The directors present the strategic report for the year ended 30 June 2024.
The principle activity of the company is that of a holding company of a trading Group which provides property, renewables, and technology services. The operating results of subsidiary companies which underpin the value in the company continue to be deemed satisfactory by the board.
Group turnover in the period amounted to £40,100,000 (2023 £31,579,000). At the year end the group had shareholders’ funds of £118,506,000 (2023 £86,900,000).
Property
As a result of the Group's long-term reinvestment strategy, the property division continues to operate profitably following the success of the 177 Bothwell Street development. During the year, the division focused efforts on managing the development of commercial property within Glasgow City Centre. Much of the current activity within the division is at the early stages of development, resulting in a decrease in turnover to £476,000 (2023: £12,225,000). This aligns with the division’s medium to long-term strategy.
The turnover of the construction division has increased throughout the year, primarily due to heightened activity on a Grade A office refurbishment in Glasgow City Centre. During the year the division also completed a Data Centre fitout in the basement of a 13-story commercial building and continued to develop HFD related party owned commercial property assets which has assisted in the successful launch of HFD’s serviced office brand OSPA. Despite increased turnover, the division has presented a loss in the financial period which relates to legacy issues on completed projects. The board is confident that provisions are adequate, and legacy issues will not cause future losses.
HFD has several major projects in the pipeline which the property and construction divisions will develop, these include several larger scale city centre office development and refurbishments, a number of out-of-town business park commercial and industrial property refurbishments, a grade A listed city centre office refurbishment and several major Data Centre projects. Considering the strong pipeline, the board is confident that these projects will generate profits in the future. Each of these projects will necessitate detailed planning and preparation, with the expectation that the next financial year will be focused on consolidation and preparation for upcoming projects.
The property services division continues to show increased operating profit primarily through continued growth of its services into the city centre. Additionally, the services division has secured long term contracts for its landscaping and security contracts divisions. These achievements have secured a substantial portion of the services division's longer term pipeline.
Technology
The technology division continues to experience significant growth in its customer base, driving ongoing increases in turnover and operating profit. Investment in the division's Tier III data centre facility remains strong, and its secondary city centre facility has demonstrated encouraging growth.
The technology division, in collaboration with key stakeholders, has submitted an Expression of Interest to participate in a national initiative aimed at establishing a leading Artificial Intelligence Growth Zone, proposing Scotland as a premier location for a globally recognised AI hub. This initiative has garnered significant support from stakeholders associated with the division. The board believes the division is well-positioned to capitalise on this initiative due to its advanced data centre infrastructure, complementary renewable energy capabilities within the Renewables division, and growing demand for data centre capacity across the UK and Europe.
The directors are confident the outlook of the group remains positive and that the group has the resilience to navigate any further headwinds caused by the uncertain economic outlook.
On 4 July 2023, HFD Group Holdings Limited ("the group") was established as the main parent entity through a capital reduction demerger, replacing HFD Group Limited. This restructuring resulted in the disposal (through demerger) of HFD Offices Limited, HFD Duart House Limited, HFD Phoenix House Limited, HFD International House Limited and HFD Willow House Limited. A resolution has also been passed for the voluntary winding up of HFD Glasgow Limited, HFD SETP Limited, High Blantyre Construction Limited, High Blantyre Developments Limited and Strathclyde Business Park (Developments) Limited as part of a group rationalisation exercise.
As part of this restructuring process, HFD Group Holdings Limited ("the company") became the immediate parent undertaking of HFD Group Limited, with no change in overall ownership. The group remained controlled by the same parties as before the demerger. Since the group's acquisition of HFD Group Limited qualifies for merger accounting under FRS 102, these consolidated financial statements have been prepared by applying the principles of merger accounting to this transaction. Consequently, the current period and comparative financial information are presented as if HFD Group Holdings Limited had always been the immediate parent of HFD Group Limited and its subsidiaries throughout the entire and prior periods, excluding the results of the above-named companies. The comparative show the exclusion of the companies that no longer form part of the overall group compared to the consolidated results of the group formerly approved.
Principal risks and uncertainties
The group finances its operations through a mixture of retained profits, secure bank deposits and bank loans.
The objectives are to:
Maximise returns on funds employed through group activities:
Retain sufficient funds for day-to-day obligations and to cover potential unforeseen risks and liabilities;
Maintain and invest in commercial property stock to ensure maximum tenant retention and occupancy levels at the business parks where the group operates;
Reduce price, building and delivery risk to acceptable levels; and
Ensure continued resilience of the group's datacentre activities to maintain current high standards of customer satisfaction.
The principal risks impacting the group are primarily the strength of customer relationships and the risk from competitors on pricing. The economic outlook can have an impact on the level of activity of commercial developments and demand for the group's services.
The directors expect the level of activity in the next financial period to evolve satisfactorily given the new contracts secured across all group divisions.
The directors use several indicators to monitor and improve the position of the business. The directors consider the financial key performance indicators of the group to be profitability, cashflow and return on capital employed. Non-financial key performance indicators include customer satisfaction levels.
KPI | 2024 | 2023 |
Gross Profit Margin | 21% | 58% |
Operating Profit Margin | 0% | 27% |
Cash position | £4,412,542 | £17,570,675 |
Return on Capital Employed | -0.15% | 10% |
As directors of the company, we have and continue to act in a way that we consider, in good faith, to be most likely to promote the continuing success of the company and wider group for the benefit of its members, and in doing so had regard, amongst other matters, to:
The likely consequences of any decisions in the long term;
The interests of the group's employees;
The need to foster the group's business relationships with suppliers, customers and others;
The impact of the group's operations on the community and the environment;
The desirability of the group maintaining a reputation for high standards of business conduct; and
The need to act fairly as between members of the group.
The following are some examples as to how we have had regard to the matters set out within sections 172(1)(a)-(f) when discharging our section 172 duties:
Our key strategic objective remains to build a sustainable business, for the benefit of current and future generations, whether that is in the form of members, employees, customers, suppliers, the community and environment. For this to be achieved, our management of the group involves us taking both decisions for the present and future benefit of the business. We work within the business on a daily basis so key internal and external relationships are maintained directly and employees, suppliers and customers have appropriate access to us. We also ensure there is a wider understanding of the group's key strategic objectives, through distilling the key messages through our management teams within the business.
In considering our fulfilment of Section 172 obligations, the Board have identified our key stakeholders as being our employees and colleagues, our customers and suppliers and the communities in which we operate.
Material issues for our stakeholder groups are presented on the following page along with a summary of how these were considered in Board discussions and decision-making and engagement throughout the year.
Stakeholders | Material Issues | Engagement |
Employees and Colleagues |
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Customers |
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Suppliers and Subcontractors |
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Communities |
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On behalf of the board
The directors present their annual report and financial statements for the year ended 30 June 2024.
The results for the year are set out on page 12.
No ordinary dividends were paid. The directors do not recommend payment of a further dividend.
No preference dividends were paid. The directors do not recommend payment of a final dividend.
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
On 29th October 2024, HFD Group Holdings Limited was acquired by HFD Holdco Limited as part of internal restructuring of the business.
Subsequent to the year-end, the companies for which the Services group (excluding HFD Grill Limited and HFD Facilities Maintenance Limited) provides financial guarantees to its bankers extended their loan facilities, resulting in an increase in total bank loans to £18,000,000. The conditions within the previous loan agreement remain unchanged, ensuring that in the event of HFD Duart House Limited, HFD Phoenix House Limited, HFD International House Limited, HFD Willow House Limited, HFD Mercury House Limited or HFD Avondale House Limited failing to repay their bank loans, HFD Services group will satisfy this debt.
We have audited the financial statements of HFD Group Holdings Limited (the 'parent company') and its subsidiaries (the 'group') for the year ended 30 June 2024 which comprise the group profit and loss account, the group statement of comprehensive income, the group balance sheet, the company balance sheet, the group statement of changes in equity, the company statement of changes in equity, the group statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
Basis for opinion
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 in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’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.
Other matter
The corresponding prior year figures for the company are unaudited.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the group's and 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.
Other information
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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the group and the parent company and their environment obtained in the course of the audit, we have not identified material misstatements in the 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.
As explained more fully in the directors' responsibilities statement set out on page 7, 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 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 parent company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report
The extent to which our procedures are capable of detecting irregularities, including fraud
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 misstatement in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below.
We assessed whether the engagement team collectively had the appropriate competence and capabilities to identify or recognise non-compliance with laws and regulations by considering their experience, past performance and support available.
All engagement team members were briefed on relevant identified laws and regulations and potential fraud risks at the planning stage of the audit. Engagement team members were reminded to remain alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
We obtained an understanding of the legal and regulatory frameworks that are applicable to the group and the parent company and the sector in which they operate, focusing on those provisions that had a direct effect on the determination of material amounts and disclosures in the financial statements. The most relevant frameworks we identified include:
UK Generally Accepted Accounting Practice (FRS 102)
Companies Act 2006;
UK Corporation Tax legislation; and
UK VAT legislation.
We gained an understanding of how the group and the parent company are complying with these laws and regulations by making enquiries of management and those charged with governance. We corroborated these enquiries through our review of relevant correspondence with regulatory bodies and board meeting minutes.
We assessed the susceptibility of the group's financial statements to material misstatement, including how fraud might occur, by meeting with management and those charged with governance to understand where it was considered there was susceptibility to fraud. This evaluation also considered how management and those charged with governance were remunerated and whether this provided an incentive for fraudulent activity. We considered the overall control environment and how management and those charged with governance oversee the implementation and operation of controls. We identified a heightened fraud risk in relation to:
Management override of controls
Revenue recognition
In addition to the above, the following procedures were performed to provide reasonable assurance that the financial statements were free of material fraud or error:
Reviewing minutes of meetings of those charged with governance for reference to: breaches of laws and regulation or for any indication of any potential litigation and claims; and events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud;
Reviewing the level of and reasoning behind the group's procurement of legal and professional services
Performing audit work procedures 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 judgements made by management in their calculation of accounting estimates for potential management bias;
Performing audit work procedures over revenue recognition, including testing of material revenue journals and other adjustments for appropriateness, as well as substantively testing revenue transactions to invoice ensuring that they are recorded in the correct accounting period by verifying the accuracy of sales and the amount of revenue being recognised in the period;
Completion of appropriate checklists and use of our experience to assess the Company's compliance with the Companies Act 2006; and
Agreement of the financial statement disclosures to supporting documentation.
Our audit procedures were designed to respond to the risk of material misstatements in the financial statements, recognising that the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve intentional concealment, forgery, collusion, omission or misrepresentation. There are inherent limitations in the procedures performed and the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
Use of our report
This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
These financial statements have been prepared in accordance with the provisions relating to medium-sized groups.
As permitted by s408 Companies Act 2006, the company has not presented its own profit and loss account and related notes. The company’s profit for the year was £0 (2023 - £0 profit).
HFD Group Holdings Limited (“the company”) is a private limited company domiciled and incorporated in Scotland. The registered office is 177 Bothwell Street, Glasgow, G2 7ER.
The group consists of HFD Group Holdings Limited and all of its subsidiaries.
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
The consolidated group financial statements consist of the financial statements of the parent company HFD Group Holdings Limited together with all entities controlled by the parent company (its subsidiaries) and the group’s share of its interests in joint ventures and associates.
All financial statements are made up to 30 June 2024. Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with those used by other members of the group.
All intra-group transactions, balances and unrealised gains on transactions between group companies are eliminated on consolidation. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
Subsidiaries are consolidated in the group’s financial statements from the date that control commences until the date that control ceases.
Group reconstructions are accounted for using the merger accounting method where ultimate equity holders and non-controlling interest remain the same, the rights of each equity holder are unchanged, and use of the merger accounting method is not prohibited by company law or other relevant legislation.
The merger method of accounting is applied to group reconstructions as if the entities had always been combined. The total comprehensive income, assets and liabilities of the entities are amended, where necessary, to align the accounting policies. The carrying values of the entities' assets and liabilities are not adjusted to fair value. Any difference between the nominal value of shares issued or fair value of consideration given and the nominal value of shares received is taken to other reserves in equity, any existing balances on the share premium account or capital redemption reservice of the legal subsidiary are shown as a movement on other reserves.
Entities in which the group holds an interest and which are jointly controlled by the group and one or more other venturers under a contractual arrangement are treated as joint ventures. Entities other than subsidiary undertakings or joint ventures, in which the group has a participating interest and over whose operating and financial policies the group exercises a significant influence, are treated as associates.
Investments in joint ventures and associates are carried in the group balance sheet at cost plus post-acquisition changes in the group’s share of the net assets of the entity, less any impairment in value. The carrying values of investments in joint ventures and associates include acquired goodwill.
If the group’s share of losses in a joint venture or associate equals or exceeds its investment in the joint venture or associate, the group does not recognise further losses unless it has incurred obligations to do so or has made payments on behalf of the joint venture or associate.
Unrealised gains arising from transactions with joint ventures and associates are eliminated to the extent of the group’s interest in the entity.
The directors have considered the financial position of the group and its ability to continue as a going concern. This assessment has included a review of the group's financial forecasts, cash flow projections, and the availability of financing facilities. Due to the ongoing commercial, industrial, and data centre projects in progress, the secured long-term pipeline in the services division and the continued increase in demand for data centre space the directors believe that the group has sufficient resources to operate for the foreseeable future. For this reason, the directors continue to adopt the going concern basis in preparing the financial statements.
In making this assessment, the directors have considered the potential impact of various risks and uncertainties, including economic conditions, market demand, and the group's operational performance. The directors have also taken into account the group's ability to manage its working capital and liquidity requirements effectively.
Based on the information available, the directors believe that the group is well-positioned to manage these risks and uncertainties and to continue its operations without significant disruption.
Turnover is recognised at the fair value of the consideration received or receivable for goods and services provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
When cash inflows are deferred and represent a financing arrangement, the fair value of the consideration is the present value of the future receipts. The difference between the fair value of the consideration and the nominal amount received is recognised as interest income.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is recognised in the profit and loss account.
Equity investments are measured at fair value through profit or loss, except for those equity investments that are not publicly traded and whose fair value cannot otherwise be measured reliably, which are recognised at cost less impairment until a reliable measure of fair value becomes available.
In the parent company financial statements, investments in subsidiaries, associates and jointly controlled entities are initially measured at cost and subsequently measured at cost less any accumulated impairment losses.
A subsidiary is an entity controlled by the group. Control is the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities.
An associate is an entity, being neither a subsidiary nor a joint venture, in which the company holds a long-term interest and where the company has significant influence. The group considers that it has significant influence where it has the power to participate in the financial and operating decisions of the associate.
Investments in associates are initially recognised at the transaction price (including transaction costs) and are subsequently adjusted to reflect the group’s share of the profit or loss, other comprehensive income and equity of the associate using the equity method. Any difference between the cost of acquisition and the share of the fair value of the net identifiable assets of the associate on acquisition is recognised as goodwill. Any unamortised balance of goodwill is included in the carrying value of the investment in associates.
Losses in excess of the carrying amount of an investment in an associate are recorded as a provision only when the company has incurred legal or constructive obligations or has made payments on behalf of the associate.
In the parent company financial statements, investments in associates are accounted for at cost less impairment.
Entities in which the group has a long term interest and shares control under a contractual arrangement are classified as jointly controlled entities.
At each reporting period end date, the group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
The carrying amount of the investments accounted for using the equity method is tested for impairment as a single asset. Any goodwill included in the carrying amount of the investment is not tested separately for impairment.
Recoverable amount is the higher of fair value less costs to sell and value in use. 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 for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
The group has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the group's balance sheet when the group becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset and the net amounts presented in the financial statements when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the group transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the group after deducting all of its liabilities.
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derivatives, including interest rate swaps and forward foreign exchange contracts, are not basic financial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in profit or loss in finance costs or finance income as appropriate, unless hedge accounting is applied and the hedge is a cash flow hedge.
Debt instruments that do not meet the conditions in FRS 102 paragraph 11.9 are subsequently measured at fair value through profit or loss. Debt instruments may be designated as being measured at fair value through profit or loss to eliminate or reduce an accounting mismatch or if the instruments are measured and their performance evaluated on a fair value basis in accordance with a documented risk management or investment strategy.
Financial liabilities are derecognised when the group's contractual obligations expire or are discharged or cancelled.
Equity instruments issued by the group are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the group.
The 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 net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end date 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 is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset if, and only if, there is a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed.
In the application of the group’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Liquidated damages
As part of the Group's contractual arrangements, certain contracts contain provisions for liquidated damages in the event of delays or failure to meet specific performance criteria. Liquidated damages are pre-agreed amounts payable by the Group for non-compliance with contractual terms, such as delayed project completion or failure to meet quality standards.
At the reporting date, the Group has assessed the potential liabilities related to liquidated damages under active contracts. The Group estimates that potential liabilities for liquidated damages may arise based on the terms of the contracts, the progress of the projects, and any risks associated with delays or breaches of contract.
The Group recognises liquidated damages as a liability when it becomes probable that the amount will be payable, and the amount can be reliably estimated. This provision is also reviewed periodically to ensure it accurately reflects any changes in the expected outcome of the contracts.
An independent valuation of land and buildings was undertaken in March 2021 by a RICS regulated practice on a market value basis. The valuation conformed to International Valuation Standards and was based on recent market data transactions performed on arm's length terms as at March 2021. The directors valuation was based on a desktop valuation provided by a third party.
In conjunction with the 2021 valuation report, the directors have reviewed current market data and conditions to revalue the land and buildings, resulting in an uplift to £53,000,000. This information has been utilised by management to determine the carrying value of land and buildings in these financial statements as of 30 June 2024. Depreciation was initially charged based on a residual value of £9,150,000, which has since been reversed following the uplift. As the facility is not yet operating at full capacity, the directors consider the net book value to be representative of the residual value as of 30 June 2024.
The group estimates the outcome of its construction contracts. This is normally measured by the proportion that contracts costs incurred for work performed to date bear to the estimated total contract costs, except where this would not be representative of the stage of completion.
Estimated total contract costs are based on management's detailed budgets and projections. Where management judge that the outcome of a contract cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred where it is probable they will be recoverable.
The directors periodically review the carrying value of work in progress for any indicators of impairment. This involves an assessment of the recoverable amount of work in progress, being the higher of the anticipated fair value less cost to sell and its value in use.
In application of the Group's accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant.
The prior year accounts include a stock impairment on the land and buildings held within City Park 2 Limited and City Park 3 Limited. The buildings that occupied the land were demolished, resulting in only the fair value of the land being recognised.
The average monthly number of persons (including directors) employed by the group and company during the year was:
Their aggregate remuneration comprised:
Contractually all employees of HFD Group Holdings Limited sit within HFD Payroll Limited.
Remuneration costs were borne by HFD Payroll Limited and recharged to the relevant HFD Group Holdings Limited subsidiaries.
The number of directors for whom retirement benefits are accruing under defined contribution schemes amounted to 4 (2023: 4).
As outlined in the Strategic report on 4 July 2023, HFD Offices Limited was demerged from the group as part of the capital reduction demerger. The amount recognised within the profit and loss relates to dividends paid to HFD Group Limited while HFD Offices Limited was still part of the group. Consequently, the disposal is recognised in HFD Group Holdings Limited's financial statements, as HFD Offices Limited did not form part of HFD Group Holdings Limited.
For the current year, demerged operations are recorded as nil. This is due to the timing of the demerger, which occurred 10 days into the current financial year. As a result, the related profit and loss impact from these operations for the period in which they were held by the Group is not considered material. Given the short duration of the holding period and the minimal impact on the overall financial performance, the demerged operations are therefore reported as nil in the current year.
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
In addition to the amount charged to the profit and loss account, the following amounts relating to tax have been recognised directly in other comprehensive income:
As outlined in the Strategic report on 4 July 2023, HFD Offices Limited, HFD Duart House Limited, HFD Phoenix House Limited, HFD International House Limited and HFD Willow House Limited were demerged from the group as part of the capital reduction demerger.
For the current year, demerged operations are recorded as nil. This is due to the timing of the demerger, which occurred 10 days into the current financial year. As a result, the related profit and loss impact from these operations for the period in which they were held by the Group is not considered material. Given the short duration of the holding period and the minimal impact on the overall financial performance, the demerged operations are therefore reported as nil in the current year.
The net carrying value of tangible fixed assets includes the following in respect of assets held under finance leases or hire purchase contracts.
A professional third-party desktop valuation of the Fortis Datacentre was conducted by CBRE, RICS Registered Valuers, in February 2024 resulting in a valuation of £53,000,000. The directors have concluded that this updated valuation represents the fair value of Fortis Datacentre and is appropriate as of 30 June 2024.
If the above revalued assets were measured using cost mode, the carrying amount would be £3,161,000 (2023: £3,161,000)
The group has made an investment in shares of an external entity, which is not part of the Group. This investment was made as part of the external entities funding round is classified as a non-current asset in the financial statements. As of the reporting date, the entity is not consolidated within the Group’s financial statements because it does not meet the criteria for consolidation under FRS 102.
Details of the company's subsidiaries at 30 June 2024 are as follows:
Registered office addresses (all UK unless otherwise indicated):
HFD Group Limited, HFD Technology Group Limited and HFD National Cloud Limited have taken the exemption from the requirement to have their individual financial statements audited. The exemption is available under section 479A of the Companies Act 2006.
Further parent company guarantees have been proved by HFD Services Limited, HFD Property Group Limited, HFD Constructions Group Limited and HFD Renewables limited to certain group companies held directly.
Following the capital reduction demerger HFD Offices Limited, HFD Willow House Limited, HFD Phoenix House Limited, HFD International House Limited and HFD Duart House Limited have been demerged from the group. Additionally as part of this group restructuring a resolution was passed for the voluntary winding up of HFD Glasgow Limited, High Blantyre Construction Limited, High Blantyre Developments Limited, HFD SEPT Limited and Strathclyde Business Park (Developments) Limited.
Unlisted investments represent the historical cost of a minority holding in Enterobiotix Limited
Included in amounts falling due within one year, the other debtors balance includes £36,954,861 (2023: £15,636,573) of amounts due from related parties and are repayable on demand.
Loans owed by related party bears interest rate of 1.75% over Bank of England base rate and is repayable in 2027.
Other loans relate to amounts owed to directors. The loans are unsecured.
Finance lease payments represent rentals payable by the company or group for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 4 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
The following are the major deferred tax liabilities and assets recognised by the group and company, and movements thereon:
A defined contribution pension scheme is operated for all qualifying employees. The assets of the scheme are held separately from those of the group in an independently administered fund.
The above shares rank parra passu in all respect but are separate classes of shares. Redeemable shares are only able to be redeemed at the instance of the company but at a price not less than the subscription price paid on such shares.
The profit and loss reserves represents cumulative profits and losses, less any dividends paid.
Share premium
This reserve records the amount above the nominal value received for share sold, less transaction costs.
Revaluation reserve
The revaluation reserves represent the difference between the fair value and the carrying value on an historic cost basis of assets held at valuation.
The group has given its bankers a guarantee that in the event of HFD Duart House Limited, HFD Willow House Limited, HFD Phoneix House Limited, HFD International House Limited and HFD Avondale House Limited not repaying their bank loans, the group will satisfy this debt. At 30 June 2024, the debt was £11,650,000 (2023: £13,450,000).
On 29th October 2024, HFD Group Holdings Limited was acquired by HFD Holdco Limited as part of internal restructuring of the business.
Subsequent to the year-end, the companies for which the Services group (excluding HFD Grill Limited and HFD Facilities Maintenance Limited) provides financial guarantees to its bankers extended their loan facilities, resulting in an increase in total bank loans to £18,000,000. The conditions within the previous loan agreement remain unchanged, ensuring that in the event of HFD Duart House Limited, HFD Phoenix House Limited, HFD International House Limited, HFD Willow House Limited, HFD Mercury House Limited or HFD Avondale House Limited failing to repay their bank loans, HFD Services group will satisfy this debt.
The remuneration of key management personnel is as follows.
During the year the group entered into the following transactions with related parties:
The following amounts were outstanding at the reporting end date:
The following amounts were outstanding at the reporting end date:
As disclosed at Note 26, the ultimate parent company became HFD Holdco Limited post year end, a company registered within the UK.
These financial statements are not consolidated in the financial statements of HFD Holdco Limited as the company did not hold significant control at the year end.
The Hill 2011 Trust and Alexander Trust and their members are considered to be the ultimate controlling party due to their majority shareholding in HFD Group Holdings Limited.