareholders and otherwise than in connection with a
pre-emptive offer, but only up to a maximum nominal amount of £331,387.56 (representing 3,313,876 ordinary shares of 10 pence each and being
approximately 10% of the total ordinary share capital (including treasury shares)).
Resolution 10.2 grants the directors power to allot those shares issued further to the powers granted to them under resolution 9.2 without first
offering them to existing shareholders.
Resolution 11: Approval of amendments to the Hargreaves Services plc Executive Share Option Scheme (the Scheme)
The Board proposes that shareholders approve an amendment to the performance criteria of the Hargreaves Services plc Executive Share Option
Scheme. It is proposed that the Company Performance Option be amended to require TSR growth between 30% and 75%. The EPS Growth Option
will remain unchanged. The amendments, if approved, will apply to future options awarded under the scheme.
Resolution 12: Purchase of Own Shares
Resolution 12 authorises the Company to purchase its own shares (in accordance with section 701 of the Act) during the period from the date of this
Annual General Meeting until the end of the next Annual General Meeting of the Company or the expiration of six months after the Company’s
current financial year end, whichever is the sooner, up to a total of 4,920,953 ordinary shares. This represents approximately 15% of the issued ordinary
share capital of the Company (excluding shares held in Treasury) as at 2 August 2024. The maximum price payable for a share shall not be more than
the higher of 5% above the average of the middle market quotations of such shares for the five business days before such purchases and the price
stipulated in the European Commission-adopted Regulatory Technical Standards pursuant to Article 5(6) of the Market Abuse Regulation (being the
higher of the price of the last independent trade and the highest current independent bid on the trading venue where the purchase is carried out).
The minimum price payable for a share will be 10 pence. Companies are permitted to retain any of their own shares which they have purchased as
treasury shares with a view to possible re-issue at a future date, rather than cancelling them. The Company will consider holding any of its own shares
that it purchases pursuant to the authority conferred by this resolution as treasury shares. This would give the Company the ability to re-issue treasury
shares quickly and cost-effectively and would provide the Company with additional flexibility in the management of its capital base.
The directors will consider making use of the renewed authority pursuant to resolution 12 in circumstances which they consider to be in the best
interests of shareholders generally after taking account of market conditions prevailing at the time, other investment opportunities, appropriate
gearing levels, the effect on earnings per share and the Company’s overall financial position. No purchases will be made which would effectively alter
the control of the Company without the prior approval of the shareholders in a general meeting.
Resolution 13: ratification and confirmation of the 2024 interim dividend and matters relating thereto
A technical issue has arisen in respect of the interim dividend of 18 pence per ordinary share paid by the Company to shareholders (amounting to
approximately £5.9m on 4 April 2024 (the “2024 Interim Dividend”). When the Company paid the 2024 Interim Dividend, although the Company had
sufficient distributable profits to pay that dividend at the payment date, interim accounts (as defined in the 2006 Act) showing the requisite level of
distributable profits had inadvertently not been filed at Companies House, as required by that Act. As a result, the 2024 Interim Dividend was paid in
technical infringement of the 2006 Act.
The Company has been advised that it may have claims against past and present shareholders who were recipients of the 2024 Interim Dividend to
recover the amount paid by way of the dividend. Similarly, the Company has also been advised that it may have claims against those directors who
participated in the meetings of the board of directors at which the decision was taken to pay the 2024 Interim Dividend.
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It is clearly not the intention of the Company that any such claim should be made by the Company against either its shareholders or its directors.
This matter can be remedied by the shareholders passing a resolution which puts shareholders and directors into the position in which they were
always intended to be. Resolution 0, which is proposed as a special resolution, is to ratify the appropriation of profits to the payment of the 2024
Interim Dividend, to waive any rights of the Company against the shareholders who received the 2024 Interim Dividend, to waive any rights of the
Company against both past and present directors in respect of the 2024 Interim Dividend and to approve the Company entering into deeds of
release in favour of such shareholders and directors. Copies of the form of the deeds of release are available for inspection in the manner described in
paragraph 16 of the general ‘Notes’ section.
The Company has drawn the attention of HM Revenue & Customs (“HMRC”) to the circumstances surrounding the payment of the 2024 Interim
Dividend and to the steps that are now proposed to rectify the legal position of the Company.
It is not expected that the passing of resolution 0 should have an effect on the UK tax position of UK shareholders. If any UK resident shareholder has
any doubts about their tax position, they should consult with an independent professional adviser. Similarly, if any non-UK resident shareholder has
any doubts about their tax position, they should consult with an independent professional adviser.
As a result of their interest in its subject matter, the directors who are also shareholders (holding beneficially in aggregate approximately
10.42 per cent. of the issued share capital of the Company as at 2 August 2024, the latest practicable date before publication of this notice) will not
vote on this resolution.
Notice of Annual General Meeting – Hargreaves Services plc
(incorporated and registered in England and Wales under company number 4952865) continued
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Shareholder Information
Company Secretary
David Hankin
Independent Auditors
PricewaterhouseCoopers LLP
Levels 5 and 6
Central Square South
Orchard Street
Newcastle upon Tyne
NE1 3AZ
Bankers
Santander
58/60 Briggate
Leeds
LS1 6AS
Nominated Adviser and Stockbroker
Singer Capital Markets
One Bartholomew Lane
London
EC2N 2AX
Joint Stockbroker
Cavendish Capital Markets Ltd
1 Bartholomew Close
London
EC1A 7BL
Registered Office
West Terrace
Esh Winning
Durham
DH7 9PT
Registrar
Neville Registrars Limited
Neville House
Steelpark Road
Halesowen
B62 8HD
Hargreaves Services plc
West Terrace
Esh Winning
Durham DH7 9PT
Tel: 0191 373 4485
Fax: 0191 373 3777
www.hsgplc.co.uk
Company number: 4952865
Hargreaves Services plc
West Terrace
Esh Winning
Durham DH7 9PT
Tel: 0191 373 4485
Fax: 0191 373 3777
Company number: 4952865
www.hsgplc.co.uk