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Share Name Share Symbol Market Type Share ISIN Share Description
Hargreaves Services Plc LSE:HSP London Ordinary Share GB00B0MTC970 ORD 10P
  Price Change % Change Share Price Bid Price Offer Price High Price Low Price Open Price Shares Traded Last Trade
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Support Services 222.2 2.2 13.4 26.8 116

Hargreaves Services PLC Interim Results

27/01/2021 7:00am

UK Regulatory (RNS & others)


Hargreaves Services (LSE:HSP)
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RNS Number : 9784M

Hargreaves Services PLC

27 January 2021

 
   27 January 2021 
 

HARGREAVES SERVICES PLC

(the "Group" or "Hargreaves")

Interim Results for the six months ended 30 November 2020

Hargreaves Services plc (AIM: HSP), a diversified group delivering key projects and services to the industrial and property sectors, announces its interim results for the six months ended 30 November 2020.

 
 KEY FINANCIAL RESULTS          Unaudited       Unaudited 
                               Six Months      Six Months 
                                 ended 30    ended 30 Nov 
                                 Nov 2020            2019 
 Revenue                         GBP92.0m       GBP124.7m 
 Underlying Profit before         GBP1.1m         GBP2.4m 
  tax*                            GBP1.1m         GBP5.2m 
  Profit before tax** 
 Underlying EPS                      3.4p            6.4p 
 EPS                                 3.4p           13.6p 
  Interim Dividend                   2.7p             - p 
 Net Debt                        GBP20.8m        GBP40.3m 
  Net Bank Debt (excluding        GBP8.0m        GBP25.4m 
  leasing debt) 
 Net Asset Value                GBP129.2m       GBP129.7m 
  Net Assets per Share               400p            403p 
 

* Underlying Profit before tax is defined by the Board as Profit before tax from continuing operations prior to exceptional items and amortisation of intangible assets.

** The comparative period Profit before tax included GBP2.8m of exceptional gains, including GBP2.4m relating to the sale of a subsidiary.

HIGHLIGHTS

-- As expected, Revenue and Underlying Profit before tax* were both lower than in the comparative period, primarily due to the phasing of works on the HS2 project within the Specialist Earthworks business;

   --      Interim dividend reinstated at 2.7p (2019: nil); 
   --      Net bank debt reduced by 69% to GBP8.0m (2019:  GBP25.4m); 
   --      Profit after tax of German joint venture up 37% to GBP0.9m (2019: GBP0.7m); 
   --      Post period end disposal of speciality coal for GBP24m, eliminating bank borrowing; 
   --      Post period end completion of the first sale of land at Blindwells. 

Commenting on the interim results, Chairman Roger McDowell said: "The Group has traded resiliently through the period and continues to do so although the delays to HS2 have been frustrating and have impacted the headline results adversely. The German joint venture continues to deliver profits in a challenging economic environment. The Group has made significant progress in reshaping its future beyond coal. The reduction in net bank debt in the period was substantial and it has been eliminated totally after the period end as a result of the sale of speciality coal. The Board expects to report results for the full financial year in line with expectations."

For further details:

 
 
   Hargreaves Services plc 
   Gordon Banham, Group Chief Executive 
   John Samuel, Group Finance Director          0191 373 4485 
 Buchanan (Financial PR) 
  Mark Court / Sophie Wills / Henry Wilson    0207 466 5000 
 N+1 Singer (NOMAD and Joint Corporate 
  Broker) 
  Sandy Fraser / Rachel Hayes / Justin 
  McKeegan                                    020 7496 3000 
 Investec (Joint Corporate Broker) 
  Sara Hale / David Anderson / Shalin 
  Bhamra                                      020 7597 5970 
 

CHAIRMAN'S STATEMENT

Introduction

I am pleased to be able to report on a solid set of results for the Group despite the ongoing uncertainty created by the coronavirus pandemic. The safety of our employees remains paramount in the Board's mind and I would like to take this opportunity to thank our employees once again for their support over this period. It is testament to the dedication and flexibility of our workforce, as well as the stability of many of the Group's activities, that we are able to present a profitable first half result alongside a substantial reduction in our bank debt. The financial position of the Group has given the Board the confidence to reinstate the interim dividend.

The Board expects to deliver full year results in line with expectations. Although revenue and profit have reduced when compared with the first half last year, this is almost wholly attributable to the impact of delays to the HS2 project on our Specialist Earthworks business. That impact is one of timing and not one of lost opportunity.

Sale of speciality coal stocks to Hargreaves Raw Materials Services GmbH ("HRMS")

It has been a pivotal period for the Group since my last report in July 2020. In particular, in relation to the Group's coal related activities, which I can now report have ceased in all material respects. As announced on 24 December 2020, the Group has sold its remaining speciality coal to its German joint venture, HRMS, and will no longer produce or purchase coal. This builds upon the cessation of all coal mining in July 2020, meaning that the Group has now exited all material coal related business activities.

The Board is very pleased with this evolution of the Group as the sale of the speciality coal stocks to HRMS not only accelerates the realisation of GBP24m of cash from coal inventory but also aids the growth of HRMS by opening it up to new markets within the UK. This is an important additional step in the growth of shareholder value within HRMS alongside the development of the Carbon Pulverisation Plant and the acquisition last year of DK Recycling und Roheisen GmbH ("DK").

Results

As expected, Revenue reduced to GBP92.0m (2019: GBP124.7m) and Underlying Profit before tax reduced to GBP1.1m (2019: GBP2.4m). Both metrics have declined primarily within the Specialist Earthworks business as the comparative period included the completion of the A14 project whilst, in the current year, delays to the commencement of HS2 have been well publicised. Further information on trading is given in the Chief Executive's Review. Underlying Profit before tax is defined by the Board as Profit before tax prior to exceptional items and amortisation of intangible assets.

Earnings Per Share

Basic underlying earnings per share from continuing operations were 3.4p (2019: 6.4p) and 3.4p (2019: 13.6p) on a reported basis.

Net Debt

Net bank debt at 30 November 2020 reduced by 69% to GBP8.0m, compared with GBP25.4m twelve months earlier and GBP13.5m at 31 May 2020. This substantial and ongoing reduction is primarily due to the cessation of coal mining in July 2020 and the expected subsequent unwind in coal related assets. The sale of the remaining speciality coal to HRMS, which occurred after the period end, has accelerated the planned unwind and therefore the Board expects to report a positive net cash position, before leasing debt, at 31 May 2021.

Total net debt, including debt associated with leased assets was GBP20.8m, compared with GBP40.3m twelve months ago. The Group anticipates total net debt at 31 May 2021 to be slightly lower than at the half year, as the cash receipt from the sale of the coal to HRMS is expected to be offset by an increase in leasing debt as a result of investment in plant assets for HS2.

Dividend

At the beginning of the coronavirus pandemic the Board took the decision to cancel the interim dividend as a precautionary measure against the potential financial impact of the virus. At the year end, the Board announced a final dividend, which demonstrated the cautious yet confident view of the Group's cashflows at the time. Since then, the Group has continued to trade resiliently and the Board has decided to reinstate an interim dividend of 2.7p (2019: nil p) per ordinary share. This will be paid on 6 April 2021 to shareholders on the register at 26 February 2021.

The Board still intends to pass through a dividend of 12p per ordinary share to shareholders which it expects to receive from its German joint venture alongside any final dividend declared later in the year.

Board Changes

During the period, I was delighted to welcome Nicholas Mills onto the Board. Nicholas is employed by Harwood Capital LLP, our largest shareholder, and will provide a valuable insight into the impact of decisions on our shareholders as well as contributing with his broader financial and business acumen.

Brexit

The Group has limited exposure to trading within the EU, which has been further reduced with the cessation of our coal trading activities. Consequently, the Board does not expect any material direct impact on the Group's trading arrangements following the UK's exit from the single market on 1 January 2021.

The Board cannot meaningfully assess the impact of the new trading relationship with the EU on business sentiment in trading and financial markets which may lead to material change in the economic or financial environment within the UK and Europe for the Group or its customers.

COVID-19

This last year has been unprecedented and led to many businesses working in new and innovative ways. Hargreaves has performed resiliently throughout the pandemic due to a combination of our flexible and dedicated workforce and because many of our business areas are focused on core critical activities. The only business which was affected materially was Hargreaves Land, which suffered delays during the first lockdown period at Blindwells, the major development project in Scotland. Whilst the vaccine roll out is welcome news, the Board remains vigilant as to the continuing impact of the pandemic and the Group is well positioned to navigate it as it has done to date.

Strategy and Shareholder Value

For some time now, the Board's strategy for the Group has been to focus on:

   --      Delivering reliable and growing profits from the Distribution & Services business; 
   --      Unlocking capital from coal related activities; 
   --      Investment in the growth of Hargreaves Land; and 
   --      Supporting the development of HRMS to deliver shareholder value. 

The Board is pleased with the progress that has been made against its strategic goals over the last six months. The contract wins within Distribution and Services highlight the ability of our teams to grow sustainable returns in our underlying businesses and recent framework appointments are improving the visibility of future revenue streams. The Group has continued to invest in Hargreaves Land, which is beginning to deliver returns with the commencement on site of the Bridlington scheme and the post period end completion of the first land sales at Blindwells.

The sale of speciality coal to HRMS has achieved the Board's aim of unlocking capital from coal activities, whilst also providing access to an additional market to aid the growth of HRMS. HRMS is becoming an increasingly important component of the overall value of the Group and its future growth and cash generation is a key factor for the Board in considering how to deliver shareholder value.

Outlook

The first six months of this financial year have been very significant in the history of Hargreaves, set against the difficulties caused by COVID-19. The Group ceased coal mining in July 2020 and, in December 2020, all material coal related revenue activities. Hargreaves has a long history tied closely to the coal industry and this marks a major transformational step for the Group.

Bank debt has now been eliminated and the Board now looks forward confidently to a future beyond coal with a strong pipeline of contracted works within Distribution and Services, a good bank of land opportunities and an increasingly valuable investment in its German joint venture. The Board expects to announce full year results in line with expectations on 28 July 2021.

Roger McDowell

Chairman

27 January 2021

CHIEF EXECUTIVE'S REVIEW

Distribution & Services

The Distribution & Services business recorded revenue of GBP92.2m (2019: GBP121.0m) and Operating Profit before exceptional items was GBP2.8m (2019: GBP4.4m). These reductions were expected due to the phasing of works within the Specialist Earthworks business unit and the reduction in coal volumes.

As the Group has now transitioned away from all material coal related activities, it is imperative that it remains focused on its continuing businesses. It has been a significant six months for new contract wins, as the Group has been appointed to six multi-year framework agreements in its Distribution & Services business both in the UK and in Hong Kong. These contracts provide more resilient, sustainable revenue streams as well as advancing our skills and credentials within mechanical and electrical engineering.

Production & Distribution

Revenue in Production & Distribution was GBP51.1m (2019: GBP59.7m). Operating Profit was GBP2.1m (2019: GBP2.5m). The first six months saw a positive performance for the Transport business offset by the expected decline in coal revenues. The Transport business saw Operating Profit grow to GBP1.2m (2019: GBP1.0m) on revenue of GBP18.3m (2019: GBP18.7m). Improving margins and an increased focus on the waste sector, including clinical waste, has helped to drive the improved performance.

Following the cessation of coal mining in July, the coal trading business recorded an Operating Profit for the first six months of GBP0.9m (2019: GBP1.5m). The reduction is due to a lower volume of speciality coal sales, which was partially impacted by coronavirus as certain industries that are reliant on coal saw reduced levels of activity.

Industrial Services

Total Industrial Services revenue was GBP36.3m for the period to 30 November 2020 (2019: GBP43.4m). The reduction in revenue derived from lower activity levels in Asia, partially due to the coronavirus, and the termination of some lower margin contracts in the UK. The division has delivered an increased margin of 5.2%, compared with 4.4% twelve months ago, and maintained its level of Operating Profit at GBP1.9m (2019: GBP1.9m).

Industrial Services - UK

The improvement in margin across Industrial Services is a result of contract selectivity in the UK and continuing tight cost control. Underlying Operating Profit was GBP2.1m (2019: GBP2.1m). The business continues to transition away from its traditional base of supporting coal fired power stations as that industry declines and has made strong progress in the last six months to broaden its customer and skills base.

As announced on 28 October 2020, the business was awarded a three-year framework contract with Severn Trent, a new customer, to provide maintenance, repair, removal and installation of clean and waste water assets. This contract award demonstrates the growing capability of the UK business to deliver mechanical and electrical engineering services to key clients in both infrastructure and industrial markets.

In addition to the Severn Trent contract, the UK business has also secured two other framework contracts with Drax and Uniper for five and three years respectively. Both frameworks have two years of extension options. These secured medium term contracts help to generate predictable, sustainable earnings over the medium term and provide a strong and stable platform for growth.

Following the acquisition of British Steel in March 2020 by Jingye Group, Hargreaves has been in discussions with the new owner, whilst continuing to provide services under short term arrangements. Those discussions concluded with an agreement for Jingye to take certain activities in house which saw the transfer of 146 Hargreaves employees to British Steel under the Transfer of Undertakings regulations in January 2021 at no cost to Hargreaves. The Group has traded profitably with British Steel since the announcement of its liquidation in May 2019 and this outcome has been anticipated for some time. As such, the Board had not factored ongoing trading with British Steel into any forecasts beyond the current financial year. A 12 month contract for the provision of some plant and equipment has been agreed with British Steel.

Industrial Services - Asia

The Hong Kong based Asia business incurred an operating loss of GBP0.2m (2019: loss of GBP0.2m), which was in line with expectations. The business remains seasonal with the majority of project work and planned site outages weighted heavily into the second half.

In addition to the five-year core framework contract secured with CLP Power in Hong Kong last year, the Group has also been successful in securing two three-year framework arrangements, both of which have extension options, at the Castle Peak and Black Point power stations in Hong Kong. These frameworks allow for the provision of maintenance, repair and refurbishment of boilers, condensers and other critical components.

The Asian business has also been appointed as a contractor to CLP Power Hong Kong (Power Systems) for Distribution Overhead Line Works. The contract is for a three year period with extension options for up to a further three years. The work encompasses the inspection, installation and both emergency and planned maintenance of part of the client's low voltage power distribution network. This contract marks a significant broadening of the scope and range of services that our Asian Industrial Services business offers, positioning it well for further growth.

Specialist Earthworks

As has been widely reported, the delays to the commencement of HS2 have led to a slow start to the financial year for the Earthworks business unit, recording revenue of GBP2.8m (2019: GBP17.9m) and an operating loss of GBP1.2m (2019: GBP0.0m). A reduction in activity was expected as the comparative period included contribution from the completion of works at the A14. However, as previously noted, the timing of these types of major infrastructure projects is often uncertain and subject to political decisions, and this further delay to the HS2 project has meant a greater disparity between H1 and H2 than originally anticipated. Although some initial works are now contracted, the HS2 project is now expected to commence mobilisation in the spring of 2021.

I am also pleased to announce that we have made substantial progress towards agreeing the final account balances on all of the legacy civils contracts. These contracts will be settled prior to the financial year end. Bringing these final accounts to a conclusion is a major step forward for the business and marks the end of the Group's involvement in civil engineering contracts.

The business unit's sole focus is on securing and delivering major earthmoving contracts beginning with HS2. The business is positioning itself on a number of other major projects in the nuclear, road and infrastructure markets in the South of England, where earthworks form a key element of the project expenditure.

Hargreaves Land

Hargreaves Land delivered revenue of GBP2.1m (2019: GBP3.7m) and a break even result (2019: profit of GBP0.2m) for the period. All revenue and profits in the first half were due to the sale of non-strategic land for which the Group determined there was insufficient development potential to warrant further investment.

Subsequent to the period end, I am pleased to report that the first sale at Blindwells to Bellway has completed. The Bellway contract includes some deferred consideration which is to be settled as to GBP4.2m in January 2021, GBP2.1m in January 2022 and not less than GBP1.4m in January 2023. The quantum of the final payment depends upon abnormal foundation costs. The Group has invested a further GBP2.2m into the Blindwells development in the period.

In May 2020, the Group announced the exchange of the first major commercial sale contract on the Unity Joint Venture scheme at Hatfield, South Yorkshire. The 32 hectare sale is conditional on the completion of certain infrastructure works at the site including the construction of an access road. Work on the access road is due to begin in early 2021, with completion expected before the end of next financial year. The cost of this work is being funded by external financing secured within the joint venture independently of Hargreaves. The link road accessing the M18, which was not part of the joint venture's responsibilities, has been completed and is now open, which is key to the future development of the site. Additionally, the Unity Joint Venture has exchanged conditional contracts with Harron Homes for the construction of over 200 homes on a 23 acre part of the site. Completion is expected to take place in 2023.

The Bridlington retail development, which was announced in December 2020 with a Gross Development Value ("GDV") of GBP9.5m, represents the type of project, in terms of both modest capital commitment and time to delivery, that Hargreaves Land is looking to target to help complement projects such as Blindwells and the Unity joint venture.

At 30 November 2020, the Group had controlling interests in land with planning permission for 4,700 residential plots and 4 million square feet of commercial space. The Group is currently progressing new projects with a combined GDV of GBP27m (Hargreaves share GBP21m).

Investment in HRMS

The Group's German Joint Venture recorded a post tax profit of GBP0.9m (2019: GBP0.7m). This improvement in performance represents a return to the level of profitability achieved in the six months to 30 November 2018, following a weakening in trading conditions in German markets in the comparative period.

Whilst margins have remained consistent, the business has seen volume increases demonstrating the ability of the team to continue trading through periods of economic uncertainty, as has been seen in Germany due to the coronavirus. The Carbon Pulverisation Plant has commenced production and is supplying to its first customer, DK, although scale up is not anticipated to impact materially on the current year's results.

It has been twelve months since HRMS acquired DK Recycling und Roheisen ("DK") for EUR1. The changes implemented by the management team at HRMS to date have improved the performance which has seen a breakeven contribution in the first half as the business was loss making prior to the acquisition. Whilst management continues to drive improvement programmes at DK, it is too early in the turnaround of the business to anticipate when it may make a meaningful contribution.

Corporate Costs

Corporate costs for the first six months were GBP1.9m (2019: GBP2.1m). This further reduction reflects many of the cost saving exercises that were actioned in the previous financial year. Whilst central costs remain a focus of the Board, no material further reductions are anticipated.

Summary

The result for the first half has been satisfactory with margin growth in our Transport and Industrial Services business partially offsetting the delays to HS2 and reduction in coal volumes. I am particularly pleased to see substantial progress in concluding the final account positions on the legacy civils contracts, allowing the Specialist Earthworks business to look to future opportunities in its field of core expertise.

The Group has often been second half weighted in terms of profitability and this year we expect this to be more pronounced than in previous years. The delays to HS2 and the timing of completions within Hargreaves Land have exacerbated the weighting to the second half that is always present due to the seasonality of the Hong Kong business.

The key strategic decision to sell all speciality coal to HRMS and cease all material coal related activities is a fundamental change in the Group's operations. Given the framework contract wins that have been secured in Distribution & Services within the first six months of the year, the momentum building within Hargreaves Land and the Group's strong balance sheet, the future for Hargreaves is strong as we continue the transition of the Group.

Gordon Banham

Group Chief Executive

27 January 2021

Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income

for the six months ended 30 November 2020

 
                                                        Unaudited     Unaudited       Audited 
                                                       six months    six months          year 
                                                            ended         ended         ended 
                                                      30 November   30 November        31 May 
                                                             2020         2019*        2020 
                                               Note        GBP000        GBP000      GBP000 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Revenue                                                   92,041       124,651     222,242 
 Cost of sales                                           (80,463)     (109,610)   (199,385) 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Gross profit                                              11,578        15,041      22,857 
 Other operating income*                                    1,045         3,382       5,288 
 Administrative expenses*                                (11,755)      (13,033)    (26,840) 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Operating profit                                             868         5,390       1,305 
 
 Operating profit (before exceptional 
  items and amortisation)                                     868         2,547       4,563 
 
 Exceptional items                              5               -         2,843     (1,683) 
 Amortisation and impairment of intangible 
  assets                                                        -             -     (1,575) 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Operating profit                                             868         5,390       1,305 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
   Financial income                                           183           240         845 
 Financial expenses                                         (911)       (1,109)     (2,134) 
 Share of profit in joint ventures (net 
  of tax)                                                     944           689       2,135 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Profit before tax                                          1,084         5,210       2,151 
 Taxation                                       6            (26)         (887)       2,119 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Profit for the period                                      1,058         4,323       4,270 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Other comprehensive (expense)/income 
 Items that will not be reclassified 
  to profit or loss 
 Remeasurements of defined benefit pension 
  plans                                                         -             -     (1,129) 
 Tax recognised on items that will not 
  be reclassified to profit or loss                             -             -         283 
 Items that are or may be reclassified 
  subsequently to profit or loss 
 Foreign exchange translation differences                   (703)         (678)         366 
 Effective portion of changes in fair 
  value of cash flow hedges                                   194           106          83 
 Equity adjustment relating to adoption 
  of IFRS 16                                                    -         (154)       (161) 
 Tax recognised on items that are or 
  may be reclassified subsequently to 
  profit or loss                                             (37)          (18)        (11) 
--------------------------------------------  -----  ------------  ------------  ---------- 
 Other comprehensive expense for the 
  period, net of tax                                        (546)         (744)       (569) 
 
 Total comprehensive income for the 
  period                                                      512         3,579       3,701 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Profit/(loss) attributable to: 
 Equity holders of the company                              1,085         4,358       4,315 
 Non-controlling interest                                    (27)          (35)        (45) 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Profit for the period                                      1,058         4,323       4,270 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Total comprehensive income/(expense) 
  for the period attributable to: 
 Equity holders of the company                                539         3,614       3,746 
 Non-controlling interest                                    (27)          (35)        (45) 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 Total comprehensive income for the 
  period                                                      512         3,579       3,701 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 GAAP measures 
 Basic earnings per share (pence)               8            3.36         13.56       13.40 
 Diluted earnings per share (pence)             8            3.26         13.26       13.11 
 Basic earnings per share from continuing 
  operations (pence)                            8            3.36         13.56       13.40 
 Diluted earnings per share from continuing 
  operations (pence)                            8            3.26         13.26       13.11 
 
 Non-GAAP measures (continuing) 
 Basic underlying earnings per share 
  (pence)                                       8            3.36          6.39       19.87 
 Diluted underlying earnings per share 
  (pence)                                       8            3.26          6.25       19.44 
--------------------------------------------  -----  ------------  ------------  ---------- 
 
 

* The comparative condensed consolidated statement of profit and loss and other comprehensive income has been restated to increase other operating income and administrative expenses by GBP2,437,000.

Condensed Consolidated Balance Sheet

as at 30 November 2020

 
 
                                             Unaudited     Unaudited     Audited 
                                           30 November   30 November      31 May 
                                                  2020          2019        2020 
                                                GBP000        GBP000      GBP000 
----------------------------------------  ------------  ------------  ---------- 
 
 Non-current assets 
   Property, plant and equipment                12,180        25,224      15,561 
   Right of use assets                          14,932        17,275      15,845 
   Investment property                           9,147         9,666       9,216 
   Intangible assets including goodwill          9,415        10,965       9,418 
   Investments in joint ventures                14,705        11,871      14,093 
   Deferred tax assets                           8,074         5,299       8,332 
----------------------------------------  ------------  ------------  ---------- 
 
                                                68,453        80,300      72,465 
----------------------------------------  ------------  ------------  ---------- 
 Current assets 
   Other financial assets                           33            10          65 
   Inventories                                  58,583        62,392      64,009 
   Trade and other receivables                  78,462        92,656      71,316 
   Income tax asset                                492             -           8 
   Contract assets                               8,468        17,415      11,456 
   Cash and cash equivalents                     4,820        15,493      18,499 
----------------------------------------  ------------  ------------  ---------- 
 
                                               150,858       187,966     165,353 
----------------------------------------  ------------  ------------  ---------- 
 
 Total assets                                  219,311       268,266     237,818 
----------------------------------------  ------------  ------------  ---------- 
 
 Non-current liabilities 
   Other Interest-bearing loans and 
    borrowings                                 (9,423)      (50,993)     (9,437) 
   Retirement benefit obligations              (2,890)       (3,336)     (3,768) 
   Provisions                                    (526)       (4,579)     (1,679) 
----------------------------------------  ------------  ------------  ---------- 
 
                                              (12,839)      (58,908)    (14,884) 
----------------------------------------  ------------  ------------  ---------- 
 
 Current liabilities 
   Other Interest-bearing loans and 
    borrowings                                (16,220)       (4,798)    (37,186) 
   Trade and other payables                   (52,242)      (72,251)    (43,362) 
   Provisions                                  (8,780)       (1,711)    (12,088) 
   Income tax liability                              -         (736)           - 
   Other financial liabilities                    (17)         (165)       (243) 
----------------------------------------  ------------  ------------  ---------- 
 
                                              (77,259)      (79,661)    (92,879) 
----------------------------------------  ------------  ------------  ---------- 
 
 Total liabilities                            (90,098)     (138,569)   (107,763) 
----------------------------------------  ------------  ------------  ---------- 
 
 Net assets                                    129,213       129,697     130,055 
----------------------------------------  ------------  ------------  ---------- 
 

Condensed Consolidated Balance Sheet (continued)

as at 30 November 2020

 
 
                                            Unaudited     Unaudited     Audited 
                                          30 November   30 November      31 May 
                                                 2020          2019        2020 
                                               GBP000        GBP000      GBP000 
---------------------------------------  ------------  ------------  ---------- 
 
 Equity attributable to equity holders 
  of the parent 
   Share capital                                3,314         3,314       3,314 
   Share premium                               73,955        73,955      73,955 
   Other reserves                                 211           211         211 
   Translation reserve                        (1,029)       (1,370)       (326) 
   Merger reserve                               1,022         1,022       1,022 
   Hedging reserve                                331           190         174 
   Capital redemption reserve                   1,530         1,530       1,530 
   Share-based payment reserve                  1,561         1,226       1,462 
   Retained earnings                           48,335        49,599      48,703 
---------------------------------------  ------------  ------------  ---------- 
                                              129,230       129,677     130,045 
 
 Non-controlling interest                        (17)            20          10 
---------------------------------------  ------------  ------------  ---------- 
 
 Total equity                                 129,213       129,697     130,055 
---------------------------------------  ------------  ------------  ---------- 
 

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 November 2019

 
                                                                                                     Share- 
                                                                                Capital               based                Total 
                        Share     Share   Translation   Hedging      Other   redemption    Merger   payment   Retained    parent   Non-controlling     Total 
                      capital   premium       reserve   reserve   reserves      reserve   reserve   reserve   earnings    equity          interest   Equity* 
                       GBP000    GBP000        GBP000    GBP000     GBP000       GBP000    GBP000    GBP000     GBP000    GBP000            GBP000    GBP000 
 
 Balance at 1 June 
  2019                  3,314    73,955         (692)       102        211        1,530     1,022     1,139     46,841   127,422                55   127,477 
                     --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
 Total 
 comprehensive 
 income and expense 
 for the period 
 Profit/(loss) for 
  the period                -         -             -         -          -            -         -         -      4,358     4,358              (35)     4,323 
 
 Other 
 comprehensive 
 (expense)/income 
 Foreign exchange 
  translation 
  differences               -         -         (678)         -          -            -         -         -          -     (678)                 -     (678) 
 Effective portion 
  of changes in 
  fair value of 
  cash flow hedges          -         -             -       106          -            -         -         -          -       106                 -       106 
 Equity adjustment 
  relating to 
  adoption of IFRS 
  16*                       -         -             -         -          -            -         -         -      (154)     (154)                 -     (154) 
 Tax recognised on 
  other 
  comprehensive 
  income                    -         -             -      (18)          -            -         -         -          -      (18)                 -      (18) 
                     --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
 Total other 
  comprehensive 
  (expense)/income          -         -         (678)        88          -            -         -         -      (154)     (744)                 -     (744) 
                     --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
 Total 
  comprehensive 
  income and 
  expense for the 
  period                    -         -         (678)        88          -            -         -         -      4,204     3,614              (35)     3,579 
                     --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
 Transactions with 
 owners recorded 
 directly in equity 
 Equity settled 
  share-based 
  payment 
  transactions              -         -             -         -          -            -         -        87          -        87                 -        87 
 Dividends paid             -         -             -         -          -            -         -         -    (1,446)   (1,446)                 -   (1,446) 
 
 Total 
  contributions by 
  and distributions 
  to owners                 -         -             -         -          -            -         -        87    (1,446)   (1,359)                 -   (1,359) 
                     --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
   Balance at 30 
   November 2019        3,314    73,955       (1,370)       190        211        1,530     1,022     1,226     49,599   129,677                20   129,697 
                     --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
 
 
 
 

*The Group has adopted IFRS 16 starting 1 June 2019 using the modified retrospective transition option which has resulted in an impact of GBP154,000 on the Group's opening equity. Under this option, the comparative information is not restated.

Condensed Consolidated Statement of Changes in Equity

for the six months ended 30 November 2020

 
                                                                                                    Share- 
                                                                               Capital               based                Total 
                       Share     Share   Translation   Hedging      Other   redemption    Merger   payment   Retained    parent   Non-controlling     Total 
                     capital   premium       reserve   reserve   reserves      reserve   reserve   reserve   earnings    equity          interest    Equity 
                      GBP000    GBP000        GBP000    GBP000     GBP000       GBP000    GBP000    GBP000     GBP000    GBP000            GBP000    GBP000 
 
 Balance at 1 June 
  2020                 3,314    73,955         (326)       174        211        1,530     1,022     1,462     48,703   130,045                10   130,055 
                    --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
 Total 
 comprehensive 
 income and 
 expense for the 
 period 
 Profit/(loss) for 
  the period               -         -             -         -          -            -         -         -      1,085     1,085              (27)     1,058 
 
 Other 
 comprehensive 
 (expense)/income 
 Foreign exchange 
  translation 
  differences              -         -         (703)         -          -            -         -         -          -     (703)                 -     (703) 
 Effective portion 
  of changes in 
  fair value of 
  cash flow hedges         -         -             -       194          -            -         -         -          -       194                 -       194 
 Tax recognised on 
  other 
  comprehensive 
  income                   -         -             -      (37)          -            -         -         -          -      (37)                 -      (37) 
                    --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
 Total other 
  comprehensive 
  (expense)/income         -         -         (703)       157          -            -         -         -          -     (546)                 -     (546) 
                    --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
 Total 
  comprehensive 
  income and 
  expense for the 
  period                   -         -         (703)       157          -            -         -         -      1,085       539              (27)       512 
                    --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
 Transactions with 
 owners recorded 
 directly in 
 equity 
 Equity settled 
  share-based 
  payment 
  transactions             -         -             -         -          -            -         -        99          -        99                 -        99 
 Dividends paid            -         -             -         -          -            -         -         -    (1,453)   (1,453)                 -   (1,453) 
 
 Total 
  contributions by 
  and 
  distributions to 
  owners                   -         -             -         -          -            -         -        99    (1,453)   (1,354)                 -   (1,354) 
                    --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 
   Balance at 30 
   November 2020       3,314    73,955       (1,029)       331        211        1,530     1,022     1,561     48,335   129,230              (17)   129,213 
                    --------  --------  ------------  --------  ---------  -----------  --------  --------  ---------  --------  ----------------  -------- 
 

Condensed Consolidated Cash Flow Statement

for the six months ended 30 November 2020

 
                                                  Unaudited     Unaudited 
                                                 six months    six months      Audited 
                                                      ended         ended   year ended 
                                                30 November   30 November       31 May 
                                                       2020          2019         2020 
                                                     GBP000        GBP000       GBP000 
---------------------------------------------  ------------  ------------  ----------- 
 
 Cash flows from operating activities 
  Profit for the period from continuing 
   operations                                         1,058         4,323        4,270 
   Adjustments for: 
   Depreciation and impairment of property, 
    plant and equipment and right-of-use 
    assets                                            3,429         8,032       19,305 
   Amortisation and impairment of goodwill 
    and intangible assets                                 -             -        1,575 
   Net finance expense                                  728           869        1,289 
   Share of profit in joint ventures 
    (net of tax)                                      (944)         (689)      (2,135) 
   Profit on sale of property, plant 
    and equipment, investment property 
    and right-of-use assets                           (988)         (945)      (2,851) 
   Equity settled share-based payment 
    expense                                              99            87          323 
   Income tax expense/(credit)                           26           887      (2,119) 
   Contributions to defined benefit pension 
    schemes                                           (879)         (849)      (1,858) 
   Translation of non-controlling interest                -            18            - 
---------------------------------------------  ------------  ------------  ----------- 
                                                      2,529        11,733       17,799 
 
   Change in inventories                              5,426      (14,352)     (15,969) 
   Change in trade and other receivables            (4,795)      (17,128)       12,611 
   Change in trade and other payables                 8,207         3,032     (22,863) 
   Change in provisions and employee 
    benefits                                        (3,460)           244        2,740 
---------------------------------------------  ------------  ------------  ----------- 
                                                      7,907      (16,471)      (5,682) 
 
   Interest paid                                      (772)         (546)      (1,104) 
   Income tax (paid)/received                         (313)           183        (272) 
---------------------------------------------  ------------  ------------  ----------- 
 
 Net cash inflow/(outflow) from operating 
  activities                                          6,822      (16,834)      (7,058) 
---------------------------------------------  ------------  ------------  ----------- 
 
 Cash flows from investing activities 
 Proceeds from sale of property, plant 
  and equipment and investment property               4,084         4,182       12,172 
 Acquisition of property, plant and 
  equipment and investment property                   (541)       (1,142)      (3,052) 
 Net cash inflow from investing activities            3,543         3,040        9,120 
---------------------------------------------  ------------  ------------  ----------- 
 
 Cash flows from financing activities 
   Principal elements of lease payments             (3,593)       (4,794)      (8,769) 
   Dividends paid                                   (1,453)       (1,446)      (1,446) 
   (Repayment) of/proceeds from Group 
    banking facilities                             (19,000)        14,000        5,000 
---------------------------------------------  ------------  ------------  ----------- 
 
 Net cash (outflow)/inflow from financing 
  activities                                       (24,046)         7,760      (5,215) 
---------------------------------------------  ------------  ------------  ----------- 
 
   Net decrease in cash and cash equivalents       (13,681)       (6,034)      (3,153) 
   Cash and cash equivalents at the start 
    of the period                                    18,499        21,583       21,583 
   Effect of exchange rate fluctuations 
    on cash held                                          2          (56)           69 
---------------------------------------------  ------------  ------------  ----------- 
 
 Cash and cash equivalents at the end 
  of the period                                       4,820        15,493       18,499 
---------------------------------------------  ------------  ------------  ----------- 
 
 

Notes to the CONDENSED CONSOLIDATED Interim FINANCIAL INFORMATION

   1.         Basis of preparation 

The condensed consolidated interim financial information set out in this statement for the six months ended 30 November 2020 and the comparative figures for the six months ended 30 November 2019 is unaudited. This financial information does not constitute statutory accounts as defined in Section 435 of the Companies Act 2006. It does not comply with IAS 34 'Interim Financial Reporting', as is permissible under the rules of the Alternative Investment Market.

The condensed consolidated interim financial information, which is neither audited nor reviewed, has been prepared in accordance with the measurement and recognition criteria of adopted International Financial Reporting Standards. This statement does not include all the information required for the annual financial statements and should be read in conjunction with the financial statements of the Group as at and for the year ended 31 May 2020.

There are no new IFRS which apply to the condensed consolidated interim financial information.

   2.         Accounting policies 

The accounting policies applied in preparing the condensed consolidated interim financial information are the same as those applied in the preparation of the annual financial statements for the year ended 31 May 2020, as described in those financial statements.

The income statement for the comparative period has been restated to increase both Other operating income and Administrative expenses by GBP2,437,000 in connection with the Gain on disposal of a subsidiary. There is no impact on previously reported Profit for the period.

   3.         Status of financial information 

The comparative figures for the financial year ended 31 May 2020 are not the Group's statutory consolidated financial statements for that financial year. The statutory financial accounts for the financial year ended 31 May 2020 have been reported on by the company's auditor and delivered to the Registrar of Companies. The report of the auditor was (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.

   4.         Principal risks and uncertainties 

The principal risks and uncertainties affecting the Group are unchanged from those set out in the Group's accounts for the year ended 31 May 2020. Following the recent sale of speciality coal to HRMS which took place after the period end, the bank debt of the Group has been eliminated. The Group's current banking facility expires on 31 July 2021 and is no longer appropriate for the activities of the Group given the disposal of coal stocks. The Directors have reviewed financial forecasts, including severe yet plausible impacts from COVID-19 and are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. The Board is in discussion with banks in relation to the provision of future facilities and is confident that these will be established in the next few months. Accordingly, the Group continues to adopt the going concern basis in preparing the condensed consolidated interim financial information .

   5.         Exceptional items 
 
                                                          Six months    Six months 
                                                               ended         ended  Year ended 
                                                         30 November   30 November      31 May 
                                                                2020          2019        2020 
                                                           Unaudited     Unaudited     Audited 
                                                             GBP'000       GBP'000     GBP'000 
------------------------------------------------------  ------------  ------------  ---------- 
Exceptional items in Revenue 
Reduction in value of legacy contracts in C.A. 
 Blackwell (Contracts) Limited                                     -             -       (933) 
------------------------------------------------------  ------------  ------------  ---------- 
Total exceptional items in Revenue                                 -             -       (933) 
------------------------------------------------------  ------------  ------------  ---------- 
Exceptional items in Cost of Sales 
Losses on legacy contracts in C.A. Blackwell 
 (Contracts) Limited                                               -             -       (487) 
Cessation of coal mining activities                                -             -     (4,108) 
Movement in provision in respect of the insolvency 
 of British Steel                                                  -             -       1,408 
Total exceptional items in Cost of Sales                           -             -     (3,187) 
------------------------------------------------------  ------------  ------------  ---------- 
Exceptional items in Other Operating income 
Gain on disposal of Drakelands Restoration Limited                 -         2,437       2,437 
------------------------------------------------------  ------------  ------------  ---------- 
Total exceptional items in Other Operating income                  -         2,437       2,437 
------------------------------------------------------  ------------  ------------  ---------- 
Exceptional items in Administrative expenses 
Profit due to insolvency of British Steel                          -           406           - 
Net amounts recovered from C.A. Blackwell (Contracts) 
 Limited breach of warranty claim                                  -             -           - 
------------------------------------------------------  ------------  ------------  ---------- 
Total exceptional items in Administrative expenses                 -           406           - 
------------------------------------------------------  ------------  ------------  ---------- 
Total                                                              -         2,843     (1,683) 
------------------------------------------------------  ------------  ------------  ---------- 
 

There are no exceptional items in the period to 30 November 2020.

In the year ended 31 May 2020 following the decision to cease all coal mining operations the Group incurred an exceptional charge of GBP4,108,000, reflecting employment related liabilities of GBP1,421,000, associated asset write-downs of GBP1,746,000 and restoration liabilities of GBP941,000.

On 29 November 2019, the Group disposed of 100% of the share capital of Drakelands Restoration Limited ("Drakelands") for proceeds of GBP2,800,000. Associated disposal costs were GBP363,000, Drakelands net assets at the date of disposal were GBPnil.

Following the acquisition of British Steel in the year ended 31 May 2020 by Jingye Group, there was no longer any need for the remaining employment related provision to be retained, and at 31 May 2020 this was released reversing the exceptional charge from the prior year.

In the year ended 31 May 2020 further losses were recognised on the legacy contracts within C.A. Blackwell (Contracts) Limited resulting in a reversal of previously recognised revenue of GBP933,000 and further costs of GBP487,000.

   6.         Taxation 

Income tax for the period is charged at 19% (2019: 19%). The effective tax rate, after removing the impact of jointly controlled entities is 18.6% (2019: 19.6%), representing an estimate of the annual effective rate for the full year to 31 May 2021.

   7.         Dividends 

The final dividend of 4.5 pence per ordinary share, proposed in the 2020 annual accounts and approved by the shareholders at the Annual General Meeting on 28 October 2020, was paid on 30 October 2020. The directors have proposed an interim dividend of 2.7 pence per share (2019: Nil) which will be paid on 6 April 2021 to shareholders on the register at the close of business on 26 February 2021. This will be paid out of the Company's available distributable reserves. In accordance with IAS 1, dividends are recorded only when paid and are shown as a movement in equity rather than as a charge in the income statement.

   8.         Earnings per share 
 
                             Six months ended                 Six months ended                Year ended 31 May 
                             30 November 2020                 30 November 2019                       2020 
                                 Unaudited                        Unaudited                         Audited 
                      Earnings        EPS       DEPS   Earnings        EPS       DEPS   Earnings        EPS       DEPS 
                        GBP000      Pence      Pence     GBP000      Pence      Pence     GBP000      Pence      Pence 
 
 Underlying 
  earnings 
  per share from 
  continuing 
  operations             1,085       3.36       3.26      2,055       6.39       6.25      6,399      19.87      19.44 
 Exceptional items 
  and amortisation 
  (net of tax)               -          -          -      2,303       7.17       7.01    (2,084)     (6.47)     (6.33) 
-------------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 Basic earnings 
  per share              1,085       3.36       3.26      4,358      13.56      13.26      4,315      13.40      13.11 
 
 Weighted average 
  number of shares                 32,282     33,240                32,137     32,862                32,199     32,913 
-------------------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  ---------  --------- 
 

The calculation of diluted earnings per share is based on the profit for the period attributable to equity holders of the Company and on the weighted average number of ordinary shares in issue in the period adjusted for the dilutive effect of the share options outstanding. The effect on the weighted average number of shares is 958,000 (2019: 725,000), the effect on continuing basic earnings per ordinary share is 0.10p (2019: 0.30p).

   9.         Segmental information 

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker has been identified as the Board of Directors since they are responsible for strategic decisions.

 
                              Distribution    Hargreaves 
                                & Services          Land   Unallocated          HSEL         Total 
                                 Unaudited     Unaudited     Unaudited     Unaudited     Unaudited 
                               30 November   30 November   30 November   30 November   30 November 
                                      2020          2020          2020          2020          2020 
                                    GBP000        GBP000        GBP000        GBP000        GBP000 
-------------------------  ---------------  ------------  ------------  ------------  ------------ 
 Revenue 
 Total revenue                      90,180         2,109             -             -        92,289 
 Intra-segment revenue               (248)             -             -             -         (248) 
-------------------------  ---------------  ------------  ------------  ------------  ------------ 
 
 Revenue from external 
  customers                         89,932         2,109             -             -        92,041 
-------------------------  ---------------  ------------  ------------  ------------  ------------ 
 
 Operating profit/(loss)             2,770           (3)       (1,899)             -           868 
 Share of profit 
  in joint ventures 
  (net of tax)                           -             -             -           944           944 
 Net financing costs                 (707)         (101)            80             -         (728) 
 
 Profit/(loss) before 
  tax                                2,063         (104)       (1,819)           944         1,084 
-------------------------  ---------------  ------------  ------------  ------------  ------------ 
 
                              Distribution    Hargreaves 
                                & Services          Land   Unallocated          HSEL         Total 
                                 Unaudited     Unaudited     Unaudited     Unaudited     Unaudited 
                               30 November   30 November   30 November   30 November   30 November 
                                      2019          2019          2019          2019          2019 
                                    GBP000        GBP000        GBP000        GBP000        GBP000 
-------------------------  ---------------  ------------  ------------  ------------  ------------ 
 Revenue 
 Total revenue                     121,000         3,700             -             -       124,700 
 Intra-segment revenue                (49)             -             -             -          (49) 
-------------------------  ---------------  ------------  ------------  ------------  ------------ 
 
 Revenue from external 
  customers                        120,951         3,700             -             -       124,651 
-------------------------  ---------------  ------------  ------------  ------------  ------------ 
 
 Operating profit/(loss) 
  (before exceptional 
  items)                             4,405           201       (2,059)             -         2,547 
 Share of profit 
  in joint ventures 
  (net of tax)                           -             -             -           689           689 
 Net financing costs                 (804)         (101)            36             -         (869) 
 Exceptional items                     406             -         2,437             -         2,843 
-------------------------  ---------------  ------------  ------------  ------------  ------------ 
 
 Profit before tax                   4,007           100           414           689         5,210 
-------------------------  ---------------  ------------  ------------  ------------  ------------ 
 
   10.        Condensed consolidated interim financial information 

The condensed consolidated interim financial information was approved by the Board of Directors on 27 January 2021. Copies of this interim statement will be sent to all shareholders and will be available to the public from the Group's registered office.

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END

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