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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 | |
|---|---|---|---|---|---|---|---|---|---|---|
| -6.00 | -1.05% | 566.00 | 566.00 | 588.00 | 566.00 | 566.00 | 566.00 | 16,007 | 13:41:18 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Sanitary Services, Nec | 211.15M | 12.28M | 0.3740 | 15.29 | 187.8M |
From Nov 2023 to Nov 2024
TIDMHSP
RNS Number : 6601A
Hargreaves Services PLC
24 January 2024
HARGREAVES SERVICES PLC
(the "Group", the "Company" or "Hargreaves")
Interim Results for the six months ended 30 November 2023
Strong period for Services with revenue and margin improvements; Interim dividend increased six-fold.
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 2023.
As anticipated the slowdown in performance within HRMS, combined with the progress on the pension buy out, has facilitated a material increase in the interim dividend in both absolute and percentage terms, whilst the Services business, with over 60 term and framework contracts, has delivered another period of solid underlying growth.
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KEY FINANCIAL RESULTS Unaudited Unaudited
Six Months Six Months
ended ended
30 Nov 30 Nov 2022
2023
Revenue GBP110.2m GBP116.5m
------------ -------------
EBITDA* GBP12.3m GBP12.9m
------------ -------------
Profit before tax ("PBT")** GBP2.7m GBP18.7m
------------ -------------
EPS 5.2p 52.2p
------------ -------------
Interim Dividend 18.0p 3.0p
------------ -------------
Cash and cash equivalents GBP18.7m GBP18.1m
------------ -------------
Leasing debt GBP28.8m GBP30.6m
------------ -------------
Net Asset Value GBP197.5m GBP196.2m
------------ -------------
Net Assets per Share 605p 603p
------------ -------------
* EBITDA is calculated as Operating Profit after adding back depreciation and amortisation.
** PBT decrease reflects the reduction in contribution from HRMS, timing of sales in Land and impact of a one off gain in the prior period
HIGHLIGHTS
-- Group revenue reduced by GBP6.3m due to several post period
end completions within Hargreaves Land.
-- Services revenue rose by 1.6%, supported by over 60 term and
framework contracts.
-- Decrease in PBT due to reduction in contribution from HRMS and
timing of sales completions within Hargreaves Land.
-- Receipt of GBP8m cash from investment in HRMS in the period,
with cash returns from HRMS now expected to remain around GBP7m
per annum (up from GBP4m).
-- Cash of GBP18.7m, compared to GBP18.1m at Nov 2022 with investment
in Land assets being offset by additional cash receipt from
HRMS.
-- Interim dividend increased six-fold following an increase in
cash receipts from HRMS and imminent elimination of annual payments
to service the pension scheme liability.
OUTLOOK
-- Services has over 90% of revenues secured under contract for
the year ending 31 May 2024, cementing its continued delivery
of sustainable and reliable profits into the future.
-- Stronger outlook for HRMS with changes to gate fees and the
impact of EU sanctions on pig iron expected to give a significant
improvement to profitability in the second half and FY25.
-- Land poised to deliver its best ever full year result with several
post-period end completions secured.
Commenting on the interim results, Group Chair Roger McDowell said: "I am delighted we continue to deliver value for our shareholders through a substantial increase in the interim dividend. This demonstrates not only the value created by the strategic initiative set out at the year end to remove the pension liability but also the recurring revenue stream generated by the Group's Services business unit underpinned by the substantial cash returns from our German joint venture and good prospects for Land.
"We are optimistic about the outlook for the business in the second half as Services continues to provide a robust underpinning to trading with over 90% of revenue already secured for the financial year. We anticipate positive pricing in Germany in the second half and Land is poised to deliver its best ever full year performance."
Investor presentation
Gordon Banham, Group Chief Executive, Stephen Craigen, Chief Financial Officer and David Anderson, Group Property Director, will provide a live presentation on the Company's interim results via the Investor Meet Company platform today at 4:30pm GMT.
For further details:
Hargreaves Services www.hsgplc.co.uk Gordon Banham, Chief Executive Tel: 0191 373 4485 Officer Stephen Craigen, Chief Financial Officer Walbrook PR (Financial Tel: 020 7933 8780 or hargreavesservices@walbrookpr.com PR & IR) Mob: 07980 541 893 / 07747 515 393 Paul McManus, Louis Ashe-Jepson, 07884 664 686 Charlotte Edgar Singer Capital Markets (Nomad and Corporate Broker) Tel: 020 7496 3000 Sandy Fraser, Phil Davies, Sam Butcher
About Hargreaves Services plc ( www.hsgplc.co.uk )
Hargreaves Services plc is a diversified group delivering services to the industrial and property sectors, supporting key industries within the UK and South East Asia. The Company's three business segments are Services, Hargreaves Land and an investment in a German joint venture, Hargreaves Raw Materials Services GmbH ("HRMS"). Services provides critical support to many core industries including Energy, Environmental, UK Infrastructure and certain manufacturing industries through the provision of materials handling, mechanical and electrical contracting services, logistics and major earthworks. Hargreaves Land is focused on the sustainable development of brownfield sites for both residential and commercial purposes. HRMS trades in specialist commodity markets and owns DK Recycling und Roheisen GmbH ("DK"), a specialist recycler of steel waste material. Hargreaves is headquartered in County Durham and has operational centres across the UK, as well as in Hong Kong and a joint venture in Duisburg, Germany.
CHAIR'S STATEMENT
Introduction
The six-month period to 30 November 2023 has been a time of contrasts across our three business segments, yet the Board is confident the overall trend leans solidly towards the positive. We have seen the momentum within our Services business continue, with increased earthmoving and engineering activity driving growth in both revenue and margin. Sales within Hargreaves Land have been slow, impacted by the wider property market. However, with several post period end completions we remain confident that Land is poised to deliver its best full year result to date. Whilst HRMS has delivered a loss for the period driven by the difficult economic circumstances in Germany and a low point in the cycle, we have started to see an increase in cash return from the joint venture and have visibility of a return to profitability in the second half.
Strategic Progress
The Board outlined two areas of strategic focus in the Annual Report and Accounts for the year ended 31 May 2023. They were the plan to realise value from the Group's renewable energy land assets over the next five years and to progress the buy out of the Group's defined benefit pension scheme. I am pleased to report several developments with each of these strategic initiatives, as detailed below.
Renewable Energy Land Assets
The team continues to prepare the Group's renewable energy land assets into suitable portfolios for realisation in the medium term. We have seen good progress on the permitting, development and commissioning of the underlying assets by the third-party operators. The timing of portfolio asset sales will be determined by the commencement of energy production as the team look to optimise the realisation values. Notwithstanding this, we expect to go to market with the first package of assets for sale in the year ending 31 May 2025.
Pension Scheme
Considerable headway has also been made on the project to buy out the Group's defined benefit pension scheme, which will remove the requirement to pay an ongoing GBP1.8m per annum to support the deficit. Our most recent estimate is that the cash cost to buy out the scheme will be no more than GBP9m with the payment expected to be made in the first half of calendar year 2024 out of existing cash reserves.
This action means that the Group will no longer be required to make annual payments to the scheme and all benefit payments will be managed by the insurer. I am pleased to confirm that once the payment has been made the main objective to cease annual contributions into the scheme will be achieved and it is this annual cash flow saving that has been used to support the increase in the sustainable dividend to our shareholders.
Results
Revenue for the Group decreased by 5.4% to GBP110.2m (2022: GBP116.5m) due to several sales within Hargreaves Land completing post period end. This resulted in a reduction in revenue from GBP8.7m to GBP0.7m for Hargreaves Land. The Group's PBT also decreased from GBP18.7m to GBP2.7m. Much of this can be attributed to the reduction in contribution from HRMS, as had been anticipated, and the impact of a GBP2m one-off gain in the first half of the prior year. EBITDA was GBP12.3m (Nov 2022: GBP12.9m), the reduction on the comparative period being due to the timing of sales within Hargreaves Land. As a result of this timing and the profile of activity with HRMS, we expect the second half of the year to be much stronger than the first.
Services Underlying Growth
Whilst the Group has seen a reduction in both revenue and PBT compared to the six months ended 30 November 2022, this masks the strong performance of the Services business, which is less impacted by the timing of individual events. EBITDA attributable to the Services business has increased to GBP15.9m (2022: GBP13.9m) reflecting the robust and resilient nature of the 60+ term and framework contracts in place.
The business remains unaffected by recent announcements regarding the future of the HS2 project, in particular the cancellation of the Northern leg between Birmingham and Manchester, as this phase had not been contracted and our forecasts had not included this aspect of the scheme. The Services project pipeline remains diverse, with limited reliance on the success of one specific scheme.
Cash return from HRMS
As expected, it has been a slower start to the year for HRMS than we have observed in recent times. The substantial profits that it has been able to generate over the last two years were not expected to be sustainable and the Board always anticipated that profit levels would reduce once commodity prices softened.
As highlighted in previous updates, the reduction in activity and commodity prices has been reflected in reduced working capital consumption, resulting in a cash release by HRMS. The Group received an GBP8m distribution from HRMS during the first half (2022: GBP4m) and we expect the cash repatriation from Germany to be sustainable at no less than GBP7m per annum. This cash inflow will be used to support the substantial increase in the interim dividend.
Cash and debt
As at 30 November 2023 the Group held cash of GBP18.7m compared with GBP21.9m on 31 May 2023 (Nov 2022: GBP18.1m). This decrease is due, in part, to the continued investment in Land assets ahead of contracted sales.
The only debt held by the Group is leasing debt for specific plant items which was GBP28.8m at 30 November 2023 (Nov 2022: GBP30.6m). This decrease reflects the regular leasing payments to reduce the liability in the ordinary course of business.
Dividend
In line with the announcement made on 21 December 2023, due to the progress made with the buy out of the pension scheme liability, combined with the additional sustainable cash receipt from HRMS the Board is confirming an historic six-fold increase in the interim dividend. The interim dividend of 18.0p (2022: 3.0p) reflects the cash generative nature of the Group and the continued expectation of recurrent cash returns from HRMS. The 18.0p interim dividend represents 50% of the Board's expected full year dividend.
The interim dividend will be paid on 11 April 2024 to shareholders on the register on 22 March 2024.
Outlook
The first half of the year has seen solid progress on our two key strategic goals, resulting in a substantial increase in the return of value to shareholders. The Group continues to trade in line with market expectations (as refreshed in December 2023). The Services business has continued to demonstrate its reliable and resilient earnings stream. Whilst it was a subdued first half of the year for Hargreaves Land, the sales expected to complete in the second half of the year leave that business unit in a strong position to deliver its best ever full year results. We anticipate a gradual recovery in Germany from the low point in the first half and the additional sustainable cash receipt from HRMS means we are also well placed to realise long-term value for our shareholders.
Roger McDowell
Chairman
24 January 2024
CHIEF EXECUTIVE'S REVIEW
GBP'm Services Land HRMS Central Total
Costs
Revenue (Nov 2023) 109.5 0.7 - - 110.2
--------- ------ ------ -------- ------
Revenue (Nov 2022) 107.8 8.7 - - 116.5
--------- ------ ------ -------- ------
Profit/(loss) before tax
(Nov 2023) 7.8 (1.0) (1.9) (2.2) 2.7
--------- ------ ------ -------- ------
Profit/(loss) before tax
(Nov 2022) 8.5 1.6 10.8 (2.2) 18.7
--------- ------ ------ -------- ------
Services
The Services business delivered first half revenues of GBP109.5m (2022: GBP107.8m) and a PBT of GBP7.8m (2022: GBP8.5m). The growth in revenue is due to increased earthmoving activities and additional engineering works on certain contracts.
The comparative period includes a non-recurring gain of GBP2m relating to asset realisations. There is no such gain in the results to 30 November 2023. As such, the like-for-like comparison is a PBT of GBP7.8m with a comparative result of GBP6.5m. This represents an improvement in the net margin from 6.0% to 7.1%. Much of this improvement in margin has been due to the increased activities at HS2, accompanied by further enabling works at the Sizewell C nuclear project.
As has been the case in previous years, the full year result for Services is likely to be weighted towards the first six months of the financial year. This is due to the earthmoving season predominantly taking place during the first half, as well as the annual GBP1m receipt from Tungsten West being received in June 23.
The Services business continues to deliver good-quality, resilient, recurring profits and remains focused on delivering services to our four key market sectors: Energy; Environmental; Industrial; and Infrastructure.
Contract Security
The Services business continues to be the main driver of performance within the Group, holding over 60 term and framework contracts with high quality customers giving excellent visibility of revenue. The period has seen further contract successes, in particular the award and commencement of a three-year materials handling contract at Port of Tyne.
The largest single contract within the Group is the earthmoving contract for EKFB on HS2, which is now in its second full year of operation. This has been a key driver for growth over the past couple of years and the Board expects there to be at least another two full earthmoving seasons of full-scale activity. Looking forward, focus for the Group remains on securing positions on Lower Thames Crossing and Sizewell C. During the period, the Group has been awarded a number of contracts for essential enabling works at Sizewell C, which places Hargreaves in the best possible position to be able to secure the main contract for earthmoving when it is tendered.
Engineering Capability
The Group has had a lot of success in building and developing its capability in mechanical engineering. The first half of the year has seen the successful commissioning of a five-section conveyor solution, which has materially reduced the carbon emissions on our section of HS2. Additionally, the team is nearing completion of a significant Lime Silo and Dosing Plant for the Skanska Costain Strabag Joint Venture ("SCS"). Both of these schemes represent material projects, and the business is well placed to secure further projects of this kind.
Whilst inflation has abated somewhat in recent months, it remains relatively high and has been so through the period. The Group's contractual positions have continued to protect it from margin erosion, as demonstrated by the substantial increase in underlying margin within Services.
Services remains the core generator of revenue and cash flow for the Group. With a secure book of recurring contracted revenue, the business is in a strong position to deal with the ongoing economic and political uncertainties.
Hargreaves Land
Land
Hargreaves Land recorded revenue of GBP0.7m (2022: GBP8.7m) and a loss before tax of GBP1.0m (2022: profit of GBP1.6m). The variation in both revenue and profit before tax is due to the timing of sales at Blindwells. Whilst the comparative period saw the completion of a plot sale at Blindwells, no such completion occurred in the six months to 30 November 2023, in part due to the trends experienced in the general property markets. However, the underlying activity within the business unit has been high in terms of developing opportunities.
Preparatory works have been completed to enable the sale of a previously exchanged 20-acre plot to Avant Homes, which is expected to complete before the end of January 2024. The deal will see the Group receive total proceeds of GBP18.5m payable in four instalments over three years.
The Unity Joint Venture saw the completion of the construction of a forward funded 191,000 sq ft logistics unit ahead of programme. Additionally, terms have been agreed for the sale of two plots to McDonalds and Starbucks, which further demonstrates the desirability of this key location.
In December 2023, Hargreaves Land completed the sale of the Energy from Waste (EfW) ground lease investment at Westfield in Scotland for consideration of GBP7.6m. The sale represents the disposal of eight acres out of the 50 available developed acres at Westfield, allowing for future sales to occur at the site.
Finally, contracts have been exchanged in December 2023 on a 28-acre site at Maltby, Rotherham for the sale of 185 residential plots for gross proceeds of GBP4.9m.
Renewables
The Group's renewable energy land assets have continued to be a core focus for the business, with realisations expected to be in excess of GBP25m once they are sufficiently mature. At present 210MW of wind assets are operational on land owned by the Group.
It is expected that this will increase to over 930MW of operational wind assets and battery storage by the end of calendar year 2025, with a further 2,165MW of wind, solar and battery assets beyond 2025 subject to agreed terms and exchange of contracts. We have seen a significant increase in the appetite for battery storage in recent months, with 1,495MW of further opportunities added to the pipeline since our Annual Report and Accounts in August 2023.
The first tranche of renewable energy land asset sales is being prepared to go to market in FY25. This is likely to include around 400MW of wind assets, which should be sufficiently mature by that stage.
HRMS
HRMS recorded a post-tax loss of GBP1.9m (2022: profit of GBP10.8m) for the six months ended 30 November 2023. This substantial reduction has been driven by a number of contributing factors. First, the principal market for the business is Germany, which is currently in a technical recession and has seen many of the joint venture's clients operate on reduced shift patterns, therefore requiring lower levels of raw materials. Subsequently this has impacted HRMS' trading activities.
Second, zinc prices have dropped to around EUR2,500 per tonne compared to highs of over EUR4,000 in the previous period. Zinc is a key output of the steel waste recycling process within DK, a subsidiary of HRMS. Whilst 60% of the zinc output is hedged, the reduction in spot prices realised on the remaining 40% has put pressure on the result.
Third, pig iron prices have been very low during the period whilst coke pricing (a key input) has remained high. This disparity between pig iron and coke pricing reflects the absence of an embargo on imports into Europe of Russian pig iron, suppressing the sales price of pig iron whilst coke pricing has been supported by an embargo on Russian product.
Despite the headwinds encountered by the joint venture during the first half of the financial year, there are two key factors that give confidence for a turnaround. First, the 12th package of sanctions against Russia, which was recently announced by the EU, includes the restriction of "steel-making raw materials", including pig iron. This is expected to result in an increase in pig iron selling prices achievable by DK.
Second, a key input of the pig iron production at DK is steel waste dusts. DK charges a gate fee for accepting the dusts, which it then recycles into pig iron and zinc. Many of the suppliers of steel dusts are on long term contracts, however, several are up for renewal and renegotiation in 2024 and there is expectation that many will see substantial increases in the gate fee. The Board believes that these changes alone will be sufficient to return the joint venture to profitability during the second half of the financial year.
The reduction in trading activity has reduced working capital consumption, leading to an increased cash receipt from HRMS of GBP8m (2022: GBP4m) in the first half of the financial year. As reported on 21 December 2023, the management of HRMS has agreed to maintain this level of cash return to the Group for the foreseeable future. The Board has confidence in the sustainability of this cash flow, at no less than GBP7m per annum, to the Group based on the future likely base level of profitability from the trading activities within HRMS, which are not linked to the steel waste recycling activities.
ESG
The Group continues to make positive strides with regard to ESG and has recently appointed its first Head of ESG. This appointment will spearhead the Group's efforts to minimise our impact on the environment whilst also championing our ESG credentials, which will be crucial to unlocking new opportunities for Hargreaves.
Furthermore, the Group was awarded the prestigious HS2 EKFB sustainability award for the second year running as a recognition of our efforts to reduce carbon emissions through our Plant Idle Time campaign.
Summary
The Services business' low capital model has continued to improve margin and grow underlying profitability through efficient contract management and engineering innovation. With over 90% of revenues secured under contract for the year ending 31 May 2024, the Services business can continue to deliver sustainable and reliable profits into the future.
Hargreaves Land has not been immune to the difficulties in the UK property market, however, this was expected and the post-period end completion of the Westfield EfW ground lease and the exchange of contracts at Maltby demonstrate the value in the underlying portfolio, as well as the ability of the team to realise these opportunities for shareholders. The outlook is also positive, with Hargreaves Land poised to deliver its best ever full year result.
Whilst the trading performance of HRMS has been disappointing, the confirmation of an increased cash flow from HRMS is very welcome and will be used to support the increased dividend to shareholders. The changes to gate fees and the impact of the recently announced EU sanctions on Russian pig iron imports are in combination expected to result in a significant improvement in the profitability of HRMS in FY25.
Overall, I remain optimistic about the value creation potential within the Group and, with no bank debt on the Balance Sheet, I firmly believe there are substantial opportunities to optimise and realise further value for shareholders in the coming years.
Gordon Banham
Group Chief Executive
24 January 2024
Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income
for the six months ended 30 November 2023
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 November 30 November 31
May
2023 2022 2023
Note GBP000 GBP000 GBP000
-------------------------------------------------------- ----- ------------ ------------ ----------
Revenue 110,171 116,475 211,459
Cost of sales (88,943) (94,782) (172,402)
-------------------------------------------------------- ----- ------------ ------------ ----------
Gross profit 21,228 21,693 39,057
Other operating income - 2,844 4,918
Administrative expenses (16,127) (16,561) (32,178)
-------------------------------------------------------- ----- ------------ ------------ ----------
Operating profit 5,101 7,976 11,797
Finance income 818 504 1,612
Finance expense (1,473) (823) (2,565)
Share of (loss)/profit in joint ventures (net
of tax) (1,714) 11,053 16,311
-------------------------------------------------------- ----- ------------ ------------ ----------
Profit before tax 2,732 18,710 27,155
Taxation 5 (1,035) (1,562) 771
-------------------------------------------------------- ----- ------------ ------------ ----------
Profit for the period 1,697 17,148 27,926
-------------------------------------------------------- ----- ------------ ------------ ----------
Other comprehensive income/(expense)
Items that will not be reclassified to profit
or loss
Remeasurements of defined benefit pension plans - - (4,645)
Tax recognised on items that will not be reclassified
to profit or loss - - 1,161
Items that are or may be reclassified subsequently
to profit or loss
Foreign exchange translation differences 528 1,406 1,130
Share of other comprehensive income of joint
ventures (net of tax) - - 1,912
Other comprehensive income/(expense) for the
period, net of tax 528 1,406 (442)
Total comprehensive income for the period 2,225 18,554 27,484
-------------------------------------------------------- ----- ------------ ------------ ----------
Profit attributable to:
Equity holders of the company 1,706 16,962 27,915
Non-controlling interest (9) 186 11
-------------------------------------------------------- ----- ------------ ------------ ---------- Profit for the period 1,697 17,148 27,926 -------------------------------------------------------- ----- ------------ ------------ ---------- Total comprehensive income for the period attributable to: Equity holders of the company 2,234 18,368 27,473 Non-controlling interest (9) 186 11 -------------------------------------------------------- ----- ------------ ------------ ---------- Total comprehensive income for the period 2,225 18,554 27,484 -------------------------------------------------------- ----- ------------ ------------ ---------- GAAP measures Basic earnings per share (pence) 7 5.22 52.15 85.85 Diluted earnings per share (pence) 7 5.14 51.09 84.13 ------------------------------------ ----- ------ ------
Condensed Consolidated Balance Sheet
as at 30 November 2023
Unaudited Unaudited Audited
30 November 30 November 31 May
2023 2022 2023
Note GBP000 GBP000 GBP000
---------------------------------------- ----- ------------ ------------ ----------
Non-current assets
Property, plant and equipment 10,822 10,392 10,861
Right of use assets 34,157 35,305 39,815
Investment property 15,267 13,672 14,074
Intangible assets including goodwill 5,589 5,949 5,685
Investments in joint ventures 9 73,226 70,541 74,282
Deferred tax assets 14,214 9,657 14,753
Trade receivables - 4,224 -
Retirement benefit surplus 9,111 11,467 8,474
---------------------------------------- ----- ------------ ------------ ----------
162,386 161,207 167,944
---------------------------------------- ----- ------------ ------------ ----------
Current assets
Inventories 44,192 33,872 39,302
Trade and other receivables 82,474 86,109 71,609
Contract assets 5,058 6,081 5,114
Cash and cash equivalents 18,718 18,102 21,859
---------------------------------------- ----- ------------ ------------ ----------
150,442 144,164 137,884
---------------------------------------- ----- ------------ ------------ ----------
Total assets 312,828 305,371 305,828
---------------------------------------- ----- ------------ ------------ ----------
Non-current liabilities
Other Interest-bearing loans and
borrowings (13,874) (17,460) (20,839)
Retirement benefit obligations (2,839) (2,666) (2,902)
Provisions (3,829) (5,898) (4,120)
Deferred tax liabilities (3,853) (2,419) (3,417)
---------------------------------------- ----- ------------ ------------ ----------
(24,395) (28,443) (31,278)
---------------------------------------- ----- ------------ ------------ ----------
Current liabilities
Other Interest-bearing loans and
borrowings (14,913) (13,140) (15,511)
Trade and other payables (64,545) (58,792) (47,427)
Provisions (11,268) (8,844) (10,467)
Income tax liability (212) - (154)
---------------------------------------- ----- ------------ ------------ ----------
(90,938) (80,776) (73,559)
---------------------------------------- ----- ------------ ------------ ----------
Total liabilities (115,333) (109,219) (104,837)
---------------------------------------- ----- ------------ ------------ ----------
Net assets 197,495 196,152 200,991
---------------------------------------- ----- ------------ ------------ ----------
Condensed Consolidated Balance Sheet (continued)
as at 30 November 2023
Unaudited Unaudited Audited
30 November 30 November 31 May
2023 2022 2023
GBP000 GBP000 GBP000
--------------------------------------- ------------ ------------ --------
Equity attributable to equity holders
of the parent
Share capital 3,314 3,314 3,314
Share premium 73,982 73,972 73,972
Other reserves 211 211 211
Translation reserve (161) (413) (689)
Merger reserve 1,022 1,022 1,022
Hedging reserve 318 318 318
Capital redemption reserve 1,530 1,530 1,530
Share-based payment reserve 2,540 2,216 2,388
Retained earnings 114,959 114,018 119,136
---------------------------------------- ------------ ------------ --------
197,715 196,188 201,202
Non-controlling interest (220) (36) (211)
---------------------------------------- ------------ ------------ --------
Total equity 197,495 196,152 200,991
---------------------------------------- ------------ ------------ --------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 November 2022
Share Share Translation Hedging Other Capital Merger Share-based Retained Total Non-controlling Total
capital premium reserve reserve reserves redemption reserve payment earnings parent interest Equity
reserve reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1
June 2022 3,314 73,972 (1,819) 318 211 1,530 1,022 2,029 102,781 183,358 (222) 183,136
-------- -------- ------------ -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total
comprehensive
income for
the period
Profit for the
period - - - - - - - - 16,962 16,962 186 17,148
Other
comprehensive
income
Foreign
exchange
translation
differences - - 1,406 - - - - - - 1,406 - 1,406
Total other
comprehensive
income - - 1,406 - - - - - - 1,406 - 1,406
-------- -------- ------------ -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total
comprehensive
income for
the period - - 1,406 - - - - - 16,962 18,368 186 18,554
-------- -------- ------------ -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Transactions
with owners
recorded
directly in
equity
Equity settled
share-based
payment
transactions - - - - - - - 187 - 187 - 187
Dividends paid - - - - - - - - (5,725) (5,725) - (5,725)
Total
contributions
by and
distributions
to owners - - - - - - - 187 (5,725) (5,538) - (5,538)
Balance at 30
November 2022 3,314 73,972 (413) 318 211 1,530 1,022 2,216 114,018 196,188 (36) 196,152
-------- -------- ------------ -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 November 2023
Share Share Translation Hedging Other Capital Merger Share-based Retained Total Non-controlling Total
capital premium reserve reserve reserves redemption reserve payment earnings parent interest Equity
reserve reserve equity
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Balance at 1 June
2023 3,314 73,972 (689) 318 211 1,530 1,022 2,388 119,136 201,202 (211) 200,991
-------- -------- ------------ -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total
comprehensive
income/(expense)
for the period
Profit/(loss) for
the period - - - - - - - - 1,706 1,706 (9) 1,697
Other
comprehensive
income
Foreign exchange
translation
differences - - 528 - - - - - - 528 - 528
-------- -------- ------------ -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total other
comprehensive
income - - 528 - - - - - - 528 - 528
-------- -------- ------------ -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Total
comprehensive
income/(expense)
for the period - - 528 - - - - - 1,706 2,234 (9) 2,225
-------- -------- ------------ -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Transactions with
owners recorded
directly in
equity
Issue of shares - 10 - - - - - - - 10 - 10
Equity settled
share-based
payment
transactions - - - - - - - 152 - 152 - 152
Dividends paid - - - - - - - - (5,883) (5,883) - (5,883)
Total
contributions by
and
distributions
to owners - 10 - - - - - 152 (5,883) (5,721) - (5,721)
Balance at 30
November 2023 3,314 73,982 (161) 318 211 1,530 1,022 2,540 114,959 197,715 (220) 197,495
-------- -------- ------------ -------- --------- ----------- -------- ------------ --------- -------- ---------------- --------
Condensed Consolidated Cash Flow Statement
for the six months ended 30 November 2023
Unaudited Unaudited
six months six months Audited
ended ended year
ended
30 November 30 November 31
May
2023 2022 2023
GBP000 GBP000 GBP000
--------------------------------------------------------------- ------------ ---------
Cash flows from operating activities
Profit for the period 1,697 17,148 27,926
Adjustments for:
Depreciation and impairment of property, plant and
equipment and right-of-use assets 7,128 4,932 14,570
Net finance expense 655 319 953
Amortisation of intangible assets 96 - 175
Share of loss/(profit) in joint ventures (net of tax) 1,714 (11,053) (16,311)
Profit on sale of property, plant and equipment, investment
property and right-of-use assets - (2,844) (4,718)
Equity settled share-based payment expense 152 187 359
Income tax expense/(credit) 1,035 1,562 (771)
Contributions to defined benefit pension schemes (589) (1,170) (2,426)
Retranslation of foreign denominated assets and liabilities (122) 31 482
--------------------------------------------------------------- ------------ ------------ ---------
11,766 9,112 20,239
Change in inventories (4,890) (3,398) (8,827)
Change in trade and other receivables (10,889) 4,314 23,290
Change in trade and other payables 17,156 6,622 (4,563)
Change in provisions and employee benefits 509 2,867 2,713
--------------------------------------------------------------- ------------ ------------ ---------
13,652 19,517 32,852
Interest received 818 504 1,127
Interest paid (1,585) (775) (2,192)
Income tax received/(paid) 2 28 (281)
--------------------------------------------------------------- ------------ ------------ ---------
Net cash inflow from operating activities 12,887 19,274 31,506
--------------------------------------------------------------- ------------ ------------ ---------
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 110 4,565 6,565
Proceeds from sale of investment property - 146 266
Proceeds from sale of ROU assets 12 54 81
Acquisition of property, plant and equipment (1,466) (1,730) (3,442)
Acquisition of investment property (770) (5,377) (5,783)
Acquisition of right of use assets - (54) (85)
Payment for acquisition of subsidiaries, net of cash
acquired - (1,447) (1,447)
--------------------------------------------------------------- ------------ ------------ ---------
Net cash outflow from investing activities (2,114) (3,843) (3,845)
--------------------------------------------------------------- ------------ ------------ ---------
Cash flows from financing activities
Principal elements of lease payments (8,027) (5,519) (12,721)
Dividends paid (5,883) (5,725) (6,701)
--------------------------------------------------------------- ------------ ------------ ---------
Net cash outflow from financing activities (13,910) (11,244) (19,422)
--------------------------------------------------------------- ------------ ------------ ---------
Net (decrease)/increase in cash and cash equivalents (3,137) 4,187 8,239
Cash and cash equivalents at the start of the period 21,859 13,773 13,773
Effect of exchange rate fluctuations on cash held (4) 142 (153)
--------------------------------------------------------------- ------------ ------------ ---------
Cash and cash equivalents at the end of the period 18,718 18,102 21,859
--------------------------------------------------------------- ------------ ------------ ---------
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 2023 and the comparative figures for the six months ended 30 November 2022 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 UK-adopted international accounting 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 2023.
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 2023, as described in those financial statements.
3. Status of financial information
The comparative figures for the financial year ended 31 May 2023 are not the Group's statutory consolidated financial statements for that financial year. The statutory financial accounts for the financial year ended 31 May 2023 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 2023. The Directors have reviewed financial forecasts and are satisfied that the Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Group continues to adopt the going concern basis in preparing the condensed consolidated interim financial information.
5. Taxation
UK income tax for the period is charged at 25% (2022: 19%). The effective tax rate, after removing the impact of joint ventures is 23.3% (2022: 20.4%), representing an estimate of the annual effective rate for the full year to 31 May 2024. This rate is lower than the standard rate of UK income tax due to the impact of overseas tax which applies a lower tax rate.
6. Dividends
The final dividend of 6.0p and additional dividend of 12.0p per ordinary share, proposed in the 2023 Annual Report and Accounts and approved by the shareholders at the Annual General Meeting on 25 October 2023, was paid on 30 October 2023.
The directors have proposed an interim dividend of 18.0p per share (2022: 3.0p) which will be paid on 11 April 2024 to shareholders on the register at the close of business on 22 March 2024. 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.
7. Earnings per share
Six months ended Six months ended Year ended 31 May
30 November 2023 30 November 2022 2023
Unaudited Unaudited Audited
Earnings EPS DEPS Earnings EPS DEPS Earnings EPS DEPS
GBP000 Pence Pence GBP000 Pence Pence GBP000 Pence Pence
Basic earnings
per share 1,706 5.22 5.14 16,962 52.15 51.09 27,926 85.85 84.13
Weighted average
number of shares
(000's) 32,659 33,217 32,528 33,200 32,528 33,193
------------------- --------- --------- --------- --------- --------- --------- --------- --------- ---------
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 558,000 (2022: 672,000), the effect on basic earnings per ordinary share is 0.08p (2022: 1.06p).
8. 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. HRMS represents the Groups share of its German joint venture, which includes Hargreaves Services Europe Limited which is the parent company of HRMS and DK.
Services Hargreaves Unallocated HRMS Total
Land
Unaudited Unaudited Unaudited Unaudited Unaudited
30 November 30 November 30 November 30 November 30 November
2023 2023 2023 2023 2023
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ------------ ------------ ------------ ------------ ------------
Revenue
Total revenue 110,327 673 - - 111,000
Intra-segment revenue (829) - - - (829)
------------------------------ ------------ ------------ ------------ ------------ ------------
Revenue from external
customers 109,498 673 - - 110,171
------------------------------ ------------ ------------ ------------ ------------ ------------
Operating profit/(loss) 8,913 (1,284) (2,528) - 5,101
Share of profit/(loss)
in joint ventures (net
of tax) - 173 - (1,887) (1,714)
Net finance (expense)/income (1,092) 108 329 - (655)
Profit/(loss) before tax 7,821 (1,003) (2,199) (1,887) 2,732
------------------------------ ------------ ------------ ------------ ------------ ------------
Services Hargreaves Unallocated HRMS Total
Land
Unaudited Unaudited Unaudited Unaudited Unaudited
30 30 30 30 30
November November November November November
2022 2022 2022 2022 2022
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------ ---------- ----------- ------------ ---------- ----------
Revenue
Total revenue 108,000 8,700 - - 116,700
Intra-segment revenue (225) - - - (225)
------------------------------ ---------- ----------- ------------ ---------- ----------
Revenue from external
customers 107,775 8,700 - - 116,475
------------------------------ ---------- ----------- ------------ ---------- ----------
Operating profit/(loss) 9,147 1,331 (2,502) - 7,976
Share of profit in
joint ventures (net
of tax) - 242 - 10,811 11,053
Net finance (expense)/income (642) 28 295 - (319)
Profit/(loss) before
tax 8,505 1,601 (2,207) 10,811 18,710
------------------------------ ---------- ----------- ------------ ---------- ----------
9. Investments in joint ventures
Tower Regeneration Hargreaves Waystone Interests Total
Limited Services Hargreaves in immaterial
Europe Limited LLP joint ventures
GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------- ------------------- --------------- ----------- --------------- -------
At 1 June 2023 - 68,607 5,751 (76) 74,282
Group's share of (loss)/profit
in joint ventures (net of
tax) - (1,887) 173 - (1,714)
Exchange differences - 646 - 12 658
At 30 November 2023 - 67,366 5,924 (64) 73,226
------------------------------- ------------------- --------------- ----------- --------------- -------
10. Condensed consolidated interim financial information
The condensed consolidated interim financial information was approved by the Board of Directors on 24 January 2024. 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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