The director presents the strategic report for the Period ended 31 December 2024.
Review of the business
HEGS PHE Limited ("HEGS") is focussed on the repair and maintenance of heat exchangers within multiple sectors in the UK including Chemical, Food & Beverage, Oil & Gas and Rail.
The Directors are satisfied with the reported turnover of £2,293,146 for the period from incorporation. It should be noted that a number of key "back office" services are provided centrally through the holding company, Ropsley Limited ("Ropsley").
The company was formed on 14 June 2024 to receive the trade and assets of Heat Exchange Group Services Limited (Company number 11454694) which had been purchased from the Administrator.
The initial intention had been for Ropsley to acquire the business as a going concern, but during the due diligence process a problematic contract was identified and the Directors of Ropsley concluded that route was no longer a viable option.
It should be noted that the problematic contract was not being operationally delivered by any part of Heat Exchange Group Services Limited and it is regrettable that it had not been contracted to the correct trading entity within its holding company.
The revised method of acquisition made the integration into Ropsley more complicated than expected, affecting all areas of the business; its customers, suppliers and staff.
Maintaining the deep-seated relationships management had with its customers was vital to the success of the new business and I am pleased to report that the clients recognised that the mode of acquisition was no fault of the current management team and continue to fully support them. In turn, this ensured that they enjoyed the same high quality service as before, albeit backed now by a fully supportive parent company and Group.
The core supply chain have been particularly understanding during this difficult process, continuing to support the business in those challenging reactive times, thereby ensuring that the clients' needs could be met by HEGS.
All the staff have been both committed, embracing the new structure, systems and procedures with enthusiasm; whilst also welcoming the support of the other companies within Ropsley.
Therefore, on behalf of the board I would like to record our thanks to all of our Stakeholders for their support in the transition process as despite the distractions of acquisition and integration, the financial result exceeded expectations for the period and the focused efforts of all involved has paid off.
Of particular note, is the successful development of business with those new Group clients whilst also increasing the quality of our engagement with existing customers. Ensuring that the business remains focussed on being able to deliver the engineering needs of tomorrow is a key strategic driver for the Senior Management Team.
The scarcity of transient labour force in the UK is a concern for clients and contractors alike and the need to grow and retain a permanent workforce is a constant challenge. To reduce risk in this area, in the medium term, HEGS is committed to aligning itself with the rest of the Group by employing 10% of its workforce as Apprentices within the business with the first recruits being in Q4 2025. Training will be delivered in conjunction with our sister group company, ACTTnow.
In all decision making, both operational and strategic, our priorities remain:
The safety of our workforce;
Minimising our impact on the environment; and
Delivering the best possible performance for all our stakeholders.
2024 also saw the need for the business to establish new quality standard certifications for ISO in the new entity name. This has validated the company’s commitment to quality, health & safety and environmental standards.
The wellbeing and safety of our clients, employees and subcontractors is at the forefront of everything we do, and we continuously strive to improve upon our exacting and industry leading standards.
Future prospects and going concern
Our customers utilise the refurbishment and repair services we offer to maximise the life of their assets before replacement. We expect to see this aspect of the business continue to grow as cost pressures increase.
The business expects to generate a significant proportion of it’s 2025 revenue from existing customer relationships and frameworks and as such is not dependent on winning any single new customer.
Post-incorporation, 2025 will be a period of consolidation and will see the business take a more focussed approach to its core markets whilst pursuing selective acquisition opportunities.
The director has prepared profit and cashflow forecasts for a period of 12 months from the date of this report taking into account possible fluctuations arising from principle risks and uncertainties together with other factors, in particular the current liquidity position and the ability to settle its future creditors as they fall due. These forecasts show the Business trading profitably and within its existing cash balances.
Therefore, as set out in note 1 to the financial statements, the director has a reasonable expectation that the company has adequate resources to meet its liabilities as they fall due for the foreseeable future and therefore has adopted the going concern basis in preparing these financial statements.
Operationally, the principle risk is ensuring that the service is delivered on time, within budget and meets the necessary quality standards. In mitigating this risk the Company employs suitably qualified and experienced personnel who manage the risk through the application of industry standard methodologies.
As was seen in 2024, the availability of suitably qualified and experienced personnel remains a risk to the business and is unlikely to change in the medium term.
The director has implemented risk management systems to identify and assess such risks and to ensure that reasonable mitigation and action plans are in place. In addition, particular attention is paid to the operational risks and uncertainties surrounding the ongoing economic conditions and to minimise its reliance on individual customers.
At present the Company has had no material transactional currency exposure arising from sales and purchases with suppliers and customer in foreign currencies.
On behalf of the board
HEGS PHE Limited is a private company limited by shares incorporated in England and Wales. The registered office is The Sidings, Main Road, Colwich, Staffordshire, United Kingdom, ST17 0XD.
The company was incorporated on 14 June 2024 and its accounting period has been shortened to 31 December 2024 to bring it in line with its parent undertaking.
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 £.
This company is a qualifying entity for the purposes of FRS 102, being a member of a group where the parent of that group prepares publicly available consolidated financial statements, including this company, which are intended to give a true and fair view of the assets, liabilities, financial position and profit or loss of the group. The company has therefore taken advantage of exemptions from the following disclosure requirements:
Section 7 ‘Statement of Cash Flows’: Presentation of a statement of cash flow and related notes and disclosures;
Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instrument Issues: Interest income/expense and net gains/losses for financial instruments not measured at fair value; basis of determining fair values; details of collateral, loan defaults or breaches, details of hedges, hedging fair value changes recognised in profit or loss and in other comprehensive income;
Section 26 ‘Share based Payment’: Share-based payment expense charged to profit or loss, reconciliation of opening and closing number and weighted average exercise price of share options, how the fair value of options granted was measured, measurement and carrying amount of liabilities for cash-settled share-based payments, explanation of modifications to arrangements;
Section 33 ‘Related Party Disclosures’: Compensation for key management personnel.
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
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.
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 company 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.
Equity instruments issued by the company 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 company.
In the application of the company’s accounting policies, the director is 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 average monthly number of persons (including directors) employed by the company during the Period was:
Included in Other creditors is a loan of £468,445 secured on the Trade debtors of the business amounting to £521,705.
On incorporation, 14 June 2024, 1 Ordinary share of £1 each was issued for cash.
As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006.
The auditor's report is unqualified and includes the following:
The parent undertaking, Ropsley Limited has provided a guarantee in respect of premises leased by the company. Details of the lease commitment are given in the operating lease commitment note.
[Further information as appropriate]
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, as follows:
[Further information as appropriate]