13th Feb 2006 07:01
Hargreaves Services PLC13 February 2006 For Immediate Release 13 February 2006 HARGREAVES SERVICES plc Interim results for the six month period ended 30 November 2005 HIGHLIGHTS • Hargreaves Services plc is a leading provider of bulk materials and services for the electricity and waste sectors. • Hargreaves successfully floated on AIM on the 30 November 2005, and announces its maiden results. • In the half year ended 30 November 2005, Hargreaves acquired The Monckton Coke & Chemical Company Limited. • Group turnover for the period was £70.8m (2004: £34.7m), an increase of 104%. • Total operating profit for the period was £4.2m (2004: £1.9m), an increase of 121%. • The Group balance sheet was strengthened by £20.0m of new funds (net) raised at flotation. • A number of major new contracts were won, giving good visibility over future earnings. Chairman, Tim Ross commented: "The Board is pleased with the growth of sales and profits in the first half ofthe year, and with the increased level of orders. This is an exciting time forthe Group and the Board remains committed to achieving expectations." EnquiriesHargreaves Services plc 0191 373 4485Gordon BanhamPeter Dillon Buchanan Communications 0207 466 5000Diane Stewart/Tim Anderson/James Strong/Amy Rajendran Brewin Dolphin Securities 0113 241 0130Andrew KitchingmanAndy Emmott Group Chief Executives' Statement It gives me great pleasure to announce our maiden interim results for the sixmonths ended 30 November 2005, on which date the Company successfully floated onthe AIM market. During this period, existing subsidiary companies forgedstrongly ahead, and we successfully acquired The Monckton Coke & ChemicalCompany Limited. In addition, the forward order books for all divisionsincreased significantly. These improve visibility to future earnings. Trading results The results for the six month period show that total operating profit increasedby 121% to £4.2m (2004: £1.9m). Acquisition of The Monckton Coke & ChemicalCompany Limited contributed £1.6m to operating profit. These increases wereachieved by increasing volumes whilst containing overheads. As indicated at thetime of floatation the Board is not recommending the payment of an interimdividend. The Company confidently expects to declare a dividend for the fullyear. Acquisitions On 17 June 2005, the Group acquired The Monckton Coke & Chemical Company Limitedfrom UK Coal for a purchase consideration including costs of £13.9m, of which£5.1m is on deferred terms. The Company is the sole independent cokemanufacturer remaining in the United Kingdom and compliments our business ofcoal and other bulk minerals. Monckton made sales of £10.1m and operatingprofit of £1.6m during the period. Financial review On 30 November 2005, we floated on AIM. This raised £20.0m (net of expenses)for the Company by way of a successful placing. The reduced gearing andincreased shareholders' funds strengthens the balance sheet considerably. Operating review Total operating profits have increased by 121%, principally by growth involumes, both organic and by acquisition, whilst at the same time containingoverheads. During the first half, significant new orders have been won,particularly in the minerals division for the sale of carbon based products.This gives a visibility of future earnings and we remain confident of anexcellent second half year. Throughout this half year, we have continued to invest in people and systems forthe future, whilst at the same time successfully integrating The Monckton Coke &Chemical Company Limited into the Group. The markets in which the Group tradesremain buoyant. There is strong demand for energy from carbon and biomass, andcontinued growth in waste recycling all of which contribute to the ongoingsuccess of our Transport Division. The Group continues with the policy ofbecoming the most significant player in a number of specialist niche markets. Strategy We remain determined to deliver strong organic growth through our existing andnewly acquired businesses, together with future strategic acquisitions withinour skill base. We are mindful of maintaining a strong management structure asour business grows and we will continue to build the senior team as necessary. Group Chief Executive's Statement continued Staff We were pleased to welcome Tim Ross to the Board as non-executive chairman inNovember 2005. His considerable experience within our sector, and with otherboard appointments, will bring wisdom and strategic expertise to our futuregrowth. We have been delighted to retain Nigel Barraclough A.C.A., as anon-executive director, a slight change from his previous role of representingour principal venture capital investor, but giving continuity and ongoing valuedservice. We would also like to thank Robert Young, the original founder of the Group forhis immense contribution to the growth of the Group. Having been anon-executive director for the past two years, he has decided to retire from theBoard, although he does continue to assist the Group in a consulting role. We welcome the new employees that have joined the Group, particularly thoselocated at Monckton. The Board has asked me to thank all employees for theefforts they have made during this six months trading, as it is by theirendeavours, often against tight deadlines and in arduous conditions, that we goforward. Outlook Sales for the first two months of the second half continue at a high level. Theincreased order books indicate that the full year will produce very acceptableresults. This is an exciting time for the Group, and your Board remainscommitted to achieving expectations. I have no reason to doubt that this willbe the case. Gordon BanhamGroup Chief Executive 13 February 2006 Consolidated profit and loss account for the six month period ended 30 November 2005 6 months ended 6 months ended Year ended 30 November 2005 30 November 2004 31 May 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Turnover: group and share of joint ventures 74,289 39,007 87,570Less: share of turnover of joint ventures Continuing operations (3,498) (4,340) (8,319) Group turnover 70,791 34,667 79,251 Group turnover Continuing operations 60,702 34,667 79,251 Acquisitions 10,089 - - 70,791 34,667 79,251Cost of sales (62,214) (30,040) (69,414) Gross profit 8,577 4,627 9,837Administrative expenses (4,517) (3,034) (6,749) Group operating profit Continuing operations 2,450 1,593 3,088 Acquisitions 1,610 - - 4,060 1,593 3,088Share of operating profit in joint ventures 184 317 460 Total operating profit 4,244 1,910 3,548Profit/(loss) on sale of fixed assets 57 (37) (77)Interest receivable 15 - 10Interest payable and similar charges - group (1,313) (603) (1,090) - joint ventures - (23) (43) Profit on ordinary activities before taxation 3,003 1,247 2,348Tax on profit on ordinary activities (985) (402) (876) Profit for the financial period/year 2,018 845 1,472 Basic and diluted earnings per shareOrdinary shares 16.43p 5.66p 9.43p A Ordinary shares 29.71p 5.66p 9.43p Consolidated balance sheet at 30 November 2005 At 30 November At 30 November At 31 May 2005 2004 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Fixed assetsIntangible assets - goodwill 5,883 383 364Tangible assets 18,827 11,284 12,506Investments Investment in joint ventures Share of gross assets 2,782 2,687 2,585 Share of gross liabilities (1,966) (2,084) (1,886) 816 603 699 Other investments 83 83 83 25,609 12,353 13,652 Current assetsStocks 10,502 1,988 3,671Debtors 24,617 15,029 15,328Cash at bank and in hand 19,764 - 2,633 54,883 17,017 21,632Creditors: amounts falling due within one year (34,490) (13,271) (16,299) Net current assets 20,393 3,746 5,333 Total assets less current liabilities 46,002 16,099 18,985Creditors: amounts falling due after more than oneyear (17,109) (10,513) (12,931)Provisions for liabilities and charges (4,175) (1,620) (1,654) Net assets 24,718 3,966 4,400 Capital and reservesCalled up share capital 2,368 3,000 3,000Share premium account 19,099 - -Other reserves 29 20 20Capital redemption reserve 1,530 - -Profit and loss account 1,692 946 1,380 Shareholders' funds 24,718 3,966 4,400 Analysis of shareholders' funds (comparatives on FRS 4 basis)Equity 1,855 2,454Non-equity 2,111 1,946 3,966 4,400 Consolidated cash flow statement for the six month period ended 30 November 2005 6 months ended 6 months ended Year ended 30 November 2005 30 November 2004 31 May 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Cash flow from operating activities (3,046) 151 3,321Returns on investments and servicing of finance (750) (512) (905)Taxation 5 (51) (14)Capital expenditure (955) 130 (134)Acquisitions (2,870) (567) (567) Cash (outflow)/inflow before financing (7,616) (849) 1,701 Financing 24,747 (143) 650 Increase/(decrease) in cash in the period/year 17,131 (992) 2,351 Reconciliation of net cash flow to movement in net debtfor the six month period ended 30 November 2005 6 months ended 6 months ended Year ended 30 November 2005 30 November 2004 31 May 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Increase/(decrease) in cash in the period/ 17,131 (992) 2,351yearNet cash (inflow)/outflow from financing (4,800) 170 (623) Change in net debt resulting from cash flows 12,331 (822) 1,728Effect of adoption of FRS 25 on 1 June 2005(with comparatives not restated) (2,087) - -Accrued premium on preference shares (367) - -Accrued premium on redemption of loan stock (88) (91) (182)New finance leases (1,115) (211) (2,269) Movement in net debt in the period/year 8,674 (1,124) (723)Net debt at the start of the period/year (12,073) (11,350) (11,350) Net debt at the end of the period/year (3,399) (12,474) (12,073) Following the adoption of the presentation requirements of FRS 25 'Financialinstruments: presentation and disclosure' the Group has, with effect from 1 June2005, reclassified certain elements of share capital from shareholders' funds toliabilities (note 6). Reconciliations of Group operating profit to net cash flow from operatingactivities for the six month period ended 30 November 2005 6 months ended 6 months ended Year ended 30 November 2005 30 November 2004 31 May 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Group operating profit 4,060 1,593 3,088Depreciation and amortisation 1,533 1,051 2,130Increase in stocks (3,362) (395) (2,078)Increase in debtors (4,884) (2,972) (3,261)(Decrease)/increase in creditors (393) 874 3,442 Net cash (outflow)/inflow from operating (3,046) 151 3,321activities Consolidated statement of total recognised gains and losses for the six month period ended 30 November 2005 6 months ended 6 months ended Year ended 30 November 2005 30 November 2004 31 May 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Profit for the financial period/year 2,018 845 1,472Effect of adoption of FRS 25 on 1 June 2005(with (166) - - comparatives not restated) Total recognised gains and losses relating tothe 1,852 845 1,472 financial period/year Reconciliation of movements in group shareholders' funds for the six month period ended 30 November 2005 6 months ended 6 months ended Year ended 30 November 2005 30 November 2004 31 May 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Profit for the financial period/year 2,018 845 1,472Effect of adoption of FRS 25 on 1 June 2005 (with comparatives not restated) (2,087) - -Dividends and finance costs of non-equityshares - (165) (331) (comparatives on FRS 4 basis)Net finance costs and dividends credited backto reserves (comparatives on FRS 4 basis) - 165 138Conversion of debt to equity 391 - -New share capital subscribed (net of issue 19,996 27 27costs) Net addition to shareholders' funds 20,318 872 1,306Opening shareholders' funds 4,400 3,094 3,094 Closing shareholders' funds 24,718 3,966 4,400 Following the adoption of the presentation requirements of FRS 25 'Financialinstruments: presentation and disclosure' the Group has, with effect from 1 June2005, reclassified certain elements of share capital from shareholders' funds toliabilities (note 6). Notes to the interim report 1 This interim report has been prepared on the basis of the accountingpolicies set out in the 31 May 2005 annual report except as noted below. In this interim report the following new standards have been adopted for thefirst time: • FRS 21 'Events after the balance sheet date'; • the presentation requirements of FRS 25 'Financial instruments: presentation and disclosure'; and • FRS 28 'Corresponding amounts'. The accounting policies under these new standards are set out below togetherwith an indication of the effects of their adoption. FRS 28 'Correspondingamounts' has had no material effect as it imposes the same requirements forcomparatives as hitherto required by the Companies Act 1985. FRS 25 permits the corresponding amounts not to be restated and the Group hasadopted this approach. Note 6 gives further details of the current year andcomparative periods' bases of accounting and of the change booked on 1 June2005. FRS 21 has no impact on the periods included in this interim report. The financial information does not constitute statutory accounts within themeaning of Section 240 of the Companies Act 1985. The figures for the yearended 31 May 2005 have been extracted from the statutory accounts which havebeen delivered to the Registrar of Companies. The independent auditors' reporton these accounts was unqualified. These results were approved by the Board of Directors and announced to theLondon Stock Exchange on 13 February 2006. 2 Taxation is based on the estimated effective rate for each year as awhole, including deferred tax. 3 No dividend has been declared on the ordinary shares during the periodunder review. Interest payable in 2005 includes £367,000 relating to cumulativedividends and other finance charges on classes of share capital (or elements ofclasses of share capital) reclassified as debt from the adoption of FRS 25 on 1June 2005. In the comparative periods dividends and finance costs of non-equityshares continue to be presented in accordance with FRS 4. 4 The calculation of earnings per share on the ordinary shares is based onthe profit for the period/year after deduction of non-equity dividends incomparative periods and on the weighted average number of ordinary shares inissue and ranking for dividend in the period. 6 months ended 6 months ended Year ended 30 November 2005 30 November 2004 31 May 2005 (unaudited) (unaudited) (audited) £000 £000 £000 Profit for the period/year 2,018 845 1,472Deduction of non-equity dividends - (165) (331)(FRS 4 basis) Profit after deduction of non-equity 2,018 680 1,141dividends Weighted average number of shares ('000) 12,280 12,011 12,105Earnings per share (pence) 16.43 5.66 9.43 The calculations of earnings per share on the A ordinary shares is identical tothe above for the six months ended 30 November 2004 and for the year ended 31May 2005 as the two classes of shares rank equally in respect of dividend rightsin these periods. In the period ended 30 November 2005 an exit dividend of £291,000 waspayable on the A ordinary shares upon the flotation of the Company on AIM. Thedividend rights of the ordinary shares and A ordinary shares were identical in all other respects. The calculation of the additional earnings perA ordinary share arising on this dividend is as follows: 6 months ended 30 November 2005 (unaudited) Exit dividend for the period (£000s) 291Weighted average number of A ordinary shares 2,191('000)Additional earnings per A ordinary share (pence) 13.28 All of the A ordinary shares were converted to ordinary shares with effect from30 November 2005. The Company has only one class of ordinary share from thisdate. During the period ended 30 November 2005 the Company's £1 ordinary shares wereeach subdivided into ten 10p ordinary shares. The weighted average number ofshares in each of the periods presented has been adjusted as if the subdivisionhad occurred at the beginning of the earliest period presented. 5 Acquisition On 17 June 2005 the Company acquired the entire issued share capital of The Monckton Coke & Chemical Company Limited. The resulting goodwillof £5,690,000 was capitalised and will be written off over 20 years. Thebusiness is long standing and well established and the directors believe thatthe Group will continue to derive financial benefit over this period. Book and fair value £000Fixed assetsTangible 5,558 Current assetsStock 3,468Debtors 4,314 Total assets 13,340 LiabilitiesExternal creditors (3,086)Intercompany (6,803)creditorsProvisions (2,000) Total liabilities (11,889) Net assets 1,451Goodwill 5,690 Net purchase consideration and costs of acquisition 7,141 Analysed as:Gross consideration 13,944Intercompany loan (6,803) 7,141 Satisfied by:Cash 8,830Deferred consideration 5,114Repayment of intercompany (6,803)loan 7,141 6 Financial instruments As explained in note 1 the Group has taken advantage of the transitionalarrangements of FRS 25 not to restate corresponding amounts in accordance withFRS 25. The adjustments necessary to implement this policy have been made as at1 June 2005 with the net adjustment to net assets, after tax, taken through thecurrent period reconciliation of movements in shareholders' funds.Corresponding amounts for comparative periods are presented and disclosed inaccordance with the requirements of FRS 4 (as applicable in those periods). Themain differences between the comparative periods and current period bases ofaccounting are shown below: Effect on the balance sheet at 1 June 2005 At 31 May 2005 Reclassification At 1 June 2005 £000 £000 £000Shares classified as liabilities- falling due after more than one year - 2,087 2,087 Share capital 3,000 (1,921) 1,079Profit and loss account 1,380 (166) 1,214 The nature of the main effects upon the balance sheet at 1 June 2005 and uponthe current period consolidated profit and loss account, statement of totalrecognised gains and losses and cash flow statement are as follows: • The ordinary shares, A ordinary shares, A preference shares and B preference shares in existence at 1 June 2005 are treated as part of shareholders' funds in comparative periods. The A preference shares and B preference shares and elements of the ordinary and A ordinary shares are treated as liabilities at the start of the current period, increasing net debt and reducing reported share capital and net assets at the start of the current period. As a consequence, the reconciliation of net cash flow to the movement in net debt in the current period is also affected. At 30 November 2005 the only class of share in existence is equity ordinary shares. • Finance payments in respect of these shares do not affect the profit for the financial year in comparative periods but are charged in the profit and loss account as interest in the current period. Any cumulative unpaid finance payments in respect of these shares are now classified as liabilities and therefore reduce net assets. In respect of elements of FRS 4 non-equity shares, the cash flow statement is unaffected as the finance payments are dealt with as servicing of finance in all periods in accordance with FRS 1. In respect of elements of FRS 4 equity shares that are classified as liabilities, the finance payments, which would now be included in servicing of finance, would have been included in dividends paid. The comparative period disclosures follow FRS 4 as applicable. This includesthe analysis of comparative periods' shareholders' funds into equity andnon-equity components. FRS 4 used "equity" as a sub-set of shareholders' funds,whereas FRS 25 applies the term "equity" to issued financial instruments otherthan those, or those components, classified as liabilities. The effect on the current period of the new policy is to present £367,000 asinterest charges which would hitherto have been included as £367,000 innon-equity dividends and thereto to reduce profit on ordinary activities beforetaxation by this amount in the period ended 30 November 2005. The main effects on the primary statements in the comparative periods, had FRS25 been adopted, would have been similar to those stated above. 7 Copies of this interim report are being sent to all shareholders and willbe available 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