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Hargreaves Servs PLC (HSP)

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Tuesday 11 August, 2015

Hargreaves Servs PLC

Preliminary Results

RNS Number : 6706V
Hargreaves Services PLC
11 August 2015
 

For Immediate Release

11 August 2015

 

HARGREAVES SERVICES PLC

(the "Company" or the "Group" or "Hargreaves")

 

Preliminary results for the year ended 31 May 2015

 

Hargreaves Services plc (AIM: HSP), the UK's leading supplier of solid fuel and bulk material logistics, announces its preliminary results for the year ended 31 May 2015.

 

Key Financials

 

Year ended
31 May 2015

Year ended

31 May 2014

Change

%

 

 

 

 

Continuing Revenue

£662.2m

£869.2m

(23.8)%

Continuing Operating Profit (1)

£38.1m

£50.9m

(25.1)%

Continuing Underlying Operating Profit (2)

£42.8m

£59.5m

(28.1)%

Continuing Profit before Tax

£24.9m

£52.1m

(52.2)%

Continuing Underlying Profit before Tax (3)

£40.3m

£55.1m

(26.9)%

Continuing Diluted EPS

64.2p

122.2p

(47.5)%

Continuing Underlying Diluted EPS (3)

93.9p

124.8p

(24.8)%

Dividend (including proposed final dividend)

30.0p

25.5p

17.6%

Net Debt (4)

£1.0m

£68.8m

(98.5)%

 

 

 

 

 

Highlights

 

·     The Group has delivered a strong performance in very challenging markets

Continuing Underlying Operating Profit of £42.8m

Excellent cash generation and our Simplification Programme have resulted in Net Debt of only £1.0m at the end of the year

·     Underlying trading for the year was broadly in line with management's expectations

·     Group Simplification Programme is now substantially complete, leading to the disposal of Imperial Tankers and the closure of our Monckton coke operation

·     Markets remain challenging with a further fall in the coal price since the interim results and a number of potential coal fired power station closures announced

·     Final dividend significantly increased to 20.0 pence per share from 16.7 pence per share reflecting the previously announced decision to move to a higher payout ratio and the strong cash generation despite the difficult trading conditions

·     Strengthened balance sheet and strategic options under active review

 

Commenting on the results, Chairman Tim Ross said:

"The last two years have presented the coal industry with extremely challenging market conditions.  The Board has worked hard to ensure controllable risks are managed and to minimise the impact of risks beyond our control. We were clearly right to initiate the Simplification Programme last year. With a significant restructuring exercise largely behind us, we can concentrate on our strategic options to deliver future shareholder value."

 

(1) Continuing Operating Profit is stated before simplification costs of £9,130,000

(2) Continuing Underlying Operating Profit is stated excluding the simplification costs, the impact of the Biomass conversion project settlement, the amortisation of acquired intangibles and impairment of goodwill, impairment of non-current assets, and including share of profit in associates and joint ventures before tax

(3) Continuing Underlying Profit before Tax and Continuing Underlying Diluted EPS are stated excluding the simplification costs, the impact of the Biomass conversion project settlement, the amortisation and impairment of acquired intangibles, impairment of non-current assets and gain on disposal of subsidiaries

(4) Net debt comprises cash and cash equivalents, bank overdrafts and other interest bearing loans and borrowings

 

 

 

Hargreaves Services plc

Gordon Banham, CEO

Iain Cockburn, Finance Director

 

 

0191 373 4485

Buchanan

Mark Court  / Sophie Cowles

 

0207 466 5000

N+1 Singer

Sandy Fraser / Nick Owen

 

020 7496 3000

Jefferies Hoare Govett Limited

Harry Nicholas

0207 029 8000

 

 

 

 

 

CHAIRMAN'S STATEMENT

 

Results

 

Underlying Profit before Tax from Continuing Operations decreased by £14.8m from £55.1m to £40.3m. Reported Profit before Tax from Continuing Operations was £24.9m after a net exceptional charge of £12.2m arising from the significant Simplification Programme and re-structuring exercise undertaken by the Group in the past financial year. Underlying Diluted EPS from Continuing Operations decreased by 24.8% from 124.8p to 93.9p.

 

Cash generation in the second half slightly exceeded our own expectations and we finished the year with net debt of £1.0m.  This figure benefitted from favourable year end working capital movements and we expect debt to build during the year in line with a planned coal stock build. We expect that, under normal conditions, stocks will be cleared by the end of the financial year and we are therefore confident that this current year will see further cash generation.

 

Strategy

 

As explained in recent announcements and in the statement below, the past twelve months has seen a perfect storm of low coal prices and a collapse in UK coal import volumes which has adversely affected the whole sector.  Whilst we still believe the UK coal markets will offer opportunity for the Group over the coming years, especially if coal prices improve, the events and developments over the past few months demonstrate that the political will to accelerate the removal of coal from the UK energy mix through energy policy and taxation is even stronger now than it was twelve months ago.

 

This increases the urgency and importance of repositioning the Group towards activities that offer a long term future. The decisive actions undertaken as part of the Group's Simplification Programme and restructuring exercise have helped to strengthen the balance sheet which will be of key importance as the Board continues to review strategic options.

 

In this regard, we are working hard to identify opportunities to leverage our skill sets and our significant asset base, especially our equipment and property assets. As we review other strategic opportunities we will be looking in particular to extend our activities in the renewable energy, biomass and material handling sectors. The risks and returns available from deploying capital for any investment will be carefully appraised alongside the need for free cash flow to support dividends or further share buy-backs.

 

Dividend

 

In view of the underlying profit performance and strong cash generation in the past financial year, the Board has confidence in recommending an increase of 19.8% in the final dividend from 16.7p to 20.0p. This will bring the dividend for the full year to 30.0p compared with 25.5p in the previous year, an overall increase of 17.6% for the year and increases the dividend payout ratio to 31.9%. The Board will continue to actively review the Group's dividend policy, although at this time the Board's view would be to progress the Group to a payout ratio of 40%. The proposed final dividend will be paid on 23 October 2015 to all shareholders on the register at the close of business on 25 September 2015.

 

People

 

Our staff have always played a key role in the development and operation of the Group. The Board recognises this contribution and acknowledges that last year was a painful one with a succession of business divestures and restructuring, culminating in a deep round of redundancies across the Group. It is essential to keep the Group competitive and ensure that it adapts to deal with changing circumstances. These changes, together with the broader restructuring initiatives will ensure the Group is better placed to deal with any further challenges and to respond to any improvement in market conditions.

 

Board

 

We have previously announced my intention to stand down from the Board following this year's Annual General Meeting after almost ten years as Chairman. I am delighted that David Morgan will be assuming the role of Chairman from that time.

 

Summary

 

UK steel and coal markets continue to be characterised by risks and uncertainties. Coal price trends, together with the level of UK thermal coal demand, will be key determinants of our future prospects and strategy over the coming months. We cannot control these factors but we have worked hard to ensure that we have a solid platform and are well placed to respond to both challenges and opportunities. With a significant restructuring exercise largely behind us, we can concentrate on our strategic options to deliver future shareholder value.

 

 

 

Tim Ross

Chairman

10 August 2015
 

GROUP BUSINESS REVIEW

 

Results

 

As a result of the unprecedented challenges that we have faced over the past two years our underlying profit performance in the past twelve months is testament to the hard work of an expert team at Hargreaves. Revenue in the last financial year declined from £869.2m to £662.2m, mainly, as a result of reduced coal trading volumes. Underlying Profit before Tax from Continuing Operations during the past year was £40.3m.

 

In parallel with this strong underlying performance we took significant steps to restructure and streamline the business. The Income Statement contains a net exceptional charge for simplification costs of £12.2m, as detailed below.

 

As part of this restructuring, we have completed the merger of the Energy and Commodities ("E&C") and Production Divisions to form one new Division called Coal Production and Distribution ("CPD"). This recognises the strong synergies that exist between the two operations, with E&C historically having provided all of the coal marketing services to the Production Division. Consequently, the Group's financial reporting is now presented across three segments: CPD, Industrial Services and Transport. Prior year segmental comparatives have been presented on the same basis.

 

From a net reported profit before tax of £24.9m, which included the £12.2m of net simplification charges, we were able to generate a reduction in net debt over the year of £67.8m. This reflected the benefits of the Simplification Programme, with the sale of Imperial Tankers and the first stage of unwinding inventories at Monckton coke works being key areas of cash generation.

 

The decision taken after the end of the year to accept a reduced settlement on the long-running engineering contract at Liverpool Bulk Terminal resulted in a further charge of £2.4m and completed the year's streamlining activity. The final settlement of this outstanding contract has resulted in a £10m cash receipt post year end and has cleared the way to develop other opportunities within our core business with an important and valued customer.

 

 

Simplification Programme

 

The markets were already challenging by the start of the past financial year, with coal prices having fallen to approximately £44 per tonne, some £9 from the levels prevailing when we acquired the Scottish mining assets in 2013. Added to low coal prices, European coke markets were very soft and the outlook for coal fired generation in the UK was increasingly unclear. We started the last financial year working to identify opportunities that would allow the Group to be able to exercise more control over elements of its coal business. As we have previously reported, we looked for opportunities to help support and improve forward visibility in both our production and port operations. Our focus on the headwinds that were impacting the coal and energy sectors led us to undertake a process to streamline the Group. This programme was aimed at simplifying operations, reducing debt levels and, where possible, seeking to reduce volatility of earnings. It started with the disposal of Imperial Tankers for £26.9m in cash. The closure of Monckton was announced and implemented early in the second half; production ceased in December and this generated further cash as the stock levels began to unwind during the second half. We also took action to exit our tyre shredding operation and other non-core joint ventures and activities.

 

The programme has allowed us to deleverage and strengthen the balance sheet at a critical time. The headwinds that we saw at the start of the financial year intensified at the start of this calendar year when there were further significant, sudden and unexpected falls in international oil and gas prices. This contributed to further falls in coal prices and also reduced projected coal burn, which combined with the planned increases in coal stock levels ahead of the doubling in Carbon Price Support tax on 31 March 2015, has resulted in coal stations carrying particularly high levels of stock.

 

Much of the past year's financial performance was protected from the combined impact of falling coal prices and falling demand through a series of contracts and hedges. As we have noted in recent statements, the current financial year will not benefit from these measures and we have had to reduce our own targets for volumes and profits accordingly.

 

 

MARKETS

 

Coal Price

 

The coal price has fallen from £44 to £38 per tonne during the past financial year. The coal price remains soft and at the date of this report stands at approximately £37 per tonne.  The outlook for the coal price remains very uncertain. Many industry commentators have questioned whether the coal price can be sustained at this level but to date there is little sign of significant production curtailment and concern exists over forward demand levels in key markets such as China and the US. The international coal price will continue to be set largely with reference to supply and demand parameters in these key markets. Production and consumption in the UK and for that matter Europe will have little or no impact on the coal price and therefore operators in the region, such as Hargreaves, will remain as a price taker with regard to power station supplies.

 

UK Energy Market Developments

 

Given the Group's focus on the coal sector, developments within the UK energy sector continue to have a significant impact on the trading performance and prospects for the Group. The UK energy markets continue to be characterised by multiple policy changes and uncertainty.  Although the UK's Carbon Price Support tax was frozen at £18.08 per tonne of CO2, this amount still equates to an additional £42 of tax cost for each tonne of coal burnt in a UK power station. The substantial drop in international gas prices has lowered the projected UK coal burn by reducing the margin or "clean dark spread" for coal station operators, making it challenging for them to operate except in periods of sustained high demand. This drop in spreads when combined with the increased cost of UK Carbon Price Support tax for coal operators will make coal stations very challenging to operate unless there is a significant increase in energy costs demonstrating that energy prices in the UK are still largely driven by and dependent upon international gas prices.

 

With falling coal generating margins as a result of the backdrop of high carbon taxes, the threatened early station closure of Ferrybridge in West Yorkshire has already been announced and mooted for Longannet in Scotland. Whilst the risk of the lights going out due to tight capacity margin is more a news headline than a reality in the short term, this risk has increased in recent times and should significant further coal station closures follow in the coming months and years it is less clear from where, and how quickly, new capacity can be brought onto the grid.

 

We have consistently stated that in the Group's view, coal will have a longer run-out in the UK than many commentators expect. Coal can provide reliable baseload capacity and is therefore very complementary to intermittent renewable capacity. We still believe this to be the case but in the past few months we have revised our own expectations on the length of that run out in the face of falling coal spreads and from the recent reaffirmation from all political parties of their intention to aggressively move the UK away from coal and other fossil fuels. In our business model we are assuming that at least 10GW of the current 18GW of coal capacity remains on the grid into the mid-2020s. That will be enough to sustain our base business and provide sufficient time and opportunity to reposition and broaden the Group's activities.

 

Other Coal Markets

 

Business pressure has not been restricted to the coal generation sector. We continue to provide services and supply coal into the UK steel sector and to UK speciality coal markets.

 

The UK steel sector is also under significant pressure due to excess volume from China driving down prices and increasing exports to Europe. We remain particularly concerned about a concentration of earnings of around £4m with one major UK steel plant where we supply both services and coal. We continue to be vigilant in reviewing and assessing our exposures in the UK steel sector, trying to balance the provision of ongoing support to help protect future profit streams with managing the associated credit risks.

 

The UK speciality coal markets have traditionally been served predominantly by coal produced from UK deep mines, imports and from certain Scottish coal field areas. In the past two years, since the collapse of UK Coal plc and the consequent loss of our exclusive coal supply contract with them to market speciality coal from their deep mines, we have been competing directly with output from their last two remaining deep mines, Thoresby and Kellingley. In the past year, in addition to the closure of Hatfield Colliery in June 2015, we have seen the cessation of mining at the Thoresby deep mine. Mining at the last remaining deep mine, Kellingley, is due to finish by the end of this calendar year. In Scotland we are working hard to source as much speciality coal as possible to replace these sources in the longer term. In the short term we will continue to see margin pressure as coal stocks are sold and cleared from these deep mine operations. We would expect all excess stocks to have been cleared out of the system by the end of next winter. This would leave the Scottish coalfields, and imported coal, as the main sources of coals for the speciality markets.

 

 

STRATEGY

 

Coal Production and Distribution Division

 

In the year to 31 May 2014 the Group traded 5.4 million tonnes of bulk coal in the UK. In the year to 31 May 2015 this dropped to 4.2 million tonnes. In the first half of the current year we see no prospect of significant third party coal sales to UK power stations as they seek to adjust their stock levels. As previously reported, we are expecting some recovery in third party volumes as this position unwinds and anticipate approximately 1.0 million tonnes to be traded in the second half of the current financial year.

 

Whilst trading activities can and have been scaled back, the impact of fixed costs on lower trading volumes will create margin pressure, even taking into account the extensive actions to mitigate this and the recent redundancy and cost saving programmes.

 

 The option to cease production has been evaluated, but comes at a greater cost and has greater implications. As a result we have reduced our production targets, as previously communicated, for the current year from two million tonnes to one million tonnes but will continue to maintain an operation and manage stock build. At current coal prices, our Scottish coal production activities would be loss making as we will incur losses on the production of thermal coal that we can only partially mitigate by maximising production of higher margin speciality coals alongside the thermal coal. We will clearly seek to maximise the yield of such coals.

 

We see three principal reasons for continuing to invest in sustaining the Scottish surface mining operation. First, we have a duty to our workforce and other stakeholders to invest and sustain the operation through difficult periods, within sensible commercial constraints. Secondly, to preserve these important assets so the Group can benefit from any improvement in coal prices. Finally, we see opportunity to build on synergy value between our production and coal trading and distribution operations, both in the thermal and speciality markets.

 

At the same time as reducing the level of our planned production activities the Group has been working hard with the Government and other stakeholders to deliver a change in the Carbon Price Support tax regime that would enable the industry to deliver significant restoration solutions for the unfunded restoration liabilities left following the failures of ATH and SRG in 2013. In the absence of a solution, such as the one we are proposing, these restoration liabilities will represent a very significant on-going cost to the taxpayer and result in substantial blight, risk and dangers to the surrounding communities were restoration not to proceed. The proposed tax exemption would preserve and create jobs by focussing the industry on designing and delivering mining and large-scale restoration schemes around the existing brownfield sites.

 

With regard to the ongoing carbon capture power station projects, we continue to watch with interest as we see UK mined coal as being a key contributor to such projects, not only through maximising the social and economic benefit of these projects but also through being able to offer long term sterling based and RPI indexed fuel sources, necessary to support the financial plans of these proposals. Such projects are making good progress through planning and feasibility and look like offering the potential for base load capacity at energy prices that would be more competitive than for many alternatives, including Hinkley Point.

 

In Wales, we are working with our joint venture partners to manage the impact of falling coal prices on the profitability of the Tower project. We continue to review mining plans to ensure that we have the optimal production strategy to allow the business to best manage the impact of reductions in the coal price and be flexible enough to deal with changes to the future level of demand for thermal coal in Wales.

 

We have made excellent progress in developing our property assets and renewable projects. Planning consents were granted in February for wind energy projects at the Dalquhandy and Poniel sites in South Lanarkshire, between them totalling 55MW of wind capacity. We have also made good progress working through feasibility analysis and planning preparation on large wind projects at three other sites. All these efforts will now be slowed while we await the Government's deliberations on the level of future subsidy for onshore wind.

 

We are also making progress in developing some of our other key property assets. We are working on revised master planning for the Monckton and Maltby sites and have submitted a planning application for a 1,600 house scheme at the Blindwells site outside Edinburgh.  If a positive planning decision can be gained, even taking account of compaction and site preparation investment the Blindwells scheme could present an exciting opportunity for the Group and for the Scottish Mines Restoration Trust who have a carried interest in the site.

 

 

Industrial Services Division

 

In the Industrial Services Division, we remain focussed on working to grow the business and diversify our base both by sector and geography. The UK business started in the coal generation sector and, whilst this will remain a key sector and focus area for the Group to ensure customers continue to receive the highest level of service and value, activity in this sector will inevitably decline over the coming years. As a result, we will continue to diversify on two fronts.

 

Our first target is to diversify our sector focus. Five years ago the Division derived substantially all of its core material handling revenues from the UK coal fired generation sector. Following our success in penetrating the steel sector, revenues from the steel sector last year contributed 38% of revenues compared to 62% from the UK coal generation sector, generating similar margins to those achieved in the thermal sector.

 

We have also worked to diversify the business away from the UK to markets where the use of coal is set to persist into the longer term. To this end the last period has seen the Group:

·      Win its first contract in Asia and continue to work with China Light and Power at the Castle Peak Power Station;

·      Enter the South African steel market with the completion of the strategic acquisition of Algol, a steel services business in South Africa, in December;

·      Succeed in winning its first significant contracts in the deep mining services sector in India.

 

Three years ago, our International services accounted for 2% of Divisional revenues. Last year they accounted for £12.3m, 10.5% of total Divisional revenue and in this current year we expect to grow the proportion of International services revenue further.

 

We will continue to look to turn our international contracts and relationships into solid reference sites from which further work can be won.  Our goal is to create a focussed Industrial Services operation with a long term sustainable profit base.

 

 

Transport Division

 

Our Transport business will remain focussed on the transport of bulk materials. We will remain open to opportunities to gradually expand our geographical coverage within the UK and will target further market share in the growing biomass markets. Significant progress has been made in the last few years to reduce the division's dependence on coal movements. Five years ago coal accounted for 48% of the Division's turnover. Last year coal only accounted for 32% and we are targeting that number to fall to 16% by the end of this financial year as waste and biomass increasingly replace coal flows.

 

 

SHARE BUY-BACK AND DIVIDEND

 

 

With the streamlining and cost reduction programme behind us, the management team is now free to focus on strategies to protect existing revenue and profit streams and deliver new opportunities. We remain focussed on shareholder value and exercise vigilance and discipline in looking to invest the Group's capital.

 

Last year we announced the commencement of a share buy-back programme. Between November 2014 and February 2015 we purchased 1,053,072 shares at a total cost of £6.3m. Ongoing weakness in coal prices and further restructuring persuaded us to adopt a more cautious approach to the buy-back process in the latter part of the year. Looking forward, we will seek to balance the distribution of returns to shareholders through a combination of dividends and share buy backs with opportunities to invest in re-positioning the Group away from coal. We have proposed a final dividend of 20 pence per share bringing the full year payment to 30 pence per share. We have reiterated our intention to move the dividend to a payout ratio of 40%, subject to continually assessing our forward cash and earnings profile.

 

 

OUTLOOK

 

We find ourselves working in the most challenging markets that I have ever experienced in more than thirty years of working in the coal sector. However, we have a talented and hard-working team, a strong balance sheet and an intimate understanding of the sectors in which we work. I am confident that whilst we still face challenges, we are well positioned to work through this period of turmoil and find opportunities to optimise the value of our considerable assets and skills base.

 

We have highlighted the key principal risks that we have faced as a business in the past few statements and these remain unchanged as we enter this financial year. Coal price (with its impact on our mining operations) and low thermal coal demand (as UK coal stations seek to clear excess coal stocks) are the two keys risks we face.

 

We will continue to review the viability of and investment in our mining operations in light of coal price movements. We will also continue to press Government for a solution to deal with the significant restoration liabilities faced by the taxpayer. Such a solution would allow the whole industry to deliver much needed restoration and safeguard many more jobs while we await a coal price improvement.  We are very well placed to supply these restoration services should the opportunity arise and we are well placed to benefit from our production operations should coal prices recover.

 

The other key risk we face is around UK thermal coal volumes. We have assumed in our annual planning that coal trading volumes will recover in the second half of the financial year. Whilst this assumption remains a risk as we have no visibility of orders or demand at this time, based on our knowledge of the market and activities of power station operators we do not believe this is an unreasonable assumption to make. Therefore we will continue to monitor that position extremely closely as we go into the winter. Assuming that coal burn returns to a normal level in the winter we would expect to resume shipments after the end of the calendar year.

 

Our current low net debt position will allow us to fund some coal stock build over the next six months within our mining activities while we wait for coal stocks at power stations to be cleared and for deliveries to resume. We are expecting to build our coal stocks by approximately £16 - 18m between now and the end of the calendar year to support continuity of activities across our mining operations. We will continue to carefully monitor the carrying value of that stock but given low current coal prices will not seek to hedge that stock from short term coal price movements. This represents a change from our historical position of not carrying any open stock positions and reflects a trading position that is amply supported by our current balance sheet capacity.

 

The Industrial Services and Transport Divisions are largely unaffected by commodity prices and less impacted by fluctuations in coal demand. The targets for growth that we have set for this year are challenging but we see opportunities to steadily diversify and grow these businesses and remain focussed on both credit risks and other exposures that are associated with a smaller and more concentrated customer base.

 

The Transport Division is already well diversified and has proven to be very resilient, due in no small part to a very talented and proactive management team. The outlook for the business remains positive, even if in the short and medium term opportunities for significant organic growth are limited. It remains a desirable and synergistic part of the Group.

 

Across our portfolio of wind and renewable projects we will await the outcome of the Government's latest thinking on policy and assess our strategy accordingly. It will be very disappointing if support for onshore wind is further reduced or removed but we remain encouraged as our Scottish property portfolio has a number of large scale and high wind-speed opportunities that offer potential in the longer term.

 

The prospects for developing the property portfolio remain very positive.

 

In summary, although our markets remain unpredictable and we are undoubtedly in for another difficult year, the Group is well positioned to deal with further challenges thanks to the work we have done in the past twelve months. These efforts have left the Group with good visibility regarding the likely risks and ready to deal with challenges should they arise and in the meantime we will also continue to actively seek opportunities to help mitigate the impact of these difficult markets. 

 

 

Gordon Banham

Group Chief Executive

10 August 2015

REVIEW OF OPERATING PERFORMANCE BY BUSINESS UNIT

 

Aside from the financial impact of the recent settlement in relation to the Group's Liverpool Biomass Conversion project with a major UK power generator, underlying trading for the year was broadly in line with management's expectations. Revenues from Continuing Operations during the year reduced by £207.0m from £869.2m to £662.2m, reflecting the challenging market conditions, particularly within our Coal Production and Distribution business where third party trading volumes and margins were significantly reduced on the prior year. In addition, the implementation of the Group Simplification Programme has resulted in lower revenues as the Group disposed of and closed a number of non-core businesses. Underlying Group Operating Profit from Continuing Operations for the year reduced by £16.7m from £59.5m to £42.8m. Underlying profit before tax was £40.3m, a decrease of £14.8m on the prior year, due largely to the impact of reduced trading volumes on revenues and margins in the CPD Division. Reported profit before tax of the Group reduced by £27.2m to £24.9m including £12.2m of net, one-off simplification costs (see below).

 

Details of Group Simplification Programme

 

The Board announced on 1 September 2014 that, following a review of strategy, it would be embarking on a Group wide programme to simplify the Group structure, increase operational focus and ensure the Group was optimally placed to deliver shareholder value in the face of very challenging market conditions.

 

The Board is pleased to report that the Simplification Programme is now substantially complete. One of the key objectives of the programme was to liberate fixed and working capital in order to strengthen the balance sheet and ensure the Group was placed on a solid platform from which to further review strategic options. This debt reduction strategy has progressed well and the cash generation in the second half of the year slightly exceeded management expectations. To date, the Simplification Programme has achieved net cash generation of approximately £30m and the Group expects it to achieve a further £10m through the year ending 31 May 2016. These efforts, helped by favourable timing of vessels and working capital around year end resulted in the Group net debt standing at £1.0m as at the year end.

 

The first phase of the Simplification Programme which we reported on in February 2015 resulted in:

 

·      The successful sale of Imperial Tankers Limited ("Imperial Tankers"), a non-core business, on 29 August 2014, to Suttons Transport Group, generating sale proceeds of £26.9m and a profit on disposal of £16.3m.

·      The orderly closure of our non-core tyre crumbing business and the Mir Trade joint venture. The Group's exit from these businesses, which had a book cost of £2.8m, had a small positive net cash impact.

·      The closure of Monckton coke works ("Monckton") on 12 December 2014. The Monckton closure has resulted in a £17.0m charge to the income statement but has, and will continue to, liberate the significant working capital that was tied up in the business, as anticipated.  Net cash flows of £5.2m were generated to 31 May 2015 and the Group expects further cash inflows of approximately £12m to be realised.

·      Other costs of simplification incurred within the first phase of the programme amounting to £4.2m, including some one-off transaction costs and a provision of £1.1m in respect of the surplus portion of the Group's interest rate swaps.

This first phase of the Simplification Programme resulted in a net, one-off charge of £7.7m.

 

In February 2015, the Group embarked on the second phase of the Simplification Programme. In the face of falling coal prices and a significant reduction in the short term orders from UK power stations, the Group announced its intention to seek reductions to its overhead base, particularly in its port and coal production operations. The Board set a challenging target of achieving a cost reduction of at least £3m by the year end and it is pleasing to report that this target has been delivered and exceeded.

 

This second phase of the Simplification Programme was substantially completed before the year end and has resulted in further one-off costs and charges totalling £4.5m. In addition to the cost of £1.4m in respect of the programme of redundancies across the Group, we have provided £1.9m against fuel hedges that are now ineffective given the reduced forward mining programme. We have also reviewed mining reserves and provided £1.2m against mine development costs for sites and reserves that we no longer anticipate mining in current market conditions.

 

The Group is therefore reporting £12.2m of net, non-recurring simplification charges across both phases of the programme.

  

The commentary below reflects the continuing, underlying performance of the three Divisions, excluding the impact of the Simplification Programme.

 

 

Coal Production & Distribution
2015
£000

Transport

2015
£000

Industrial Services

2015
£000

Total

2015
£000

Segment Continuing Operating profit

32,547

2,267

3,260

38,074

Intangible amortisation/impairment

143

-

-

143

Impact of Biomass Conversion Project settlement

-

-

2,400

2,400

Share of profit in jointly controlled entities (net of tax)

1,504

-

-

1,504

Share of tax in associates and jointly controlled entities

634

-

-

634

Underlying Continuing Operating Profit

34,828

5,660

42,755

Net financing costs - Continuing Operations

   (1,435)

 (421)

(609)

(2,465)

Underlying Continuing Profit before Tax

33,393

1,846

5,051

40,290

 

 

Coal Production & Distribution
2014
£000

Transport

2014
£000

Industrial Services

2014
£000

Total

2014
£000

Segment Continuing Operating profit

41,027

4,508

5,405

50,940

Intangible amortisation/impairment

990

-

329

1,319

Impairment of property, plant and equipment

2,829

-

-

2,829

Share of profit in jointly controlled entities (net of tax)

3,499

-

-

3,499

Share of tax in associates and jointly controlled entities

912

-

-

912

Underlying Continuing Operating Profit

49,257

5,734

59,499

Net financing costs - Continuing Operations

(2,940)

(933)

(574)

(4,447)

Underlying Continuing Profit before Tax

46,317

3,575

5,160

55,052

 

 

Coal Production and Distribution ('CPD') Division

 

The newly formed CPD Division consists of two main activities - "Mining Operations" and "Third Party Trading".  Mining Operations encompasses the power station and speciality volumes that are produced within our surface mining business in Scotland and England and the activities encompassed within our Tower operation. The Third Party Trading business consists of coal purchased from third party suppliers to service the thermal, metallurgical and speciality markets. There are two other principal activities included in the CPD Division; Europe and Property and Renewables.

 

The Tower joint venture, Tower Regeneration Limited, ("TRL") and our European joint venture Hargreaves Raw Material Services GmbH are reported within CPD but their results are not consolidated. The Tower contract mining operation and our development activities around Property and Renewables are also included in CPD and are consolidated. At the moment the Property and Renewables operations are not contributing significant profits, but our aspiration is that they rapidly evolve to a level where they can justify being an operating segment on their own.

 

CPD Division revenues reduced by £275.1m from £761.0m to £485.9m during the year. While our Mining Operations delivered increased volumes and margins, reflecting the first full year of operation, at full run rate, in Scotland, our Third Party Trading business, as expected, experienced significantly reduced thermal volumes and margins in the face of challenging coal market conditions.

 

Third Party Trading

 

Revenues from the Third Party Trading business reduced during the year from £484.4m to £336.7m reflecting a substantial reduction in thermal volumes. This was the main driver of the reduction in underlying Operating Profit from Continuing Operations in the CPD Division from £49.3m to £34.8m.

 

The Third Party Trading business contributed £14.4m of operating profit to the CPD Division during the year, a reduction of £9.6m compared to the prior year result of £24.0m. This result, and its comparative, excludes profits on our sales of speciality coal produced from our Mining Operations, which, following the consolidation of the two operations, are now reported within Group Mining Operations.

 

Ongoing uncertainty and volatility within coal markets have resulted in a significant reduction in UK Bulk volumes from 5.4m tonnes to 4.2m tonnes. This reduction was almost entirely attributable to the year on year fall in thermal volumes with metallurgical volumes into Redcar Steel works relatively stable at approximately 1.4 million tonnes. The significant drop in throughput adversely impacted the average profit per tonne achieved during the year with the operating margin on bulk tonnes decreasing by in excess of £1 per tonne from £2.52 per tonne to £1.39 per tonne. These low volumes prompted the Group to review the fixed cost base at both its Redcar and Immingham operations as part of the Simplification Programme.  

 

The coal and steel markets remain very uncertain. A number of power stations have announced potential closure decisions and there remains very limited revenue visibility from UK power generators as they continue to burn the high stockpiles built ahead of the carbon tax increase. We will closely monitor the market going forward and in particular, as previously stated, we will continue to monitor and manage exposures in the steel sector, being careful to try and balance the provision of ongoing support to sustain earnings with the management of risks and exposures.

 

Volumes within our UK third party speciality business have remained more robust during the year with softness in domestic heating markets partly offset by strong volumes into the industrial markets. Whilst the throughput increased slightly from 485,000 tonnes to 515,000 tonnes, the warm weather through December and early January and the competitive dynamics of the market, resulted in reduced pricing levels. Consequently, we have seen a reduction in the profit achieved of just under £5 per tonne with margins reducing from £21.31 to £16.78 per tonne as per the table below. Since the start of this calendar year we have seen other producers reducing prices to stimulate demand and we expect some short term competitive turbulence in the industrial and domestic markets as the last remaining deep mines liquidate their remaining production and stocks as they progress through their managed closure plans.

 

European Operations

 

The steel sector in the UK and Europe has continued to face significant challenges which are impacting on the demand for coke at our associate German operations. A reduction in volumes from 491,000 tonnes to 304,000 tonnes resulted in revenues falling from £107.2m to £64.1m. The previously announced managed reduction to a lower level of activity saw subdued contracting activity and resulted in the business generating an underlying operating profit of only £1.4m before the one-off settlement of a long standing legal claim. Underlying operating profit of £0.7m represents a reduction of £3.8m on the prior year result of £4.5m.

 

Mining Operations

 

Mining Operations contributed £20.0m of operating profit during the year ended 31 May 2015, an increase of £3.5m on the prior year. This increase reflected the first year of operations, at full run rate, of our Scottish assets.

 

The Group's surface mining operations in Scotland and England performed broadly in line with management expectations in the year. Mining Operations' result includes the profits earned on Scottish speciality volumes, traded into the Industrial and Domestic markets. Speciality volumes sourced from third parties continue to be reported within the Third Party Trading business.

 

Our Group mining sites in Scotland and England continued to perform well through the second half of the year and achieved power station sales across the year of 1.1m tonnes and speciality sales into the Industrial and Domestic markets of 0.3m tonnes.

 

At the time of reporting our interim results in February 2015, the forward coal price for the year ending 31 May 2016 was approximately £41 per tonne which resulted in a downward revision to mining production targets at that time to approximately 1m tonnes. Whilst we scaled back the cost structure of our Mining Operations as part of the Simplification Programme in response to these volatile and challenging market conditions, there was also a downward revision in profit expectations to reflect the latest coal price. Since February 2015, conditions in the coal markets have further deteriorated and the coal price has fallen by an additional £4 per tonne. Whilst the coal price followed a downward trend throughout the year ended 31 May 2015, the strong result reported in our Mining Operations for the year has been supported by the financial hedges and fixed price contracts put in place following the acquisition of the Scottish assets in 2013. However, as previously reported, this protection fell away at the end of 31 May 2015 and the Group have announced that we will retain an open and unhedged position.

 

Notwithstanding this further deterioration in the coal markets, the Group continues to take the view that it is right to continue to protect the viability of its current Scottish operations, subject to reviewing mining plans and reducing forecast production volumes where necessary. This commitment reflects the Group's desire to protect the viability of the Scottish operations and the potential longer term value of the reserve base. Given our expertise in the production and distribution of speciality coals, Scotland remains a key source of coal volumes for sale into the industrial and domestic markets that the Group has worked very hard to secure.

 

Tower

 

The Tower project performed in line with management's expectations during the year. The contribution from our Tower operation comprises our 35% share of mining profits and profits made by Hargreaves Surface Mining. Coal sales during the year increased from 470,000 tonnes to 700,000 tonnes.  Current coal price levels continue to impact adversely on the Tower mining operation and, whilst a proportion of Tower's output is fixed price, the fall in the coal price since February 2015 will further impact the contribution from the Tower joint venture in the current financial year.

 

Property and Renewables

 

The Group continues to step up its efforts to drive as much value as possible from its significant property and renewable portfolio. The year ended 31 May 2015 saw some progress in this regard with the contribution of £0.8m of operating profit following a number of property disposals including a section of land at the Poniel site in Lanarkshire.

 

At this time, the Group is particularly focussing on its portfolio of renewables opportunities. As announced previously, we were pleased to receive planning permission for 55MW of wind capacity in South Lanarkshire and we will continue to work hard to ensure these projects can be commercialised at optimal valuations. The Group also has a number of other interesting wind projects in the pipeline. In addition, efforts are continuing to optimise cash and profits from our property portfolio and we remain very pleased with the progress in seeking planning approval for a major housing development on a former surface mine site at Blindwells, east of Edinburgh. Further opportunities exist within the Group's property portfolio and we will report further on these as they progress.

 

As noted above, we continue to work very hard with government at local, Holyrood and Westminster levels to find a solution for the significant legacy of opencast restoration with which local communities have been left by the failure of previous operators. An early solution would provide an opportunity for Hargreaves and other operators to create significant environmental benefits to those communities that are affected, as well as creating employment and protecting future capacity.

 

Operating Profit by Business Unit within the CPD Division

 

 

Bulk

Industrial and Domestic

Total

 

2015

2014

2015

2014

2015

2014

Third Party Traded Volumes ('000s tonnes)

4,157

5,411

515

485

4,672

5,896

Profit per tonne (£)

1.39

2.52

16.78

21.31

3.09

4.07

Third Party Trading (£'000)

5,792

13,638

8,644

10,337

14,436

23,975

Mining Operations (£'000)

 

 

 

 

19,972

16,548

Germany (Associate) (£'000)

 

 

 

 

663

4,522

Property and Renewables (£'000)

 

 

 

 

767

                        -

Monckton (£'000)

 

 

 

 

    (139)

2,969

Other (£'000)

 

 

 

 

(871)

1,243

CPD Operating Profit (£'000)

 

 

 

 

34,828

49,257

 

 

 

 

Industrial Services Division

 

It is pleasing to report that over the past financial year the Industrial Services Division continued to demonstrate steady progress on contract awards in the UK and internationally.

 

Following the end of the year, and after careful consideration, the Group agreed to accept a reduced settlement to conclude the Liverpool Biomass Conversion project with a major UK power generator which brings to an end the Division's activities in this space. This contract commenced in 2012 and was largely concluded in early 2014. Whilst the settlement fell £2.4m short of the amount that the Group expected to collect on the contract, the decision will allow the Group to conclude the long running negotiations and move on. This resulted in a cash inflow to the Group of approximately £10m in July 2015, the collection of which had been delayed by the negotiations. The provision shortfall of £2.4m was charged against the Division's profits in the year ended 31 May 2015.

 

Excluding the financial impact of this settlement, Industrial Services Division revenues reduced by £12.0m from £122.6m to £110.6m reflecting some one-off project activities in the prior year. Underlying operating profit remained in line with the prior year at £5.7m.

 

The UK core materials handling business experienced a slight reduction in revenues from £104.2m to £99.7m together with a fall in UK operating profit from £5.5m to £4.6m due to a reduction in the level of additional works issued by customers during the year.

 

International profits of £0.3m showed improvement on the prior year, where start-up costs were incurred in mobilising the integrated maintenance services contract with China Light and Power in Hong Kong.

 

We continue to be focused on the careful development of our international growth opportunities. In December 2014 the Group acquired a small South African steel services provider with a contract at a steel facility outside Johannesburg. This is the Group's first step into the region and builds on our increased credentials and experience in the steel sector. The Division was also successful last year in winning its first significant mining services contracts in India, focussing initially at least on the provision of expertise and services in the deep mining sector. 

 

 

 

Transport Division

 

Imperial Tankers Limited was sold during the period, as announced on 1 September 2014. Consequently, Transport revenues have reduced by £20.7m from £89.0m to £68.3m. Underlying operating profit from continuing operations has also reduced by £2.2m from £4.5m to £2.3m.

 

Excluding the £7.3m of revenue and £0.2m of operating profit from Imperial Tankers that was included in the past financial year, Bulk Transport revenues are slightly ahead of the prior year at £61.0m whilst underlying operating profit is in line with the prior year at £2.1m reflecting a competitive market. 

 

 

Health, Safety and Environment

 

The health and safety of employees, contractors, customers and the public continues to be of the highest priority to the Board and management. We recognise the potentially hazardous nature of the work undertaken across all of our Divisions and we are determined to ensure that we provide safe systems of work throughout our diverse range of operations.

 

The whole Board takes an active role in Health & Safety. The CEO personally acts as a Group Health and Safety Champion, working alongside the Chief Operating Officer and health and safety team to drive high quality health and safety performance throughout the business, not just in terms of developing processes and systems, but in providing the necessary leadership to underpin the behavioural culture we demand.

 

The Group has health and safety management systems in place that are either internally or externally audited to the highest standard. In addition we have worked hard to ensure that a positive engaging health and safety culture is encouraged throughout our operations. We focus on safety at the business unit level and have regular accountability meetings as well as a Group Health and Safety Forum to define best practice and to promote high standards of communication and coordination across the Group.

 

Health and safety statistics continue to be monitored at a Divisional and business unit level, with regular main Board review. Health and safety strategies are developed at the Business Unit and Group level to deal with any evolving trends and drive overall performance.

 

The Group is committed to a philosophy of continuing improvement across all Group operations. During the last 18 months the Group has reshaped its health and safety team and invested in additional resources where appropriate. Our strategy has been to identify risks and eliminate them before an accident and not to rely on "lessons learned".

 

Accident rates within the Group are monitored on the basis of RIDDOR reportable accidents per 100,000 hours worked. The Group has seen a 21% year on year RIDDOR accident rate reduction from 0.33 in the year ended 31 May 2014 to 0.26 in the year ended 31 May 2015.

                                                                                                                                                                                                                    

The incidence of RIDDOR accidents at Hargreaves has been trending downwards for a number of years and reflects the efforts that continue to be focussed in this area.

 

The Group is also committed to mitigating its impact on the environment in the course of its daily business activities by the application of robust environmental management systems. The current work to comply with the new ESOS legislation should help towards the material demonstration of our improvements. 

 

Iain Cockburn

Group Finance Director

 

Gordon Banham

Group Chief Executive

10 August 2015

FINANCIAL REVIEW

 

Revenue

 

The Group has experienced a substantial reduction in revenue during the year, with reported revenue decreasing by £207.0m from £869.2m in the year ended 31 May 2014 to £662.2m in the year ended 31 May 2015. This reduction largely reflects challenging market conditions within its Third Party Trading business where a reduction in thermal volumes of 1.1m tonnes has been seen. In addition, the Simplification Programme has had some impact on revenues in the period, following the disposal or orderly closure of certain businesses within the Group, and the European restructure has meant that no European revenues were consolidated in the year being reported compared with £55.4m in the prior year.

 

Operating Profit and Margins

 

Underlying Operating Profit from Continuing Operations reduced by £16.7m from £59.5m to £42.8m almost entirely driven by a reduced contribution from our Third Party Trading business and subdued activity in our European business. As anticipated, the volumes and margins within our Third Party Trading business came under significant pressure against a backdrop of a second consecutive mild winter, low gas prices and a consequent overall reduced coal burn. Our Mining Operations delivered a year on year increase of £3.5m to operating profit following a full year's production, at full run rate, in our Scottish surface mining business; this increased contribution helped to offset the reduced contribution from Monckton following its closure in December 2014. Reported Group continuing operating profit before simplification costs fell from £50.9m to £38.1m whilst continuing profit before tax fell more sharply from £52.1m to £24.9m reflecting £9.1m of simplification costs and £3.1m of fair value losses on derivatives (see below).

 

Simplification Programme

 

Amounts relating to the Group Simplification Programme have been aggregated and are shown as a net charge to the income statement during the period. The net charge relating to simplification for the full year amounts to £12.2m (further detail is included within the Operating Performance by Business Unit). These costs do not form part of the Group's ongoing activities, are considered exceptional by size and nature, and are therefore excluded from the Group's underlying result.

 

Interest

 

In the year to 31 May 2015, continuing net finance expenses for the Group reduced by £1.9m from £4.4m to £2.5m. This positive movement reflects a significant reduction in average Group net debt levels, ahead of expectations, during the year largely as a result of the successful impact of the Simplification Programme.

 

Taxation

 

Income tax expense for year is £3.6m compared with £11.5m for the year ended 31 May 2014; including the share of tax of equity accounted investees of £0.6m (2014: £0.9m) this results in a total tax expense of £4.2m (2014: £12.4m). Whilst this charge represents a reported effective tax rate for the Group of 16.40% (2014: 23.5%), the underlying effective tax rate, before the impact of the Simplification Programme and other non-underlying items, amounts to 22.8%, in line with the half year position.

 

The reduction from the underlying rate of 23.5% for the year ended 31 May 2014 to the underlying rate of 22.8% is largely driven by the fall in the UK corporation tax rate from 23% at April 2013 to 20% at April 2015.

 

As previously reported, following the change in regulation introduced in the 2014 Finance Act, HMRC are now able to request payment in advance of concluding discussions in respect of certain disclosable tax planning schemes. The Board can now confirm that HMRC have formally requested, or are in the process of requesting, the tax payments on a corporation tax planning arrangement which is still subject to ongoing negotiation with HMRC. Whilst the full amount is likely to be paid in this current financial year, should HMRC ultimately accept the Group's view on how this arrangement should be treated for corporation tax purposes, any cash paid under the 2014 Finance Act will be subsequently repaid by HMRC. As previously reported, no profit or loss benefit was taken at the time the scheme was enacted. The quantum of the tax involved is approximately £11m and £4m of this amount was paid by the Group in June 2015.

 

Dividend

 

The Board has proposed a final dividend of 20.0p per share (2014: 16.7p), bringing the dividend for the full year to 30.0p per share (2014: 25.5p), an increase of 17.6% in the total dividend for the year. The proposed dividend represents a payout ratio of 31.9% on underlying diluted earnings per share (2014: 20.4%). The proposed final dividend will be paid on 23 October 2015 to all shareholders on the register at the close of business on 25 September 2015.

 

Pensions

 

Both Monckton and Maltby operate unfunded concessionary fuel schemes and Maltby continues to operate its two defined benefit pension schemes. The combined net liability of all of the schemes has decreased over the year from £5.6m to £5.5m due mainly to remeasurement of £(2.1)m and deficit contributions of £2.0m during the year. In addition, there is a curtailment event as a result of the closure of Monckton which has resulted in a gain of £0.4m.

 

 

Earnings per Share

 

Reported basic earnings per share from Continuing Operations decreased by 47.0% from 123.2p to 65.3p reflecting reduced profitability and the one-off charge for simplification costs during the year. Underlying diluted earnings per share decreased by 24.8% from 124.8p to 93.9p. The weighted average diluted number of shares reduced slightly during the year from 33.3m to 33.1m. The impact of the share buyback programme, which was approved on 5 November 2014, and resulted in the purchase of 1,053,072 shares at 31 May 2015, was partly offset by the impact of exercised LTIP options during the year.

 

Discontinued Operations

 

The loss for the period from Discontinued Operations was £0.8m during the year. This represented a significant reduction on the prior year charge of £3.7m.

 

Net Debt

 

Net debt reduced by £67.8m from £68.8m at 31 May 2014 to £1.0m at 31 May 2015. The net debt figure has decreased largely as a result of the Group's strong operating cash flows and the impact of the Simplification Programme.

 

Group net assets decreased from £150.1m at 31 May 2014 to £148.5m at 31 May 2015. Gearing (measured as net debt compared to net assets) at the end of May 2015 was 1%, compared to 46% at 31 May 2014.

 

Borrowings and Facilities

 

During the year, the Group was financed by a mixture of cash flows from operating trade credit, short term borrowings, longer term borrowings and finance leases.  Operating leases are used in conjunction with asset financing to balance the flexibility afforded by asset ownership and the efficient use of capital.

 

In July 2015, the Group secured a new multi bank committed facility of £110m.  The new arrangement consists of a £70m borrowing base facility and a £40m revolving credit facility.  The arrangement was concluded with a three bank group comprising of HSBC, Lloyds and Barclays and is committed through to August 2018. The change in structure of the facility has resulted in improved pricing and provides the Group with the debt capacity to support its developing strategy.  We continue to work closely and positively with our banking Group and are very appreciative of their support in delivering this innovative, efficient and flexible structure.

 

The Group's financial position remains strong and we continue to operate comfortably below our maximum covenant levels.

 

Cash Flow

 

Net cash flow from continuing operating activities generated a strong cash inflow of £63.0m during the year.  This cash generation reflected robust EBITDA of £46.1m, despite the cash element of the simplification charges during the year, supported by a strong working capital unwind of £23.0m detailed below.

 

As in previous years, the strong cash flows achieved through working capital were heavily weighted to the second half of the year, reflecting the normal seasonal stock build in the first half of the year. These strong cash flows were bolstered during the year by the positive working capital impact of the Simplification Programme.  The reduction in inventories of £37.6m in the year included a managed reduction in our readily marketable coal stocks in our Third Party Trading and Mining Operations in response to market challenges.  Further inventory reductions resulted from the Simplification Programme, including an unwind in coke stocks following the closure of the Monckton operation and a review of the Group's property portfolio which identified changes in the intended use of a number of sites resulting in a reclassification of those assets from inventory to fixed assets during the year.  Finally, the conclusion of the commercial discussions in relation to the Group's Liverpool Biomass Conversion project resulted in the remaining sums to be collected transferring from work in progress to trade receivables.

 

The unwinding of inventory was offset by a £11.3m net cash outflow resulting from movements in receivables and payables.  Approximately £10m of the net movement reflects a receivable at 31 May 2015 from a major UK power generator relating to the conclusion of the Liverpool Biomass Conversion project.  The remaining offsetting movements in receivables and payables, both of which have reduced substantially during the year, reflects an overall reduction in Group activity levels following the Simplification Programme and as a result of the lower level of activity in the UK power station sector at the end of the current year compared with twelve months ago.   

 

Gross capital expenditure of £18.5m (2014: £37.5m) included £2.1m of new finance leases (2014: £13.0m) and £5.1m of properties transferred from inventory into fixed assets, therefore cash outflow on capital expenditure amounted to only £11.3m. The majority of the cash outflow related to investment in mine stripping assets, following the first full year of production in Scotland, and is expected to begin to unwind into operating cash flow in the next financial year.  The amount also includes investment in our transport and yellow plant fleet. The reduction in capital expenditure from the previous year reflects significant investment in mining equipment in the year ended 31 May 2014 as part of the mobilisation of our Scottish mining operations. Proceeds received on the disposal of fixed assets were £2.9m (2014: 2.1m).

 

The Group generated a cash inflow of £24.8m through the disposal of subsidiaries following the sale of Imperial Tankers in August 2014. The total reduction in net debt arising from the disposal was £27.5m.

 

Consequently, the Group generated cash during the year of £83.6m through its operating and investing activities. Following this significant cash generation, the Group has repaid £48.0m of its banking facilities during the year, made dividend payments of £8.7m, made purchases totalling £6.3m through the share buyback programme and funded finance lease payments amounting to £5.6m.

 

Capital Management

 

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern, whilst maximising the return to shareholders. The capital structure of the Group consists of debt, which includes borrowings, cash and cash equivalents, and equity attributable to equity holders of the parent, comprising capital, reserves and retained earnings.

 

The capital structure is reviewed regularly by the Group's Board of Directors. The Group's policy is to maintain gearing at levels appropriate to the business. The Board principally reviews gearing determined as a proportion of debt to earnings before interest, tax and depreciation. The Board also takes consideration of gearing determined as the proportion of net debt to total capital. It should be noted that the Board reviews gearing taking careful account of the working capital needs and flows of the business. In the trading businesses, where working capital cycles are generally less than 90 days, the Board is comfortable to maintain higher levels of debt and gearing as measured against EBITDA.

 

Summary of Net Debt

 

2015

£000

2014

£000

Cash and cash equivalents

(43,853)

   (30,768)

Revolving credit facility

32,773

80,190

Finance lease liabilities

12,049

19,353

Net Debt

969

68,775

 

 

Going Concern

 

The Group has considerable financial resources together with long-term contracts with a number of customers and suppliers across different geographic areas and industries. As a consequence, the directors believe that the Group is well placed to manage its business risks successfully despite the current uncertain economic outlook.

 

After making enquiries, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

 

Iain Cockburn
Group Finance Director

10 August 2015

 

 

Consolidated Statement of Comprehensive Income

for year ended 31 May 2015

 

Continuing Operations

Note

2015
£000

2014
£000

Revenue

2

 

662,161

869,244

Cost of sales

 

(588,390)

(771,626)

 

 

 

 

Gross profit

 

73,771

97,618

Other operating income

 

733

970

Administrative expenses - Impairment of non-current assets

 

-

(2,829)

Other administrative expenses

 

(36,430)

(44,819)

 

 

 

 

Operating profit (before simplification costs)

 

38,074

50,940

 

 

 

 

Simplification costs - Administrative expenses

 

(9,130)

2,087

 

 

 

 

Operating profit (after simplification costs)

 

28,944

53,027

Financial income

 

1,152

1,121

Financial expenses

 

(3,617)

(5,568)

Simplification costs - Unrealised fair value gains and losses on derivative financial instruments

 

(3,080)

-

Share of profit in associates and joint ventures (net of tax)

 

1,504

3,499

 

 

 

 

Profit before tax

 

24,903

52,079

Income tax expense

3

 

(3,554)

(11,525)

 

 

 

 

Profit for the year from continuing operations

 

21,349

40,554

 

 

 

 

Discontinued Operations

 

 

 

Loss for the year from discontinued operations

 

(779)

(3,734)

 

 

 

 

Profit for the year

 

20,570

36,820

 

 

 

 

Other comprehensive (expense)/income

 

 

 

Items that will not be reclassified to profit or loss

 

 

 

Remeasurements of defined benefit pension plans

 

(1,733)

(2,738)

Tax recognised on items that will not be reclassified to profit or loss

3

368

460

Items that are or may be reclassified subsequently to profit or loss

 

 

 

Foreign exchange translation differences

 

(1,766)

(754)

Effective portion of changes in fair value of cash flow hedges

 

(4,769)

10,576

Tax recognised on items that are or may be reclassified subsequently to profit or loss

3

862

(2,118)

 

 

 

 

Other comprehensive (expense)/income for the year, net of tax

 

(7,038)

5,426

 

 

 

 

Total comprehensive income for the year

 

13,532

42,246

 

 

 

 

Profit attributable to:

 

 

 

Equity holders of the Company

 

20,454

36,995

Non-controlling interest

 

116

(175)

 

 

 

 

Profit for the year

 

20,570

36,820

 

 

 

 

Total comprehensive income/(expense) attributable to:

 

 

 

Equity holders of the Company

 

13,416

42,443

Non-controlling interest

 

116

(197)

 

 

 

 

Total comprehensive income for the year

 

13,532

42,246

 

 

 

 

Basic earnings per share (pence)

4

 

62.91

111.88

Diluted earnings per share (pence)

4

 

61.88

110.99

Basic earnings per share from continuing operations (pence)

4

 

65.31

123.18

Diluted earnings per share from continuing operations (pence)

4

 

64.24

122.19

Non-GAAP measures

 

 

 

Basic underlying earnings per share from continuing operations (pence)

 

95.41

125.77

Diluted underlying earnings per share from continuing operations (pence)

 

       93.85

124.76

 

 

Consolidated Balance Sheet

at 31 May 2015

 

 

2015
£000

2014
£000

Non-current assets

 

 

 

Property, plant and equipment

 

57,144

80,293

Investment property

 

5,126

-

Intangible assets

 

9,472

17,801

Investments in associates and joint ventures

 

5,963

6,843

Derivative financial instruments

 

-

2,965

Deferred tax assets

 

2,512

-

 

 

80,217

107,902

Current assets

 

 

 

Assets held for sale

 

5,040

8,171

Inventories

 

57,803

100,437

Derivative financial instruments

 

1,088

4,178

Trade and other receivables

 

108,750

133,518

Cash and cash equivalents

 

43,853

30,768

 

 

216,534

277,072

Total assets

 

296,751

384,974

 

 

 

 

Non-current liabilities

 

 

 

Other interest-bearing loans and borrowings

 

(7,165)

(92,328)

Retirement benefit obligations

 

(5,516)

(5,580)

Provisions

 

(5,762)

(8,641)

Derivative financial instruments

 

(1,308)

(1,343)

Deferred tax liabilities

 

-

(2,172)

 

 

(19,751)

(110,064)

Current liabilities

 

 

 

Other interest-bearing loans and borrowings

 

(37,656)

(7,215)

Trade and other payables

 

(73,078)

(99,612)

Income tax liabilities

 

(13,414)

(14,823)

Provisions

 

-

(550)

Derivative financial instruments

 

(4,351)

(2,586)

 

 

(128,499)

(124,786)

Total liabilities

 

(148,250)

(234,850)

Net assets

 

148,501

150,124

 

 

 

 

 

2015
£000

2014
£000

Equity attributable to equity holders of the parent

 

 

 

Share capital

 

3,314

3,309

Share premium

 

73,955

73,952

Other reserves

 

211

211

Translation reserve

 

(3,731)

(1,965)

Merger reserve

 

1,022

1,022

Hedging reserve

 

(1,141)

2,766

Capital redemption reserve

 

1,530

1,530

Retained earnings

 

72,999

69,073

 

 

148,159

149,898

Non-controlling interest

 

342

226

Total equity

 

148,501

150,124

 

 

 

Consolidated Statement of Changes in Equity

for year ended 31 May 2015

 

 

Share capital
£000

Share premium
£000

Translation reserve
£000

Hedging reserve
£000

Other reserves
£000

Capital redemption reserve
£000

Merger reserve
£000

Retained earnings
£000

Total parent equity
£000

Non-controlling interest
£000

Total equity
£000

Balance at 1 June 2013

3,296

73,208

(872)

(5,692)

211

1,530

1,022

47,265

119,968

(1,638)

118,330

Total comprehensive income for the year

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

-

-

-

36,995

36,995

(175)

36,820

Other comprehensive income/(expense)

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation differences

-

-

(732)

-

-

-

-

-

(732)

(22)

(754)

Effective portion of changes in fair value of cash flow hedges

-

-

-

10,576

-

-

-

-

10,576

-

10,576

Remeasurements of defined benefit pension plans

-

-

-

-

-

-

-

(2,738)

(2,738)

-

(2,738)

Tax recognised on other comprehensive income

-

-

-

(2,118)

-

-

-

460

(1,658)

-

(1,658)

Total other comprehensive income/(expense)

-

-

(732)

8,458

-

-

-

(2,278)

5,448

(22)

5,426

Total comprehensive income/(expense) for the year

-

-

(732)

8,458

-

-

-

34,717

42,443

(197)

42,246

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners recorded directly in equity

 

 

 

 

 

 

 

 

 

 

 

Issue of shares

13

744

-

-

-

-

-

-

757

-

757

Equity settled share-based payment transactions

-

-

-

-

-

-

-

1,224

1,224

-

1,224

Dividends

-

-

-

-

-

-

-

(7,406)

(7,406)

-

(7,406)

Total contributions by and distributions to owners

13

744

-

-

-

-

-

(6,182)

(5,425)

-

(5,425)

 

 

 

 

 

 

 

 

 

 

 

 

Changes in ownership interests

 

 

 

 

 

 

 

 

 

 

 

Acquisition of non-controlling interest without a change in control

-

-

-

-

-

-

-

(6,727)

(6,727)

3,922

(2,805)

Disposal of subsidiaries

-

-

(361)

-

-

-

-

-

(361)

(1,861)

(2,222)

Total changes in ownership

-

-

(361)

-

-

-

-

(6,727)

(7,088)

2,061

(5,027)

Total transactions with owners

13

744

(361)

-

-

-

-

(12,909)

(12,513)

2,061

(10,452)

Balance as at 31 May 2014

3,309

73,952

(1,965)

2,766

211

1,530

1,022

69,073

149,898

226

150,124

 

 

 

 

Share capital
£000

Share premium
£000

Translation reserve
£000

Hedging reserve
£000

Other reserves
£000

Capital redemption reserve
£000

Merger reserve
£000

Retained earnings
£000

Total parent equity
£000

Non-controlling interest
£000

Total equity
£000

Balance at 1 June 2014

3,309

73,952

(1,965)

2,766

211

1,530

1,022

69,073

149,898

226

150,124

Total comprehensive income for the year

 

 

 

 

 

 

 

 

 

 

 

Profit for the year

-

-

-

-

-

-

-

20,454

20,454

116

20,570

Other comprehensive income/(expense)

 

 

 

 

 

 

 

 

 

 

 

Foreign exchange translation differences

-

-

(1,766)

-

-

-

-

-

(1,766)

-

(1,766)

Effective portion of changes in fair value of cash flow hedges

-

-

-

(4,769)

-

-

-

-

(4,769)

-

(4,769)

Remeasurements of defined benefit pension plans

 

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(1,733)

 

(1,733)

 

-

 

(1,733)

Tax recognised on other comprehensive income

 

-

 

-

 

-

 

862

 

-

 

-

 

 

368

 

1,230

 

-

 

1,230

Total other comprehensive expense

 

-

 

-

 

(1,766)

 

(3,907)

 

-

 

-

 

-

 

(1,365)

 

(7,038)

 

-

 

(7,038)

Total comprehensive (expense)/income for the year

 

-

 

-

 

(1,766)

 

(3,907)

 

-

 

-

 

-

 

19,089

 

13,416

 

116

 

13,532

 

 

 

 

 

 

 

 

 

 

 

 

Transactions with owners recorded directly in equity

 

 

 

 

 

 

 

 

 

 

 

Issue of shares

5

3

-

-

-

-

-

-

8

-

8

Equity settled share-based payment transactions

-

-

-

-

-

-

-

(89)

(89)

-

(89)

Dividends

-

-

-

-

-

-

-

(8,744)

(8,744)

-

(8,744)

Purchase of own shares

-

-

-

-

-

-

-

(6,330)

(6,330)

-

(6,330)

Total contributions by and distributions to owners

5

3

-

-

-

-

-

(15,163)

(15,155)

-

(15,155)

 

 

 

 

 

 

 

 

 

 

 

 

Balance as at 31 May 2015

3,314

73,955

(3,731)

(1,141)

211

1,530

1,022

72,999

 

148,159

342

148,501

 

 

 

 

 

 

 

 

Consolidated Cash Flow Statement

for year ended 31 May 2015

 

 


2015
£000


2014
£000

Cash flows from operating activities

 

 

 

Profit for the year from continuing operations

 

21,349

40,554

Adjustments for:

 

 

 

Depreciation

 

10,009

9,407

Impairment of property, plant and equipment

 

10,078

2,829

Depreciation of mining assets

 

8,901

2,873

Amortisation and impairment of goodwill and intangible assets

 

5,567

1,319

Net finance expense

 

2,465

4,447

Share of profit in associates and joint ventures (net of tax)

 

(1,504)

(3,499)

Profit on sale of property, plant and equipment

 

(733)

(970)

Profit on disposal of subsidiaries

 

(16,253)

(2,087)

Equity settled share-based payment expenses

 

(123)

1,050

Income tax expense

 

3,554

11,525

Loss/(gain) on derivative financial instruments

 

3,080

(199)

Translation of non-controlling interest and overseas investments

 

(298)

(22)

 

 

46,092

67,227

 

 

 

 

Change in inventories

 

37,627

(28,434)

Change in trade and other receivables

 

11,257

13,435

Change in trade and other payables

 

(22,666)

(6,461)

Change in provisions and employee benefits

 

(3,334)

1,115

 

 

68,976

46,882

 

 

 

 

Interest paid

 

(1,362)

(3,871)

Income tax paid

 

(4,716)

(793)

 

 

 

 

Net cash from continuing operating activities

 

62,898

42,218

Net cash from discontinued operating activities

 

1,055

(9,149)

Net cash from operating activities

 

63,953

33,069

 

 

 

 

Cash flows from investing activities

 

 

 

Proceeds from sale of property, plant and equipment

 

2,927

2,089

Dividends received

 

2,153

4,273

European reorganisation

 

-

10,242

Disposal of subsidiaries

 

24,807

-

Acquisition of subsidiaries (net of cash acquired)

 

(637)

-

Acquisition of property, plant and equipment

 

(11,263)

(23,618)

 

 

 

 

Net cash from investing activities in continuing operations

 

17,987

(7,014)

Net cash from investing activities in discontinued operations

 

1,677

2,910

Net cash from investing activities

 

19,664

(4,104)

 

 

 

 

Cash flows from financing activities

 

 

 

Proceeds from the issue of share capital (net of directly attributable expenses)

 

8

755

Payment of finance lease liabilities

 

(5,636)

(4,960)

Dividends paid

 

(8,744)

(7,406)

Purchase of own shares

 

(6,330)

-

Repayment of revolving credit facility

 

(48,000)

(4,000)

 

 

 

 

Net cash from financing activities in continuing operations

 

(68,702)

(15,611)

Net cash from financing activities in discontinued operations

 

(1,578)

(1,923)

Net cash from financing activities

 

(70,280)

(17,534)

 

 

 

 

Net increase in cash and cash equivalents

 

13,337

11,431

Cash and cash equivalents as 1 June

 

30,768

18,959

Effect of exchange rate fluctuations on cash held

 

(252)

378

Cash and cash equivalents at 31 May

 

43,853

30,768

                                                                                                                                                                                                         

1. Basis of preparation and status of financial information

 

The financial information set out above has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards as adopted by the EU (Adopted IFRSs).

 

The financial information set out above does not constitute the Group's statutory accounts for the years ended 31 May 2015 or 2014. Statutory accounts for 2014 have been delivered to the Registrar of Companies, and those for 2015 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

These results were approved by the Board of Directors on 10 August 2015.

 

2. Segmental Information

The following analysis by industry segment is presented in accordance with IFRS 8 on the basis of those segments whose operating results are regularly reviewed by the Board of Directors (the Chief Operating Decision Maker as defined by IFRS 8) to assess performance and make strategic decisions about allocation of resources.

 

The Group announced on 11 February 2015 the intention to combine the E&C Division and Production Division into one new division called Coal Production and Distribution ("CPD"). The integration is complete and performance is now measured only at the combined CPD level. The resultant three division structure now forms the basis of the operating segments upon which the Chief Operating Decision Maker assesses the business performance and makes strategic decisions.  The comparative period has been restated to reflect this new divisional structure.

 

The new divisional structure is therefore:

·      Coal Production and Distribution: Provides coal, coke, minerals, smokeless fuel and biomass products to a range of industrial, wholesale and public sector energy consumers.

·      Industrial Services: Provides quality assured contract management services to clients in materials handling and a wide range of other industrial sectors.

·      Transport: provides bulk logistics to customers across the UK.

 

These segments are combinations of subsidiaries, joint venturesand associates.  They have separate management teams and provide different products and services. The three operating segments are also reportable segments.

 

Transactions between divisions are carried out at rates that do not give a competitive advantage to a particular division of the Group.

 

The segment results, as reported to the Board of Directors, are calculated under the principles of IFRS. Performance is measured on the basis of continuing underlying operating profit, which is reconciled to continuing profit before tax in the tables below:

 

 

Coal Production & Distribution
 

 

2015
£000

Transport


 

2015
£000

Industrial Services

 

2015
£000

Total


 

2015
£000

Revenue

 

 

 

 

Total revenue

485,948

68,309

127,769

682,026

Inter-segment revenue

(1,332)

(11,693)

(6,840)

(19,865)

Revenue from external customers

484,616

56,616

120,929

662,161

 

 

 

 

Underlying operating profit

34,828

2,267

5,660

Loss on Biomass conversion project settlement

-

-

(2,400)

(2,400)

Amortisation of intangibles

(143)

-

-

Taxation on associates and joint ventures

(634)

-

-

Net financing costs

(1,435)

(421)

(609)

(2,465)

Profit before taxation (pre-simplification)

32,616

1,846

2,651

37,113

Simplification costs

 

 

 

(9,130)

Unrealised fair value gains and losses on derivative financial instruments

 

 

 

(3,080)

Profit before taxation

 

 

 

24,903

Depreciation charge

(13,120)

(2,411)

(3,427)

(18,958)

Capital expenditure

11,163

1,864

397

13,424

Net assets

 

 

 

 

Segment assets

186,300

17,111

46,012

Segment liabilities

(67,929)

(10,649)

(23,150)

(101,728)

Segment net assets

118,371

6,462

22,862

147,695

Associates and joint ventures

5,963

-

-

5,963

Segment net assets including share of associates and joint ventures

124,334

6,462

22,862

153,658

Unallocated net assets

 

 

 

(5,157)

Total net assets

 

 

 

148,501

 

Unallocated net assets include goodwill and intangibles (£9.5m), revolving credit facility (£32.8m), cash and cash equivalents (£19.8m), derivative financial instruments (£4.6m), deferred tax asset (£2.9m) and other corporate items (£1.2m).

 

 

 

 

Coal Production & Distribution
 

2014
£000

Transport

 

2014
£000

Industrial Services

2014
£000

Total

 

2014
£000

Revenue

 

 

 

 

Total revenue

760,992

88,975

122,599

972,566

Inter-segment revenue

(85,949)

(12,467)

(4,906)

(103,322)

Revenue from external customers

675,043

76,508

117,693

869,244

 

 

 

 

 

Underlying operating profit

49,257

4,508

5,734

59,499

Gain on disposal of subsidiaries

2,087

-

-

2,087

Impairment of property, plant and equipment

(2,829)

-

-

(2,829)

Amortisation of intangibles

(990)

-

(329)

(1,319)

Taxation on associates and joint ventures

(912)

-

-

(912)

Net financing costs

(2,940)

(933)

(574)

(4,447)

Profit before taxation

43,673

3,575

4,831

52,079

Depreciation charge

(8,000)

(3,196)

(1,084)

(12,280)

Capital expenditure

27,971

6,251

1,336

35,558

Net assets

 

 

 

 

Segment assets

249,856

30,518

52,111

332,485

Segment liabilities

(91,353)

(20,631)

(22,111)

(134,095)

Segment net assets

158,503

9,887

30,000

198,390

Associates and joint ventures

6,843

-

-

6,843

Segment net assets including share of associates and joint ventures

165,346

9,887

30,000

205,233

Unallocated net assets

 

 

 

(55,109)

Total net assets

 

 

 

150,124

 

Unallocated net assets includes goodwill and intangibles (£17.8m), revolving credit facility (£80.2m), cash and cash equivalents (£3.0m), derivative financial instruments (£3.2m), deferred tax liability (£2.2m) and other corporate items (£3.3m).

 

Information About Key Customers

Included in revenue is an amount of £95,236,000 (2014: £155,595,000) arising from sales to the Group's largest customer, relating to the Energy and Commodities and Industrial Services Divisions.

 

The following table analyses revenue by significant category:

 


2015
£000


2014
£000

Sale of goods

484,616

675,043

Rendering of services

177,545

194,201

 

662,161

869,244

 

 

Geographical Information

 

 

2015

2014

 

UK

£000

Overseas
£000

UK
£000

Overseas
£000

Revenue

649,816

12,345

816,274

52,970

Non-current assets

79,889

328

107,766

-

 

 

 

 

 

 

                                                                                                                                                                                                                                                                                                                                          

3. Taxation

Recognised in the Income Statement

 

 

2015
£000

2014
£000

Current tax expense

 

 

Current year

5,777

11,444

Adjustments for prior years

(107)

472

Foreign tax - current year

-

377

Current tax expense

5,670

12,293

 

 

 

Deferred tax credit

 

 

Origination and reversal of temporary differences

(2,262)

(710)

Adjustments for prior years

56

(98)

Reduction in tax rate

90

40

 

 

 

Deferred tax credit

(2,116)

(768)

 

 

 

Tax expense in income statement (excluding share of tax of equity accounted investees)

3,554

11,525

Share of tax of equity accounted investees

634

912

 

 

 

Total tax expense from continuing operations

4,188

12,437

 

The £3,554,000 tax expense in the income statement comprises a tax credit of £5,632,000 relating to the Simplification Programme and other non-underlying items and a tax charge of £9,186,000 (underlying effective tax rate 22.8%) relating to underlying trading.

 

 

Recognised in Other Comprehensive Income

 

 

2015
£000

2014
£000

Deferred tax income/(expense)

 

 

Effective portion of changes in fair value of cash flow hedges

862

(2,118)

Actuarial gains and losses on defined benefit pension plans

368

460

 

 

 

 

1,230

(1,658)

 

 

Reconciliation of Effective Tax Rate

 

 

2015
Rate

2015
£000

2014
Rate

2014
£000

Profit for the year from continuing operations

 

21,349

 

40,554

Total tax expense (including tax on equity accounted investees)

 

4,188

 

12,437

 

 

 

 

 

Profit excluding taxation from continuing operations

 

25,537

 

52,991

 

 

 

 

 

Tax using the UK corporation tax rate of 20.83% (2014: 22.67%)

20.83%

5,319

22.67%

12,011

 

 

 

 

 

Effect of tax rates in foreign jurisdictions

0.37%

95

0.43%

228

Unrecognised tax losses

-

-

0.02%

13

Non-deductible expenses

(5.39%)

(1,376)

(0.36%)

(187)

Reduction in tax rate on deferred tax balances

0.35%

90

-

(2)

Under provided in prior years

0.23%

60

0.71%

374

 

 

 

 

 

Effective tax rate and total tax expense

16.40%

4,188

23.47%

12,437

 

 

The UK corporation tax rate reduced to 20% on 1 April 2015, giving an effective base rate of 20.83% (2014: 22.67%).

 

Factors that may affect future current and total tax charges

Reductions in the UK corporation tax rate from 23% to 21% (effective from 1 April 2014) and 20% (effective from 1 April 2015) were substantively enacted on 2 July 2013. In the Budget on 8 July 2015, the Chancellor announced additional planned reductions to 18% by 2020. This will reduce the Group's future current tax charge accordingly. The deferred tax asset at 31 May 2015 has been calculated based on the rate of 20% substantively enacted at the balance sheet date.

 

4. Earnings Per Share

 

 

2015

2014

 

Continuing and discontinued

Continuing

Continuing and discontinued

Continuing

Ordinary Shares

 

 

 

 

Basic earnings per share

62.91p

65.31p

111.88p

123.18p

Diluted earnings per share

61.88p

64.24p

110.99p

122.19p

 

 

The calculation of earnings per share is based on the profit for the year attributable to equity holders and on the weighted average number of shares in issue and ranking for dividend in the year.

 

 

2015

2014

 

Continuing and discontinued

Continuing

Continuing and discontinued

Continuing

Profit for the year attributable to equity holders (£000)

20,454

21,233

36,995

40,729

Weighted average number of shares

32,511,083

32,511,083

33,065,926

33,065,926

Basic earnings per share

62.91p

65.31p

111.88p

123.18p

           

 

 

The calculation of weighted average number of shares includes the effect of own shares held of 1,053,072 (2014: nil). The calculation of diluted earnings per share is based on the profit for the year and the weighted average number of ordinary shares in issue in the year adjusted for the dilutive effect of the share options outstanding (effect on weighted average number of shares is 540,262 (2014: 266,277)); effect on earnings per ordinary share is 1.03p (2014: 0.89p). Effect on continuing earnings per ordinary share is 1.07p (2014: 0.99p).

 

 

2015

2014

 

Continuing and discontinued

Continuing

Continuing and discontinued

Continuing

Profit for the year attributable to equity holders (£000)

20,454

21,233

36,995

40,729

Weighted average number of shares

33,051,345

33,051,345

33,332,203

33,332,203

Diluted earnings per share

61.88p

64.24p

110.99p

122.19p

 

 

Continuing underlying basic and diluted earnings per share are calculated on the same weighted average number of shares in the table above, and on underlying profit after tax, as reconciled below:

 

 

2015
£000

2014
£000

Profit for the year attributable to equity holders from continuing operations

21,233

40,729

Amortisation/impairment of intangibles/goodwill

143

1,319

Simplification costs (including derivative movement)

12,210

(2,087)

Impact of Biomass conversion project settlement

2,400

-

Impairment of property, plant and equipment

-

2,404

Tax effect of above items

(4,967)

(780)

 

 

 

Underlying Profit after Tax from Continuing Operations

31,019

41,585

 

 

5. Dividends

The aggregate amount of dividends comprises:

 

 

2015
£000

2014
£000

Final dividends paid in respect of prior year but not recognised as liabilities in that year
(16.7 pence per share (2014: 13.6p))

 

5,534

 

4,498

Interim dividends paid in respect of the current year (10.0 pence per share (2014: 8.8p))

3,210

2,908

 

 

 

 

8,744

7,406

 

 

 

Proposed dividend (20.0 pence per share (2014: 16.7p))

6,417

5,522

 

 

The proposed dividend has not been included in liabilities as it was not approved before the year end.

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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