Company registration number:
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COMPANY INFORMATION
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CONTENTS
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GROUP STRATEGIC REPORT
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
The principal activity of Hawk Incentives Holdings Limited is that of an investment holding company. Its subsidiaries provide a range of business services designed to help clients engage with their employees, channel partners, customers and prospects, to improve their business performance. In addition, following the transfer of a fellow Blackhawk business into the Group, the Group also facilitates the marketing, activation and sale of physical and electronic gift cards and vouchers through distribution channels in the UK, Europe and the Nordics.
Gross profit increased for the Group by £20.6M (61.0%) from £33.9M in 2022. Organic growth accounted for £4.6M of the £20.6M increase, with the balance attributable to the transfer into the Group of a fellow Blackhawk business.
The Group's business does not expose it to any risks other than those associated with normal commercial trading. The Hawk Incentives Holdings Limited group, performs a comprehensive review of risks each year across all businesses in the Group. Each business leader is involved in the review and tasked with identification of risks, actions to mitigate and implementing plans to address risks. The main risks specific to the Group are identified below:
∙Failure of our infrastructure may result in non-delivery of agreed services to clients resulting in loss of business, reputational damage and potential legal claims. The Group invests heavily in its IT infrastructure and employees to ensure this risk is mitigated
∙As part of the trading activities the Group receives money on behalf of clients. The Directors recognise that there are specific obligations when dealing money on behalf of third parties.
∙Some of the products sold by the Group, in particular relating to certain employee benefits, are attractive to our clients and their employees because of the tax savings on offer. If the government were to change or remove these savings, this could result in a loss of business. To this end, the Group is always monitoring the legislative environment and works with government wherever possible.
∙Our operating revenues may decline if we or Blackhawk Network, Inc. lose one or more of our top retail distribution partners, or if we fail to maintain existing relationships with our retail distribution partners or fail to attract new retail distribution partners to our network, or if the financial performance of our retail distribution partners’ businesses declines.
The Blackhawk Network Group relies on its content providers for its product and service offerings, and the loss of one or more of our top content providers or a decline in demand for their products, or our failure to maintain existing arrangements with certain content providers or to attract new content providers to our network, could have a material adverse effect on our business.
∙The Group is dependent on the efficient and uninterrupted operation of Blackhawk Network Inc’s transaction processing systems, including its computer network systems and data centres, and if such systems are disrupted, our business, results of operations and financial condition could be materially and adversely affected. A data security breach could expose the Group to costly government enforcement actions, liability and protracted and costly litigation, and could adversely affect our reputation and operating revenues.
∙Failure to keep pace with the rapid technological developments in our industry and the wider electronic payments industry may materially and adversely affect our business, results of operations and financial condition.
Due to the nature of the Group’s business and the assets and liabilities contained within the Group’s Statement of Comprehensive Income, the main financial risk the Directors consider relevant is credit risk. This is mitigated by the Group’s credit control policies.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
The Group's operating cash has increased following the transfer into the Group of a fellow Blackhawk business which added £47.4M of cash to the groups cash resources. In addition, members of the group entered into a cash pooling arrangement during 2023 with other entities in the EMEA Region. This allows the group to manage its working capital requirements without the need for external funding.
The Group’s cashflow forecasts show the Group maintaining a positive operating cash position under a stress test related scenario planning for a period at least 12 months for the date of this report. At the end of 2023, the Group has operating cash balances of £101.3M (2022: £77.3M), the Group’s ratio of current assets to current liabilities was 1.13 (2022:1.34) and the Group has no external debt obligations. The Directors therefore consider the Group to have enough liquid reserves for the next 12 months.
The Directors are satisfied that the procedures and controls that have been put in place are robust and appropriate for the nature of the business in which Hawk Incentives Holdings Limited and its subsidiaries engage.
The following are our financial Key Performance Indicators.
30 Dec 2023 31 Dec 2022 Turnover (£’000’s) 159,939 37,129 Gross profit (£'000's) 54,512 33,865 Profit before tax (£'000's) 21,639 8,937 Gross profit % of turnover 34% 91% Profit before tax % of turnover 14% 24% Turnover increased by £123 million to £160 million and gross profit increased by £20.6 million to £54.5 million. These significant increases were driven by the transfer of the Blackhawk Network (Europe) Ltd and Samba Days UK Ltd trade into the subsidiary company Blackhawk Network EMEA Limited with effect from 1st January 2023. The turnover and gross profit attributable to the businesses transferred was £116.5 million and £16 million respectively. The remaining increases in turnover and gross profit of £6.5 million and £4.6 million respectively relate to organic growth of the existing businesses. The directors are pleased with the performance of the Group against challenging economic conditions and increasingly competitive markets. The Group made a significant investment of £1.5 million in internally developed software in the period to generate profit in future periods from new products and enhancements. The Directors believe that these investments will position the business well for growth in future years. Shareholders funds have decreased by £5.5 million to £35.6 million. The transfer of the net assets of Blackhawk Network (Europe) Ltd and Samba Days UK Ltd into Blackhawk Network EMEA Limited have been treated as a Capital contribution which increased Shareholders funds by £28 million. A dividend of £50 million was paid during 2023 to the Parent Company. Free cash increased by £24 million.
We’ve outlined the below as part of the Group’s duty to promote the success of the group for the benefit of all stakeholders, under section 172(1) of the Companies Act (2006). In our continued efforts to uphold a high-quality standard of business across our product portfolio, we take considered action to ensure that stakeholders are informed and on board
with our decisions. Foster business relationships with suppliers, customers, and other stakeholders Our customers We take the utmost care to be transparent in all of our customer communications. We do not mislead or convey false information. We divide our cardholder communications between marketing and transactional, to ensure that customer preferences are adhered to. We tailor our offering and subsequent email communications to relevant, honest topics where we have a genuine belief (and resulting data) that our customers have an interest.
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
Partners and suppliers When managing and building relationships with our partners and suppliers, we maintain a vigorous auditing process that ensures we present ourselves at the expected standard. We provide robust compliance training for our employees, which results in positive partner and supplier management. We work conscientiously with our partners to provide quality content to our customers, while keeping an open channel of communication to highlight issues or changes to service in good time. Our suppliers are trusted, compliant businesses who we audit on an annual basis. These audits allow us to remain in a position of trust with our customers and partners. Interests of employees The interests of our employees are deep routed within everything we do at Hawk Incentives Holdings. We invest our time into regular employee briefings, so that all internal stakeholders feel informed as to group decisions and processes. We provide the opportunity for quarterly feedback via our ‘Listen Surveys’, of which the results are collated and acted upon. We also provide in depth compliance training such as anti-money laundering, code of business conduct and ethics, data privacy and information security. These trainings are mandatory once per 12-month period. Our review process, undertaken every 6 months, allows employees to envision a clear career progression and provides a forum for issues to be raised and dealt with professionally. Act fairly as between members of the group Hawk Incentives Holdings are dedicated to ensuring transparency in a fair and just manner between its members. Maintain a reputation for high standards of business conduct Our Board of Directors are experts in their field and can therefore make calculated decisions under pressure, to drive our business forward without compromising on the quality of our products, reputation or service. We are known within the payments industry as a compliant and well-managed organisation. Impact of the operations on the community and the environment In light of the marked concerns surrounding environmental health, there are a number of initiatives underway. We take into consideration all impact points along the production line and have minimised our emissions wherever possible. In terms of our products, we have focused on driving forward digital-first options. Whilst physical rewards are available to our clients, we highlight the many benefits of utilising our technology, over printed form. In relation to our workforce and offices, we employ the services of a waste removal group who sort our waste and ensure that as little as possible goes into landfill. We encourage our staff to commute via a green method and reward those who choose to travel via bike, car-share or public transport. We have installed cycling facilities and provide employees with access to our Cyclescheme benefit whereby participants agree to use their bike for commuting purposes where possible. During 2022, we launched a new Green Car Benefit scheme for our employees, offering brand new, electric or hybrid vehicles as part of a salary sacrifice scheme, thereby encouraging the use of electric and hybrid vehicles where car transport is necessary. Additionally, we have invested in our headquarters to ensure that energy is consumed in a thoughtful way. We have built some strong relationships within our local and wider community. We have a ‘charity of the year’, with several hosted fundraising events for our employees to participate in. We also encourage our employees to invest their own time in volunteering roles, with 2 working days per year granted for community outreach, per employee. We have raised multiple sums of money and donations of belongings for our local foodbank and many of our staff have participated in team volunteer days to collate and distribute donations at the shelter. Other teams have visited other local charities to help with ongoing projects. Likely consequence of any decision in the long term Our Board of Directors consider the potential consequences of all decisions and appropriately weigh risk against each action. Regular reporting and a robust escalation process mean that the board remain fully informed at all times and are
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GROUP STRATEGIC REPORT (CONTINUED)
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
poised to take action if required.
This report was approved by the board and signed on its behalf.
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DIRECTORS' REPORT
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
The directors present their report and the financial statements for the 52 week period ended 30 December 2023.
The directors are responsible for preparing the Group strategic report, the Directors' report and the consolidated financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland'. Under company law the 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 Company and the Group and of the profit or loss of the Group for that period.
In preparing these financial statements, the directors are required to:
∙select suitable accounting policies for the Group's financial statements and then apply them consistently;
∙make judgements and accounting estimates that are reasonable and prudent;
∙state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;
∙prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The profit for the 52 week period, after taxation, amounted to £16,035k (2022 - £7,316k).
On 26 April 2023 the company paid a dividend of £50 million to the sole shareholder of the company. The Directors do not recommend payment of a further interim dividend for the period ended 30 December 2023.
The directors who served during the 52 week period were:
The Company will continue to expand its distribution networks through grocery, convenience, speciality, online and incentives channels. It continues to expand its product portfolio to include newly launched third party branded gift cards, prepaid cards, other category specific Own Content cards and Software Platforms.
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DIRECTORS' REPORT (CONTINUED)
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
The Group is exposed to financial risk through its financial assets and liabilities. The key financial risk is that the proceeds from financial assets are not sufficient to fund the obligations arising from liabilities as they fall due.
The Group's principal financial assets are cash, trade debtors and balances due from other group companies. In order to manage third party credit risk the Group sets limits for customers based on a combination of payment history and third party credit references. Credit limits are reviewed by the credit controller on a regular basis in conjunction with debt ageing and collection history. The credit risk on cash balances is limited because the counterparties are banks with high credit ratings assigned by international credit rating agencies.
Investing in research and development programs delivers product innovation within the Group. The Group made a significant investment of £1.5m (2022: £1.1m) in internally developed software in the period to generate profit in future periods from new products and enhancements. The Directors believe that these investments will position the business well for growth in future years.This is in line with expectations.
Blackhawk Network, of which the Group is a part, has published a Modern Slavery and Human Trafficking Statement on its UK corporate website www.blackhawknetworkeurope.com, in line with legislative requirements, and which applies to the Group.
The team remains as committed and enthusiastic as always. The Group's profile allows it to attract and hire some of the
best talent in the market place. The Board of Directors are committed to invest time and resources in our most valuable asset, our people. The Group is ever mindful of the importance and value of its employees and ensures that employees are informed and involved regarding matters affecting them as employees and on the various factors affecting the performance of the Group.
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DIRECTORS' REPORT (CONTINUED)
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
Energy efficiency
In terms of our products, we have focused on driving forward digital-first options. Whilst physical rewards are available to our clients, we highlight the many benefits of utilising our technology, over printed form. We encourage our staff to commute via a green method and reward those who choose to travel via bike, car-share or public transport. We have installed cycling facilities and provide employees with access to our Cyclescheme benefit whereby participants agree to use their bike for commuting purposes where possible. Additionally, we have invested in our headquarters to ensure that energy is consumed in a thoughtful way.
Intensity ratio: tCO2e/£million revenue 3.5 (2022: 9.8)
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DIRECTORS' REPORT (CONTINUED)
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
The Company has entered into a new lease arrangement relating to its offices in Apsley. As a result of the new arrangement the Company will reduce its occupation of the building from 4 floors to 2 with effect from 1st January 2025.
The auditors, Menzies LLP, will be proposed for reappointment in accordance with section 487 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF HAWK INCENTIVES HOLDINGS LIMITED
We have audited the financial statements of Hawk Incentives Holdings Limited (the 'parent Company') and its subsidiaries (the 'Group') for the 52 week period ended 30 December 2023, which comprise the Consolidated statement of comprehensive income, the Consolidated statement of financial position, the Company statement of financial position, the Consolidated statement of cash flows, the Consolidated statement of changes in equity, the Company statement of changes in equity, the Consolidated analysis of net debt and the related notes, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland' (United Kingdom Generally Accepted Accounting Practice).
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditors' responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the United Kingdom, including the Financial Reporting Council's Ethical Standard and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
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 Group's or the parent 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.
The other information comprises the information included in the Annual Report other than the financial statements and our Auditors' report thereon. The directors are responsible for the other information contained within the Annual Report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. 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 course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. 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 in this regard.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF HAWK INCENTIVES HOLDINGS LIMITED (CONTINUED)
In our opinion, based on the work undertaken in the course of the audit:
∙the information given in the Group strategic report and the Directors' report for the financial 52 week period for which the financial statements are prepared is consistent with the financial statements; and
∙the Group strategic report and the Directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and the parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Group strategic report or the Directors' report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF HAWK INCENTIVES HOLDINGS LIMITED (CONTINUED)
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 Group 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:
The Group is subject to laws and regulations that directly affect the financial statements including financial reporting legislation. We determined that the following laws and regulations were most significant:
∙The Companies Act 2006;
∙Financial Reporting Standard 102;
∙UK employment legislation;
∙UK tax legislation.
We assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.
We understood how the Group is complying with those legal and regulatory frameworks by making inquiries to management and those responsible for legal and compliance procedures. The engagement partner assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations. He did not identify any issues in this area. We assessed the susceptibility of the Group’s financial statements to material misstatement, including how fraud might occur. Audit procedures performed by the engagement team included:
∙Identifying and assessing the design effectiveness of controls management has in place to prevent and detect fraud;
∙Understanding how those charged with governance considered and addressed the potential for override of controls or other inappropriate influence over the financial reporting process;
∙Challenging assumptions and judgements made by management in its significant accounting estimates; and
∙Identifying and testing journal entries, in particular any journal entries posted outside of the normal working patterns of the accounts team, or with unusual descriptions or account combinations.
As a result of the above procedures, we considered the opportunities and incentives that may exist within the organisation for fraud and identified the greatest potential for fraud in the following areas:
∙The application of inappropriate judgements or estimation to manipulate the financial position in the calculation of the year end provisions;
∙The posting of unusual journals and complex transactions; or
∙The use of management override of controls to manipulate results.
Because of the inherent limitations of an audit, there is a risk that we will not detect all irregularities, including those leading to a material misstatement in the financial statements or non-compliance with regulation. This risk increases the more that compliance with a law or regulation is removed from the events and transactions reflected in the financial statements, as we will be less likely to become aware of instances of non-compliance. The risk is also greater regarding irregularities occurring due to fraud rather than error, as fraud involves intentional concealment, forgery, collusion, omission or misrepresentation.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council's website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our Auditors' report.
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INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF HAWK INCENTIVES HOLDINGS LIMITED (CONTINUED)
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 Auditors' 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.
for and on behalf of
Chartered Accountants
Statutory Auditor
Lynton House
7-12 Tavistock Square
London
WC1H 9LT
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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 DECEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 20 to 40 form part of these financial statements.
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COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 30 DECEMBER 2023
The financial statements were approved and authorised for issue by the board and were signed on its behalf by:
The notes on pages 20 to 40 form part of these financial statements.
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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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CONSOLIDATED ANALYSIS OF NET DEBT
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
Hawk Incentives Holdings Limited is a private Company limited by shares incorporated in the United Kingdom under the Companies Act 2006. The Company is registered in England and Wales and the address of the registered office is given on the company information page.
2.Accounting policies
The financial statements have been prepared under the historical cost convention unless otherwise specified within these accounting policies and in accordance with Financial Reporting Standard 102, the Financial Reporting Standard applicable in the UK and the Republic of Ireland and the Companies Act 2006.
The preparation of financial statements in compliance with FRS 102 requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies (see note 3).
The Company has taken advantage of the exemption allowed under section 408 of the Companies Act 2006 and has not presented its own Statement of comprehensive income in these financial statements.
The 52 week ended 30 December 2023 is stated as 2023, whilst the 52 week ended 31 December 2022 is stated as 2022. All reference to years represents the years detailed here, unless otherwise noted.
The following principal accounting policies have been applied:
The consolidated financial statements present the results of the Company and its own subsidiaries ("the Group") as if they form a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the purchase method. In the Statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the Consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies in line with those used by the Group.
Hawk Incentives Holdings Limited incorporates an Employee Benefit Trust, Grass Roots Group PLC Employee Share Scheme, within its Company financial information.
The Directors have a reasonable expectation that the Company and Group has adequate resources to continue in operational existence for the foreseeable future and there are no post balance sheet events which alter this view. The Directors have considered the future expected cashflows of the Group by adjusting the cashflow forecasts for a reduction in gross profit and paying particular attention to the Group’s cost base. The group’s amended cashflow forecasts show a positive operating cash position under a stress test related scenario for a period of at least one year from the signing of the financial statements. For this reason, they continue to adopt the going concern basis in preparing the financial statements
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
2.Accounting policies (continued)
For Cyclescheme Limited, revenue represents the net commission received from retailers, excluding VAT, on ‘redemption’ of Cyclescheme certificates, and amounts earned from employer participants for the provision of the Cyclescheme service. Revenue on certificates is recognised on issue of a certificate when an employer signs off, which is not materially different from the date of redemption. Revenue on service provision to employer participants is recognised when the service is provided, unless collectively is not reasonably assured, in which case it is recognised once collection of consideration is reasonably assured. Revenue from breakage is recognised only after six years have passed since the certificate was issued.
Functional and presentation currency
Transactions and balances
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
2.Accounting policies (continued)
If it is not possible to distinguish between the research phase and the development phase of an internal project, the expenditure is treated as if it were all incurred in the research phase only.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
2.Accounting policies (continued)
The fair value of the award also takes into account non-vesting conditions. These are either factors beyond the control of either party (such as a target based on an index) or factors which are within the control of one or other of the parties (such as the Group keeping the scheme open or the employee maintaining any contributions required by the scheme). Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to profit or loss over the remaining vesting period. Where equity instruments are granted to persons other than employees, profit or loss is charged with fair value of goods and services received. The fair value of restricted shares, restricted share units and performance share units is determined as the grant date fair value of Blackhawk Network Holdings, Inc. shares and determine the fair value of share options and share appreciation rights using a Black-Scholes option pricing model. The Black-Scholes option pricing model incorporates certain assumptions, such as the risk-fiee interest rate, expected volatility, expected dividend yield and the expected life of options in order to arrive at a fair value estimate. Share-based employee compensation expense is classified in administrative expenses, with the credit being recognised as a liability.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
2.Accounting policies (continued)
Goodwill
Other intangible assets
All intangible assets are considered to have a finite useful life. If a reliable estimate of the useful life cannot be made, the useful life shall not exceed ten years.
The estimated useful lives range as follows:
Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives, using the straight-line method.
The estimated useful lives range as follows:
The assets' residual values, useful lives and depreciation methods are reviewed, and adjusted prospectively if appropriate, or if there is an indication of a significant change since the last reporting date.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in profit or loss.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
2.Accounting policies (continued)
Cash and cash equivalents includes amounts held in accounts that are operationally ring-fenced. The Company voluntarily undertakes this arrangement and considers that the offsetting requirements are not met. As such the cash balance and creditor balance are shown separately.
The Group only enters into basic financial instrument transactions that result in the recognition of financial assets and liabilities like trade and other debtors and creditors, loans from banks and other third parties, loans to related parties and investments in ordinary shares.
Financial assets that are measured at cost and amortised cost are assessed at the end of each reporting period for objective evidence of impairment. If objective evidence of impairment is found, an impairment loss is recognised in the Consolidated statement of comprehensive income. For financial assets measured at amortised cost, the impairment loss is measured as the difference between an asset's carrying amount and the present value of estimated cash flows discounted at the asset's original effective interest rate. If a financial asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. For financial assets measured at cost less impairment, the impairment loss is measured as the difference between an asset's carrying amount and best estimate of the recoverable amount, which is an approximation of the amount that the Group would receive for the asset if it were to be sold at the reporting date.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
2.Accounting policies (continued)
Hawk Select codes ("Select codes") are reward products issued by the Company. The codes are a choice product which the holder can redeem for a gift card or voucher of their choice.
Unredeemed Select codes are stated in the statement of financial position at the face value of the codes outstanding. Select codes are held on the statement of financial position until their expiry date. Critical judgements in applying the Group's accounting policies Presentation of revenue A number of the Group’s revenue streams involve the sale of third party products and content. The presentation of revenue as gross or net is dependent on the judgement of whether the Group is acting as the principal or agent in the transaction, and the judgement is based on a number of considerations under FRS 102. Each individual consideration can lead to a different conclusion on whether the Group is acting as principal or agent and a degree of judgement is therefore involved as whether, on balance, it is appropriate to present these revenue streams as gross or net. Capitalised software costs Costs relating to the development of computer software for internal use are capitalised once all of the development phase recognition criteria of FRS 102 are met. When the software is available for intended use, these costs are amortised in equal amounts over the estimated useful life of the software. Amortisation and impairment of computer software of licences are charged to administrative expenses in the period in which they arise. Judgement is required in the determination of whether and when costs incurred qualify as development expenditure as in order to be capitalised, it must be determinable to that project will meet its design specifications, including functions, features and technical performance requirements and that the expenditure will generate probable future economic benefits in excess of the development costs incurred. During the year the Company has capitalised costs of £1,457K (2022: £1,102K).
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
11.Taxation (continued)
There were no factors that may affect future tax charges.
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
Share premium account
Foreign exchange reserve
Profit and loss account
On 1st January 2023 the trade and assets of Blackhawk Network (Europe) Limited were transferred to the Company at fair value and have been accounted for using the hybrid method of merger accounting. A promissory note was raised as consideration for the transfer of trade which has subsequently been waived. The waiving of this promissory note has been treated as a capital contribution and is disclosed in the profit and loss reserve.
The Group operates a defined contribution pension scheme. The assets of the scheme are held separately from those of the Group in an independently administered fund. There were contributions receivable to the fund at the reporting date of £213,000 (2022: £183,000).
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NOTES TO THE FINANCIAL STATEMENTS
FOR THE 52 WEEK PERIOD ENDED 30 DECEMBER 2023
As at 30 December 2023, the ultimate parent company is BHN Holdings, Inc. which is the largest group that the Company is consolidated into and is incorporated in the USA. The registered office of BHN Holdings, Inc. is 6220 Stoneridge Mall Rd, Pleasanton, CA 94588, USA. BHN Holdings, Inc. is majority owned by investment funds affiliated with Silver Lake Partners and investment funds affiliated with P2 Capital Partners. There is no individual who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, owns 25% or more of the equity interests of BHN Holdings, Inc.
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