The 2011 Halcrow Group Accounts are now available at Companies House at the cost of £1. They make very interesting reading and suggest that the financial health of the company was not as sound as indicated at the time of the sale to CH2M Hill.
John
For those of us that are a bit lazy - you should point out that the News Section of the Website gives a good summary of what the accounts show!
On the HPA accounts has anyone worked out what caused the actuarial loss of £100m - apart from that things were largely unchanged as far as I can tell?
Tony
:o :-\
The additional info, for those who have not received the HPA newsletter, is at http://www.halcrowpensioners.org.uk/pages/news/newsletters/newsletter-no.-5/the-2011-halcrow-accounts.php (http://www.halcrowpensioners.org.uk/pages/news/newsletters/newsletter-no.-5/the-2011-halcrow-accounts.php). There is a link on that page to a 5 page extract from the Halcrow Accounts which includes the pensions calculations. Remember to sign up for the newsletters http://www.halcrowpensioners.org.uk/pages/the-association/membership.php (http://www.halcrowpensioners.org.uk/pages/the-association/membership.php) so you don't miss any more news.
John
The trend in the Halcrow Pension Scheme deficit can be seen below (figures from 2011 report recently posted)
Quite simply, the liabilities are going up faster than assets. Over the last 5 years, the liabilities have increased at an average rate of £39 a year, the assets at £16 million and the deficit at £23 million. The big jump this year was due in part to a relatively large increase in the assumed life expectancy got males over 65 (the assumption for females is not stated in the accounts), and the adoption of a lower discount rate. There may be other explanations which we will be able to see when the 2011 Valuation Report finally appears.
We can assume that this is why the trustees are asking for a substantial increase in contributions from CH2 after years of low contributions from Halcrow in their eternally back-end loaded recovery plans (the 2005 recovery plan left the HPS worse off in 2008 than it had been in 2005!)
Stephen
'the 2005 recovery plan left the HPS worse off in 2008 than it had been in 2005! '
In 2008 the stock market was very low - FTSE was 3700 if my memory serves cf now at 6300. Personally, I would expect this to have a major bearing on the deficit. Of course I may be wrong depends on the assets class split eg equities, bonds etc
Brian
Brian,
I agree that the markets are a bit turbulent and 2008 may have been affected by this but the actuarial review in the 2011 Halcrow accounts (see my post above for a link) shows that the funding gap has substantially widened. The trustees very kindly let Halcrow make relatively low contributions post 2008 which hasn't helped the situation.
John
With respect to the pension fund deficit of £179m, as I read it, net actuarial losses are £94m of this number due principally to the revised longevity and discount rate assumptions. If the discount rate continues further on its downward trend from 4.9% in 2011 to say 4.6% at end 2012, (as is likely in the current low interest rate environment), significant actuarial losses will continue. The underlying asset value of £404m is up.
It is all very well to say Halcrow contributions have been low in relation to the deficit but they matched Halcrow ability to pay. Without CH2 intervention where would we be now?
We can only trust that the Halcrow 2011 losses resulted from one-off write-downs to prduce a clean slate and the company is operationally efficient under CH2 controls.
The recovery plan for the pension scheme looks challenging.
ref vicscott 'The recovery plan for the pension scheme looks challenging.'
CH2's revenue per employee was £178,000 pa cf Halcrow's £83,000 (extracted at the time of the sale from HHL and CH2MHill's 2009 Annual Reports available on the internet) To get Halcrow's figures up to the CH2 level they are going to have to work smarter because you can't work twice as hard. They are going to have to find and enter new more profitable markets and/or have different contractual arrangements ie a risk share arrangement with Halcrow achieving a significant project bonus when they deliver – can't see the small project UK public sector buying that arrangement!
Clearly, CH2 had the demonstrated ability to achieve these figures, which personally gives me some confidence that there will be sufficient finance available in the longer term. But, we live in difficult times and need the UK Govt to support/encourage private finance to build infrastucture which may help considerably to deliver the financial benefits of a risk share arrangement generating a significantly higher revenue per employee.
Just my tuppence worth.