Hargreaves Services plc Retirement Benefit Obligation Buy-In Update

Hargreaves Services plc

(“Hargreaves” or the “Group”)

Retirement Benefit Obligation Buy In update

Hargreaves Services plc (AIM: HSP), a diversified group delivering services to the industrial and property sectors, announces that is has completed the buy in (the “Buy In”) of the Group’s two defined benefit pensions schemes (the “Schemes”).

The Board is pleased to announce that the Schemes completed the Buy In transaction with Just Group plc (“Just”) on 29 February 2024. The shortfall in the Schemes assets which required funding was £3.7m. After taking into account fees, the impact of GMP equalisation legislation and other potential data cleansing adjustments this could rise to a maximum of £6.6m. This is lower than the previously estimated maximum cost of £9m.

This process means that the member benefits to be paid out upon their retirement are now covered by an insurance policy provided by Just. The Group has made an initial cash payment of £7.7m out of existing cash reserves in order to secure this position. This initial cash payment reflects the shortfall on the Schemes assets of £3.7m, noted above, plus an additional £4.0m in the form of a loan, as some of the property assets held in the Schemes are illiquid. This loan allows the Schemes to purchase the requisite insurance policy. The loan, which will bear interest at a commercial rate, will be repaid to the Group upon the subsequent sale of the underlying assets by the trustees.

The Group has been paying £1.8m in annual deficit reduction contribution payments to the Schemes. The Board announced in the Annual Report and Accounts for the year ended 31 May 2023 the intention to ultimately buy out the Schemes’ obligation. The Buy In has removed the need for any further deficit reduction contributions from the Group. However, the obligation (albeit now fully insured) remains with the Group until the buy-out is completed. The buy-out will likely take between 12 to 24 months to complete during which time Just will be undertaking routine data validation checks on the Schemes.

Change of dividend payment date

The interim dividend of 18p which was announced as being payable on the 11 April 2024 in the Interim Statement, will now be paid on the 4 April 2024 to shareholders on the register on 22 March 2024.

Roger McDowell, Non-Executive Chair of Hargreaves, said: “The Buy In represents a significant step forward in the Group’s stated strategy of realising value for shareholders. Not only does it further simplify the Group’s Balance Sheet, but it also releases annual free cash flow, which will support the sustainability of the recently announced 36p annual dividend.”

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