14th Feb 2008 07:01
Hargreaves Services PLC14 February 2008 For immediate release 14 February 2008 HARGREAVES SERVICES PLC (the "Group") Interim Results for the Six Month Period Ended 30 November 2007 Hargreaves Services PLC, a leading supplier of support services to the energy,mineral and waste sectors today announces its interim results for the periodended 30 November 2007. Business Highlights • Group continues to deliver ahead of expectations • Particularly strong performance from Minerals Division • Imperial Tankers acquired in September • Expected production life of Maltby extended two years to 2017 Financial Highlights • Revenue up 70% to £174.3m • Underlying operating profit up 114% from £4.3m to £9.2m • Underlying profit before tax up 61% from £4.4m to £7.1m • Underlying EPS up 33% to 17.64p • Interim dividend increased 10% to 3.3p • Return on Average Capital Employed 18.0% Chairman, Tim Ross commented "These are another impressive set of results and the Board is delighted with theperformance of the business. We are pleased to have good visibility of short andmedium term forward revenues. The acquisition of Imperial Tankers, which wascompleted during the period, is integrating well into the Group. The outlook andprospects for all divisions is very positive and we are pleased to be proposingan increase of 10% in the interim dividend to 3.3p per share" EnquiriesHargreaves Services PLC 0191 373 4485Gordon BanhamIain Cockburn Buchanan Communications 020 7466 5000Diane StewartTim Anderson Brewin Dolphin Investment Banking 07785 708 167Andrew Kitchingman INTERIM STATEMENT Hargreaves Services plc (the "Group" or "Hargreaves") announces interim resultsfor the six months ended 30 November 2007. The unaudited interim financialinformation represents the first published financial information prepared on thebasis of the recognition and measurement requirements of International FinancialReporting Standards ("IFRS") adopted by the EU ("Adopted IFRS"). RESULTS We are pleased to report that Hargreaves has had a successful first half and isreporting a strong set of results, reflecting a combination of robust organicgrowth and the benefits and synergies from its recent acquisitions. Revenue hasincreased 70% from £102.7m to £174.3m. Including our share of revenue from jointventures, revenue increased by 68% from £114.8m to £192.9m. The Group operatingmargin has also increased from 3.8% to 4.9% due in a large part to the effect ofprior-period acquisitions. Operating profit before amortisation of acquiredintangibles, including our share of profit from joint ventures, increased from£4.3m to £9.2m. Despite the full period acquisition of land and assetsassociated with the Maltby Colliery our return on average capital employed forthe first six months of the year remained a respectable 18.0% (2006: 21.5%). TRADING AND BUSINESS REVIEW The markets in which we operate have seen some significant changes. Thebenchmark price of coal has risen strongly during the period and finishedNovember at $128 per tonne, 72% higher than the beginning of the period.Although these price increases offer Hargreaves the potential of increasingfuture profits, the Group continues to adhere to its strategy of reducing riskwherever practicable by seeking long term contracts with hedged and determinablemargins. Although this limits the opportunity to exploit higher prices in theshort term, it is more than offset by the benefit of increased predictability ofprofits. Minerals The minerals business has had a strong first half of the year with revenueincluding share of joint ventures increasing 69% from £67.0m to £113.0m.Underlying operating profit increased from £2.1m to £3.0m. The German businesshas grown rapidly in the period and has established itself as a leading importerof coke and refractory minerals into Europe. In the UK coal volumes and order books for power stations remain strong and ourstocks and supply position are geared up for what we anticipate will be a busysecond half. Our Coal4Energy joint venture has rapidly established itself as the leadingsupplier of coal to the UK domestic market and is well placed to deliver astrong result for the full year. Our ash handling joint venture, comprising Hargreaves Building Products ("HBP")and Hargreaves Coal Combustion Products ("HCCP") continues to perform well andis a leading service provider to the UK power station market. In September wecombined this joint venture with our lightweight aggregates associate, Lytag.The restructuring brought together our expertise in ash sourcing and disposalwith our expertise in the use of ash to make lightweight aggregates. Discussionswith a number of power stations, aimed at establishing a Lytag plant in the UK,are ongoing. Following the re-structuring, Hargreaves lifted its stake in the overallcombined joint venture to 50%. The cost to the Group will depend on the level ofprofits made by the joint venture in the 18 months proceeding the transactionbut is expected to be £1.2m. The consideration will be settled in shares inHargreaves Services PLC at the conclusion of the earn-out period. Industrial Following the acquisition of Norec Limited in September 2006, the Norec businesshas delivered a strong revenue and margin performance. The Industrial Divisionreported revenues of £20.4m, up from £8.6m in the first half of 2006. Under themanagement of Norec the Industrial Division margins have improved from 3.6% to5.0% generating an operating profit before amortisation of acquired intangiblesof £1.0m in the period. Transport and Waste The Transport and Waste division has had a satisfactory first half. The Divisionachieved revenue growth of £4.3m from £26.2m to £30.5m. Adjusting for the impactof the Imperial acquisition this reflected an organic increase of 5.6%.Operating profits increased from £1.6m to £1.7m. The decrease in the marginsfrom 6.0% to 5.5% was principally due to the performance of the Crewe andBarnsley waste transport contracts, both of which have now expired. On 28 September 2007, the Group completed the acquisition of the entire sharecapital of Imperial Tankers Ltd ("Imperial"). The purchase price paid was £5.4mwith a further deferred consideration of up to £2.0m, subject to the achievementof targets based on the profitability of the combined Imperial and HargreavesBulk Liquid Transport Ltd ("HBLT") businesses in the 12 months following theacquisition. It is expected that the earn-out targets will both help to ensure that themaximum available synergies are achieved and allow the Group to benefit from themanagement strength and expertise of the Imperial team. Monckton Monckton generated revenues of £15.8m, an increase of £2.7m or 20.6% on thecomparative period. The majority of the increase in revenues can be attributedto revenues from the new tyre shredding operation. Operating profit improvedfrom £0.5m in the period to 30 November 2006 to £1.4m in the current period,mainly reflecting the impact of a one off charge in the comparative period. The Coke works has performed well during the first half of the year and shouldbenefit from increased prices for the available output that has not been soldunder long term fixed or hedged contracts. With the increases that have occurredin international coke prices we are looking at the feasibility ofre-commissioning old ovens in order to increase production capacity. We have made good progress in achieving sources of supply for the tyre feedstockand the sale of the resulting tyre crumb. A strengthened management team havebeen tasked with achieving further improvements in production efficiency andequipment utilisation. Maltby Maltby Colliery generated revenues of £13.3m and an operating profit of £2.4m inthe first six months. This was slightly below internal expectations, with theface equipment acquired with the mine becoming increasingly unreliable as thelong T10 face was worked to completion. The change from T10 to the next face(T22) took place in January 2008 without any major issues and we are nowproducing on the T22 face with new equipment. The professionalism with whichthe face change was executed is a reflection of the expertise and commitment ofour team at the colliery. We will continue to invest significant amounts in plant, equipment and drivagedevelopment to extend as far as possible, the life of the area of reservescurrently being worked. When the colliery was acquired the expected life wasstated as being 2015. With the investment we have made and continue to make,coupled with the expertise of our mining team, we now believe that the currentreserves area will be generating coal until 2017. We are also currently undertaking a review of the technical and financialfeasibility of reaching new areas of reserves, outside the current area ofworking, with a view to potentially extending the mine beyond the currentforecast expected closure date of 2017. FINANCIAL REVIEW IFRS The Alternative Investment Market (AIM) rules require that the next annualconsolidated financial statements of the Group, for the year ending 31 May 2008,be prepared in accordance with Adopted IFRS. This interim financial information has been prepared on the basis of therecognition and measurement requirements of Adopted IFRS as at 30 November 2007that are anticipated to be effective (or available for early adoption) at 31 May2008, the Group's first annual reporting date at which it is required to useAdopted IFRS. Based on these Adopted IFRS, the directors have applied theaccounting policies, as set out in the restatement document referred to in note1 of this interim financial information, which they expect to apply when thefirst annual IFRS financial statements are prepared for the year ending 31 May2008. However, the Adopted IFRS that will be effective (or available for earlyadoption) in the financial statements for the year ending 31 May 2008 are stillsubject to change and to additional interpretations and therefore cannot bedetermined with certainty. Accordingly, the accounting policies for that annualperiod will only be determined finally when the annual financial statements areprepared for the year ending 31 May 2008. Interest The net finance charge for the period was £2.1m (2006: £0.0m). The increasedinterest was attributable to the cost of acquisitions, predominantly the MaltbyColliery and associated working capital investment. The interest expense in thecomparative period was £0.6m but was mitigated by £0.6m of income recorded inrespect of the fair value movement on interest rate swaps and foreign exchangecontracts. With the increase in debt levels, interest cover has decreased, butremains at a comfortable 6.8x (2006: 11.2x). Taxation The taxation charge was £2.1m compared to £1.3m in the same period of 2006. Theeffective tax rate for the period increased from 30% to 32% due to an increasein the proportion of Group profits subject to the higher German tax rates. Profit Attributable to Equity Shareholders The profit attributable to equity shareholders increased from £2.9m to £4.1m.The minority interest, which now stands at 27.5%, relates to management shareinterests in Hargreaves Raw Material Services Gmbh. Earnings per Share Reported basic earnings per share increased by 28% from 12.25p to 15.70p. Basicearnings per share excluding amortisation of acquired intangibles increased 33%from 13.22p to 17.64p. Dividend The Board has recommended an increase in the interim dividend from 3.0p lastyear to 3.3p. Dividend cover remains robust at just over 4.7 times earnings.This dividend will be paid on 20 March 2008 to all shareholders on the registerat the close of business on 22 February 2008. CAPITAL STRUCTURE Cash Flow and Working Capital Cash flow from operating activities was £3.1m (2006: £6.0m). Cash generationfrom operating activities was strong but was offset by an increase in workingcapital of £10.7m in the period. The key driver of the investment in working capital was an increase of £6.9m instocks. This reflected higher trading levels, the increase in the coal and cokeprices and the build up of coal stocks and work in process at Maltby followingthe acquisition. Coal and coke stock levels continue to be carefully monitoredand controlled. These stocks are readily convertible into cash and the coal andcoke stock at the end of the half year amounted to £33.8m and represented lessthan 2 months supply based on recent shipping levels. Trade debtors also increased during the period by £13.9m to £45.0m due to highertrading levels. Although trade debtors increased in absolute terms, debtor days,expressed in terms of days sales outstanding, have fallen from 47 at the end ofNovember 2006 to 39 at the end of this period. The impact of the increasedtrade debtors was only partially mitigated by a corresponding increase of £7.5min trade and other creditors due to tighter payment terms in respect for mineralexports from China to the European market, through our German operation. Capital expenditure Capital expenditure during the period was £4.4m compared to £2.8m in the priorperiod principally reflecting the higher investment levels attributable to theMaltby Colliery. Net Debt Net Debt levels at the end of the period were £56.9m, an increase of £18.5m fromthe start of the period. This increase was attributable to the acquisition ofImperial Tankers and the increased investment in working capital discussedabove. Term loans and hire purchase debt increased by £6.5m in the period from £25.2mto £31.7m reflecting the £5.0m of term loan debt added for the acquisition ofImperial together with an additional £4.4m of hire purchase and term loan debtacquired with the company. Net debt available to finance working capitalincreased by £12m, from £13.2m to £25.2m, reflecting the higher working capitallevels discussed above. Following the acquisition of Imperial, the Group has reviewed it bankingcovenants and facilities with its bankers. The Group continues to be able toborrow at competitive rates and is satisfied with its current facilities. Thegearing at the end of the period was 136% (2006: 73%). Given the ease withwhich the Group could convert stocks into cash, the Group is comfortable withthis level of gearing and believes that the current facilities are adequate andappropriate for the Group's current needs. BOARD CHANGES On 31st December 2007, as planned, Peter Dillon retired as Finance Director andwas replaced by Iain Cockburn. The Group recognises the considerablecontribution made by Peter to the development of the business and thanks him forhis substantial commitment and achievement. The Group wishes him well for thefuture and welcomes Iain to the Board. CURRENT TRADING AND OUTLOOK The Group has grown very quickly in the last two years. We are very pleased withthe way that the acquisitions are fitting into the Group and with the successthat we are having in generating incremental synergies from these investments. We will continue to review further investment opportunities, both organic andacquisition, and remain firmly focussed on the day-to-day operationalperformance. Following the recent period of growth, we continue to devoteconsiderable energy to strengthening and refining our management structure andresources. We remain very optimistic about the prospects for all divisions. A strongforward order book provides us with good revenue and profit visibility, in boththe short and medium term. Gordon BanhamChief Executive14 February 2008 Iain CockburnFinance Director14 February 2008 Consolidated Income Statementfor the six months ended 30 November 2007 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2007 2006 2007 Unaudited Unaudited Unaudited £000 £000 £000 Revenue 174,293 102,684 240,105 Cost of sales (152,695) (92,936) (213,164) Gross profit 21,598 9,748 26,941Other income/(expense) 80 (16) 25Administrative expenses (13,215) (5,834) (17,075) Operating profit 8,463 3,898 9,891Finance income 114 618 324Finance expenses (2,206) (574) (920)Share of profit of joint ventures 222 205 270Share of profit of associates - - 56 Profit before income tax 6,593 4,147 9,621Income tax (2,126) (1,253) (3,134) Profit for the period 4,467 2,894 6,487 Attributable to:Equity holders of the company 4,124 2,901 6,414Minority interest 343 (7) 73 Profit for the period 4,467 2,894 6,487 Basic earnings per share 15.70p 12.25p 26.32p Diluted earning per share 15.48p 12.21p 26.16p Consolidated Statement of Recognised Income and Expensefor the six month period ended 30 November 2007 Unaudited Unaudited Unaudited 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000 Foreign currency translation differences for foreign operations 98 - (4)Effective portion of changes in fair value of cash flow hedges (3,307) - (769)Defined benefit plan actuarial gains - - 108Income tax on income and expense recognised directly in equity 910 - 199Income and expense recognised directly in equity (2,299) - (466) Profit for the period 4,467 2,894 6,487 Total recognised income and expense for the period 2,168 2,894 6,021 Attributable to:Equity holders of the company 1,825 2,901 5,948Minority interest 343 (7) 73Total recognised income and expense for the period 2,168 2,894 6,021 Consolidated Balance Sheetat 30 November 2007 30 November 30 November 2006 31 May 2007 2007 Unaudited Unaudited Unaudited £000 £000 £000ASSETSNon-current assetsProperty, plant and equipment 71,162 24,209 63,178Intangible assets 17,445 11,531 12,630Investments in joint ventures 1,360 1,110 881Investments in associates - - 58Other investments, including derivates 7 159 220Other receivables - 500 500Deferred tax assets 1,060 - 502Total non-current assets 91,034 37,509 77,969 Current assetsInventories 42,617 15,208 35,027Other investments, including derivates 129 - -Trade and other receivables 55,815 32,291 38,406Cash and cash equivalents 7,850 3,788 11,779Total current assets 106,411 51,287 85,212 Total assets 197,445 88,796 163,181 LIABILITIESNon-current liabilitiesLoans and borrowings (22,014) (18,582) (38,477)Other non-current liabilities (1,243) - -Derivative financial instruments (4,122) - (631)Deferred tax liabilities - (1,618) -Retirement benefit obligations (9,411) (469) (9,411)Provisions (9,827) (2,671) (10,327)Total non-current liabilities (46,617) (23,340) (58,846) Current liabilitiesTrade and other payables (62,513) (30,822) (49,505)Current income tax liabilities (3,689) (2,099) (1,851)Borrowings (42,725) (4,956) (11,740)Derivative financial instruments (37) (523) (205)Total current liabilities (108,964) (38,400) (63,301) Total liabilities (155,581) (61,740) (122,147) Net assets 41,864 27,056 41,034EQUITYCapital and reserves attributable to equity holdersIssued capital 2,627 2,368 2,627Share premium 29,177 19,082 29,177Other reserves 29 29 29Translation reserve 94 - (4)Merger reserve 1,022 - 1,022Hedging reserve (2,934) - (538)Capital redemption reserve 1,530 1,530 1,530Retained earnings 9,826 4,054 7,041 41,371 27,063 40,884Minority interest in equity 493 (7) 150 41,864 27,056 41,034 Consolidated Cash Flow Statementfor the six month period ended 30 November 2007 Unaudited Unaudited Unaudited 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2007 2006 2007 £000 £000 £000Cash flows from operating activitiesProfit for the period 4,467 2,894 6,487Adjustments for:Depreciation 4,714 1,758 5,030Amortisation of intangible assets 512 228 685Negative goodwill on acquisition - - (84)Share of profit of joint ventures (222) (205) (270)Share of profit of associates - - (56)Gain on sale of property, plant and equipment (80) 16 (25)Equity-settled share-based payment transactions 237 90 268Net finance expense/(income) 2,092 (44) 596Income tax expense 2,126 1,253 3,134 13,846 5,990 15,765Change in inventories (6,857) (153) (13,254)Change in trade and other receivables (14,180) (3,553) (4,914)Change in trade and other payables 10,288 3,713 10,691Change in provisions and employee benefits - - 117 Cash from operating activities 3,097 5,997 8,405Interest paid (2,089) (571) (1,971)Income tax paid (1,504) (982) (2,245) Net cash (outflow)/inflow from operating activities (496) 4,444 4,189 Cash flows from investing activitiesInterest received 114 50 324Proceeds from sale of property, plant and equipment 493 241 794Acquisition of property, plant and equipment (4,862) (3,014) (8,661)Acquisition of subsidiary, net of cash acquired (6,640) (7,710) (33,693)Acquisition of other investments (8) - 75 Net cash outflow from investing activities (10,904) (10,433) (41,161) Cash flows from financing activitiesProceeds from issue of shares - - 10,332Proceeds of borrowings 5,040 - 15,000Repayments of borrowings (2,454) (3,006) (1,164)Repayment of finance lease liabilities (1,294) (848) (1,947)Proceeds from invoice discounting facility 4,787 (207) 3,656Dividends paid (1,536) (1,184) (1,972) Net cash (outflow)/inflow from financing activities 4,543 (5,245) 23,905 Net decrease in cash and cash equivalents (6,857) (11,234) (13,067)Cash and cash equivalents at the start of the period/year 1,955 15,022 15,022Effect of exchange rate fluctuations on cash held (591) - - Cash and cash equivalents at the end of the period/year (5,493) 3,788 1,955 Notes (forming part of the financial statements) 1. Basis of preparation The AIM rules require that the next annual consolidated financial statements ofthe Group, for the year ending 31 May 2008, be prepared in accordance withInternational Financial Reporting Standards ('IFRS') adopted for use in the EU('Adopted IFRS'). The interim financial information has been prepared on the basis of therecognition and measurement requirements of Adopted IFRS that are effective (oravailable for early adoption) at 31 May 2008, the Group's first annual reportingdate at which it is required to use Adopted IFRS. Based on these Adopted IFRS,the directors have applied the accounting policies, as set out in the IFRSrestatement document referred to below, which they expect to apply when thefirst annual IFRS financial statements are prepared for the year ending 31 May2008. However, the Adopted IFRS that will be effective (or available for earlyadoption) in the financial statements for the year ending 31 May 2008 are stillsubject to change and to additional interpretations and therefore cannot bedetermined with certainty. Accordingly, the accounting policies for that annualperiod will be determined finally only when the financial statement are preparedfor the year ending 31 May 2008. The preparation of this financial information resulted in changes to theaccounting policies as compared with the most recent annual financial statementsprepared under previous Generally Accepted Accounting Practice ('GAAP'). Therevised accounting policies have, except where otherwise stated, been applied toall periods presented in this financial information. IFRS 1 - 'First Time Adoption of International Financial Reporting Standards'mandates that most IFRS are applied fully retrospectively, meaning that theopening balance sheet at 1 June 2006 is restated as if those accounting policieshad always been applied. IFRS 1 permits companies to apply certain exemptionsfrom the full requirements of IFRS during the transition. Details of theexemptions applied by the Group are outlined in the restatement documentreferred to below. A detailed review of the changes in our accounting policies and reconciliationsof our financial statements from UK GAAP to IFRS at key dates were published tothe London Stock Exchange on 14 February 2008 and are also available on theGroup's website at www.hargreavesservices.co.uk 2. Accounting policies The accounting policies that the Group intend to apply to the year ending 31 May2008 are set out in the IFRS restatement document referred to in note 1. 3. Status of financial information The comparative figures for the year ended 31 May 2007 are not the Group'sstatutory financial statements for that year. Those financial statements, whichwere prepared under UK GAAP, have been reported on by the Group's auditors anddelivered to the Registrar of Companies. The report of the auditors wasunqualified and did not contain statements under section 237(2) or (3) of theCompanies Act 1985. The interim information for the half years ended 30 November 2007 and 30November 2006 is unaudited. This information does not constitute statutoryaccounts within the meaning of the Companies Act 1985. In relation to thefinancial statements for the year ended 31 May 2007, this has been extractedfrom an unaudited restatement of the financial information taken from theaudited Group's statutory financial statements for that year details of whichare given in the IFRS restatement document referred to in note 1. 4. Taxation Taxation is based on the estimated effective rate for each year as a whole,including deferred tax. 5. Dividends The dividend of 6 pence per ordinary share, proposed in the 2007 AnnualAccounts, agreed by the shareholders at the Annual General Meeting on 3 October2007 and paid on 11 October 2007, has been charged to reserves in these interimfinancial statements. The directors have recommended an interim dividend of 3.3 pence per share, whichwill be paid on 20 March 2008. 6. Earnings per share The calculation of earnings per share is based on the profit for the period/yearand on the weighted average number of ordinary shares in issue and ranking fordividend in the period. Unaudited Unaudited Unaudited 6 months 6 months ended Year ended 30 November ended 30 November 2006 31 May 2007 2007 Profit for the period/year (£000) 4,124 2,901 6,414Weighted average number of ordinary shares ('000) 26,271 23,675 24,372Earnings per share (pence) 15.70 12.25 26.32 The calculation of diluted earnings per share is based on the profit for theperiod/year and on the weighted average number of ordinary shares in issue inthe period/year adjusted for the dilutive effect of the share optionsoutstanding. Unaudited Unaudited Unaudited 6 months 6 months ended Year ended 30 November ended 30 November 2006 31 May 2007 2007 Profit for the period/year (£000) 4,124 2,901 6,414Weighted average number of ordinary shares ('000) 26,642 23,751 24,516Earnings per share (pence) 15.48 12.21 26.16 7. Divisional performance The Divisions enjoy a considerable amount of inter-divisional trade as part ofthe integrated solutions provided to clients. This level of inter-divisionalactivities, cross-utilisation of the overhead base and other facilities limitthe usefulness of analysis beyond direct costs. Below are the stated divisionalresults. 2007 2007 2007 2007 2007 2007 Minerals Industrial Transport Monckton Maltby Total £000 £000 £000 £000 £000 £000 Revenue 94,363 20,377 30,480 15,803 13,269 174,293 Segment operating profit 2,784 570 1,583 1,395 2,363 8,695 Segment profit before tax 2,287 443 1,306 1,175 1,756 6,966 Common costs (373) Group profit before taxation 6,593 2006 2006 2006 2006 2006 2006 Minerals Industrial Transport Monckton Maltby Total £000 £000 £000 £000 £000 £000 Revenue 57,663 8,583 23,379 13,060 - 102,684 Segment operating profit 1,962 78 1,493 482 - 4,015 Segment profit before tax 1,967 11 1,363 483 - 3,821 Common costs 326 Group profit before taxation 4,147 8. Acquisition On 28 September 2007 the Company acquired the entire issued share capital ofImperial Tankers Limited. In accordance with IFRS 3 Business Combinations, areview of the acquisition was performed to identify specific intangible assets.This resulted in the creation of an intangible asset of £1,622,000 for customercontracts, based on the discounted future cash flows of the key long term salescontracts in place at the date of acquisition. The residual goodwill of£2,596,000 was capitalised and will be reviewed annually for impairment. Book and fair value £000ASSETSNon-current assetsProperty, plant and equipment 7,287 Current assetsInventories 126Trade and other receivables 2,782Cash and cash equivalents 1,306 Total assets 11,501 LIABILITIESNon-current liabilitiesLoans and borrowings (2,993)Deferred income tax liabilities (1,068) Current liabilitiesTrade and other payables (2,213)Current income tax liabilities (390)Borrowings (1,609) Total liabilities (8,273) Net assets 3,229Goodwill 2,596Intangibles under IFRS 3 1,622 Net purchase consideration and costs of acquisition 7,447 Satisfied by :Cash 5,447Deferred consideration 2,000 The intangible asset is being amortised over the weighted average expected lifeof these contracts, which is 62 months. The goodwill is not being amortised, butwill be reviewed for impairment annually. On 30 September 2007, the Group increased its stake in Hargreaves BuildingProducts Ltd and Lytag Ltd by way of a share exchange between HargreavesBuilding Products Ltd and Hargreaves Coal Combustion Products Ltd, andexchanging shares in Hargreaves Services plc with the other shareholders of HCCPLtd, HBP Ltd, and Lytag Ltd. Hargreaves increased its share of the new combinedgroup from 25% to 50%, resulting in an increase in investments of £130,476. Theconsideration was valued at £1,243,375 based on expected future profits of thecombined HBP/HCCP group. This resulted in goodwill of £1,112,899. The goodwillwill not be amortised over a specific period of time, however it will bereviewed annually for impairment at each reporting date, in line with Grouppolicy. 9. Hedging reserve The hedging reserve relates to the fair value of three commodity swap contractstaken out to protect Group margin on the sale of coke under a long-term supplycontract. This contract is subject to commodity price and foreign exchangefluctuations, hence the commercial decision to minimise the effect of thesefluctuations. 10. Interim results These results were approved by the Board of Directors on 14 February 2008. Copies of this interim report will be sent to all shareholders and will beavailable to the public from the group's registered office. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Hargreaves Serv