Registered number: 02453001
DAR AL-HANDASAH (UK) LIMITED
ANNUAL REPORT AND GROUP FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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DAR AL-HANDASAH (UK) LIMITED
COMPANY INFORMATION
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A A Loudon (resigned 30 June 2024)
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M B Sleiman (resigned 29 November 2023)
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D J S Horner (appointed 18 December 2023)
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S Kadi (appointed 15 November 2024)
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DAR AL-HANDASAH (UK) LIMITED
CONTENTS
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Directors' Responsibilities Statement
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Independent Auditor's Report
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Consolidated Statement of Profit or Loss and Other Comprehensive Income
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Consolidated Statement of Financial Position
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Company Statement of Financial Position
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Consolidated Statement of Changes in Equity
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Company Statement of Changes in Equity
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Consolidated Statement of Cash Flows
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Company Statement of Cash Flows
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Notes to the Consolidated Financial Statements
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DAR AL-HANDASAH (UK) LIMITED
GROUP STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their strategic report for the year ended 31 December 2023. This strategic report has been prepared for the Group as a whole and therefore gives greater emphasis to those matters which are significant for Dar Al-Handasah (UK) Limited and its subsidiary undertakings when viewed as a whole.
Principal activities
The principal activity of the company is that of a holding company. The business of the Group is providing specialised professional services in connection with engineering, urban development, economic studies, project management, asset management and asset integrity services to the energy sector and the operation of a pipeline supplying fuel to Manchester Airport.
Business review and future developments
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This year has seen an increase in market activity, as clients are investing more in energy security projects with market conditions returning to normal following the slowdown caused by the Covid-19 outbreak, as well as new investments being made in energy transition projects. The Group has grown revenue to £104.2m, up on £82.4m in 2022, with growth delivered across all regions. We secured a new long-term project in the Kingdom of Saudi Arabia in the year and have set up a new branch there to capitalise on the opportunities we see in this market.
The gross profit grew to £24.3m (2022: £17.7m) with an increase in the margin to 23.3% (2022: 21.5%). We have continued to see strong growth in the lower margin project management consulting services, but we also saw good results across our engineering design projects, following a small number of projects delivering losses in the prior year.
The recovery in air travel in the UK has continued, with passenger numbers at Manchester airport increasing against the prior year, resulting in higher demand for fuel from the airlines. Our net result for the pipeline was lower than the prior year as we recognised £0.9m in 2022 for a business interruption claim that was finalised that year.
The Group is focused on expanding its coverage within its key markets of UK & Europe, the Middle East and Americas. In 2023 we opened a new regional office in the Kingdom of Saudi Arabia, as well as a new office in Peru and further growth is targeted from mainland Europe.
The Group has been developing THEIA, a pipeline integrity management solution, for its asset integrity service line. This platform is now being used internally by the asset integrity engineers to increase the efficiency of analysing pipeline data and is also available as an external product offering to help energy, oil and gas operators to optimise the performance of their assets.
The Group has an integral revenue stream of providing specialised services in connection with engineering, urban development, town and regional planning, architecture and economic studies to serve clients in the emerging market territories of the Middle East, Africa and Asia.
Some of the services provided depends on work fed through the Dar Group from other companies within the larger Dar group, who market the group's services and contract directly with the client for the services provided. This turnover is recognised in line with the transfer pricing agreement, at a 6.5% uplift on costs.
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DAR AL-HANDASAH (UK) LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
The Group operates with two market segments:
∙Our traditional market is providing engineering consultancy and design services and asset management and integrity services to the energy sector. Whilst the majority of clients operate in the oil and gas sector, the Group has seen increasing opportunities in the energy transition market, in particular in Europe and Latin America, with a focus on new hydrogen and CO2 infrastructure, the repurposing of existing infrastructure for hydrogen and CO2 and infrastructure maintenance services. The Group continues to win new contracts and management believe that the business is well placed to take advantage of expected positive market conditions in the coming years, although there can be a long lead time to secure larger and long-term contracts.
∙The Group also operates a pipeline supplying fuel to Manchester Airport. The revenue for this is generated by the volume of fuel supplied through the pipeline. There was a recovery in air travel following the Covid-19 pandemic, which started in 2022 and has continued this year. Market predictions are for passenger numbers to continue to grow in the coming years as Manchester airport delivers its transformation programme.
The Group has a global footprint across two geographic regions (East region covering the Middle East and the West region covering Europe and the Americas) and will continue to pursue growth by:
∙Developing closer, more strategic relationships with clients in our target regions;
∙Focusing on services for which there is greatest demand in our current markets and where we have existing knowledge and experience, e.g. midstream engineering design and consultancy, and asset management and integrity services;
∙Investing in business processes and systems to improve operational efficiency;
∙Differentiate our services through innovative solutions to meet the needs of the energy sector; and
∙Assessing acquisition opportunities of companies offering services that complement the Group's existing capabilities and offer the potential for economies of scale in its target markets.
The Group continues to be reliant on the continued support of the ultimate parent through the provision of necessary financial assistance.
The Company will continue to act as the holding company for the Group in the United Kingdom for the foreseeable future.
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DAR AL-HANDASAH (UK) LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Financial key performance indicators
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Revenue grew across all regions of the business, in particular in the Middle East.
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The strong revenue growth in project management consulting services resulted in gross margin increasing in the year. There has also been an improved margin from engineering projects following the impact of loss-making projects in the Middle East in the prior year.
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The increase in gross profit was partially offset by higher administrative costs required to support the higher levels of activity. In the prior year there was a loss on disposal of the investment property (£1.1m) but also a foreign exchange gain (£2.0m), against a foreign exchange loss of £0.9m this year.
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* Gross profit % is the Gross profit as a percentage of Revenue. This is used to illustrate the profit earned by the company on projects. By using the percentage it allows easier comparability across different service lines and regions.
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DAR AL-HANDASAH (UK) LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Principal risks and uncertainties
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The ability to attract and retain quality employees
The Group focuses strongly on its employees, offering many competitive benefits, such as flexible working, a staff bonus scheme and a flexible benefits scheme. The Group regularly benchmarks remuneration levels to ensure our staff are paid appropriately.
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The risk is increasing. The Group needs to retain and attract staff due to the growth in revenue and increasing market opportunities.
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The Group's continued focus on employees means it is well placed to manage this risk. The Group has an internal recruiting team that tracks market conditions and builds pipelines on potential candidates. The Group also has an established graduate model to attract newly qualified staff.
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The ability to perform and deliver contracted services in accordance with client requirements
The Group has rigorous processes of project and quality review and management of project teams to ensure projects are delivered to a high quality. In addition, the Group invests in technical and personal training and development of its employees and regularly reviews each individual's training requirements.
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This risk has remained stable in the year. The Group has a clear focus on the types of projects to target which align to our skills and experience, but margin pressures continue due to the competitive markets we operate in.
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The Group has an experienced management team and established systems and processes to manage and monitor project performance.
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Credit risk representing non-payment or late/part payment by clients
The Group has established standard processes to ensure regular liaison with clients to manage invoicing and collection and to resolve any matters delaying receipts.
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The risk has reduced in the year due to the collection of some older debts.
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The Group actively reviews and manages all debtor and unbilled balances.
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Impact of climate change on demand for oil & gas services
There is a growing recognition that the world needs to transition from oil & gas and other fossil fuels to renewable energy sources. Over time this is expected to reduce the investment in oil & gas development, however with current consumption levels, the demand for oil & gas is predicted to remain high for the rest of this decade, although there will be much higher growth in investment in new renewable projects.
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The risk has remained stable in the year. There is an ongoing need for energy security policies in our core markets as well as an increasing investment in new renewable energy projects.
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The Group is working on the energy transition, in particular in the hydrogen economy (see Environment section below). Over time we expect to offset any decline in the oil & gas market by growth from the energy transition.
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DAR AL-HANDASAH (UK) LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Competitor pressure and the availability from
clients
The Group operates in a highly competitive market and the availability of new projects is influenced by general economic conditions, the oil price and the investments in the energy transition. Over the last year there has been an increase in projects being made available for tender, although margins remain very competitive. The Group operates different service lines and across different geographies, to reduce the reliance on any single market, although a global economic downturn will have a negative impact on the business.
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This risk has reduced in the year as more projects have been tendered by clients, resulting in an increase in backlog levels for the Group.
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The Group undertakes various cost efficiency measures to control its costs to allow it to compete with competitors on price and maximises its manpower utilisation by executing projects, where applicable, jointly across operating regions. The Group is also building a reputation in the hydrogen and CO2 areas of the energy transition market, which will create new opportunities in the coming years.
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DAR AL-HANDASAH (UK) LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Directors' statement of compliance with duty to promote the success of the Group
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The directors are cognisant of their duties under Section 172 of the Companies Act 2006 in their deliberations and decisions on all matters affecting the Group. Decisions made by the directors take into account the interests of all key stakeholders and reflect the directors' belief that the long-term sustainable success of the Group is linked directly to its stakeholders.
Relationship with customers and suppliers
Delivering our strategy requires strong and mutually beneficial relationships with our customers, suppliers and other business partners. The executive leadership team are actively engaged in a management capacity with the sectors and markets that we operate in and as part of that they are actively engaged with our key clients, partners and suppliers. This helps them to understand the strategy and requirements of our clients and suppliers and how we can work with them to help deliver better solutions and results and feeds into the decision-making process for the choice of and pricing of new projects to bid on.
Long-term approach
The directors are focused on the success of the Group over the long-term through the implementation of a long term strategy for the Group to develop in key targeted sectors where the Group can bring a strong value proposition, leveraging its strengths. The directors regularly review performance, opportunities and risks in the markets that the Group operates in to ensure it is focused on those areas that will deliver the best returns. As a result of this, the Group has opened new offices in the Kingdom of Saudi Arabia and Peru in 2023 to strengthen our position in existing key markets.
Employees
The directors are committed to developing the Group's employees and to creating a climate in which they will flourish and be able to deliver their best. The Group operates a framework for employee information and consultation in line with the requirements of information and consultation regulations.
During the year, the directors continued to provide employees with information about the Group through regular communication including director led staff briefings and employee information updates and ran a number of workshops to support employees on topics such as mindfulness, mental health awareness and financial wellbeing.
Disabled employees
Applications for employment by a disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled every effort is made to ensure that their employment with the Group continues and that appropriate training is arranged. It is the policy of the Group that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.
Other stakeholders
The Group, as a wholly owned subsidiary of Dar Al-Handasah Consultants Shair and Partners Holdings Limited (DIFC) is an integrated member of the Dar Group. During the year, the directors maintained regular engagement with Group representatives across a range of topics, including Group performance, opportunities to work on joint projects, financing arrangements, Group procurement and sustainability.
The directors oversee an ongoing programme of engagement with clients including satisfaction surveys in addition to regular one to one contact between clients and individual directors and senior management.
The Group is engaged with the local communities in which it operates, with a focus on helping young people and supporting local charities in the areas it operates. Throughout the year, our teams across the globe have been involved in various initiatives aimed at supporting young people, local charities, and broader community welfare.
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DAR AL-HANDASAH (UK) LIMITED
GROUP STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
In the UK, our engineers have inspired and educated students by visiting local schools and providing valuable work experience opportunities. Additionally, some of our UK employees have participated in local litter-picking activities in support of World Environment Day. Our UK Asset Management team has also sponsored a local junior rugby club in Resolven, Wales, by funding the contact tops for all the young male and female junior rugby players, enabling them to compete in the new rugby season. In Mexico, our employees organised and participated in a 5km run and 2km walk in support of World Breast Cancer Day, with all proceeds donated to support future breast cancer prevention screenings in the region. In the Middle East region we have developed our Emirati Graduate Programme, offering young Emiratis the opportunity to gain real-world experience working alongside industry experts, helping to advance both professional careers and regional economic development.
Environment
The Group recognises the importance of its environmental responsibilities and monitors its impact on the environment and designs and implements appropriate policies to minimise any damage that may be caused by the Group's activities. This includes changing to renewable energy sources where possible in our offices and introducing details about the carbon impact of various travel options to help staff make informed decisions about how business-related travel is impacting the environment. The Group also participates in the Dar sustainability programme.
The Group has a track record of delivering projects in the hydrogen economy as part of our vision to improve access to energy for the communities in which we work. This includes supporting projects around new hydrogen infrastructure, repurposing of hydrogen infrastructure, hydrogen infrastructure design and project management and infrastructure maintenance services. From the 1960s, in the UK, Africa, Middle East and Southeast Asia, the Group has designed and helped build natural gas pipeline networks which have enabled communities to switch away from the dirtier coal and heavy fuel oil power generation. Since the 1990s the Group has helped many companies in the UK evaluate opportunities to build new or repurpose existing infrastructure for carbon capture and sequestration. More recently, the Group has been helping our clients in the UK, Africa, and the Middle East to convert their infrastructure for use with hydrogen in Latin America, using our engineering skills to extend the life of solar power generation facilities. Penspen's future growth will come from applying its engineering skills and experience to drive the energy transition, particularly concerning hydrogen and other low or zero-carbon fuels.
Reputation for high standards of business conduct
Ethical business represents a cornerstone of the Group's strategic approach, as part of its wider focus to be a responsible and committed employer and business partner. The directors ensure that the Group implements procedures and awareness training which reflect the requirements of UK legislation such as the Bribery Act and Modern Slavery Act, as well as the wider Group compliance procedures. The Group is committed, in its day-to-day operations to uphold high standards of business conduct and integrity.
Acting fairly between members of the Group
The Group is a wholly owned subsidiary of Dar Al-Handasah Consultants Shair and Partners Holdings Limited and has a single shareholder and therefore the directors have no considerations to address in relation to acting fairly between members.
This report was approved by the board and signed on its behalf.
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D J S Horner
Director
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DAR AL-HANDASAH (UK) LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors present their report and the financial statements for the year ended 31 December 2023.
The loss for the year, after taxation, amounted to £7,115,258 (2022 - loss £4,944,228).
The directors are unable to recommend the payment of a dividend on the ordinary shares (2022: £Nil).
The directors who served during the year were:
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A A Loudon (resigned 30 June 2024)
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M B Sleiman (resigned 29 November 2023)
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D J S Horner (appointed 18 December 2023)
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Going concern
The Group has experienced trading losses in recent years, including in the year ended 31 December 2023, which has resulted in increasing levels of external and inter-company borrowings. External borrowings consist of overdrafts of £9.0m that are repayable on demand and term loans of £17.4m as at 31 December 2023. This includes a $11.0m term loan with HSBC Bank UK plc expiring in August 2024 and a term loan for $11.1m with Europe Arab Bank plc expiring in September 2024. The overdraft facility contributes to a net current liability position of £52.4m (31 December 2022: £27.4m). This increase is largely due to the term loans being classified as current liabilities, given their renewal dates as at the end of the year.
In preparing the consolidated financial statements, the directors note that the Group has access to the financial resources of its ultimate parent undertaking, Dar Al-Handasah Consultants Shair and Partners Holdings Limited ('Dar') . The ultimate parent has confirmed its ongoing financial support in writing for at least one year following approval of these financial statements. This confirmation is in addition to specific guarantees made in respect of the overdraft and loan facilities highlighted above.
The uncertainty as to the ongoing impact on the Group from the conflict in Ukraine has been considered in connection with the Group's adoption of the going concern basis. The Penspen Group has prepared profit and cash-flow forecasts for the period to 31 October 2025. There are no forecasts available for the other companies within the Group. The forecasts include a number of plausible downside scenarios, making assumptions around revenue levels and a slow-down in debtor recoverability. The Group is confident that it can take sufficient mitigating action, where necessary, to ensure that resources remain sufficient over the forecast period and that it has adequate resources to continue operations for a period for at least one year following the approval of these financial statements. In addition, in confirming its ability to provide ongoing financial support, Dar has considered its own financial position and anticipated cash resources over the period for at least one year following approval of these financial statements, to enable it to meet its commitment to the Group and is aware of the plausible downside scenarios included in The Penspen Group's profit and cash-flow forecasts.
Based on the confirmation of support received from the ultimate parent undertaking, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in the preparation of the financial statements.
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DAR AL-HANDASAH (UK) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Although, the Parent Company is in a net current asset position at 31 December 2023, it has made significant losses in recent years as a result of the value of its investments being written off. Therefore, it relies on the support of the ultimate parent undertaking to be able to continue operating as the UK group company. Again, based on the confirmation of support received from the ultimate parent undertaking, the directors have a reasonable expectation that the Parent Company has adequate resources to continue in operational existence for the foreseeable future.
Details of future developments can be found in the Strategic Report on page 1 and form part of this report by cross-reference.
Financial risk management objectives
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The Group's principal financial liabilities comprise loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group's operations and to provide guarantees to support its operations. The Group has financial assets in the form of trade and other receivables, cash and short-term deposits and other receivables that arise directly from its operations.
The Group is exposed to interest rate risk, foreign currency risk, credit risk and liquidity risk. The Group's senior management oversees these risks and reviews and agrees policies for their management, which have a significant impact on the Group as set out in note 29.
Engagement with employees, suppliers, customers and others
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For details of the Group's engagement with employees, suppliers, customers and others please refer to the Directors' statement of responsibilities under section 172 Companies Act 2006 in the Strategic report.
Research and development activities
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The Group has substantial industry know-how across the business, which it uses to create innovative solutions for its clients. The Group collates key work into a knowledge library to be used on future projects and has a continuing focus on improving current processes and practices.
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DAR AL-HANDASAH (UK) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Streamlined energy and carbon reporting
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During the year our energy emissions have reduced, through a mix of reduced office space being available during the year and heightened awareness of climate change and how the Group can reduce its impact on the environment. The Group provides details about the carbon impact of various travel options to help staff make informed decisions about how business-related travel impacts the environment. The Group's greenhouse gas emissions and energy consumption for the year are:
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- Office purchased electricity
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Associated Greenhouse Gas emissions (Tonnes CO2 equivalent)
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- Total Scope 1 emissions
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- Other indirect emissions
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Intensity ratio (Total emission/Turnover) (kWh/£'000)*
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Energy use per employee (kWh)*
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UK energy use covers all business activities for The Penspen Group Limited, Penspen Limited, Penspen and Penspen Theia Limited. The transport use refers to fuel used by company vehicles or fuel reimbursed to employees for business travel which are very minimal. The associated greenhouse gas emissions have been calculated using Digest of UK Energy Statistics (DUKES) methodology and limited to UK energy use only. It is in line with 'The Companies (Directors' Report) and Limited Liabilities Partnerships (Energy and Carbon Report) Regulations 2018'.
*These calculations are based on total revenue for The Penspen Group Limited amounting to £90,050,000 (2022: £66,876,000) and average employee numbers for The Penspen Group Limited of 1,079 (2022: 955).
Indemnity provision
The Company has granted an indemnity to one or more of its directors against liability in respect of proceedings bought by third parties, subject to the conditions set out in s234 of the Companies Act 2006. Such qualifying third-party indemnity provision remains in force as at the date of approving the directors' report.
Matters covered in the Group Strategic Report
Certain items required under Schedule 7 to be disclosed in the Directors' Report are set out in the Strategic Report in accordance with S.414C(II) of the Companies Act 2006; these being the Group's principal activity, future developments, principal risks and uncertainties and disabled employees and employee consultation matters.
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DAR AL-HANDASAH (UK) LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
Disclosure of information to auditor
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Each of the persons who are directors at the time when this Directors' Report is approved has confirmed that:
∙so far as the director is aware, there is no relevant audit information of which the Company and the Group's auditor is unaware, and
∙the director has taken all the steps that ought to have been taken as a director in order to be aware of any relevant audit information and to establish that the Company and the Group's auditor is aware of that information.
Post balance sheet events
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On 1 March 2024, Dar Al-Handasah (UK) Limited (the Parent) purchased 100% of the share capital and voting rights of Urban Initiatives Studio Limited for consideration of £250,000.
After the year end, the entire share capital of Dar Plus Limited and Dar Group Ltd were transferred from the wider Dar group to Dar Al-Handasah (UK) Limited.
On 5 March 2024, Para Digital Solutions Limited was incorporated as a private company in England and Wales with its ordinary share capital owned by the Group.
The auditor, MHA, will be proposed for reappointment in accordance with section 485 of the Companies Act 2006.
This report was approved by the board and signed on its behalf.
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D J S Horner
Director
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DAR AL-HANDASAH (UK) LIMITED
DIRECTORS' RESPONSIBILITIES STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2023
The directors are responsible for preparing the Group Strategic Report, Directors' Report and the consolidated financial statements, in accordance with applicable law.
Company law requires the directors to prepare consolidated financial statements for each financial year. Under that law they have elected to prepare the consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the UK.
Under company law the directors must not approve the consolidated financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and the Company and of the profit or loss of the Group for that period. In preparing the consolidated financial statements, the directors are required to:
∙select suitable accounting policies and then apply them consistently;
∙make judgements and estimates that are reasonable and prudent;
∙state whether they have been prepared in accordance with IFRS as adopted by the UK, subject to any material departures disclosed and explained in the financial statements;
∙assess the Group and Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
∙use the going concern basis of accounting unless they either intend to liquidate the Group or the Company or to cease operations, or have no realistic alternative but to do so.
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 Group and enable them to ensure that the financial statements comply with the Companies Act 2006. They are 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, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and Group and to prevent and detect fraud and other irregularities.
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DAR AL-HANDASAH (UK) LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DAR AL-HANDASAH (UK) LIMITED
We have audited the financial statements of Dar Al-Handasah (UK) Limited (the 'Parent Company') and its subsidiaries (the 'Group') for the year ended 31 December 2023 which comprise the Consolidated Statement of Profit or Loss and Other Comprehensive Income, the Consolidated Statement of Financial Position, the Company Statement of Financial Position, the Consolidated Statement of Cash Flows, the Company Statement of Cash Flows, the Consolidated Statement of Changes in Equity, the Company Statement of Changes in Equity and the related notes, including a summary of significant accounting policies set out on pages 27 - 41. The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the United Kingdom.
In our opinion:
∙the financial statements give a true and fair view of the state of the Group's and the Parent Company's affairs as at 31 December 2023 and of the Group's loss for the year then ended;
∙the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the United Kingdom; and
∙the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
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 auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Group and the Parent Company 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.
Conclusions relating to going concern
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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.
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DAR AL-HANDASAH (UK) LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DAR AL-HANDASAH (UK) LIMITED (CONTINUED)
The other information comprises the information included in the Annual Report, other than the financial statements and our auditor's 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.
Opinion on other matters prescribed by the Companies Act 2006
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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 year 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.
Matters on which we are required to report by exception
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.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
∙adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
∙the Parent Company financial statements are not in agreement with the accounting records and returns; or
∙certain disclosures of directors' remuneration specified by law are not made; or
∙we have not received all the information and explanations we require for our audit.
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DAR AL-HANDASAH (UK) LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DAR AL-HANDASAH (UK) LIMITED (CONTINUED)
Responsibilities of directors
As explained more fully in the directors' responsibilities statement on page 12, 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 Group's and the Parent 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 Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor's 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 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 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:
∙Enquiry of management around actual and potential litigation claims;
∙Enquiry of entity staff to identify any instances of non-compliance with laws and regulations;
∙Performing audit work over the risk of management override of controls, including testing of journal entries and other adjustments for appropriateness, evaluating the business rationale of significant transactions outside the normal course of business and reviewing accounting estimates for bias;
∙Reviewing minutes of meetings of those charged with governance; and
∙Reviewing financial statement disclosures and testing to supporting documentation to assess compliance with applicable laws and regulation.
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 auditor's report.
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DAR AL-HANDASAH (UK) LIMITED
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF DAR AL-HANDASAH (UK) 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.
Duncan Cochrane-Dyet BSc BFP FCA (Senior Statutory Auditor)
for and on behalf of
MHA
Statutory Auditor
Maidstone
United Kingdom
24 February 2025
MHA is the trading name of MacIntyre Hudson LLP, a limited liability partnership in England and Wales (registered number OC312313).
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DAR AL-HANDASAH (UK) LIMITED
CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
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Expected credit loss movements
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Other comprehensive income:
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Items that will not be reclassified to profit or loss:
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Revaluation of freehold property and pipeline
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Deferred tax on revaluation
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Remeasurement of defined benefit plan
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Deferred tax on defined benefit plan
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Items that will or may be reclassified to profit or loss:
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Exchange differences arising on translation of foreign operations
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Other comprehensive income for the year, net of tax
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Total comprehensive loss for the year, net of tax
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The notes on pages 27 to 80 form part of these financial statements.
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DAR AL-HANDASAH (UK) LIMITED
REGISTERED NUMBER: 02453001
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2023
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Property, plant and equipment
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Trade and other receivables
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Trade and other receivables
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Cash and cash equivalents
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Trade and other liabilities
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Interest bearing loans and borrowings
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Trade and other liabilities
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Interest bearing loans and borrowings
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DAR AL-HANDASAH (UK) LIMITED
REGISTERED NUMBER: 02453001
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2023
Issued capital and reserves attributable to owners of the parent
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The financial statements on pages 17 to 80 were approved and authorised for issue by the board of directors and were signed on its behalf by:
................................................
D J S Horner
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The notes on pages 27 to 80 form part of these financial statements.
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DAR AL-HANDASAH (UK) LIMITED
REGISTERED NUMBER: 02453001
COMPANY STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2023
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Other non-current investments
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Trade and other receivables
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Cash and cash equivalents
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Trade and other liabilities
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Issued capital and reserves attributable to owners of the parent
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The Company's loss for the year was £12,763 (2022 - £5,484).
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DAR AL-HANDASAH (UK) LIMITED
REGISTERED NUMBER: 02453001
COMPANY STATEMENT OF FINANCIAL POSITION (CONTINUED)
AS AT 31 DECEMBER 2023
The financial statements on pages 17 to 80 were approved and authorised for issue by the board of directors and were signed on its behalf by:
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D J S Horner
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The notes on pages 27 to 80 form part of these financial statements.
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DAR AL-HANDASAH (UK) LIMITED
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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Total attributable to equity holders of parent
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Other comprehensive income
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Total comprehensive income/(loss) for the year
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Transfer to/from retained earnings
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Other comprehensive income
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Total comprehensive income/(loss) for the year
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Transfer to/from retained earnings
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The notes on pages 27 to 80 form part of these financial statements.
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DAR AL-HANDASAH (UK) LIMITED
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
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Comprehensive income for the year
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Total comprehensive loss for the year
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Comprehensive income for the year
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Total comprehensive loss for the year
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The notes on pages 27 to 80 form part of these financial statements.
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DAR AL-HANDASAH (UK) LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
Cash flows from operating activities
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Depreciation of property, plant and equipment
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Amortisation of intangible fixed assets
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Loss on sale of property, plant and equipment
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Non cash movements on defined benefit pension scheme
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Increase/(decrease) in provisions
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Income tax (credit)/expense
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Movements in working capital:
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Increase in trade and other receivables
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Increase in trade and other payables
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Cash generated from/(used in) operations
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Net cash used in operating activities
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DAR AL-HANDASAH (UK) LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2023
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Cash flows from investing activities
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Purchases of property, plant and equipment
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Proceeds from disposal of property, plant and equipment
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Amounts advanced to related parties
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Net cash (used in)/from investing activities
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Cash flows from financing activities
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Proceeds from related party liabilities
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Payment of principal element of lease liabilities
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Net cash from financing activities
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Net (decrease)/increase in cash and cash equivalents
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Cash and cash equivalents at the beginning of year
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Exchange (loss)/gains on cash and cash equivalents
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Cash and cash equivalents at the end of the year
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The notes on pages 27 to 80 form part of these financial statements.
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DAR AL-HANDASAH (UK) LIMITED
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
Cash flows from operating activities
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Movements in working capital:
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Decrease in trade and other receivables
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Decrease in trade and other payables
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Net cash from operating activities
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Net increase in cash and cash equivalents
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Cash and cash equivalents at the beginning of year
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Cash and cash equivalents at the end of the year
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The notes on pages 27 to 80 form part of these financial statements.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Dar Al-Handasah (UK) Limited (the 'Company') is a private company limited by shares incorporated in the United Kingdom under the Companies Act and is registered in England and Wales. The Company's registered office is at 150 Holborn, London, EC1N 2NS. These consolidated financial statements comprise the Company and its subsidiaries (collectively the 'Group' and individually 'Group companies'). The Group is primarily involved in civil engineering consultancy services, to the energy sector particularly, and the operation of a pipeline, supplying aviation fuel to Manchester Airport (see note 5). Information on the Group's ultimate parent undertaking is presented in note 27.
2.Accounting policies
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Basis of preparation of financial statements
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The Group's consolidated and the Company's individual financial statements have been prepared in accordance with International Financial Reporting Standards, International Accounting Standards and Interpretations as adopted by the UK (collectively IFRSs).
Details of the Group's accounting policies, including changes during the year, are included in this note.
The Company has taken advantage of the exemption available under section 408 of the Companies Act 2006 and elected not to present its own Statement of Comprehensive Income in these financial statements.
In preparing these financial statements, management has made judgements, estimates and assumptions that affect the application of the Group accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
The areas where judgements and estimates have been made in preparing the consolidated financial statements and their effects are disclosed in note 4.
The financial statements have been prepared on the historical cost basis except for investment properties, freehold property and a pipeline fixed asset held by a subsidiary undertaking (classified under pipelines) that have been measured at fair value.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by the Company and its subsidiaries. Control is achieved when the Company:
∙has power over the investee;
∙is exposed, or has rights, to variable returns from its involvement with the investee; and
∙has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.
When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances in assessing whether or not the Company's voting rights in an investee are sufficient to give it power, including:
∙the size of the Company's holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
∙potential voting rights held by the Company, other vote holders or other parties;
∙rights arising from other contractual arrangements; and
∙any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at this time that decisions need to be made, including voting patterns at previous shareholders' meetings.
Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, income and expenses of a subsidiary acquired or disposed of during the year are included in the consolidated statement of profit or loss and other comprehensive income from the date the Company gains control until the date when the Company ceases to control the subsidiary.
Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.
When necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with the Group's accounting policies.
All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group are eliminated in full on consolidation.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
The Group has experienced trading losses in recent years, including in the year ended 31 December 2023, which has resulted in increasing levels of external and inter-company borrowings. External borrowings consist of overdrafts of £9.0m that are repayable on demand and term loans of £17.4m as at 31 December 2023. This includes a $11.0m term loan with HSBC Bank UK plc expiring in August 2024 and a term loan for $11.1m with Europe Arab Bank plc expiring in September 2024. The overdraft facility contributes to a net current liability position of £52.4m (31 December 2022: £27.4m). This increase is largely due to the term loans being classified as current liabilities, given their renewal dates as at the end of the year.
In preparing the consolidated financial statements, the directors note that the Group has access to the financial resources of its ultimate parent undertaking, Dar Al-Handasah Consultants Shair and Partners Holdings Limited ('Dar') . The ultimate parent has confirmed its ongoing financial support in writing for the period of 12 months following approval of these financial statements. This confirmation is in addition to specific guarantees made in respect of the overdraft and loan facilities highlighted above.
The uncertainty as to the ongoing impact on the Group from the conflict in Ukraine has been considered in connection with the Group's adoption of the going concern basis. The Penspen Group has prepared profit and cash-flow forecasts for the period of 12 months following approval of these financial statements. The forecasts include a number of plausible downside scenarios, making assumptions around revenue levels and a slow-down in debtor recoverability. The Penspen Group is confident that it can take sufficient mitigating action, where necessary, to ensure that resources remain sufficient over the forecast period and that it has adequate resources to continue operations for a period at least 12 months following approval of these financial statements. In addition, in confirming its ability to provide ongoing financial support, Dar has considered its own financial position and anticipated cash resources for the period of 12 months following approval of these financial statements, to enable it to meet its commitment to The Penspen Group and is aware of the plausible downside scenarios included in The Penspen Group's profit and cash-flow forecasts. There are no forecasts available for the Dar companies within the Group.
Based on the confirmation of support received from the ultimate parent undertaking, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in the preparation of the financial statements.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the Group to the former owners of the acquiree and the equity interests issued by the Group in exchange for control of the acquiree. Acquisition-related costs are generally recognised in profit or loss as incurred.
At the acquisition date, the identifiable assets acquired and the liabilities assumed are recognised at their fair value, except that:
∙deferred tax assets or liabilities, and assets or liabilities related to employee benefit arrangements are recognised and measured in accordance with IAS 12 Income Taxes and IAS 19 respectively;
∙liabilities or equity instruments related to share-based payment arrangements of the acquiree or share-based payment arrangements of the Group entered into to replace share-based payment arrangements of the acquiree are measured in accordance with IFRS 2 at the acquisition date; and
∙assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations are measured in accordance with that Standard.
Goodwill is measured as the excess of the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree, and the fair value of the acquirer's previously held equity interest in the acquiree (if any) over the net of the acquisition-date amounts of the identifiable assets acquired and the liabilities assumed. If, after reassessment, the net of the acquisition-date amounts of the identifiable assets acquired and liabilities assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the acquirer's previously held interest in the acquiree (if any), the excess is recognised immediately in profit or loss as a bargain purchase gain.
Goodwill arising on an acquisition of a business is carried at cost as established at the date of acquisition of the business (see note 2.4) less accumulated impairment losses, if any.
For the purposes of impairment testing, goodwill is allocated to each of the Group's cash-generating units (or groups of cash-generating units) that is expected to benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated is tested for impairment annually, or more frequently when there is an indication that the unit may be impaired. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit pro rata based on the carrying amount of each asset in the unit. Any impairment loss for goodwill is recognised directly in profit or loss. An impairment loss recognised for goodwill is not reversed in subsequent periods.
On disposal of the relevant cash-generating unit, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Rendering of services
Revenue from contracts with customers is recognised when services are transferred to the customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those services. The Group acts as the principal in its revenue arrangements because it typically controls the services before transferring them to the customer.
The Group satisfies a performance obligation and recognises revenue over time, if one of the following criteria is met:
∙The customer simultaneously receives and consumes the benefits provided by the Group's performance as the Group performs; or
∙The Group's performance creates or enhances an asset that the customer controls as the asset is created or enhanced; or
∙The Group's performance does not create an asset with an alternative use to the Group and the entity has an enforceable right to payment for performance completed to date.
For performance obligations where one of the conditions are not met, revenue is recognised at the point in time at which the performance obligation is satisfied. The Group is required to assess each of its contracts with customers to determine whether performance obligations are satisfied over time or at a point in time in order to determine the appropriate method of recognising revenue.
The Group has concluded that for all of its contracts with customers, it is either creating or enhancing an asset controlled by the customer. Therefore, it meets the criteria to recognise revenue over time and measure progress of its projects through the cost to complete method (input method) as it best depicts the transfer of control of products and services under each performance obligation.
The Group's contracts generally consist of a single performance obligation or series of distinct services which in substance represent a single performance obligation. Contracts with multiple performance obligations have pre-agreed consideration for each performance obligation reducing the need to manually allocate the transaction price using stand-alone selling prices.
Interim milestones may be agreed as staged payments for single or multiple performance obligations. Once these milestones are signed off by clients we will invoice and our general terms and conditions will trigger due dates for these payments. As we invoice clients contract asset/liability values reduce in accordance with invoicing values.
Revenue from Group Companies
Revenue receivable from the ultimate parent undertaking represents costs recharged to that entity at an agreed mark-up of 6.5%. Income from fellow subsidiary undertakings, where this is the simple recharge of expenses, is not subject to a mark-up.
Engineering services - lump sum and fixed price contracts
The Group provides engineering, asset integrity and asset management services through lump sum or fixed price contracts. Where the services are provided through an overarching framework agreement, each individual project is separately identified before the service commences. Each contract or project comprises a single performance obligation. The Group recognises revenue on these contracts over time as our performance creates or enhances an asset that the customer controls. The Group uses the input method in measuring progress because there is a direct relationship between the Group's effort (i.e.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
based on labour hours incurred) and the transfer of service to the customer. The proportion of revenue recognised in the year is equal to the proportion of costs incurred to total anticipated contract costs less amounts recognised in previous years where relevant. Contract variations are included in revenue when the variation has been approved by both parties, such that it is probable that the amount, which can be measured reliably, will be recovered from the client.
When it is probable that total contract costs will exceed total contract income, a provision is made for the full amount of any anticipated losses in the period in which the loss is first foreseen.
Engineering and Asset Management services - cost reimbursable projects
The Group provides project management and asset management services on cost reimbursable contracts. Each contract comprises a single performance obligation. The Group recognises revenue over time as the customer simultaneously receives and consumes all of the benefits provided by our service. The Group uses the output method as the services are provided based on contractual rates per man hour.
Operation of pipeline
The Group provides fuel to customers at Manchester Airport through a dedicated pipeline into the airport. This represents a single performance obligation. The Group recognises revenue at the point in time that the fuel is delivered to the customer.
Procurement services
The Group has some contracts with customers to acquire equipment or other assets on their behalf. Under these contracts, the Group provides procurement services (i.e., coordinating the selection of suitable suppliers and managing the ordering and delivery of imported equipment). The Group does not have control of the equipment before it is being transferred to the customer. The Group is acting as an agent and recognises the revenue at the net amount that is retained for these arrangements. Revenue is recognised at a point in time (i.e. upon receipt of the customer of the equipment) because this is when the customer benefits from the Group's procurement services.
Contract assets
A contract asset represents the excess of amounts of revenue earned by reference to work done over the amounts invoiced. This involves an objective evaluation of project progress against the delivery schedule, evaluation of the work to be performed and the associated costs to fully deliver the contract to the client and contingencies. These factors are affected by a variety of uncertainties that depend on the outcome of future events, and so often need to be revised as events unfold, and therefore it is not practically possible to present these sensitivities. The estimates could have an impact on revenue, cost of sales, gross amounts due to customers and gross amounts due from customers.
Trade receivables
A receivable represents the Group's right to an amount of consideration that is unconditional. Trade receivables are initially measured at fair value and subsequently at amortised cost using the effective interest method.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
received consideration (or an amount of consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract liability is recognised when the payment is made or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when the Group performs its obligation under the contract.
Provision is made as appropriate for any anticipated losses on contracts as soon as they are foreseen.
Other income
Rental income from third party tenants that sublet the Group's surplus freehold office space by way of operating leases is recognised on a straight-line basis over the term of the lease as adjusted for the effect of any incentives.
The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
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(i) The Group as a lessor
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The Group enters into lease agreements as a lessor with respect to its investment properties. Leases for which the Group is a lessor are classified as finance or operating leases. Whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee, the contract is classified as a finance lease. All other leases are classified as operating leases.
Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term.
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(ii) The Group as a lessee
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The Group applies a single recognition and measurement approach for all leases, except for short-term leases of less than twelve months and leases of low-value assets with a value of less than $5,000 or equivalent. The Group recognises lease liabilities to make lease payments and right-of-use assets representing the right to use the underlying assets.
Right of use assets
The Group recognises right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at or before the commencement date less any lease incentives received.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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(ii) The Group as a lessee (continued)
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In calculating the present value of lease payments, the Group uses its parent Company's incremental borrowing rate at the beginning of the year because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, or a change in the lease payments. IFRS 16 requires certain adjustments to be expensed, while others are added to the cost of the related right-of-use asset.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases. It also applies the lease of low-value assets recognition exemption to leases of office equipment that are considered to be low value. Lease payments on short-term leases and leases of low-value assets are recognised as an expense on a straight-line basis over the lease term.
In preparing the financial statements of each individual group entity, transactions in currencies other than the entity's functional currency (foreign currencies) are recognised at the rates of exchange prevailing at the dates of the transactions. At the end of each reporting period, monetary items denominated in foreign currencies are retranslated at the rates prevailing at that date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences on monetary items are recognised in profit or loss in the period in which they arise except for:
∙exchange differences on foreign currency borrowings relating to assets under construction for future productive use, which are included in the cost of those assets when they are regarded as an adjustment to interest costs on those foreign currency borrowings;
∙exchange differences on transactions entered into in order to hedge certain foreign currency risks; and
∙exchange differences on monetary items receivable from or payable to foreign operation for which settlement is neither planned nor likely to occur (therefore forming part of the net investment in the foreign operation), which are recognised initially in other comprehensive income and reclassified from equity to profit or loss on repayment of the monetary items.
For the purposes of presenting these consolidated financial statements, the assets and liabilities of the Group's foreign operations are translated into pounds using exchange rates prevailing at the end of each reporting period. Income and expense items are translated at the average exchange rates for the period, unless exchange rates fluctuate significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognised in other comprehensive income and accumulated in equity (and attributed to non-controlling interests as appropriate).
Goodwill and fair value adjustments to identifiable assets acquired and liabilities assumed through
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Foreign currency (continued)
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acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the rate of exchange prevailing at the end of each reporting period. Exchange differences arising are recognised in other comprehensive income.
Income tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the year. Taxable profit differs from ‘profit before tax’ as reported in the consolidated Consolidated Statement of Profit or Loss and Other Comprehensive Income because of items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible. The Group's current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.
Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities in the consolidated financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax assets are generally recognised for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilised. Such deferred tax assets and liabilities are not recognised if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognised if the temporary difference arises from the initial recognition of goodwill.
Deferred tax liabilities are recognised for taxable temporary differences associated with investments in subsidiaries and associates, and interests in joint ventures, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets arising from deductible temporary differences associated with such investments and interests are only recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise the benefits of the temporary differences and they are expected to reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realised, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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(iii) Current and deferred tax for the year
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Current and deferred tax are recognised in profit or loss, except when they relate to items that are recognised in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognised in other comprehensive income or directly in equity respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is included in the accounting for the business combination.
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Property, plant and equipment
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Freehold property in Richmond and the Pipeline asset in Manchester are measured at fair value recognised at the date of revaluation. Valuations are performed annually to ensure that the carrying amount of a revalued asset does not differ materially from its fair value.
A revaluation surplus is recorded in OCI and credited to the asset revaluation surplus in equity. However, to the extent that it reverses a revaluation deficit of the same asset previously recognised in profit or loss, the increase is recognised in profit and loss. A revaluation deficit is recognised in the statement of profit or loss, except to the extent that it offsets an existing surplus on the same asset recognised in the asset revaluation surplus.
An annual transfer from the asset revaluation surplus to retained earnings is made for the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset's original cost.
Other items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.
If significant parts of an item of property, plant and equipment have different useful lives, then they are accounted for as separate items (major components) of property, plant and equipment. Any gain or loss on disposal of an item of property, plant and equipment is recognised in profit or loss. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group.
Depreciation is provided on all other items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates:
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Short-term leasehold property
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10% or over the lease term (1 to 10 years)
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25% or over the lease term (1 to 5 years)
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Fixtures, fittings and equipment
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12.5% - 20% or over the lease term (1 to 3 years)
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The carrying value of property, plant and equipment is reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable and are written down immediately to their recoverable amount. Useful lives and residual values are reviewed annually and where adjustments are required these are made prospectively.
An item of property, plant and equipment is derecognised upon disposal or when no future economic
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Property, plant and equipment (continued)
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benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset is included in the income statement in the period of derecognition.
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Intangible assets acquired separately
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Intangible assets with finite useful lives, such as software and licenses, that are acquired separately are carried at cost less accumulated amortisation and accumulated impairment losses. During the period of development, the asset is tested for impairment annually by reviewing the costs to complete against the expected benefits. Amortisation is recognised on a straight-line basis over their estimated useful lives. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any changes in estimate being accounted for on a prospective basis. Intangible assets with indefinite useful lives that are acquired separately are carried at cost less accumulated impairment losses.
Internally generated intangibles, excluding capitalised development costs, are not capitalised and the related expenditure is reflected in profit or loss in the period in which the expenditure is incurred.
Amortisation of other intangibles is included in administrative expenses in the income statement.
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Research and development costs
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Research costs are expensed as incurred. Development expenditure on an individual project is capitalised and recognised as an intangible asset only when the Group can demonstrate:
∙The technical feasibility or completing the intangible asset so that the asset will be available for use or sale
∙Its intention to complete and its ability and intention to use or sell the asset
∙How the asset will generate future economic benefits
∙The availability of resources to complete the asset
∙The ability to measure reliably the expenditure during development
Following initial recognition of the development expenditure as an intangible asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. During the period of development, the asset is tested for impairment annually.
Inventories are stated at the lower of cost and net realisable value. Costs of inventories are determined on a weighted average basis. Net realisable value represents the estimated selling price for inventories less all estimated costs of completion and costs necessary to make the sale.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).
When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognised as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.
Financial assets
The Group's financial assets include cash, contract receivables and trade receivables. All financial assets are recognised initially at fair value plus transaction costs that are attributable to the acquisition of the financial asset.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. After initial measurement, such financial assets are subsequently measured at amortised cost using the effective interest rate (EIR) method, less impairment. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance income in the statement of profit or loss. The losses arising from impairment are recognised in the statement of profit or loss in finance costs for loans and in cost of sales or other operating expenses for receivables.
Impairment of financial assets
The Group assesses, at each reporting date, whether there is objective evidence that a financial asset or a Group of financial assets is impaired. An impairment exists if one or more events that has occurred since the initial recognition of the asset (an incurred 'loss event') has an impact on the estimated future cash flows of the financial asset or the Group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the debtor or a Group of debtors are experiencing significant financial difficulty, default or delinquency in interest of principal payments, the probability that they will enter bankruptcy or other financial reorganisation and observable data indicating that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults.
Financial assets carried at amortised cost
For financial assets carried at amortised cost, the Group first assesses whether impairment exists for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a Group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Financial instruments (continued)
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individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in collective assessment of impairment.
The Group recognises a loss allowance for expected credit losses on trade receivables and contract assets. The amount of expected credit losses is updated at each reporting date to reflect changes in credit risk since initial recognition of the respective financial instrument. The Group recognises lifetime expected credit losses (ECL) for trade receivables. The expected credit is estimated using a provision matrix based on the Group's historical credit loss experience, adjusted for factors that are specific to the debtors, general economic conditions and an assessment of both the current as well as the forecast direction of conditions at the reporting date.
Financial liabilities
The Group's financial liabilities include trade payables, bank overdrafts and loans and borrowings. All financial liabilities are recognised initially at fair value. This includes directly attributable transaction costs.
The measurement of financial liabilities depends on their classification.
After initial recognition, interest bearing loans and borrowings are subsequently measured at amortised cost using the effective interest rate (EIR) method. Gains and losses are recognised in the income statement when the liabilities are derecognised as well as through the EIR amortisation process.
Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in finance costs in the income statement.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in respective carrying amounts is recognised in the statement of profit or loss.
Impairment of non-financial assets
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the assets's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's (CGU) fair value less costs to sell and its value in use. It is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or Groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions can be identified, an appropriate valuation model is used.
The Group bases its impairment calculation on detailed budgets and forecasts which are prepared separately for each of the Group's CGUs to which the individual assets are allocated. These budgets and forecast calculations generally cover a period of five years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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Financial instruments (continued)
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Impairment losses of continuing operations, including impairment on inventories, are recognised in the statement of profit or loss in those expense categories consistent with the function of the impaired asset.
For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or CGU's recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used to determine the assets recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying amount of the asset does not exceed its recoverable amount, nor exceed that carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement unless the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
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Defined contribution schemes
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Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the year to which they relate.
The Group also operates a defined benefit pension scheme providing benefits based on final pensionable pay. This scheme is no longer open to new employees and closed to future accrual. The assets of the plan are held separately from those of the Group, being invested with a pensions and investments provider. Any curtailment gains on the scheme are recognised within other operating income in the consolidated statement of profit or loss. Financing costs are reflected in interest payable in the period in which they arise. Actuarial gains and losses are included in the consolidated statement of profit or loss.
Net interest is calculated by applying the discount rate to the net defined benefit liability or asset. The Group recognises the following changes in the net defined benefit obligation under 'cost of sales' and 'administrative expenses' in the consolidated statement of profit or loss (by function):
∙Service costs comprising current service costs, past-service costs, gains and losses on curtailments and non-routine settlements
∙Net interest expenses or income
Further details of the pension plan valuation as at 31 December 2023 are given in note 25. The Group recognises actuarial gains and losses in the period in which they occur in full in other comprehensive income in accordance with IAS 19.93A. Accordingly, the Group recognised all cumulative actuarial gains and losses at the date of transition to IFRS. Further details are disclosed in note 25.
In both years a pension scheme surplus has arisen i.e. a surplus of the scheme assets over the scheme liabilities. This is recognised in the consolidated statement of financial position on the basis that the Group is able to realise the net present value of economic benefits in the form of a refund from the scheme or reductions in future contributions. In forming this view, the Group has taken legal advice in respect of the Group's rights under the scheme deed.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
2.Accounting policies (continued)
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New and amended standards and interpretations effective for annual period beginning on or after 1 January 2023:
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In the current year, the following amendments to IFRS Accounting Standards, which are relevant to the Group, were issued by the International Accounting Standards Board (IASB) and are mandatorily effective for an accounting period that begins on or after 1 January 2023. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.
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Definition of Accounting Estimates Amendments to IAS 8
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Definition of Accounting Estimates amends IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors. The amendments introduced the definition of accounting estimates and included other amendments to help entities distinguish changes in accounting estimates from changes in accounting policies.
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Disclosure of Accounting Policies Amendments to IAS 1 and IFRS Practice Statement 2
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Disclosure of Accounting Policies amends IAS 1 Presentation of Financial Statement and IFRS Practice Statement 2 Making Materiality Judgements. The amendments replace the requirement for entities to disclose their material accounting policy information. The amendments also include guidance to help entities apply the definition of material in making decisions about accounting policy disclosures.
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Deferred Tax Related to Assets and Liabilities Arising from a Single Transaction Amendments to IAS 12
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Deferred Tax related to Assets and Liabilities arising from a Single Transaction amends IAS 12 Income Taxes. The amendments narrowed the scope of the recognition exemption in paragraph 15 and 24 of IAS 12 so that it no longer applies to transactions that, on initial recognition gives rise to equal taxable and deductible temporary differences. The amendments apply to transactions such as leases and decommissioning obligations
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Standards issued but not yet effective
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At the date of authorisation of these financial statements, the Group has not applied the following new and revised IFRS Standards that have been issued but are not yet effective:
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Covid-19 related rent concessions beyond 30 June 21
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Lease liability in a sale and lease back
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Amendments to IAS 7 and IFRS 7
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Supplier finance arrangements
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Non-current liabilities with covenants
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Classification of liabilities as current or non-current
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Classification of liabilities as current or non-current - deferral of effective date
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The directors do not expect that the adoption of the Standards listed above will have a material impact on the financial statements of the Group in future periods.
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Functional and presentation currency
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These consolidated financial statements are presented in pound sterling, which is the Group and Company's functional currency. All amounts have been rounded to the nearest pound, unless otherwise indicated.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Accounting estimates and judgements
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4.1 Judgements
In the current year there were no critical judgements in applying the Group's accounting policies.
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4.2 Estimates and assumptions
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The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year, are described below. Existing circumstances and assumptions about future developments, however, may change due to market changes or circumstances arising beyond the control of the Group. Such changes are reflected in the assumptions when they occur.
Revaluation of pipeline
The Group carries its pipeline asset at fair value, with changes in fair value being recognised in the statement of comprehensive income. The fair valuation methodology for the pipeline asset is based on a discounted cash flow (DCF) model, as there is a lack of comparable market data because of the nature of the asset. The Group engaged an independent valuation specialist to assess the fair values for the pipeline asset, see note 12 for further details.
Employee benefit liability/asset
The cost of defined benefit pension plans and the present value of the pension obligation are determined using actuarial valuations. An actuarial valuation involves making various assumptions which may differ from actual developments in the future. These include the determination of the discount rate, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and its long-term nature, a defined benefit obligation is highly sensitive to changes in these assumptions and they are described in note 25. All assumptions are reviewed at each reporting date.
In determining the appropriate discount rate, management considers the interest rates of corporate bonds in their respective currencies with at least an AA rating or above, and extrapolated maturity corresponding to the expected duration of the defined benefit obligation. The underlying bonds are further reviewed for quality. Those having excessive credit spreads are removed from the analysis of bonds on which the discount rate is based, on the basis that they do not represent high quality bonds.
The mortality rate assumption is based on publicly available mortality tables for the specific countries. Future salary increases and pension increases are based on the expected future inflation rates for the respective countries.
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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The following is an analysis of the Group's revenue for the year from continuing operations:
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Engineering consultancy services (services provided over time)
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Operation of pipeline (services provided at a point in time)
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Management charges receivable
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Fees receivable from other Dar companies
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Analysis of revenue by country of destination:
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|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Subcontractors and consultants
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Computers, software licencing and other IT costs
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Insurance and other professional fees
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Depreciation and amortisation
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Loss on disposal of tangible fixed assets
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Corporate recharges from parent
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Telephone and communication
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During the year, the Group obtained the following services from the Company's auditor and its associates:
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Fees payable to the Company's auditor and its associates for the audit of the consolidated and parent Company's financial statements
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Fees payable to the Company's auditor and its associates in respect of:
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The auditing of accounts of associates of the Group
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Taxation compliance services
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All non-audit services not included above
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
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Employee benefit expenses
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Employee benefit expenses (including directors) comprise:
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End of service indemnity expense
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Key management personnel compensation
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the Group, including the directors of the Company listed on page 7, and the Financial Controller of the Company.
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The monthly average number of persons, including the directors, employed by the Group during the year was as follows:
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Company
The monthly average number of persons, including the directors, employed by the Company during the year was 4 (2022 - 4), none of whom received any employee benefit expenses from the Company (2022 - none).
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DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
During the year, there were no retirement benefits accruing to the directors in respect of qualifying services.
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The highest paid director's emoluments were as follows:
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Total emoluments and amounts receivable under long-term incentive schemes (excluding shares)
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Finance income and expense
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Recognised in profit or loss
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|
Other interest receivable
|
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|
|
Other loan interest payable
|
|
|
|
|
|
|
|
|
|
|
|
Net finance expense recognised in profit or loss
|
|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
|
|
11.1 Income tax recognised in profit or loss
|
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|
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|
|
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|
|
|
|
|
|
Current tax on profits for the year
|
|
|
|
Adjustments in respect of prior years
|
|
|
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|
|
|
|
|
|
|
|
Origination and reversal of timing differences
|
|
|
|
Adjustments in respect of prior years
|
|
|
|
|
|
|
|
|
|
|
|
Tax expense/(credit) in the consolidated statement of profit or loss
|
|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
11.Tax expense (continued)
|
11.1 Income tax recognised in profit or loss (continued)
|
|
The reasons for the difference between the actual tax charge for the year and the standard rate of corporation tax in the United Kingdom applied to losses for the year are as follows:
|
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Income tax expense/(credit) (including income tax on associate, joint venture and discontinued operations)
|
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|
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|
|
|
|
|
|
|
|
Tax using the Company's domestic tax rate of 23.52% (2022:19%)
|
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|
|
Expenses not deductible for tax purposes
|
|
|
|
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|
|
|
Remeasurement of deferred tax for changes in tax rates
|
|
|
|
Movement in deferred tax not recognised
|
|
|
|
Higher rate taxes on overseas earnings
|
|
|
|
Adjustments to tax charge in respect of prior periods
|
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|
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|
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|
|
Other differences leading to an increase/(decrease) in the tax charge
|
|
|
|
|
|
|
|
Payment/(receipt) for group relief
|
|
|
|
|
|
|
|
Total tax expense/(credit)
|
|
|
|
11.2 Deferred tax balances
|
|
The following is the analysis of deferred tax assets/(liabilities) presented in the consolidated statement of financial position:
|
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|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
11. Tax expense (continued)
11.2 Deferred tax balances (continued)
|
|
|
Defined benefit pension scheme
|
Other temporary timing differences
|
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Credit to income statement
|
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|
|
The Group offsets tax assets and liabilities if and only if it has a legally enforceable right to set off current tax assets and current tax liabilities and the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same tax authority.
The Group has tax losses at the balance sheet date of £37,100,000 (2022: £35,093,030) which are available for offset against future relevant taxable profits. However, as these losses and other tax assets relate to subsidiaries that have been loss making for some time, deferred tax assets have not been recognised based on the future taxable profits forecast in relevant Group companies.
Pillar Two legislation has been enacted or substantively enacted in a number of jurisdictions in which the Group operates. The legislation will be effective for the Group's financial year beginning 1 January 2024. The Group is in the scope of Pillar Two and considering the enacted or substantively enacted legislation has performed an assessment of the Group's potential exposure to Pillar Two income taxes.
The assessment of the potential exposure to Pillar Two income taxes is based on the most recent tax filings and country-by-country reporting for the constituent entities in the Group. Based on the assessment, the Pillar Two effective tax rates in some of the jurisdictions in which the Group operates are below 15%. However, the Group expects to benefit from transitional safe harbour and other Pillar 2 reliefs in all jurisdictions which have enacted or substantively enacted Pillar Two legislation so does not expect any material exposure to Pillar Two top-up taxes.
The Group is continuing to assess the impact of the Pillar Two income taxes legislation on its future financial performance.
The Group has applied the temporary exception issued by the IASB in May 2023 from the accounting requirements for deferred taxes in IAS 12. Accordingly, the Group neither recognises nor discloses information about deferred tax assets and liabilities related to Pillar Two income taxes.
|
|
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|
|
DAR AL-HANDASAH (UK) LIMITED
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
Property, plant and equipment
|
|
|
|
|
|
|
|
|
|
|
Short-term leasehold property
|
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|
|
Fair value gain recognised in other comprehensive income
|
|
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|
Foreign exchange movements
|
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|
|
Fair value gain recognised in other comprehensive income
|
|
|
|
|
|
|
|
|
|
Foreign exchange movements
|
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|
|
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|
DAR AL-HANDASAH (UK) LIMITED
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
12.Property, plant and equipment (continued)
|
|
|
Short-term leasehold property
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation and impairment
|
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Charge owned for the year
|
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|
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|
Charged financed for the year
|
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|
|
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|
|
|
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|
|
|
|
|
|
Charge owned for the year
|
|
|
|
|
|
|
|
|
|
Charged financed for the year
|
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|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
12.Property, plant and equipment (continued)
|
12.1. Assets held under leases
|
|
The net book value of owned and leased assets included as "Property, plant and equipment" in the Consolidated Statement of Financial Position is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment owned
|
|
|
|
Right-of-use assets, excluding investment property
|
|
|
|
|
|
|
|
Information about right-of-use assets is summarised below:
Net book value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation charge for the year ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
12.Property, plant and equipment (continued)
12.1 Assets held under leases (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions to right-of-use assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During the year, disposals of right-of-use assets totalled £45,000 (2022: £147,000) with accumulated depreciation on these disposals of £17,000 (2022: £Nil). Furthermore, there were additional adjustments in relation to the movements in exchange rates of £13,000 (2022: (£99,000)).
12.2 Revaluation of Manchester Jetline Ltd Pipeline
Management determines that the pipeline asset owned by Manchester Jetline Ltd, a subsidiary undertaking, constitutes a separate class of property, plant and equipment, based on the nature, characteristics and risks of the property.
The fair value of this property was determined using the discounted cash flows ("DCF") method. As at the date of revaluation on the 31 December 2023, the pipeline's fair value is based on a valuation performed by Kestrel Energy Solutions Ltd, an independent consultancy firm providing strategic insight, techno-economic and financial analysis to the oil, gas and energy midstream and downstream sectors. The net gain recognised in Other Comprehensive Income for 2023 was £5,188,000 (2022: net gain of £4,263,000). The difference in depreciation between fair value basis and historical cost basis is transferred from Revaluation reserve to profit and loss reserve each year as shown in the Statement of changes in equity.
On assessing the inputs and methodology used in arriving at the fair value, the Group considers the full amount as at December 2023 and 2022 should be classified as Level 3 hierarchy. The fair value calculation is impacted by the weighted average cost of capital used as a discount rate as well as growth assumptions for airport passenger numbers. Given the lack of comparable companies for this asset class, management judgements and assumptions are needed to determine the appropriate weighted average cost of capital, being 6.87% in 2023 (2022: 6.78%). If this rate moved by 25 basis points the fair value would increase by £1.3m or decrease by £1.2m.
If the pipeline asset was measured using the cost model, the carrying amount would be as follows:
2023 2022
Cost 4,388,000 4,388,000
Accumulated depreciation (3,321,000) (3,212,000)
Net carrying value 1,067,000 1,176,000
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
|
|
|
|
|
|
|
|
|
Accumulated amortisation and impairment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign exchange movement
|
|
|
|
|
|
|
|
|
|
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|
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|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
13.Intangible assets (continued)
|
Goodwill - European Asset Management CGU
Goodwill arose on the acquisition of Progas Limited in 2009 which became the European Asset Management service line. The historical cost book value brought forward on transition to IFRS at 1 January 2021 represents the carrying value subject to annual impairment review in accordance with International Financial Reporting Standards.
The Group performed an annual impairment test as at 31 December 2023 and no impairment was identified.
The recoverable amount of the European Asset Management CGU is also determined based on a value in use calculation using cash flow projections from financial budgets approved by senior management covering a five-year period. The pre-tax discount rate applied to the cashflow projections is 15.0% (2022: 15.0%). The growth rate used to extrapolate the cash flows of this unit beyond the five-year period is 2.0% (2022: 2.0%). Management believes this growth rate is justified based on the recent contracts won and bids in the pipeline. As a result of the analysis, management did not identify an impairment for this CGU to which goodwill of £470,000 is allocated.
Key assumptions used in value in use calculations
The calculation of value in use for the Asset Management CGU is most sensitive to the following assumptions:
∙EBITDA
∙Discount rates
EBITDA - EBITDA for the five-year period used in the analysis is based on the value achieved by the CGU during 2023. EBITDA growth is in line with the forecast growth in cash flows included above.
Discount rates - Discount rates represent the current market assessment of the risks specified to each cash-generating unit, regarding the time value of money and individual risks of the underlying assets which have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific circumstances of the Group and its operating segments and derived from its weighted average cost of capital (WACC). The WACC takes into account both debt and equity, where applicable. The cost of equity is derived from the expected return on investment by the Group's investors. A sensitivity analysis is performed with a 20% discount rate to ensure the headroom in excess of carrying value is still positive.
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
13.Intangible assets (continued)
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
Details of the Group's subsidiaries at the end of the reporting period which are all included in the consolidated accounts are as follows:
|
|
Place of incorporation and operation
|
Proportion of ownership and interest - 2023 (%)
|
Proportion of ownership and interest - 2022 (%)
|
|
Dar Al-Handasah Consultants (Shair & Partners) (UK) Limited
|
150 Holborn, London, EC1N 2NS
|
|
|
|
|
150 Holborn, London, EC1N 2NS
|
|
|
|
*IPA Energy + Water Economics Limited
|
11-15 Thistle Street, Edinburgh, EH2 1DF
|
|
|
|
Dar Consultants (UK) Limited
|
150 Holborn, London, EC1 2NS
|
|
|
|
The Penspen Group Limited
|
150 Holborn, London, EC1 2NS
|
|
|
|
|
150 Holborn, London, EC1 2NS
|
|
|
|
*Manchester Jetline Limited
|
150 Holborn, London, EC1 2NS
|
|
|
|
|
150 Holborn, London, EC1 2NS
|
|
|
|
|
150 Holborn, London, EC1 2NS
|
|
|
|
*Penspen International Limited
|
150 Holborn, London, EC1 2NS
|
|
|
|
|
Samarkanda 306, Pso 3 Col. Tabasco 2000, Villahermosa, CP86035, Tabasco, Mexico
|
|
|
|
*Servicios de Inganeria y Proyectos Latam SA de CV
|
Samarkanda 306, Piso 3 Col. Tabasco 2000, Villahermosa, CP86035, Tabasco, Mexico
|
|
|
|
|
Samarkanda 306, Piso 3 Col. Tabasco 2000, Villhermosa, CP86035, Tabasco, Mexico
|
|
|
|
|
Samarkanda 306, Piso 3 Col. Tabasco 2000, Villahermosa, CP86035, Tabasco, Mexico
|
|
|
|
|
Permpoon Building, 5th Floor, 32Soi Sukhumvit 87 Bangchak, Phrakanon, Thailand, 10260
|
|
|
|
*Penspen Services Limited
|
Permpoon Building, 5th Floor, 32Soi Sukhumvit 87 Bangchak, Phrakanong, Thailand, 10260
|
|
|
|
|
920 Memorial City Way, Suite200, Houston, TX 77024, USA
|
|
|
|
*PLGS Holdings Incorporated
|
920 Memorial City Way, Suite200, Houston, TX 77024, USA
|
|
|
|
*Penspen Singapore PTE Limited
|
1 Marina Boulevard #28-00, 018989, Singapore
|
|
|
|
*Penspen Services SDN BHD
|
Leven 15-2, Faber Imperial Court, Jalan Sultan Ismall, Kuala Lumpur, Malaysia
|
|
|
|
|
|
|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
15. Subsidiaries (continued)
Name of subsidiary
*Bayt Al Tasamim - for Engineering Consultancy LLC
*Penspen Energy Services Malaysia SDN BHD
|
Place of incorporation and operation
First Floor, 14/334, Zuweyat Al-waqe in Baghdad, Aljaderya/Mahala 913 / Zedaq 73e
Level 15-2, Faber Imperial Court, Jalan Sultan Ismall, Kuala Lumpur, Malaysia
|
Proportion of ownership and interest - 2023 (%)
100
100
|
Proportion of ownership and interest - 2022 (%)
100
100
|
|
|
Al Doud Street-Ben Ashour, Tripoli, Libya
|
|
|
*The interest in these subsidiaries is held indirectly through wholly owned subsidiary undertakings.
The following have active branches: Penspen Ltd in the Kingdom of Saudia Arabia, Penspen International Ltd in the United Arab Emirates, Penspen SA de CV in Columbia and Peru, and Greystar Mexico in Peru.
The principal activity of Manchester Jetline Ltd is the operation of a pipeline supplying fuel to Manchester Airport. Principal activities of all other entities include provision of engineering, project management and asset management and integrity services to the energy sector.
The principal activity of Dar Al-Handasah Consultants (Shair & Partners) (UK) Limited is to provide specialised professional services in connection with engineering, urban development, town and regional planning, architecture and economic studies to other Dar Group companies who serve clients in the emerging market territories of the Middle East, Africa and Asia.
|
Investments in subsidiary companies
|
|
|
|
|
|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
|
|
|
Inventories of equipment held for sale
|
|
|
|
|
|
|
|
During the year, the Group reversed £1,464,000, part of an inventory write-down made in 2010, following an agreement with the customer to reimburse the cost of that equipment. The reversal has been included in "cost of sales" in the statement of profit or loss.
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
Trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total non-current trade and other receivables
|
|
|
|
|
|
|
|
|
|
|
|
Less: provision for impairment of trade receivables
|
|
|
|
|
|
|
|
Receivables from related parties
|
|
|
|
Total financial assets other than cash and cash equivalents classified as loans and receivables
|
|
|
|
Prepayments and accrued income
|
|
|
|
|
|
|
|
Total current trade and other receivables
|
|
|
|
Trade receivables are non-interest bearing and are generally on terms of 30-90 days. Amounts receivable from parent and Group undertakings are also non-interest bearing.
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
|
|
|
Receivables from related parties
|
|
|
|
Total financial assets other than cash and cash equivalents classified as loans and receivables
|
|
|
|
|
|
|
|
Total current trade and other receivables
|
|
|
As at 31 December, the ageing analysis of group trade receivables based on due date is as follows:
|
|
Expected credit loss rate
|
Estimates total gross carrying amount at default
|
|
|
|
Neither past due nor impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected credit loss rate
|
Estimates total gross carrying amount at default
|
|
|
|
Neither past due nor impaired
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See note 29 on credit risk of trade receivables, which discusses how the Group manages and measures credit quality of trade receivables that are neither past due nor impaired.
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
The contract assets primarily relate to the Group's right to consideration for the work completed but not invoiced on various contracts at the balance sheet date. The contract assets transfer to trade receivables when the amounts are invoiced to the customer. Invoices are issued to customers either on a monthly basis or based on meeting agreed milestones. All contract assets held at 31 December 2023 are expected to be invoiced and transferred to trade receivables in the next 12 months and there is no expected credit loss recognised (2022: £Nil).
|
|
|
|
|
|
|
|
|
|
Total financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised cost
|
|
|
|
Total non-current trade and other payables
|
|
|
|
|
|
|
|
|
|
|
|
Payables to related parties
|
|
|
|
|
|
|
|
|
|
|
|
Total financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised cost
|
|
|
|
Other payables - tax and social security payments
|
|
|
|
Total current trade and other payables
|
|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
|
|
|
|
|
|
|
Payables to related parties
|
|
|
|
|
|
|
|
Total financial liabilities, excluding loans and borrowings, classified as financial liabilities measured at amortised cost
|
|
|
|
Other payables - tax and social security payments
|
|
|
|
Total current trade and other payables
|
|
|
|
Trade payables are non-interest bearing and are normally settled on 60-day terms.
Other payables are non-interest bearing and have an average term of six months.
Amounts owed to other Group undertakings are non-interest bearing and repayable on demand
Non-current liabilities comprise mainly deferred bonuses payable under senior management incentive plans, which were terminated at 31 December 2013. The balance left relates to unvested amounts on these plans which are expected to be settled in future years.
|
|
|
|
|
|
Additions during the year
|
|
|
|
Released to the profit or loss
|
|
|
|
|
|
|
|
The contract liabilities primarily relate to the advance consideration received from customers in respect of performance obligations which have not yet been fully satisfied and for which revenue has not been recognised. The majority of contract liabilities held at 31 December 2023 are expected to be satisfied by performance obligations in the next 12 months.
Revenue recognised that was included in the contract liability balance at the beginning of the period amounted to £1,167,000 (2022: £765,000).
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
Other financial liabilities
|
|
|
|
|
|
Current interest-bearing loans and borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured loan of US$11,097,000
|
|
|
|
|
Total current interest-bearing loans and borrowings
|
|
|
|
|
|
|
|
|
|
Non-current interest-bearing loans and borrowings
|
|
|
|
|
|
|
|
|
|
Secured loan of US$11,097,000
|
|
|
|
|
Total non-current interest bearing loans and borrowings
|
|
|
|
|
|
|
|
|
|
Total current and non-current interest-bearing loans and borrowings
|
|
|
|
|
Bank overdrafts of £9,000,000
The bank overdrafts are secured by guarantees provided by the ultimate parent and are repayable on demand.
US$11,000,000 bank loan
This loan is secured by an unconditional and irrevocable blanket corporate guarantee from the ultimate parent. The loan expires at the end of August 2024. We are working with the bank and expect to secure an extension.
$11,097,000 secured bank loan
This loan is secured by a deposit placed with the bank for an equivalent amount by the Group's ultimate parent undertaking. The full amount is due for repayment in September 2024.
At 31 December 2023, the Group had available £1,000 (2022: £21,000) of undrawn committed borrowing facilities.
In the opinion of the directors, the Group's financial assets and liabilities have the same carrying value and fair value.
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
20. Other financial liabilities (continued)
Changes in liabilities arising from financing activities
|
|
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|
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|
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|
|
New borrowings and leases
|
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|
|
|
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|
|
New borrowings and leases
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
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|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
|
End of service indemnity provision
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
Charged to profit or loss
|
|
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|
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|
|
|
|
|
|
|
|
|
Foreign exchange movements
|
|
|
|
|
|
|
|
|
|
Due after more than one year
|
|
|
|
|
The provision in respect of office dilapidation costs has been released and transferred to accruals because a company within the Group vacated office space at Wigmore Street, London. After the year end, a final settlement has been agreed with the landlord for the dilapidation cost, and so the liability has been transferred to accruals, recognised within current liabilities.
The provision in respect of end of service indemnity relates to Penspen International Limited for employees located in United Arab Emirates. The calculation is based on length of service and basic salary for each employee, and a financial payment is made to an employee upon termination of employment. It is calculated in accordance with local government rules and is undiscounted as the discounting effect is immaterial.
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
|
|
|
|
|
Ordinary shares of £10,000.00 each
|
|
|
|
|
|
|
|
|
|
|
|
Ordinary shares of £10,000.00 each
|
|
|
|
|
|
At 1 January and 31 December
|
|
|
|
|
Revaluation reserve
The revaluation reserve is used to record the fair value adjustment of the freehold property and Manchester pipeline.
Foreign exchange reserve
The foreign currency translation reserve is used to record exchange differences arising from the translation of the financial statements of foreign subsidiaries to the Group functional currency.
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
|
The Group has lease contracts for the use of office space, with lease terms of 1-10 years. The Group's obligations under its leases are secured by the lessor's title to the leased assets. Generally, the Group's leases also include restrictions on assigning and subleasing the leased assets and they require the Group to meet minimum values for certain financial ratios.
The Group also has lease contracts with lease terms of 12 months or less and has certain leases of office equipment with low value. The Group applies the 'short-term lease' and 'lease of low-value assets' recognition exemptions available under IFRS 16 for these leases.
|
|
Lease liabilities are due as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
Between one year and five years
|
|
|
|
|
|
|
|
|
|
|
|
Lease liabilities included in the Consolidated Statement of Financial Position at 31 December
|
|
|
|
The following amounts in respect of leases have been recognised in profit or loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense on lease liabilities
|
|
|
|
Expenses relating to short-term leases
|
|
|
|
Depreciation expense of right-of-use assets
|
|
|
A renewal option related to one of the office buildings is expected to be exercised post year end. This would increase the undiscounted lease payments within one year by £55,000 and after one year but not more than five years by £5,000. All other leases are expected to expire at the end of their lease term
The Group had total cash outflows for leases of £2,181,541 in 2023 including expenses relating to short-term leases (2022 - £1,155,742).
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
24.Leases (continued)
|
(ii) Operating leases - lessor
|
|
The Group held surplus office and industrial buildings until the Richmond property was sold in November 2022. This was let to third parties. The rental income recognised in 2022 was £148,000.
|
|
|
|
The Group operates a defined benefit pension scheme ("The Pension and Life Assurance Plan of Penspen Ltd") providing benefits based on final pensionable pay. From 31 July 2015, the scheme was closed to future accrual. The weighted average duration of the defined benefit obligation is approximately 20 years. The plan historically invested assets in a With-Profits Fund held with Clerical Medical Investment Group Ltd ("CMIG"). On 17 December 2021, the Plan surrendered their With-Profits contract held with CMIG. The assets were transferred into the L&G Sterling Liquidity Fund via the Mobius Life platform and were invested into a mixture of pooled investment funds by the Trustees in 2022. In addition, the Scheme also hold annuities in respect of some pensioners. The value of the annuities is included in the defined benefit obligation and the assets.
The trustees are required to carry out an actuarial valuation every 3 years. The last actuarial valuation of the plan was performed as at 31 December 2020 and completed on 31 March 2022.
The Group also operates defined contribution schemes. Contribution to these schemes are charged to the profit and loss account as incurred. The contributions payable for these schemes at the year end were £99,000 (2022: £81,000).
The following tables summarise the components of net benefit expense recognised in the consolidated income statement and the funded status and amounts recognised in the consolidated statement of financial position in relation to the defined benefit scheme:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
Net benefit (income)/expense (recognised in the statement of profit or loss)
|
|
|
|
|
|
|
|
|
|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
25. Defined benefit schemes (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net actuarial gains/(losses) (recognised in other comprehensive income)
|
|
|
|
Actuarial loss on pension scheme assets
|
|
|
|
Actuarial gain arising from changes in demographic assumptions
|
|
|
|
Actuarial (loss)/gain arising from changes in financial assumptions
|
|
|
|
Actuarial gain arising from experience adjustment
|
|
|
|
Net actuarial (loss)/gain
|
|
|
|
|
|
|
|
Fair value of scheme assets
|
|
|
|
Present value of defined benefit obligation
|
|
|
|
|
|
|
|
Changes in the present value of the defined benefit obligation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gain on obligation
|
|
|
|
|
|
|
|
|
|
|
|
Actuarial gain on obligation
|
|
|
|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
|
25. Defined benefit schemes (continued)
Changes in the fair value of plan assets
|
|
|
|
|
|
|
|
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|
Contributions by employer
|
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|
|
Contributions by employer
|
|
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|
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|
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|
|
The Group expects to contribute £360,000 to its defined benefit pension plan in 2024.
The major categories of plan assets as a percentage of the fair value of the total plan assets are as follows:
2023 2022
% %
Liability driven investment 21 11
Diversified credit funds 7 11
Bonds 19 16
Cash 1 6
Other, including annuities 52 56
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
25. Defined benefit schemes (continued)
The overall expected rate of return on assets is determined based on the market expectations prevailing on that date, applicable to the period over which the obligation is to be settled. These are reflected in the principal assumptions below.
|
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|
Expected rate of return on assets
|
|
|
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|
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|
|
|
Post mortality for pensioners at the age of 65:
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below summarises the sensitivity of the defined benefit obligation to the changes in discount rate, inflation rate and mortality rate.
|
|
|
Change in defined benefit obligation
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Experience adjustments
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Fair value of assets, end of year
|
|
|
|
|
|
|
Defined benefit obligation, end of year
|
|
|
|
|
|
|
Net pension asset/(liability)
|
|
|
|
|
|
|
Experience adjustment on plan assets loss/(gain)
|
|
|
|
|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
Related party transactions
|
Balances and transactions between the Company and its subsidiaries, which are related parties of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related parties are disclosed below.
Outstanding balances at the year-end are unsecured, interest free and repayable on demand. There have been no guarantees provided or received for any related party receivables or payables. For the year ended 31 December 2023, the Group has not recorded any impairment of receivables relating to amounts owed by related parties (2022: £Nil). This assessment is undertaken each financial year by examining the financial position of the related party and the market in which the related party operates.
The company has taken advantage of the following disclosure exemptions under:
∙The requirements of paragraph 17 of IAS 24 Related Party Disclosures;
∙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 a party to the transaction is wholly owned by such a member.
|
|
|
During the year, group entities entered into the following trading transactions with related parties that are not members of the Group:
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
Dar Al-Handasah Consultants Shair & Partners Holdings Limited
|
|
|
|
|
|
Dar Al-Handasah Consultants Shair & Partners Limited
|
|
|
|
|
|
|
|
|
|
|
|
Maffeis Engineering (UK) Limited
|
|
|
|
|
|
|
|
|
|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
26.Related party transactions (continued)
|
Trading transactions (continued)
|
|
The following balances were outstanding at the end of the reporting period:
|
|
|
Amounts owed by related parties
|
Amounts owed to related parties
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dar Al-Handasah Consultants Shair & Partners Holdings Limited
|
|
|
|
|
|
|
|
|
|
|
|
The Perkins & Will Group Limited
|
|
|
|
|
|
Maffeis Engineering (UK) Limited
|
|
|
|
|
|
150 Holborn Operations Limited
|
|
|
|
|
|
Dar 150 Holborn Developments Limited
|
|
|
|
|
|
|
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|
|
150 Holborn Real Estate Limited
|
|
|
|
|
|
Introba Consulting Limited
|
|
|
|
|
|
|
|
|
|
|
|
Ultimate parent undertaking
|
The ultimate parent undertaking is Dar Al-Handasah Consultants Shair & Partners Holdings Limited, a company registered in Dubai, United Arab Emirates. The consolidated financial statements of Dar Al-Handasah Consultants Shair & Partners Holdings Limited (the largest group in which the results of the Group are consolidated) are not available to the public.
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
There are contingent liabilities in respect of performance and guarantee bonds given in the normal course of business by subsidiary undertakings to clients. At 31 December 2023, the liability under these bonds at current exchange rates amounted to £24,860,000 (2022: £24,004,000).
As permitted by s479a of the Companies Act 2006 ('the Act'), The Penspen Group Limited has provided guarantees in respect of all outstanding liabilities relating to the year ended 31 December 2023 in respect of the following Group undertakings, which are consequently exempt from the requirements of the Act relating to the audit of individual accounts:
∙Manchester Jetline Limited (Registered No: 2392093, Registered Office address is 150 Holborn, London, EC1 2NS)
∙Penspen Process Limited (Registered No: 1947242, Registered Office address is 150 Holborn, London, EC1 2NS)
∙Penspen Theia Limited (Registered No: 12317095, Registered Office address is 150 Holborn, London, EC1 2NS)
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
|
Financial risk management objectives and policies
|
The Group's principal financial liabilities comprise loans and borrowings and trade and other payables. The main purposes of these financial liabilities is to finance the Group's operations and to provide guarantees to support its operations. The Group has financial assets in the form of loan and other receivables, trade and other receivables, and cash and short-term deposits that arise directly from its operations.
The Group is exposed to interest rate risk, foreign currency risk, credit risk and liquidity risk. The Group's senior management oversees these risks and reviews and agrees policies for their management, which have a significant impact on the Group as set out below.
Foreign currency risk
Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Group's exposure to the risk of changes in foreign exchange rates relates primarily to the Group's operating activities (when revenue or expense is denominated in a different currency from the Group's functional currency) and the Group's net investments in foreign subsidiaries.
During the year, the Group recognised a net foreign exchange loss of £894,832 (2022 - net gain of £2,076,605) in the consolidated income statement.
The carrying amounts of the Group's significant monetary assets and liabilities held in currencies other than a business' functional currency at 31 December 2023 are set out in the table below along with sensitivity analysis showing the approximate impact of a 10% weakening of the foreign currency against the relevant functional currency as at 31 December. This assumed all other variables remain constant:
|
|
Foreign currency monetary items
|
Sensitivity analysis impact of non-functional currency foreign exchange exposure
|
|
|
|
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
Foreign currency monetary items
|
Sensitivity analysis impact on non-functional currency foreign exchange exposure
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
|
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
29. Financial risk management objectives and policies (continued)
A 10% strengthening of the above currencies against relevant functional currency at 31 December would have had the equal but opposite effect to the amounts shown above, on the basis that all other variables remain constant. A 10% change is considered to be appropriate by the Group based on the historic exchange rate movement of the major foreign currencies detailed above.
In management's opinion, the sensitivity analysis presented above does not completely represent the inherent foreign exchange risk as the year end exposure does not reflect the exposure during the year.
The Group also has currency exposure on the translation of overseas subsidiaries' results into pound sterling. The Group does not actively hedge this exposure although there is an element of natural hedge by having operations in different countries. The amount of retranslation gain recognised in equity was £1,711,000 (2022: loss of £3,004,000).
Interest rate risk
Interest rate risk comprises both cash flow and fair value risks. Fair value risk is the risk that the fair value of the financial instruments will fluctuate as a result of changes in interest rates. The Group is not exposed to fair value risks as it has no financial instruments that are revalued to fair value at the balance sheet date. Cash flow risk arises on the future cash flows of a financial instrument. The Group is exposed to cash flow risk on its variable rate borrowings. The Group manages its interest rate risk through a mixture of shareholder funding and borrowing and management monitors movements in interest rates to determine the most advantageous debt profile for the Group.
As at 31 December 2023 the Group is exposed to changes in market interest rates through its borrowings, which are subject to variable interest rates.
2023 2022
Effective interest rate on borrowing in the year 8.6% 3.9%
An increase of 100 basis points in interest rates would have decreased the equity and the income statement by £264,000 (2022: £270,000), assuming all other variables remain constant. A 100 basis point change is considered appropriate based on the historical interest rate movements the Group has been exposed to on GBP and USD borrowings.
Credit risk
Credit risk is the risk of financial loss if a client or counterparty fails to meet an obligation under a contract. Credit risk arises primarily from trade receivables, contract assets and cash.
Carrying amounts
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
Trade and other receivables
|
|
|
|
|
|
|
The Group's credit risk on its cash balance is managed by limiting exposure to banks with a credit rating higher than "BBB" and through adhering to authorised limits for all counterparties.
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
29. Financial risk management objectives and policies (continued)
The Group manages its exposure to trade receivables through its credit policy. It is the Group's policy that all customers who wish to trade on credit terms are subject to credit verification procedures. In addition, receivable balances are monitored on an ongoing basis. The Group's management also monitors the ageing of the trade receivables regularly and follows up with the relevant business operating unit on overdue balances. Ongoing risk exposure is mitigated through the credit control process, setting credit limits and regular review of clients and trade receivable balances.
For trade receivables, and contract assets, the Group has applied the simplified approach in IFRS 9 to measure the loss allowance at lifetime ECL. The Group determines the expected credit losses on these items by using a provision matrix, estimated based on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. Accordingly, the credit risk profile of these assets is presented based on their past due status in terms of the provision matrix.
The amounts presented in the balance sheet are net of allowances for impairment. An allowance for impairment is made based on the expected credit loss. A provision of £648,146 (2022: £1,536,130) has been recorded (see note 17). Other than the specific expected credit loss, management considers that there is a potential concentration risk, due to the size of the outstanding balances, with the following customers.
2023 2022
£ % £ %
Customer A 4,670,000 30 2,248,000 23
Customer B 2,776,000 18 - -
Customer C 2,075,000 13 1,851,000 19
There are no other significant concentrations of credit risk within the Group, as the Group operates in a number of geographical regions, across different market segments, with a diverse customer base spread across the public and private sectors.
Liquidity risk
Liquidity risk is managed to ensure the Group is able to meet its payment obligations as they fall due. The Group's funding strategy is to use a mix of financing methods offering flexibility and cost effectiveness to match the requirements of the Group, including trade receivables, bank and inter-company borrowings. The Group monitors its exposure to the amount and timing of cash requirements on an ongoing basis with regular cash flow forecasts.
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
29. Financial risk management objectives and policies (continued)
The table below summarises the maturity profile of the Group's financial liabilities based on contractual
undiscounted payments.
|
Year ended 31 December 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest bearing loans and borrowings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Payables to related parties
|
|
|
|
|
|
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|
|
Year ended 31 December 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing loans and borrowings
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
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|
|
Payables to related parties
|
|
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|
|
|
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|
|
|
|
|
|
|
|
Capital management
Capital refers to the equity attributable to the equity holders of the parent. The primary objective of the Group's capital management is to ensure that it addresses the strength of the credit rating in order to support its business. The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may take actions such as the issue of new shares. No changes were made in the objectives, policies or processes for managing capital during the years ended 31 December 2023 and 2022, other than the conversion of the preference shares to ordinary shares in 2022.
The Group is not subject to any externally imposed capital requirements.
|
DAR AL-HANDASAH (UK) LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2023
29. Financial risk management objectives and policies (continued)
Gearing ratio
The gearing ratio at the year end is as follows:
|
|
|
|
|
Interest bearing loans and borrowings (current & non-current)
|
|
|
|
|
|
|
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|
|
Events after the reporting date
|
On 1 March 2024, Dar Al-Handasah (UK) Limited (the Parent) purchased 100% of the share capital and voting rights of Urban Initiatives Studio Limited for consideration of £250,000.
After the year end, the entire share capital of Dar Plus Limited and Dar Group Ltd were transferred from the wider Dar group to Dar Al-Handasah (UK) Limited.
On 5 March 2024, Para Digital Solutions Limited was incorporated as a private company in England and Wales with its ordinary share capital owned by the Group.
On 17 December 2024, The Penspen Group Ltd issued 33,026,694 ordinary shares at £1 each at par. Full consideration in exchange for the share issue was received on the same date.
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