The directors present the strategic report for the year ended 31 December 2023.
H+H UK Limited is the largest manufacturer of aircrete blocks & systems in the UK. We bring our product, together with our experience, know-how and advice on building materials and building technology to support our long-term trading partners.
The market in 2023 was challenging, with volumes down 25% compared with 2022. As a result, we had to review our production capacity and take the decision to temporarily close our Pollington 1 plant towards the end of 2023. Given the reduction in volumes, we have of course seen a reduction in profit in 2023 compared with 2022. However prioritising customer relationships and quality product, together with review of our capacity and reacting quickly to changes, has meant that we have limited a more significant impact on profit.
We remain focussed on the longer term trends, and the need for more new homes to be delivered in the UK. We have prioritised investment in capacity that will allow us to respond when volumes return. Our upgrade project at Borough Green completed in mid 2024 and adds 10% more capacity to the total network.
UK inflation and interest rates
Towards the end of 2022, market demand slowed down, and that has persisted through 2023. Inflation has at least reduced from 9.2% in December 2022 down to 4.2% in December 2023, and further reduced to 2% in 2024. The Bank of England base rate increased in the early part of 2023, then remained static at 5.25% from August 2023 until a reduction to 5.0% in August 2024. This gives a more stable economic environment now than we had seen through 2023, and gives us some optimism that the market should start to come back as we go through 2024 and 2025.
In earlier years, high activity levels resulted in a continued high demand for our products. As a result, we focused on the delivery of core wall products leaving some market share to alternative solutions. Whilst we are in the scenario of a softer market, the company has looked to regain some market share by restoring a widened product portfolio. We will continue to review our product mix moving forwards.
Financial risk management objectives and policies
The company's activities expose it to a number of financial risks including cash flow risk, credit risk, and liquidity risk. During 2022, the company entered into fixed volume and price gas contracts covering the period 2023 to 2026. Not all contracted gas for the period from 1 April 2023 was used in production, and was sold off to the market at spot prices. This resulted in a loss in relation to gas not used, and this is reported in exceptional items.
Cash flow risk
The company has access to a Group treasury facility that currently has plenty of headroom. Our cash flow projections indicate that we will remain cash positive for the foreseeable future. Any surplus cash is placed on deposit or lent to our parent company. Any cash requirement is available as needed from our parent company.
Credit risk
The company has a financing initiative whereby we can choose to be paid early. The company exercises this option. If this initiative were to be withdrawn the company's cash flow would be adversely affected but would still operate within the current group facility.
Liquidity risk
The company uses a group facility to ensure that sufficient funds are available. Our cash flow projections indicate that sufficient funds should be available.
Quality Management Systems
The company has maintained third party quality assurance in respect of its Quality Management System and with the international standard BS EN ISO 9001:2015 Quality Management System.
The company maintained the necessary documentation to continue to CE/UKCA mark its products to meet the requirements of the Construction Products Regulations. All the company's masonry products continue to be constantly assessed and approved by the British Board of Agrément.
Whilst there are many uncertainties facing both the global and UK economies, the outlook for new housebuilding in the UK remains positive in the medium term.
The market outlook for 2024 and into 2025 indicates improving market conditions as reported by our customers both in new build housing and RMI (Repair, Maintenance and Improvement).
The long-term outlook for aircrete remains positive. Aircrete continues to show increasing levels of market penetration as growth in the building industry is, in part, being driven by an increasing demand for larger, detached houses, which require more aircrete.
Going concern
The directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the 12 months from the date of these statements. The directors continually monitor their forecast and cash flow statements to ensure that adequate funding is in place. Further details regarding the adoption of the going concern basis can be found in note 1.2 in the accounting policies in the financial statements.
The company's activities are regularly reviewed to ensure that they meet the core strategy of being cash positive and profitable. The directors are therefore content that this will not cause a going concern issue.
There are no impending developments or matters in the course of negotiation that would, in the opinion of the directors, be seriously prejudicial to the interest of the company.
The following KPIs are used by the Board to assess the company's progress against its objectives and to measure the performance and development of the Company. The company's activities are regularly reviewed to ensure that they met the company's core strategy of being cash positive and profitable.
2023 2022
Turnover (£'000) 88,967 120,549
Gross profit (£'000) 23,032 48,170
Gross profit margin 25.9% 40.0%
EBITDA (£'000) 6,221 22,547
The reduction in Turnover, Gross Profit, and EBITDA is as a result of the reduction in volumes seen in the wider market. The reduction in gross profit margin is largely due to the fixed price gas contract in 2023. This will improve through 2024.
The Directors of the company have acted in accordance with their duties codified in law, which include their duty to act in a way which they consider, in good faith, would most likely promote the success of the Company for the benefit of the members as a whole, having regards to all stakeholders and matters set out in s172(1) of the Companies Act 2016, including:
a) the likely consequences of any decision in the long term;
b) the interests of the company's employees;
c) the need to foster the company's business relationships with suppliers, customers and others;
d) the impact of the company's operations on the community and the environment;
e) the desirability of the company maintaining a reputation for high standards of business conduct; and
f) the need to act fairly as between members of the company.
The board of Directors satisfies the criteria as set out in reference to S172(1)(a-f) of the Companies Act by considering the following:
1) Our strategy was designed to have a long-term beneficial impact on the company and to contribute to its success in delivering quality products and services to our customers. We will continue to operate our business within tight budgetary controls and in line with our regulatory targets.
2) Our stakeholders (both internal and external) are fundamental to the delivery of our strategy. Our relationship with our stakeholders is defined through our Trusted Partner ethos; do things to ensure both parties have equal leverage in the relationship. With regards to our employees, we provide regular two-way updates directly through our face-to-face MD updates with all our employees. We have regular direct contact with all our customers at varying levels of our organisations. We also engage via our association with the HBF (Home Builders Federation) and sponsoring other trade related events. We engage directly and indirectly with our suppliers. Our indirect involvement come through our association with the MPA (Mineral Products Association), UKQAA (UK Quality Ash Association) and other trade associations.
3) The health, safety and well-being of our employees is one of our primary considerations in the way we do business. We conduct regular site safety days across all our factories which are attended by members of the board of directors. We strive to ensure that no harm comes to our stakeholders.
4) Our strategy took into account the impact of the company’s operations on the community and environment and our wider societal responsibilities. To this end we only innovate and invest to support long term sustainable business.
5) As the board of directors, our intention is to behave responsibly towards our shareholders so that they too may benefit from the successful delivery of our plan and ensure that management operate the business in a responsible manner. We operate within the high standards of business conduct and good governance expected for a business such as ours. By following these actions we will contribute to the delivery of our strategy.
On behalf of the board
The directors present their annual report and financial statements for the year ended 31 December 2023.
The results for the year are set out on page 12.
No ordinary dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
These are fully referenced in the strategic report.
This is discussed in note 25.
Quantification and reporting methodology
We have followed the 2019 HM Government Environmental Reporting Guidelines. We have also used the OHO Reporting Protocol -Corporate Standard and have used a blend of the 2022 UK Government's Conversion Factors together with our ultimate holding company, H+H International A/S conversion factors for company reporting. for Company Reporting.
Intensity measurement
The chosen intensity measurement ratio is total gross emissions in metric tonnes CO2 to Turnover.
Measure taken to improve efficiency
H+H UK Limited continues to strive for energy and carbon reduction arising from their activities. We implemented energy efficiency actions by way of continuous Improvement projects, and also capital investment projects. The total emissions decreased from the previous year due to lower sales demand and lower production, but we were still able to make improvements on the intensity ratio by efficiency actions.
SECR data
The following data includes scope 1,2 and 3 and summarises the energy consumption (kWh) and carbon emissions (tCO2e):
| Usage | CHG Emissions tCO2e | Usage | CHG Emissions tCO2e |
| 2023 | 2023 | 2022 | 2022 |
Natural gas | 419,861 GJ | 21,292 | 549,292 GJ | 27,852 |
Site fuels | 288,689 litres | 795 | 385,605 litres | 1,064 |
Grid electricity | 31,285 GJ | 877 | 34,680 GJ | 2,389 |
Raw materials | 146,874 tonnes | 116,885 | 192,437 tonnes | 168,884 |
Transportation | 81.5M km | 5,814 | 121.1M km | 7,289 |
Emission Total |
| 145,663 |
| 207,478 |
| CHG Emissions tCO2e | |
| 2023 | 2022 |
Scope 1 | 22,087 | 28,916 |
Scope 2 | 877 | 2,389 |
Scope 3 | 122,699 | 176,173 |
Total emissions | 145,663 | 207,478 |
| 2023 | 2022 |
Total GHG emissions tCO2e | 145,663 | 207,478 |
Intensity ratio (tCO2e : £’000turnover) | 1.637 | 1.721 |
This is discussed in the strategic report.
In accordance with the company's articles, a resolution proposing that Lopian Gross Barnett & Co be reappointed as auditor of the company will be put at a General Meeting.
Compliance was continued with the Occupational Health and Safety Management Systems Standard BS ISO 4500 I. This same high standard of health and safety is reflected in the design, installation, operation and maintenance of plant, equipment and services for all works and projects undertaken by the company. The directors recognise that safe behaviour of staff is as important as good systems and communication, and that cooperation on their part is vital. To enrich this idea, the company will continue to engage all employees in changing their attitudes towards safety. It is company policy to provide a safe and healthy environment for employees, contractors, and visitors and to enhance the importance of health and safety.
The company has acted upon its environmental policy during the year and continued to disseminate information widely to staff and customers to foster an understanding of environmental issues arising from the business. The environmental policy addresses the use of energy, raw materials, air, water, and waste and seeks to prevent and limit the environmental impact of its business activities.
The company has sought to continually improve environmental performance where it is reasonably practical and economic to do so.
Third party compliance with ISO 1400 I for an environmental management system was maintained. The company has met targets requested by customers and continues with its environmental improvement teams set up at each of its locations.
The company maintained its systems to enable the retention of its Certificate of Approval for Responsible Sourcing of Construction Products to BES 6001 and obtained an "excellent" performance rating and is accredited under the BS ISO 50001 Energy Management Systems Standard.
Employees
The Company ensures that all employees are treated fairly and granted the same access to continuing employment and training, career development and promotion, regardless of any physical disabilities.
The Company has taken the necessary action during the year to:
a) provide employees with regular information on matters of concern to them as employees;
b) consult employees or their representatives on a regular basis regarding decisions which are likely to affect their interests;
c) encourage employee involvement in the company's performance through appropriate incentive schemes;
d) achieve a common awareness on the part of all employees of the financial and economic factors affecting the performance of the company.
The directors of the Company have taken steps to regularly engage with employees and to have regard to employee interests, including on the principal decisions made during the financial year.
The directors have had regard to the need to foster the company’s business relationships with suppliers, customers and others, including on the principal decisions taken by the company during the financial year.
Basis for opinion
Conclusions relating to going concern
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.
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 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.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Other information
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors 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 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 company or to cease operations, or have no realistic alternative but to do so.
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 auditor's 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.
We obtained an understanding of laws and regulations that affect the entity, focusing on those that had a direct effect on the financial statements or that had a fundamental effect on its operations.
Where considered necessary we enquired of the those charged with governance, reviewed correspondence and reviewed meeting minutes for evidence of non-compliance with relevant laws and regulations.
We gained an understanding of the controls environment which includes the controls in place to prevent and detect fraud. We enquired of the those charged with governance about any incidences of fraud that had taken place during the accounting period.
We reviewed financial statements disclosures to assess compliance with relevant laws and regulations.
We enquired of those charged with governance about actual and potential litigation and claims.
We performed analytical procedures to identify any unusual or unexpected relationships that might indicate risks of material misstatement due to fraud.
In addressing the risk of fraud due to management override of internal controls we tested the appropriateness of journal entries and assessed whether the judgements made in making accounting estimates were indicative of a potential bias.
Due to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, as with any audit, there remained a higher risk of non-detection of irregularities, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. We are not responsible for preventing fraud or non-compliance with laws and regulations and cannot be expected to detect all fraud and non-compliance with laws and regulations.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
Use of our report
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
The profit and loss account has been prepared on the basis that all operations are continuing operations.
The notes on pages 16 to 32 form part of these financial statements.
The notes on pages 16 to 32 form part of these financial statements.
The notes on pages 16 to 32 form part of these financial statements.
The notes on pages 16 to 32 form part of these financial statements.
H+H UK Limited is a private company limited by shares incorporated in England and Wales. The registered office is Celcon House, Ightham, Sevenoaks, Kent, TN15 9HZ.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £'000.
Where the company has taken exemptions in terms of FRS 102, this has been approved by the shareholders and that the appropriate disclosures have been reflected in the consolidated financial statements as per the requirement of the application guidance of FRS 100.
The company meets the definition of a qualifying entity under FRS 102 and has therefore taken advantage of the disclosure exemptions available to it in respect of its financial statements. The company is consolidated in the financial statements of its parent, H+H International A/S, Lautrupsgade 7, 6th Floor, 2100 Copenhagen 0, Denmark. These can be obtained at www.hplush.com. Exemptions have been taken in these company financial statements in relation to presentation of a cash flow statement, and remuneration of key management personnel.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
All financial assets and liabilities are initially measured at transaction price (including transaction costs), except for those financial assets classified as at fair value through profit or loss, which are initially measured at fair value (which is nonnally the transaction price excluding transaction costs), unless the arrangement constitutes a financing transaction. If an arrangement constitutes a financing transaction, the financial asset or financial liability is measured at the present value of the future payments discounted at a market rate of interest for a similar debt instrument.
Financial assets and Liabilities are only offset in the statement of financial position when, and only when there exists a legally enforceable right to set off the recognised amounts and the company intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.
With the exception of some hedging instruments, other debt instruments not meeting these conditions are measured at fair value through profit or loss.
Financial assets are derecognised when and only when a) the contractual rights to the cash flows from the financial asset expire or are settled, b) the company transfers to another party substantially all of the risks and rewards of ownership of the financial asset, or c) the company, despite having retained some, but not all, significant risks and rewards of ownership, has transferred control of the asset to another party.
Financial liabilities are derecognised only when the obligation specified in the contract is discharged, cancelled or expires.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
During 2022, H+H UK Limited entered into fixed volume and price gas contracts covering the period 2023 to 2026. Due to a significantly lower demand, not all contracted gas for the period 1 April 2023 to 31 March 2024 is expected to be used in production and consequently the excess will be sold off to the market at spot prices on a monthly basis, effectively falling outside the exemption of “own use” recognition in accordance with FRS 102 Section 12 (p12.5) for all similar gas contracts entered. Therefore, the hedge accounting principles has been applied for the commodity forward contracts from the day of the breach, being 1 April 2023 (cash flow hedge).
At the inception of the hedge relationship, the company documents the relationship between the hedging instrument and the hedged item along with risk management objectives and strategy for undertaking various hedge transactions. At the inception of the hedge and on an ongoing basis, the company documents whether the hedging instrument is highly effective in offsetting changes in fair values or cash flows of the hedged item.
At initial recognition the commodity forward contracts were measured at fair value and a corresponding ‘day one loss’ included in other payables. The ‘day one loss’ is transferred to the income statement upon realisation of the underlying hedged items, whereas the commodity forward contracts are measured at fair value through Other comprehensive income for the part that qualify for hedge accounting and as Special Items in the income statement for the part that is deemed ineffective.
For derivatives that are designated and qualify as cash flow hedges, the effective portion of changes in the fair value of the hedge is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss.
The fair value movement amounted to £1,325,366 which is recognised in other payables, consisting of £1,101,196 effective part, recognised in other comprehensive income and £224,170 ineffective part, recognised as special items in the profit and loss account. Hedge effectiveness is measured using forecasted production, as well as estimates market gas prices.
Any gain or loss previously recognised in other comprehensive income is reclassified to profit or loss when the hedge relationship ends. This occurs when the hedging instrument expires or no longer meets the hedging criteria, the forecast transaction is no longer highly probable, the hedged debt instrument is derecognised, or the hedging instrument is terminated.
Unrelieved tax losses and other deferred tax assets are recognised only to the extent that, based on all available evidence, it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.
Where items recognised in other comprehensive income or equity are chargeable to or deductible for tax purposes the resulting current or deferred tax expense or income is presented in the same component of comprehensive income or equity as the transaction or other event that resulted in the tax expense or income.
The company operates two pension schemes. One provides benefits based on final pensionable pay and the other is a defined contribution scheme.
The defined benefit fund was closed to new entrants on 1 June 2007 and closed to the accrual of future service benefits, effective from 31 December 2011. The assets of the fund are held separately from those of the company.
The net interest cost on the net defined benefit liability is shown within finance costs. Remeasurement comprising actuarial gains and losses, the effect of the asset ceiling (if applicable) and the return on scheme assets (excluding interest) are recognised immediately in other comprehensive income. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis.
The company operates a Group Personal Pension Plan (GPPP) for which contributions are based on rules of the scheme and are charged against profits during the year in which contributions are made. Differences between contributions payable in the year and contributions paid are shown as either accruals or prepayments in the balance sheet.
Leased assets
Rentals under operating leases are charged on a straight-line basis over the lease term, even if the payments are not made on such a basis. Benefits received and receivable as an incentive to sign an operating lease are similarly spread on a straight-line basis over the lease term.
Transactions in foreign currencies are recorded at the exchange rate ruling at the date of the transaction.
Assets and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the balance sheet date, unless, in the case of balances relating to trading transactions, there is a related forward contract, in which case the contract rate is used. All exchange differences are taken to the profit and loss account.
Interest receivable and similar income
Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective interest rate applicable.
Related Party Transactions
Disclosures need not be given of transactions entered between two or more members of a group, provided that any subsidiary which is a party to the transaction is wholly owned by such a member and so the company has taken advantage of the exemption from disclosing transactions with related parties that are part of the H+H International group.
There were no related party transactions which require disclosure.
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
Defined benefit pension
The group has obligations to pay pension benefits to certain employees. The cost of these benefits and the present value of the obligation depend on a number of factors, including: life expectancy, salary increases, asset valuations and the discount rate on corporate bonds. Management, supported by an independent actuary, estimates these factors in determining the net pension obligation in the balance sheet. The assumptions reflect historical experience and current trends. There exists no explicit contractual right to a surplus return should contributions from the sponsoring employer exceed the calculated scheme deficit. The carrying value of the net scheme liability for 2023 is £5.4M (2022: £1.5M).
Turnover, which is derived wholly from within the UK, relates to the sale of aircrete products.
Turnover is stated net of customer rebates and discounts allowed.
Exceptional items consist of various non-recurring expenditures incurred during the year, split between costs of sales and administrative expenses. These relate to one off items in respect of a gas contract, this is explained further in note 1.9.
The average monthly number of persons (including directors) employed by the company during the year was:
Their aggregate remuneration comprised:
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
Contained within the total cost value of £2,089 are £Nil (2022: £206) of items still under construction which have not been amortised in the year.
The above figures are rounded to £'000.
Contained within the total cost value of owned plant and machinery of £73,600 are £11,254 (2022 - £9,109) of items still under construction which have not been depreciated in the year.
The total cost of Freehold Land and Buildings £11,947 (2022 - £12,142) can be split as follows: Land £1,005 (2022 - £1,005) and Buildings £10,942 (2022 - £11,137).
As stated in note 1.5 Freehold Land is not depreciated.
The above figures are rounded to £'000.
Derivative financial instruments recognised only contain the aforementioned commodity forward contracts which are measured at fair value using generally accepted valuation techniques based on observable market prices and forward market rates.
No other assets or liabilities are measured at fair value as of 31 December 2023.
Group loans are due for repayment within 5 days of any repayment request issued by the company however, we do not anticipate needing to recall any funds in the next 12 months due to the company's profitable operations.
Onerous contract provision:
An onerous contractual position arose due to a lease of a former operating site in Westbury. The company engaged with the landowner to re-gear the current lease on the site to reduce the lease tenure from 55 years to 7 years (Expiry date: September 2025). During 2023 an agreement was reached to exit the lease earlier, this will complete in 2024.
The following are the major deferred tax liabilities and assets recognised by the company and movements thereon:
The deferred tax liability set out above is expected to reverse within 5 years and relates to accelerated capital allowances that are expected to mature within the same period.
Deferred tax assets and liabilities are offset only where the company bas a legally enforceable right to do so and where the assets and liabilities relate to income taxes levied by the same taxation authority on the same taxable entity or another entity within the company.
There is no expiry date on timing differences, or tax credits.
Scheme characteristics and nature of the benefits provided
The Principal Employer, H+H UK Limited (the “Company”) operates a final salary defined benefit scheme for its employees. Any purely defined contribution assets and liabilities in this Pension Fund have been excluded. The H+H Celcon Pension Fund (the “Pension Fund”) closed to the future accrual of benefits on 31 December 2011, although some deferred members who are still employed by the Company retain the link to future salary increases on their benefits. Pension benefits are based on historic length of service and final salary. On retirement members can opt for a lump sum and a lower pension. The Pension Fund is managed by the Trustee. The Pension Fund operates within the standard UK regulatory framework for employer-sponsored pension schemes. Funding rates are agreed between the Trustee and the Company, based on a prudent assessment of the Pension Fund liabilities.
Funding arrangements
Under regulations, a funding valuation is required to take place every three years. If the valuation shows that the Pension Fund is in deficit, contributions to eliminate the deficit will be payable over an agreed period. Under the Schedule of Contributions agreed as part of the April 2020 actuarial valuation, the Company will pay the following annual deficit recovery contributions in monthly instalments: £2,936 in the year starting April 2020, £4,000 from April 2021, £3,208 from April 2023 and £3,029 from April 2024 to February 2025.
For the April 2020 valuation the trustees and employer also agreed a secondary funding objective, which is to be fully funded on an agreed low dependency basis by 5 April 2029. This secondary funding objective allows for contingency contributions to be paid if actual funding falls below expected funding development on the low dependency basis. This expected funding path is based on the funding position at April 2020 on the low dependency basis, the deficit contributions above and expected investment returns at the April 2020 valuation. Contingent contributions are £3.024 million per annum increased by 3% per annum compound (with the first increase in April 2022) less any deficit recovery contributions. Contingent contributions are payable while actual funding is behind the expected development.
The above figures are rounded to £'000.
Investment strategy
Pension Fund investments are in a broad range of asset classes, aimed at producing an acceptable level of risk whilst being able to meet the benefit payments due to Pension Fund members. Some of the Pension Fund’s investments are invested in “Liability Driven Investment” funds, which are designed to match the movements in Scheme liabilities as a result of changes to long-term interest rates and inflation expectations.
Risk exposure
Since the Pension Fund is a defined benefit arrangement, the benefits payable to fund members are not directly related to the amount of the assets. The Company is exposed to the risk of the Pension Fund’s assets being insufficient to meet the benefits and expenses payable. Risks arise due to uncertain future investment returns, future levels of inflation, and future changes to life expectancy. No amendments, curtailments, or settlements have occurred over the past year.
Employer-related assets
The value of the Pension Fund’s assets does not include any financial instruments issued by, or any property occupied by, or any other assets used by, the Company.
Assumed life expectations on retirement at age 65:
Amounts recognised in the profit and loss account
Amounts taken to other comprehensive income
The amounts included in the balance sheet arising from the company's obligations in respect of defined benefit plans are as follows:
Movements in the present value of defined benefit obligations
The defined benefit obligations arise from plans which are wholly or partly funded.
Movements in the fair value of plan assets
The actual return on plan assets was £1,970 (2022 - (£36,044).
Fair value of plan assets at the reporting period end
The company's Group personal pension plan (GPPP) commenced in June 2007 and is a defined contribution scheme. Contributions made by the company are at varying rates between 3.5% and 12% of employees' pensionable salary, according to the rules of the scheme. Employees pay contributions varying between 3% and 5%. The members of the now closed defined benefits scheme have been invited to join a defined contribution scheme.
On 1 March 2023, a new committed credit facility was agreed with Nordea Danmark, branch of Nordea Abp, Finland, effectively in place 31 March 2023. The agreement has a duration of 3 years. As part of the agreement, there are cross company guarantees between some of the group companies. Those companies are:
• H+H International A/S
• H+H Polska Sp. Z.o.o.
• H+H UK Limited
• H+H Deutschland GmbH
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, which fall due as follows:
In March 2024, the company decided to unwind an energy hedge made in 2022. This resulted in a one-off loss in Q1 2024 of £10.7m. A new hedging arrangement has been entered into to cover a proportion of expected gas volumes for the remainder of 2024.
There were no other events after the reporting period end date which require disclosure.