Interim Results
Hargreaves Services PLC
27 February 2007
For Immediate Release 27 February 2007
HARGREAVES SERVICES plc
Interim results for the six month period ended 30 November 2006
HIGHLIGHTS
• Hargreaves Services plc provides materials and services principally to
the energy industry, plus other major material consumers. By moving materials
and waste for itself and clients, the Group is the largest bulk haulier in the
United Kingdom. The Group is also the UK's sole independent manufacturer of
coke.
• In the half year ended 30 November, Hargreaves acquired Norec Limited,
a major supplier of services to the energy industry, which employs in excess of
500 people.
• Group turnover for the period was £102.7m (2005: £70.8m) an increase
of 45%.
• Profit on ordinary activities before taxation was £3.7m (2005: £3.0m)
an increase of 22%.
• A maiden dividend of 5p per share was approved and paid in respect of
the year to 31 May 2006.
• The Group continued to win substantial new contracts, giving
confidence over future revenue streams and earnings.
• The Group is also pleased to announce the acquisition of Maltby
Colliery from UK Coal plc for £21.5m part funded by a placing of £11.1m at a
price of 469p per share.
Chairman, Tim Ross commented:
'The Board is delighted with the excellent performance of the group in the first
half of the year. It is even more pleased with the increased order book, and the
visibility that this gives in relation to future results. Norec, acquired in
September 2006, is being smoothly integrated within the Industrial Services
Division, and will make a full contribution to the second half of the year. The
Board is also excited by the Maltby deal which will further complement the
group's existing operations. Your Board is confident, and committed to,
achieving expectations. An interim dividend of 3p per share will be paid on 26
March 2007 to those shareholders on the register at 9 March 2007.'
Enquiries
Hargreaves Services plc 0191 373 4485
Gordon Banham
Peter Dillon
Buchanan Communications 0207 466 5000
Diane Stewart
Tim Anderson
Brewin Dolphin Securities 0113 241 0130
Andrew Kitchingman
Group Chief Executive's Statement
It gives me great pleasure to announce our interim results for the six months
ended 30 November 2006. During this period we successfully acquired Norec
Limited, a service supplier principally to generators and ports, adding over 500
people to our workforce. A number of major new contracts won during this period
also contributed to a substantial organic growth.
Trading results
It was pleasing to see Group turnover for the period increase 45% to £102.7m
(2005: £70.8m). This was largely driven by the Minerals division, reflecting new
contracts with generators. There was also a considerable increase in turnover
from Coal4Energy, our joint venture company with UK Coal, which supplies the
domestic and light industrial markets. Total operating profit (pre goodwill)
increased by 5% from £4.3m to £4.5m. However this masks a strong underlying
performance, as there were £0.8m of non recurring costs which were expensed
during the period. Profit on ordinary activities before taxation increased by
22% to £3.7m (2005: £3.0m).
The Board is recommending the payment of 3p per share interim dividend in line
with our stated dividend policy.
Acquisitions
On 1 September 2006, the Group acquired Norec Limited for an initial purchase
consideration, including costs, of £5.9m plus a further payment of up to £1.5m
depending upon the results to 31 December 2006. The Company, which employs in
excess of 500 people, principally provides support services to generators, ports
and other heavy industrial companies. Norec made sales of £7.5m and an operating
profit of £0.5m during this period.
Operating review
The group enjoyed strong organic sales growth in the first half. The growth is
largest in the Minerals Division, principally through sales of coal to the
generators. However, all divisions have progressed satisfactorily. We have also
won significant new orders for our goods and services, this gives good
visibility of future earnings, both in the short and medium term. The Board is
confident of an excellent second half year.
Throughout this half year, we have continued our policy of investing for future
growth by recruitment and promotion of people, plus continuing to invest in
advanced systems.
The integration of our newest acquisition, Norec, with Hargreaves Industrial
Services, has proceeded smoothly, and many opportunities are arising from the
combined management and workforce plus the enlarged customer base. In September
2006, we began an operation in Germany, Hargreaves Raw Material Services GmbH,
to supply the European Market for foundry coke and other associated products.
The Company is trading successfully, has won significant orders, and we believe
it will make an initial contribution to the Group full year results.
We also purchased a technically advanced tyre crumbing plant in Sheffield at a
cost of £1.0m to take advantage of the new directive preventing disposal of used
tyres into landfill. This market provides income from the receipt of used tyres,
and income from the subsequent sale of crumb rubber.
Group Chief Executive's Statement continued
The processed product may also be used as a coal substitute by our subsidiary,
Monckton Coke and Chemical Company Limited. This plant will be commissioned and
operational by May 2007, with a capacity to process 30,000 tonnes of used tyres
per annum.
The Group continues with the policy of becoming the most significant player in a
number of specialist niche markets.
Strategy
We remain determined to deliver strong organic growth through our existing
business. The recent investment into Germany will demonstrate that our business
model can be replicated outside the United Kingdom. We will continue to pursue
strategic and significant acquisitions relevant to our markets and skill base.
In order to achieve these objectives we will maintain strong management
structures, strengthening the senior management team, in line with business
growth.
Staff
We welcome the new employees that have joined the Group, particularly those at
Norec. The Board has asked me to thank every employee in the Group for the
efforts that they have made over this period. It is by their efforts, often in
arduous conditions and against tight deadlines, that the Group prospers and goes
forward.
Outlook
Sales for the two months of the second half continue at a high level. The
increased order books, plus the second half contribution from Norec, indicate
that the full year will be another satisfactory performance continuing the
Group's successful track record. The Group has achieved significant growth,
increasing sales and profit year on year. The markets in which the Group trades
remain buoyant, and your Board remains committed to a policy of exploiting
opportunities within its skill base, whether by organic or acquisition means.
Our principal aim will continue to be generating significant returns for our
shareholders.
Post balance sheet event
I am delighted to announce the acquisition of Maltby Colliery from UK Coal for a
total consideration of £21.5m plus £8.6m pension deficit assumed. The Group
raised £11.1m by way of a placing at 469p per share to fund part of the
consideration.
Gordon Banham
Group Chief Executive 27 February 2007
Consolidated profit and loss account
for the six month period ended 30 November 2006
6 months ended 6 months ended Year ended
30 November 30 November 31 May
2006 2005 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Turnover: group and share
of joint ventures 114,843 74,289 155,001
Less: share of turnover of joint
ventures
Continuing operations (12,159) (3,498) (8,017)
-------- -------- --------
Group turnover 102,684 70,791 146,984
======== ======== ========
Group turnover
Continuing operations 89,443 60,702 124,896
Acquisitions 13,241 10,089 22,088
-------- -------- --------
102,684 70,791 146,984
Cost of sales (92,936) (62,214) (129,955)
-------- -------- --------
Gross profit 9,748 8,577 17,029
Administrative expenses (5,829) (4,517) (10,177)
-------- -------- --------
Group operating profit
Continuing operations 3,467 2,450 4,709
Acquisitions 452 1,610 2,143
-------- -------- --------
3,919 4,060 6,852
Share of operating profit
in joint ventures 326 184 380
-------- -------- --------
Total operating profit 4,245 4,244 7,232
(Loss)/profit on sale of
fixed assets (16) 57 60
Interest receivable 50 15 74
Other finance costs - - (20)
Interest payable and similar
charges
- group (574) (1,313) (1,837)
- joint ventures (33) - (36)
-------- -------- --------
Profit on ordinary
activities before taxation 3,672 3,003 5,473
Tax on profit on ordinary
activities (1,171) (985) (1,823)
-------- -------- --------
Profit on ordinary
activities after taxation 2,501 2,018 3,650
Minority interest 7 - -
-------- -------- --------
Profit for the financial
period/year 2,508 2,018 3,650
======== ======== ========
Consolidated profit and loss account (continued)
for the six month period ended 30 November 2006
6 months ended 6 months ended Year ended
30 November 30 November 31 May
2006 2005 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Basic earnings per share
Ordinary shares 10.59p 16.43p 20.32p
A Ordinary shares - 29.71p 29.71p
Diluted earnings per share
Ordinary shares 10.56p 16.43p 20.21p
A Ordinary shares - 29.71p 29.71p
======== ======== ========
Dividend per ordinary
share paid in the
period/year 5p - -
======== ======== ========
Dividend per A ordinary
share paid in the
period/year - - 13.3p
======== ======== ========
Consolidated balance sheet
at 30 November 2006
At 30 November At 30 November At 31 May
2006 2005 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Fixed assets
Intangible assets - goodwill 11,859 5,883 5,745
Tangible assets 24,209 18,827 21,146
Investments
Investment in joint ventures
+-------------------------------------------+
Share of gross assets | 10,023 2,782 7,328 |
Share of gross liabilities | (8,913) (1,966) (6,431)|
+-------------------------------------------+
1,110 816 897
Other investments 83 83 83
---------- ---------- ----------
37,261 25,609 27,871
---------- ---------- ----------
Current assets
Stocks 15,208 10,502 15,055
Debtors 32,291 24,617 21,167
Cash at bank and in hand 3,788 19,764 15,022
---------- ---------- ----------
51,287 54,883 51,244
Creditors: amounts falling due
within one year (37,877) (34,490) (26,904)
---------- ---------- ----------
Net current assets 13,410 20,393 24,340
---------- ---------- ----------
Total assets less current
liabilities 50,671 46,002 52,211
Creditors: amounts falling due
after more than one (18,582) (17,109) (21,521)
year
Provisions for liabilities and
charges (4,064) (4,175) (4,064)
---------- ---------- ----------
Net assets excluding pension
liabilities 28,025 24,718 26,626
Net pension liability (328) - (328)
---------- ---------- ----------
Net assets 27,697 24,718 26,298
========== ========== ==========
Capital and reserves
Called up share capital 2,368 2,368 2,368
Share premium account 19,082 19,099 19,082
Other reserves 29 29 29
Capital redemption reserve 1,530 1,530 1,530
Profit and loss account 4,695 1,692 3,289
---------- ---------- ----------
Shareholders' funds 27,704 24,718 26,298
Minority interest (7) - -
---------- ---------- ----------
27,697 24,718 26,298
========== ========== ==========
Consolidated cash flow statement
for the six month period ended 30 November 2006
6 months ended 6 months ended Year ended
30 November 30 November 31 May
2006 2005 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Cash flow from operating
activities 5,997 (3,046) (215)
Returns on investments and
servicing of finance (521) (750) (2,508)
Taxation (982) 5 (895)
Dividends paid on shares
classified in
shareholders' (1,184) - -
funds
Capital expenditure (2,773) (955) (2,067)
Acquisitions (7,710) (2,870) (3,376)
--------- --------- ---------
Cash outflow before
financing (7,173) (7,616) (9,061)
Financing (4,061) 24,747 21,450
--------- --------- ---------
(Decrease)/increase in
cash in the period/year (11,234) 17,131 12,389
========= ========= =========
Reconciliation of net cash flow to movement in net debt
for the six month period ended 30 November 2006
6 months ended 6 months ended Year ended
30 November 30 November 31 May
2006 2005 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
(Decrease)/increase in
cash in the period/year (11,234) 17,131 12,389
Net cash outflow/(inflow)
from financing 4,061 (4,800) (2,985)
--------- --------- ---------
Change in net debt
resulting from cash flows (7,173) 12,331 9,404
Effect of adoption of FRS
25 on 1 June 2005 (note 7) - (2,087) -
Accrued premium on
preference shares - (367) -
Accrued premium on
redemption of loan stock - (88) 135
New finance leases (1,548) (1,115) (3,880)
--------- --------- ---------
Movement in net debt in
the period/year (8,721) 8,674 5,659
Net debt at the start of
the period/year (6,414) (12,073) (12,073)
--------- --------- ---------
Net debt at the end of the
period/year (15,135) (3,399) (6,414)
========= ========= =========
Following the adoption of the presentation requirements of FRS 25 'Financial
instruments: presentation and disclosure' the Group has, with effect from 1 June
2005, reclassified certain elements of share capital from shareholders' funds to
liabilities (note 7).
Reconciliations of Group operating profit to net cash flow from operating
activities
for the six month period ended 30 November 2006
6 months ended 6 months ended Year ended
30 November 30 November 31 May
2006 2005 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Group operating profit 3,919 4,060 6,852
Depreciation and amortisation 1,981 1,533 3,239
Increase in stocks (153) (3,362) (7,916)
Increase in debtors (3,553) (4,884) (1,364)
Increase/(decrease) in
creditors 3,803 (393) (1,026)
--------- --------- ---------
Net cash inflow/(outflow) from
operating activities 5,997 (3,046) (215)
========= ========= =========
Consolidated statement of total recognised gains and losses
for the six month period ended 30 November 2006
6 months ended 6 months ended Year ended
30 November 30 November 31 May
2006 2005 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Profit for the financial
period/year 2,508 2,018 3,650
Effect of adoption of FRS
25 on 1 June 2005 (note 7) - (166) (166)
--------- --------- ---------
2,508 1,852 3,484
Actuarial loss arising on
retirement benefit scheme - - (50)
Deferred tax arising on
losses in retirement
benefit scheme - - 15
--------- --------- ---------
Total recognised gains and
losses relating to the 2,508 1,852 3,449
financial period/year
========= ========= =========
Reconciliation of movements in group shareholders' funds
for the six month period ended 30 November 2006
6 months ended 6 months ended Year ended
30 November 30 November 31 May
2006 2005 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Profit for the financial
period/year 2,508 2,018 3,650
Dividends (1,192) - -
--------- --------- ---------
1,316 2,018 3,650
Effect of adoption of FRS
25 on 1 June 2005 (note 7) - (2,087) (2,087)
Conversion of debt to
equity - 391 391
New share capital
subscribed (net of issue
costs) - 19,996 19,979
Other recognised losses - - (35)
Credit in relation to
share based payments (note
2) 90 - -
--------- --------- ---------
Net addition to
shareholders' funds 1,406 20,318 21,898
Opening shareholders'
funds 26,298 4,400 4,400
--------- --------- ---------
Closing shareholders'
funds 27,704 24,718 26,298
========= ========= =========
Following the adoption of the presentation requirements of FRS 25 'Financial
instruments: presentation and disclosure' the Group has, with effect from 1 June
2005, reclassified certain elements of share capital from shareholders' funds to
liabilities (note 7).
Notes to the interim report
1 This interim report has been prepared on the basis of the accounting policies
set out in the 31 May 2006 annual report except as noted below.
In this interim report FRS 20 'Share-based payments' has been adopted for the
first time (see note 2).
The financial information does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act 1985. The figures for the year ended
31 May 2006 have been extracted from the statutory accounts which have been
delivered to the Registrar of Companies. The independent auditors' report on
these accounts was unqualified.
These results were approved by the Board of Directors and announced to the
London Stock Exchange on 27 February 2007.
2 FRS 20 share-based payments
In December 2005, the shareholders approved the establishment of a save as you
earn ('SAYE') share option scheme under which options were issued over 145,000
ordinary shares to employees of group companies. Under FRS 20 the fair value of
options granted is recognised as an employee expense with a corresponding
increase in equity. The fair value is measured at grant date and spread over the
period during which the employee becomes unconditionally entitled to the
options, in this case over 3 years. The fair value of the options granted had
been independently measured taking into account the terms and conditions on
which the options were granted. The charge in respect of the share based
payments is matched by an equal and opposite adjustment to profit and loss
reserves, thereby having no net impact on the group's closing reserves. The full
movement on reserves is shown in the reconciliation of shareholders' funds on
page 8.
FRS 20 had no material effect on the comparative figures therefore no prior year
adjustment has been made.
3 Taxation is based on the estimated effective rate for each year as a whole,
including deferred tax.
4 The dividend of 5 pence per ordinary share, proposed in the 2006 Annual
Accounts, agreed by the shareholders at the Annual General Meeting on 10 October
2006 and paid on 18 October 2006, has been charged to the reserves in these
interim financial statements.
The directors have recommended an interim dividend of 3 pence per share, which
will be paid on 26 March 2007.
Interest payable in 2005 includes £367,000 relating to cumulative dividends and
other finance charges on classes of share capital (or elements of classes of
share capital) reclassified as debt from the adoption of FRS 25 on 1 June 2005.
5 The calculation of earnings per share on the ordinary shares is based on the
profit for the period/year and on the weighted average number of ordinary shares
in issue and ranking for dividend in the period.
6 months ended 6 months ended Year ended
30 November 30 November 31 May
2006 2005 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Profit for the period/year 2,508 2,018 3,650
========= ========= =========
Weighted average number of
shares ('000) 23,675 12,280 17,962
Earnings per share (pence) 10.59 16.43 20.32
========= ========= =========
The calculation of diluted earnings per share is based on the profit for the
period/year and on the weighted average number of ordinary shares in issue in
the period/year adjusted for the dilutive effect of the share options
outstanding.
6 months ended 6 months ended Year ended
30 November 30 November 31 May
2006 2005 2006
(unaudited) (unaudited) (audited)
£000 £000 £000
Profit for the period/year 2,508 2,018 3,650
========= ========= =========
Weighted average number of
shares ('000) 23,751 12,280 17,962
Earnings per share (pence) 10.56 16.43 20.32
========= ========= =========
In the period ended 30 November 2005 an exit dividend of £291,000 was payable on
the A ordinary shares upon the flotation of the Company on AIM. The dividend
rights of the ordinary shares and A ordinary shares were identical in all other
respects. The calculation of the additional earnings per A ordinary share
arising on this dividend was as follows:
6 months ended
30 November
2005
(unaudited)
Exit dividend for the period (£000s) 291
Weighted average number of A ordinary shares ('000) 2,191
Additional earnings per A ordinary share (pence) 13.28
All of the A ordinary shares were converted to ordinary shares with effect from
30 November 2005. The Company has only one class of ordinary share from this
date.
During the period ended 30 November 2005 the Company's £1 ordinary shares were
each subdivided into ten 10p ordinary shares. The weighted average number of
shares in each of the periods presented has been adjusted as if the subdivision
had occurred at the beginning of the earliest period presented.
6 Acquisition
On 1 September 2006 the Company acquired the entire issued share capital of
Norec Limited. The resulting goodwill of £6,336,000 was capitalised and will be
written off over 20 years. The business is long standing and well established
and the directors believe that the Group will continue to derive financial
benefit over this period.
Book and
fair value
£000
Fixed assets
Tangible 764
Current assets
Debtors 4,271
Cash 1,371
--------
Total assets 6,406
========
Liabilities
External (2,172)
creditors
Provisions (3,173)
--------
Total (5,345)
liabilities
========
Net assets 1,061
Goodwill 6,336
--------
Net purchase consideration and costs of 7,397
acquisition
========
Analysed as:
Gross consideration 7,397
========
Satisfied by:
Cash 5,897
Deferred consideration 1,500
--------
7,397
========
7 Financial instruments
In the period ended 30 November 2005 the Group took advantage of the
transitional arrangements of FRS 25 not to restate corresponding amounts in
accordance with FRS 25. The adjustments necessary to implement this policy were
made as at 1 June 2005 with the net adjustment to net assets, after tax, taken
through the period ended 30 November 2005 reconciliation of movements in
shareholders' funds.
8 Post balance sheet event
I am delighted to announce the acquisition of Maltby Colliery from UK Coal for a
total consideration of £21.5m plus £8.6m pension deficit assumed. The Group
raised £11.1m by way of a placing at 469p per share to fund part of the
consideration.
9 Copies of this interim report are being sent to all shareholders and will be
available to the public from the Group's registered office.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 15th May 2024
COMPANIES COVERED:
Latest directors dealings
- 1 hour ago Wildcat Petroleum
- 1 hour ago Animalcare Group
- 1 hour ago BBGI Global Infrastructure S.A. NPV (DI)
- 1 hour ago Chesnara
- 1 hour ago Tap Global Group Plc