REG - Hargreaves Servs PLC - Preliminary results
06/08/2024 07:00
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RNS Number : 2497Z Hargreaves Services PLC 06 August 2024
Hargreaves Services plc
("Hargreaves", the "Company", or the "Group")
Results for the year ended 31 May 2024
Hargreaves Services plc (AIM: HSP), a diversified group delivering services to
the industrial and property sectors, announces its results for the year ended
31 May 2024.
Financial results
The Group has seen strong performances across its Services and Hargreaves Land
divisions and reduced profitability within German Joint Venture, HRMS.
Hargreaves Land delivered a record profit before tax following several notable
transactions. HRMS also delivered an increased cash receipt, double that of
the prior financial year. With a high level of secured revenue in Services,
clear visibility of transactions in Land and signs of market recovery at HRMS
there are many reasons to feel positive about the coming year. The Group
maintains a strong, debt-free balance sheet and a clear focus on realising and
delivering value to our shareholders.
KEY FINANCIAL RESULTS
Year ended 31 May 2024 2024 2023
Revenue £211.1m £211.5m
EBITDA* £26.1m £21.8m
Underlying Profit Before Tax ("UPBT")* £16.9m £27.3m
Share of profit from HRMS (net of tax) £1.3m £15.5m
Profit Before Tax £16.7m £27.2m
Basic underlying EPS* 38.2p 86.3p
Basic EPS 37.8p 85.9p
Proposed Final Dividend 18.0p 6.0p
Additional Dividend from HRMS - 12.0p
Cash and cash equivalents £22.7m £21.9m
Net Assets £192.1m £201.0m
Net Assets per Share* 586p 618p
HIGHLIGHTS
· UPBT at £16.9m (2023: £27.3m), with a decrease due to expected
reduction in profitability in HRMS, somewhat offset by growth in Hargreaves
Land
· EBITDA increased 19.7% to £26.1m (2023: £21.8m) due to improved
profitability of the Services business
· Record profit for Hargreaves Land with UPBT increasing 110.3% to
£8.2m (2023: £3.9m)
· Increased cash receipt from HRMS of £7.8m (2023: £4.0m)
· Services business holds a strong contract portfolio, growing to over
65 term and framework contracts following several new contract wins, providing
visibility of 70% of next year's expected revenue
· The buy-in of the pension scheme completed in March 2024 for a cash
consideration of £3.7m
* The basis of Underlying profit before tax, EBITDA, Net Assets per Share and
basic underlying EPS is set out in Note 5. The calculation of Net Assets per
Share includes the renewable energy land assets at cost.
Commenting on the preliminary results, Group Chair Roger McDowell said: "The
Group remains focused on its core objective to create, realise and deliver
value for our shareholders. Despite the challenges faced by HRMS, the
improvement in the second half of the year provides confidence that we will
see an increased contribution in the current financial year. We also expect to
bring to market the first tranche of renewable energy land assets, marking the
beginning of substantial realisation events within that business.
Additionally, the Services business continues to perform strongly, with over
70% of revenue already secured and further opportunities emerging within the
power, water and infrastructure sectors. The Balance Sheet remains free from
bank debt and no longer requires pension deficit contributions, providing a
strong and stable platform from which to deliver substantial value to
shareholders in the coming years."
Analyst briefing
A briefing open to analysts will take place on Tuesday 6 August 2024 at 10.00
am BST. To register and for more details please contact Walbrook PR on
hargreavesservices@walbrookpr.com (mailto:hargreavesservices@walbrookpr.com) .
Investor presentation
Gordon Banham, Group Chief Executive, David Anderson, Group Property Director
and Stephen Craigen, Chief Financial Officer, will provide a live presentation
on the Company's preliminary results via the Investor Meet Company platform on
Wednesday 7 August 2024 at 4.00 pm BST.
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via your Investor Meet Company dashboard up until
9.00 am the day before the meeting or at any time during the live
presentation.
Investors can sign up to Investor Meet Company for free here
(https://www.investormeetcompany.com/hargreaves-services-plc/register-investor)
.
For further details:
Hargreaves Services www.hsgplc.co.uk (http://www.hsgplc.co.uk)
Gordon Banham, Chief Executive Tel: 0191 373 4485
Stephen Craigen, Chief Financial Officer
Walbrook PR (Financial PR & IR) Tel: 020 7933 8780 or hargreavesservices@walbrookpr.com
(mailto:hargreavesservices@walbrookpr.com)
Paul McManus / Charlotte Edgar /
Mob: 07980 541 893 / 07884 664 686
Louis Ashe-Jepson
07747 515 393
Singer Capital Markets (Nomad and Corporate Broker) Tel: 020 7496 3000
Sandy Fraser / Phil Davies / Sam Butcher
Cavendish Capital Markets Ltd (Joint Corporate Broker) Tel: 020 7220 0500
Katy Birkin / Hamish Waller - Corporate Finance
Jasper Berry / Tim Redfern - Sales / ECM
About Hargreaves Services plc (www.hsgplc.co.uk (http://www.hsgplc.co.uk) )
Hargreaves Services plc is a diversified group delivering services to the
industrial and property sectors, supporting key industries within the UK and
South East Asia. The Company's three business segments are Services,
Hargreaves Land and an investment in a German joint venture, Hargreaves Raw
Materials Services GmbH (HRMS). Services provides critical support to many
core industries including Energy, Environmental, UK Infrastructure and certain
manufacturing industries through the provision of materials handling,
mechanical and electrical contracting services, logistics and major
earthworks. Hargreaves Land is focused on the sustainable development of
brownfield sites for both residential and commercial purposes. HRMS trades in
specialist commodity markets and owns DK Recycling, a specialist recycler of
steel waste material. Hargreaves is headquartered in County Durham and has
operational centres across the UK, as well as in Hong Kong and a joint venture
in Duisburg, Germany.
Chair's Statement
Roger McDowell, Group Chair
Introduction
I am pleased to be able to report another year of good strategic progress and
strong financial performance, notwithstanding the contrasting performance
across our three business units, Services, Hargreaves Land and HRMS. A record
year in Hargreaves Land and strong underlying margin growth in Services was
offset by a significant decline in contribution from our German joint venture,
HRMS.
The Group remains focused on the realisation and delivery of value to our
shareholders, which is applied to each of our businesses as follows:-
· Services - We concentrate on creating and delivering growth through the
identification and successful tendering of high-quality, robust contracts in
areas of core competence within the infrastructure market.
· Hargreaves Land - Our medium-term strategy to deliver value through the
realisation of capital employed within our landmark Blindwells development
near Edinburgh and additional value creation through the management and
ultimate disposal of the renewable energy land asset portfolio, whilst also
growing an 'asset light' active development business.
· HRMS - Our focus is on longer term realisation whilst exploring certain
accretive initiatives. We have an agreement for a minimum annual cash return
target of £7m
Strategic Projects
The Board outlined two areas of key focus in the Annual Report and Accounts
for the year ended 31 May 2023. First, to realise value from the Group's
renewable energy land assets over the next five years. Second, to progress the
Buy-Out of the Group's defined benefit pension scheme. I am pleased to report
positive updates on both initiatives:
Renewable Energy Land Assets
During the year, the second wind farm constructed on land within our portfolio
became operational. This means that land owned by the Group is now helping to
support the generation and storage of over 200MW of installed capacity of
renewable electricity.
An updated independent valuation of the Group's near-term renewable energy
land assets was undertaken in July 2024 by Jones Lang LaSalle Limited ("JLL").
The review has placed a Market Value at Commissioning of Development** of
between £27.0m and £28.8m (2023: £27.2m to £28.9m). These assets are held
in the Balance Sheet at a historic cost of £7.4m (2023: £7.4m).
The Group remains committed to realising value from these assets through their
orderly sale over the next three to four years. As a result of several wind
farms becoming operational, including the wind farms at Broken Cross and
Dalquhandy, I can confirm that we intend to bring the first tranche to market
within the current financial year. It is anticipated that this tranche should
be valued in excess of £10m.
Pension Scheme Buy-In
I'm pleased to say that the Buy-In of the pension scheme was executed in March
2024. Not only has the Buy-In completed, but it was done at a cost
substantially lower than initially envisaged. This involved a one-off payment
of £7.7m to the scheme, which allowed the trustees to purchase an insurance
policy to cover the schemes liabilities. The payment of £7.7m included a loan
of £4.0m to the scheme, which will be repaid to the Group within two years.
This Buy-In has removed the need to pay £1.8m in annual deficit reduction
payments from FY25 onwards, which has in turn allowed the Board to increase
the annual dividend for shareholders.
Financial Results
Overall Group Underlying Profit before Tax ("UPBT")* was £16.9m (2023:
£27.3m) for the year ended 31 May 2024. The reduction is due, in most part,
to the challenges faced by HRMS. HRMS did see an improved second half of the
year with more favourable, although still uncertain, market conditions
resulting in increased volumes. There are also early signs of improvement in
gate-fees and commodity pricing.
The record profit within Hargreaves Land of £8.2m (2023: £3.9m) demonstrates
the high quality of our professional team and underlying asset portfolio,
which is all held at historic cost. Whilst profit profiles can be variable
within this business, it is pleasing to see this milestone achieved.
We have also seen revenue and margin growth within the underlying results of
Services, driven by growth within our Earthworks and Environmental activities.
Basic earnings per share have decreased to 37.8p from 85.9p in the prior year,
reflecting the impact on the reduction in profit from HRMS.
Cash and leasing debt
On 31 May 2024 the Group held cash in the bank of £22.7m (2023: £21.9m). The
business remains cash generative, predominantly through the activities in
Services and the receipt of HRMS dividends. The overall cash balance remains
consistent with the prior year due to the one-off payment of £7.7m (inclusive
of a £4m loan) made to the pension scheme to ensure the buy-in was completed,
which has offset the underlying cash generation from operations.
The Group's debt relates solely to leasing debt and hire purchase arrangements
for the acquisition of fixed assets. At the year end the balance of the debt
was £34.2m (2023: £36.4m), the reduction reflects the net repayments made in
the year.
Dividend
The Group paid an interim dividend of 18.0p (2023: 3.0p), which represented a
six-fold increase in the interim dividend. This significant increase reflected
the additional free cash flow available following the buy-in of the pension
scheme, as well as the additional sustainable cash returns from HRMS combined
with a move to increase the interim dividend to represent 50% of the full year
dividend.
The business has continued to trade well in the second half of the year and
the Board can recommend a final dividend of 18.0p (2023: 6.0p) taking the full
year dividend to 36.0p (2023: 21.0p), representing an increase of 71%.
In the previous year, we paid an additional dividend of 12.0p relating to cash
received from HRMS. No such additional dividend is proposed as the impact of
cash received from HRMS is factored into the 36.0p full year dividend.
If approved at the Annual General Meeting, the final dividend of 18.0p will be
paid on 4 November 2024 to all shareholders on the register at the close of
business on 27 September 2024. The shares will become ex-dividend on 26
September 2024.
Outlook
The Group remains steadfast in its core objective to create, realise and
deliver value for our shareholders. Despite challenges faced by HRMS, the
notable improvement in the second half of the year gives us confidence in an
improved contribution for the current financial year. We are also excited to
introduce the first tranche of renewable energy land assets to the market,
marking the start of substantial realisation events within this business
sector. The Services business continues to demonstrate robust performance,
with over 70% of budgeted revenue already secured and additional opportunities
emerging within the power, water and infrastructure sectors.
Our Balance Sheet remains free from bank debt and now relieved of pension
deficit contribution requirements. This provides a solid and stable foundation
for the delivery of substantial value for shareholders in the coming years.
Finally, I extend my sincere gratitude to all my colleagues and all the
members of the Hargreaves team for their continuing hard work and dedication.
We look forward to the future with confidence.
Roger McDowell
Group Chair
5 August 2024
* The basis of Underlying profit before tax is set out in Note 5
**Market Value at Commissioning of Development - represents the price at which
the portfolio would change hands between a willing buyer and a willing seller,
neither being under any compulsion to buy or sell and both having reasonable
knowledge of the relevant facts.
Group Business Review
Gordon Banham, Group Chief Executive
CHIEF EXECUTIVE'S REVIEW
Services Hargreaves Land HRMS Central Costs Total
£'m 2024 2023 2024 2023 2024 2023 2024 2023 2024 2023
Revenue 204.1 200.9 7.0 10.6 - - - - 211.1 211.5
Underlying PBT/(LBT)* 11.4 12.3 8.2 3.9 1.3 15.5 (4.0) (4.4) 16.9 27.3
* The basis of Underlying Profit Before Tax is set out in Note 5.
Services
Revenue across the Services business has grown by 1.6% to £204.1m (2023:
£200.9m). The HS2 contract remains the largest contract held by the Group
delivering revenue of £48.3m (2023: £54.1m). It's anticipated that there is
a further two years of work required on HS2 at a similar run rate. The prior
year activities at HS2 included substantial engineering project works.
Services delivered an underlying profit before tax of £11.4m compared to
£12.3m in FY23. The prior year included several non-recurring asset sales,
which delivered a non-recurring profit of £3.2m. As such, the like for like
PBT is £9.1m for the year ended 31 May 2023. The Services business has
therefore delivered an underlying growth of £2.3m representing a 25.3% year
on year improvement.
This improvement has been delivered, in the most part, through the increased
margin the business has been able to recognise. Current year net margin is
5.6%, which compares to 4.5% in the prior year. The margin growth demonstrates
the high quality of the contracts the Group is entering into within the
transport and earthwork operations, combined with a constant focus on contract
efficiency.
Continued contract success
A core focus of the Services business is the resilience and reliability of its
contract base. The business is focused on securing term and framework
contracts with high quality counterparties in areas of core competence. During
the year we have seen success in this area, with the Services business signing
several new term and framework contracts.
These include a five-year framework contract for Yorkshire Water delivering
environmental handling services and a three-year agreement with Stirling
Council to provide transportation services for their waste recovery operations
to name but two. Additionally, the business has made great progress at
Sizewell C Nuclear Power Station, with additional work secured on preparatory
earthworks in advance of any major works.
Furthermore, the Group has, for the third time in a row, secured a five-year
NEC Term Service contract with CLP Power Hong Kong Ltd ("CLP") providing
mechanical and electrical engineering services within planned and reactive
maintenance operations. The award of the contract is not only testament to the
high quality of service provision but also critical for the ongoing
development within Hong Kong and the wider region, providing a stable platform
for growth in the area.
The Services Group now holds a strong contract portfolio which has grown to
over 65 term and framework contracts, many of which contain escalation clauses
to insulate the Group from inflationary pressures, providing the business with
visibility of over 70% of budgeted revenue heading into the new financial
year. This provides a stable base from which to deliver reliable revenues and
strong margins helping underpin the cash generation of the Group.
We note the recent announcement from Tungsten West plc ("TW") regarding the
successful award of the operating permit for their Mineral Processing Facility
at the tungsten mine in Devon. The announcement also noted that TW is well
progressed with its latest feasibility study. The completion of this study
will enable TW to undertake the capital raise required to bring the project
into production. The Group remains party to an exclusive long-term Mining
Services Contract with TW, which will commence should the project move to
production. A further £1m instalment was received in July 2024, leaving a
further £4m to be received.
Hargreaves Land
Hargreaves Land has delivered a record profit for the year of £8.2m (2023:
£3.9m) which is particularly pleasing to see amidst a backdrop of uncertainty
within the property market more generally.
The business has benefited from significant disposals, including the 8-acre
site at Westfield, which held an Energy from Waste ("EfW") plant lease, which
was sold for proceeds of £7.6m. Additionally, the business completed the sale
of 28 acres of land at Maltby raising proceeds of £4.9m.
Revenue for Hargreaves Land of £7.0m (2023: £10.6m) is lower than the prior
year due to the mix of sales. The land at Westfield, which was sold in the
year, was held as an Investment Property and therefore is not recognised as
revenue.
The Group's largest project, Blindwells, has continued to be impacted by some
uncertainty within the residential housing market as we have seen house
builders delay purchases. The Group had anticipated a material sale to Avant
Homes to complete in the second half of the year for a 20-acre site generating
proceeds of £18.5m. Whilst contracts were exchanged, the completion has not
yet taken place and is now expected to occur in the current financial year.
The longer-term prospects of the Blindwells site remain positive, with high
levels of interest in the plots we have brought to market during the year.
Sale terms have been agreed on a further two development parcels bringing the
total number of residential plots under offer or contract to 708. We expect
the site to provide a substantial contribution in the current financial year.
The project continues to represent a long-term, regular profit stream for
Hargreaves Land with approximately 100 acres remaining in phase 1. Following
the completion of phase 1, there is a second phase, for which a further
planning allocation for up to an additional 1,500 homes is being progressed on
135 acres owned by the Group.
Progress has continued at the Group's other multi-phase development sites,
including Westfield and Unity. Development works, which were started in the
previous financial year have been completed at Westfield. There has been
substantial interest in the site from industrial users and also for green
energy storage.
At the start of FY24 demand for both residential and commercial plots was very
subdued as rapidly rising interest rates and wider macro-economic uncertainty
weighed on markets. This market fragility persisted into the second half of
the year but as conditions stabilised and the medium-term outlook for interest
rates moderated we saw a return of demand from house builders for serviced
residential land in quality locations although values have yet to recover to
levels seen at the peak of the market.
Commercial demand has been much slower to recover with increased construction
costs combining with weaker investment values making scheme viability more
challenging and this has only partially been offset by above inflation rental
growth in many sectors.
Pipeline
As Hargreaves Land transitions to a lower-capital model the long-term pipeline
of opportunities represents a key indicator of performance and opportunity for
the business. We have seen significant progress in the building of the
pipeline over the last few years. In the last twelve months alone, the
business has exchanged contracts on five different schemes with a combined
Gross Development Value ("GDV") of £210m. Additionally, the pipeline includes
a further five schemes with an estimated combined GDV of £70m, which have
terms agreed prior to exchange of contract.
The total estimated GDV of schemes on which the Group has exchanged contracts
is now £1.1bn (2023: £940m). These schemes cover a total of 1,600 acres and
represent a mix of residential and commercial developments. These schemes
represent long-term opportunities and are expected to deliver a minimum margin
of 15% of GDV.
Pipeline Summary Number of sites Residential plots Acres Estimated GDV
Residential (planning allocated) 5 5,560 763 £197m
Residential (planning promotion) 8 3,075 299 £130m
Commercial (planning allocated) 10 n/a 538 £770m
1,600 £1,097m
Renewables
Significant progress has been made within the renewable energy asset portfolio
in the year. Two windfarms on land owned by the Group are now operational and
generating clean electricity. A third is under construction and due to become
operational by 2026. Option agreements were exchanged on a fourth windfarm
project at the end of FY24 which is targeted to be under construction within
the next five years. Of the six wind farm projects that require access across
our land ("Access agreements"), two are fully operational, two are under
construction and two are at pre-construction stage, having secured planning
and grid connections.
The recent independent valuation of the Group's near-term renewable energy
land assets of between £27.0m and £28.8m (2023: £27.2m and £28.9m)
reaffirms the inherent value within these assets. The business remains focused
on taking the first tranche of operational schemes to market within the coming
financial year.
In addition to the well-established schemes there has been a lot of progress
regarding new schemes on our land, including substantial new battery storage
opportunities. The recent valuation covers eleven schemes, many of which are
in operation, with a total MW output of 1,614MW. The Group has line of sight
on a pipeline of an additional ten schemes with total output of 1,695MW which
is not currently included within the valuation due to pre-planning or the
long-term delivery timescales currently envisaged.
HRMS
The Group's share of post-tax profits from HRMS was £1.3m (2023: £15.5m).
This represents a significant reduction in contribution from the joint venture
which can be attributed to two main factors. First, a reduction in trading
volumes which has been impacted by the German recession. Second, the impact of
commodity pricing on the steel waste recycling process at DK.
The trading business has seen a return to more normal conditions following a
period of two years during which volumes and pricing were extremely strong.
This area of the business has seen traded volumes of 746kt, which compares to
1,020kt in the previous year. Additionally, average margin has been squeezed
to 5.7% (2023: 6.4%). Yet despite this, the trading operation has delivered a
local PBT of £10.0m (2023: £24.5m).
The other aspect of HRMS is the steel waste recycling operation, DK Recycling
und Roheisen GmbH ("DK"). This facility takes in approximately 500kt of waste
dusts from around Europe and produces pig iron and zinc for sale. In the
current year DK has been impacted by several pricing pressures.
1. Pig iron sales pricing is down, impacted by the lack of any EU sanctions on
pig iron imported from Russian sources.
2. Coke pricing, which is a key fuel in the process, has remained high impacted
by the embargo on Russian imports.
3. Zinc pricing is down on the prior year, with the market price down as low as
$2,200 per tonne, compared to highs of over $4,000 per tonne twelve months
earlier.
This has resulted in DK delivering a local loss before tax of £7.4m (2023:
£5.3m profit). However, this masks a bit of a turnaround in the second half
of the year, which has seen the business deliver a profit for the final six
months. This has been assisted by an improvement in gate fees on dust brought
on site and a general improvement in pig iron and zinc pricing since the turn
of the year.
Looking forward, there are reasons to be more positive about the coming
financial year within DK. Most notably the cost of coke has been secured at
lower prices, which will lead to a substantial improvement in the DK
profitability. The higher gate fees recognised in the second half of the year
will be in place for the whole of the new year. Finally, there has been an
improvement in pig iron pricing as some modest sanctions on the importation of
Russian product begin to have an impact.
Despite the overall reduction in contribution to PBT from the joint venture, I
am pleased to report that HRMS made a cash payment to the Group of £7.8m
during the year (2023: £4.0m). The management team of HRMS have agreed to
maintain a minimum cash return to the Group of £7m per annum. It is important
to note that this is not dependent on the performance of DK. This will be
funded out of the ongoing profits of HRMS trading operations as there is no
requirement to reinvest profits into working capital due to the significant
headroom on their banking facility.
During the year, HRMS refinanced their Balance Sheet and now hold a €76m
asset backed finance facility. One key aspect of this new facility is that it
no longer requires an off-Balance Sheet guarantee from Hargreaves Services
plc. As such, the €10m guarantee that was previously in place and recorded
as a contingent liability has been removed.
Summary
The Group has seen strong performances within Services and Hargreaves Land and
reduced profitability within HRMS. With a high level of secured revenue in
Services, clear visibility of transactions in Land and early signs of a
recovery in HRMS there are many reasons to feel positive about the coming
year.
The business has a strong, debt-free balance sheet and we remain focus on
creating, delivering and realising value for our shareholders.
Gordon Banham
Group Chief Executive
5 August 2024
Consolidated Statement of Profit and Loss
and Other Comprehensive Income
for the year ended 31 May 2024
Note 2024
£000 2023
£000
Revenue 211,146 211,459
Cost of sales (167,763) (172,402)
Gross profit 43,383 39,057
Other operating income 6,404 4,918
Administrative expenses (33,920) (32,178)
Operating profit 15,867 11,797
Analysed as:
Operating profit (before amortisation charges) 16,058 11,972
Amortisation of intangible assets (191) (175)
Operating profit 15,867 11,797
Finance income 2,078 1,612
Finance expense (2,802) (2,565)
Share of profit in joint ventures (net of tax) 1,533 16,311
Profit before tax 16,676 27,155
Taxation 3 (4,458) 771
Profit for the year 12,218 27,926
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Loss in defined benefit pension schemes (12,377) (4,645)
Tax recognised on items that will not be reclassified to profit or loss 3,094 1,161
Items that are or may be reclassified subsequently to profit or loss
Foreign exchange translation differences (569) 1,130
Share of other comprehensive income of joint ventures, (net of tax) 167 1,912
Other comprehensive expense for the year, net of tax (9,685) (442)
Total comprehensive income for the year 2,533 27,484
Profit/(loss) attributable to:
Equity holders of the Company 12,278 27,915
Non-controlling interest (60) 11
Profit for the year 12,218 27,926
Total comprehensive income/(expense) attributable to:
Equity holders of the Company 2,593 27,473
Non-controlling interest (60) 11
Total comprehensive income for the year 2,533 27,484
Basic earnings per share (pence) 4 37.78 85.85
Diluted earnings per share (pence) 4 37.00 84.13
Non-GAAP Measures
Basic underlying earnings per share (pence)* 4 38.22 86.28
Diluted underlying earnings per share (pence)* 4 37.43 84.55
* The basis of Underlying earnings per share is set out in Note 5
Group Balance Sheet
at 31 May 2024
Group
2024 2023
£000 £000
Non-current assets
Property, plant and equipment 9,415 10,861
Right-of-use assets 40,675 39,815
Investment property 14,829 14,074
Intangible assets including goodwill 6,048 5,685
Investments in joint ventures 61,988 74,282
Trade and other receivables 4,000 -
Deferred tax assets 11,323 14,753
Retirement benefit surplus 1,259 8,474
149,537 167,944
Current assets
Inventories 49,325 39,302
Trade and other receivables 70,905 71,609
Contract assets 6,425 5,114
Cash and cash equivalents 22,700 21,859
149,355 137,884
Total assets 298,892 305,828
Non-current liabilities
Other interest-bearing loans and borrowings (15,884) (20,839)
Retirement benefit obligations (2,979) (2,902)
Provisions (15,290) (4,120)
Deferred tax liabilities - (3,417)
(34,153) (31,278)
Current liabilities
Other interest-bearing loans and borrowings (18,270) (15,511)
Trade and other payables (48,383) (47,427)
Provisions (4,524) (10,467)
Income tax liability (1,466) (154)
(72,643) (73,559)
Total liabilities (106,796) (104,837)
Net assets 192,096 200,991
Equity attributable to equity holders of the Parent
Share capital 3,314 3,314
Share premium 73,990 73,972
Other reserves 211 211
Translation reserve (1,258) (689)
Merger reserve 1,022 1,022
Hedging reserve 318 318
Capital redemption reserve 1,530 1,530
Share-based payment reserve 2,730 2,388
Retained earnings 110,510 119,136
192,367 201,202
Non-controlling interest (271) (211)
Total equity 192,096 200,991
Group Statement of Changes in Equity
for year ended 31 May 2024
Group Share capital £000 Share premium £000 Translation reserve Hedging reserve £000 Other reserves £000 Capital redemption reserve Merger reserve £000 Share- based payment reserve £000 Retained earnings £000 Non-controlling interest Total equity £000
£000 £000 Total Parent equity £000
£000
At 1 June 2022 3,314 73,972 (1,819) 318 211 1,530 1,022 2,029 99,494 180,071 (222) 179,849
Total comprehensive income/(expense) for the year
Profit for the year - - - - - - - - 27,915 27,915 11 27,926
Other comprehensive income/(expense) - - 1,130 - - - - - (1,572) (442) - (442)
Total comprehensive income for the year - - 1,130 - - - - - 26,343 27,473 11 27,484
Transactions with owners recorded directly in equity
Equity-settled share-based payment transactions - - - - - - - 359 - 359 - 359
Dividends paid - - - - - - - - (6,701) (6,701) - (6,701)
Total contributions by and distributions to owners - - - - - - - 359 (6,701) (6,342) - (6,342)
At 31 May 2023 and 1 June 2023 3,314 73,972 (689) 318 211 1,530 1,022 2,388 119,136 201,202 (211) 200,991
Total comprehensive income/(expense) for the year
Profit/(Loss) for the year - - - - - - - - 12,278 12,278 (60) 12,218
Other comprehensive expense - - (569) - - - - - (9,116) (9,685) - (9,685)
Total comprehensive (expense)/income for the year - - (569) - - - - - 3,162 2,593 (60) 2,533
Transactions with owners recorded directly in equity
Issue of shares - 18 - - - - - - - 18 - 18
Equity-settled share-based payment transactions - - - - - - - 342 - 342 - 342
Dividends paid - - - - - - - - (11,788) (11,788) - (11,788)
Total contributions by and distributions to owners - 18 - - - - - 342 (11,788) (11,428) - (11,428)
At 31 May 2024 3,314 73,990 (1,258) 318 211 1,530 1,022 2,730 110,510 192,367 (271) 192,096
Group Cash Flow Statement
for year ended 31 May 2024
Group
2024 Restated*
£000 2023
£000
Cash flows from operating activities
Profit for the year 12,218 27,926
Adjustments for:
Depreciation of property, plant and equipment and right-of-use assets 16,212 14,570
Amortisation of intangible assets 191 175
Net finance expense 724 953
Share of profit in joint ventures (net of tax) (1,533) (16,311)
Profit on sale of property, plant and equipment, investment property and (6,204) (4,718)
right-of-use assets
Equity-settled share-based payment expenses 342 359
Income tax expense/(credit) 4,458 (771)
Contributions to defined benefit pension schemes (5,427) (2,426)
Translation of non-controlling interest and investments (217) 482
20,764 20,239
Change in inventories (10,024) (8,827)
Change in trade and other receivables* 1,777 11,620
Change in trade and other payables* 5,358 (8,517)
Change in provisions and employee benefits 5,226 2,713
23,101 17,228
Interest received 2,078 1,127
Interest paid (2,548) (2,192)
Income tax paid (37) (281)
Net cash inflow from operating activities* 22,594 15,882
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 219 6,565
Proceeds from sale of investment property 7,879 266
Proceeds from sale of right of use assets 115 81
Acquisition of property, plant and equipment (2,254) (3,442)
Acquisition of investment property (1,040) (5,783)
Acquisition of right of use assets - (85)
Payment for acquisition of subsidiaries, net of cash acquired (500) (1,447)
Dividends received from joint ventures 7,800 -
Repayment of loans due from joint ventures* - 28,500
Drawdown of loans due from joint ventures* (683) (16,830)
Loan to pension scheme in relation to buy-in (4,000) -
Net cash inflow from investing activities* 7,536 7,825
Cash flows from financing activities
Principal elements of lease payments (17,425) (12,721)
Dividends paid (11,788) (6,701)
Drawdown of loans from joint ventures* - 3,954
Net cash outflow from financing activities * (29,213) (15,468)
Net increase in cash and cash equivalents 917 8,239
Cash and cash equivalents at 1 June 21,859 13,773
Effect of exchange rate fluctuations on cash held (76) (153)
Cash and cash equivalents at 31 May 22,700 21,859
*Upon review of the prior year cash flow balances, it was identified that cash
flow movements arising from movement in loans due from a joint venture should
be recognised as investing activities. It was also identified that cash flow
movements arising from movement in loans due to a joint venture should be
recognised as financing activities. As such a representation of the prior year
cashflow statement has been undertaken. The impact is a decrease in change in
trade and other receivables of £11,670,000, a decrease in change in trade and
other payables of £3,954,000, an increase in change repayment of loans due
from joint ventures of £28,500,000, a decrease in the drawdowns of loans from
joint ventures of £16,830,000 and an increase in drawdown of loans from joint
ventures of £3,954,000. There is no impact on the balance sheet or statement
of profit and loss.
Notes
1 Basis of preparation and status of financial information
The financial information set out above has been prepared and approved by the
Directors in accordance with the recognition and measurement criteria of
international accounting standards in conformity with the requirements of the
Companies Act 2006.
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 May 2024 or 31 May 2023. Statutory
accounts for 2023 have been delivered to the Registrar of Companies, and those
for 2024 will be delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include a reference
to any matters to which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under section
498 (2) or (3) of the Companies Act 2006.
The accounting policies set out below have, unless otherwise stated, been
applied consistently to all periods presented in these consolidated financial
statements.
The Group has represented the 31 May 2023 cash flow statement due to a review
of the prior year movement in joint venture loan balances where it was
identified that they should be classified as investing and financing
activities.
Going Concern
The Group's financing is not dependent on bank borrowings, however the group
has access to a £12m invoice discounting facility, which is currently undrawn
and will remain in place at this level until 31 October 2025. Notwithstanding
that, a rigorous review of cash flow forecasts including testing for a range
of challenging downside sensitivities has been undertaken. Mitigating
strategies to these sensitivities considered by the Board exclude any remedies
which are not entirely within the Group's control. As a result, and after
making appropriate enquiries including reviewing budgets and strategic plans,
the Directors have a reasonable expectation that both the Company and the
Group have adequate resources to continue in operational existence for the
foreseeable future. Accordingly, the Board continues to adopt the going
concern basis in preparing the Annual Report and Financial Statements.
These results were approved by the Board of Directors on 5 August 2024.
2 Segmental Information
The following analysis by industry segment is presented in accordance with
IFRS 8 on the basis of those segments whose operating results are regularly
reviewed by the Board of Directors (the Chief Operating Decision Maker as
defined by IFRS 8) to assess performance and make strategic decisions about
allocation of resources.
The sectors distinguished as operating segments are Services, Hargreaves Land,
Unallocated and HRMS.
• Services: Provides materials handling, mechanical and electrical
engineering, land restoration, logistics and bulk earthworks into the energy,
environmental, infrastructure and industrial sectors.
• Hargreaves Land: The development and realisation of value from the land
portfolio including rental income from investment properties and the share of
profit of the Unity joint venture.
• Unallocated: The corporate overhead contains the central functions that
are not devolved to the individual business units.
• Hargreaves Raw Materials Services ("HRMS"): The Group's share of its
German joint venture, which includes Hargreaves Services Europe Limited, which
is the parent company of HRMS and DK.
These segments are combinations of subsidiaries and joint ventures. They have
separate management teams and provide different products and services. The
four operating segments are also reportable segments.
The segment results, as reported to the Board of Directors, are calculated
under the principles of IFRS. Performance is measured on the basis of
underlying profit/(loss) before tax, which is reconciled to profit/(loss)
before tax in the tables below:
Services Hargreaves Unallocated HRMS Total
2024 Land 2024 2024 2024
£000 2024 £000 £000 £000
£000
Revenue
Total revenue 206,857 7,036 - - 213,893
Intra-segment revenue (2,747) - - - (2,747)
Revenue from external customers 204,110 7,036 - - 211,146
Operating profit/(loss) (before amortisation) 13,665 7,694 (5,301) - 16,058
Share of profit in joint ventures (net of tax) - 250 - 1,283 1,533
Net finance (expense)/income (2,293) 207 1,362 - (724)
Amortisation charge (191) - - - (191)
Profit/(loss) before taxation 11,181 8,151 (3,939) 1,283 16,676
Taxation (2,764) (1,704) 10 - (4,458)
Profit/(loss) after taxation 8,417 6,447 (3,929) 1,283 12,218
Depreciation charge 15,905 129 178 - 16,212
Capital expenditure 16,884 1,096 202 - 18,182
Net assets/(liabilities)
Segment assets 100,368 78,832 57,704 - 236,904
Segment liabilities (95,327) (5,389) (6,080) - (106,796)
Segment net assets 5,041 73,443 51,624 - 130,108
Joint ventures - 5,942 - 56,046 61,988
Total net assets 5,041 79,385 51,624 56,046 192,096
Unallocated net assets of £51.6m include cash and cash equivalents of
£22.7m, deferred tax asset of £11.3m, amounts due from joint ventures of
£17.0m, a net pension liability of £1.7m and other corporate items (£2.3m
asset).
Services Hargreaves Unallocated
2023 Land 2023 HRMS Total
£000 2023 £000 2023 2023
£000 £000 £000
Revenue
Total revenue 202,958 10,608 - - 213,566
Intra-segment revenue (2,107) - - - (2,107)
Revenue from external customers 200,851 10,608 - - 211,459
Operating profit/(loss) (before amortisation) 14,326 3,011 (5,365) - 11,972
Share of profit in joint ventures (net of tax) - 841 - 15,470 16,311
Net finance (expense)/income (1,956) 44 959 - (953)
Amortisation charge (175) - - - (175)
Profit/(loss) before taxation 12,195 3,896 (4,406) 15,470 27,155
Taxation (231) 629 373 - 771
Profit/(loss) after taxation 11,964 4,525 (4,033) 15,470 27,926
Depreciation charge 14,295 110 165 - 14,570
Capital expenditure 33,690 6,083 235 - 40,008
Net assets/(liabilities)
Segment assets 94,111 73,920 63,515 - 231,546
Segment liabilities (85,028) (6,623) (13,186) - (104,837)
Segment net assets 9,083 67,297 50,329 - 126,709
Joint ventures - 5,675 - 68,607 74,282
Total net assets 9,083 72,972 50,329 68,607 200,991
Unallocated net assets of £50.3m include cash and cash equivalents of
£21.9m, net deferred tax asset of £11.3m, amounts due from joint ventures of
£11.2m, amounts due to joint ventures of £4.1m, a net pension asset of
£5.6m and other corporate items (£4.4m asset).
3 Taxation
Recognised in the Income Statement
2024 2023
£000 £000
Current tax
Current year 1,344 187
Adjustments for prior years 7 24
Current tax expense 1,351 211
Deferred tax
Origination and reversal of temporary timing differences 2,267 2,382
Adjustments for prior years 840 (3,364)
Deferred tax expense/(credit) 3,107 (982)
Tax expense/(credit) in Income Statement (excluding share of tax of equity 4,458 (771)
accounted investees)
The deferred tax adjustment in respect of prior years of £840,000 (2023:
£3,364,000 credit) relates to the treatment of losses assumed to be unused in
the previous year, which were ultimately utilised.
Recognised in Other Comprehensive Income
2024 2023
£000 £000
Deferred tax expense
Remeasurements of defined benefit pension schemes 3,094 1,161
3,094 1,161
Reconciliation of Effective Tax Rate
2024
£000 2023
£000
Profit for the year 12,218 27,926
Total tax expense/(credit) 4,458 (771)
Profit before taxation 16,676 27,155
Tax using the UK corporation tax rate of 25.00% (2023: 20.00%) 4,169 5,431
Effect of tax rates in foreign jurisdictions (249) (159)
Tax effect of joint ventures (321) (3,100)
Changes in unrecognised tax losses (49) (616)
Non-deductible expenses 224 776
Other temporary trading differences (163) 237
Adjustment in respect of previous periods 847 (3,340)
Effective total tax expense/(credit) 4,458 (771)
The UK corporation tax rate increased from 19% to 25% on 1 April 2023,
therefore a blended rate of 20.00% was used in the prior year.
Factors That May Affect Future Current and Total Tax Charges
The corporate tax rate increased from 19% to 25% on 1 April 2023. There are no
known changes planned for the rate of UK corporate tax. The deferred tax
balances at 31 May 2024 and 31 May 2023 have been calculated based on the rate
substantively enacted at the balance sheet date of 25%.
4 Earnings per Share
The calculation of earnings per share ("EPS") is based on the profit for the
year attributable to equity holders and on the weighted average number of
shares in issue and ranking for dividend in the year.
2024 2023
Earnings EPS DEPS Earnings EPS DEPS
£000 Pence Pence £000 Pence Pence
Underlying earnings per share 12,361 38.22 37.43 28,066 86.28 84.55
Amortisation (net of tax) (143) (0.44) (0.43) (140) (0.43) (0.42)
Basic earnings per share 12,218 37.78 37.00 27,926 85.85 84.13
Weighted average number of shares 32,345 33,021 32,528 33,193
The calculation of weighted average number of shares includes the effect of
own shares held of 332,401 (2023: 611,118).
The calculation of diluted earnings per share ("DEPS") is based on the profit
for the year and the weighted average number of ordinary shares in issue in
the year. The potentially dilutive effect of the share options outstanding
(effect on weighted average number of shares) is 676,305 (2023: 665,549);
effect on basic earnings per ordinary share in the current year is 0.78p
(2023: 1.72p). Effect on underlying earnings per ordinary share is 0.79p
(2023: 1.73p).
5 Alternative Performance Measures Glossary
This report provides alternative performance measures ("APMs"), which are not
defined or specified under the requirements of International Financial
Reporting Standards. The Board believes that these APMs provide readers with
important additional information on the business.
Alternative Performance Measure Definition and Purpose
Underlying profit before tax ("UPBT") Represents the profit before tax prior to amortisation of intangible assets,
and, in accordance with International Accounting Standards, includes the
Group's share of the post-tax profit of its German joint venture. This measure
is consistent with how the business measures performance and is reported to
the Board.
2024
£000 2023
£000
Profit before tax 16,676 27,155
Amortisation of intangible assets 191 175
Underlying Profit before Tax 16,867 27,330
Basic underlying earnings per share Profit attributable to the equity holders of the Company prior to amortisation
of intangible assets after tax divided by the weighted average number of
ordinary shares during the financial year adjusted for the effects of any
potentially dilutive options. See Note 4.
EBITDA EBITDA is defined as profit before tax prior to charges for depreciation,
amortisation and interest and excludes the share of profit from joint ventures
and gains and losses on the sale of fixed assets and investment property.
2024 2023
£'000 £'000
Profit before tax 16,676 27,155
Depreciation 16,212 14,570
Amortisation of intangible assets 191 175
Net finance expense 724 953
Share of profit in joint ventures (net of tax) (1,533) (16,311)
Profit on sale of fixed assets and investment property (6,204) (4,718)
EBITDA 26,066 21,824
Net Asset Value per share Represents the Net Asset value of the Group divided by the number of shares in
issue less those shares held in treasury. Calculated as follows:
2023
2024
Total shares in issue 33,138,756 33,138,756
Less shares in treasury (332,401) (611,118)
Shares for calculation 32,806,355 32,527,638
Net Asset Value per Balance Sheet £192,096,000 £200,991,000
Net Asset Value per share £5.86 £6.18
Net Asset Value per share
Represents the Net Asset value of the Group divided by the number of shares in
issue less those shares held in treasury. Calculated as follows:
2024
2023
Total shares in issue
33,138,756
33,138,756
Less shares in treasury
(332,401)
(611,118)
Shares for calculation
32,806,355
32,527,638
Net Asset Value per Balance Sheet
£192,096,000
£200,991,000
Net Asset Value per share
£5.86
£6.18
6 Posting of Report & Accounts
The Group confirms that the annual report and accounts for the year ended 31
May 2024 will be posted to shareholders as soon as practicable and a copy will
be made available on the Group's website:
www.hsgplc.co.uk
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