REG - Hargreaves Servs PLC - Interim Results
26/01/2022 07:05
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RNS Number : 5967Z Hargreaves Services PLC 26 January 2022
HARGREAVES SERVICES PLC
(the "Group", the "Company" or "Hargreaves")
Interim Results for the six months ended 30 November 2021
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 2021.
KEY FINANCIAL RESULTS Unaudited Unaudited
Six Months ended Six Months ended
30 Nov 2021 30 Nov 2020
Revenue £76.1m £92.0m
Profit before tax £10.4m £1.1m
EPS 31.0p 3.4p
Interim Dividend 2.8p 2.7p
Net Debt £3.0m £20.8m
Net Bank Cash/(Debt) (excluding leasing debt) £8.5m (£8.0)m
Net Asset Value £149.2m £129.2m
Net Assets per Share 462p 400p
HIGHLIGHTS
· Revenue reduced as expected following exit from coal business in
December 2020;
· Profits increased in all three business segments;
· Profit after tax from German joint venture £9.0m (2020: £0.9m);
· Board expectations increased materially for current and future
years;
· Interim dividend increased by 3.7% to 2.8p (2020: 2.7p);
· Net debt reduced to £3.0m (2020: £20.8m).
Commenting on the interim results, Chairman Roger McDowell said: "The Group
has delivered a strong set of results and carries real momentum into the
second half of the financial year in all segments of the business. The German
joint venture continues to deliver substantial profits and our balance sheet
is strong with no bank debt. The Board has increased its expectations for
financial performance in the current and future years materially and I look
forward to reporting further progress in due course."
For further details:
Hargreaves Services www.hsgplc.co.uk (http://www.hsgplc.co.uk)
Gordon Banham, Chief Executive Officer Tel: 0191 373 4485
John Samuel, Group Finance Director
Walbrook PR (Financial PR & IR) Tel: 020 7933 8780 or hargreavesservices@walbrookpr.com
(mailto:hargreavesservices@walbrookpr.com)
Paul McManus / Lianne Applegarth / Louis Ashe-Jepson
Mob: 07980 541 893 / 07584 391 303 / 07747 515 393
Singer Capital Markets (Nomad and Joint Corporate Broker) Tel: 020 7496 3000
Sandy Fraser/ Justin McKeegan / Rachel Hayes
Investec (Joint Corporate Broker) Tel: 020 7597 5970
Sara Hale / David Anderson / Shalin Bhamra
About Hargreaves Services plc (www.hsgplc.co.uk (http://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, 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.
CHAIRMAN'S STATEMENT
Introduction
I am pleased to be able to report another strong set of results for the Group.
Each of the three pillars of the business, being Services, Hargreaves Land and
our investment in Germany, now have real momentum behind them and the Group
has seen year on year growth in profitability across each business segment.
The last six months have continued to be challenging for many, as the world
continues to deal with the impact of the Coronavirus pandemic. Throughout this
time, I have been particularly impressed with the dedication and
professionalism of our employees and I would like to thank them once again for
their support.
Momentum
The first half of this financial year has been a period of demonstrable
momentum in each of our businesses. Whilst, the Group's German Joint Venture,
Hargreaves Raw Materials Services GmbH ("HRMS") has continued to capitalise on
favourable market conditions, it has also delivered sustainable operational
improvements within DK Recycling.
The Services business has started work in earnest on HS2, with monthly
revenues now over £2m from that contract. The announcement of the successful
listing of Tungsten West plc ("TW") has provided further impetus to the
business which has a 10 year mining services contract with TW in addition to
the right to eight annual payments of £1m, the first of which has been
received.
Hargreaves Land has made substantial progress on both the commercial and
residential aspects of the Unity Joint Venture. More details are set out below
in the Chief Executive's Review. This is in addition to the news that
Brockwell Energy Limited, a former subsidiary of the Group, has obtained
financial close on an Energy from Waste plant which is to be constructed at
our Westfield site. This represents the start of the development of the
Group's renewable energy land assets.
Results
As expected, Group Revenue reduced to £76.1m (2020: £92.0m) following the
decision to end all material coal related activities in December 2020. The
Group's Profit before tax has increased substantially to £10.4m (2020:
£1.1m). While the majority of the improvement in profit is attributable to
the continued strong performance of HRMS, I note that both the Services and
Land businesses have contributed a combined £1.3m of this growth. Basic
earnings per share have increased over ninefold to 31.0p (2020: 3.4p). Further
information on trading is given in the Chief Executive's Review.
Cash and debt
The Group held net cash of £8.5m on 30 November 2021, compared to a net bank
debt position of £8.0m twelve months ago. This improvement was largely due to
the decision to exit coal in December 2020, which released a substantial
amount of cash from working capital.
The Group has loaned £15m to HRMS in the period to support the German
management team to capitalise on strong trading conditions in their specialist
markets. This loan will be repaid in the second half of the year.
Total net debt, which includes leasing debt of £11.5m (2020: £12.8m), was
£3.0m compared with £20.8m on 30 November 2020. The Board is anticipating
net debt (including leasing debt) to be higher at the year end due to the
anticipated investment in leased equipment for the HS2 contract, but the
quantum is dependent on the timing of delivery. The Group does not expect to
have any net bank debt at the year end.
Dividend
The Group's performance has enabled the Board to increase the interim dividend
by 3.7% to 2.8p (2020: 2.7p). The interim dividend will be paid on 6 April
2022 to shareholders on the register at 25 February 2022. Subject to HRMS
maintaining the requirements of its borrowing arrangements, the Board intends
to continue to pass through an additional 12p per share dividend from HRMS to
Hargreaves' shareholders annually for the next few years as previously
undistributed profits in HRMS are repatriated to the Company. Such additional
dividend would be declared and paid alongside any final ordinary dividend
following shareholder approval at the 2022 Annual General Meeting.
COVID-19
The Group has traded resiliently throughout the pandemic. The Board does not
consider the pandemic to be a material threat to its operations at the present
time.
Strategy and Shareholder Value
The Group has developed three strong, defined pillars through which to create,
deliver and realise value for shareholders.
Services
The Services business is building a sustainable profit stream through stable
term contracts and framework agreements in the Energy, Environmental,
Infrastructure and Industrial sectors. The Group currently has over 50 such
contracts in place to support the reliability of future performance. The
business is concentrated on organic, capital-light growth, with a particular
focus on contract selectivity and higher margin activities.
Hargreaves Land
This business is focused on maximising the inherent value of its existing
portfolio, including Blindwells and Unity, as well as developing a strong
pipeline of new opportunities. In addition, the business is now starting to
deliver value from its renewable energy land portfolio.
HRMS
This business is continuing to take advantage of strong trading conditions
leading to a material increase in the Board's expectations for profits in the
current and future years. It is now focused on sustaining an increased level
of profitability in DK Recycling following its acquisition in December 2019
and securing contracts to increase the utilisation of its Carbon Pulverisation
Plant.
In July 2021, I stated: "the Board believes that its investment in the HRMS
joint venture has the potential to deliver substantial shareholder value in
the next few years. The Board considers it likely that HRMS would benefit in
due course from being part of a larger, more specialised business and it plans
to explore strategic options for HRMS with its professional advisors over the
course of the next several months." Following such discussions and after
consultation with the German management team, the Board has decided to
continue to support the development of HRMS. The Board believes that the
inherent value of HRMS can be most effectively demonstrated by trading
successfully through commodity cycles. Over the medium term the Board
considers that HRMS will be a material profit and cash generator for the Group
and that it has further value opportunities to exploit.
Outlook
The first six months of the year have been positive for the Group and have
built on the back of the strong year ended 31 May 2021. The Group has now
moved on from its historic activities and has a clear strategy to create,
deliver and realise shareholder value in each of its businesses. The Group has
real momentum behind each of its businesses, and the progress made in HRMS has
encouraged the Board to increase its expectations materially for the current
and future years. I look forward to reporting further progress in the second
half of the year.
Roger McDowell
Chairman
26 January 2022
CHIEF EXECUTIVE'S REVIEW
£'m Services Land HRMS Central Costs Total
Revenue (Nov 2021) 70.2 5.9 - - 76.1
Revenue (Nov 2020) 89.9 2.1 - - 92.0
Profit before Tax (Nov 2021) 3.1 0.5 9.0 (2.2) 10.4
Profit before Tax (Nov 2020) 2.1 (0.1) 0.9 (1.8) 1.1
Services
The Services business recorded revenue of £70.2m (2020: £89.9m) and Profit
before tax of £3.1m (2020: £2.0m).The reduction in revenue is due to the
cessation of all material coal related activities in December 2020. Growth in
Profit before tax is due, in part, to the performance of the Specialist
Earthworks business which has seen a contribution from the HS2 contract in the
first half compared to minimal activity in the comparative period.
Services has continued to make good progress throughout the first half. It is
focused on delivering services to four key market sectors, being Energy,
Environmental, Industrial and Infrastructure. In addition to the solid trading
performance delivered in the first half, there are two particular factors that
I would like to highlight.
Hemerdon
As announced in October 2021, the Board was pleased to note the successful
listing of Tungsten West plc ("TW") on AIM. TW are the owners of the large
tungsten mine at Hemerdon in Devon and the funds raised by the listing will
help to secure the future of the site. This news was important for Hargreaves,
because we have an exclusive 10-year mining services contract with TW, which
is now expected to commence operations in 2023. As part of this, the Group is
entitled to eight annual payments of £1m, the first of which was received in
November 2021.
This contract provides a long term and sustainable revenue stream for the
Services business in an operation that plays to our key strengths. Credit risk
has been mitigated through the agreed contract terms.
HS2
The Group was appointed by the EKFB Joint Venture to carry out the major
earthworks on a part of the HS2 project in March 2021 under a £120m contract,
however work did not begin in earnest until the current financial year. I am
pleased to report that we now have over 100 employees on the project and the
monthly run rate for revenue is over £2m. We anticipate the level of activity
to grow from the spring of 2022 as the weather improves and we enter the
normal earthmoving season.
The Services business continues to be heavily weighted to the second half of
the financial year, in terms of both revenue and profit. This is partly due to
the recurring annual profile of our operations in Hong Kong, in which major
outages generally occur in the second half. In the current year, the weighting
of results is also impacted by the timing of works on the HS2 contract.
The UK has seen higher levels of inflation in recent times and with the
possibility of further increases this is an area of risk for many businesses.
Hargreaves is well insulated against inflation, with many of the term
contracts in the Services business having specific escalation clauses to
mitigate any increase in underlying delivery costs.
Looking to the medium term, we are growing our environmental offering as we
look at the potential for carbon sequestration on former surface mining sites
in Scotland as well as continuing to develop the mechanical and electrical
engineering business, which provides for better margins and which complements
our existing materials handling operations.
There are many reasons to be optimistic about the outlook for the Services
business both in the second half of the year and in the medium to long term.
Hargreaves Land
Hargreaves Land recorded revenue of £5.8m (2020: £2.1m) and a Profit before
tax of £0.5m (2020: loss of £0.1m) for the period.
Subsequent to the period end, I am pleased to report that completion has been
achieved on the 12.9 acre sale at Blindwells to Persimmon for a total
consideration of £9.6m payable in three equal annual instalments. This
highlights the progress being made on this flagship residential development.
To date Hargreaves Land has achieved total completed sales of £18.6m over
26.6 acres. There are a further eight parcels of land remaining to be sold
over the next ten years within phase one of the Blindwells project. Phase two
represents an additional 110 acres which is currently being promoted through
the local plan for a further 1,500 homes, with planning allocated expected in
2027. This provides a solid and reliable base for recurring revenue and
profits from Blindwells.
Progress has also been made at the 650 acre Unity Joint Venture. The project
has exchanged contracts with Bellway and Harron Homes for the conditional sale
of 36 acres of residential land, which will generate an expected revenue for
the Joint Venture of £15m, with completion expected in stages commencing in
the financial year ending 31 May 2024. In addition to the residential
exchange, following the 79 acre sale for the development of a £25m logistics
hub announced in April 21, the Joint Venture has secured a £14m enabling
works contract to facilitate that development.
This progress provides clear visibility of future cashflows for the Unity
Joint Venture. The scheme, which is independently funded, is a long term
project and is expected to deliver substantial value to the Group over at
least the next 10 years.
In December 2021, the Group noted the successful financial close that was
achieved on the Westfield Energy from Waste ("EfW") plant being developed by
our former subsidiary Brockwell Energy Limited ("Brockwell"). The immediate
impact was the receipt of £2m of deferred consideration from the sale of
Brockwell. Additionally, Brockwell has entered into a minimum 35 year index
linked lease starting at £105k per annum and growing to £420k per annum
following the construction of the plant, but this higher rent will commence no
later than 2025.
This also marks the first major step in the delivery of value within the
Group's portfolio of renewable energy land assets. There are approximately 100
developable acres at Westfield, and the EfW plant will only occupy 9 acres,
allowing for over 90 acres of available space for businesses keen to utilise
the cheaper heat and power to be provided by the EfW plant. Additionally, the
site has 80 acres allocated for the construction of a 30MW solar farm.
In addition to Westfield, the Group also holds several parcels of land in
Scotland, each of which has options to lease wind farms with a total
generation capability of 120MW per annum. One of these options to lease was
exercised in 2021 by a major international renewable energy company and
construction of the wind farm is underway. Further to this a number of
agreements are held whereby proposed wind farms with a generation capability
of 450MW can only be accessed through land which Hargreaves controls. These
wind farms already have planning permission in place and grid connections
secured. The Group expects the build out timetables to result in rental
returns to the Group commencing after 2024. This specific element of our
Hargreaves Land portfolio represents an exciting opportunity for the Group to
support the transition to a green economy within the UK, whilst creating and
delivering substantial shareholder value.
Hargreaves Land now has offices in Durham, Glasgow and Leeds as the business
looks actively to identify new opportunities. The business currently has
visibility of a pipeline of commercial projects with a combined GDV of £65m+
focused in Scotland and the North of England and control over land with the
potential for 600 residential homes.
Investment in HRMS
HRMS recorded a post tax profit of £9.0m (2020: £0.9m) for the six months
ended 30 November 2021. Profitability has increased in each aspect of the
operation, Minerals Trading, the Carbon Pulverisation Plant ("CPP") and DK
Recycling. This improvement in profit follows on from the strong results seen
in the second half of the year ended 31 May 2021.
The minerals trading business has always been skilled in adapting to market
conditions and has again delivered excellent results. The business trades in
pig iron, ferroalloys and other speciality minerals. Volumes traded in the
first six months of the financial year were 750kt across all products,
compared with 415kt in the comparative period. In addition to the increased
volumes, margin has also improved, particularly on sales of pig iron, which
have seen a sustained increase in pricing throughout the period. As pricing
and volumes have increased, so has the demand for working capital within HRMS.
To support HRMS in capitalising on the current market conditions, Hargreaves
has provided a temporary £15m loan which is due for repayment in the second
half.
As previously reported, the CPP is now commissioned and producing product for
DK Recycling as well as trial product for other potential customers. The CPP
can produce 400kt of pulverised carbon when at full capacity. The plant is on
course to produce approximately 100kt in the current financial year. As the
business secures orders for the remaining capacity, I expect to see
progressive growth in sustainable profits from the CPP over the next few
years.
The third element of HRMS, DK Recycling, has also made a substantial
contribution to the Group as it has benefited from strong pig iron and zinc
commodity prices. The plant takes around 500kt of waste material from the
steel manufacturing industry in Germany and recycles it into 285kt of pig iron
and approximately 6kt of zinc per annum. That waste material would otherwise
go to landfill. Some of the current level of profitability has been driven by
the strong zinc and pig iron prices DK is experiencing and to provide greater
security over future revenue, forward positions have been taken to hedge 40%
of the projected zinc sales for the next 12 months. Additionally, the German
management team is now confident that they have created a sustainable level of
operational improvement following the acquisition of DK in December 2019.
ESG
The Annual Report for the year ended 31 May 2021 noted that the Group had
established a Cross-Business Working Group ("ESG Group") to assess procedures,
review methods and identify goals to ensure the business is informed, educated
and can act on its ongoing ESG responsibilities. The ESG Group reports
quarterly to the Audit & Risk Committee on its progress and its findings
will continue to form an integral part of future annual reports and investor
presentations.
Environmental
Hargreaves is looking to develop various business initiatives in response to
climate change including potentially establishing carbon sequestration on
former surface mining sites and providing opportunities for Energy from Waste
plants and Wind Farms to be operated from appropriate sites controlled by the
Group. One of the key activities of Hargreaves Land is the redevelopment of
brownfield sites to bring them back into productive use for both residential
and employment purposes. Over 1,200 acres of such land is currently being
redeveloped by the Group. Such developments also feature the creation of new
ecological habitats that enhance and expand biodiversity.
Social
The Group is working with a mental health specialist to train identified
individuals as Mental Health First Aiders. In addition, the Group provides an
Employee Assistance Programme which offers confidential support, counselling
and advice, alongside a 24/7 freephone helpline for employees and their
families to help support their mental health and wellbeing. The Group has also
established a Corporate Social Responsibility fund which supports charities,
as well as local groups and initiatives that employees are actively involved
with.
Governance
The Company is committed to maintaining high standards of corporate governance
and has adopted the Quoted Companies Alliance Corporate Governance Code. The
Board will continue to develop its governance arrangements particularly in
respect of environmental and social issues, including any changes required as
a result of the requirements of the Taskforce on Climate-related Financial
Disclosures.
Summary
I am pleased with the strong results delivered in the first half with growth
in profits in our three pillars of Services, Hargreaves Land and HRMS.
With over 50 term contracts and framework agreements in place and over 85% of
Services revenue secured for the current financial year, the opportunities
which are within sight in Services at both Hemerdon and HS2 point to
substantial further growth. The recent announcements of progress at
Blindwells, Unity and Westfield combined with the opportunities within the
renewable energy land portfolio demonstrate the reliable income streams I
expect from Hargreaves Land in the coming years. Finally, at HRMS, the
sustainable improvements being delivered at both the CPP and DK Recycling
together with their ability to capitalise on trading opportunities lead me to
believe that HRMS will continue to be a substantial contributor of profits to
the Group.
Gordon Banham
Group Chief Executive
26 January 2022
Condensed Consolidated Statement of Profit and Loss and Other Comprehensive
Income
for the six months ended 30 November 2021
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 November 30 November 31 May
2021 2020 2021
Note £000 £000 £000
Revenue 76,082 92,041 204,796
Cost of sales (64,196) (80,463) (181,453)
Gross profit 11,886 11,578 23,343
Other operating income 542 1,045 3,821
Administrative expenses (11,369) (11,755) (29,234)
Operating profit/(loss) 1,059 868 (2,070)
Operating profit (before exceptional items and amortisation) 1,059 868 4,751
Exceptional items 5 - - (2,186)
Amortisation and impairment of intangible assets - - (4,635)
Operating profit/(loss) 1,059 868 (2,070)
361 183 646
Finance income
Finance expense (292) (911) (1,882)
Share of profit in joint ventures (net of tax) 9 9,269 944 17,680
Profit before tax 10,397 1,084 14,374
Taxation 6 (386) (26) 2,032
Profit for the period 10,011 1,058 16,406
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit pension plans - - 1,956
Tax recognised on items that will not be reclassified to profit or loss - - (319)
Items that are or may be reclassified subsequently to profit or loss
Foreign exchange translation differences 45 (703) (1,806)
Effective portion of changes in fair value of cash flow hedges 35 194 136
Tax recognised on items that are or may be reclassified subsequently to profit (7) (37) (25)
or loss
Other comprehensive income/(expense) for the period, net of tax 73 (58)
(546)
Total comprehensive income for the period 10,084 512 16,348
Profit/(loss) attributable to:
Equity holders of the company 10,029 1,085 16,426
Non-controlling interest (18) (27) (20)
Profit for the period 10,011 1,058 16,406
Total comprehensive income/(expense) for the period attributable to:
Equity holders of the company 10,102 539 16,368
Non-controlling interest (18) (27) (20)
Total comprehensive income for the period 10,084 512 16,348
GAAP measures
Basic earnings per share (pence) 8 31.04 3.36 50.84
Diluted earnings per share (pence) 8 30.15 3.26 49.38
Non-GAAP measures
Basic underlying earnings per share (pence) 8 31.04 3.36 70.66
Diluted underlying earnings per share (pence) 8 30.15 3.26 68.64
Condensed Consolidated Balance Sheet
as at 30 November 2021
Unaudited Unaudited
Audited
30 November 30 November 31 May
2021 2020 2021
£000 £000 £000
Non-current assets
Property, plant and equipment 11,995 12,180 13,806
Right of use assets 15,040 14,932 13,776
Investment property 7,286 9,147 7,607
Intangible assets including goodwill 4,824 9,415 4,824
Investments in joint ventures 39,873 14,705 31,187
Deferred tax assets 9,662 8,074 10,084
Retirement benefit surplus 3,600 - 2,911
92,280 68,453 84,195
Current assets
Other financial assets 2 33 2
Inventories 31,117 58,583 27,168
Trade and other receivables 87,102 78,462 78,260
Income tax asset 629 492 59
Contract assets 2,667 8,468 1,720
Cash and cash equivalents 8,509 4,820 28,303
130,026 150,858 135,512
Total assets 222,306 219,311 219,707
Non-current liabilities
Other Interest-bearing loans and borrowings (8,354) (9,423) (8,586)
Retirement benefit obligations (2,831) (2,890) (2,867)
Provisions - (526) (2,495)
(11,185) (12,839) (13,948)
Current liabilities
Other Interest-bearing loans and borrowings (3,192) (16,220) (3,179)
Trade and other payables (52,714) (52,242) (53,334)
Provisions (6,021) (8,780) (4,907)
Other financial liabilities (7) (17) (43)
(61,934) (77,259) (61,463)
Total liabilities (73,119) (90,098) (75,411)
Net assets 149,187 129,213 144,296
Condensed Consolidated Balance Sheet (continued)
as at 30 November 2021
Unaudited Unaudited
Audited
30 November 30 November 31 May
2021 2020 2021
£000 £000 £000
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 (2,087) (1,029) (2,132)
Merger reserve 1,022 1,022 1,022
Hedging reserve 313 331 285
Capital redemption reserve 1,530 1,530 1,530
Share-based payment reserve 1,818 1,561 1,680
Retained earnings 69,139 48,335 64,441
149,215 129,230 144,306
Non-controlling interest (28) (17) (10)
Total equity 149,187 129,213 144,296
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 November 2020
Share Translation Hedging Other Capital Merger Share- Retained Total Non-controlling Total
Share redemption based parent
payment
capital premium reserve reserve reserves reserve reserve reserve earnings equity interest Equity
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
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
Equity adjustment relating to adoption of IFRS 16 - - - (37) - - - - - (37) - (37)
Tax recognised on other comprehensive income
- - (703) 157 - - - - - (546) - (546)
Total other comprehensive (expense)/income
- - (703) 157 - - - - 1,085 539 (27) 512
Total comprehensive income and expense for the period
Transactions with owners recorded directly in equity - - - - - - - 99 - 99 - 99
Equity settled share-based payment transactions - - - - - - - - (1,453) (1,453) - (1,453)
Dividends paid
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 Statement of Changes in Equity
for the six months ended 30 November 2021
Share Translation Hedging Other Capital Merger Share- Retained Total Non-controlling Total
Share redemption based parent
payment
capital premium reserve reserve reserves reserve reserve reserve earnings equity interest Equity
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
Balance at 1 June 2021 3,314 73,955 (2,132) 285 211 1,530 1,022 1,680 64,441 144,306 (10) 144,296
Total comprehensive income and expense for the period
Profit/(loss) for the period - - - - - - - - 10,029 10,029 (18) 10,011
Other comprehensive income/(expense)
Foreign exchange translation differences - - 45 - - - - - - 45 - 45
Effective portion of changes in fair value of cash flow hedges - - - 35 - - - - - 35 - 35
Tax recognised on other comprehensive income - - - (7) - - - - - (7) - (7)
Total other comprehensive income - - 45 28 - - - - - 73 - 73
Total comprehensive income and expense for the period - - 45 28 - - - - 10,029 10,102 (18) 10,084
Transactions with owners recorded directly in equity
Equity settled share-based payment transactions - - - - - - - 138 - 138 - 138
Dividends paid - - - - - - - - (5,331) (5,331) - (5,331)
Total contributions by and distributions to owners - - - - - - - - (5,331) (5,193) - (5,193)
3,314 73,955 (2,087) 313 211 1,530 1,022 1,818 69,139 149,215 (28) 149,187
Balance at 30 November 2021
Condensed Consolidated Cash Flow Statement
for the six months ended 30 November 2021
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 November 30 November 31 May
2021 2020 2021
£000 £000 £000
Cash flows from operating activities
Profit for the period 10,011 1,058 16,406
Adjustments for:
Depreciation and impairment of property, plant and equipment and right-of-use 2,598 3,429 6,562
assets
Amortisation and impairment of goodwill and intangible assets - - 4,635
Net finance (income)/expense (69) 728 1,236
Share of profit in joint ventures (net of tax) (9,269) (944) (17,680)
Profit on sale of property, plant and equipment, investment property and (602) (988) (3,667)
right-of-use assets
Equity settled share-based payment expense 138 99 218
Income tax expense/(credit) 386 26 (2,032)
Contributions to defined benefit pension schemes (768) (879) (2,039)
Retranslation of foreign denominated assets and liabilities 764 - -
3,189 2,529 3,639
Change in inventories (3,949) 5,426 36,841
Change in trade and other receivables (10,495) (4,795) 2,012
Change in trade and other payables (581) 8,207 9,268
Change in provisions and employee benefits (1,380) (3,460) (5,212)
(13,216) 7,907 46,548
Interest paid 299 (772) (1,194)
Income tax paid - (313) (127)
Net cash (outflow)/inflow from operating activities (12,917) 6,822 45,227
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 640 2,833 3,125
Proceeds from sale of investment property 786 557 5,040
Proceeds from sale of ROU assets 33 694 753
Acquisition of property, plant and equipment (224) (420) (2,727)
Acquisition of investment property (15) (121) (390)
Net cash inflow from investing activities 1,220 3,543 5,801
Cash flows from financing activities
Principal elements of lease payments (2,755) (3,593) (6,085)
Dividends paid (5,331) (1,453) (2,325)
Repayment of Group banking facilities - (19,000) (32,000)
Net cash outflow from financing activities (8,086) (24,046) (40,410)
Net (decrease)/increase in cash and cash equivalents (19,783) (13,681) 10,618
Cash and cash equivalents at the start of the period 28,303 18,499 18,499
Effect of exchange rate fluctuations on cash held (11) 2 (814)
Cash and cash equivalents at the end of the period 8,509 4,820 28,303
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 2021 and the comparative
figures for the six months ended 30 November 2020 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 2021.
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 2021, as
described in those financial statements.
3. Status of financial information
The comparative figures for the financial year ended 31 May 2021 are not the
Group's statutory consolidated financial statements for that financial year.
The statutory financial accounts for the financial year ended 31 May 2021 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 2021. 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. Accordingly,
the Group continues to adopt the going concern basis in preparing the
condensed consolidated interim financial information.
5. Exceptional items
Six months ended 30 November 2021 Six months ended 30 November 2020 Year ended 31 May 2021
Unaudited Unaudited Audited
£'000 £'000 £'000
Exceptional items in Cost of Sales
Losses on legacy contracts in C.A. Blackwell (Contracts) Limited - - (2,186)
Total exceptional items in Cost of Sales - - (2,186)
There are no exceptional items in the period ended 30 November 2021 (30
November 2020: £nil).
In the year ended 31 May 2021 £2.2m of losses were recognised on the legacy
contracts within C.A. Blackwell (Contracts) Limited. These contracts have now
been concluded and final accounts agreed. The contracts are now in defects
periods with appropriate accruals held to cover all anticipated costs of
rectification.
6.
Taxation
Income tax for the period is charged at 19% (2020: 19%). The effective tax
rate, after removing the impact of jointly controlled entities is 34.2% (2020:
18.6%), representing an estimate of the annual effective rate for the full
year to 31 May 2022. This rate is higher than the standard rate of income tax
due to the effect on deferred tax of the forthcoming rise in the corporate tax
rate and the impact of accounting for tax related to the Unity Joint Venture,
which is a Limited Liability Partnership.
7.
Dividends
The final dividend of 4.5 pence and additional dividend of 12p per ordinary
share, proposed in the 2021 annual accounts and approved by the shareholders
at the Annual General Meeting on 27 October 2021, was paid on 29 October 2021.
The directors have proposed an interim dividend of 2.8 pence per share (2020:
2.7p) which will be paid on 6 April 2022 to shareholders on the register at
the close of business on 25 February 2022. 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 30 November 2021 Six months ended 30 November 2020 Year ended 31 May 2021
Unaudited Unaudited Audited
Earnings EPS DEPS Earnings EPS DEPS Earnings EPS DEPS
£000 Pence Pence £000 Pence Pence £000 Pence Pence
Underlying earnings per share 10,029 31.04 30.15 1,085 3.36 3.26 22,832 70.66 68.64
Exceptional items and amortisation (net of tax) - - - - - - (6,406) (19.82) (19.26)
Basic earnings per share 10,029 31.04 30.15 1,085 3.36 3.26 16,426 50.84 49.38
Weighted average number of shares
32,316 33,267 32,282 33,240 32,312 33,262
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 951,000 (2020: 958,000), the effect on continuing
basic earnings per ordinary share is 0.89p (2020: 0.10p).
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. HSEL represents Hargreaves Services
Europe Limited, the holding company for the Group's investment in its German
Joint Venture.
Services Hargreaves Land Unallocated HSEL Total
Unaudited Unaudited Unaudited Unaudited Unaudited
30 November 30 November 30 November 30 November 30 November
2021 2021 2021 2021 2021
£000 £000 £000 £000 £000
Revenue
Total revenue 71,043 5,846 - - 76,889
Intra-segment revenue (807) - - - (807)
Revenue from external customers 70,236 5,846 - - 76,082
Operating profit/(loss) 3,149 169 (2,259) - 1,059
Share of profit in joint ventures (net of tax) - 292 - 8,977 9,269
Net finance income - - 69 - 69
Profit/(loss) before tax 3,149 461 (2,190) 8,977 10,397
Hargreaves Land Unallocated HSEL Total
Services
Unaudited Unaudited Unaudited Unaudited Unaudited
30 November 30 November 30 November 30 November 30 November
2020 2020 2020 2020 2020
£000 £000 £000 £000 £000
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) (before exceptional items) 2,770 (3) (1,899) - 868
Share of profit in joint ventures (net of tax) - - - 944 944
Net finance expense (707) (101) 80 - (728)
Profit/(loss) before tax 2,063 (104) (1,819) 944 1,084
10. Condensed consolidated interim financial
information
The condensed consolidated interim financial information was approved by the
Board of Directors on 26 January 2022. 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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