Preliminary Results
Hargreaves Services PLC
03 September 2007
For Immediate Release 3 September 2007
HARGREAVES SERVICES plc
Preliminary results for the year ended 31 May 2007
Hargreaves Services plc (AIM:HSP), a leading provider of transport and support
services to the energy and waste sectors announces its preliminary results for
the year ended 31 May 2007.
HIGHLIGHTS
• Group turnover including share of joint ventures up 71% to £265.3m
(2006: £155.0m)
• Total operating profit up 44% to £10.4m (2006: £7.2m)
• Profit before tax up 56% to £8.6m (2006: £5.5m)
• Final Dividend of 6p per share
• Strong organic and acquisitive growth delivered with three key
acquisitions and one new business formed
• Expansion into growing European raw materials markets
• Current trading and order books at record levels
Chairman, Tim Ross commented: 'Following a very good result for the financial
year, I am pleased to report that the early months of the new financial year are
fully up to expectations. We are proceeding in line with broker's forecasts.'
Enquiries
Hargreaves Services plc 0191 373 4485
Gordon Banham
Peter Dillon
Buchanan Communications 0207 466 5000
Tim Anderson
Karen Morrison
Brewin Dolphin Securities 0113 241 0130
Andrew Kitchingman
Chairman's statement
I am delighted to report an excellent result for the year ended 31 May 2007,
driven by strong organic growth and successful acquisitions.
Group turnover (including share of joint ventures) of £265.3m (2006: £155.0m)
and operating profit of £10.4m (2006: £7.2m) illustrate the considerable
progress that has been achieved.
Highlights of the year were the acquisition of Norec Limited, in September 2006,
for a gross purchase consideration (including expenses) of £7.4m and the
acquisition of the Maltby Colliery, in February 2007, for a consideration
(including pension deficit and expenses) of £31.0m. Finally, the acquisition of
the business and assets of Simon Bulk Warehousing and Distribution was made in
April 2007 at a cost of £4.2m (including expenses).
As the result of these and other smaller acquisitions we welcomed more than
1,000 new employees to the Group. All these acquisitions have been duly
integrated and have performed in accordance with expectations. We look forward
to a full year's contribution from each in 2007/2008.
During the year we established a new presence in Dusseldorf and commenced
trading operations in coal, coke and other minerals, to customers in Germany and
other European markets.
The newly-acquired Maltby Colliery is the leading UK supplier of low-sulphur
coal, with Monckton Coke Works, the only independent UK coke producer, one of
its principal outlets. Each operates as a Division in its own right and,
combined with the various operations in our established Minerals, Transport and
Industrial Services Divisions, together make up an unrivalled supply chain in
the provision of carbon-based and related minerals.
The Group remains strongly focused on services to the energy sector and now
comprises the largest independent supplier of solid fuels to the generators,
whilst additionally enjoying very strong market positions in supplies to the
foundry, cement and chemical industries. The Group's excellent port facilities
at Immingham and Newport enable extremely efficient distribution of imported
products by road, rail and water as well as the export of specialist products,
notably to Scandinavia.
I continue to be greatly impressed by the work ethic, motivation and loyalty of
our employees at all levels. I would like to thank each and every one of them,
whose skills and efforts are at the heart of the Group's success.
In the light of the Group's continuing success, the Board has recommended a
final dividend of 6p per share payable immediately after the Annual General
Meeting on 3 October 2007, in addition to the interim dividend of 3p per share
paid earlier in the year.
We continue to enjoy good visibility of earnings, with order books at record
levels and with additional long term contracts already secured with major blue
chip companies. We remain firmly committed to expansion and anticipate further
significant progress, both by organic growth and selective acquisition, in the
year ahead.
Tim Ross
Chairman 3 September 2007
Group Chief Executive's statement
It gives me pleasure to announce that the Group turnover (including share of
joint ventures) for the year ended 31 May 2007 was a record at £265.3m (2006:
£155.0m), an increase of 71.2%.
Total operating profit was £10.4m (2006: £7.2m), an increase of 44.4%, which met
Directors' expectations.
The Board have recommended the payment of a final dividend of 6p per share, in
addition to the interim dividend already paid of 3p per share.
Review of operations
During the year the Group grew significantly both organically and by
acquisition.
In September 2006, Norec Limited, a successful industrial services provider
employing in excess of 500 people, was purchased. In February 2007 the Group
acquired the assets of Maltby Colliery from UK Coal. In April 2007 the Group
acquired the business and assets of Simon Bulk Warehousing and Distribution.
This company has a long term contract with ConocoPhillips for the transport and
storage of petroleum coke. This activity is being integrated into the Industrial
Division.
The Group now operates in five reporting divisions thus giving a clear focussed
management structure with defined lines of reporting. The Group has successfully
integrated the new acquisitions which are contributing to profits.
The Group also achieved expansion in the year within its pre-existing Divisions,
making excellent progress in market share and profitability.
Minerals Division
The Minerals Division is principally concerned with the import and subsequent
sale of carbon based materials to end users. The main areas of site operations
are the ports of Immingham and Newport. The majority of imported material is for
the power generation industry.
In September 2006 the Group commenced trading from a new office in Dusseldorf,
Germany, through a new company, Hargreaves Raw Material Services GmbH. I am
pleased to report that this operation has been successful and substantial
quantities of material have been imported, principally from China, through
European ports for distribution throughout Continental Europe. In addition,
quantities of blast furnace coke have been imported from Poland to satisfy
market demand. The results of this venture have exceeded expectations and
contributed to profits earlier than expected.
Coal remains a competitive fuel for power generation and despite the mild
winter, supply volumes have been maintained. The strategic locations at
Immingham and Newport, helped by the recent new terminal facility opened by
Associated British Ports at Immingham, have allowed the Group to import and
contract for sale additional tonnage. This Division has substantially increased
its volumes during the year and contained its overheads. This has produced an
excellent result with operating profits considerably increased.
The Division is headed by Steve Anson and is now believed to be the largest
importer of coal into the UK (excluding direct imports by generators and steel
producers). It adds value to products by processing prior to despatch by road,
rail or water.
Increasing variety and volume of materials comprising coal, anthracite, coke,
petcoke, pumice, shale, ash and aggregates all contribute to the growth
achieved.
Group Chief Executive's statement (continued)
Industrial Division
The Industrial Division, headed by Greg Kelley, Managing Director of Norec
Limited, is principally concerned with providing labour and expertise in the
power generation, chemical and port industries around the UK. The acquisition of
Norec Limited allowed the existing Industrial Division to be integrated to
provide a larger and more efficient operation with sizeable activities
throughout the UK.
During the year Norec Limited was successfully integrated leading to sales
increases, margin improvement and reduced overheads. The result was very
satisfactory progress.
Transport Division
This Division is principally concerned with bulk haulage and is the largest bulk
haulier in the UK. The Division is headed by Paul Young. The customer base is
largely major blue chip companies for whom dedicated haulage often on long-term
index-linked contracts provides a substantial base load of work.
The year produced a good result despite cost pressures particularly diesel fuel
and tyres. The market was reasonably buoyant but remained competitive.
In February 2007 the Group acquired the remaining 50% of the share capital of
Hargreaves (Bulk Liquid Transport) Limited and integrated it into main fleet
operations. The tanker operation has successfully integrated the business of
Gilbraith Tankers Limited, acquired in May 2006.
The Division has considerably benefited from haulage of materials for the other
part of the Group. The ability to react swiftly to market opportunities plus
investment in modern vehicles and leading technology to control vehicle
movements together with increased volumes from the tanker business all
contribute increased efficiency and economies of scale.
The Monckton Coke & Chemical Company Limited ('Monckton')
The Company, headed by Mick Gore, is the last independent coke producer in the
UK and has long term contracts for the supply of its specialist product to a
major UK customer and substantial exports to Scandinavian customers. The
combined heat and power plant produces electricity for sale to the National Grid
from excess gas generated by the coking process. The Company has operated
successfully during the year and produced a satisfactory profit.
The Monckton Rubber Technologies tyre crumbing plant which was purchased for
£1.0m has been commissioned in the latter part of the financial year and is
processing waste tyres which are now restricted from input into landfill.
Revenue is generated by charging for tyre disposal and by sale of processed
rubber crumb produced. The operation is about to complete commissioning trials
and is expected to make a full contribution for the financial year 2007/2008.
Maltby Colliery Limited
In February 2007 the Group acquired the business and assets of Maltby Colliery
from UK Coal plc. Maltby Colliery is a deep mine producing specialist coal,
mining approximately 1,250,000 tonnes per annum. The Group negotiated a
three-year contract, at close to international prices, with Drax Power Station
for approximately 60% of production. A further 25% of production is used by
Monckton Coke and Chemical Company Limited, due to the specialist coking
properties of the coal.
The Group has recruited Alan Houghton OBE, to act as adviser and director at
Maltby. It is expected that the mine will achieve production targets for 2007/
2008 and is already making a worthwhile contribution to operating profits.
Group Chief Executive's statement (continued)
Joint Ventures
Hargreaves Coal Combustion Products Limited, which assists coal fired generating
stations by the sale of ash as a bi-product, has continued to grow and is now
recognised as the UK leader in this field. During the year a further development
was the obtaining of the UK licence for Lytag from Cemex. Lytag is a lightweight
aggregate used in the construction industry.
Coal4Energy Limited, our joint venture with UK Coal plc, commenced trading in
April 2006. The Company is selling to the light industrial and domestic markets,
previously supplied independently by each partner. The synergy, by way of more
efficient distribution, reduced overhead and common marketing, has allowed the
Company to prosper. It is the largest UK supplier to these markets and has
produced satisfactory results.
ThyssenKrupp Metallurgical Services Limited had a satisfactory year of
operations however with the advent of Hargreaves Raw Material Services GmbH the
Group is now able to directly source the relevant raw materials from its own
German operations, accordingly this joint venture was dissolved with effect from
31 May 2007.
Employees
Numbers employed have increased from 585 in 2006 to 1,900 in 2007. The principal
reasons for this very large increase have been the acquisition of Norec Limited,
Maltby Colliery and Simon Distribution together with organic growth. I would
like to take the opportunity to welcome all new employees and I am pleased to
report that the integration into the Group has been successful.
Our work is often hard and dirty and only by the efforts of our people at all
levels are our customer expectations fully met. The Group Board joins me in
thanking both our new and existing employees for the major part they have played
in the continuing growth and success of the Group.
By the nature of what we do, we operate to tight deadlines over wide
geographical areas and the growth and future prosperity of the Group relies on
the skills, dedication and motivation of all our employees.
Group Board
The Group Board has remained unchanged during the year, however we expect our
Financial Director, Peter Dillon, to retire at 31 December 2007 and active steps
have been put in place to recruit his replacement.
Current trading and outlook
The markets in which the Group trades and has core competencies are subject to
fluctuations but remain strong. Further consistent and profitable growth of the
Group is anticipated. The Group Board remains committed to a policy of
substantial and continued growth within the areas of its expertise. I am
confident of being able to report continued growth across all companies and
divisions in the future.
Gordon Banham
Group Chief Executive 3 September 2007
Financial review
The trading results for the year ended 31 May 2007 are a record for the Group.
Group turnover (including share of joint ventures) was £265.3m (2006: £155.0m)
and total operating profit was £10.4m (2006: £7.2m), increases of 71.2% and
44.4% respectively.
As well as organic expansion, the Group made major acquisitions during the year.
These are as fully explained in the Chairman's and Group Chief Executive's
statements.
Part of the funding for the Maltby acquisition was raised by a share placing
which realised £10.0m after expenses.
The joint venture, Coal4Energy Limited, which commenced in April 2006 in
partnership with UK Coal plc, became firmly established and achieved
expectations. Finally the establishment of Hargreaves Raw Material Services GmbH
in Dusseldorf, Germany, in September 2006 has been successful and has
contributed to Group profits within the current financial year.
The Group operates as five trading divisions, three of which are within
Hargreaves (UK) Services Limited. Additionally there are currently three joint
venture companies.
The Minerals Division which imports, processes, handles and delivers carbon
based minerals has achieved a very significant growth in volume, aided by
improvements to our facilities at Immingham and Newport.
The Industrial Division now incorporates Norec which has been successfully
integrated. It provides equipment and labour on site for major industrial
customers, particularly power generators and ports. The Division has shown good
growth and reinforces the view that blue chip clients continue to wish to
outsource material handling and maintenance.
The Transport Division, which includes waste haulage and tanker operations, is
the largest bulk haulier in the UK. It has a number of depots and operational
centres which allows the fleet to be cost effectively deployed over a wide
geographic area. The Division increased its turnover, client base and operating
profits.
Monckton, which was acquired in June 2005, is the sole independent coke works in
the UK. The long-term index-linked contract with a major UK customer has been
successfully supplied. In addition, exports to Scandinavian clients are made
directly and have increased in volume. Operating profits of £2.8m reflect the
actions taken.
The tyre crumbing plant, purchased for £1.0m in August 2006, has been
refurbished and is currently starting to produce significant quantities of
material. Changes in legislation mean that used tyres can no longer be put into
landfill. Substantial revenues are generated from both receipts for used tyre
disposal and from sales of the subsequently crumbed product. The plant will be
fully operational in the 2007/08 financial year.
Hargreaves Coal Combustion Products Limited, a joint venture company
specialising in the disposal of ash for generators, further extended its
activity by obtaining the UK licence for Lytag to distribute lightweight
aggregates exclusively in the UK. Trading volumes increased and the Company made
a very worthwhile contribution to the Group profits.
The joint venture company, Coal4Energy Limited, in partnership with UK Coal plc
traded well. The amalgamation of light industrial and domestic coal sales of
both companies has made it the largest UK supplier to these markets. The
combined volume, more efficient distribution and reduced overhead have all
played a part in the successful trading of this Company.
Hargreaves (Bulk Liquid Transport) Limited which operates a fleet of road
tankers and acquired, in May 2006, the fleet and assets of Gilbraith Tankers
Limited has, in February 2007, become a wholly-owned subsidiary of the Group,
and is now managed as part of the Transport Division. This has resulted in an
ability to give wider geographic coverage and reduced overhead cost, the major
benefits of which will be felt in 2007/08.
The joint venture, ThyssenKrupp Metallurgical Services Limited, has traded
successfully during the year. However, it was dissolved by mutual consent at 31
May 2007. The products previously supplied by ThyssenKrupp will in future be
supplied by Hargreaves Raw Material Services GmbH, the Group's Germany
subsidiary.
Financial review (continued)
Divisional performance
The Divisions enjoy a considerable amount of inter-divisional trade as part of
the integrated solutions provided to clients. This level of inter-divisional
activities, cross-utilisation of the overhead base and other facilities limit
the usefulness of analysis beyond direct costs. Below are the stated divisional
results.
2007 2007 2007 2007 2007 2007
Minerals Industrial Transport Monckton Maltby Total
£000 £000 £000 £000 £000 £000
Group 134,321 25,039 44,105 27,411 9,229 240,105
turnover
=========== =========== ========== ========= ========= ============
Segment
operating
profit 3,018 1,080 2,425 2,785 1,159 10,467
=========== =========== ========== ========= ========= ============
Segment
profit 3,036 944 2,327 2,437 1,086 9,830
before tax
=========== =========== ========== ========= =========
Common (1,203)
costs
------------
Group
profit
before 8,627
taxation
============
2006 2006 2006 2006 2006 2006
Minerals Industrial Transport Monckton Maltby Total
£000 £000 £000 £000 £000 £000
Group 75,040 8,292 41,564 22,088 - 146,984
turnover
============ ============ ========= ========= ========= ============
Segment
operating
profit 2,130 539 2,394 2,143 - 7,206
============ ============ ========= ========= ========= ============
Segment
profit 2,063 420 2,277 2,033 - 6,793
before tax
============ ============ ========= ========= =========
Common (1,320)
costs
------------
Group
profit
before 5,473
taxation
============
Profitability during the year was increased due to volume increases against a
largely fixed overhead base, together with acquisitions.
Key financial performance indicators
The group monitors a range of key performance indicators. Group wide examples
are:
2007 2006
• Turnover (including group share of joint £265.3m £155.0m
ventures)
• Gross margin 11.2% 11.6%
• Interest cover 5.0 3.9
• Profit before tax/turnover 3.6% 3.7%
• Effective tax rate 33.8% 33.3%
• Cash generated from/(absorbed by) operations £8.4m (£0.2m)
Further comment on a number of the above key performance indicators can be found
in this Financial Review.
Financial review (continued)
In addition there are a significant number of further key performance indicators
which are used to measure the business on a more detailed basis, and these are
listed here for information.
• Tonnage handled per week/month • Revenue and contribution per vehicle
• Tonnage sold • Road traffic accident analysis
• Purchase price per tonne • Non-road traffic accident analysis
• Sales value per tonne • Staff turnover levels
• Quality of coal • Injury claims
• Waste handled by type and average weight • Daily and weekly coke production
• Number of loads per month • Daily and weekly crumb production
• Aged debtor analysis • Daily and weekly coal production
• Debtor day reports
Gross profit
Overall gross profit percentage of 11.2% (2006: 11.6%) represents a small
reduction from the previous period. This is entirely due to the continuing
change in mix of sales, particularly the high volume, low margin, quantity of
mineral sales. In absolute terms gross profit of £26.9m (2006: £17.0m) sees an
increase of 58.2%.
Total operating profit
Total operating profit of £10.4m (2006: £7.2m) represents an increase of 44.4%
due to increased volumes, contained overheads and the acquisition of Norec,
Maltby Colliery and Simon Distribution.
Interest and profit before taxation
Net interest charges of £1.7m (2006: £1.8m) reflect the cost of acquisitions
less cash generated by operations. Interest is covered 5.0 times by total
operating profits and 7.7 times EBITDA (Earnings Before Interest, Tax,
Depreciation and Amortisation).
The record Group profits of £9.2m (2006: £5.8m), before goodwill and taxation,
exceeded Directors' expectations. Included were contributions from Norec
Limited, Maltby Colliery and Simon Distribution for part of the financial year.
Cash flow
EBITDA of £16.0m (2006: £10.1m) was generated from operational activities.
During the year £10.0m was raised (net of expenses) from a share placing and was
used to meet part of the purchase consideration of Maltby Colliery.
Financial review (continued)
Net worth
The capital and resources of the Group have increased to £41.8m (2006: £26.3m)
due to both retained earnings and the proceeds from a share placing.
Dividend
The Group's stated policy is to pay an interim and final dividend split
one-third/two-thirds each year. Accordingly the Board authorised the payment of
an interim dividend of 3p per share paid in February 2007 and propose a final
dividend for the year of 6p (2006: 5p per share), an increase of 20%.
Peter Dillon
Group Financial Director 3 September 2007
Consolidated profit and loss account
for the year ended 31 May 2007
Note 2007 2006
£000 £000 £000 £000
Turnover: group and share of 265,274 155,001
joint ventures
Less: share of turnover of
joint ventures
Continuing operations (25,169) (8,017)
--- ---
Group turnover 240,105 146,984
=== ===
Group turnover
Continuing operations 173,881 146,984
Acquisitions 66,224 -
--- --- --- ---
240,105 146,984
Cost of sales (213,164) (129,955)
--- ---
Gross profit 26,941 17,029
Administrative expenses (17,049) (10,177)
--- ---
Group operating profit
Continuing operations 7,265 6,852
Acquisitions 2,627 -
--- --- --- ---
9,892 6,852
Share of operating profit
in:
joint ventures 413 380
associates 76 -
--- ---
Total operating profit 10,381 7,232
Profit on sale of fixed
assets - continuing 25 60
operations
Group
Joint ventures 30 -
Interest receivable 358 74
Other finance costs - group (97) (20)
Interest payable and similar
charges - group
Finance costs on shares
classified as - (455)
liabilities
(pre-flotation finance
costs)
Other (1,971) (1,382)
--- --- --- ---
(1,971) (1,837)
Interest payable and similar
charges - joint (99) (36)
ventures
--- ---
Profit on ordinary 8,627 5,473
activities before taxation
Tax on profit on ordinary 2 (2,918) (1,823)
activities
--- ---
Profit on ordinary 5,709 3,650
activities after taxation
Minority interests (73) -
--- ---
Profit for the financial 5,636 3,650
year
=== ===
Earnings per share 4
Ordinary shares 23.12p 20.32p
A ordinary shares - 29.71p
Consolidated profit and loss account (continued)
for the year ended 31 May 2007
Note 2007 2006
£000 £000 £000 £000
Diluted earnings per share 4
Ordinary shares 22.73p 20.21p
A ordinary shares - 29.71p
The group had no discontinued operations. Earnings per share relate entirely to
continuing operations.
Consolidated balance sheet
at 31 May 2007
2007 2006
Fixed assets £000 £000 £000 £000
Intangible assets - goodwill 13,052 5,745
- negative goodwill (73) -
Tangible assets 63,178 21,146
Investments
Investments in joint ventures
Share of gross assets 5,000 7,328
Share of gross liabilities (4,119) (6,431)
--- ---
881 897
Investments in associates 58 -
Other investments 20 83
--- --- --- ---
959 980
--- ---
77,116 27,871
Current assets
Stocks 35,027 15,055
Debtors 38,406 21,167
Cash at bank and in hand 11,779 15,022
--- ---
85,212 51,244
Creditors: amounts falling due (63,096) (26,904)
within one year
--- ---
Net current assets 22,116 24,340
--- ---
Total assets less current 99,232 52,211
liabilities
Creditors: amounts falling due after (38,477) (21,521)
more than one
year
Provisions for liabilities and (12,339) (4,064)
charges
--- ---
Net assets excluding pension 48,416 26,626
liabilities
Net pension liability (6,588) (328)
--- ---
Net assets including pension 41,828 26,298
liabilities
=== ===
Capital and reserves
Called up share capital 2,627 2,368
Share premium account 29,177 19,082
Other reserves 29 29
Merger reserve 1,022 -
Capital redemption reserve 1,530 1,530
Profit and loss account 7,293 3,289
--- ---
Shareholders' funds 41,678 26,298
Minority interest 150 -
--- ---
41,828 26,298
=== ===
Consolidated balance sheet (continued)
at 31 May 2007
These financial statements were approved by the board of directors on 3
September 2007 and were signed on its behalf by:
GFC Banham PM Dillon
Director Director
Consolidated cash flow statement
for the year ended 31 May 2007
Note 2007 2006
£000 £000
Cash flow statement
Cash flow from operating activities 5 8,405 (215)
Returns on investments and servicing of finance (1,647) (2,508)
Taxation (2,245) (895)
Capital expenditure (7,869) (2,067)
Acquisitions (33,616) (3,376)
Dividends paid on shares classified in shareholders'
funds (1,972) -
--- ---
Cash (outflow)/inflow before financing (38,944) (9,061)
Financing 25,877 21,450
--- ---
(Decrease)/increase in cash in the year (13,067) 12,389
=== ===
Reconciliation of net cash flow to 6
movement in net debt
(Decrease)/increase in cash in the year (13,067) 12,389
Net cash inflow from financing (15,205) (2,985)
--- ---
Change in net debt resulting from cash flows (28,272) 9,404
Release of premium on redemption of loan - 135
stock
Release of loan arrangement fees 46 -
New finance leases (1,931) (3,880)
Loans and finance leases acquired with subsidiary (1,867) -
--- ---
Movement in net debt in the year (32,024) 5,659
Net debt at the start of the year (6,414) (12,073)
--- ---
Net debt at the end of the year (38,438) (6,414)
=== ===
Consolidated statement of total recognised gains and losses
for the year ended 31 May 2007
2007 2006
£000 £000
Profit for the financial year
Group 5,308 3,377
Share of joint ventures 272 273
Share of associates 56 -
--- ---
5,636 3,650
Effect of adoption of FRS 25 on 1 June - (166)
2005
Exchange differences on consolidation (4) -
--- ---
5,632 3,484
Actuarial gain/(loss) arising on retirement benefit
scheme 108 (50)
Deferred tax arising on gains/(losses) in retirement
benefit scheme (32) 15
--- ---
Total recognised gains and losses relating 5,708 3,449
to the financial year
=== ===
Reconciliations of movements in shareholders' funds
for the year ended 31 May 2007
Group Company
2007 2006 2007 2006
£000 £000 £000 £000
Profit for the financial year 5,636 3,650 8,217 2,707
Dividends on shares classified in
shareholders' funds (1,972) - (1,972) -
--- --- --- ---
Retained profit 3,664 3,650 6,245 2,707
Effect of adoption of FRS 25 on 1 June - (2,087) - (2,087)
2005
Other recognised gains/(losses) 76 (35) - -
Conversion of debt to equity - 391 - 391
New share capital subscribed (net of 11,376 19,979 11,376 19,979
issue
costs)
Credit in relation to share based 268 - - -
payments
Exchange differences on consolidation (4) - - -
--- --- --- ---
Net addition to shareholders' funds 15,380 21,898 17,621 20,990
Opening shareholders' funds 26,298 4,400 24,221 3,231
--- --- --- ---
Closing shareholders' funds 41,678 26,298 41,842 24,221
=== === === ===
1 Accounting policies
This announcement has been prepared on the basis of the accounting policies set
out in the 31 May 2006 financial statements, except that the following new
standards have been adopted for the first time:
FRS 20 'Share based payments';
The accounting policy under this new standard is set out below. FRS 20 has had
no material effect on the comparative figures therefore no prior year adjustment
has been made.
Share based payments
The share option programme allows employees to acquire shares of the Company.
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 employees become unconditionally
entitled to the options. The fair value of the options granted is measured using
an option pricing model, taking into account the terms and conditions upon which
the options were granted. The amount recognised as an expense is adjusted to
reflect the actual number of share options that vest except where variations are
due only to share prices not achieving the threshold for vesting.
2 Taxation
Analysis of charge in period
2007 2006
£000 £000 £000 £000
UK
corporation
tax
Current tax 2,443 1,580
on income
for the
period
Share of 71 49
joint
ventures'
current tax
Share of 20 -
associates'
current tax
Adjustment (294) (145)
in respect
of prior
years
------- -------
2,240 1,484
Foreign tax
Current tax 243 -
on income
for the
period
-------- --------
Total 2,483 1,484
current tax
Deferred tax
Origination 209 317
of timing
differences
Share of 37 22
joint
ventures'
deferred tax
Share of - -
associates'
deferred tax
Adjustment 189 -
in respect
of previous
years
------- -------
Total 435 339
deferred tax
-------- --------
Tax on 2,918 1,823
profit on
ordinary
activities
======== ========
2 Taxation (continued)
Factors affecting the tax charge for the current period
The current tax charge for the period is lower (2006: lower) than the standard
rate of corporation tax in the UK of 30% (2006: 30%). The differences are
explained below.
2007 2006
£000 £000
Current tax reconciliation
Profit on ordinary activities before tax 8,627 5,473
------ ------
Current tax at 30% (2006: 30%) 2,588 1,642
Effects of:
Finance charges on shares classified as - 115
liabilities
Expenses not deductible for tax purposes 424 243
Capital allowances for period in excess of
depreciation - (387) (315)
group
- share of joint ventures (1) (52)
Small companies tax rates (32) (49)
Higher tax rates on overseas earnings 73 -
Tax losses utilised (41) -
Tax losses carried forward in joint venture - 31
Chargeable gain - 14
Other timing differences 153 -
Adjustment in respect of prior years (294) (145)
------ ------
Total current tax charge (see above) 2,483 1,484
====== ======
Factors affecting the tax charge for future periods
The group has unrelieved UK corporation tax losses of approximately £nil (2006:
£nil) available to carry forward against profits from the same trade.
3 Dividends and finance costs
The aggregate amount of dividends on ordinary shares comprises:
2007 2006
£000 £000
Dividends on ordinary shares
Final dividends paid in respect of prior year but not
recognised as 1,184 -
liabilities in that year
Interim dividends paid in respect of the current year 788 -
--- ---
Aggregate amount of dividends paid in the financial year 1,972 -
=== ===
Proposed dividend of 6p per share (2006: 5p per share) 1,576 1,184
=== ===
The above amount has not been included within creditors as it was not approved
before the year end.
2007 2006
£000 £000
Dividends and finance charges on other classes of shares
Premium payable on redemption of A preference shares - 76
Dividends on A preference shares - 76
Dividends on B preference shares - 12
Dividends on A convertible preferred ordinary shares - 291
--- ---
- 455
=== ===
Charged to interest payable and similar charges - 455
Charged to shareholders' funds - -
--- ---
- 455
=== ===
4 Earnings per share
All earnings per share disclosures relate to continuing operations as the group
had no discontinued operations in either 2006 or 2007.
Up until 30 November 2005 two classes of ordinary share were in existence, £1
ordinary shares and £1 A ordinary shares. With effect from 30 November 2005 the
A ordinary shares converted into ordinary shares. Also on this date the ordinary
shares (including those arising on the conversion of the A ordinary shares) were
each subdivided into 10 ordinary shares of 10p each.
Earnings per share for each class of ordinary share are as follows:
2007 2006
Ordinary shares
Basic earnings per share 23.12p 20.32p
Diluted earnings per share 22.73p 20.21p
======= =======
A ordinary shares
Basic earnings per share - 29.71p
Diluted earnings per share - 29.71p
======= =======
The calculation of earnings per share is based on the profit for the year and on
the weighted average number of shares in issue and ranking for dividend in the
year.
Ordinary shares
2007 2006
£000 £000
Profit for the year 5,636 3,650
=========== ===========
Weighted average number of shares 24,372,457 17,962,000
Earnings per ordinary share (pence) 23.12p 20.32p
=========== ===========
On 30 November 2005 the company's ordinary shares of £1 each were subdivided
into ten ordinary shares of 10p each. The weighted average number of shares in
2006 has been adjusted as if the subdivision had occurred at the beginning of
the earliest period presented.
The calculation of diluted earnings per share is based on the profit for the
year and on the weighted average number of ordinary shares in issue in the year
adjusted for the dilutive effect of the share options outstanding.
2007 2006
£000 £000
Profit for the year 5,636 3,650
========== ==========
Weighted average number of shares 24,798,490 18,058,000
Diluted earnings per ordinary share 22.73p 20.21p
(pence) ========== ==========
A ordinary shares
Immediately prior to flotation on 30 November 2005 an exit dividend of £291,000
was payable on this class of share in accordance with the Articles of
Association. The dividend rights of the Ordinary and A ordinary shares were
identical in all other respects. The calculation of the additional earnings per
A ordinary share arising on this dividend is as follows:
2006
Exit dividend £291,000
Weighted average number of A ordinary shares in issue 2,191,000
Additional earnings per A ordinary share 13.28p
=========
The earnings per A ordinary shares for the 2006 year comprises the earnings per
share to 30 November 2005 (the date on which they were converted) of 16.43p
(based on a half year profit of £2,018,000 and a weighted number of shares of
12,280,000), plus the additional earnings per A ordinary share of 13.28p above.
There was no dilutive effect on the A ordinary shares.
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.
5 Reconciliation of group operating profit to operating cash flows
2007 2006
£000 £000
Group operating profit 9,892 6,852
Depreciation and amortisation 5,605 3,239
Increase in stocks (13,254) (7,916)
Increase in debtors (4,914) (1,364)
Increase/(decrease) in creditors 10,808 (1,026)
Credit in relation to share based payments 268 -
------- -------
Net cash inflow/(outflow) from operating 8,405 (215)
activities
======= =======
6 Analysis of net debt
Acquisition
At beginning (excluding cash Non-cash At end of
of year Cash flow and overdrafts) changes year
£000 £000 £000 £000 £000
Cash in
hand, 15,022 (3,243) - - 11,779
at bank
Overdrafts - (9,824) - - (9,824)
--- --- --- --- ---
15,022 (13,067) - - 1,955
Finance (5,582) 1,947 (1,119) (1,931) (6,685)
leases
Invoice
discounting
advances (10,834) (3,656) (748) - (15,238)
Bank and other
loans due
within one
year (14) 14 - (15) (15)
Bank and other
loans due
after more
than one year (5,006) (13,510) - 61 (18,455)
--- --- --- --- ---
Total (6,414) (28,272) (1,867) (1,885) (38,438)
=== === === === ===
Non-cash changes arise from the inception of finance leases and the release of
loan arrangement fees.
7 Acquisitions
The Group acquired the entire issued share capital of Norec Limited on 1
September 2006. The resulting goodwill of £6,336,000 was capitalised and will be
amortised over 20 years, the period over which the directors anticipate the
group to derive continuing economic benefit.
Book and
fair value
£000
Fixed assets
Tangible 764
Current assets
Debtors 4,271
Cash 1,371
---
Total assets 6,406
===
Liabilities
External creditors (2,172)
Provisions (3,173)
---
Total liabilities (5,345)
===
Net assets 1,061
Goodwill 6,336
---
Net purchase consideration and costs of acquisition 7,397
===
Analysed as:
Gross consideration 7,397
===
Satisfied by:
Cash 5,897
Deferred consideration paid by 31 May 2007 1,500
---
7,397
===
The group also acquired the trade and assets of Maltby Colliery, on 26 February
2007 resulting in goodwill of £nil.
Book value Revaluations Fair value
£000 £000 £000
Fixed assets
Tangible 12,694 17,839 30,533
Current assets
Stock 5,171 (1,358) 3,813
------- ------- -------
Total assets 17,865 16,481 34,346
======= ======= =======
Liabilities
Provisions (6,186) (7,656) (13,842)
------- ------- -------
Total liabilities (6,186) (7,656) (13,842)
======= ======= =======
Net assets 20,504
Goodwill -
-------
Net purchase consideration
and 20,504
costs of acquisition
=======
Satisfied by:
Cash 20,504
=======
This subsidiary undertaking acquired during the year contributed £4,112,000 to
the group's net operating cashflows, paid £nil in respect of net returns on
investments and servicing of finance and utilised £4,150,000 for capital
expenditure.
Prior to the acquisition, Maltby Colliery was part of a division of UK Coal.
The Group also acquired an additional 50% of the issued share capital of
Hargreaves (Bulk Liquid Transport) Limited taking its shareholding to 100%. The
resulting goodwill of £1,529,000 was capitalised and will be amortised over 20
years, the period over which the directors anticipate the group to derive
continuing economic benefit.
Book and
fair value
£000
Fixed assets
Intangible 14
Tangible 856
Current assets
Stock 17
Debtors 855
Cash 5
---
Total assets 1,747
===
Liabilities
External creditors (1,389)
Provisions (78)
---
Total liabilities (1,467)
===
Net assets 280
Goodwill 1,529
---
Net purchase consideration and costs of acquisition 1,809
===
Satisfied by:
Cash 764
Shares 1,045
---
1,809
===
The Group also acquired the entire issued share capital of Mineral Resources
Europe GmbH, through it 77.5% owned subsidiary, Hargreaves Raw Material Services
GmbH. The resulting negative goodwill of £84,000 is being written off over 5
years in line with the estimated life of the attributable assets.
Bok and
fair value
£000
Fixed assets
Tangible 15
Current assets
Stock 2,870
Debtors 6,345
Cash 1,083
---
Total assets 10,313
===
Liabilities
External creditors (9,566)
---
Total liabilities (9,566)
===
Net assets 747
Goodwill (84)
---
Net purchase consideration and costs of acquisition 663
===
Satisfied by:
Cash 663
===
The group also acquired the trade and certain assets of the Simon Bulk
Warehousing and Distribution division from Humber Sea Terminal Limited on 30
March 2007 resulting in goodwill of £nil.
Book value Revaluations Fair value
£000 £000 £000
Fixed assets
Tangible 3,000 1,215 4,215
------ ------ ------
Net assets 4,215
Goodwill -
------ ------ ------
Net purchase consideration
and 4,215
costs of acquisition
======
Satisfied by:
Cash 4,215
======
8 Status of accounts
The financial information set out above does not constitute the Group's
statutory accounts for the years ended 31 May 2007 or 31 May 2006 but is derived
from those accounts. Statutory accounts for the year ended 31 May 2006 have been
delivered to the Registrar of Companies, and those for the year ended 31 May
2007 will be delivered following the company's Annual General Meeting. The
auditors have reported on those accounts; their reports were unqualified and did
not contain statements under Section 237(2) or (3) of the Companies Act 1985.
These results were approved by the Board of Directors on 3 September 2007.
This information is provided by RNS
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