REG - Hercules Site Svcs - Interim Results
05/06/2023 07:00
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RNS Number : 5355B Hercules Site Services PLC 05 June 2023
5 June 2023
Hercules Site Services plc
("Hercules" or "the Company")
Interim Results
Hercules Site Services plc (AIM: HERC), a leading technology enabled labour
supply company for the UK infrastructure sector, is pleased to announce its
unaudited interim results for the six months ended 31 March 2023 ("H1 2023").
Financial highlights:
§ Revenue increased by 85% to £37.0m (H1 2022: £19.9m)
§ Gross profit increased by 71% to £6.9m (H1 2022: £4.0m)
§ Adjusted EBITDA* increased by 83% to £1.1m (H1 2022: £0.7m)
§ Interim dividend of 0.6p declared (H1 2022: 0.6p)
Operational highlights:
§ Further investment in people and procedures in H1 2023 has prepared the
business for expected growth in the second half of the year ("H2 2023"),
particularly labour supply and suction excavator services
§ Labour supply to HS2 Phase 1 (northern section) has increased to 400
operatives from 180 at 31 March 2022
§ Skills, Employment and Education Everything Portal has become revenue
generative
§ Now supplying labour to Taylor Woodrow, at the Exxon-Mobil oil refinery
expansion in Fawley, near Southampton
§ New clients secured during the period in the civil projects division
including Amey and SGN Ltd
§ Further fundraise completed, raising £1.7m to finance continuing growth
§ Progress made in developing and planning the Hercules Training Initiative
*Adjusted EBITDA definition - earnings before interest, tax, depreciation,
amortisation, profit/loss on sale of fixed assets, exceptional items and
R&D expenditure.
Brusk Korkmaz, Chief Executive Officer, commented:
"We are delighted to have delivered a positive start to the year, with revenue
growing by 85% and an increase in gross profit of 71% over 2022 levels, whilst
we continue investing in support of further value creation in H2 2023.
"This success has been achieved through the continued labour supply services
ramp-up at the HS2 northern section, the addition of new clients across all
areas of our business and the delivery of more suction excavators in the
period.
"We are also very pleased to see that our Skills, Employment and Education
Everything Portal has become revenue generating, demonstrating again that we
are at the cutting edge of labour supply and services innovation in the
construction sector. The addition of new clients, namely Amey and SGN, has
also further accelerated growth in our civil projects division.
"With this strong momentum in the construction and infrastructure sectors, and
a solid pipeline of new clients, we are ideally placed to maintain the levels
of growth we have delivered in recent years and are on track to meet market
expectations for the full year."
Retail Investor Webinar
CEO Brusk Korkmaz and CFO Paul Wheatcroft will deliver a live presentation
regarding the Company's Final Results via the Investor Meet Company platform
today at 09.30am (BST).
The presentation is open to all existing and potential shareholders. Questions
can be submitted pre-event via the Investor Meet Company dashboard up until
9.00am the day before the meeting or at any time during the live presentation.
Although the Company may not be in a position to answer every question it
receives, it will address the most prominent within the confines of
information already disclosed to the market. Responses to the Q&A from the
live presentation will be published at the earliest opportunity on the
Investor Meet Company platform.
Investor feedback can also be submitted directly to management post-event to
ensure the Company can understand the views of all interested parties.
Investors can sign up to Investor Meet Company for free and add to meet
Hercules Site Services plc via:
https://www.investormeetcompany.com/hercules-site-services-plc/register-investor
Investors who already follow Hercules Site Services plc on the Investor Meet
Company platform will automatically be invited.
For further information and enquiries, please contact:
Hercules Site Services plc c/o SEC Newgate
Brusk Korkmaz (CEO)
Paul Wheatcroft (CFO)
SP Angel (Nominated Adviser and Broker) +44 (0) 20 3470 0470
Matthew Johnson / Adam Cowl / Harry Davies-Ball (Corporate Finance)
Grant Barker / Rob Rees (Sales and Broking)
Cenkos Securities Plc (Joint Broker) +44 (0)20 7397 8900
Adrian Hadden/ Charlie Combe (Corporate Finance)
Alex Pollen (Sales)
SEC Newgate (Financial Communications) +44 (0) 20 3757 6882
Elisabeth Cowell / Ian Silvera / Matthew Elliott Hercules@secnewgate.co.uk
The information contained within this announcement is deemed by the Company to
constitute inside information as stipulated under the Market Abuse Regulations
(EU) No. 596/2014 which has been incorporated into UK law by the European
Union (Withdrawal) Act 2018.
Chairman's statement
Hercules continues to demonstrate its proficiency in the current
macro-economic environments, by delivering record growth in H1 2023. Revenues
are 85% ahead of the comparative 2022 period and trading is in line with
expectations. We have experienced growth across all areas of our business and
in our core labour supply division we have won new clients, ramped up
deployment of operatives across our cornerstone projects and launched new
specialisms.
Market dynamics remain strong
The infrastructure and construction sectors are experiencing continued
buoyancy providing a supportive backdrop for our growth, and recent research
demonstrates that this is continuing post period end. According to S&P
Global, new orders received by UK commercial and civil engineering
construction companies increased for the third consecutive month in April,
with leaders in the sector anticipating a further increase in business
activity during the year ahead.
Given the labour shortages experienced by the sector, and the effectiveness of
our digital tools in placing operatives to jobs, we are well placed to benefit
from this growth in the months and years ahead. Demand for our range of
complementary services has been strong and our pipeline is very robust.
Continued growth across all areas of our business
Labour supply
We provide labour to some of the top construction and infrastructure projects
in the country and this core business unit has experienced continued growth in
H1 2023, up 110% on H1 2022. A key driver of this has been the multi-year HS2
Phase 1 (northern section) contract, which is the largest construction project
in Europe. Our work on site continues to expand and we currently have c. 400
Hercules operatives on site (H1 2022: 180). We are providing additional labour
every week in response to increasing demand, leveraging our digital platform
as a source of labour supply.
We have also been successful in winning significant new clients in the period
including SISK (we are now on their Preferred Supplier List), Galliford Try
Highways (now an approved supplier with all of Galliford Try, not just
environmental) and CHC Highways (a Costain joint venture initially for a
project on the A1(M)). Looking ahead to H2 2023 and beyond, we are very
pleased with the significant pipeline of projects this segment of our business
enjoys.
Suction excavator services
The high utilisation we are experiencing for our suction excavator fleet is
extremely positive and is in line with that reported for 2022. During the
period, our revenues were up 49% year on year, benefitting from an enlarged
fleet. At the end of H1 2023, we took delivery of 10 more units which will
provide additional growth into H2 2023 and beyond.
These recent acquisitions complete our fleet for the foreseeable future, and
our enlarged group of 30 vehicles makes us one of the largest providers of
suction excavator services in the UK.
We have supplied our suction excavator services to a number of new clients
during the period, including A2 Site Investigations Ltd, Derryard Ltd, R &
R Groundworks, Harris & Harris Civil Engineering and Delta Simons.
Civil projects
Our civil projects team has responded brilliantly to what is a huge level of
demand for new infrastructure in the water treatment sector. The team has had
a very successful H1 2023, with £1.6m additional revenue compared to H1 2022
(£5.1m), representing a 30% increase. New clients secured during the period
include Amey and SGN. The civil projects team continues to be very busy into
H2 2023.
Digital
We have often spoken of the clear differentiation we have achieved due to the
strength of our proprietary apps, digital capabilities and bespoke data. We
are able to facilitate rapid, local placement of operatives which means that
we can provide clients with more efficient and effective results.
During the period, we were delighted to announce that we are now monetising
our digital capabilities, which was an important milestone for Hercules. In
November 2022, we launched our skills portal, the Skills, Employment and
Education ("SEE") Everything Portal, which was developed in conjunction with
Balfour Beatty Vinci Systra joint ventures on the HS2 rail project.
Following a successful trial, we are now receiving licence fees and, while
relatively small at the moment, the revenues are recurring and we expect to
announce further updates in the future as we seek additional licensing
opportunities across the public and private sectors.
We believe that the SEE Everything Portal represents a highly relevant
proposition due to its ability to reduce the time and resource spent
coordinating, tracking, monitoring and validating data on equality, diversity,
inclusion, skills, employment and education outputs on infrastructure and
construction projects.
Contractors are increasingly required to demonstrate the SEE impact of a
project when entering into a tendering process following the implementation of
the Social Value Act (2012), and our portal should make this a much simpler
process for our clients.
Interim dividend and timetable
The Board is pleased to declare an interim dividend of 0.6p per share (2022:
0.6p). The interim dividend will be paid on 24 August 2023 to shareholders on
the register at close of business on 25 July 2023. The shares will go
ex-dividend on 24 July 2023.
Financial results show strategic progress in line with expectations
Revenue for the period grew by 85% to £37,012,000 (H1 2022: £19,958,000).
Gross profit increased 71% to £6,903,000 (H1 2022: £4,046,000).
Adjusted EBITDA was £1,127,000 (H1 2022: £650,000). In line with
expectations, H1 2023 delivered growth in profits over H1 2022, particularly
with the increased suction excavator fleet to 30 vehicles from 16 at the start
of the period (H1 2022 increased from 9 to 13 vehicles), as well as further
considerable labour supply growth, particularly on the HS2 project. The growth
in administrative expenses over H1 2022 is expected to level off now the final
10 suction excavators have been delivered.
Basic profit /(loss) per share improved to £0.006 (H1 2022 (£0.006)).
£2,576,000 cash was held at 31 March 2023 (H1 2022: £1,650,000). In March
2023, the Company raised £1.7m (gross) from a new share issue to aid working
capital to fund continuing organic growth in the labour supply division.
Outlook
I am remarkably proud of the significant contributions made by the team in H1
2023, building on the track record of growth that has been delivered by
Hercules since inception. The Company's financial performance is traditionally
H2 weighted, and we are pleased with trading to date.
Between now and the year end, we look forward to executing on our current
pipeline and delivering on our strategy. We continue to advance our training
academy plans, which represents a medium-term objective for the business, and
to nurture a range of opportunities to achieve additional scale for the
Company.
With demand for our services expected to remain strong given the market
backdrop, we look forward to the remainder of the year with confidence and
updating shareholders along the way.
Henry Pitman
Non-executive Chairman
Hercules Site Service PLC
Condensed Statement of Comprehensive Income
6 Months Ended 31 March 2023
Unaudited Audited Unaudited
6 months to Year ended 6 months to
31-Mar-23 30-Sep-22 31-Mar-22
£000 £000 £000
Revenue 37,012 49,549 19,958
Cost of sales (30,109) (39,770) (15,912)
Gross profit 6,903 9,779 4,046
Recurring administrative expenses (5,776) (7,470) (3,396)
Adjusted EBITDA 1,127 2,309 650
Non-recurring administrative expenses (15) (471) (414)
EBITDA 1,112 1,838 236
Depreciation (760) (1,034) (452)
R&D expenditure 5 (37) (3)
Share based payment provision 0 (40)
Profit/Loss on sale of fixed assets (26) (21) 6
Operating Profit/(Loss) 331 706 (213)
Finance costs (577) (545) (170)
Profit/(Loss) before tax (246) 161 (383)
Taxation 596 160 260
Total comprehensive
profit/(loss) for the period 350 321 (123)
Earnings per share:
Basic earnings/(loss) per share (£) 0.006 0.577 (0.006)
Condensed Statement of Financial Position
31 March 2023
Unaudited Audited Unaudited
31-Mar-23 30-Sep-22 31-Mar-22
£000 £000 £000
Non-current assets
Property, plant & equipment 21,394 14,642 12,360
21,394 14,642 12,360
Current assets
Inventories 47 52 8
Assets at fair value through profit or loss 0 0 312
Trade and other receivables 18,248 17,907 10,794
Current tax recoverable 83 83 83
Cash and cash equivalents 2,576 1,211 1,650
Total current assets 20,954 19,253 12,847
Total assets 42,348 33,895 25,207
Equity and liabilities
Share capital 62 59 59
Share premium 5,002 3,417 3,417
Share based payment reserve 40 40 0
Retained earnings 3,485 3,322 3,264
Total equity 8,589 6,838 6,740
Non-current liabilities
Deferred tax liabilities/(assets) (309) 287 188
Lease liabilities 15,346 10,879 9,317
Total non-current liabilities 15,037 11,166 9,505
Current liabilities
Trade and other payables 6,187 7,005 3,534
Provisions 309 305 325
Borrowings 8,686 6,529 3,142
Lease liabilities 3,540 2,052 1,961
Total current liabilities 18,722 15,891 8,962
Total liabilities 33,759 27,057 18,467
Total equity & liabilities 42,348 33,895 25,207
Condensed Statement of Changes in equity
6 Months Ended 31 March 2023
Share capital Retained earnings Total equity
(Unaudited) (Unaudited) (Unaudited)
£000 £000 £000
At 1 October 2021 as previously stated 50 3,387 3,437
New share capital 9 0 9
Share premium 3,417 0 3,417
Total comprehensive loss for the period 0 (123) (123)
Balance at 31 March 2022 3,476 3,264 6,740
Share capital Retained earnings Total equity
(Unaudited) (Unaudited) (Unaudited)
£000 £000 £000
At 1 October 2022 as previously stated 3,516 3,322 6,838
New share capital 3 0 3
New share premium 1,585 0 1,585
Dividend paid 0 (187) (187)
Total comprehensive profit for the period 0 350 350
Balance at 31 March 2023 5,104 3,485 8,589
Condensed Statement of Cash Flow
6 Months Ended 31 March 2023
Unaudited Audited Unaudited
6 months to Year ended 6 months to
31-Mar-23 30-Sep-22 31-Mar-22
£000 £000 £000
Cash flows from operating activities:
Profit/(loss) for the period 350 321 (123)
Listing costs 0 443 414
Taxation charge (596) (160) (260)
Finance costs 577 545 170
Fair value movements 0 (1) (40)
Share based payment charge 0 40 0
Depreciation expense 760 1,034 452
Profit/(loss) on disposal of property, plant & equip 26 21 (6)
Increase in trade and other receivables (340) (9,614) (2,502)
Decrease/(increase) in trade and other payables (812) 2,530 (207)
Decrease/(increase) in inventories 5 (50) (6)
Cash absorbed by operations (30) (4,891) (2,108)
Tax (paid)/received 0 0 0
Net cash absorbed by operating activities (30) (4,891) (2,108)
Cash flows from investing activities:
Purchase of property, plant and equip (282) (228) 277
Proceeds on disposal of property, plant and equip 55 241 199
Proceeds on disposal of other assets 0 272 0
Interest received 0 4 0
Net cash flows from investing activities (227) 289 476
Cash flows from financing activities:
Interest paid (95) (232) (130)
Dividends paid (187) (385) 0
Payment of lease liabilities (1,630) (1,407) (1,029)
(Repayment)/Drawdown of bank borrowings 1,946 3,389 (37)
Share issue proceeds 1,700 4,000 4,000
Share issue costs (112) (574) (574)
Listing costs 0 (443) (414)
Amounts advanced/(repaid) on parent company loan (1) 0 1
Net cash inflow from financing activities 1,621 4,348 1,817
Net (dec)/inc in cash and cash equivalents 1,364 (254) 185
Cash and equivalents at start of period 1,212 1,465 1,465
Cash and equivalents at end of period 2,576 1,211 1,650
Cash and equivalents at end of period comprises:
Cash at bank and in hand 2,576 1,211 1,650
Notes
1. Notes to the Financial Information
Basis of preparation & accounting policies
The interim financial information for the six months ended 31 March 2023 is
unaudited and was approved by the Board of Directors on 2 June 2023.
The interim financial statements do not include all of the information
required for full annual financial statements and should be read in
conjunction with the financial statements for the year ended 30 September
2022.
The interim financial information for the six months ended 31 March 2023,
including comparative financial information has been prepared on the basis of
the accounting policies set out in the last annual report and accounts.
The preparation of the interim financial statements requires management to
make judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expense. Actual results may subsequently differ from those estimates.
In preparing the interim financial statements, the significant judgements made
by management in applying the Company's accounting policies and key sources of
estimation uncertainty were the same, in all material respects, as those
applied to the financial statements for the year ended 30 September 2022.
Going Concern assumption
The Company meets its day to day working capital requirements through its cash
balance.
Consequently, after making enquires, the Directors have a reasonable
expectation that the Company has adequate resources to continue in operational
existence for the foreseeable future. Accordingly, they continue to adopt the
going concern basis of accounting in preparing the interim financial
statements.
Information extracted from the Company's 2022 Annual Report
The financial information for the year ended 30 September 2022, as set out in
this report, do not constitute statutory accounts but are derived from the
statutory accounts for that financial year.
The statutory accounts for the year ended 30 September 2022 were prepared
under IFRS and have been delivered to the Registrar of Companies. The auditors
reported on those accounts. Their report was unqualified, did not draw
attention to any matters by way of emphasis and did not include a statement
under Section 498(2) or 498(3) of the Companies Act 2006.
2. Earnings per share
The calculation of earnings per share is based upon the profit/(loss) after
tax for the respective period. The weighted average number of ordinary shares
used in the calculation of basic earnings per share is based upon the number
of ordinary shares in issue in each respective period.
3. Significant Capital Purchases
14 new suction excavators were purchased in H1 2023, at a capital cost of
£7.0m. The excavators were received in time to qualify for the Super tax
deduction before it expired, and were all financed by 90% conventional asset
funding, with repayment over 7 years at fixed interest rates.
4. Share capital
62,427,984 ordinary shares were in issue at 31 March 2023 (58,650,206 31 March
2022)
5. Availability of interim results
The interim results will not be sent to shareholders but will be available at
the Company's registered office at Hercules Court, Lakeside Business Park,
Broadway Lane, South Cerney, Cirencester GL7 5XZ and on the Company's website:
www.hercules-construction.co.uk (http://www.hercules-construction.co.uk) .
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