Newsletter No. 41

 HALCROW PENSIONERS ASSOCIATION 

 Newsletter No. 41 : April 2020

This is a newsletter of the Halcrow Pensioners Association. More details of HPA's objectives, organisation and its activities are here. You have been sent this newsletter because you may be a member of the Halcrow Pension Scheme or its successor, HPS2 or be a former member of HPS who has transferred to the PPF. Membership of HPA is open to all interested HPS / HPS2 members and currently costs £10/year.  If you do not wish to receive the HPA newsletters then please email the webmaster to remove your name from the mailing list.

Reminder about 2020 Annual General Meeting
The 2020 AGM will be held in the HPA forum between 18th and 26th April and will adopt the format used previously of a virtual meeting in a sub-forum of the HPA forum to which only paid-up members of HPA will be given access. If you have not already paid your 2020 subscription then payment methods are here but please note the treasurer much prefers bank transfers as Paypal incurs a service charge. Please remember to email the treasurer when you pay your subscription so that funds received can be easily identified. The proposed schedule for the meeting based on the pace of previous AGMs is:

The agenda is here and links to the other documents will be posted in the HPA forum prior to the commencement of the meeting. Nominations or proposed items to be discussed at the AGM can be posted in the 2020 AGM forum to provide opportunity for others to view and, if appropriate, comment on them. Alternatively, please email them (also any apologies) to the secretary. The AGM is the opportunity for the members to provide their views on the direction and strategy of HPA. Please attend: There's zero risk of catching Covid-19!

Unsolicited Approach Regarding Halcrow Pension
One of our members has reported receiving an unsolicited approach from a person claiming to be a financial services professional based in Malaga, Spain who wanted to discuss their Halcrow pension. HPA's advice is to treat any unsolicited approaches with caution and those relating to money with extreme caution. We are wondering if other Halcrow pensioners have received similar approaches (if so, please contact the webmaster).  If anyone is seriously considering moving out of HPS2 then we would remind you of this note, which featured in HPA Newsletter No. 38 and was written by a former HPS2 member and documents the process.

PPF Members' Forum
HPA committee member, Chris Hoggart, whose pension is now with the Pension Protection Fund (PPF) has been accepted onto that organisation’s member forum. This forum, which met for the first time in February of this year, is one of the ways in which the PPF attempts to communicate with its members. Essentially it is a discussion group formed so that the PPF’s management can understand the issues that their members think important, gather views on the organisation’s services and debate future initiatives. If any HPA member would like to find out more about this initiative, or use this channel to communicate with the PPF, Chris can be contacted here. The PPF management's willingness to interact with members contrasts with the approach taken by the HPS2 Trustee.

Halcrow Group Ltd (HGL) 2018 Annual Report and Financial Statements
As noted in Newsletter No. 40, the 2018 accounts for HGL were finally posted at Companies House on 13th March 2020. What does the report reveal? In addition to the shifting of scheme sponsorship and thus pension costs away from HGL to Jacobs UK as already been announced by the HPS2 Trustee as a notice on its website, HGL continues to operate at a loss due primarily to an onerous lease provision (would this be Elms House which was vacated in 2019?) and transfer pricing costs. However, the revenue recognition policy has been aligned with the Jacob's, and results in the profit margin of contracted work from this point being recognised within the legal entities that employ the individuals working on any specific project, which should mean that more of the profit generated by HGL's 2100 professional and technical staff should show on the HGL accounts. It should be noted that the 2019 HGL accounts (due later this year) will be the last of relevance to HPS2, with the financial strength of Jacobs UK being of primary interest to members from 2020 onwards. Some extracts from the report are below:

Turnover decreased from £223.4 million in 2017 to £212.8 million in 2018. The loss before taxation of £16.5 million in 2017 increased to a loss before taxation of £69.9 million in 2018.

Restructuring - During the year to 31 December 2018 we incurred redundancy costs of £1.1 million and also an onerous lease provision of £30.8 million relating to the vacation of offices within the UK.

Administrative expenses - These costs increased by £33.8 million in the year. moving from £56.8 million in 2017 to £90.6 million in 2018. The increase in costs is mainly due to transfer pricing costs of £33.5 million (2017 £7.2 million), intercompany debtor provisions of £6.3 million (2017: release of £3.0 million), impairment of fixed assets of £2.0 million (2017 £nil), exchange losses of £0.7 million (2017 £nil), and a reduction in other costs year on year of £4.5 million.  

The Company continues to hold a strong reputation within the market. Whilst much of the new work in the UK is bid under Jacobs UK Limited the change in revenue recognition methodology means that Halcrow Group Limited will continue to derive a steady revenue stream by virtue of its experienced employee base. The Company expects to see a growing. proportion of its revenue being obtained via the mechanism of inter-company trade with employees working upon projects housed in other 'Jacobs' trading companies.

Following the acquisition of the Company by Jacobs Engineering Group Inc. ("Jacobs") in December 2017, the Company's financial accounting system was updated during the year to align with Jacobs' system, effective 1 October 2018. At this point, the Company's revenue recognition policy was also aligned with the Jacob's, and results in the profit margin of contracted work from this point being recognised within the legal entities that employ the individuals working on any specific project. This differs to the previous policy of margin being recognised in the contracting company. The impact of the change in policy in 2018 is a £29.7m increase of turnover, and a £19.2m increase of cost of sales, resulting in a £10.5m increase in operating margin. It is not possible to determine the effect on 2017 operating margin as this was a prospective change without any restatement of prior year numbers and Group companies transitioning policies and systems at different times post acquisition by Jacobs as well as the complexity of the business. 

Post Balance Sheet Events
On the 1st December 2019 the sponsorship of the Halcrow Rail section of the Railways Pension Scheme transferred to Jacobs UK Limited. The Halcrow section of the scheme shall thereafter be called the Jacobs UK Shared Cost section of the scheme. All assets, liabilities and future obligations pertaining to this section of the scheme transfer from Halcrow Group Limited to Jacobs UK limited as of 1st December 2019. On 23rd December 2019  the main scheme, the Halcrow Pension Scheme 2 (HPS2) also saw sponsorship transfer to Jacobs UK Limited with Halcrow Group Limited released from all of its obligations (that had a value of £32m at 31 December 2018) as the principal Employer.

For each of the schemes, the Company is making contributions in accordance with arrangements made with the relevant scheme trustees, which are designed to address these deficits over an agreed period of time. For the year to 31 December 2018, contributions by the Company of £7.6m (2017: £7.7m) were made to the HPS 2 scheme. Further contributions totalling £1.8m (2017: £1. 7m) were made to other defined benefit schemes. Further, following the High Court's judgement in relation to the defined benefit pension schemes of Lloyds Bank Group, the Company has recognised £1.8m as a past service cost through the profit and loss account to equalise benefits to take account of unequal Guaranteed Minimum Pensions between men and women. 

The Future of HPA
The need for HPA continues and among the possible ongoing tasks to look after HPA members' interests are:
1.    To keep HPA members informed about HPS2 and other pension-related matters.
2.    To closely monitor HPS2, the HPS2 Trustee and Jacobs UK (the scheme sponsoring company) to ensure that adequate contributions are made to the pension schemes. This could soon become a significant risk as the ongoing HPS2 triennial review could identify the need for increased company contributions.
3.    To examine or comment on proposals for changes to pension-related laws or regulations.
4.    Take opportunities to press for better supervision of pension schemes and their sponsoring companies.
5.    To follow the potential changes in pension scheme rules arising from the Hampshire vs PPF and Bauer court decisions.

Previous Newsletters
If you haven't been with HPA from the start or want to remind yourself of previous events then you can browse through the previous newsletters for which there is a full list here.