TIDMHSP
RNS Number : 7457N
Hargreaves Services PLC
25 January 2023
HARGREAVES SERVICES PLC
(the "Group", the "Company" or "Hargreaves")
Interim Results for the six months ended 30 November 2022
Hargreaves Services plc (AIM: HSP), a diversified group
delivering key projects and services to the industrial and property
sectors, announces its interim results for the six months ended 30
November 2022, having achieved strong trading throughout the
period, profitable growth across all business sectors and reporting
an increase in the interim dividend of 7.1%.
KEY FINANCIAL RESULTS Unaudited Unaudited
Six Months Six Months
ended ended
30 Nov 2022 30 Nov 2021
Revenue GBP116.5m GBP76.1m
Profit before tax ("PBT") GBP18.7m GBP10.4m
EPS 52.2p 31.0p
Interim Dividend 3.0p 2.8p
Cash in hand GBP18.1m GBP8.5m
Leasing debt GBP30.6m GBP11.5m
Net Asset Value GBP196.2m GBP149.2m
Net Assets per Share 603p 462p
HIGHLIGHTS
-- Strong revenue growth in Services, leading to an overall
increase of 53% year on year, primarily due to HS2
-- Growth in PBT across all business units, delivering an overall increase of 80%
-- Interim dividend increased by 7.1% to 3.0p
-- Cash in hand of GBP18.1m, up from GBP8.5m in Nov 2021.
-- Increase in leasing debt due to investment in plant to
support HS2 driven growth in revenue and PBT
-- Net assets per share have increased by 31% over the last twelve months.
Commenting on the interim results, Chairman Roger McDowell said:
"I am delighted to report very strong results for our half-year.
The outcome is both a result of great work by our team and a
vindication of our strategy. Whilst conscious of the macro-economic
challenges we remain confident in the strength of the
business."
CEO video Q&A
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For further details:
Hargreaves Services www.hsgplc.co.uk
Gordon Banham, Chief Executive Officer Tel: 0191 373 4485
John Samuel, Group Finance Director
Walbrook PR (Financial PR & IR) Tel: 020 7933 8780 or hargreavesservices@walbrookpr.com
Paul McManus / Lianne Applegarth / Louis Ashe-Jepson Mob: 07980 541 893 / 07584 391 303 / 07747 515 393
Singer Capital Markets (Nomad and Corporate Broker) Tel: 020 7496 3000
Sandy Fraser/ Justin McKeegan
About Hargreaves Services plc ( 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.
CHAIRMAN'S STATEMENT
Introduction
The last six months have seen an increased level of operations
on the HS2 contract within Services, continuing land sales at
Blindwells in Hargreaves Land and further strong trading at HRMS.
This has delivered profitable growth across all business sectors,
despite the well-publicised challenges posed by the inflationary
environment.
I am pleased that the Group has remained resilient throughout
this period and continued to create opportunities to deliver value
for our shareholders.
Resilience and growth
The past 12 months have seen a substantial increase in the cost
of goods and services, which has put many businesses and industries
under pressure, not to mention the wider population. Against this
backdrop, the Group has demonstrated its resilience, particularly
within the Services business, to withstand these pressures and to
deliver profitable growth. With over 50 term and framework
contracts in Services, most of which have inflation related
escalation clauses, the Group is well insulated against the impact
of inflation.
During the period, activity levels on the HS2 contract have
increased, which has provided substantial growth in revenue and
profitability both in earthmoving and mechanical and electrical
engineering services. Even discounting the impact of HS2
earthmoving activities, revenue grew by 8.7% across the Services
business due primarily to the success of the engineering projects
work.
Hargreaves Land has completed another sale at Blindwells, which
continues to demonstrate the recurrent nature of the revenue from
that site.
Our German Joint Venture, HRMS, benefited in the prior year from
very favourable commodity markets, and they have been able to
continue to trade well in volatile market conditions.
Results
Group revenue increased by 53% to GBP116.5m (2021: GBP76.1m)
primarily due to increased activity on the HS2 contract. The
Group's PBT has increased substantially by 80% from GBP10.4m to
GBP18.7m. EBITDA has increased to GBP12.9m (Nov 2021: GBP3.7m) as
more profit is derived from Services and Land business segments.
Whilst much of this improvement is due to the HS2 contract, the
first half has also seen some non-recurring asset realisations
yielding a profit of GBP2.0m. As a result, the full year results
are likely to be weighted towards the first half.
Cash and debt
The Group held cash in hand of GBP18.1m on 30 November 2022
compared to GBP13.8m on 31 May 2022 (Nov 2021: GBP8.5m). This cash
increase is due, in part, to the repayment of the short-term
working capital funding that was provided to HRMS in the prior
year, offset by investment into Hargreaves Land assets.
The only debt held by the Group is leasing debt for specific
plant items. At 30 November 2022 the Group had leasing debt of
GBP30.6m, which is a substantial increase on the 31 May 2022
leasing debt of GBP18.4m (Nov 2021: GBP11.5m). This increase is due
to the acquisition of plant and equipment to support the HS2
contract. The total amount of leasing debt is expected to increase
further before the end of the financial year as the final plant
deliveries for HS2 are due to be received in the second half.
Net asset value
The net asset per share of the Group has increased to 603p from
462p representing an increase of 31% in a year.
Dividend
Following the continued strong performance of the Group, the
Board is announcing a 7.1% increase in the interim dividend to 3.0p
(2021: 2.8p). The interim dividend will be paid on 6(th) April 2023
to shareholders on the register at 24(th) March 2023.
Board changes
John Samuel has informed the Board of his intention to step down
as Group Finance Director and Board Director on 31 July 2023.
John will be succeeded as Group Finance Director and Board
Director (the latter subject to satisfactory completion of
customary due diligence and approval by the Company's nominated
advisor) by Stephen Craigen,(39), with effect from 1 August 2023.
Stephen has been with the Group for nine years and has held the
role of Group Financial Controller since 2017. The Board has great
confidence in Stephen and that there will be a seamless transition
of responsibilities.
Strategy and Shareholder Value
The Group has developed three strong, defined businesses through
which it aims to create, deliver and realise value for
shareholders.
Services
The Services business is building a sustainable and resilient
profit stream through term contracts and framework agreements in
the Energy, Environmental, Infrastructure and Industrial sectors.
The Group currently has over 50 such contracts in place to support
future performance. The business is concentrated on organic,
profitable growth, with a particular focus on contract selectivity
and higher margin activities. The current year has seen a notable
increase in its level of operations with the ramp up at HS2 and
there is a solid foundation for further sustainable growth.
Additionally. I am pleased to announce that our specialist
earthmoving subsidiary, Blackwell, expects to be appointed to
support Balfour Beatty to deliver the 'Roads North of the Thames'
package of works for the proposed Lower Thames Crossing, on behalf
of National Highways. Contractual arrangements will be clarified in
due course. Designed to be the greenest road project ever built in
the UK, the Lower Thames Crossing will create a new connection
under the River Thames, increasing road capacity and easing
congestion in the South of England.
Hargreaves Land
This business is focused on maximising the inherent value of its
existing portfolio, including Blindwells and the Unity joint
venture, as well as developing a strong pipeline of new
opportunities. In addition, the business is now starting to deliver
returns from its renewable energy land portfolio.
HRMS
This business has taken advantage of strong trading conditions
although, as expected, these seem likely to weaken in the second
half of the financial year. It is focused on sustaining the
structural improvement in profitability achieved in DK Recycling
und Roheisen GmbH ("DK") and securing contracts to increase the
utilisation of its Carbon Pulverisation Plant ("CPP") whilst
continuing to take advantage of trading opportunities in the
minerals commodity markets.
Outlook
The first six months of the year have been positive for the
Group during a period of inflationary pressures and other economic
uncertainties. The Board has a clear focus on the creation,
delivery and realisation of value for shareholders in each business
unit. The Group has demonstrated its resilience and its ability to
drive organic profitable growth. I look forward to reporting
further progress in the second half of the financial year and the
Board is confident that results for the year will be in line with
market expectations.
Roger McDowell
Chairman
25 January 2023
CHIEF EXECUTIVE'S REVIEW
GBP'm Land HRMS Central Total
Services Costs
Revenue (Nov 2022) 107.8 8.7 - - 116.5
---------- ----- ----- -------- ------
Revenue (Nov 2021) 70.2 5.9 - - 76.1
---------- ----- ----- -------- ------
Profit/(loss) before tax
(Nov 2022) 8.5 1.6 10.8 (2.2) 18.7
---------- ----- ----- -------- ------
Profit/(loss) before tax
(Nov 2021) 3.1 0.5 9.0 (2.2) 10.4
---------- ----- ----- -------- ------
Services
The Services business recorded revenue of GBP107.8m (2021:
GBP70.2m) and Profit before tax of GBP8.5m (2021: GBP3.1m). The
increase in revenue is due in large part to the HS2 project, which
commenced in the second half of the prior financial year. The
increase in revenue attributable to earthmoving at HS2 is GBP31.5m
and the remaining revenue increase of GBP6.1m represents a growth
of 8.7% due to the successful award of certain engineering project
works.
Profit before tax in the first half of the year includes a
non-recurring gain of GBP2.0m from asset realisations, which is
likely to mean that market expectations for the full year
performance of this business segment will be similarly exceeded.
Excluding this gain, the improvement in Profit before tax is due
primarily to the HS2 contract and represents a 110% increase. The
result for the full year is likely to be heavily weighted to the
first half because the earthmoving season for HS2 falls into the
Group's H1 and the GBP1m annual receipt from Tungsten West plc
("TW") is also a first half event.
The Services business continues to deliver good quality,
resilient profits and remains focused on delivering services to our
four key market sectors, Energy, Environmental, Industrial and
Infrastructure.
Contract success
During the period the Group has been awarded a 10-year contract
with Durham County Council and a 5-year contract with Scottish
Water, both of which will help to provide a base of further
Environmental business development. Elsewhere the Services business
has seen success with the renewal of several other contracts in all
of its key markets ranging from 1 to 5 year extensions.
The earthmoving part of the business, Blackwell, has been
awarded a short-term contract to assist in the creation of a nature
reserve, which is associated with the Sizewell C nuclear project.
This provides an ideal opportunity to demonstrate capability on a
project that will require significant future earthworks to be
undertaken.
The business is carrying out the major earthworks on part of the
HS2 project, working for the EKFB Joint Venture. This contract is
individually significant and represents a substantial growth in the
revenue and profitability of the Group as a whole. I am pleased to
confirm that the project is going well and at peak operation the
Group had over 400 workers on site.
In addition to the earthmoving activity, the Group has also
developed and installed a five section 650m conveyor system, which
will reduce the carbon emissions on HS2 by over 5,000 tonnes in
total through the removal of approximately 1.15 million miles of
HGV traffic from the local roads, thus reducing diesel consumption
by 1.6 million litres, as well as any traffic disturbances to the
local community. This innovative solution has been recognised
through the team winning the EKFB C23 project of the year award in
the best environmental and sustainable initiative category.
The Group has now received the second of eight annual GBP1m
payments from TW relating to maintaining our capabilities on site.
TW has informed the market of their progress in restarting
operations at the Tungsten mine at Hemerdon in Devon. The Group
continues to maintain a close relationship with TW and retains the
exclusive contract for the provision of mining services should the
project come to fruition.
Inflation has been high throughout the period and this has
presented significant challenges for many businesses. We have
reported previously that Hargreaves is well insulated against such
inflationary pressures, due to many of the term contracts
containing specific escalation clauses. I am pleased to confirm
that during the first half, these measures have been successful in
protecting the Group against loss of value through inflation as
demonstrated by the strong profits recorded.
Looking to the medium term, the contract wins and renewals
secured in the period as well as the recent announcement of the
Balfour Beatty on Lower Thames Crossing, we continue to strengthen
the sustainable and resilient revenue streams in the Services
business. The business is continuing to develop its mechanical and
electrical engineering offering building on the successful conveyor
installation at HS2 as well as exploring opportunities for carbon
sequestration on some of our Scottish land assets.
Services remains the core generator of revenue and cash flow for
the Group. With a strong book of recurring contracted revenue, the
business is in a strong position to deal with the ongoing economic
and political uncertainties.
Hargreaves Land
Land
Hargreaves Land recorded revenue of GBP8.7m (2021: GBP5.9m) and
a Profit before tax of GBP1.6m (2021: GBP0.5m). The growth in both
revenue and Profit before tax is due to the timing of sales at
Blindwells.
The first half saw the completion of the sale of 4.5 acres to
Ogilvie Homes generating revenue of GBP3.4m. This development of 77
new homes, including 23 affordable, has now commenced and Ogilvie
is the fourth housebuilder now onsite at Blindwells. Out of 480
housing plots sold to date, including 144 affordable, 100 have now
been built.
At the Unity joint venture, the 650-acre mixed use development
in Doncaster, work has commenced on the forward funded 191,000 sq
ft logistics unit following the grant of detailed planning
permission at the end of last year with the completion of this
initial phase of commercial development expected to be achieved in
the second half of FY24.
As reported elsewhere, market conditions tightened across
virtually all sectors in the second half of 2022. However, demand
from house builders for serviced development sites with planning
permission in prime locations has remained resilient, although
unsurprisingly we are not expecting the continuation of the
aggressive land price inflation that was experienced in early 2022.
We expect demand for quality residential land to return to a more
normalised level in the coming year, underpinned by a shortage of
available residential opportunities in the areas we operate in.
In the commercial sectors where we operate, primarily
industrial/logistics and retail warehousing, occupier demand has
remained reasonably robust for well-located opportunities, although
investment values began to moderate from mid-2022 reflecting
increased interest rates and greater uncertainty over wider
economic conditions.
Hargreaves Land is currently working on contracted pipeline
opportunities with an estimated Gross Development Value of over
GBP200m, ranging from residential to industrial and mixed
commercial use.
Renewables
I am pleased to confirm that infrastructure work is nearing
completion at our site in Westfield, which has seen a capital
investment of GBP5m in the period. This work is being undertaken to
service an initial phase of 50 acres of consented employment land
on the site. The construction of an Energy from Waste ("EfW") plant
at Westfield by Brockwell Energy is underway and Hargreaves Land is
receiving associated rental income on a 35-year minimum term lease,
which will increase to GBP0.4m p.a. index linked at the end of the
first 3 years of the lease term.
The development at Westfield is a major step in the delivery of
value from our renewable land portfolio. In addition to Westfield,
the Group owns circa 3,000 acres of land, which will be developed
for the purpose of renewable energy generation, primarily
windfarms, solar farms and battery storage. Hargreaves Land will
not build out any of these projects but will be the landlord in any
arrangement. Dalquhandy, the first of the windfarm projects, has
now been completed and is expected to be fully operational in early
2023, with the construction of another wind farm at Broken Cross in
South Lanarkshire now being developed out.
Investment in HRMS
HRMS recorded a post tax profit of GBP10.8m (2021: GBP9.0m) for
the six months ended 30 November 2022. Whilst minerals trading has
been strong in the first half, and ahead of the comparative period,
it has not been at the level experienced in the second half of last
financial year, as commodity prices and global demand have
softened.
The HRMS trading business has always been skilled at maximising
opportunities whilst minimising the risk profile taken. We have
seen this again in the first half of the year. I can also confirm
that GBP12.5m of the temporary GBP15m loan from Hargreaves Services
plc that was in place on 31 May 2022 has now been repaid.
Visibility remains relatively short term for the trading team
but it is likely that the second half of the financial year will be
less strong than the first half as markets are expected to soften
further.
The steel waste recycling business, DK has seen another good
performance in the first half, albeit lower than the previous six
months, as pig iron prices have reduced. Due to an unusually
extended period of maintenance on the power plant additional costs
were incurred on energy amounting to EUR3m. As a result, it is
probable that the full year results for HRMS will be approximately
GBP1.5m lower than market expectations.
Having proved the concept of the CPP and delivered high quality
product, the conflict in Ukraine has impacted heavily on the
pricing of raw materials, which has restricted sales of the product
to new customers as brown lignite coal dust is more competitively
priced. The Board of HRMS remains confident in the future of the
plant, which is breaking even at present, and once markets return
to a more sustainable level, expects to see return from this
investment.
ESG
The Group's Cross-Business Working Group ("ESG Group") is now
well established and has previously set out the following three
targets for FY2023:
-- to reduce electricity and gas usage per office based employee by 2% per annum;
-- to improve the kilometres per litre attained by the haulage fleet by 3% per annum; and
-- to reduce the idling time in yellow plant by 6% per annum.
The ESG Group is monitoring the Group's performance against
these targets and will report the outcomes in the 2023 Annual
Report and Accounts.
Further, in 2022, the Group was pleased to be awarded an A "Very
Good" ESG rating from Integrum ESG, an independent ratings
advisor.
Summary
The contract wins and renewals in the Services business provide
further resilience to the Group's profitability as we head into the
second half of the financial year and beyond. Whilst there is
uncertainty within the UK housing and property market more
generally, I remain confident in the viability of the Hargreaves
Land portfolio as we continue to see strong demand for schemes
brought to market. Finally, HRMS has performed well in the last six
months, however, some commodity markets have softened recently and
visibility remains limited. As expected, it is likely that the
contribution from HRMS in the second half will be lower than that
for the first six months of the year.
I am pleased with the profitable growth the Group has delivered
in the period within each of its business segments, during a period
of challenging economic conditions.
Gordon Banham
Group Chief Executive
25 January 2023
Condensed Consolidated Statement of Profit and Loss and Other
Comprehensive Income
for the six months ended 30 November 2022
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 November 30 November 31
May
2022 2021 2022
Note GBP000 GBP000 GBP000
--------------------------------------------------------- ----- ------------ ------------ ----------
Revenue 116,475 76,082 177,908
Cost of sales (94,782) (64,196) (148,458)
--------------------------------------------------------- ----- ------------ ------------ ----------
Gross profit 21,693 11,886 29,450
Other operating income 2,844 542 1,298
Administrative expenses (16,561) (11,369) (24,520)
--------------------------------------------------------- ----- ------------ ------------ ----------
Operating profit 7,976 1,059 6,228
Operating profit (before exceptional items) 7,976 1,059 4,474
Exceptional items 5 - - 1,754
--------------------------------------------------------- ----- ------------ ------------ ----------
Operating profit 7,976 1,059 6,228
--------------------------------------------------------- ----- ------------ ------------ ----------
Finance income 504 361 823
Finance expense (823) (292) (770)
Share of profit in joint ventures (net of tax) 11,053 9,269 28,200
--------------------------------------------------------- ----- ------------ ------------ ----------
Profit before tax 18,710 10,397 34,481
Taxation 6 (1,562) (386) 347
--------------------------------------------------------- ----- ------------ ------------ ----------
Profit for the period from continuing operations 17,148 10,011 34,828
--------------------------------------------------------- ----- ------------ ------------ ----------
Discontinued operations
Profit for the period from discontinued operations - - 2,000
--------------------------------------------------------- ----- ------------ ------------ ----------
Profit for the period 17,148 10,011 36,828
--------------------------------------------------------- ----- ------------ ------------ ----------
Other comprehensive income/(expense)
Items that will not be reclassified to profit
or loss
Remeasurements of defined benefit pension plans - - 5,955
Tax recognised on items that will not be reclassified
to profit or loss - - (1,488)
Items that are or may be reclassified subsequently
to profit or loss
Foreign exchange translation differences 1,406 45 313
Effective portion of changes in fair value of
cash flow hedges - 35 41
Tax recognised on items that are or may be reclassified
subsequently to profit or loss - (7) (8)
Share of other comprehensive income of joint ventures
(net of tax) - - 3,070
--------------------------------------------------------- ----- ------------ ------------ ----------
Other comprehensive income for the period, net
of tax 1,406 73 7,883
Total comprehensive income for the period 18,554 10,084 44,711
--------------------------------------------------------- ----- ------------ ------------ ----------
Profit/(loss) attributable to:
Equity holders of the company 16,962 10,029 37,040
Non-controlling interest 186 (18) (212)
--------------------------------------------------------- ----- ------------ ------------ ----------
Profit for the period 17,148 10,011 36,828
--------------------------------------------------------- ----- ------------ ------------ ----------
Total comprehensive income/(expense) for the
period attributable to:
Equity holders of the company 18,368 10,102 44,923
Non-controlling interest 186 (18) (212)
--------------------------------------------------------- ----- ------------ ------------ ----------
Total comprehensive income for the period 18,554 10,084 44,711
--------------------------------------------------------- ----- ------------ ------------ ----------
GAAP measures
Basic earnings per share (pence) 8 52.15 31.04 113.80
Diluted earnings per share (pence) 8 51.09 30.15 110.44
Condensed Consolidated Balance Sheet
as at 30 November 2022
Unaudited Unaudited Audited
30 November 30 November 31 May
2022 2021 2022
Note GBP000 GBP000 GBP000
---------------------------------- ----- ------------ ------------ -----------
Non-current assets
Property, plant and equipment 10,392 11,995 9,938
Right of use assets 35,305 15,040 22,062
Investment property 13,672 7,286 8,298
Intangible assets including
goodwill 5,949 4,824 4,824
Investments in joint ventures 10 70,541 39,873 58,383
Deferred tax assets 9,657 9,662 11,063
Trade receivables 4,224 - 4,224
Retirement benefit surplus 11,467 3,600 10,382
---------------------------------- ----- ------------ ------------ -----------
161,207 92,280 129,174
---------------------------------- ----- ------------ ------------ -----------
Current assets
Other financial assets - 2 -
Inventories 33,872 31,117 30,476
Trade and other receivables 86,109 87,102 88,574
Income tax asset - 629 -
Contract assets 6,081 2,667 6,752
Cash and cash equivalents 18,102 8,509 13,773
---------------------------------- ----- ------------ ------------ -----------
144,164 130,026 139,575
---------------------------------- ----- ------------ ------------ -----------
Total assets 305,371 222,306 268,749
---------------------------------- ----- ------------ ------------ -----------
Non-current liabilities
Other Interest-bearing loans
and borrowings ( 17,460) (8,354) (11,045)
Retirement benefit obligations ( 2,666) (2,831) (2,703)
Provisions ( 5,898) - (2,344)
Deferred tax liabilities (2,419) - (1,920)
---------------------------------- ----- ------------ ------------ -----------
(28,443) (11,185) (18,012)
---------------------------------- ----- ------------ ------------ -----------
Current liabilities
Other Interest-bearing loans
and borrowings ( 13,140) (3,192) (7,326)
Trade and other payables ( 58,792) (52,714) (50,727)
Provisions ( 8,844) (6,021) (9,440)
Income tax liability - - (108)
Other financial liabilities - (7) -
---------------------------------- ----- ------------ ------------ -----------
(80,776) (61,934) (67,601)
---------------------------------- ----- ------------ ------------ -----------
Total liabilities (109,219) (73,119) (85,613)
---------------------------------- ----- ------------ ------------ -----------
Net assets 196,152 149,187 183,136
---------------------------------- ----- ------------ ------------ -----------
Condensed Consolidated Balance Sheet (continued)
as at 30 November 2022
Unaudited Unaudited Audited
30 November 30 November 31 May
2022 2021 2022
Note GBP000 GBP000 GBP000
------------------------------------------ --------- ------------ ------------ ----------
Equity attributable to
equity holders of the parent
Share capital 3,314 3,314 3,314
Share premium 73,972 73,955 73,972
Other reserves 211 211 211
Translation reserve (41 3) (2,087) (1,819)
Merger reserve 1,022 1,022 1,022
Hedging reserve 318 313 318
Capital redemption reserve 1,530 1,530 1,530
Share-based payment reserve 2,216 1,818 2,029
Retained earnings 114,018 69,139 102,781
------------------------------------------ --------- ------------ ------------ ----------
196,188 149,215 183,358
Non-controlling interest (36) (28) (222)
------------------------------------------ --------- ------------ ------------ ----------
Total equity 196,152 149,187 183,136
------------------------------------------ --------- ------------ ------------ ----------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 November 2021
Share Share Translation Hedging Other Capital Merger Share-based Retained Total Non-controlling Total
capital premium reserve reserve reserves redemption reserve payment earnings parent interest Equity
reserve reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 June
2021 3,314 73,955 (2,132) 285 211 1,530 1,022 1,680 64,441 144,306 (10) 144,296
-------- -------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total
comprehensive
income and
expense for the
period
Profit/(loss) for
the period - - - - - - - - 10,029 10,029 (18) 10,011
Other
comprehensive
income/(expense)
Foreign exchange
translation
differences - - 45 - - - - - - 45 - 45
Effective portion
of changes in
fair value of
cash flow hedges - - - 35 - - - - - 35 - 35
Tax recognised on
other
comprehensive
income - - - (7) - - - - - (7) - (7)
-------- -------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total other
comprehensive
income - - 45 28 - - - - - 73 - 73
-------- -------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total
comprehensive
income and
expense for the
period - - 45 28 - - - - 10,029 10,102 (18) 10,084
-------- -------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Transactions with
owners recorded
directly in equity
Equity settled
share-based
payment
transactions - - - - - - - 138 - 138 - 138
Dividends paid - - - - - - - - (5,331) (5,331) - (5,331)
-------- -------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total
contributions by
and
distributions to
owners - - - - - - - 138 (5,331) (5,193) - (5,193)
Balance at 30
November 2021 3,314 73,955 (2,087) 313 211 1,530 1,022 1,818 69,139 149,215 (28) 149,187
-------- -------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 November 2022
Share Share Translation Hedging Other Capital Merger Share-based Retained Total Non-controlling Total
capital premium reserve reserve reserves redemption reserve payment earnings parent interest Equity
reserve reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
June 2022 3,314 73,972 (1,819) 318 211 1,530 1,022 2,029 102,781 183,358 (222) 183,136
-------- --------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total
comprehensive
income
for the period
Profit for the
period - - - - - - - - 16,962 16,962 186 17,148
Other
comprehensive
income
Foreign
exchange
translation
differences - - 1,406 - - - - - - 1,406 - 1,406
-------- --------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total other
comprehensive
income - - 1,406 - - - - - - 1,406 - 1,406
-------- --------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total
comprehensive
income
for the period - - 1,406 - - - - - 16,962 18,368 186 18,554
-------- --------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Transactions
with owners
recorded
directly in
equity
Equity settled
share-based
payment
transactions - - - - - - - 187 - 187 - 187
Dividends paid - - - - - - - - (5,725) (5,725) - (5,725)
Total
contributions
by and
distributions
to owners - - - - - - - 187 (5,725) (5,538) - (5,538)
Balance at 30
November 2022 3,314 73,972 (413) 318 211 1,530 1,022 2,216 114,018 196,188 (36) 196,152
-------- --------- ------------- -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Condensed Consolidated Cash Flow Statement
for the six months ended 30 November 2022
Unaudited Unaudited
six months six months Audited
ended ended year
ended
30 30 November 31
November May
2022 2021 2022
GBP000 GBP000 GBP000
-------------------------------------------------------- ------------ ---------
Cash flows from operating activities
Profit for the period from continuing operations 17,148 10,011 34,828
Adjustments for:
Depreciation and impairment of property, plant
and equipment and right-of-use assets 4,932 2,598 8,666
Net finance expense/(income) 319 (69) (53)
Share of profit in joint ventures (net of tax) (11,053) (9,269) (28,200)
Profit on sale of property, plant and equipment,
investment property and right-of-use assets (2,844) (602) (1,298)
Equity settled share-based payment expense 187 138 349
Income tax expense/(credit) 1,562 386 (347)
Contributions to defined benefit pension schemes (1,170) (768) (2,002)
Retranslation of foreign denominated assets and
liabilities 31 764 202
-------------------------------------------------------- ----------- ------------ ---------
9,112 3,189 12,145
Change in inventories (3,398) (3,949) (3,308)
Change in trade and other receivables 4,314 (10,495) (19,256)
Change in trade and other payables 6,622 (581) 903
Change in provisions and employee benefits 2,867 (1,380) 1,000
-------------------------------------------------------- ----------- ------------ ---------
19,517 (13,216) (8,516)
Interest (paid)/received (271) 299 34
Income tax received/(paid) 28 - (44)
-------------------------------------------------------- ----------- ------------ ---------
Net cash inflow/(outflow) from operating activities 19,274 (12,917) (8,526)
-------------------------------------------------------- ----------- ------------ ---------
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 4,565 640 801
Proceeds from sale of investment property 146 786 1,407
Proceeds from sale of ROU assets 54 33 78
Acquisition of property, plant and equipment (1,730) (224) (1,479)
Acquisition of investment property (5,377) (15) (1,070)
Acquisition of right of use assets (54) - (163)
Acquisition of subsidiaries (1,447) - -
Dividends received from joint ventures - - 3,917
-------------------------------------------------------- ----------- ------------ ---------
Net cash (outflow)/inflow from investing activities
in continuing operations (3,843) 1,220 3,491
-------------------------------------------------------- ----------- ------------ ---------
Net cash inflow from investing activities in
discontinued operations - - 2,000
----------- ------------
Net cash (outflow)/inflow from investing activities (3,843) 1,220 5,491
-------------------------------------------------------- ----------- ------------ ---------
Cash flows from financing activities
Principal elements of lease payments (5,519) (2,755) (5,531)
Dividends paid (5,725) (5,331) (6,237)
-------------------------------------------------------- ----------- ------------ ---------
Net cash outflow from financing activities (11,244) (8,086) (11,768)
-------------------------------------------------------- ----------- ------------ ---------
Net increase/(decrease) in cash and cash equivalents 4,187 (19,783) (14,803)
Cash and cash equivalents at the start of the
period 13,773 28,303 28,303
Effect of exchange rate fluctuations on cash
held 142 (11) 273
-------------------------------------------------------- ----------- ------------ ---------
Cash and cash equivalents at the end of the
period 18,102 8,509 13,773
-------------------------------------------------------- ----------- ------------ ---------
Notes to the CONDENSED CONSOLIDATED Interim FINANCIAL
INFORMATION
1. Basis of preparation
The condensed consolidated interim financial information set out
in this statement for the six months ended 30 November 2022 and the
comparative figures for the six months ended 30 November 2021 is
unaudited. This financial information does not constitute statutory
accounts as defined in Section 435 of the Companies Act 2006. It
does not comply with IAS 34 'Interim Financial Reporting', as is
permissible under the rules of the Alternative Investment
Market.
The condensed consolidated interim financial information, which
is neither audited nor reviewed, has been prepared in accordance
with the measurement and recognition criteria of UK-adopted
international accounting standards. This statement does not include
all the information required for the annual financial statements
and should be read in conjunction with the financial statements of
the Group as at and for the year ended 31 May 2022.
There are no new IFRS which apply to the condensed consolidated
interim financial information.
2. Accounting policies
The accounting policies applied in preparing the condensed
consolidated interim financial information are the same as those
applied in the preparation of the annual financial statements for
the year ended 31 May 2022, as described in those financial
statements.
3. Status of financial information
The comparative figures for the financial year ended 31 May 2022
are not the Group's statutory consolidated financial statements for
that financial year. The statutory financial accounts for the
financial year ended 31 May 2022 have been reported on by the
company's auditor and delivered to the Registrar of Companies. The
report of the auditor was (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.
4. Principal risks and uncertainties
The principal risks and uncertainties affecting the Group are
unchanged from those set out in the Group's accounts for the year
ended 31 May 2022. The Directors have reviewed financial forecasts
and are satisfied that the Group has adequate resources to continue
in operational existence for the foreseeable future. Accordingly,
the Group continues to adopt the going concern basis in preparing
the condensed consolidated interim financial information .
5. Exceptional items
Six months Six months Year
ended ended 30 ended
30 November November 31 May
2022 2021 2022
Unaudited Unaudited Audited
GBP000 GBP000 GBP000
----------------------------------------------- -------------- ------------ --------
Exceptional items in Administrative expenses
Release of accrual relating to liability from
the year ended 31 May 2015 - - 1,754
Total exceptional items in Administrative
expenses - - 1,754
----------------------------------------------- -------------- ------------ --------
There are no exceptional items in the six month period ended 30
November 2022 (30 November 2021: GBPnil).
In the year ending 31 May 2022, an aged accrual dating from the
year ended 31 May 2015 totalling GBP1,754,000 was released as the
potential for payment had lapsed due to time.
6. Taxation
UK income tax for the period is charged at 19% (2021: 19%). The
effective tax rate, after removing the impact of jointly controlled
entities is 20.4% (2021: 34.2%), representing an estimate of the
annual effective rate for the full year to 31 May 2023. This rate
is higher than the standard rate of UK income tax due to the effect
on deferred tax of the forthcoming rise in the corporate tax rate
to 25% and the impact of accounting for tax related to the Unity
Joint Venture, which is a Limited Liability Partnership.
7. Dividends
The final dividend of 5.6p and additional dividend of 12p per
ordinary share, proposed in the 2022 annual accounts and approved
by the shareholders at the Annual General Meeting on 27 October
2022, was paid on 31 October 2022. The directors have proposed an
interim dividend of 3.0p per share (2021: 2.8p) which will be paid
on 6 April 2023 to shareholders on the register at the close of
business on 24 March 2023. This will be paid out of the Company's
available distributable reserves. In accordance with IAS 1,
dividends are recorded only when paid and are shown as a movement
in equity rather than as a charge in the income statement.
8. Earnings per share
Six months ended Six months ended Year ended 31
30 November 2022 30 November 2021 May 2022
Unaudited Unaudited Audited
Earnings EPS DEPS Earnings EPS DEPS Earnings EPS DEPS
GBP000 Pence Pence GBP000 Pence Pence GBP000 Pence Pence
Underlying earnings per
share 16,962 52.15 51.09 10,029 31.04 30.15 33,407 103.23 100.18
Exceptional items and
amortisation
(net of tax) - - - - - - 1,421 4.39 4.26
------------------------------- --------- ------- ------- --------- ------- ------- --------- ------- -------
Continuing basic earnings
per share 16,962 52.15 51.09 10,029 31.04 30.15 34,828 107.62 104.44
Discontinued operations - - - - - - 2,000 6.18 6.00
------------------------------- --------- ------- ------- --------- ------- ------- --------- ------- -------
Basic earnings per share 16,962 52.15 51.09 10,029 31.04 30.15 36,828 113.80 110.44
--------- ------- ------- --------- ------- ------- --------- ------- -------
Weighted average number
of shares 32,528 33,200 32,316 33,267 32,362 33,347
------------------------------- --------- ------- ------- --------- ------- ------- --------- ------- -------
The calculation of diluted earnings per share is based on the
profit for the period attributable to equity holders of the Company
and on the weighted average number of ordinary shares in issue in
the period adjusted for the dilutive effect of the share options
outstanding. The effect on the weighted average number of shares is
672,000 (2021: 951,000), the effect on continuing basic earnings
per ordinary share is 1.06p (2021: 0.89p).
9. Segmental information
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision-maker.
The chief operating decision-maker has been identified as the Board
of Directors since they are responsible for strategic decisions.
HSEL represents Hargreaves Services Europe Limited, the holding
company for the Group's investment in its German Joint Venture.
Services Hargreaves Unallocated HSEL Total
Land
Unaudited Unaudited Unaudited Unaudited Unaudited
30 November 30 November 30 November 30 November 30 November
2022 2022 2022 2022 2022
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ------------ ------------ ------------ ------------ ------------
Revenue
Total revenue 108,000 8,700 - - 116,700
Intra-segment revenue (225) - - - (225)
------------------------------------------ ------------ ------------ ------------ ------------ ------------
Revenue from external customers 107,775 8,700 - - 116,475
------------------------------------------ ------------ ------------ ------------ ------------ ------------
Operating profit/(loss) 9,147 1,331 (2,502) - 7,976
Share of profit in joint ventures
(net of tax) - 242 - 10,811 11,053
Net finance (expense)/income (642) 28 295 - (319)
Profit/(loss) before tax 8,505 1,601 (2,207) 10,811 18,710
------------------------------------------ ------------ ------------ ------------ ------------ ------------
Services Hargreaves Unallocated HSEL Total
Land
Unaudited Unaudited Unaudited Unaudited Unaudited
30 30 30 30 30
November November November November November
2021 2021 2021 2021 2021
GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ------------ ------------ ------------ ------------ ------------
Revenue
Total revenue 71,043 5,846 - - 76,889
Intra-segment revenue (807) - - - (807)
------------------------------------------ ------------ ------------ ------------ ------------ ------------
Revenue from external customers 70,236 5,846 - - 76,082
------------------------------------------ ------------ ------------ ------------ ------------ ------------
Operating profit/(loss) 3,149 169 (2,259) - 1,059
Share of profit in joint ventures
(net of tax) 292 - 8,977 9,269
Net finance income - - 69 - 69
Profit/(loss) before tax 3,149 461 (2,190) 8,977 10,397
------------------------------------------ ------------ ------------ ------------ ------------ ------------
10. Investments in joint ventures
Tower Hargreaves Waystone Interests Total
Regeneration Services Hargreaves in immaterial
Limited Europe LLP joint
Limited ventures
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ --------------- ----------- ------------ --------------- -------
At 1 June 2022 - 53,547 4,910 (74) 58,383
Group's share of profit in
joint ventures (net of tax) - 10,811 241 1 11,053
Exchange differences - 1,112 - (7) 1,105
At 30 November 2022 - 65,470 5,151 (80) 70,541
------------------------------ --------------- ----------- ------------ --------------- -------
11. Condensed consolidated interim financial information
The condensed consolidated interim financial information was
approved by the Board of Directors on 25 January 2023. Copies of
this interim statement will be sent to all shareholders and will be
available to the public from the Group's registered office.
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END
IR VZLFLXFLLBBF
(END) Dow Jones Newswires
January 25, 2023 02:00 ET (07:00 GMT)
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