Final Results

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Other operating income

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Defined contribution pension obligation

A defined contribution plan is a pension plan under which fixed contributions are paid into a pension fund and the Company has no legal or constructive obligation to pay further contributions even if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.

The Company applies IFRS 2 to share-based payments. The Company operates a share-based payment compensation plan, under which the entity grants key employees the option to purchase shares in the Company at a specified price maintained for a certain duration. The Company has also issued warrants to certain key suppliers with similar characteristics which are accounted for in the same way as the options.

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UK 100

Hercules Site Services PLC

15 January 2024

Hercules Site Services plc

("Hercules" or "the Company")

Final Results

Hercules Site Services plc (AIM: HERC), a leading technology enabled labour supply company for the UK infrastructure sector, is pleased to announce its audited results for the year ended 30 September 2023.

Financial Highlights

· Growth across all areas of the business and results exceeding market expectations

· Revenues increased 71% to a record £84.7m (2022: £49.5m)

· Gross profit increased 67% to £16.3m (2022: £9.8m)

· Adjusted EBITDA* increased 79% to a record £4.1m (2022: £2.3m)

· Pre-tax profit of £641,321 (2022: £160,685)

· EPS increased to 1.27p (2022: 0.58p) - increase of 119%

· Cash at year end of £4.2m (2022: £1.2m)

· Proposed final dividend of 1.12p per share (2022: 1.12p)

*Adjusted EBITDA excludes research and development, share based payments, profit/(loss) on sale of assets and exceptional items

Operational Highlights

· Labour supply operatives have increased to over 1,000 (2022: 750) over the period

· Labour supply to HS2 (Birmingham section) increased to c.425 operatives (2022: 280)

· App downloads (Recruitment and Onboarding) increased to c.12,000 (2022: 8,100)

· New client wins include Balfour Beatty Rail, Galliford Try PSL and Octavius

· Agreed a five-year contract with Balfour Beatty Rail through Hercules' new "live tracks" rail offering

· New contract wins with Thames and Anglian Water, numerous contracts completed within the year

· Post year end, the Company completed its first acquisition, Future Build Recruitment Limited, expanding Hercules' exposure to the white-collar construction market

· Construction of Hercules' training Academy has been completed, ready for launch in January 2024

Outlook

The Board and the Company's wider senior management team remain committed to Hercules' growth strategy and the business has a strong pipeline of projects heading into 2024. Hercules is now well positioned to take advantage of secular trends in both the infrastructure and construction sectors. Management will continue to pursue a disciplined approach to M&A to help further accelerate the growth of the Company. The launch of Hercules' training academy in 2024 will help future-proof the business and expand upskilling opportunities, as the Company continues to strengthen relationships throughout the construction and infrastructure industries.

Brusk Korkmaz, Hercules' Chief Executive Officer, commented:

"2023 was a truly transformative year for Hercules. We saw significant growth across all areas of our business and we are delighted to have exceeded market expectations and achieved record revenue and EBITDA figures.

"As the infrastructure and construction sectors continued to face labour supply and skills shortages, we were able to deliver for our clients, including a range of blue-chip companies including Galliford Try, Balfour Beatty, Costain and Vinci. During the year, we also agreed a five-year contract with Balfour Beatty alongside numerous new contracts with both Thames and Anglian Water. The addition of these new contracts has further accelerated growth within both our Labour Supply and Construction Services divisions.

"With our digital edge (total app downloads have now reached 12,000), our new training academy and our recent acquisition of Future Build, Hercules is increasingly well prepared for the future and continues to ingrain itself into the heart of the UK infrastructure and construction market."

Retail Investor Webinar

CEO Brusk Korkmaz and CFO Paul Wheatcroft will deliver a live presentation regarding the Company's Final Results via the Investor Meet Company platform today at 9:30 a.m (GMT).

The presentation is open to all existing and potential shareholders. Questions can be submitted pre-event via the Investor Meet Company dashboard up until 9.00 a.m. today or at any time during the live presentation.

Although the Company may not be in a position to answer every question it receives, it will address the most prominent within the confines of information already disclosed to the market. Responses to the Q&A from the live presentation will be published at the earliest opportunity on the Investor Meet Company platform.

Investor feedback can also be submitted directly to management post-event to ensure the Company can understand the views of all interested parties.

Investors can sign up to Investor Meet Company for free and add to meet Hercules Site Services plc via:

https://www.investormeetcompany.com/hercules-site-services-plc/register-investor

Investors who already follow Hercules Site Services plc on the Investor Meet Company platform will automatically be invited.

For further information and enquiries, please contact:

Hercules Site Services plc Brusk Korkmaz (CEO) Paul Wheatcroft (CFO)	c/o SEC Newgate

SP Angel (Nominated Adviser and Joint Broker) Matthew Johnson / Adam Cowl / Harry Davies-Ball (Corporate Finance) Grant Barker / Rob Rees (Sales and Broking)	+44 (0) 20 3470 0470

Cavendish Securities plc (Joint Broker) Adrian Hadden / Charlie Combe / Dale Bellis (Sales and Broking)	+44 (0) 20 7397 8900

SEC Newgate (Financial Communications) Elisabeth Cowell / Ian Silvera / Matthew Elliott	+44 (0) 20 3757 6882 Hercules@secnewgate.co.uk

About Hercules Site Services PLC

Hercules is a leading tech enabled labour supply company for the UK infrastructure sector. Founded in 2008, Hercules has an established track record of profitability and fast-growth and has built a blue-chip customer base which includes Balfour Beatty, Costain, Kier, Skanska, Dyer & Butler and Volker Fitzpatrick. The Company has been appointed to provide labour for a range of high-profile infrastructure projects, such as HS2, due to its agile, innovative, digital first approach and complete service offering. It is well-placed to benefit from any government increase in infrastructure spending and its experienced management team has identified multiple opportunities for growth.

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014 which has been incorporated into UK law by the European Union (Withdrawal) Act 2018.

CHAIRMAN'S REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2023

Hercules has had another very busy and successful year with revenue increasing by 71% and we are also pleased to report that we have surpassed market expectations.

We are delighted with this result, particularly given that this is the first set of full year results that cover an entire 12 months as an AIM listed company. I would like to thank our original investors, those who took part in our fundraise in the spring of last year and our other investors for their support. We are anticipating another busy financial year ahead with exciting opportunities and initiatives for the company to focus on.

We have achieved growth across all areas of our business, which is testament to the strong demand for our suite of services. Cross-selling between all our business units has continued to be a feature, demonstrating the complementary and integrated nature of our offering.

Strong market dynamics

The UK has been living with high inflation and interest rates for a good period of time now, but pleasingly the infrastructure sector is still forging ahead. Access to labour continues to be a core priority for the industry and we have built an excellent reputation as a tier 1 provider due to our technological edge and our experienced management team.

With our Balfour Beatty Rail contract win in 2023, and Network Rail's CP7 investment plans, representing a £44bn investment into the rail network from April 2024 across 5 years through to 2029, we are well placed to significantly grow our presence in the Rail labour market. In addition, National Highways strategic business plan set aside £14.2bn for road enhancement schemes between 2020 - 2025.

The Water Industry delivers work in 5-year cycles called AMP (Asset Management Plan) periods where budgets are pre-agreed with Ofwat (Office of Water Services Regulation Authority). AMP 7 (2020 - 2025) had a slow start due to Covid and the work is now continuing at an increased pace to cope with growth demands and to meet legislative requirements. AMP 8 (2025-2030) is planned to be an even greater period of investment (almost double AMP 7) with the industry expecting a step change in performance to clean rivers and coastlines and to meet the challenges of climate change.

Hercules will continue to benefit from significant investment in government-backed infrastructure spending. The result of which means that the cancellation of HS2 (Manchester section) has had no impact to our existing contracts and our outlook for 2024 and beyond continues to look positive.

Inflation pressures affected the business in FY22, particularly pay levels, but in FY23 the pressures have reduced, and we have continued to demonstrate our ability to regularly renegotiate increased pay levels with our clients.

Dividend

The Board is pleased to propose a final dividend of 1.12 pence per share (2022: 1.12 pence). The dividend will be paid on 22 March 2024 to shareholders on the register at close of business on 23 February 2024. The shares will go ex-dividend on 22 February 2024.Brusk Korkmaz, CEO, via his company Hercules Real Estate Ltd, took the interim dividend in August 2023 and will be taking the final dividend as well. This is the first year he has taken a dividend since the IPO.

Outlook

After a year of significant growth, the outlook for Hercules remains very positive. Revenue growth has averaged 55% over the last three years, and while the Directors don't expect such high levels of organic growth to continue, our pipeline for 2024 looks robust across all our business units and we have experienced positive trading across all areas for the first three months of our current financial year.

We entered the 2024 financial year with additional financial firepower, having secured a new debt facility with IGF Business Credit Limited. The three-year invoice discounting debt facility for up to £15m will fund our continued organic growth and ongoing working capital needs. We believe that this increased funding capacity will provide the headroom required to support continued growth.

We continue to develop new revenue streams which will come to the fore in FY 2024. We will be very shortly launching our Training Academy, which will also secure and enhance our supply chain of highly trained employees, and our new "live track" rail offering is expected to continue building steam.

Post period end, Hercules began to implement its acquisition strategy, acquiring 60% of Future Build Recruitment Ltd ("Future Build") in November 2023, a profitable specialist white-collar recruitment company operating in the UK construction sector. Having tested the market opportunity in white-collar recruitment through organic growth initiatives, this deal expands our footprint in the white-collar recruitment market by bringing a highly regarded business and team into the Company. It also provides an array of compelling cross-selling opportunities.

With respect to further potential acquisitions, and partnership arrangements, we are progressing positively with a number of discussions and we look forward to updating the market at the appropriate time.

Once again, I would like to thank our shareholders and advisers for their support during the year, and the Hercules team for continuing to successfully deliver a range of operational growth milestones.

Henry Pitman, Non-executive Chairman

Date: 12.01.2024

CHIEF EXECUTIVE OFFICER'S REVIEW FOR THE YEAR ENDED 30 SEPTEMBER 2023

To have exceeded the market's expectations against the backdrop of a year of high inflation and interest rates is an extraordinary achievement.

Revenue has increased by 71% year on year to £84.7m (2022: £49.5m) and Adjusted EBITDA for the year was well above market expectations at £4.1m (2022: £2.3m), representing growth of 79%.

Revenue growth was accompanied by strong cash conversion and effective credit management.Net cash generated from operations during the year was £3.8m compared with cash absorbed of £5.3m in FY22.

This has been achieved through growth across all areas of our business: Labour Supply and Construction Services. Hercules offers a "one stop shop" service to contractors within the UK infrastructure sector and our complementary suite of services enables us to cross-sell and create strong relationships with blue chip companies. This takes determination and coordination across our talented teams and given the challenges that all businesses have had to navigate this year, the entire Hercules team have shown incredible hard work and dedication throughout the year, and for that they have my sincere thanks.

On top of this, we have also built foundations for future growth and recurring revenue. We completed our first acquisition post period end, in November 2023, providing us with exposure to the growing white-collar and permanent recruitment market, and we have made excellent progress towards launching our Training Academy, which will open its doors imminently.

The infrastructure and construction sectors are experiencing continued buoyancy providing a supportive backdrop for our growth, and recent research demonstrates that this is continuing post period end.

Given the labour shortages experienced by the sector, and the effectiveness of our digital tools in placing operatives on projects, we are well placed to benefit from this growth in the months and years ahead. Demand for our range of complementary services has been strong and our pipeline is very robust. Although there is a possibility of a change of government in the UK during this year, we do not have any reason to believe there will be any significant change in infrastructure investment in the next few years.

Labour Supply

Labour Supply is our core business and we have a strong track record of working in partnership with blue chip construction companies to deliver key infrastructure, civil engineering, utilities, groundworks, highway and railway projects. It represented 75% of Hercules' revenue for the year ended 30 September 2023 (FY 2022: 67%).

This is our second year working with the Beatty Vinci JV on the HS2 (Birmingham section). This is our largest ever contract and the Company is now playing a huge part in the delivery of one of modern history's greatest legacy projects. We are the leading labour supplier on the six-supplier labour desk, now with circa 425 operatives on site. This growth is expected to continue for the next 5-7 years with FY2024 requirements expected to be greater than those in 2023.

Our strong, blue chip client base continues to provide repeat business for Hercules and during the period these relationships have delivered contracts such as the A47 with Galliford Try and the A428 with Skanska. In the last 12 months, on average, the Company has been supplying between 625 and 980 personnel to projects each day (average of around 850), which is up year on year by circa 77%. We have won new contracts for NEAR (National Emergency Areas Retrofit) schemes on the M25, M4 and M3 and we also continue to supply labour for RDP (regional development programme) projects including the A12, A30 and A63.

Relationships built with our clients have been the cornerstone of the Company's success. These clients have either won or are bidding for major projects such as Net Zero Teesside, Sizewell C, Heathrow Expansion and various national rail frameworks.

As per the contracts referenced above, we have traditionally supplied blue collar personnel and have been successful in doing so due to our innovative mobile recruitment and onboarding apps which ensure that we supply the right person to the right location on time to fulfil client requirements. We have built upon this strong track record by expanding into white-collar and security recruitment. The success of our organic growth in the white-collar space motivated us to focus on this area, and post period end, we acquired specialist white-collar recruitment company Future Build. With minimal overlap between clients, the acquisition will enhance the service offering we are able to provide our existing customer base, while Hercules' current offering will provide complementary services to Future Build clients.

A third new revenue stream has also been added through the launch of our "live tracks" Rail offering, which kicked-off with a five-year contract with Balfour Beatty Rail Limited. The Board of Hercules is confident that these new services will drive additional revenue and EBITDA moving forward.

Our technology gives us a strong competitive edge, enabling us to quickly meet our clients' labour needs and to source local labour, which often is a stipulation in government-funded projects. Indeed, our 'Hercules Construction Jobs' recruitment app, launched in October 2019, has more than 11,500 downloads and more than 6,250 registered users at the time of writing (FY 2022: 8,100 and 4,700 respectively).

I am pleased to report that we have a healthy pipeline which extends beyond 2024, so we look forward to delivering further growth in our Labour Supply business.

Construction Services

Specialist Plant Services

Since Hercules commenced business in this space, growth of our suction excavator business has been impressive. We almost doubled the size of our fleet to 30 vehicles during the year (post year end we sold the two oldest suction excavators), which saw revenue from this division rise to £4.9m (2022: £3.6m). During the period, this business unit accounted for 6% (2022: 7%) of total revenue. The 14 new vehicles acquired during the period were all delivered in time for Hercules to benefit from the government's super deduction tax relief scheme, before it expired.

As part of this expansion, we now have our first three Triple Fan Excavators, providing extra capability for our clients, as these units can work at distance above the 70m efficient limit of the twin fan. In addition to this, we now offer a custom tracked satellite unit to offer our clients. These remote units are a vital piece of equipment to work in locations where the main truck unit cannot get to.

Utilisation of vehicles is key to this division and following the delivery of the vehicles in March 2023 this reduced temporarily from its previous high position (averaging 85%) to circa 66%. A key challenge has and will no doubt continue to be the availability of suitable operators. However, the team has worked well on business development, developed a new approach to recruitment which is working well, and utilisation is already back up to circa 75% and rising. We have delivered an increase in the client base during the year, with Amey, Keltbray, RSK and Tideway are now all working with our Specialist Plant Services division. We have also increased utilisation through a number of existing clients, including M&J Evans, Anglian Water, Costain, Skanska, Milestone, Tilbury Douglas and Kier.

Hercules developed the 'Zero-Trim' piles method, which uses a vacuum excavator to suck out excess concrete from a concrete pile while still wet. We successfully trialled this for the Balfour Beatty Vinci JV on HS2 (Birmingham section), and now have a significant programme of piling work upcoming in 2024.

Civil Projects

Hercules' Civil Projects division partners with some of the UK's top contractors to provide end-to-end project delivery for civil engineering contracts. Turnover for Civil Projects grew to £15.6m (2022: £12.4m), accounting for approximately 18% of company revenue for the year ended 30 September 2023 (2022: 25%).

With the water industry facing enormous challenges, as has been well documented in the media, our Civil Projects team has leveraged its experience in this space to win significant levels of repeat work, mainly for key delivery partners for AMP7 (Asset Management Programme 7). The Anglian Water Civils Framework gained momentum, with some sizeable projects being allocated to Hercules. Six of these schemes were completed in the year. Activity levels remained high this year, with an increase in size of project having a positive impact on the turnover. Eight projects with a value over £1m were started or completed at various sites for clients such as Galliford Try, Mott Macdonald Bentley and the @one Alliance. In addition to this, the division also completed two projects in the gas industry for TGE and SGN.

Additional site management staff were recruited to supplement the existing teams to cover the larger, more complex projects. The division operated with an average of 150 operatives across all their sites, the largest number to date. They work closely with the Labour Supply division to cope with variances in workload.

This year the Civils team also introduced a Hercules Suction Excavator into its equipment fleet. This provides the Civils team with access to this extremely useful equipment for use across all of its projects and having it available full time has promoted its use on some sites and is an added benefit for our clients.

Additional growth initiatives

Hercules provides a range of services for its clients, which increases the total value of the Company to the client and provides the business with a diversified range of revenue streams.

Hercules Digital

We have a licence agreement regarding the SEE (Skills, Education and Employment) Everything Portal's full implementation and use at the Old Oak Common regeneration project in west London. We are hoping to expand this further in 2024, as we believe we are well positioned to progress a pipeline of licensing opportunities across the public and private sectors in the years to come.

Training Academy

The Company leased an industrial site in Nuneaton (West Midlands, circa 15 miles from the HS2 (Birmingham section) in August 2022 from Hercules Real Estate Limited ("HRE"). Since then we have been executing plans so that this site can house Hercules' first Training Academy. Following a period of development and refurbishment the Academy is now operational and a new lease agreement has been entered into with HRE.

The training academy has been built on the foundations of our business and values to provide the very best services to the construction industry. As the skills shortages throughout the UK continue to rise, our academy has been established to address them and to provide a solution to attract new talent and upskill the current workforce. By providing excellent facilities, in a strategic location, the Academy will not only serve the Hercules workforce (and thus reduce external training costs) but will also deliver specific training for clients across the infrastructure and construction industries. The Academy will deliver training to all of the existing Hercules clients, as well as new clients who are currently not using our other services.

Our Training Academy will deliver a diverse range of accredited courses that cater to aspiring professionals and industry personnel alike. It will provide specialised technical training in areas such as plant operation, health and safety, utilities and other bespoke courses. The facilities replicate the modern construction site giving learners a safe environment to train and qualify to be site ready. As well as short duration courses, the Academy will run and manage NVQ assessments and apprenticeships. Providing apprenticeships will allow us to assist the wider Hercules client base meet their commitments in this regard and our facility will help attract new talent to the industry. A further strategy is to work closely with local authorities and central government to obtain funding for the delivery of training of new entrants to the construction industry, with a focus on skills bootcamps and upskilling.

With further areas for development available at the site, the Academy facilities have an opportunity to grow and evolve as the industry develops and introduces further use of technology. This will allow Hercules to continually upskill its current workforce for the future.

The official opening of the Academy is planned for 31st January 2024.

Health Trailer

In the last twelve months the Hercules Health Screening Trailer has been provided to clients including Skanska, Balfour Beatty, Galliford Try, Blackwell Earthmoving, Taylor Woodrow and Hitachi Energy. Nurses can be provided to carry out health and wellbeing screening to the workforce on site. Depending on the client requirements, the trailer can also be utilised to provide safety critical medicals, drug and alcohol testing, and deliver flu jabs. With repeat bookings already secured for FY2024, the medical trailer is set for another busy year.

Creating positive social value

Apart from our core business, we continue to help deliver positive social value outcomes in and around our clients' projects often working collaboratively to achieve the best results. The culture at Hercules is one which is very much centred around teamwork and we are all guided by our Core Values and Mission Statement, dedicated to delivering a world class service to our clients, workforce and now our investors.

Our team strives to encourage the next generation into our industry, so engagements in schools and further education colleges are vitally important. We also endeavour to source candidates from diverse channels such as ex-military, ex-offenders, BAME and other hard to reach communities. Our success with hiring from the ex-military community has been rewarded with the coveted ERS MOD Gold Award.

Additionally, our ownership of a bespoke, fully equipped mobile health screening trailer, enhances our commitment to employee wellbeing, in an industry which has high mental and physical health challenges.

The trailer has been deployed to provide a range of medical services, including vision and hearing tests, safety critical medicals, heart and blood pressure testing and lung function testing to on-site operatives. The medical screening facility also provides mental health awareness support, discreet monitoring of modern slavery related issues and a platform for raising awareness of health, safety and wellbeing issues to workers.

The health screening trailer provides a number of advantages to site workers, including faster turnaround for medical certificates, increased awareness of health and safety matters, reduction in downtime away from sites for General Practitioner visits and reduced carbon emissions.

Outlook

We enter 2024 with an excellent foundation for further growth, having exceeded market expectations and developed an array of accretive commercial workstreams which will expand our business and deliver additional revenue and profits.

The first quarter of FY 2024 has been successful, with our first acquisition completed and strong pipeline of new business across our divisions, and the outlook for the infrastructure sector remains buoyant.

As well as driving our core business, we will advance some exciting new avenues, such as our Hercules Training Academy, our rail, white collar and site security divisions and other acquisition and new business opportunities, to complement the organic growth we continue to achieve.

As we move through and beyond the next reporting period, we will maintain that growth mindset which has served us well over the past 16 years.

Brusk Korkmaz, Chief Executive Officer

Date: 12.01.2024

Nuneaton Lease Agreement - Related Party Transaction

As referenced in the Chief Executive Officer's Review, the Company has entered into a new 15-year lease agreement ("New Lease") for the Hercules Training Academy site in Nuneaton. The New Lease replaces the original lease agreement, details of which were notified on 31 August 2022. Under the terms of the New Lease, the new rent payable by the Company is £160,107 per annum commencing on 1 February 2024.

The terms of the New Lease reflect the development and refurbishment of the site by Hercules Real Estate Limited ("HRE"), a substantial shareholder and related party of the Company. Brusk Korkmaz, the Company's Chief Executive Officer, is a director of HRE and the majority shareholder.

The New Lease is being treated as a related party transaction for the purposes of Rule 13 of the AIM Rules for Companies. The directors independent of the New Lease (being all directors except Brusk Korkmaz) consider, having consulted with SP Angel Corporate Finance LLP, the Company's Nominated Adviser, that the terms of the New Lease are fair and reasonable in so far as Hercules' shareholders are concerned.

CHIEF FINANCIAL OFFICER'S REVIEW FOR THE YEAR ENDED 30 SEPTEMBER 2023

Introduction

Inflation is expected to fall gradually in 2024 but is currently not anticipated to be back to normal levels until the end of 2025. The Company has procedures in place to seek rate increases from our Labour Supply clients where applicable and we ensure that quotes for our Civil Projects work are only valid for a minimum period to mitigate the impact of inflation on our operations.

The Directors anticipate continued growth for the Company driven by further significant investment in infrastructure as outlined by the UK Government.

Financial Performance

In the year ended 30 September 2023, revenue increased to £84,664,536 (2022: £49,549,487) representing a 70% increase year-on-year.

	Year ended 30 September
		2023	2022
		£	£
Labour Supply Civil Projects		63,818,639 15,656,407	33,250,617 12,370,937
Suction excavator services Other		4,895,671 293,820	3,645,934 281,999
		84,664,536	49,549,487

Administrative costs rose to £14,274,828 (2022: £9,073,415) - an increase of more than 57% compared to the prior year. Excluding depreciation, loss on sale of fixed assets, and R&D costs (see Note 8), administrative costs were £12,455,715 (2022: £7,981,571). The increases reflected the growth in all business areas during the year, including :

1) Suction excavator services expanded from 16 to 30 vehicles during the year requiring further management and administration provision. Depreciation, maintenance, insurance and operative training costs all rose in direct proportion to the number of vehicles in use.

2) Civil projects had a record year requiring more project managers and site supervision.

3) Labour supply has had to boost management structures (both in operational and commercial administration areas) in the last few years in readiness for what has turned out to be very significant growth in 2021, 2022, 2023, and FY 2024. Successful delivery of large projects is the key to future success, and this requires more senior experienced managers and administrators. The growth seen out on sites has also required more training.

During the year the Company delivered:

Pre-tax profit - increased by 299% to £641,321 (2022: £160,685)

Pre-tax profit before exceptional nonrecurring items - increased by 38% to £872,564 (2022: £631,949)

Adjusted EBITDA (see below) increased by 79% to £4,139,491 (2022: £2,308,579).

Net cash generated from operations of £3.8m in the year (2022: 5.3m absorbed) and labour supply debtor days reduced to 40 (2022: 75) days.

Year ended Year ended

30 September 30 September

2023 2022

£ £

Profit from operations 2,060,340 705,698

Added back

Depreciation 1,771,890 1,034,071

Research & development 4,098 36,554

Loss on sales of assets 43,124 21,218

Exceptional items (see below) 231,243 471,264

Share based payment expense 28,796 39,774

Adjusted EBITDA 4,139,491 2,308,579

Exceptional items related to:

Cost relating to AIM admission - 443,264

Employment settlement 7,550 28,000

HMRC Consultancy 7,088 -

Bad Debt 91,577 -

CID planning 36,750 -

Partnership preparation 16,801 -

Adjudication 71,477 -

Total 231,243 471,264

The Company categorises non-operational and development costs such as those above as exceptional.

R&W Civil Engineering Ltd went into administration in August 2023, hence the bad debt provided for above.

Statement of Financial Position

As of 30 September 2023, the Company's net assets were £8,657,202 (2022: £6,838,092) of which £4,151,564 (2022: £1,211,554) were cash and cash equivalents.

Non-current assets at 30 September 2023 were £20,799,145 (2022: £14.642.396). Current assets at 30 September 2023 were £26,833,353 (2022: £19,253,174).

Net current assets at 30 September 2023 were £1,512,958 (2022 net assets: £3,362,064).

The change in assets in 2023 over 2022 was due to significant increases in plant & equipment (financed mostly through asset financing), and trade debtors.

Company loans & borrowings were £9,959,646 as at 30 September 2023 (2022: £6,528,750). This is the balance on a working capital facility with Investec that was introduced in May 2021 - this was an £11m facility. This has been replaced in November 2023 with a £15m facility with IGF, to facilitate future growth.

Fourteen more suction excavators were added to the fleet during the year, all are financed with conventional asset funding from a number of different providers.

Paul Wheatcroft, CFO

Date: 12.01.2024

STATEMENT OF COMPREHENSIVE INCOME

		Year ended 30 September 2023	Year ended 30 September 2022
Continuing operations	Note	£	£
Revenue	6	84,664,536	49,549,487
Cost of sales		(68,339,572)	(39,770,374)
Gross profit		16,324,964	9,779,113
Other operating income	7	10,204	-
Administrative expenses		(14,274,828)	(9,073,415)
Profit from operations	8	2,060,340	705,698
Fair value gains		-	691
Finance income		326	4,634
Finance costs	12	(1,419,345)	(550,338)
Profit before tax expense		641,321	160,685
Tax credit on profit	13	128,914	160,167
Net profit for the year		770,235	320,852
Total comprehensive income for the year		770,235	320,852



Earnings per share
Basic and diluted	4	1.27p	0.58p

There are no further items of comprehensive income other than those shown above.

STATEMENT OF FINANCIAL POSITION


		30 September 2023	30 September 2022
	Note	£	£
Non-current assets
Property, plant and equipment	15	20,799,144	14,642,398
		20,799,144	14,642,398

Current assets
Inventories		50,753	51,772
Trade and other receivables	16	22,598,144	17,906,957
Current tax receivable		82,891	82,891
Cash and cash equivalents		4,151,565	1,211,554
Total current assets		26,883,353	19,253,174

TOTAL ASSETS		47,682,497	33,895,572

Equity and liabilities
Share capital	23	62,428	58,650
Share premium		4,995,514	3,417,068
Share based payment reserve		68,569	39,774
Retained earnings		3,530,691	3,322,600
Total equity		8,657,202	6,838,092

Non-current liabilities
Deferred tax liabilities	14	158,506	287,420
Lease liabilities	20	13,496,394	10,878,950
Total non-current liabilities		13,654,900	11,166,370

Current liabilities
Trade and other payables	17	11,921,928	7,005,102
Provisions	18	-	304,951
Loans and borrowings	19	9,959,646	6,528,750
Lease liabilities	20	3,488,821	2,052,307
Total current liabilities		25,370,395	15,891,110
TOTAL LIABILITIES		39,025,295	27,057,480
TOTAL EQUITY AND LIABILITIES		47,682,497	33,895,572

STATEMENT OF CHANGES IN EQUITY

	Share capital	Share premium	Share based payment reserve	Retained earnings	Total equity
	£	£	£	£	£
Balance at 1 October 2021	50,000	-	-	3,386,950	3,436,950
Profit for the year	-	-	-	320,852	320,852
Proceeds from issue of shares	8.650	4,359,704	-	-	4,368,354
Share issue costs	-	(942,636)	-	-	(942,636)
Share based payment	-	-	39,774	-	39,774
Dividends paid	-	-	-	(385,202)	(385,202)
Balance at 30 September 2022	58,650	3,417,068	39,774	3,322,600	6,838,092

Profit for the year	-	-	-	770,235	770,235
Proceeds from issue of shares	3,778	1,578,446	-	-	1,582,224
Share based payment	-	-	28,795	-	28,795
Dividends paid	-	-	-	(562,144)	(562,144)
Balance at 30 September 2023	62,428	4,995,514	68,569	3,530,691	8,657,202

Share premium represents the amount raised on the proceeds of share issues in excess of the par value of those shares, net of issue costs.

The share based payment reserve represents the accumulated entries to equity arising from the recognition of share-based payments in accordance with IFRS 2.

Retained earnings represent the accumulated profits and losses of the Company, less distributions and similar items, since its incorporation.

Dividends of £562,144 were paid during the year in two instalments, a final dividend for the year ended 30 September 2022 of £187,576, 1.12p per share (FY 2022, 284,715), and an interim dividend for the year ended 30 September 2023 of £374,568, 0.6p per share (interim 2022 £100,487).

STATEMENT OF CASH FLOWS		Year ended 30 September
			2023	2022
	Note		£	£
Cash flows from operating activities:
Profit after taxation			770,235	320,852
Taxation credit	13		(128,914)	(160,167)
Finance income			(326)	(4,634)
Finance costs	12		1,419,345	550,338
Fair value movements gain			-	(691)
Share based payment charge			28,795	39,774
Depreciation of property plant and equipment	15		1,771,890	1,034,071
Loss on disposal of property, plant and equipment			43,124	21,218
Decrease/(increase) in inventories			1,019	(49,799)
Increase in trade and other receivables			(4,691,187)	(9,614,731)
Increase in trade and other payables and provisions			4,611,875	2,529,984

Cash generated from / (used in) operations			3,825,856	(5,333,785)
Tax paid			-	-
Net cash from operating activities			3,825,856	(5,333,785)

Cash flows from investing activities:
Purchase of tangible assets	15		(380,420)	(228,184)
Proceeds from disposal of tangible assets			172,478	240,755
Proceeds from disposal of other assets			-	272,141
Interest received			326	4,634

Net cash from investing activities			(207,616)	289,346

Cash flows from financing activities:
Payment of lease liabilities	20		(4,402,874)	(1,406,611)
Interest paid			(726,331)	(232,491)
Bank loan advances			3,430,896	3,389,287
Dividends paid			(562,144)	(385,202)
Net proceeds of share issues			1,582,224	3,425,718
Net cash from financing activities			(678,229)	4,790,701

Net increase/(decrease) in cash and cash equivalents			2,940,011	(253,738)

Cash and cash equivalents at start of year			1,211,554	1,465,292
Cash and cash equivalents at end of year			4,151,565	1,211,554

NOTES TO THE FINANCIAL STATEMENTS

Net debt

	At 30 September 2022	Cash flow	Non-cash movement	At 30 September 2023
Cash and cash equivalents
Cash	1,211,554	2,940,011	-	4,151,565
Debt
Bank loans	(6,528,750)	(3,430,896)	-	(9,959,646)
Lease liabilities	(12,931,257)	4,402,874	(8,456,832)	(16,985,215)
	(19,460,007)	971,978	(8,456,832)	(26,944,861)
Net debt	(18,248,453)	3,911,989	(8,456,832)	(22,793,296)

Non-cash movements represent new liabilities and interest recognised under IFRS 16 in respect of leases.

1 General Information

The Company is a public company limited by share capital incorporated and domiciled in England and Wales. The principal activity of the Company is that of general construction and civil engineering.

The address of its registered office and principal place of business is:

Hercules Court

Lakeside Business Park

Broadway Lane

South Cerney

Cirencester

GL7 5XZ

The immediate and ultimate parent undertaking of the Company is Hercules Real Estate Limited, the financial statements of which can be obtained from the above address.

2 Basis of preparation & Summary of significant accounting policies

The financial information set out in this preliminary announcement does not constitute statutory accounts for the purposes of the Companies Act 2006.

The statement of financial position at 31 December 2023 and Statement of comprehensive income, statement of changes in equity, statement of cash flows and associated notes for the year ended 31 December 2023 have been extracted from the Company's 2023 financial statements upon which the auditor opinion is unqualified.

The financial information in this preliminary statement has been prepared in accordance with the accounting policies, and on the basis set out, in the Company's 2023 financial statements and as set out below.

The 2023 Annual Report and Accounts will be available on the Company's website: www.hercules-construction.co.uk Copies may be obtained by contacting the Company Secretary at paul.wheatcroft@hercules-construction.co.uk

(a) New and amended accounting standards

New Standards applicable for the year were as follows:

- Narrow scope amendments to IFRS 3, IAS 16 and IAS 37 (1 January 2022)

- Annual improvements to IFRS 1, IFRS 9, IAS 41 and IFRS 16 (1 January 2022)

- Amendments to IAS 12 : International Tax Reform

- IFRIC Agenda decision affecting IFRS 9 and IFRS 16 : Lessor Forgiveness of Lease Payments

None of these amendments to Standards had a material impact on the Company's results for the year.

(b) Future standards

At the date of authorisation of the financial statements, the Company has not early adopted the following amendments to Standards and Interpretations that have been issued but are not yet effective:

- Amendments to IFRS 17 Insurance Contracts (1 January 2023)

- Amendments to IAS 1 and IFRS Practice Statement 2 : Disclosure of Accounting Policies (1 January 2023)

- Amendments to IAS 8 : Definition of Accounting Estimates (1 January 2023)

- Amendments to IAS 12 : Deferred Tax related to Assets and Liabilities arising from a Single Transaction (1 January 2023)

- Amendments to IFRS 16 : Lease Liability in a Sale and Leaseback (1 January 2024)

- Amendments to IAS 1 : Non-current Liabilities with Covenants (1 January 2024)

- Amendments to IAS 12 : International tax reform (1 January 2023 for disclosure requirements)

- Amendments to IAS 7 and IFRS 7 Supplier Finance (1 January 2024)

- Amendments to IAS 21 : Lack of Exchangeability (1 January 2025)

These Standards and amendments are effective from accounting periods beginning on or after the dates shown above. The directors do not expect any material impact as a result of adopting the standards and amendments listed above in the financial year they become effective.

The directors have prepared a forecast using prudent assumptions. The financial information has been prepared assuming the Company will continue as a going concern. Under the going concern assumption, an entity is ordinarily viewed as continuing in business for the foreseeable future. In assessing whether the going concern assumption is appropriate, management has considered the Company's existing working capital and management are of the opinion that the Company has adequate resources to undertake its planned programme of activities for a period of at least 12 months from the date of approval of these financial statements. The Company's new working capital facility is now capped at £15m (but the directors believe could be extended if required), and is on a 3 month notice period on either side. This new facility was implemented November 2023, and has started to operate well. A good relationship exists between the Company and the provider, therefore the Directors do not believe the facility will be terminated within the going concern assessment period.

The directors have taken a view of the Company as a whole over the 12 months January 2024 to January 2025. Assessments have been made of revenue streams from key contracts, growth in a number of areas, overheads, cash levels, cash facilities where required, tax projections etc. A further scenario test with 5% lower sales, margins reduced in the key areas by 0.5%, and worse debt collection days has been undertaken, without reducing planned headcount increases, and sufficient (but reduced) cash levels are forecast in the 12 months ahead.

The Company increased its turnover by 70% in the year and exceeded its forecast turnover and EBITDA (before extraordinary items). The Company is one of six labour suppliers selected for the Northern Section of HS2 (Birmingham section), which is currently the largest construction project in Europe. This will continue to underpin and grow turnover over the next few years. In addition, the Company raised funds to purchase another fourteen suction excavators, which further boosted turnover. Civil projects are expected to be similarly busy, due to the requirements of AMP7 being squeezed into three years rather than five, and the well documented pressures on the water industry.

A net £1.6m was raised from the AIM market in March 2023. Based on the current status, the Directors have a reasonable expectation that the Company will be able to execute its plans in the medium term such that the Company will have adequate resources to continue in operational existence for the foreseeable future. This provides the Directors with assurance on the Company's ability to continue as a going concern, and therefore adopt the going concern basis of accounting in preparing the annual financial statements. Cash at the end of FY2023 was £4,151,565 (FY2022 £1,211,554), so a considerable increase in liquidity has been achieved during the year.

Hercules acquired 60% of FutureBuild Recruitment Ltd in November 2023. The is the first partnership arrangement (which kicks in following the acquisition) the Company has entered in to, and it is cash generative.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the executive directors that make strategic decisions. The Company operates from one location but, in the Directors' opinion, has four reportable segments: Labour supply, civil projects, the provision of suction excavator services and other activities.

Revenue arises from the provision of construction and civil engineering services under fixed price contracts, as well as the hire of suction excavators under hire contracts. Contract duration can vary and can range from the supply of labour only to the provision of fully managed construction and engineering projects. Where variations are requested, prices are agreed as soon as practically possible. Variations are exactly that - changes or additions to initial requests. Discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties are rarely encountered, but if any of them are, they are not material.

To determine whether to recognise revenue, the Company follows the 5-step process as set out within IFRS 15:

1. Identifying the contract with a customer

2. Identifying the performance obligations

3. Determining the transaction price

4. Allocating the transaction price to the performance obligations

5. Recognising revenue when/as performance obligation(s) are satisfied

Certain fixed price contracts span more than one accounting period and can have a duration of more than one year. The Company's accounting policies for these projects require revenue and costs to be allocated to individual accounting periods and the consequent recognition at period-end of contract assets or liabilities for projects still in progress. Management apply judgement in estimating the total revenue and total costs expected on each project. Such estimates are revised as a project progresses to reflect the current status of the project and the latest information available to management. The project teams regularly review contract progress to ensure the latest estimates are appropriate. The carrying amounts of contract assets and liabilities are stated in Note 17.

The key judgements and policies in respect of revenue from the Company's various activities are described further below.

Labour Supply

This represents the provision of labour to customers. The amount of revenue is based on agreed contractual hourly rates with customers. The customer simultaneously receives and consumes the benefits provided by the Company's performance under these contracts and the performance obligation (being the provision of labour) is therefore satisfied over time. In the majority of cases, the Company invoices customers monthly in arrears for the hours of labour supplied during that month. Amounts invoiced but unpaid at the balance sheet date are included within trade receivables.

In some cases, the monthly invoice will not correspond with a calendar month, and the Company is therefore required to include an amount within contract assets in the Statement of Financial Position, for revenue relating to periods for which labour has been provided but not yet invoiced.

Civil Projects

This represents work performed under contracts with customers to undertake construction and/or civil engineering works. These contracts contain a number of individually identified services. However, the directors consider that the services being provided are highly interdependent and interrelated and therefore should not be considered to be separate performance obligations under IFRS 15. Furthermore, the services provided by the Company either enhance an asset that the customer controls and/or do not create an asset with alternative use to the Company and there is an enforceable right to payment for performance completed to date. The Company therefore considers the delivery under these contracts to be a single performance obligation that is satisfied over time.

Each contract has its own assessed view. Contract modifications are recognised when the Company considers that they have been approved. The estimation of final contract value includes the assessment of the recovery of variations, claims and compensation events. The estimate made is constrained in accordance with IFRS 15 so that it is highly probable not to result in a significant reversal of revenue in the future. Where the change in scope results in an increase to the work to be performed that is distinct and reflects the stand-alone selling price of the good/service, it is treated as a separate contract.

Under these contracts, the Company produces a monthly 'application' to the customer detailing the work performed to date and requesting payment accordingly. Within a period of one to two months (in the majority of cases) the customer will confirm agreement to the 'application' and remit the necessary funds to the Company. Historically, the Company's experience is that instances of customers materially disagreeing with the 'application' are rare and that this is therefore a reliable method by which to recognise revenue earned ("output method"). There have been no new 'output' method projects started since March 2021, and internal valuations made under this method in the year ending 30 September 2023 would not change the position in any material way.

At the balance sheet date, the Company includes a balance in receivables for the amount of revenue receivable on contracts based on the work performed. The Company used the output method for all projects still in operation at the end of March 2021 (until those projects are completed), but all new projects since then use the input method, based on costs incurred to date, to estimate the amount of revenue earned and includes an amount in contract assets within receivables. The input method is based on costs incurred at the balance sheet date compared to expected costs to be incurred throughout the life of the contract.

Suction excavators

Revenue from the provision of suction excavator's services represents the supply of equipment to customers for an agreed period of time. Revenue is recognised on a straight line basis over the term of the relevant contracts/sale agreements. Labour & material costs are recognised as they occur. Payment terms are typically 30 days.

Other

Revenue from the sale of software products is recognised at a point in time, being when the software is delivered to the end customer. Likewise, the revenue from the health trailer (where nursing services are provided) is recognised, at a point in time, when the services have been delivered to the end customer. Payment terms are typically 30 days.

Work done for Hercules Real Estate Ltd and reclaims of training costs from ex employees are included here.

The tax expense or credit for the period comprises current and deferred tax. Tax is recognised in the income statement, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income.

The current tax charge or credit is calculated on the basis of tax rates and laws that have been enacted or substantively enacted by the reporting date in the United Kingdom, where the Company operates and generates taxable income.

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements and on unused tax losses or tax credits available to the Company. Deferred tax is determined using tax rates and laws that have been enacted or substantively enacted by the reporting date and that are expected to apply in the period when the liability is settled or the asset realised.

Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. The carrying amounts of deferred tax assets are reviewed at each reporting date and a valuation allowance is set up against deferred tax assets so that the net carrying amount equals the highest amount that is more likely than not to be recovered based on current or future taxable profit.

Deferred tax assets and liabilities are only offset against each other when there is a legally enforceable right to set off current taxation assets against current taxation liabilities and the deferred tax assets and liabilities relate to income taxes levied by the same tax authority on either (a) the same taxable entity, or (b) different taxable entities which intend to settle these on a net basis, or to realise the assets and settle the liabilities simultaneously. In the Company's accounts all taxes are levied by H M Revenue and Customs. Management review the offset of deferred tax assets and liabilities to ensure such an offset is appropriate.

Property, plant and equipment is stated in the statement of financial position at cost, less any subsequent accumulated depreciation and subsequent accumulated impairment losses.

The cost of property, plant and equipment includes directly attributable incremental costs incurred in its acquisition and installation.

Depreciation is charged so as to write off the cost of assets over their estimated useful lives, as follows:

Asset class Depreciation method and rate

Plant and machinery 10% reducing balance

Fixtures, fittings and equipment 20% reducing balance

Right-of-use assets

Cars Straight line over the term of the lease

Vans 10% reducing balance

Property Straight line over the term of the lease

Plant & Machinery 8.3% reducing balance

For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately independent cash inflows (CGU). All non-financial assets or CGUs are tested for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

An impairment charge is recognised for the amount by which the assets or CGUs carrying amount exceeds its recoverable amount. The recoverable amount is the higher of fair value, reflecting market conditions less costs to sell, and value in use. All assets are subsequently reassessed for indications that an impairment loss previously recognised may no longer exist.

Value in use is assessed by discounting the estimated future cash flows that the asset is expected to generate throughout its useful life.

The Company classifies financial instruments, or their component parts, on initial recognition as a financial asset, a financial liability, or an equity instrument in accordance with the substance of the underlying contractual arrangement. Financial instruments are recognised on the date when the Company becomes a party to the contractual provisions of the instrument. Financial instruments are initially recognised at fair value. Financial instruments cease to be recognised at the date when the Company ceases to be party to the contractual provisions of the instrument.

Financial assets are included on the balance sheet as trade and other receivables or cash and cash equivalents. Financial liabilities include borrowings, trade payables and accruals.

Trade receivables are amounts due from customers for services performed in the ordinary course of business. They are recognised initially at the amount of consideration that is unconditional. The Company holds the trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established based on the expected credit loss. The Group applies the IFRS 9 simplified approach to measure expected credit losses that uses a lifetime expected loss allowance for all trade receivables, which are grouped based on shared credit risk characteristics and the days past due. The amount of the provision is recognised in the balance sheet within trade receivables. Movements in the provision are recognised in the profit and loss account in administrative expenses. Any change in their value through impairment or reversal of impairment is recognised in the income statement. Default is defined as non-payment - there is no specific write off policy, but disputes are settled by discussion as is common in the industry.

All borrowings are initially recorded at fair value. Borrowings are subsequently carried at amortised cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognised as a charge to the income statement over the period of the relevant borrowing. Interest expense is recognised on the basis of the effective interest method and is included in finance costs.

Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if the company does not have an unconditional right, at the end of the reporting period, to defer settlement of the creditor for at least twelve months after the reporting date. If there is an unconditional right to defer settlement for at least twelve months after the reporting date, they are presented as non-current liabilities.

Trade payables are recognised initially at fair value, and all are repayable within one year and hence are included at the undiscounted amount of cash expected to be paid.

A contract asset is recognised within receivables where the Company has earned the right to revenue through performance under contracts. Contract assets are also potentially subject to credit losses and are therefore subject to a provision for expected credit losses in the same way as trade receivables as described above.

Cash and cash equivalents comprise cash on hand and call deposits, and other short-term highly liquid investments that have a maturity date of 3 months or less, are readily convertible to a known amount of cash and are subject to an insignificant risk of change in value.

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of a past event, it is probable that the Company will be required to settle that obligation and a reliable estimate can be made of the amount of the obligation.

Provisions are measured at the directors' best estimate of the expenditure required to settle the obligation at the reporting date and are discounted to present value where the effect is material.

The Company as lessee

Short term leases or leases of low value are recognised as an expense on a straight-line basis over the term of the lease.

The Company recognises right-of-use assets under lease agreements in which it is the lessee. The underlying assets comprise property, plant and machinery and motor vehicles, and are used in the normal course of business. The right-of-use assets comprise the initial measurement of the corresponding lease liability payments made at or before the commencement day as well as any initial direct costs and an estimate of costs to be incurred in dismantling the asset. Lease incentives are deducted from the cost of the right-of-use asset. The corresponding lease liability is included in the statement of financial position as a lease liability.

The right-of-use asset is depreciated on a straight-line basis over shorter of the asset's useful life and the lease term and if necessary impaired in accordance with applicable standards. The lease liability shall initially be

measured at the present value of the lease payments that are not paid at that date, discounted using the rate implicit in the lease or, where this cannot be determined, the Company's incremental borrowing rate. The lease liability is subsequently measured by increasing the carrying amount to reflect interest on the lease liability (application of the effective interest method) and by reducing the carrying amount to reflect the lease payments

made. No lease modification or reassessment changes have been made during the reporting period from changes in any lease terms or rent charges.

Share capital

Ordinary shares are classified as equity. Equity instruments are measured at the fair value of the cash or other resources received or receivable, net of the direct costs of issuing the equity instruments. If payment is deferred and the time value of money is material, the initial measurement is on a present value basis.

Contributions to defined contribution plans are recognised as employee benefit expense when they are due. If contribution payments exceed the contribution due for service, the excess is recognised as a prepayment.

Share-based payment

The fair value of the services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted:

• including any market performance conditions (e.g., an entity's share price);

• excluding the impact of any service and non-market performance vesting conditions (e.g., profitability, sales growth targets and remaining an employee of the entity over a specified time period), and

• including the impact of any non-vesting conditions (e.g., the requirement for employees to save).

Non-market performance and service conditions are included in assumptions about the number of options that are expected to vest. The total expense is recognised over the vesting period, which is the period over which all of the specified vesting conditions are to be satisfied. At the end of each financial period, the Group revises its estimates

of the number of options that are expected to vest based on the non-market vesting conditions. It recognises the impact of the revision to original estimates, if any, in the Consolidated Statement of Comprehensive Income, with a corresponding adjustment to equity. When the options are exercised, and the Group issues new shares to meet that obligation, the proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share premium.

3 Critical accounting judgements and key sources of estimation uncertainty

In the application of the Company's accounting policies, management is required to make judgements, estimates and assumptions about the carrying value of assets and liabilities that are not readily apparent from other sources. The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of revision and future periods if the revision affects both current and future periods. The key sources of estimation uncertainty that have a significant effect on the amounts recognised in the financial statements are described below. The impact of climate change are at present considered to be not material.

The Company has considered the nature of the estimates involved in deriving balances on long term contracts, and concluded that it is possible that outcomes within the next financial year may be different from the Company's assumptions applied as at 30 September 2023 and could require an adjustment (but not considered to be material) to the carrying amounts of these assets and liabilities in the next financial year.

However, due to the level of uncertainty, combination of cost and income variables and timing across the Company's portfolio of contracts at different stages of their contract life, it is impracticable to provide a quantitative analysis of the aggregated judgements that are applied at a portfolio level.

Key judgements

Lease discount rate

IFRS 16 requires the carrying value lease liabilities and the corresponding right of use assets to be calculated using the net present value of future lease payments. This calculation inherently requires a discount rate to be applied, which requires judgement. The Directors have used the Company's incremental borrowing rate for property leases where the rate implicit in the lease cannot be determined. The incremental borrowing rate applied is based on the interest rate applied to the bank loan disclosed in note 20.

Key sources of estimation uncertainty

Revenue recognition (Civil projects)

In order to determine the profit and loss that the Company is able to recognise on its Civil projects in the accounting period, the Company has to estimate the total costs expected to be incurred under each project. While the costs incurred to date are known, the estimation of costs to complete for each project requires judgement. Management assess the degree of completion by measuring the value of costs incurred as a percentage of the estimated total costs of the project. This is considered the most appropriate measure of completion of projects as revenue is invoiced based on the value of work performed. This represents an 'input method' under IFRS 15. Such estimates are revised as a project progresses to reflect the current status of the project and the latest information available to management. The project teams regularly review contract progress to ensure the latest estimates are appropriate. Further information is disclosed in note 2 under 'Revenue' and the carrying amounts of contract assets are stated in Note 6. There will always be some estimation uncertainty in the recognition of revenue owing to the estimate of cost to complete.

The Group recognises recoveries of claims from clients as revenue where clear entitlement has been established, such as through dispute-resolution processes. This includes the recovery of costs (such as delays to the contract programme) to the extent it is highly probable not to result in a significant reversal of revenue in the future.

Provision

As disclosed in note 18, a provision is included in this financial statements relating to the potential underpayment of National Insurance Contributions under the Construction Industry Scheme. There is a level of uncertainty in the quantum and timing of future payments related to this liability.

4 Earnings per share

	Year ended 30 September
		2023	2022
Basic and diluted		£	£
Earnings used in calculation of earnings per share:
Total profits attributable to equity holders		770,235	320,852
Weighted average number of shares in issue		60,803,022	55,640,408

Earnings per share

On total profits attributable to equity holders

1.27p

0.58p

The Company has share options and warrants in issue as disclosed in note 25. However, the average share price during the period since issue was lower than the exercise price, therefore the potential shares arising are not dilutive.

5 Segmental reporting

The Company's management have identified four operating segments: labour supply, civil projects, suction excavator services; and other services. The segments are monitored by the Company's chief operating decision maker and strategic decisions are made based on the segments' operating results.

In total, at 30 September 2023 suction excavators accounted for £11,928,050 (2022: £6,040,600) of right-of-use assets, and £9,890,628 (2022: £5,364,237) of lease liabilities. All other assets and liabilities relate to other business segments.

Segment information for the year ended 30 September 2023 is as follows:

	Labour supply	Civil projects	Suction excavator services	Other	Total
	£	£	£	£	£
Revenue (all from external customers)	63,818,639	15,656,406	4,895,671	293,820	84,664,536
Cost of sales	(53,191,736)	(12,409,711)	(2,642,434)	(95,691)	(68,339,572)
Gross profit	10,626,903	3,246,695	2,253,237	198,129	16,324,964
Administrative expenses	(1,961,416)	(1,455,333)	(1,620,355)	(225,673)	(5,262,777)
Other operating income				10,204	10,204
Operating profit from segments	8,665,487	1,791,361	632,882	(17,340)	11,072,391
Administrative expenses
not attributable to segments					(9,012,051)
Profit from operations					2,060,340
Finance income					326
Finance costs					(1,419,345)
Profit before tax					641,321

Other services include digital products, health trailer service and vehicle investment sales.

All suction excavators belong to and are used by the Suction Excavator Services segment outlined above.

Segment information for the year ended 30 September 2022 is as follows:

	Labour supply	Civil projects	Suction excavator services	Other	Total
	£	£	£	£	£
Revenue (all from external customers)	33,250,617	12,370,937	3,645,934	281,999	49,549,487
Cost of sales	(27,719,436)	(10,355,715)	(1,517,541)	(177,682)	(39,770,374)
Gross profit	5,531,181	2,015,222	2,128,393	104,317	9,779,113
Administrative expenses	(1,284,275)	(810,482)	(1,085,008)	0	(3,179,765)
Operating profit from segments	4,246,906	1,204,740	1,043,385	104,317	6,599,348
Administrative expenses
not attributable to segments					(5,893,650)
Profit from operations					705,698
Fair value gains					691
Finance income					4,634
Finance costs					(550,338)
Profit before tax					160,685

6 Revenue

The total turnover of the Company has been derived from activities wholly undertaken in the United Kingdom, being the provision of service through supply of labour and the operation of construction and engineering contracts, the hire of suction excavators and other services.

The Company's revenue from each activity is shown below and is all derived in the United Kingdom.

	Year ended 30 September
	2023	2022
	£	£
Labour Supply	63,818,639	33,250,617
Civil projects	15,656,406	12,370,937
Suction excavator services	4,895,671	3,645,934
Other	293,820	281,999
	84,664,536	49,549,487

Other than suction excavator and other services, the Company derives its income from two main activities, both of which are linked to the principal activity of the delivery of construction and civil engineering services, being the provision of labour and services provided under construction and/or civil engineering contracts. These are referred to internally as 'labour supply' and 'civil projects' respectively.

Significant customers

In the year ended 30 September 2023 one customer represented 36% (£33,660,426) of revenue (2022 one customer 17% (£8,437,682)), and another customer represented 8% (£7,872,934) of revenue (2022 one customer 11% (£5,404,125)). These customers were primarily labour supply customers. No other customers represented more than 8% of revenue in either year.

Contracts with customers

The Company has contract assets relating to revenue earned from the supply of labour and construction services. Due to the nature of this revenue, balances defined as contract assets will vary and depend on the number, timing and nature of the contracts in progress at the balance sheet date. The relevant balances are shown as contract assets in note 17. The increase in contract assets compared to the prior year represents the increased level of activity at the year end.

Revenue from contract assets

Revenue in the year relating to previously recognised contract assets was £6,739,637 (2021 : £3,362,862)

Contract balances

The nature of the Company's revenue recognition is such that the only contract balances arising relate to accrued income, which is shown as a contract asset. The balance at 30 September 2023 was £9,948,670 (2022 : £6,739,637).

Significant changes in contract assets

The Company has many contracts for services and underway at any point in time, and these are a mix of large and small contracts, generally with monthly invoicing. The level of contract assets therefore fluctuates depending on the mix of contracts and the stage of contract completion at the balance sheet date by reference to costs incurred to date.

7 Other operating income

	Year ended 30 September
		2023	2022
		£	£
Inter-company sales		3,102	-
Reclaim of training costs		7,102	-

		10,204	-

Other operating income comprises amounts recognised as income that not considered to be part of the main revenue generating activities, the Company presents this income separately from revenue.

8 Profit from operations

Year ended 30 September

£ £

2023 2022

Operating profit 2,060,340 705,698

Operating profit is stated in the income statement after charging:


Depreciation - owned assets	168,356	146,472
Deprecation - right-of-use assets	1,603,534	887,599
Loss on disposal of fixed assets	43,124	21,218
Research and development costs	4,098	36,555

9 Auditors' remuneration

No non-audit services have been provided in the year.

10 Staff costs

The aggregate employee benefit expenses were as follows:

	Year ended 30 September
		2023	2022
		£	£
Wages and salaries		29,276,624	13,375,145
Social security costs		3,143,116	1,506,878
Pension costs		515,400	265,586
		32,935,140	15,147,609

The average monthly number of employees during the year was as follows:

	Year ended 30 September
		2023	2022

Site based operatives		422	212
Administrative and Managerial		138	63
		560	275

11 Directors' remuneration

Key management of the Company are the members of the board of directors. Key management personnel remuneration includes the following expenses:

	Year ended 30 September
		2023	2022
		£	£
Salaries		628,937	517,646
Benefits		11,693	14,331
Pension contributions		93,750	70,500
		734,380	602,477

During the year retirement benefits were accruing to 2 directors (2022: 4) in respect of defined contribution pension schemes.

Amounts paid to the highest paid director were as follows:

	Year ended 30 September
		2023	2022
		£	£
Salary and benefits		277,894	164,861
Pension contributions		60,000	40,000
		337,894	204,861

12 Finance costs

	Year ended 30 September
		2023	2022
		£	£
Lease finance costs		693,014	317,847
Interest on loans measured at amortised cost		683,812	230,552
Other interest		42,519	1,939
		1,419,345	550,338

13 Income taxes

	Year ended 30 September
		2023	2022
		£	£
Current tax:
UK corporation tax		-	-
Adjustments to prior periods		-	-
Total current tax charge		-	-


Deferred tax:
Origination and reversal of timing differences		(62,378)	(114,925)
Adjustments in respect of prior periods		(66,536)	(45,242)
Effect of tax rate change on opening balance		-	-
		(128,914)	(160,167)

Tax on profit on ordinary activities		(128,914)	(160,167)

Tax on profit on ordinary activities for the year is lower than the standard rate of corporate tax in the UK of 22%, (2022: 19%).

On 1 April 2023 the rate of corporation tax in the UK increased from 19% to 25%. As a result, the effective tax rate applied to the Company's profits for the year is 22%, being six months at 19% and six months at 25%.

The differences are reconciled below:

	Year ended 30 September
Continuing operations		2023	2022
		£	£
Profit on ordinary activities before taxation		641,320	160,685

Tax at the UK rate of 22% (2022: 19%)		141,143	30,530
Effect of:
Expenses not deductible for tax purposes		45,960	112,796
Fixed asset differences		(242,016)	(230,669)
Adjustments in respect of prior periods		(66,536)	(45,242)
Remeasurement of deferred tax for change in tax rates		(7,465)	(27,582)
Total tax credit		(128,914)	(160,167)

14 Deferred tax

Deferred tax balances are analysed as follows:

Deferred tax balances before offset	30 September 2023	30 September 2022
	£	£
Deferred tax liability	(3,833,399)	(1,998,219)
Deferred tax asset	3,674,893	1,710,799
Total deferred tax liability	(158,506)	(287,420)

Deferred tax balances after offset	30 September 2023	30 September 2022
	£	£
Deferred tax asset	-	-
Deferred tax liability	(158,506)	(287,420)
Total deferred tax liability	(158,506)	(287,420)

The amounts reflect the differences between the carrying and tax amounts of the following balance sheet headings as at each year end.

Credits/(charges) during each year are as follows:

	Tax losses	Short term temporary differences	Fixed asset temporary differences	Total
	£	£	£	£

At 1 October 2021 - asset/(liability)	645,946	143	(1,093,676)	(447,587)
Tax credit/(charge) in respect of current year	1,063,412	1,298	(904,543)	160,167
At 30 September 2022 - asset/(liability)	1,709,358	1,441	(1,998,219)	(287,420)
Tax credit/(charge) in respect of current year	1,892.999	71,095	(1,835,180)	128,914
At 30 September 2023 - asset/(liability)	3,602,357	72,536	(3,833,399)	(158,506)

In May 2021 an increase in the main corporation tax rate to 25% was enacted, and has been applied to the deferred tax provisions and assets shown above.

15 Property, Plant and Equipment

	Plant and machinery		Fixtures & office equipment	Right-of-use assets	Total
		£	£	£	£
Cost
At 1 October 2021		1,347,502	426,198	9,131,491	10,905,191
Additions		67,710	160,475	6,474,034	6,702,219
Disposals		(438,917)	-	-	(438,917)
At 30 September 2022		976,295	586,673	15,605,525	17,168,493
Additions		159,279	221,141	7,763,818	8,144,238
Disposals		(259,872)	(21,909)	(122,821)	(404,602)
At 30 September 2023		875,702	785,905	23,246,522	24,908,129

Depreciation
At 1 October 2021		370,769	265,598	1,032,601	1,668,968
Charge		85,683	60,748	887,640	1,034,071
Disposals		(176,944)	-	-	(176,944)
At 30 September 2022		279,508	326,346	1,920,241	2,526,095
Charge		68,754	99,602	1,603,534	1,771,890
Disposals		(107,334)	(21,909)	(59,757)	(189,000)
At 30 September 2023		240,928	404,039	3,464,018	4,108,985

Net book value
At 30 September 2023		634,774	381,866	19,782,504	20,799,144
At 30 September 2022		696,787	260,327	13,685,284	14,642,398
At 30 September 2021		976,733	160,600	8,098,890	9,236,223

Certain right-of-use assets are pledged as security on the lease agreements to which they relate.

16 Trade and other receivables


	As at 30 September 2023	As at 30 September 2022
Amounts falling due within one year:	£	£

Trade receivables	12,017,411	9,395,331
Other receivables	49,414	812,251
Contract assets	9,948,670	6,739,637
Prepayments	582,649	959,738
	22,598,144	17,906,957

Trade and other receivables and contract assets above are stated net of expected credit loss ('ECL') provisions where necessary, which are calculated using the simplified approach grouping trade receivables and contract assets on the basis of their shared credit risk characteristics.

Trade receivables are regularly reviewed for bad and doubtful debts. The Company's policy is to include a provision for impairment based on estimated credit losses. This includes an assessment where relevant of forward-looking information on macroeconomic factors that may affect the ability of customers to settle receivables. Trade receivables are written off where there is no reasonable expectation or recovery, for example where the customer has entered insolvency proceedings or where a customer has failed to make contractual payments for an extended period. As part of this assessment, the Company also considers the likelihood of any credit losses occurring in future based on previous experience and knowledge of the respective customers.

Trade and other receivables are all current and any fair value difference is not material. Trade and other receivables are assessed for impairment based upon the expected credit losses model. In order to manage credit risk, the Directors set limits for customers based on a combination of payment history and third party credit references. Credit limits are reviewed on a regular basis in conjunction with debt ageing and collection history.

At 30 September 2023 an amount of £91,577 was included as an ECL provision. This was in respect of a single customer, which had gone into administration, and was considered by the Directors to be a fairly exceptional event. It was therefore excluded when considering any further provision required under the expected credit loss model. The company believe the credit risk attached to its customer base is minimal, as such have taken the ECL percentage as nil.

In addition to any provisions required for ECL, the Company also includes a provision against trade receivables and contract assets for disputed items. During the year ended 30 September 2023 the Company recorded a credit to the income statement of £129,140 in respect of changes in the dispute provision.

As at 30 September 2023 the balance of the dispute provision was £170,429 (2022: £41,289).

The maturity analysis of trade receivables is:

	< 1 month	1-2 months	2-3 months	> 3 months	Total
	£	£	£	£	£

30 September 2023	6,320,261	4,728,343	440,014	528,793	12,017,411

30 September 2022	4,920,487	1,013,039	1,509,228	1,993,866	9,436,620

The expected credit loss rate on all ageing columns above has been assessed as being immaterial.

17 Trade and other payables


	As at 30 September 2023	As at 30 September 2022
Amounts falling due within one year:	£	£

Trade payables	2,019,417	2,257,614
Amounts owed to parent undertaking	38,938	-
Social security and other taxes	4,629,718	2,353,042
Other payables	4,781,476	2,216,235
Accrued expenses	452,379	178,211

	11,921,928	7,005,102

Trade payables are all current and any fair value difference is not material.

18 Provisions


	2022	2022
	£	£

At 1 October	304,951	259,537
Payments made	(304,951)	-
Additional provision for year	-	45,414


At 30 September	-	304,951

The Directors have identified a potential underpayment of National Insurance contributions in respect of payments made to subcontractors. Following extensive professional consultation and advice, the Directors considered the roles for all subcontractors provided by the Company. Whilst the Directors consider that many of the roles were outside the scope of the Agency legislation, there were several that were potentially considered within the scope of the rules.

The Company has commenced the process of voluntary disclosure to HM Revenue & Customs in this regard. The provision of £(0) 2022 : £304,951), based on those roles that the Directors deemed were inside the scope of the Agency legislation, was recognised as at 30 September 2022, and the amounts provided have now been repaid to HMRC in full. Any adjustment to this settlement however, currently remains uncertain. The directors have not provided for a penalty which may be between 0% and 30% of any liability arising from the disclosure, on the basis that they are making a voluntary disclosure to HM Revenue & Customs. The Directors have used their best estimate based on the advice provided and their analysis of the potential underpayments.

The provision stated above is subject to uncertainty in both amount and timing of cash flows due to the fact that the Company has submitted voluntary disclosure to HM Revenue & Customs but is yet to receive any substantive response. It is possible that, following the voluntary disclosure exercise, HM Revenue & Customs may challenge that more of the roles should be caught by the Agency rules and therefore the final liability may be higher. The risks of this liability being higher fall into two categories:

1) HMRC may conclude, after investigation into the relevant contractors self assessment tax returns, that their tax and/or NIC has been underpaid, and that the right of "set off" is not applicable. This may require the Company to make good any underpaid amounts the contractors can't pay.

2) HMRC may decide at some point in the future that they wish to consider the roles the Company deems are outside of the Agency legislation.

However, the amounts stated above are, in the Directors opinion, reflective of the best estimate and are confident of having a robust position to defend their judgements to which the Company is exposed.

During the year the Company made a number of payments on account in anticipation of a final settlement with HMRC and, as such, there was no remaining balance on the provision at the balance sheet date.

19 Loans and borrowings


	As at 30 September 2023	As at 30 September 2022
	£	£
Included within current liabilities
Bank loans	9,959,646	6,528,750

The bank loan is secured by guarantees from the Company's major shareholder, Hercules Real Estate Limited. The loan is a revolving facility with a rolling 3 month notice period, is secured on trade receivables and attracts interest at a rate of 2.25% over base rate. The facility was capped at £11m and replaced post period end by a new, larger facility (see note 28).

20 Leases

The Company leases properties and certain items of plant and machinery. With the exception of short-term leases and leases of low value underlying assets, each lease is reflected on the balance sheet as a right-of-use asset (Note 15) and a lease liability.

The Company had recognised 4 property leases in 2023 (2022 - 4), 56 vehicle leases (2022 - 65) and 28 plant and machinery leases (2022 -17).

All future cashflows are included. The property leases are subject to rent reviews every five years. The nature of the rent reviews is such that annual rentals are adjusted to prevailing market rates unless that would lead to a reduction. In accordance with IFRS 16, any future increases in annual rentals arising from rent reviews are not included in the calculation of the lease liabilities. Any future increases in annual rentals will result in prospective adjustments to the lease liabilities at the point of the rent review.

Amounts recognised in the Statement of Financial Position relating to leases, categorised by underlying type of asset, are:

	Leasehold property £	Plant and machinery £	Motor vehicles £	Total £
Net book value
At 1 October 2021	4,231,347	3,713,061	154,482	8,098,890
New leases recognised in the year	1,251,157	3,840,541	1,382,337	6,474,035
Depreciation charge for the year	(234,968)	(444,072)	(208,559)	(887,599)
At 30 September 2022 Adj to PY	5,247,536 (1)	7,109,530 (2,871)	1,328,260	13,685,326 (2,872)
New leases recognised in the year Leases terminated in the year	85,829 (37,752)	6,539,653 -	1,138,336 (22,482)	7,763,818 (60,234)
Depreciation charge for the year	(309,786)	(922,908)	(370,840)	(1,603,534)
At 30 September 2023	4,985,826	12,723,404	2,073,274	19,782,504

Maturity analysis


	2023	2022
	£	£

Due within one year	3,488,821	2,483,527
Due within two to five years	10,562,511	7,045,096
Due after five years	6,260,133	5,784,982
Future finance charges	(3,326,250)	(2,382,348)

	16,985,215	12,931,257

Amounts recognised in the Statement of Comprehensive Income

The statement of comprehensive income shows the following amounts relating to leases:


	2023	2022
	£	£

Depreciation charge of right of use asset	1,603,534	887,599
Interest expenses (within finance costs)	693,014	317,848

	2,296,548	1,205,447

Amounts recognised in the Statement of Cash Flows

The statement of cash flows shows the following amounts relating to leases:


	2023	2022
	£	£

Cash outflows	4,402,874	1,406,611

Low value leases and short-term leases

The Company has no leases for which the low value or short-term exemptions of IFRS 16 has been applied.

21 Financial instruments


	As at 30 September 2023	As at 30 September 2022
Financial assets held at amortised cost:	£	£

Trade receivables	12,017,411	9,395,331
Other receivables	49,414	812,251
Cash and cash equivalents	4,151,565	1,211,554


	16,218,390	11,419,136

	As at 30 September 2023	As at 30 September 2022
Financial liabilities held at amortised cost:	£	£

Bank borrowings	9,959,646	6,528,750
Trade payables	2,019,417	2,742,981
Amounts owed to parent undertaking	38,938	-
Other payables	4,781,476	2,216,235
Accrued expenses	452,379	178,211
Lease liabilities	16,985,215	12,931,257


	34,237,071	24,597,434

22 Financial Risk management

The Company uses various financial instruments. These primarily include bank borrowings, cash and various items, such as trade receivables and trade payables that arise directly from its operations. The main purpose of these financial instruments is to finance the Company's operations.

The existence of these financial instruments exposes the Company to a number of financial risks, which are described in more detail below.

a) Market risk

Market risk encompasses three types of risk, being currency risk, interest rate risk and price risk.

Exposure to interest rate risk is considered further below. There is no exposure to currency risk as the Company operates entirely with the United Kingdom and all transactions are denominated in Pounds Sterling.

Interest rate risk is limited to interest paid on the Company's variable rate bank borrowings and interest received on cash deposits. Due to the relatively low level of borrowings and the low rates of interest on cash deposits, the impact of any changes in interest rate is not considered significant.

A change in interest rates of 1% would add additional cost of between £65,000 and £100,000 per year depending on the likely average level of the use of the invoice discounting facility.

b) Liquidity risk

The Company seeks to manage financial risk by ensuring sufficient liquidity is available to meet foreseeable needs by closely managing its cash balance. The Company has significant levels of cash reserves available and continues to generate profit before taxation. In this context, liquidity risk is therefore considered to be low.

The Company's borrowing facilities are continually monitored against forecast requirements and timely action is taken to put in place, renew or replace credit lines.

A new invoice discounting facility was implemented in November 2023, with an initial cap of £15m. The only relevant covenant is the Company needs to keep a minimum headroom of £0.5m.

The Company acquires items of property, plant, and equipment on lease agreements where appropriate to assist in managing liquidity risk by avoiding the depletion of cash on large capital purchases. The Company also manages its liquidity needs by carefully monitoring cash outflows due on a day-to-day basis.

The Company's financial liabilities comprise bank borrowings, trade payables, other payables, accruals, amounts due to related parties and lease liabilities. The maturity of lease liabilities is disclosed in note 21 above. All other financial liabilities are expected to be settled within 12 months of the balance sheet date.

Where the balances are due within 12 months the contractual undiscounted cash flow is considered to be their carrying value as the impact of discounting is not significant.

c) Credit risk

The Company's principal financial assets are cash and trade receivables. Credit risk is also attached to contract assets that represent accrued income. The credit risk associated with cash is limited, as the counterparties have high credit ratings assigned by international credit-rating agencies. The credit risk associated with trade receivables is minimal as invoices are based on contractual agreements with long-standing customers. Debt levels with all customers are closely monitored, and a process involving informal and then formal communications is used where payments a re delayed. New customers are carefully assessed using the usual credit risk agencies.

Credit losses historically incurred by the Company have consequently been immaterial, other than two bad debts incurred in the years ended 30 September 2021 and September 2023 of approximately £691,000 that the directors consider to be fairly exceptional. These arose due to the unexpected business failures of one major and one minor customer.

Notwithstanding the lack of historical credit losses, the Company maintains a credit note provision against receivables. However, this is not necessarily linked to credit risk and the ageing of receivables is not the most relevant indicator to determine the potential impairment of a receivable. The nature of the Company's operations is such that misunderstandings or minor disagreements may arise during the course of contracts, which may sometimes require an adjustment to be made to achieve settlement.

The Company's provision is broadly on the basis of any receivables that remain outstanding after 6 months. The Company had no material individual receivables past due or impaired at 30 September 2023 or 30 September 2022, other than the exceptional amount referred to above.

Further details regarding expected credit losses can be found in note 17.

Capital management

The Company's capital comprises total equity and net debt. The Company's capital management objectives are:

- To ensure its ability to trade as a going concern; and

- To provide an adequate return to shareholders.

The Company monitors capital based on the carrying amount of equity and net debt. Adjustments are made as necessary based on the Directors' assessment of the needs of the business and external factors such as the Company's industry and the wider economy. The Company has traded profitably and therefore generally levels of debt have been low. More recently a revolving credit facility has been utilised to assist with working capital, and debt has also been increased by the leasing of a number of capital items, particularly suction excavators which are expected to be a significant future source of income and profitability.

Therefore, whilst the Company appears to be relatively highly geared, this is in line with the Directors' strategy to grow the business.

The Directors are able to maintain and adjust the capital structure by adjusting dividends, issuing new shares or selling assets to reduce debt.

A summary of the Company's gearing is shown below.

	30 September 2023	30 September 2022
		£

Total equity	8,657,202	6,838,092
Net debt	22,793,296	18,248,453
Total capital	31,450,498	25,086,545
Gearing ratio (net debt / capital)	72%	73%

23 Share capital

Issued capital


	As at 30 September 2023	As at 30 September 2022
Allotted, called up and fully paid	Number	Number
Ordinary shares of 0.1p each (2022: 0.1p each)	62,427,984	58,650,206
	As at 30 September 2023	As at 30 September 2022
Allotted, called up and fully paid	£	£
Ordinary shares of 0.1p each (2022: 0.1p each)	62,428	58,650

Share rights

The ordinary shares have attached to them full voting, dividend and capital distribution rights (including on winding up). They do not confer any right of redemption.

In March 2023, the Company issued a further 3,777,778 ordinary shares of 0.1p each for total gross consideration of £1,700,000, which amounted to £1,582,224 after issue costs.

24 Share based payments

As part of its flotation on the AIM Market of the London Stock Exchange on 4 February 2022, the Company issued a number of share options and warrants to key employees and suppliers. 293,250 further options were granted during the year.

The number of options and warrants granted is shown in the table below.

	Options		Warrants
	Number	Weighted average exercise price	Number	Weighted average exercise price
At 1 October 2022	2,932,504	50.5p	716,379	50.5p
Issued on 6 February 2023	293,250	56.0p	-	-
At 30 September 2023	3,225,754	51.0p	716,379	50.5p

Options

The weighted average remaining contractual life of the share options outstanding at 30 September 2022 was 6 years and 4 months. The options have a fixed exercise price based on the market price at the time of grant.

The options may be exercised between 4 February 2027 and 3 February 2029. No specific criteria is involved other than to be on the payroll for the period up to the start of the expected life of the options (see below). Any option holder leaving the employment of the Company before then forfeits the options. The issue of these options is not part of the remuneration package for the individuals concerned.

The fair value of the options is estimated at the grant date using a Black-Scholes option-pricing model that uses assumptions noted in the table below. All options were granted on 6 February 2022 and were valued using the following assumptions:

Date of grant of option	6 Feb 2023	4 Feb 2022

Expected life of options (years)	5 years	6 years
Exercise price	56.0p	50.5p
Market value of share at date of grant	56.5p	50.5p
Risk free rate	3.15%	1.43%
Expected share price volatility	42%	20%
Expected dividend yield	6.31%	3.36%
Fair value per option	9.20p	5.18p
Total fair value of options	£26,986	£121,489
Charged to profit and loss in year	£4,498	£24,297

Expected life of options

The expected life of the options was estimated based on the average of the minimum and maximum life under the option agreements.

Risk-free rate

A risk free rate of 3.15% (2022 options: 1.43%) was assumed in the option pricing model, based on the yield from dividend strip government bonds with a similar life to the options issued as close as possible to date of grant.

Dividend yield

This is based on the level of dividends paid by the Company in the period since listing on AIM.

Exercise price

The exercise price was fixed at the market price at the date of grant.

Volatility

Volatility was assumed to be 42% on average (2022 options: 20%). The directors based this assumption on the share price of the Company throughout the year. The Directors consider this the most appropriate method of assessing expected volatility as there is no comparable listed company from which to draw data. Taking into account factors such as liquidity and performance, this is expected to be a reasonable reflection of the expected volatility throughout the expected life of the options.

The cost that has been charged to profit and loss in respect of share options is shown above and was included in staff costs. The total fair value of the options as shown above is being spread over the vesting period of 5 years in each case.

Warrants

The weighted average remaining contractual life of the warrants outstanding at 30 September 2022 was 2 years and 4 months. The options have a fixed exercise price based on the market price at the time of grant.

The warrants may be exercised at any time from the date of grant (31 January 2022) to 31 January 2025 at the option of the warrant holder.

The fair value of the warrants was estimated at the grant date using a Black-Scholes option-pricing model that uses assumptions noted in the table below. All options were granted on 4 February 2022 and were valued using the following assumptions:

Expected life of warrants (years)				3 years
Exercise price				50.5p
Market value of share at date of grant				50.5p
Risk free rate				1.43%
Expected share price volatility				20%
Expected dividend yield				3.36%
Fair value per option				4.11p

Expected life of warrants

The estimate for the expected life of the warrants was based on the warrant's contractual life.

Risk-free rate

A risk free rate of 1.43% was assumed in the option pricing model, based on the yield from dividend strip government bonds with a similar life to the options issued as close as possible to date of grant.

Dividend yield

This was based on the level of dividends paid by the Company in the year.

Exercise price

The exercise price was fixed at the market price at the date of grant, being 50.5p.

Volatility

Volatility was assumed to be 20% on average. The directors based this assumption on the share price of the Company throughout the year. Taking into account factors such as liquidity and performance, this is expected to be a reasonable reflection of the expected volatility throughout the expected life of the options.

The cost that was charged to profit and loss in the prior year in respect of share options was £23,575. The charge was included within administrative expenses. The warrants vested immediately, therefore this charge represented the full calculated fair value of the instruments and no further charge to profit and loss will be required.

25 Defined contribution pension scheme

The Company operates defined contribution pension schemes. The pension cost charge for the year represented contributions payable by the Company to the schemes and amounted to £503,035 (2022 - £265,586). Contributions totalling £195,709 (2022 - £5,766) were payable to the schemes at the end of the year and are included in other payables.

26 Related party transactions

Ultimate controlling party

During the historical financial period, the Company was controlled by B K Korkmaz and Mrs N Korkmaz by virtue of their shareholding in the parent undertaking, Hercules Real Estate Limited.

Key management personnel compensation

Key management personnel remuneration has been set out in note 11 to the financial statements.

Transactions with parent entity

The following transactions occurred with the Company's ultimate controlling party, Hercules Real Estate Limited:


	2023	2022
	£	£
Rental payments	390,000	379,156
Work done & insurance recharged	3,102	-

Hercules Real Estate Limited has provided a guarantee against the borrowings disclosed in note 19.

Outstanding balances arising from sales/purchases of goods and services

At 30 September 2023 the Company owed £38,938 to Hercules Real Estate Limited. There were no outstanding balances as at 30 September 2022.

27 Capital commitments

At 30 September 2023, the Company had orders committed to a value of £74,028 (2022: £6,506,472).

28 Post Balance Sheet Events

Hercules acquired 60% of Future Build Recruitment Ltd in November 2023, and as part of the acquisition a partnership arrangement was entered into with the owners of the remaining 40%. The consideration was £1,001,000 in cash and £250,000 satisfied through the issue of 994,431 shares. Future Build Recruitment Ltd are a business operating in the construction sector specialising in white collar placements.

Hercules sold two of the oldest suction excavators in October 2023, as they were of the "floppy arm" design, not the "power arm" design that most customers now expect. The Company now has 28 suction excavators in its fleet.

A new replacement invoice discounting facility was entered into in November 2023, with IGF Business Credit Limited and provides a facility up to £15m, further supporting Hercules' growth plans in the years ahead. The guarantee given by Hercules Real Estate Limited at that point became null and void.

The Board is pleased to propose a final dividend of 1.12 pence per share for the year ended 30 September 2023. The dividend will be paid on 22 March 2024 to shareholders on the register at close of business on 23 February 2024. The shares will go ex-dividend on 22 February 2024.

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END

Hercules Site Services (HERC)

Monday, 29th April 2024

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