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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Hargreaves Services | AQSE:HSP.GB | Aquis Stock Exchange | Ordinary Share | GB00B0MTC970 | Ordinary Shares 10p |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 575.00 | 560.00 | 590.00 | 575.00 | 575.00 | 575.00 | 0.00 | 07:01:06 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMHSP
RNS Number : 6031G
Hargreaves Services PLC
09 August 2016
For Immediate Release 9 August 2016
HARGREAVES SERVICES PLC
(the "Company" or the "Group" or "Hargreaves")
Preliminary results for the year ended 31 May 2016
Hargreaves Services plc (AIM: HSP) announces its preliminary results for the year ended 31 May 2016.
Key Financials
Hot Features
Premium
Year
Year ended ended
31 May 31 May Change
2016 2015 %
Continuing Revenue GBP340.7m GBP662.2m (48.6)
Continuing Operating Profit(1) GBP5.2m GBP38.1m (86.4)
Continuing Underlying Operating
Profit(2) GBP4.6m GBP42.8m (89.3)
Exceptional Costs(3) GBP(12.4)m GBP(12.2)m (1.6)
Continuing (Loss)/Profit
Before Tax GBP(10.6)m GBP24.9m (142.6)
Continuing Underlying Profit
Before Tax(4) GBP3.0m GBP40.3m (92.6)
Continuing Diluted EPS (30.0)p 64.2p (146.7)
Continuing Underlying Diluted
EPS(4) 5.6p 93.9p (94.0)
Dividend (including proposed
final dividend) 2.3p 30.0p (92.3)
Net Debt(5) GBP32.3m GBP1.0m 3,130.0
Highlights
-- The Group has delivered Continuing Underlying Operating Profit of GBP4.6m -- Trading since Interim results in line with management's expectations -- Coal production and trading successfully reduced and now focussing on speciality markets
-- Decision taken to shorten mine life at the Tower project with mining due to finish March 2017; the Group expects full repayment of loans after write off of equity investment and other balances of GBP4.7m
-- Charge of GBP12.4m for exceptional costs arising from re-structuring activities
-- Successful acquisition of CA Blackwell in January 2016 broadens Group's Services operations and delivers significant heavy plant synergies
-- Establishment of Property & Energy Division to drive GBP35-50m of value creation in next five to seven years
-- Aggressive targets set for new business for Industrial Services operations in face of accelerated UK coal fired station closures
-- Coal stocks built to GBP26.0m in face of negligible demand from UK coal stations, confident of sale of surplus stocks this financial year
-- Balance sheet remains strong and well financed to allow orderly run-out of GBP60m of coal stocks and other legacy assets which include land, property, equipment, stocks and loans, into cash
-- Final dividend of 2.3 pence in line with Group's 40% pay-out ratio target
Commenting on the results, Chairman David Morgan said:
"After two challenging years, we have a clear opportunity in front of us to develop and deliver significant shareholder value. The Group's core business operations have been enhanced following the acquisition of CA Blackwell. Our portfolio of property and energy projects offer an exciting platform for significant value creation that is incremental to that created from our Distribution & Services operations. We have targeted GBP35-50m of incremental value creation from development and energy projects related to these property assets. The GBP60m of legacy assets that we aim to convert to cash will strengthen a balance sheet that is already strong and allow consideration of a wide range of options to return value or capital to shareholders."
(1) Continuing Operating Profit is stated before exceptional costs of GBP12,378,000 (2015: GBP9,130,000).
(2) Continuing Underlying Operating Profit is stated excluding the exceptional 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) Exceptional costs for the year ended 31 May 2015 are stated after including an amount of GBP3,080,000 in respect of unrealised fair value losses on derivative financial instruments.
(4) Continuing Underlying Profit before Tax and Continuing Underlying Diluted EPS are stated excluding the exceptional 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.
(5) 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 (Financial PR) Mark Court / Sophie Cowles 0207 466 5000 N+1 Singer (NOMAD and Joint Corporate Broker) Sandy Fraser / Nick Owen 020 7496 3000 Investec (Joint Corporate Broker) Sara Hale / Rob Baker 020 7597 4000
CHAIRMAN'S STATEMENT
Results
The period just ended has once again seen a significant transition in our business and this is reflected in these results. Underlying Profit before Tax from Continuing Operations decreased by GBP37.3m from GBP40.3m to GBP3.0m. The reported Loss before Tax from Continuing Operations was GBP10.6m after a net exceptional charge of GBP12.4m arising from the continuing restructuring, the accelerated closure of a number of significant customer sites and the decision to impair our equity investment in the Tower project. Underlying Diluted EPS from Continuing Operations decreased from 93.9p to 5.6p.
Net debt increased by GBP31.3m to finish the year with net debt of GBP32.3m. The Blackwell acquisition accounted for GBP13.4m of this increase in net debt. The collapse in thermal coal demand in the UK resulted in an unplanned build of coal stocks which we are confident will be cleared in this financial year.
Strategy
Faced by very challenging market conditions we have spent the last two years making changes to the very nature of the Group and have been successful in achieving a fundamental re-positioning. In the year ended 31 May 2014, the Group generated revenues of GBP761.0m and operating profit of GBP49.3m from coal and coke production and trading where we produced and traded over seven million tonnes. In the year to 31 May 2016 revenues and operating profits/losses from coal and coke trading and production fell to GBP179.3m and a GBP0.9m loss respectively. We produced or traded less than two million tonnes and are on track to reduce activity further as we respond to reduced thermal coal demand and consequently focus greater efforts on specialised coal products and markets.
The management team have been proactive and have responded well to these challenges. Excellent progress has been made and a clear strategy has been set out to develop long term value through a portfolio of complementary Services businesses and through the development of value in a property and energy project portfolio that is rich with opportunity. Over the last two years, we have established a strong team with a focus on developing and delivering value from that portfolio. Looking forward, we will start to see that investment generating and demonstrating value. The acquisition of C.A. Blackwell Group Limited ("Blackwell") in January 2016 was an exciting and positive step to building our long term Services offering.
Throughout this process, we have maintained a strong balance sheet and as we move forward the business will utilise this to generate significant amounts of cash from the realisation of various assets related to our legacy operations. These steps are outlined in more detail in the Strategic Report, which is included within the Annual Report and Accounts.
Dividend
The Board proposes a final dividend of 0.6p, consistent with the targeted 40% pay-out ratio. If approved at the Annual General Meeting, this will result in a dividend for the full year of 2.3p compared with 30.0p in the previous year, an overall decrease of 92.3%. The proposed final dividend will be paid on 21 October 2016 to all shareholders on the register at the close of business on 23 September 2016.
People
Our staff will always play a key role in the development and operation of the Group. This last financial year has been another tough and challenging year during which further significant redundancies have been necessary. Whilst such redundancies are highly regrettable, the Group's restructuring programme is fundamentally complete and the acquisition of Blackwell demonstrates the Group's ability and appetite to invest in the future. I would also like to make special note of the contribution and achievements by our team in Hong Kong as their skills and teamwork have increased our revenues from that operation by 104% to GBP11.0m.
Board
During the year there were a number of Board changes. I assumed the role of Chairman following the retirement of Tim Ross after the AGM on 7 October 2015. I would like to thank Tim for his contribution to the Group since its flotation in 2005. As a result of my planned succession to Chairman, Nigel Halkes joined the Board on 21 August 2015. I would like to welcome Nigel Halkes to the Board as Non-executive director and Chair of the Audit Committee. I am pleased to see how quickly Nigel has integrated into the Board and developed his understanding of the Group's operations.
Summary
In the last two years the Group has been through a radical restructuring and re-positioning programme, undertaken in the face of tumultuous market conditions. With the restructuring and re-positioning of the Group fundamentally complete, our objective and priority is to demonstrate the intrinsic value of the business as reflected in the Group's considerable asset base. We now have a clear strategy to generate significant shareholder value through the development of a profitable services offering that leverages our core skills, as well as the significant value that can be unlocked in our property and energy portfolio. As we recently announced, our target is to generate between GBP35m and GBP50m of incremental value from our property and energy project portfolio over the next five to seven years. Across the transition the Group has protected and maintained its strong balance sheet. The successful conversion of over GBP60m of legacy assets into cash will further improve the Group's flexibility and allow us to consider strategic options to enhance shareholder value.
David Morgan
Chairman
8 August 2016
GROUP BUSINESS REVIEW
Results
Group revenues decreased from GBP662.2m to GBP340.7m, reflecting the actions taken to reduce the scale of our coal production and coal trading activities. Underlying Continuing Group Operating Profit reduced from GBP42.8m to GBP4.6m reflecting the reduction in coal trading volumes and the impact of falling coal prices on the profits of our residual mining activity. Underlying Continuing Profit before Tax fell in line with Operating Profit from GBP40.3m to GBP3.0m. The transformation of the Group has required significant actions, which in the period incurred exceptional costs of GBP12.4m. These charges related to scaling down the Group's mining activities, the impairment of the Group's equity investment in the Tower joint venture and provisions taken for redundancy and contract demobilisation costs at a number of client sites following early closure announcements. These exceptional costs are reviewed in more detail in the Financial Review below. The reported Continuing Loss before Tax was GBP10.6m compared with a Profit before Tax of GBP24.9m in the prior year.
Coal Exposure Successfully Reduced
Our key focus in the last two years has been to reduce exposure to thermal coal production, trading and related ancillary services. The recent power station closure announcements, continuing falls in coal prices and low UK demand has hastened our scaling-down of operations. The reductions in gas prices and the increases in UK carbon taxes have significantly reduced electricity generation from coal and have precipitated the announcement of the early closure or changes to operating regimes that will significantly reduce coal usage. Stations closed or otherwise likely to be burning less coal include Longannet, Rugeley, Fiddlers Ferry, Eggborough and Ferrybridge. A strengthening of Government sentiment against coal fired generation increases the probability of further closures.
Whilst these developments have presented more challenges to us in the last year, they have also validated our decision to reduce our exposure to the thermal coal markets through trading and production operations. Although coal prices have firmed slightly over the last few months, helped by the weakening of Sterling following the "Brexit" vote, we see no evidence of any market trends in coal price or market demand that would cause us to re-consider the decisions we have taken.
Strategy
In the last year we have started to see the benefits materialise from two years of restructuring, simplification and repositioning. On the 27 April 2016 we published an update on the progress we had made with repositioning the Group; this statement marks an important turning point for the Group. Following the actions taken, we are now focused on developing and demonstrating the value within the Group.
As outlined in the recent update, we now have three clear areas of focus to generate value:
-- Distribution & Services -- Property & Energy -- Legacy Asset Realisation
These focus areas clearly identify the long term, on-going business opportunities which offer medium term development and value creation opportunities and the short term process to release cash from the significant amount of legacy assets which we have protected as our businesses have been closed or activities stepped down.
Reflecting the anticipated momentum and importance of Property and Energy, this will become a segment in its own right from the start of this financial year 1 June 2016. It is currently reported under the Coal Distribution Division. Profits and losses and cash flows related to legacy assets will also be reported in a separate Legacy segment, until such times as these have run to a de minimis level. From 1 June 2016, we will also separately report central group overhead and this will no longer be allocated between individual operations and will also not be allocated between Distribution & Services, Property & Energy and Legacy Asset Realisation. Central group overhead spend was GBP6.1m in the year ended 31 May 2016 compared with GBP7.1m in the prior year. The reductions made during the year should reduce the overhead to around GBP5.0m in the next financial year.
We believe this enhanced segmentation will provide greater transparency on profits, cash flows and capital allocation leading to a clearer understanding of the development of underlying business and the release of cash from legacy asset realisations.
DISTRIBUTION & SERVICES
Supplementing our Coal Distribution operation, we have a portfolio of three complementary Services businesses. We have set ourselves the aspiration of achieving an Operating Profit of between GBP10m and GBP15m from these operations in the medium term. These businesses are reviewed in more detail below.
Specialist Earthworks Services
Our heritage in coal production left us with the skills and plant necessary to undertake contract mining and earthworks projects. The acquisition of Blackwell, which was completed in January 2016, complements that capability and provides a significant step forward in the Group's transition plan. The acquisition establishes our new Specialist Earthworks Division and offers an important opportunity for the Group to grow its Services operations in the UK. A new internal team was established to manage and optimise the utilisation of heavy plant across the Group. The synergies between Blackwell's operations and the Group's mining and restoration experience are very compelling and give us confidence that we can grow the size and scale of our activities in this area. The backing and financial support available from the Group will allow Blackwell to tender, resource and deliver larger scale projects that were not possible as a standalone operation.
Logistics Services
Our Logistics business had a difficult year, however we are confident it is a business with long term profit potential. The recent acquisition of Blackwell offers both synergies and a number of joint bidding opportunities. In the period the business was impacted by a combination of low coal movements and a major change in waste flows following an HMRC landfill tax ruling. These pressures are continuing but the team are working hard to re-build routes and flows. Logistic volumes have not returned to the level enjoyed in the previous financial year and it is unlikely that these will fully recover before the end of this financial year, however the team is confident that the opportunity is there to re-build revenues and profits. In the meantime, every effort is being made to manage overheads and optimise fleet operations to protect profits in the short term. We are encouraged by recent trading. A lease signed in April on a new depot in Harlow, Essex presents a first opportunity for the Division to start to build significant operations in the South East.
Industrial Services
The Industrial Services Division operates a number of key contracts at coal power stations, steel-works and ports in the UK, Hong Kong and South Africa. Although UK coal fired generation has been facing a limited life for a number of years, the recent announcements of closure or reductions in coal burn have been earlier than expected.
Over recent years the Industrial Services Division has made good progress with its strategy of expanding its international activities; in particular its operation in Hong Kong generated revenues of GBP11.0m in the year. The establishment of Hargreaves South Africa (Pty) Limited in 2014, which followed the Algol acquisition, provided a foothold in the South African steel sector, a market that offered long-term opportunities to deploy the Division's skills. Over the last twelve months the world steel sector has faced considerable challenges, therefore we have decided to suspend any further capital investment to support a larger market share in the steel market in South Africa until the outlook becomes more stable.
The key focus for Industrial Services is to deliver quality services from an efficient cost base. The division has set itself an ambitious target of delivering GBP2.0m of operating profit from new business in the next financial year to replace the business lost through recent closures. This represents a significant challenge and every care will be taken to ensure that business is only taken on if the risk weighted return is deemed acceptable. The outlook for the Division's operations in Hong Kong and other key Asian markets is encouraging and development of these operations is key to achieving the Division's new business target.
Coal Distribution
The Coal Distribution operation will focus on the supply of specialist coal and coal products (briquettes) into the speciality markets. These markets include:
-- Domestic home heating -- Space heating (including prisons, schools and hospitals operating coal boilers) -- Industrial markets -- Cement manufacturers -- Steam railways
For a long time the Group has been the leading supplier of specialist coals to markets in England and Wales. Our geographical reach was increased three years ago by the acquisition of the Scottish mining assets that provided a platform to supply parts of the Scottish market. Although we have more work to do to align overheads with activity levels and we see significant short term challenges in disposing of inferior coals that arise from the production of speciality coals, we also see potential for sustaining a profitable distribution business servicing these diverse specialist coal markets. The Group expects to that losses on disposal of inferior coals in the current challenging market could reduce profitability of speciality coal trading by around GBP2m per annum in current market conditions. Fixed costs of around GBP1m will add further pressure until leases and other fixed overheads can be cut.
The Group will work to minimise the cost of the coal that we supply into these markets through our expertise in coal sourcing and carefully managing the balance between indigenous and imported coals. The Group will also work to minimise the amount of inferior coal that arises from the production and preparation of speciality coals and the investment at KIlloch in improved coal preparation equipment is a key action. The coal that we supply into the specialist markets will be from a combination of sources; our own mining operation at the House of Water site in East Ayrshire, other UK producers and imported coal. The average cost of acquiring specialist coal will increase for several reasons. These reasons include, the loss of bulk coal volumes over which fixed overheads can be recovered and the reduced value of non-speciality coal that arises in the process, particularly in the current difficult thermal coal markets.
Imported coal is generally cheaper but can generate significant quantities of lower grade finer coals that may prove difficult to sell in the UK given the challenges of low demand in the thermal sector. Although we will retain the ability to import significant volumes of coal, we will continue to seek to manage and optimise our fixed cost base that supports coal imports. These efforts to reduce the fixed cost base and finding channels to dispose of the non-speciality coal that arises will continue through the current financial year, with the Group working to have an optimal cost structure in place before the start of the financial year ended 31 May 2018 to support a speciality focussed business. Although we believe that the speciality coal markets offer a long term return that justifies the capital deployment, we are aware that the visibility of prices, costs and margins in the next two years is very low.
We expect the House of Water site in East Ayrshire to offer a supply of around 350,000 tonnes of coal for at least the next five years. An investment of GBP1.0m was made at our railhead in Killoch to improve the processing of speciality coals.
PROPERTY & ENERGY PROJECTS
As a legacy of our coal operations we have a diversified 18,500 acre portfolio of property, which includes a range of agricultural and development land including a number of sites with grid connections. We have built a team to focus on the development of value in that portfolio with a view to optimising the conversion of these assets into cash over the next five to seven years and have set ourselves the target of creating between GBP35m and GBP50m of value over and above the GBP24.9m book value of these assets. The initial focus will be on developing value and realising cash from the assets we currently own.
We have been working on this portfolio over the last two years and we are confident that there is very significant value that will be delivered. We will continue to challenge the allocation of capital but we are confident that the returns from development more than justify the cost of holding these sites and taking them through at least the early stages of the development cycle. We are confident that the incremental return on capital compared with an outright sale would far exceed our hurdle rate and compare very favourably with the 10-15% Return on Capital Employed ("ROCE") rate found in typical property development operations.
The Blindwell site, East of Edinburgh, represents a particularly exciting development opportunity. A planning application for a major residential scheme is currently under consideration by the local authority. The table below lists some of the key development sites that present the greatest immediate opportunity for value creation through development:
Project Location Acres Development Focus
Blindwell East Lothian 390 Large scale residential
development
Westfield Fife 390 Renewable energy through
EfW and mixed industrial
St Ninians Fife 1,155 Leisure led, mixed
use development
North Killingholme Lincolnshire 33 Industrial
Eggborough Yorkshire 10 Energy, including existing
consent for a EfW plant
Maltby Yorkshire 84 Mixed residential and Industrial
development
Monckton Yorkshire 35 Mixed residential and Industrial
development
In the energy space, the key focus of development effort at this time is around the two flagship Energy-from-Waste (EfW) projects, where we continue to progress planning and development; one at the Earls Gate Energy Centre at Grangemouth and one on the Westfield site. These projects are complex but offer a very significant value creation opportunity for the Group. Both projects have been carefully appraised and the Board is confident that they are both well founded and deliverable.
In addition, our energy team continue to appraise carefully the opportunities for the 75MW of grid connections that are owned by the Group. Our portfolio also includes 70MW of consented wind energy in South Lanarkshire and we have a number of other sites that offer significant wind potential. All of these key sites benefit from high wind speed and whilst market conditions and prices do not allow commercial development at this time, if onshore sites do become financeable, many of these sites will be very attractive. Like most other operators, we have suspended the bulk of speculative investment in solar and onshore wind whilst the market evolves.
LEGACY ASSET REALISATION
The Group also owns a portfolio of surplus assets obtained through our coal and coke trading and extensive mining operations. All of these assets are marketable and represent an opportunity to generate a significant amount of cash for the Group. Many of the markets into which these assets are sold are however depressed or illiquid at this time.
These assets comprise largely of stock, plant and equipment and loans to the Tower joint venture and are held on the balance sheet at the lower of cost and net realisable value. The estimated net realisable value is based on our assessment of the fair market value that could be expected from the sale of these assets in an orderly manner. Whilst the realisation of cash is likely to be lumpy, the recent weakness of Sterling should improve prospects for a speedy realisation.
The carrying value of legacy assets as at 31 May 2016 was GBP60.1m, following the GBP4.7m impairment of the Tower equity investment and other asset balances. The translation of these assets into cash is a key priority for the Group and we see this as an area of focus over the remainder of the project.
The most significant balances are the GBP22.4m of loans and balances relating to the Tower joint venture and GBP19.7m of coal and coke stocks. It is our current view that as Tower completes its final seven months of mining and two years of restoration, the joint venture will generate enough cash to repay these loans. A large proportion of these loan repayments will be achieved through the sale of plant, equipment and land. We are currently looking at options to achieve plant sales as early as possible, both to pay down debt and reduce the interest cost to the Tower joint venture itself.
SHAREHOLDER VALUE
As we manage these areas of activity we will remain focussed on shareholder value. At this time, we believe that the operational and value generation objectives we have set ourselves can be achieved with relatively little incremental investment. The cash that we will realise from legacy assets will create significant opportunity to look at delivering shareholder value through dividends, special dividends or share-buy backs. The Board remains open to the re-investment of capital should the right opportunities arise and provided such opportunities clearly offer a better investment return compared with the return of surplus capital to shareholders. As we review options, we will be careful to maintain a strong balance sheet position with an appropriate level of leverage.
OUTLOOK
The reduction in thermal coal distribution and production combined with our exit from coke production and coke and coking coal trading has significantly reduced the risk and volatility of the business. Whilst the streamlining process has been long and hard and the profitability of the Group has significantly reduced, the Group emerges from this process with a clear strategic and operational focus and a strong balance sheet.
The biggest challenge to delivering our profit expectations for the coming year is the need for our Industrial Services Division to contract new business to replace that lost in the UK through the early closure of its customers' sites. Pleasingly, the Division is already making good progress in this regard. Compensating that risk, we have an exciting opportunity to grow the Specialist Earthworks Division. Whilst many of our recent statements have focussed on the challenges around the wider coal markets, the specialist coal markets have consistently remained robust. The operational opportunities presented by these markets in the coming years should not be overlooked and we will work hard to maximise the profit opportunity. We have budgeted for profits from Property & Energy and Industrial Services to be second half weighted.
Turning to the balance sheet, the net assets at the end of the year were GBP131m, equivalent to GBP3.96 pence per share. As noted above, we have set ourselves the medium term target of adding GBP35m to GBP50m of value to the property assets included within these net assets and at the same time converting our legacy assets into cash. Whilst, by their nature, the delivery of the increased development value and legacy cash realisations is likely to be lumpy, we are confident that very significant value can be delivered. This represents an exciting opportunity to create significant shareholder value that is very material in the context of the size and scale of the Group.
Gordon Banham
Group Chief Executive
8 August 2016
REVIEW OF OPERATING PERFORMANCE BY BUSINESS UNIT
Review of Underlying Performance
Revenues from Continuing Operations during the year reduced by GBP321.5m from GBP662.2m to GBP340.7m, reflecting the significant decrease in coal sales caused by low UK coal demand for both imported and indigenous coals and through the cessation of supply of metallurgical coals following the closure of Redcar Steelworks. Underlying Group Operating Profit from Continuing Operations for the year reduced by GBP38.2m from GBP42.8m to GBP4.6m. Underlying Profit before Tax was GBP3.0m, a decrease of GBP37.3m on the prior year, due largely to the impact of reduced trading volumes on revenues and margins in Coal Distribution. Reported Profit before Tax of the Group reduced by GBP35.5m from GBP24.9m to a loss of GBP10.6m after exceptional costs totalling GBP12.4m. The bulk of the exceptional costs related to the early closure of a number of mining sites to support a move towards a single operating site model and redundancy and contract demobilisation costs following the closure of major steel, coal and port sites at which the Group provided industrial services as well as impairment of the equity investment and other assets in Tower.
The commentary below reflects the continuing underlying performance of the four Divisions.
Industrial Specialist Total Coal
Services Logistics Earthworks Services Distribution Total
2016 2016 2016 2016 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Segment Continuing
Operating Profit/(Loss) 3,297 1,173 1,076 5,546 (341) 5,205
Intangible amortisation/impairment - - - - 584 584
Share of loss in jointly
controlled entities
(net of tax) - - - - (1,792) (1,792)
Share of tax in associates
and jointly controlled
entities - - - - 628 628
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Underlying Continuing
Operating Profit/(Loss) 3,297 1,173 1,076 5,546 (921) 4,625
Net financing costs
- Continuing Operations (211) (356) (71) (638) (994) (1,632)
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Underlying Continuing
Profit/(Loss) before
Tax 3,086 817 1,005 4,908 (1,915) 2,993
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Industrial Specialist Total Coal
Services Logistics Earthworks Services Distribution Total
2015 2015 2015 2015 2015 2015
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Segment Continuing
Operating Profit 3,260 2,267 - 5,527 32,547 38,074
Intangible amortisation/impairment - - - - 143 143
Impact of Biomass conversion
project settlement 2,400 - - 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 5,660 2,267 - 7,927 34,828 42,755
Net financing costs
- Continuing Operations (609) (421) - (1,030) (1,435) (2,465)
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Underlying Continuing
Profit before Tax 5,051 1,846 - 6,897 33,393 40,290
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Coal Distribution Division
As the Group's coal mining activities reduced, the focus of the Division shifted last year to Coal Distribution. The table below shows the breakdown of operating profit within the Coal Distribution Division by key activity.
Bulk Industrial Total
and Domestic
------------- ---------------- -----------------
2016 2015 2016 2015 2016 2015
Third Party Traded
Volumes ('000s tonnes) 602 4,157 556 515 1,158 4,672
Profit per tonne (GBP) 0.89 1.39 9.26 16.78 4.91 3.09
----- ------ ------- ------- -------- -------
Third Party Trading
(GBP'000) 534 5,792 5,147 8,644 5,681 14,436
----- ------ ------- -------
Mining Operations (GBP'000) (8,089) 19,972
Germany (Associate)
(GBP'000) 1,776 663
Property and Energy
(GBP'000) 395 767
Monckton (GBP'000) (341) (139)
Other (GBP'000) (343) (871)
Division Underlying
Continuing Operating
(Loss)/Profit (GBP'000) (921) 34,828
-------- -------
Coal Distribution revenues fell from GBP485.9m to GBP179.3m principally due to the lower volumes of third party coal being traded, as demand for coal in the steel and thermal markets fell significantly. Following the decisions to reduce levels of thermal coal imports and to cease importing metallurgical coals, third party bulk coal volumes traded by the Division fell from 4,157,000 tonnes to 602,000 tonnes. The Operating Profit generated from coal trading fell from GBP14.4m to GBP5.7m.
The volume of speciality coal traded was 556,000 tonnes compared with 515,000 tonnes, whilst the average Operating Profit per tonne achieved fell from GBP16.78 to GBP9.26 in the comparative year. The pressure on margins reflected the impact of a number of factors including strong competition in the cement sector, a significant quantity of stock remaining unsold in the market following the closure of Kellingley Colliery by its operator UK Coal and a second successive exceptionally mild winter. The Board expects market supply and demand balance to improve in the coming years and is focussed on managing the future acquisition cost of speciality coals to support the Coal Distribution business.
Revenues from coal production activity also fell sharply, from GBP96.4m to GBP46.0m, as the Group scaled down its production activity in the face of low coal prices. Mining Operations recorded a GBP8.1m operating loss during the year ended 31 May 2016 compared with GBP20.0m operating profit in the prior year. This performance reflected the impact of lower coal prices combined with the decision to reduce output levels in response to the low coal prices. The mining operations supplied 126,000 tonnes of speciality coal to support the Third Party Trading operations.
Coal production was 506,000 tonnes compared with 1,399,000 tonnes in the prior year. The Division started the year producing coal at six sites and finished the year producing coal at only two; Glenmuckloch and House of Water. Production activity at Glenmuckloch will be concluded by the end of September 2016 due to low coal prices and low demand, at which time the only active coal production site operated by the Group will be House of Water. During the year, coal production ended at Netherton, Duncanziemere and St Ninians. Following the announcement of Longannet's closure the decision was taken to cease mining early at Muir Dean. The Group incurred an exceptional charge of GBP4.0m to support the early closure of Glenmuckloch and Muir Dean. As the mining operations have reduced in scale, mining operations will no longer be separately reported and instead will be reported as part of the residual Coal Distribution operation.
The Group retains options and planning permissions over a number of sites. These sites represent the best and most cost effective options available to the Group. The balance sheet contains GBP2.1m of development costs in respect of these sites and options which are held as strategic assets and represent reserves of approximately 4.1 million tonnes.
The Group continues to provide mining services to Tower Regeneration Limited ("TRL"), a joint venture in which the Group owns a 35% beneficial stake. Mining operations at Tower performed satisfactorily last year and 813,000 tonnes of coal were sold compared with 713,000 tonnes in the previous year. TRL, however, had a challenging year due to low coal prices and posted a loss of GBP8.4m. The Group's 35% share of that loss was GBP2.9m. Overall, the Tower project contributed a net profit at the operating level of GBP0.3m compared with GBP5.5m in the prior year.
Although the UK and European steel sectors continue to face significant challenges, our European associate performed well last year and exceeded its targets. The European operation generated revenue of GBP89m from the trading of 652,000 tonnes of product compared with GBP64m of revenue from 304,000 tonnes in the prior year. The Group's 86% share of Operating Profit increased from GBP0.7m to GBP1.8m. Revenue visibility remains low but we note that the operation continues, as it always has, to manage its fixed cost base closely.
Property and Energy
The Property and Energy results for the year ended 31 May 2016 were reported within the Coal Distribution Division and are shown in the table above. The Property team generated an Operating Profit in the year ended 31 May 2016 of GBP0.4m. This figure was lower than the GBP0.8m reported in the prior year simply due to the timing of sundry non-core property sales.
Beyond the Operating Profit generated, the Group has continued to invest in the development of its Property and Energy portfolio. The team supporting these development projects has been grown from eight to twelve. The operation delivered a net Operating Profit of GBP0.4m, arising from sundry trading property sales. The key focus of the Property team has been the development of seven key sites listed in the table in the Group Business Review. Investment of GBP2.1m on property and project development was capitalised during the year.
The Group is pleased with the progress being made in the development of the Earls Gate Energy Centre project in the last financial year and notes that the planning application was formally submitted in May 2016. The project aims to deliver a 75MW replacement Combined Heat and Power plant using refuse derived fuels at a chemical complex in Grangemouth in Scotland.
The Group has continued to complete and formalise their consents for the three wind projects that have received planning consent in the last twelve months. These are Dalquhandy, Broken Cross and Poniel and total 70MW. Financial investment in these projects in the prior year was negligible and restricted to the formalisation of the planning permissions to preserve the option value in these schemes.
Specialist Earthworks Division
On 11 January 2016, the Group completed the acquisition of Blackwell, establishing the Group's Specialist Earthworks Division. In the four and a half months between acquisition and 31 May 2016, the Division reported an Operating Profit of GBP1.1m from revenues of GBP31.3m. The performance was slightly ahead of management's expectations. Since the acquisition, good progress has been made with the Blackwell team in developing the short term contract pipeline. The Board was encouraged by the news in April that the Division has been selected as the preferred provider for the earthworks related to two sections of the Government's GBP1.5 billion A14 improvement scheme.
Industrial Services Division
The Industrial Services business faced a number of significant challenges in the UK in the last financial year as a consequence of the pressures in the coal and steel sectors. The last year also saw announcements or closure decisions at a number of key client sites including Liverpool Bulk Terminal and Ferrybridge. Changes in operating regimes that will result in reduced coal burn have taken place at both Fiddlers Ferry and Eggborough.
In October 2015, the Redcar steelworks was forced to close whilst both the Scunthorpe and Port Talbot steelworks were the subject of sale processes during the year. We continue to provide services at Port Talbot and Scunthorpe, however the closure of the Redcar operation resulted in an exceptional charge for the Group of GBP1.6m in respect of redundancies and other contract demobilisation costs. Excellent stewardship and structuring of trading arrangements ensured that bad debts and losses on stock positions were avoided.
Revenue for the Division reduced by GBP44.3m from GBP127.8m to GBP83.5m in the prior year. The table below shows the split of revenue by geography. The challenges in the UK market were reflected by a GBP51.9m reduction in revenues rising from the various site closures. Excellent progress and development in the Hong Kong operation saw revenues increase by GBP5.6m or 104% from GBP5.4m to GBP11.0m.
Total revenue by destination GBPm FY14 FY15 FY16 ----------------- ------ ------ ----- UK 119.8 120.9 69.0 Hong Kong 2.8 5.4 11.0 Other - 1.5 3.5 ----------------- ------ ------ ----- Total 122.6 127.8 83.5 ----------------- ------ ------ -----
The bulk of the reduction in UK revenue was attributable to the closure of Redcar Steelworks and Liverpool Bulk Terminal. Orders for additional works at coal power stations and other steel sites were also lower than the prior year due to the economic and business challenges faced by many of our key customer sites and operations.
Six key customer sites were closed or announced closure in the last financial year. These operations contributed GBP20.2m of revenue and GBP2.1m of gross margin in the year ended 31 May 2016. In addition to the loss of revenue and profits, the closures resulted in exceptional charges in respect of redundancy and other contract demobilisation costs which are outlined in the Financial Review.
Offsetting the challenges faced by the UK business, good progress was made in developing operations in Hong Kong. Revenues in Hong Kong grew from GBP5.4m to GBP11.0m, an increase of 104%. The operating profit generated from international operations accounted for GBP0.3m. Efforts continue to develop the business, particularly in Hong Kong where ambitious targets have been set for growth.
Logistics Division
The Logistics Division had a challenging year. Revenues for the operation fell from GBP68.3m to GBP54.5m. GBP7.3m of that fall related to Imperial Tankers which was disposed of in the prior year. The balance of the reduction in revenues stemmed from a major change in the movement of waste flows following a clarification of waste classification for landfill tax purposes by HMRC. The Division's activity levels were also impacted by very low seasonal flows of coal and rock salt following the mild winter. As a result of reduced activity levels and the disruption to established waste routes, Operating Profit for the Division fell by GBP1.1m from GBP2.3m to GBP1.2m.
Safety, Health and the Environment
Our vision is to create an environment where all employees can work with zero harm to them. To achieve this, the Group takes a proactive approach to Safety, Health and the Environment and remains committed to the highest practicable standards of safety and health management and the minimisation of adverse environmental impacts.
The Board ensures that Health and Safety issues for employees, customers and the public are of foremost concern in all Group activities. The Group Chief Executive, supported by external advice, is charged with overall responsibility. All divisions have formulated safety management systems. We continue with the programme to achieve OHSAS 18001 Occupation Health and Safety Assessment Series for health and safety management systems and ISO 14000 environmental management.
During the previous year, we continued to strengthen our approach to behavioural safety training, with emphasis on raising the awareness and understanding of our supervisory staff, who form the 'front line' in delivering our standards within the workplace. This is being achieved through internal safety champions and external accredited training providers.
We have also developed our Senior Manager Safety Engagement Programme to deliver leadership across our operating sites. This Programme is led by the Board members and involves all senior managers undertaking site based safety visits, engaging directly with the workforce to discuss issues that impact on them. This Programme has proved to be effective in delivering a consistent approach across the Group and will continue to be a cornerstone of our safety strategy.
It is disappointing to report that, despite our best efforts, our safety performance deteriorated slightly during the year, as measured by Lost Time Incident Frequency Rate ("LTIFR"). This performance was in some part influenced by the period being a year of transition for the Group, with a number of operating units closing and others downsizing their workforce. Notwithstanding these influences, this remains a disappointing result and addressing the challenges of the changing environment remains a key focus for the Group.
Iain Cockburn
Group Finance Director
Gordon Banham
Group Chief Executive
8 August 2016
FINANCIAL REVIEW
Revenue
The Group has continued to be faced with significant challenges within the coal sector in the UK with continued coal price weakness and lower levels of demand for power station grade coal, arising from the accelerated programme of coal generation plant closures. These market pressures together with the Group's decision to scale down its coal activities have resulted in a reduction in revenue of GBP321.5m from GBP662.2m to GBP340.7m in the current year.
Operating Profit and Margins
Underlying Operating Profit from Continuing Operations reduced by GBP38.2m from GBP42.8m to GBP4.6m, mainly driven by a reduced contribution from our Third Party Trading business, due to the aforementioned challenges within the coal markets. Additionally, underlying operating profit within the Industrial Services division has reduced in the year, linked to the closure of Redcar Steelworks and the accelerated closure programme of many UK coal power generation plants.
The initial period of operation within the newly established Specialist Earthworks division has been promising, delivering an Underlying Operating Profit of GBP1.1m in the first period of operation. This contribution has helped to offset the reduction in Underlying Operating Profit of GBP1.1m delivered by our Logistics division. The Logistics division was impacted by a reduction in coal and rock salt volumes combined with some significant challenges within the waste sector. These factors contributed to the reduction in Underlying Operating Profit from GBP2.3m in the prior year to GBP1.2m in the year ended 31 May 2016.
Reported Group Continuing Operating Profit before exceptional costs fell from GBP38.1m to GBP5.2m whilst Continuing Profit before Tax fell more sharply from GBP24.9m to a loss of GBP10.6m reflecting GBP12.4m of exceptional costs as the Group continues to transition the business away from thermal coal exposure within the UK.
Acquisition of Blackwell
On 11 January 2016, the Group completed the acquisition of Blackwell for a consideration of up to GBP11.85m. The consideration was settled by a net cash payment of GBP8.5m and the transfer to the Blackwell shareholders of a property at Earls Colne with a market value of GBP3.35m. The property was owned by Blackwell. Of the GBP8.5m net cash payment, GBP5.25m was placed in escrow pending the settlement of a number of historic claims and the realisation of proceeds from the disposal of two other investment properties, which will be marketed post-acquisition. These property disposals are expected to be completed by 31 December 2016. The net debt of Blackwell at the date of the acquisition was GBP4.9m.
In our calculation of fair value, we have impaired the value of assets to which the escrow relates and assumed that the balance of GBP5.25m is returned to the Group. This has resulted in the establishment of a GBP5.25m debtor and an investment of GBP6.6m. The value of net assets acquired was GBP5.8m, resulting in goodwill of GBP0.8m.
Following the acquisition of Blackwell, a new Specialist Earthworks Services Division was established and will be managed and reported as a new separate business segment. The operation will continue to trade as "Blackwell".
Exceptional Costs
The Group continued its re-structuring to reduce exposure to thermal coal volatility and production within the UK. The various port, power station and steel plant closures that were announced last year required further steps to restructure and reduce costs. As a direct result of this, the Group has incurred non-recurring costs relating to redundancy and asset write downs of GBP12.4m. Included within these exceptional costs in the year to 31 May 2016 is a one off impairment on the Tower project of GBP4.7m. This impairment has arisen following the announcement from Aberthaw power station to cease the purchasing of Welsh coal at the end of the current contract, which has in turn led to the decision to shorten the mine life at Tower.
Item GBPm
------------------------------------- ----
Impairment of investment and
other assets relating to the
Tower project 4.7
Redundancy and related site closure
cost at Redcar Steelworks 1.6
Redundancy and related site closure
costs in Industrial Services 1.1
Cost associated with early closure
of certain mining operations 4.0
Cost attributable to the acquisition
of Blackwell 0.7
Redundancy costs from central
overhead cost reduction programme 0.3
------------------------------------- ----
12.4
------------------------------------- ----
As a result of the strategic move to transition away from exposures to thermal coal, in light of continued price and volume pressures, the Group took the decision in the prior financial year to cease operations at a number of our mining sites in Scotland. This led to a write off of mining assets and associated redundancy costs. The Group will now only operate coal extraction from a single site at House of Water.
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 2016, continuing net finance expenses for the Group reduced by GBP0.9m from GBP2.5m to GBP1.6m. This is driven partially by the success of the simplification programme in the prior year, which has led to a reduced level of average net debt.
Taxation
The income tax credit for the year is GBP1.1m compared with a tax charge of GBP3.6m for the year ended 31 May 2015; including the share of tax of equity accounted investees of GBP0.6m (2015: GBP0.6m) this results in a total tax credit of GBP0.5m (2015: charge of GBP4.2m). Whilst this credit represents a reported effective tax rate for the Group of 4.5% (2015: 16.4%), this rate is affected by a number of exceptional costs that are not tax deductible, including the write off of certain Tower balances and acquisition of Blackwell.
Dividend
The Board is proposing a final dividend of 0.6p per share (2015: 20.0p), bringing the dividend for the full year to 2.3p per share (2015: 30.0p). Whilst this reflects a decrease of 92.3% in the total dividend for the year, this increases the dividend pay out ratio to 40% (2015: 31.9%) of underlying diluted earnings per share. The proposed final dividend will be paid on 21 October 2016 to all shareholders on the register at the close of business on 23 September 2016.
Share buybacks
The Group has continued the programme of purchasing its own shares as a means of returning value to shareholders. In the year to 31 May 2016 the Group purchased 175,000 (2015: 1,053,072) shares for a total consideration of GBP0.6m (2015: GBP6.3m). The Group now holds 1,228,072 of its own shares in treasury.
Pensions
Our former deep mining operation at Maltby Colliery was a member of two industry wide defined benefit pension schemes. Whilst our operations at the mine have ceased, the obligation to fund the schemes remains within the Group, and the Directors remain committed to funding the schemes.
In addition to the two industry wide defined benefit pension schemes, Maltby Colliery also operates an unfunded concessionary fuel scheme. The combined liability of both elements as at 31 May 2016 is GBP5.7m, increased from GBP5.5m at 31 May 2015. Contributions in the year of GBP1.2m (2015: GBP2.1m) have been offset by interest and expenses of GBP0.3m (2015: GBP0.3m) and a net re-measurement loss of GBP1.0m (2015: GBP2.1m).
In the prior year, the Group also maintained a concessionary fuel scheme for former employees of The Monckton Coke & Chemical Company Limited. As noted in the prior year Annual Report and Accounts, the scheme has ended and a final settlement was made in June 2015. The Group has no further obligation in relation to this scheme.
Earnings per Share
Reported basic earnings per share from Continuing Operations decreased from 65.3p to a loss of 30.0p reflecting the impact of the reduced underlying profits and the exceptional costs. Underlying diluted earnings per share decreased by 94.0% from 93.9p to 5.6p. The weighted average diluted number of shares reduced slightly during the year from 33.1m to 32.3m. The share buy-back programme, which was approved on 5 November 2014 resulted in the purchase of 1,228,072 shares as at 31 May 2016, and therefore reduced the weighted average number of shares.
Net Debt
Net debt increased by GBP31.3m from GBP1.0m at 31 May 2015 to GBP32.3m at 31 May 2016. The net debt figure has increased following the Group's acquisition of Blackwell, as well as plant and mining asset investment.
Group net assets decreased from GBP148.5m at 31 May 2015 to GBP131.4m at 31 May 2016. Gearing (measured as net debt compared with net assets) at the end of May 2016 was 24.6%, compared with 0.7% at 31 May 2015.
Movement in Net Debt
2016 2015
Item GBPm GBPm
----------------------------------------------- ------ -----
EBITDA 14.9 46.1
Movement in working capital 5.3 22.9
----------------------------------------------- ------ -----
Cash from operating activities before interest
and tax 20.2 69.0
Interest payable (4.0) (1.4)
Taxation payable (6.7) (4.7)
Net capital expenditure (13.5) (8.3)
New finance leases (3.5) (2.1)
Business combinations (13.7) 26.9
Dividends received 0.8 2.2
Dividends paid (6.9) (8.7)
Purchase of own shares (0.6) (6.3)
Discontinued cash flows (3.4) 1.2
----------------------------------------------- ------ -----
Total movement in cash and cash equivalents (31.3) 67.8
----------------------------------------------- ------ -----
Net cash flow from continuing operating activities before interest and tax generated a cash inflow of GBP20.2m during the year. This cash generation reflected positive EBITDA of GBP14.9m, despite the significant pressures faced across the group on profits. The cash impact of exceptional costs in the year, included within the GBP14.9m was GBP2.9m.
The movement within the Group's working capital balances was a GBP5.3m inflow. Reductions in coking coal, coke and PCI coal, following the closure of Redcar Steelworks offset the impact of increased coal stocks in Scotland. The release of working capital was lower than expected in the last year due to the lack of demand last winter. The Group is confident that these stocks will be saleable during the coming year, although visibility of demand remains low.
Interest payments included amounts of GBP3.0m in respect of the cash settlement of ineffective derivative financial instruments, for which the cost had been provided within the previous year's Income Statement.
Tax payments in the year included GBP6.3m in respect of a disclosable tax planning scheme implemented in 2011. An additional amount of GBP5.2m was paid in June 2016. Following this payment the Group has no further cash payment obligations in relation to the scheme. The Group and its advisors, KPMG are still confident that the scheme was sound and lawful. Should HMRC ultimately accept the Group's view on how this arrangement should be treated for corporation tax purposes, the GBP11.5m of cash paid will be repaid by HMRC. As previously reported, no profit benefit was taken at the time the scheme was enacted. No provision has been made for approximately GBP1m of interest that would be payable should to planning not be successful.
Net capital expenditure in the last financial year was GBP13.5m (2015: GBP8.3m) and includes disposal proceeds of GBP1.6m (2015: GBP2.9m). Gross cash on capital expenditure was GBP15.1m (2015: GBP11.2m) and related to investment of GBP8.5m to supplement our existing plant fleet and further investment in mine development assets across our Scottish operations of GBP3.0m to develop the House of Water site. The Group have also continued to invest in its property portfolio as assets are developed for future use or sale.
The acquisition of Blackwell resulted in an increase in net debt of GBP13.4m. This was made of cash payments to settle the acquisition consideration of GBP6.6m, an amount of GBP5.25m paid into escrow, net debt included in the acquisition balance sheet of GBP4.9m, less the GBP3.35m received in relation to the disposal of the head office property. Additionally, the Group also acquired Earls Gate Energy Centre Limited for net cash of GBP0.3m.
In addition to the cash flows described above, the Group paid dividends totalling GBP6.9m, reflecting the prior year final dividend of 20.0p and the current year interim dividend of 1.7p. The Group have also purchased a number of shares as part of the share buy back programme for GBP0.6m (2015: GBP6.3m) and reduced the long term loans balance by GBP1.6m (2015: GBP53.9m).
Coal stocks are expected in to increase by around 100k tonnes in the first half of the current financial year before sales commence in earnest during next winter. The Group also expects to offer stocking deals to coal merchants of around GBP6m in the first half, in line with normal practice.
Capital Management and Bank Facilities
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.
The Group's current UK banking arrangements consists of a GBP70m borrowing base facility ("BBF") and a GBP40m revolving credit facility ("RCF"). 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, which has had a positive impact on the net finance expense for the year. The new structure was also designed to provide a greater degree of flexibility for the Group in financing working capital. This was judged to be important given the reductions that were anticipated to occur with Group EBITDA. Although the Group's RCF is subject to a Debt:EBITDA leverage covenant maximum of only 2:1, the Group's BBF facility sits outside the leverage test and leverage test parameters as it is secured against the underlying working capital assets.
As a result of this innovative arrangement the Group benefits from a flexible facility structure, and with the reduced need to finance significant coal stocks and plant assets, the Board does not foresee any covenant stress or pressure, in light of the reduced current profitability.
Summary of Net Debt
2016 2015
GBP000 GBP000
-------------------- -------- --------
Cash and
cash equivalents (21,161) (43,853)
Interest
bearing borrowings 37,593 32,772
Finance lease
liabilities 15,906 12,049
-------------------- -------- --------
Net Debt 32,338 968
-------------------- -------- --------
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
8 August 2016
Consolidated Statement of Profit and Loss and Other Comprehensive Income
for year ended 31 May 2016
2016 2015
Continuing operations Note GBP000 GBP000
----------------------------------------------- ---- --------- ---------
Revenue 2 340,665 662,161
Cost of sales (299,764) (588,390)
----------------------------------------------- ---- --------- ---------
Gross profit 40,901 73,771
Other operating income 265 733
Administrative expenses (48,339) (45,560)
----------------------------------------------- ---- --------- ---------
Operating (loss)/profit (7,173) 28,944
Analysed as:
Operating profit (before exceptional costs) 5,205 38,074
Exceptional costs - Cost of sales (3,473) -
Exceptional costs - Administrative expenses (8,905) (9,130)
----------------------------------------------- ---- --------- ---------
Exceptional costs (12,378) (9,130)
Operating (loss)/profit (after exceptional
costs) (7,173) 28,944
----------------------------------------------- ---- --------- ---------
Financial income 1,153 1,152
Financial expenses (2,785) (3,617)
Unrealised fair value gains and losses
on derivative financial instruments - (3,080)
Share of (loss)/profit in associates and
joint ventures (net of tax) (1,792) 1,504
----------------------------------------------- ---- --------- ---------
(Loss)/profit before tax (10,597) 24,903
Income tax credit/(expense) 3 1,082 (3,554)
----------------------------------------------- ---- --------- ---------
(Loss)/profit for the year from continuing
operations (9,515) 21,349
Discontinued operations
Loss for the year from discontinued operations (940) (779)
----------------------------------------------- ---- --------- ---------
(Loss)/profit for the year (10,455) 20,570
----------------------------------------------- ---- --------- ---------
Other comprehensive income/(expense)
Items that will not be reclassified to
profit or loss
Remeasurements of defined benefit pension
plans (1,098) (1,733)
Tax recognised on items that will not
be reclassified to profit or loss 3 181 368
Items that are or may be reclassified
subsequently to profit or loss
Foreign exchange translation differences 149 (1,766)
Effective portion of changes in fair value
of cash flow hedges 1,119 (4,769)
Tax recognised on items that are or may
be reclassified subsequently to profit
or loss 3 (40) 862
----------------------------------------------- ---- --------- ---------
Other comprehensive income/(expense) for
the year, net of tax 311 (7,038)
----------------------------------------------- ---- --------- ---------
Total comprehensive (expense)/ income
for the year (10,144) 13,532
----------------------------------------------- ---- --------- ---------
2016 2015
Note GBP000 GBP000
-------------------------------------------------- ---- -------- -------
(Loss)/profit attributable to:
Equity holders of the Company (10,498) 20,454
Non-controlling interest 43 116
-------------------------------------------------- ---- -------- -------
(Loss)/profit for the year (10,455) 20,570
-------------------------------------------------- ---- -------- -------
Total comprehensive (expense)/income attributable
to:
Equity holders of the Company (10,187) 13,416
Non-controlling interest 43 116
-------------------------------------------------- ---- -------- -------
Total comprehensive (expense)/income for
the year (10,144) 13,532
-------------------------------------------------- ---- -------- -------
Basic earnings per share (pence) 4 (32.96) 62.91
Diluted earnings per share (pence) 4 (32.96) 61.88
Basic earnings per share from continuing
operations (pence) 4 (30.01) 65.31
Diluted earnings per share from continuing
operations (pence) 4 (30.01) 64.24
-------------------------------------------------- ---- -------- -------
Non GAAP Measures
Basic underlying earnings per share from
continuing operations (pence) 5.70 95.41
Diluted underlying earnings per share
continuing operations (pence) 5.63 93.85
-------------------------------------------------- ---- -------- -------
Consolidated Balance Sheet
at 31 May 2016
Group
--------------------
2016 2015
GBP000 GBP000
--------------------------------------------- --------- ---------
Non-current assets
Property, plant and equipment 68,095 57,144
Investment property 5,126 5,126
Intangible assets 9,475 9,472
Investments in associates and joint ventures 1,043 5,963
Deferred tax assets 3,207 2,512
---------------------------------------------- --------- ---------
86,946 80,217
--------------------------------------------- --------- ---------
Current assets
Assets held for sale 5,040 5,040
Inventories 46,983 57,803
Derivative financial instruments 32 1,088
Trade and other receivables 117,310 108,750
Cash and cash equivalents 21,161 43,853
---------------------------------------------- --------- ---------
190,526 216,534
--------------------------------------------- --------- ---------
Total assets 277,472 296,751
---------------------------------------------- --------- ---------
Non-current liabilities
Other interest-bearing loans and borrowings (46,098) (7,165)
Retirement benefit obligations (5,699) (5,516)
Provisions (4,189) (5,762)
Derivative financial instruments (66) (1,308)
(56,052) (19,751)
--------------------------------------------- --------- ---------
Current liabilities
Other interest-bearing loans and borrowings (7,401) (37,656)
Trade and other payables (75,096) (73,078)
Income tax liabilities (6,271) (13,414)
Provisions (867) -
Derivative financial instruments (430) (4,351)
---------------------------------------------- --------- ---------
(90,065) (128,499)
--------------------------------------------- --------- ---------
Total liabilities (146,117) (148,250)
---------------------------------------------- --------- ---------
Net assets 131,355 148,501
---------------------------------------------- --------- ---------
Group
----------------
2016 2015
GBP000 GBP000
-------------------------------------- ------- -------
Equity attributable to equity holders
of the parent
Share capital 3,314 3,314
Share premium 73,955 73,955
Other reserves 211 211
Translation reserve (3,582) (3,731)
Merger reserve 1,022 1,022
Hedging reserve (62) (1,141)
Capital redemption reserve 1,530 1,530
Retained earnings 54,582 72,999
--------------------------------------- ------- -------
130,970 148,159
Non-controlling interest 385 342
--------------------------------------- ------- -------
Total equity 131,355 148,501
--------------------------------------- ------- -------
Consolidated Statement of Changes in Equity
for year ended 31 May 2016
Capital Total
Share Share Translation Hedging Other redemption Merger Retained parent Non-controlling Total
capital premium reserve reserve reserves reserve reserve earnings equity interest equity
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ------- ------- ----------- ------- -------- ---------- ------- ---------- ---------- --------------- ----------
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 paid - - - - - - - (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 at
31 May 2015 3,314 73,955 (3,731) (1,141) 211 1,530 1,022 72,999 148,159 342 148,501
------------------ ------- ------- ----------- ------- -------- ---------- ------- ---------- ---------- --------------- ----------
Capital Total
Share Share Translation Hedging Other redemption Merger Retained parent Non-controlling Total
capital premium reserve reserve reserves reserve reserve earnings equity interest equity
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Balance at
1 June 2015 3,314 73,955 (3,731) (1,141) 211 1,530 1,022 72,999 148,159 342 148,501
Total
comprehensive
(expense)/income
for the year
Loss for the
year - - - - - - - (10,498) (10,498) 43 (10,455)
Other
comprehensive
income/(expense)
Foreign exchange
translation
differences - - 149 - - - - - 149 - 149
Effective portion
of changes
in fair value
of cash flow
hedges - - - 1,119 - - - - 1,119 - 1,119
Remeasurements
of defined
benefit pension
plans - - - - - - - (1,098) (1,098) - (1,098)
Tax recognised
on other
comprehensive
income - - - (40) - - - 181 141 - 141
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Total other
comprehensive
income/(expense) - - 149 1,079 - - - (917) 311 - 311
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Total
comprehensive
income/(expense)
for the year - - 149 1,079 - - - (11,415) (10,187) 43 (10,144)
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Transactions
with owners
recorded directly
in equity
Equity settled
share-based
payment
transactions - - - - - - - 520 520 - 520
Dividends paid - - - - - - - (6,924) (6,924) - (6,924)
Purchase of
own shares - - - - - - - (598) (598) - (598)
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Total
contributions
by and
distributions
to owners - - - - - - - (7,002) (7,002) - (7,002)
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Balance at
31 May 2016 3,314 73,955 (3,582) (62) 211 1,530 1,022 54,582 130,970 385 131,355
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Consolidated Cash Flow Statement
for year ended 31 May 2016
Group
------------------
2016 2015
GBP000 GBP000
------------------------------------------- -------- --------
Cash flows from operating activities
(Loss)/profit for the year from continuing
operations (9,515) 21,349
Adjustments for:
Depreciation of property, plant and
equipment 9,261 10,009
Impairment of property, plant and
equipment - 10,078
Depreciation of mining assets 7,263 8,901
Amortisation and impairment of goodwill
and intangible assets 1,026 5,567
Net finance expense 1,632 2,465
Share of loss/(profit) in associates
and joint ventures (net of tax) 1,792 (1,504)
Impairment of Tower investment and
other balances 4,302 -
Profit on sale of property, plant
and equipment (265) (733)
Profit on disposal of subsidiaries - (16,253)
Equity settled share-based payment
expenses 520 (123)
Income tax (credit)/expense (1,082) 3,554
Loss on derivative financial instruments - 3,080
Translation of non-controlling interest
and investments (5) (298)
-------------------------------------------- -------- --------
14,929 46,092
Change in inventories 15,541 37,627
Change in trade and other receivables 10,696 11,257
Change in trade and other payables (21,775) (22,666)
Change in provisions and employee
benefits 754 (3,334)
-------------------------------------------- -------- --------
20,145 68,976
Interest paid (4,011) (1,362)
Income tax paid (6,702) (4,716)
-------------------------------------------- -------- --------
Net cash from continuing operating
activities 9,432 62,898
Net cash from operating activities
in discontinued operations (3,156) 1,055
-------------------------------------------- -------- --------
Net cash from operating activities 6,276 63,953
-------------------------------------------- -------- --------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment 1,613 2,927
Dividends received 839 2,153
Disposal of subsidiaries - 24,807
Acquisition of subsidiaries (net of
cash acquired) (4,110) (637)
Acquisition of property, plant and
equipment (15,075) (11,263)
-------------------------------------------- -------- --------
Net cash from investing activities
in continuing operations (16,733) 17,987
Net cash from investing activities
in discontinued operations - 1,677
-------------------------------------------- -------- --------
Net cash from investing activities (16,733) 19,664
-------------------------------------------- -------- --------
Cash flows from financing activities
Proceeds from the issue of share capital
(net of directly attributable expenses) - 8
Payment of finance lease liabilities (6,591) (5,636)
Payment of other loan balances (2,890) -
Dividends paid (6,924) (8,744)
Purchase of own shares (598) (6,330) Proceeds from/(repayment of) Group banking facilities 5,000 (48,000) -------------------------------------------- -------- -------- Net cash from financing activities in continuing operations (12,003) (68,702) Net cash from financing activities in discontinued operations (282) (1,578) -------------------------------------------- -------- -------- Net cash from financing activities (12,285) (70,280) -------------------------------------------- -------- -------- Net (decrease)/increase in cash and cash equivalents (22,742) 13,337 Cash and cash equivalents at 1 June 43,853 30,768 Effect of exchange rate fluctuations on cash held 50 (252) -------------------------------------------- -------- -------- Cash and cash equivalents at 31 May 21,161 43,853 -------------------------------------------- -------- --------
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 2016 or 2015. Statutory accounts for 2015 have been delivered to the Registrar of Companies, and those for 2016 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 8 August 2016.
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 sectors distinguished as operating segments are Coal Distribution, Industrial Services, Logistics and Specialist Earthworks. Specialist Earthworks has been identified as a new operating segment following the acquisition of Blackwell during the year ended 31 May 2016. A short description of these sectors is as follows:
-- Coal 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.
-- Logistics: Provides bulk logistics to customers across the UK.
-- Specialist Earthworks: Provides earth moving, civil engineering and infrastructure services across the UK.
These segments are combinations of subsidiaries, jointly controlled entities and associates. They have separate management teams and provide different products and services. The four 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 underlying operating (loss)/profit, which is reconciled to (loss)/profit before tax in the tables below:
Industrial Specialist Total Coal
Services Logistics Earthworks Services Distribution Total
2016 2016 2016 2016 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Revenue
Total revenue 83,512 54,512 31,338 169,362 179,316 348,678
Inter-segment revenue (2,333) (4,680) (5) (7,018) (995) (8,013)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Revenue from external customers 81,179 49,832 31,333 162,344 178,321 340,665
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Underlying operating (loss)/profit 3,297 1,173 1,076 5,546 (921) 4,625
Amortisation of intangibles (256) - - (256) (328) (584)
Taxation on associates
and joint ventures - - - - (628) (628)
Net financing costs (211) (356) (71) (638) (994) (1,632)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Profit/(loss) before taxation
(pre-exceptional) 2,830 817 1,005 4,652 (2,871) 1,781
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Exceptional costs (12,378)
Loss before taxation (10,597)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Depreciation charge (2,411) (2,674) (1,013) (6,098) (12,860) (18,958)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Capital expenditure 2,172 4,573 - 6,745 11,969 18,714
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Net assets
Segment assets 37,816 23,095 42,789 103,700 162,520 266,220
Segment liabilities (20,755) (12,178) (30,662) (63,595) (46,760) (110,355)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Segment net assets 17,061 10,917 12,127 40,105 115,760 155,865
Associates and joint ventures - - - - 1,043 1,043
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Segment net assets including
share of associates and
joint ventures 17,061 10,917 12,127 40,105 116,803 156,908
Unallocated net assets (25,553)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Total net assets 131,355
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Unallocated net assets include goodwill and intangibles (GBP9.5m), Group banking facilities liability (GBP37.6m), cash and cash equivalents (GBP4.5m liability), derivative financial instruments (GBP0.4m liability), deferred tax asset (GBP3.2m) and other corporate items (GBP4.2m).
2 Segmental Information continued
Coal
Industrial Specialist Total Production
Services Logistics Earthworks Services & Distribution Total
2015 2015 2015 2015 2015 2015
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Revenue
Total revenue 127,769 68,309 - 196,078 485,948 682,026
Inter-segment revenue (6,840) (11,693) - (18,533) (1,332) (19,865)
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Revenue from external customers 120,929 56,616 - 177,545 484,616 662,161
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Underlying operating profit 5,660 2,267 - 7,927 34,828 42,755
Loss on Biomass conversion
project (2,400) - - (2,400) - (2,400)
Amortisation of intangibles - - - - (143) (143)
Taxation on associates and
joint ventures - - - - (634) (634)
Net financing costs (609) (421) - (1,030) (1,435) (2,465)
------------------------------------------- ---------- --------- ----------- --------- --------------- --------- Profit before taxation (pre-simplification) 2,651 1,846 - 4,497 32,616 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 (3,427) (2,411) - (5,838) (13,120) (18,958) ------------------------------------------- ---------- --------- ----------- --------- --------------- --------- Capital expenditure 397 1,864 - 2,261 11,163 13,424 ------------------------------------------- ---------- --------- ----------- --------- --------------- --------- Net assets Segment assets 46,012 17,111 - 63,123 186,300 249,423 Segment liabilities (23,150) (10,649) - (33,799) (67,929) (101,728) ------------------------------------------- ---------- --------- ----------- --------- --------------- --------- Segment net assets 22,862 6,462 - 29,324 118,371 147,695 Associates and joint ventures - - - - 5,963 5,963 ------------------------------------------- ---------- --------- ----------- --------- --------------- --------- Segment net assets including share of associates and joint ventures 22,862 6,462 - 29,324 124,334 153,658 Unallocated net assets (5,157) ------------------------------------------- ---------- --------- ----------- --------- --------------- --------- Total net assets 148,501 ------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Unallocated net assets include goodwill and intangibles (GBP9.5m), revolving credit facility (GBP32.8m), cash and cash equivalent (GBP19.8m) derivative financial instruments (GBP4.6m liability), deferred tax asset (GBP2.9m) and other corporate items (GBP1.2m).
Information About Key Customers
Included in revenue is an amount of GBP12,751,000 (2015: GBP95,236,000) arising from sales to the Group's largest customer, relating to the Coal Distribution division.
The following table analyses revenue by significant category:
2016 2015
GBP000 GBP000
----------------------- ------- -------
Sale of goods 178,321 484,616
Rendering of services 131,011 177,545
Construction contracts 31,333 -
----------------------- ------- -------
340,665 662,161
----------------------- ------- -------
3. Taxation
Recognised in the Income Statement
2016 2015
GBP000 GBP000
---------------------------------------------------- ------- -------
Current tax (credit)/expense
Current year 213 5,777
Adjustments for prior years (738) (107)
Current tax (credit)/expense (525) 5,670
---------------------------------------------------- ------- -------
Deferred tax credit
---------------------------------------------------- ------- -------
Origination and reversal of temporary differences (831) (2,262)
Adjustments for prior years (128) 56
Reduction in tax rate 402 90
---------------------------------------------------- ------- -------
Deferred tax credit (557) (2,116)
---------------------------------------------------- ------- -------
Tax (credit)/expense in income statement (excluding
share of tax of equity accounted investees) (1,082) 3,554
Share of tax of equity accounted investees 628 634
---------------------------------------------------- ------- -------
Total tax (credit)/expense from continuing
operations (454) 4,188
Tax expense/(credit) from discontinued operations 199 (1,605)
---------------------------------------------------- ------- -------
Total tax (credit)/expense (255) 2,583
---------------------------------------------------- ------- -------
Recognised in Other Comprehensive Income
2016 2015
GBP000 GBP000
------------------------------------------- ------- -------
Deferred tax (expense)/income
Effective portion of changes in fair value
of cash flow hedges (40) 862
Remeasurements of defined benefit pension
plans 181 368
------------------------------------------- ------- -------
141 1,230
------------------------------------------- ------- -------
Reconciliation of Effective Tax Rate
2016 2016 2015 2015
Rate GBP000 Rate GBP000
-------------------------------------------------- ------ ------- ------ -------
(Loss)/profit for the year from continuing
operations (9,515) 21,349
Total tax (credit)/expense from continuing
operations (including tax on equity
accounted investees) (454) 4,188
-------------------------------------------------- ------ ------- ------ -------
(Loss)/profit excluding taxation from
continuing operations (9,969) 25,537
-------------------------------------------------- ------ ------- ------ -------
Tax using the UK corporation tax rate
of 20.0% (2015: 20.83%) 20.0% (1,994) 20.8% 5,319
Effect of tax rates in foreign jurisdictions (2.8%) 276 0.4% 95
Unrecognised tax losses (3.9%) 389 - -
Non-deductible (income)/expenses (6.4%) 644 (5.4%) (1,376)
Reduction in tax rate on deferred
tax balances (4.2%) 417 0.4% 90
(Over)/under provided in prior years 1.9% (186) 0.2% 60
-------------------------------------------------- ------ ------- ------ -------
Effective tax rate and total tax (credit)/expense 4.6% (454) 16.4% 4,188
-------------------------------------------------- ------ ------- ------ -------
The UK corporation tax rate reduced to 20% on 1 April 2015, giving an effective base rate of 20% (2015: 20.83%).
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. Further reductions to 19% (effective from 1 April 2017) and to 18% (effective from 1 April 2020) were substantively enacted on 26 October 2015. A reduction to 17% has been announced but has not been substantively enacted. This will reduce the Group's current tax charge accordingly. The deferred tax balances at 31 May 2016 has been calculated based on the rate of 18% substantively enacted at the balance sheet date.
4. Earnings per Share
2016 2015
------------------------------------------- -------------------------------------------
Continuing Continuing
and discontinued Continuing Discontinued and discontinued Continuing Discontinued
------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
Ordinary Shares
Basic earnings per
share (32.96)p (30.01)p (2.95)p 62.91p 65.31p (2.40)p
Diluted earnings
per share (32.96)p (30.01)p (2.95)p 61.88p 64.24p (2.40)p
------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
The calculation of earnings per share is based on the (loss)/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.
2016 2015
------------------------------------------- -------------------------------------------
Continuing Continuing
and discontinued Continuing Discontinued and discontinued Continuing Discontinued
----------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
(Loss)/profit for
the year attributable
to equity holders
(GBP000) (10,498) (9,558) (940) 20,454 21,233 (779)
Weighted average
number of shares 31,851,053 31,851,053 31,851,053 32,511,083 32,511,083 32,511,083
Basic earnings per
share (32.96)p (30.01)p (2.95)p 62.91p 65.31p (2.40)p
----------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
The calculation of weighted average number of shares includes the effect of own shares held of 1,228,072 (2015: 1,053,072). The calculation of diluted earnings per share is based on the (loss)/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 400,444 (2015: 540,262)); effect on earnings per ordinary share is nil p (2015: 1.03p). Effect on continuing earnings per ordinary share is nil p (2015: 1.07p). The effect on earnings per ordinary share and continuing earnings per ordinary share is nil p in the year due to the loss reported.
2016 2015
------------------------------------------- -------------------------------------------
Continuing Continuing
and discontinued Continuing Discontinued and discontinued Continuing Discontinued
----------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
(Loss)/profit for
the year attributable
to equity holders
(GBP000) (10,498) (9,558) (940) 20,454 21,233 (779)
Weighted average
number of shares 32,251,497 32,251,497 32,251,497 33,051,345 33,051,345 33,051,345
Diluted earnings
per share (32.96)p (30.01)p (2.95)p 61.88p 64.24p (2.40)p
----------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
Continuing underlying basic and diluted earnings per share are calculated on the diluted weighted average number of shares of 32,251,497 (2015: 33,051,345) and on underlying (loss)/profit after tax, as reconciled below:
2016 2015
GBP000 GBP000
------------------------------------------------ ------- -------
(Loss)/profit for the year attributable to
equity holders from continuing operations (9,558) 21,233
Amortisation/impairment of intangibles/goodwill 584 143
Exceptional items 12,378 12,210
Loss on Biomass conversion project settlement - 2,400
Tax effect of above items (1,587) (4,967)
------------------------------------------------ ------- -------
Underlying Profit after Tax from Continuing
Operations 1,817 31,019
------------------------------------------------ ------- -------
5. Dividends
The aggregate amount of dividends comprises:
2016 2015
GBP000 GBP000
---------------------------------------------- -------- --------
Final dividends paid in respect of prior
year but not recognised as liabilities in
that year
(20.0p per share (2015: 16.7p)) 6,382 5,534
Interim dividends paid in respect of the
current year (1.7p per share (2015: 10.0p)) 542 3,210
---------------------------------------------- -------- --------
6,924 8,744
---------------------------------------------- -------- --------
Proposed dividend (0.6p per share (2015:
20.0p)) 191 6,417
---------------------------------------------- -------- --------
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
END
FR EAAPPEEAKEAF
(END) Dow Jones Newswires
August 09, 2016 02:01 ET (06:01 GMT)
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