REG - Hargreaves Servs PLC - Interim results
25/01/2023 07:00
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RNS Number : 7457N Hargreaves Services PLC 25 January 2023
HARGREAVES SERVICES PLC
(the "Group", the "Company" or "Hargreaves")
Interim Results for the six months ended 30 November 2022
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 2022, having achieved
strong trading throughout the period, profitable growth across all business
sectors and reporting an increase in the interim dividend of 7.1%.
KEY FINANCIAL RESULTS Unaudited Unaudited
Six Months ended Six Months ended
30 Nov 2022 30 Nov 2021
Revenue £116.5m £76.1m
Profit before tax ("PBT") £18.7m £10.4m
EPS 52.2p 31.0p
Interim Dividend 3.0p 2.8p
Cash in hand £18.1m £8.5m
Leasing debt £30.6m £11.5m
Net Asset Value £196.2m £149.2m
Net Assets per Share 603p 462p
HIGHLIGHTS
· Strong revenue growth in Services, leading to an overall increase of
53% year on year, primarily due to HS2
· Growth in PBT across all business units, delivering an overall
increase of 80%
· Interim dividend increased by 7.1% to 3.0p
· Cash in hand of £18.1m, up from £8.5m in Nov 2021.
· Increase in leasing debt due to investment in plant to support HS2
driven growth in revenue and PBT
· Net assets per share have increased by 31% over the last twelve
months.
Commenting on the interim results, Chairman Roger McDowell said: "I am
delighted to report very strong results for our half-year. The outcome is both
a result of great work by our team and a vindication of our strategy. Whilst
conscious of the macro-economic challenges we remain confident in the strength
of the business."
CEO video Q&A
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 Corporate Broker) Tel: 020 7496 3000
Sandy Fraser/ Justin McKeegan
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
The last six months have seen an increased level of operations on the HS2
contract within Services, continuing land sales at Blindwells in Hargreaves
Land and further strong trading at HRMS. This has delivered profitable growth
across all business sectors, despite the well-publicised challenges posed by
the inflationary environment.
I am pleased that the Group has remained resilient throughout this period and
continued to create opportunities to deliver value for our shareholders.
Resilience and growth
The past 12 months have seen a substantial increase in the cost of goods and
services, which has put many businesses and industries under pressure, not to
mention the wider population. Against this backdrop, the Group has
demonstrated its resilience, particularly within the Services business, to
withstand these pressures and to deliver profitable growth. With over 50 term
and framework contracts in Services, most of which have inflation related
escalation clauses, the Group is well insulated against the impact of
inflation.
During the period, activity levels on the HS2 contract have increased, which
has provided substantial growth in revenue and profitability both in
earthmoving and mechanical and electrical engineering services. Even
discounting the impact of HS2 earthmoving activities, revenue grew by 8.7%
across the Services business due primarily to the success of the engineering
projects work.
Hargreaves Land has completed another sale at Blindwells, which continues to
demonstrate the recurrent nature of the revenue from that site.
Our German Joint Venture, HRMS, benefited in the prior year from very
favourable commodity markets, and they have been able to continue to trade
well in volatile market conditions.
Results
Group revenue increased by 53% to £116.5m (2021: £76.1m) primarily due to
increased activity on the HS2 contract. The Group's PBT has increased
substantially by 80% from £10.4m to £18.7m. EBITDA has increased to £12.9m
(Nov 2021: £3.7m) as more profit is derived from Services and Land business
segments. Whilst much of this improvement is due to the HS2 contract, the
first half has also seen some non-recurring asset realisations yielding a
profit of £2.0m. As a result, the full year results are likely to be weighted
towards the first half.
Cash and debt
The Group held cash in hand of £18.1m on 30 November 2022 compared to £13.8m
on 31 May 2022 (Nov 2021: £8.5m). This cash increase is due, in part, to the
repayment of the short-term working capital funding that was provided to HRMS
in the prior year, offset by investment into Hargreaves Land assets.
The only debt held by the Group is leasing debt for specific plant items. At
30 November 2022 the Group had leasing debt of £30.6m, which is a substantial
increase on the 31 May 2022 leasing debt of £18.4m (Nov 2021: £11.5m). This
increase is due to the acquisition of plant and equipment to support the HS2
contract. The total amount of leasing debt is expected to increase further
before the end of the financial year as the final plant deliveries for HS2 are
due to be received in the second half.
Net asset value
The net asset per share of the Group has increased to 603p from 462p
representing an increase of 31% in a year.
Dividend
Following the continued strong performance of the Group, the Board is
announcing a 7.1% increase in the interim dividend to 3.0p (2021: 2.8p). The
interim dividend will be paid on 6(th) April 2023 to shareholders on the
register at 24(th) March 2023.
Board changes
John Samuel has informed the Board of his intention to step down as Group
Finance Director and Board Director on 31 July 2023.
John will be succeeded as Group Finance Director and Board Director (the
latter subject to satisfactory completion of customary due diligence and
approval by the Company's nominated advisor) by Stephen Craigen,(39), with
effect from 1 August 2023. Stephen has been with the Group for nine years and
has held the role of Group Financial Controller since 2017. The Board has
great confidence in Stephen and that there will be a seamless transition of
responsibilities.
Strategy and Shareholder Value
The Group has developed three strong, defined businesses through which it aims
to create, deliver and realise value for shareholders.
Services
The Services business is building a sustainable and resilient profit stream
through 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 future performance. The business is concentrated
on organic, profitable growth, with a particular focus on contract selectivity
and higher margin activities. The current year has seen a notable increase in
its level of operations with the ramp up at HS2 and there is a solid
foundation for further sustainable growth. Additionally. I am pleased to
announce that our specialist earthmoving subsidiary, Blackwell, expects to be
appointed to support Balfour Beatty to deliver the 'Roads North of the Thames'
package of works for the proposed Lower Thames Crossing, on behalf of National
Highways. Contractual arrangements will be clarified in due course. Designed
to be the greenest road project ever built in the UK, the Lower Thames
Crossing will create a new connection under the River Thames, increasing road
capacity and easing congestion in the South of England.
Hargreaves Land
This business is focused on maximising the inherent value of its existing
portfolio, including Blindwells and the Unity joint venture, as well as
developing a strong pipeline of new opportunities. In addition, the business
is now starting to deliver returns from its renewable energy land portfolio.
HRMS
This business has taken advantage of strong trading conditions although, as
expected, these seem likely to weaken in the second half of the financial
year. It is focused on sustaining the structural improvement in profitability
achieved in DK Recycling und Roheisen GmbH ("DK") and securing contracts to
increase the utilisation of its Carbon Pulverisation Plant ("CPP") whilst
continuing to take advantage of trading opportunities in the minerals
commodity markets.
Outlook
The first six months of the year have been positive for the Group during a
period of inflationary pressures and other economic uncertainties. The Board
has a clear focus on the creation, delivery and realisation of value for
shareholders in each business unit. The Group has demonstrated its resilience
and its ability to drive organic profitable growth. I look forward to
reporting further progress in the second half of the financial year and the
Board is confident that results for the year will be in line with market
expectations.
Roger McDowell
Chairman
25 January 2023
CHIEF EXECUTIVE'S REVIEW
£'m Services Land HRMS Central Costs Total
Revenue (Nov 2022) 107.8 8.7 - - 116.5
Revenue (Nov 2021) 70.2 5.9 - - 76.1
Profit/(loss) before tax (Nov 2022) 8.5 1.6 10.8 (2.2) 18.7
Profit/(loss) before tax (Nov 2021) 3.1 0.5 9.0 (2.2) 10.4
Services
The Services business recorded revenue of £107.8m (2021: £70.2m) and Profit
before tax of £8.5m (2021: £3.1m). The increase in revenue is due in large
part to the HS2 project, which commenced in the second half of the prior
financial year. The increase in revenue attributable to earthmoving at HS2 is
£31.5m and the remaining revenue increase of £6.1m represents a growth of
8.7% due to the successful award of certain engineering project works.
Profit before tax in the first half of the year includes a non-recurring gain
of £2.0m from asset realisations, which is likely to mean that market
expectations for the full year performance of this business segment will be
similarly exceeded. Excluding this gain, the improvement in Profit before tax
is due primarily to the HS2 contract and represents a 110% increase. The
result for the full year is likely to be heavily weighted to the first half
because the earthmoving season for HS2 falls into the Group's H1 and the £1m
annual receipt from Tungsten West plc ("TW") is also a first half event.
The Services business continues to deliver good quality, resilient profits and
remains focused on delivering services to our four key market sectors, Energy,
Environmental, Industrial and Infrastructure.
Contract success
During the period the Group has been awarded a 10-year contract with Durham
County Council and a 5-year contract with Scottish Water, both of which will
help to provide a base of further Environmental business development.
Elsewhere the Services business has seen success with the renewal of several
other contracts in all of its key markets ranging from 1 to 5 year extensions.
The earthmoving part of the business, Blackwell, has been awarded a short-term
contract to assist in the creation of a nature reserve, which is associated
with the Sizewell C nuclear project. This provides an ideal opportunity to
demonstrate capability on a project that will require significant future
earthworks to be undertaken.
The business is carrying out the major earthworks on part of the HS2 project,
working for the EKFB Joint Venture. This contract is individually significant
and represents a substantial growth in the revenue and profitability of the
Group as a whole. I am pleased to confirm that the project is going well and
at peak operation the Group had over 400 workers on site.
In addition to the earthmoving activity, the Group has also developed and
installed a five section 650m conveyor system, which will reduce the carbon
emissions on HS2 by over 5,000 tonnes in total through the removal of
approximately 1.15 million miles of HGV traffic from the local roads, thus
reducing diesel consumption by 1.6 million litres, as well as any traffic
disturbances to the local community. This innovative solution has been
recognised through the team winning the EKFB C23 project of the year award in
the best environmental and sustainable initiative category.
The Group has now received the second of eight annual £1m payments from TW
relating to maintaining our capabilities on site. TW has informed the market
of their progress in restarting operations at the Tungsten mine at Hemerdon in
Devon. The Group continues to maintain a close relationship with TW and
retains the exclusive contract for the provision of mining services should the
project come to fruition.
Inflation has been high throughout the period and this has presented
significant challenges for many businesses. We have reported previously that
Hargreaves is well insulated against such inflationary pressures, due to many
of the term contracts containing specific escalation clauses. I am pleased to
confirm that during the first half, these measures have been successful in
protecting the Group against loss of value through inflation as demonstrated
by the strong profits recorded.
Looking to the medium term, the contract wins and renewals secured in the
period as well as the recent announcement of the Balfour Beatty on Lower
Thames Crossing, we continue to strengthen the sustainable and resilient
revenue streams in the Services business. The business is continuing to
develop its mechanical and electrical engineering offering building on the
successful conveyor installation at HS2 as well as exploring opportunities for
carbon sequestration on some of our Scottish land assets.
Services remains the core generator of revenue and cash flow for the Group.
With a strong 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 £8.7m (2021: £5.9m) and a Profit before
tax of £1.6m (2021: £0.5m). The growth in both revenue and Profit before tax
is due to the timing of sales at Blindwells.
The first half saw the completion of the sale of 4.5 acres to Ogilvie Homes
generating revenue of £3.4m. This development of 77 new homes, including 23
affordable, has now commenced and Ogilvie is the fourth housebuilder now
onsite at Blindwells. Out of 480 housing plots sold to date, including 144
affordable, 100 have now been built.
At the Unity joint venture, the 650-acre mixed use development in Doncaster,
work has commenced on the forward funded 191,000 sq ft logistics unit
following the grant of detailed planning permission at the end of last year
with the completion of this initial phase of commercial development expected
to be achieved in the second half of FY24.
As reported elsewhere, market conditions tightened across virtually all
sectors in the second half of 2022. However, demand from house builders for
serviced development sites with planning permission in prime locations has
remained resilient, although unsurprisingly we are not expecting the
continuation of the aggressive land price inflation that was experienced in
early 2022. We expect demand for quality residential land to return to a more
normalised level in the coming year, underpinned by a shortage of available
residential opportunities in the areas we operate in.
In the commercial sectors where we operate, primarily industrial/logistics and
retail warehousing, occupier demand has remained reasonably robust for
well-located opportunities, although investment values began to moderate from
mid-2022 reflecting increased interest rates and greater uncertainty over
wider economic conditions.
Hargreaves Land is currently working on contracted pipeline opportunities with
an estimated Gross Development Value of over £200m, ranging from residential
to industrial and mixed commercial use.
Renewables
I am pleased to confirm that infrastructure work is nearing completion at our
site in Westfield, which has seen a capital investment of £5m in the period.
This work is being undertaken to service an initial phase of 50 acres of
consented employment land on the site. The construction of an Energy from
Waste ("EfW") plant at Westfield by Brockwell Energy is underway and
Hargreaves Land is receiving associated rental income on a 35-year minimum
term lease, which will increase to £0.4m p.a. index linked at the end of the
first 3 years of the lease term.
The development at Westfield is a major step in the delivery of value from our
renewable land portfolio. In addition to Westfield, the Group owns circa 3,000
acres of land, which will be developed for the purpose of renewable energy
generation, primarily windfarms, solar farms and battery storage. Hargreaves
Land will not build out any of these projects but will be the landlord in any
arrangement. Dalquhandy, the first of the windfarm projects, has now been
completed and is expected to be fully operational in early 2023, with the
construction of another wind farm at Broken Cross in South Lanarkshire now
being developed out.
Investment in HRMS
HRMS recorded a post tax profit of £10.8m (2021: £9.0m) for the six months
ended 30 November 2022. Whilst minerals trading has been strong in the first
half, and ahead of the comparative period, it has not been at the level
experienced in the second half of last financial year, as commodity prices and
global demand have softened.
The HRMS trading business has always been skilled at maximising opportunities
whilst minimising the risk profile taken. We have seen this again in the first
half of the year. I can also confirm that £12.5m of the temporary £15m loan
from Hargreaves Services plc that was in place on 31 May 2022 has now been
repaid.
Visibility remains relatively short term for the trading team but it is likely
that the second half of the financial year will be less strong than the first
half as markets are expected to soften further.
The steel waste recycling business, DK has seen another good performance in
the first half, albeit lower than the previous six months, as pig iron prices
have reduced. Due to an unusually extended period of maintenance on the power
plant additional costs were incurred on energy amounting to €3m. As a
result, it is probable that the full year results for HRMS will be
approximately £1.5m lower than market expectations.
Having proved the concept of the CPP and delivered high quality product, the
conflict in Ukraine has impacted heavily on the pricing of raw materials,
which has restricted sales of the product to new customers as brown lignite
coal dust is more competitively priced. The Board of HRMS remains confident in
the future of the plant, which is breaking even at present, and once markets
return to a more sustainable level, expects to see return from this
investment.
ESG
The Group's Cross-Business Working Group ("ESG Group") is now well established
and has previously set out the following three targets for FY2023:
· to reduce electricity and gas usage per office based employee by 2%
per annum;
· to improve the kilometres per litre attained by the haulage fleet by
3% per annum; and
· to reduce the idling time in yellow plant by 6% per annum.
The ESG Group is monitoring the Group's performance against these targets and
will report the outcomes in the 2023 Annual Report and Accounts.
Further, in 2022, the Group was pleased to be awarded an A "Very Good" ESG
rating from Integrum ESG, an independent ratings advisor.
Summary
The contract wins and renewals in the Services business provide further
resilience to the Group's profitability as we head into the second half of the
financial year and beyond. Whilst there is uncertainty within the UK housing
and property market more generally, I remain confident in the viability of the
Hargreaves Land portfolio as we continue to see strong demand for schemes
brought to market. Finally, HRMS has performed well in the last six months,
however, some commodity markets have softened recently and visibility remains
limited. As expected, it is likely that the contribution from HRMS in the
second half will be lower than that for the first six months of the year.
I am pleased with the profitable growth the Group has delivered in the period
within each of its business segments, during a period of challenging economic
conditions.
Gordon Banham
Group Chief Executive
25 January 2023
Condensed Consolidated Statement of Profit and Loss and Other Comprehensive
Income
for the six months ended 30 November 2022
Unaudited Unaudited Audited
six months six months year
ended ended ended
30 November 30 November 31
May
2022 2021 2022
Note £000 £000 £000
Revenue 116,475 76,082 177,908
Cost of sales (94,782) (64,196) (148,458)
Gross profit 21,693 11,886 29,450
Other operating income 2,844 542 1,298
Administrative expenses (16,561) (11,369) (24,520)
Operating profit 7,976 1,059 6,228
Operating profit (before exceptional items) 7,976 1,059 4,474
Exceptional items 5 - - 1,754
Operating profit 7,976 1,059 6,228
Finance income 504 361 823
Finance expense (823) (292) (770)
Share of profit in joint ventures (net of tax) 11,053 9,269 28,200
Profit before tax 18,710 10,397 34,481
Taxation 6 (1,562) (386) 347
Profit for the period from continuing operations 17,148 10,011 34,828
Discontinued operations
Profit for the period from discontinued operations - - 2,000
Profit for the period 17,148 10,011 36,828
Other comprehensive income/(expense)
Items that will not be reclassified to profit or loss
Remeasurements of defined benefit pension plans - - 5,955
Tax recognised on items that will not be reclassified to profit or loss - - (1,488)
Items that are or may be reclassified subsequently to profit or loss
Foreign exchange translation differences 1,406 45 313
Effective portion of changes in fair value of cash flow hedges - 35 41
Tax recognised on items that are or may be reclassified subsequently to profit - (7) (8)
or loss
Share of other comprehensive income of joint ventures (net of tax) - - 3,070
Other comprehensive income for the period, net of tax 1,406 73 7,883
Total comprehensive income for the period 18,554 10,084 44,711
Profit/(loss) attributable to:
Equity holders of the company 16,962 10,029 37,040
Non-controlling interest 186 (18) (212)
Profit for the period 17,148 10,011 36,828
Total comprehensive income/(expense) for the period attributable to:
Equity holders of the company 18,368 10,102 44,923
Non-controlling interest 186 (18) (212)
Total comprehensive income for the period 18,554 10,084 44,711
GAAP measures
Basic earnings per share (pence) 8 52.15 31.04 113.80
Diluted earnings per share (pence) 8 51.09 30.15 110.44
Condensed Consolidated Balance Sheet
as at 30 November 2022
Unaudited Unaudited Audited
30 November 30 November 31 May
2022 2021 2022
Note £000 £000 £000
Non-current assets
Property, plant and equipment 10,392 11,995 9,938
Right of use assets 35,305 15,040 22,062
Investment property 13,672 7,286 8,298
Intangible assets including goodwill 5,949 4,824 4,824
Investments in joint ventures 10 70,541 39,873 58,383
Deferred tax assets 9,657 9,662 11,063
Trade receivables 4,224 - 4,224
Retirement benefit surplus 11,467 3,600 10,382
161,207 92,280 129,174
Current assets
Other financial assets - 2 -
Inventories 33,872 31,117 30,476
Trade and other receivables 86,109 87,102 88,574
Income tax asset - 629 -
Contract assets 6,081 2,667 6,752
Cash and cash equivalents 18,102 8,509 13,773
144,164 130,026 139,575
Total assets 305,371 222,306 268,749
Non-current liabilities
Other Interest-bearing loans and borrowings (17,460) (8,354) (11,045)
Retirement benefit obligations (2,666) (2,831) (2,703)
Provisions (5,898) - (2,344)
Deferred tax liabilities (2,419) - (1,920)
(28,443) (11,185) (18,012)
Current liabilities
Other Interest-bearing loans and borrowings (13,140) (3,192) (7,326)
Trade and other payables (58,792) (52,714) (50,727)
Provisions (8,844) (6,021) (9,440)
Income tax liability - - (108)
Other financial liabilities - (7) -
(80,776) (61,934) (67,601)
Total liabilities (109,219) (73,119) (85,613)
Net assets 196,152 149,187 183,136
Condensed Consolidated Balance Sheet (continued)
as at 30 November 2022
Unaudited Unaudited Audited
30 November 30 November 31 May
2022 2021 2022
Note £000 £000 £000
Equity attributable to equity holders of the parent
Share capital 3,314 3,314 3,314
Share premium 73,972 73,955 73,972
Other reserves 211 211 211
Translation reserve (413) (2,087) (1,819)
Merger reserve 1,022 1,022 1,022
Hedging reserve 318 313 318
Capital redemption reserve 1,530 1,530 1,530
Share-based payment reserve 2,216 1,818 2,029
Retained earnings 114,018 69,139 102,781
196,188 149,215 183,358
Non-controlling interest (36) (28) (222)
Total equity 196,152 149,187 183,136
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 November 2021
Share capital Share premium Translation reserve Hedging reserve Other reserves Capital redemption reserve Merger reserve Share-based payment reserve Retained earnings Total parent equity Non-controlling interest Total 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 - - - - - - - 138 (5,331) (5,193) - (5,193)
Balance at 30 November 2021 3,314 73,955 (2,087) 313 211 1,530 1,022 1,818 69,139 149,215 (28) 149,187
Condensed Consolidated Statement of Changes in Equity
for the six months ended 30 November 2022
Share capital Share premium Translation reserve Hedging reserve Other reserves Capital redemption reserve Merger reserve Share-based payment reserve Retained earnings Total parent equity Non-controlling interest Total Equity
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000 £000
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 Cash Flow Statement
for the six months ended 30 November 2022
Unaudited Unaudited
six months six months Audited
ended ended year ended
30 30 November 31
November May
2022 2021 2022
£000 £000 £000
Cash flows from operating activities
Profit for the period from continuing operations 17,148 10,011 34,828
Adjustments for:
Depreciation and impairment of property, plant and equipment and right-of-use 4,932 2,598 8,666
assets
Net finance expense/(income) 319 (69) (53)
Share of profit in joint ventures (net of tax) (11,053) (9,269) (28,200)
Profit on sale of property, plant and equipment, investment property and (2,844) (602) (1,298)
right-of-use assets
Equity settled share-based payment expense 187 138 349
Income tax expense/(credit) 1,562 386 (347)
Contributions to defined benefit pension schemes (1,170) (768) (2,002)
Retranslation of foreign denominated assets and liabilities 31 764 202
9,112 3,189 12,145
Change in inventories (3,398) (3,949) (3,308)
Change in trade and other receivables 4,314 (10,495) (19,256)
Change in trade and other payables 6,622 (581) 903
Change in provisions and employee benefits 2,867 (1,380) 1,000
19,517 (13,216) (8,516)
Interest (paid)/received (271) 299 34
Income tax received/(paid) 28 - (44)
Net cash inflow/(outflow) from operating activities 19,274 (12,917) (8,526)
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 4,565 640 801
Proceeds from sale of investment property 146 786 1,407
Proceeds from sale of ROU assets 54 33 78
Acquisition of property, plant and equipment (1,730) (224) (1,479)
Acquisition of investment property (5,377) (15) (1,070)
Acquisition of right of use assets (54) - (163)
Acquisition of subsidiaries (1,447) - -
Dividends received from joint ventures - - 3,917
Net cash (outflow)/inflow from investing activities in continuing operations (3,843) 1,220 3,491
Net cash inflow from investing activities in discontinued operations - - 2,000
Net cash (outflow)/inflow from investing activities (3,843) 1,220 5,491
Cash flows from financing activities
Principal elements of lease payments (5,519) (2,755) (5,531)
Dividends paid (5,725) (5,331) (6,237)
Net cash outflow from financing activities (11,244) (8,086) (11,768)
Net increase/(decrease) in cash and cash equivalents 4,187 (19,783) (14,803)
Cash and cash equivalents at the start of the period 13,773 28,303 28,303
Effect of exchange rate fluctuations on cash held 142 (11) 273
Cash and cash equivalents at the end of the period 18,102 8,509 13,773
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 2022 and the comparative
figures for the six months ended 30 November 2021 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 2022.
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 2022, as
described in those financial statements.
3. Status of financial information
The comparative figures for the financial year ended 31 May 2022 are not the
Group's statutory consolidated financial statements for that financial year.
The statutory financial accounts for the financial year ended 31 May 2022 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 2022. 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. Exceptional items
Six months ended 30 November 2022 Six months ended 30 November 2021 Year ended 31 May
2022
Unaudited Unaudited Audited
£000 £000 £000
Exceptional items in Administrative expenses
Release of accrual relating to liability from the year ended 31 May 2015 - - 1,754
Total exceptional items in Administrative expenses - - 1,754
There are no exceptional items in the six month period ended 30 November 2022
(30 November 2021: £nil).
In the year ending 31 May 2022, an aged accrual dating from the year ended 31
May 2015 totalling £1,754,000 was released as the potential for payment had
lapsed due to time.
6.
Taxation
UK income tax for the period is charged at 19% (2021: 19%). The effective tax
rate, after removing the impact of jointly controlled entities is 20.4% (2021:
34.2%), representing an estimate of the annual effective rate for the full
year to 31 May 2023. This rate is higher than the standard rate of UK income
tax due to the effect on deferred tax of the forthcoming rise in the corporate
tax rate to 25% 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 5.6p and additional dividend of 12p per ordinary share,
proposed in the 2022 annual accounts and approved by the shareholders at the
Annual General Meeting on 27 October 2022, was paid on 31 October 2022. The
directors have proposed an interim dividend of 3.0p per share (2021: 2.8p)
which will be paid on 6 April 2023 to shareholders on the register at the
close of business on 24 March 2023. 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 2022 Six months ended 30 November 2021 Year ended 31
May 2022
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 16,962 52.15 51.09 10,029 31.04 30.15 33,407 103.23 100.18
Exceptional items and amortisation (net of tax) - - - - - - 1,421 4.39 4.26
Continuing basic earnings per share 16,962 52.15 51.09 10,029 31.04 30.15 34,828 107.62 104.44
Discontinued operations - - - - - - 2,000 6.18 6.00
Basic earnings per share 16,962 52.15 51.09 10,029 31.04 30.15 36,828 113.80 110.44
Weighted average number of shares 32,528 33,200 32,316 33,267 32,362 33,347
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 672,000 (2021: 951,000), the effect on continuing
basic earnings per ordinary share is 1.06p (2021: 0.89p).
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
2022 2022 2022 2022 2022
£000 £000 £000 £000 £000
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
Services Hargreaves Land Unallocated HSEL Total
Unaudited Unaudited Unaudited Unaudited Unaudited
30 30 30 30 30
November November November November 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
10. Investments in joint ventures
Tower Regeneration Limited Hargreaves Services Europe Limited Waystone Hargreaves LLP Interests in immaterial joint ventures Total
£000 £000 £000 £000 £000
At 1 June 2022 - 53,547 4,910 (74) 58,383
Group's share of profit in joint ventures (net of tax) - 10,811 241 1 11,053
Exchange differences - 1,112 - (7) 1,105
At 30 November 2022 - 65,470 5,151 (80) 70,541
11. Condensed consolidated interim financial
information
The condensed consolidated interim financial information was approved by the
Board of Directors on 25 January 2023. 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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