27th Feb 2007 07:05
Hargreaves Services PLC27 February 2007 For Immediate Release 27 February 2007 HARGREAVES SERVICES plc Interim results for the six month period ended 30 November 2006 HIGHLIGHTS • Hargreaves Services plc provides materials and services principally tothe energy industry, plus other major material consumers. By moving materialsand waste for itself and clients, the Group is the largest bulk haulier in theUnited Kingdom. The Group is also the UK's sole independent manufacturer ofcoke. • In the half year ended 30 November, Hargreaves acquired Norec Limited,a major supplier of services to the energy industry, which employs in excess of500 people. • Group turnover for the period was £102.7m (2005: £70.8m) an increaseof 45%. • Profit on ordinary activities before taxation was £3.7m (2005: £3.0m)an increase of 22%. • A maiden dividend of 5p per share was approved and paid in respect ofthe year to 31 May 2006. • The Group continued to win substantial new contracts, givingconfidence over future revenue streams and earnings. • The Group is also pleased to announce the acquisition of MaltbyColliery from UK Coal plc for £21.5m part funded by a placing of £11.1m at aprice of 469p per share. Chairman, Tim Ross commented: "The Board is delighted with the excellent performance of the group in the firsthalf of the year. It is even more pleased with the increased order book, and thevisibility that this gives in relation to future results. Norec, acquired inSeptember 2006, is being smoothly integrated within the Industrial ServicesDivision, and will make a full contribution to the second half of the year. TheBoard is also excited by the Maltby deal which will further complement thegroup's existing operations. Your Board is confident, and committed to,achieving expectations. An interim dividend of 3p per share will be paid on 26March 2007 to those shareholders on the register at 9 March 2007." EnquiriesHargreaves Services plc 0191 373 4485Gordon BanhamPeter Dillon Buchanan Communications 0207 466 5000Diane StewartTim Anderson Brewin Dolphin Securities 0113 241 0130Andrew Kitchingman Group Chief Executive's Statement It gives me great pleasure to announce our interim results for the six monthsended 30 November 2006. During this period we successfully acquired NorecLimited, a service supplier principally to generators and ports, adding over 500people to our workforce. A number of major new contracts won during this periodalso contributed to a substantial organic growth. Trading results It was pleasing to see Group turnover for the period increase 45% to £102.7m(2005: £70.8m). This was largely driven by the Minerals division, reflecting newcontracts with generators. There was also a considerable increase in turnoverfrom Coal4Energy, our joint venture company with UK Coal, which supplies thedomestic and light industrial markets. Total operating profit (pre goodwill)increased by 5% from £4.3m to £4.5m. However this masks a strong underlyingperformance, as there were £0.8m of non recurring costs which were expensedduring the period. Profit on ordinary activities before taxation increased by22% to £3.7m (2005: £3.0m). The Board is recommending the payment of 3p per share interim dividend in linewith our stated dividend policy. Acquisitions On 1 September 2006, the Group acquired Norec Limited for an initial purchaseconsideration, including costs, of £5.9m plus a further payment of up to £1.5mdepending upon the results to 31 December 2006. The Company, which employs inexcess of 500 people, principally provides support services to generators, portsand other heavy industrial companies. Norec made sales of £7.5m and an operatingprofit of £0.5m during this period. Operating review The group enjoyed strong organic sales growth in the first half. The growth islargest in the Minerals Division, principally through sales of coal to thegenerators. However, all divisions have progressed satisfactorily. We have alsowon significant new orders for our goods and services, this gives goodvisibility of future earnings, both in the short and medium term. The Board isconfident of an excellent second half year. Throughout this half year, we have continued our policy of investing for futuregrowth by recruitment and promotion of people, plus continuing to invest inadvanced systems. The integration of our newest acquisition, Norec, with Hargreaves IndustrialServices, has proceeded smoothly, and many opportunities are arising from thecombined management and workforce plus the enlarged customer base. In September2006, we began an operation in Germany, Hargreaves Raw Material Services GmbH,to supply the European Market for foundry coke and other associated products.The Company is trading successfully, has won significant orders, and we believeit will make an initial contribution to the Group full year results. We also purchased a technically advanced tyre crumbing plant in Sheffield at acost of £1.0m to take advantage of the new directive preventing disposal of usedtyres into landfill. This market provides income from the receipt of used tyres,and income from the subsequent sale of crumb rubber. Group Chief Executive's Statement continued The processed product may also be used as a coal substitute by our subsidiary,Monckton Coke and Chemical Company Limited. This plant will be commissioned andoperational by May 2007, with a capacity to process 30,000 tonnes of used tyresper annum. The Group continues with the policy of becoming the most significant player in anumber of specialist niche markets. Strategy We remain determined to deliver strong organic growth through our existingbusiness. The recent investment into Germany will demonstrate that our businessmodel can be replicated outside the United Kingdom. We will continue to pursuestrategic and significant acquisitions relevant to our markets and skill base.In order to achieve these objectives we will maintain strong managementstructures, strengthening the senior management team, in line with businessgrowth. Staff We welcome the new employees that have joined the Group, particularly those atNorec. The Board has asked me to thank every employee in the Group for theefforts that they have made over this period. It is by their efforts, often inarduous conditions and against tight deadlines, that the Group prospers and goesforward. Outlook Sales for the two months of the second half continue at a high level. Theincreased order books, plus the second half contribution from Norec, indicatethat the full year will be another satisfactory performance continuing theGroup's successful track record. The Group has achieved significant growth,increasing sales and profit year on year. The markets in which the Group tradesremain buoyant, and your Board remains committed to a policy of exploitingopportunities within its skill base, whether by organic or acquisition means.Our principal aim will continue to be generating significant returns for ourshareholders. Post balance sheet event I am delighted to announce the acquisition of Maltby Colliery from UK Coal for atotal consideration of £21.5m plus £8.6m pension deficit assumed. The Groupraised £11.1m by way of a placing at 469p per share to fund part of theconsideration. Gordon BanhamGroup Chief Executive 27 February 2007 Consolidated profit and loss accountfor the six month period ended 30 November 2006 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2006 2005 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Turnover: group and shareof joint ventures 114,843 74,289 155,001Less: share of turnover of jointventuresContinuing operations (12,159) (3,498) (8,017) -------- -------- --------Group turnover 102,684 70,791 146,984 ======== ======== ========Group turnoverContinuing operations 89,443 60,702 124,896Acquisitions 13,241 10,089 22,088 -------- -------- -------- 102,684 70,791 146,984Cost of sales (92,936) (62,214) (129,955) -------- -------- --------Gross profit 9,748 8,577 17,029Administrative expenses (5,829) (4,517) (10,177) -------- -------- --------Group operating profitContinuing operations 3,467 2,450 4,709Acquisitions 452 1,610 2,143 -------- -------- -------- 3,919 4,060 6,852Share of operating profitin joint ventures 326 184 380 -------- -------- --------Total operating profit 4,245 4,244 7,232(Loss)/profit on sale offixed assets (16) 57 60Interest receivable 50 15 74Other finance costs - - (20)Interest payable and similarcharges - group (574) (1,313) (1,837) - joint ventures (33) - (36) -------- -------- --------Profit on ordinaryactivities before taxation 3,672 3,003 5,473Tax on profit on ordinaryactivities (1,171) (985) (1,823) -------- -------- --------Profit on ordinaryactivities after taxation 2,501 2,018 3,650Minority interest 7 - - -------- -------- --------Profit for the financialperiod/year 2,508 2,018 3,650 ======== ======== ======== Consolidated profit and loss account (continued)for the six month period ended 30 November 2006 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2006 2005 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Basic earnings per shareOrdinary shares 10.59p 16.43p 20.32pA Ordinary shares - 29.71p 29.71p Diluted earnings per shareOrdinary shares 10.56p 16.43p 20.21pA Ordinary shares - 29.71p 29.71p ======== ======== ========Dividend per ordinaryshare paid in theperiod/year 5p - - ======== ======== ========Dividend per A ordinaryshare paid in theperiod/year - - 13.3p ======== ======== ======== Consolidated balance sheetat 30 November 2006 At 30 November At 30 November At 31 May 2006 2005 2006 (unaudited) (unaudited) (audited) £000 £000 £000Fixed assetsIntangible assets - goodwill 11,859 5,883 5,745Tangible assets 24,209 18,827 21,146InvestmentsInvestment in joint ventures +-------------------------------------------+Share of gross assets | 10,023 2,782 7,328 |Share of gross liabilities | (8,913) (1,966) (6,431)| +-------------------------------------------+ 1,110 816 897Other investments 83 83 83 ---------- ---------- ---------- 37,261 25,609 27,871 ---------- ---------- ----------Current assetsStocks 15,208 10,502 15,055Debtors 32,291 24,617 21,167Cash at bank and in hand 3,788 19,764 15,022 ---------- ---------- ---------- 51,287 54,883 51,244Creditors: amounts falling duewithin one year (37,877) (34,490) (26,904) ---------- ---------- ----------Net current assets 13,410 20,393 24,340 ---------- ---------- ---------- Total assets less currentliabilities 50,671 46,002 52,211Creditors: amounts falling dueafter more than one (18,582) (17,109) (21,521)yearProvisions for liabilities andcharges (4,064) (4,175) (4,064) ---------- ---------- ----------Net assets excluding pensionliabilities 28,025 24,718 26,626Net pension liability (328) - (328) ---------- ---------- ----------Net assets 27,697 24,718 26,298 ========== ========== ==========Capital and reservesCalled up share capital 2,368 2,368 2,368Share premium account 19,082 19,099 19,082Other reserves 29 29 29Capital redemption reserve 1,530 1,530 1,530Profit and loss account 4,695 1,692 3,289 ---------- ---------- ----------Shareholders' funds 27,704 24,718 26,298Minority interest (7) - - ---------- ---------- ---------- 27,697 24,718 26,298 ========== ========== ========== Consolidated cash flow statementfor the six month period ended 30 November 2006 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2006 2005 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Cash flow from operatingactivities 5,997 (3,046) (215)Returns on investments andservicing of finance (521) (750) (2,508)Taxation (982) 5 (895)Dividends paid on sharesclassified inshareholders' (1,184) - -fundsCapital expenditure (2,773) (955) (2,067)Acquisitions (7,710) (2,870) (3,376) --------- --------- ---------Cash outflow beforefinancing (7,173) (7,616) (9,061) Financing (4,061) 24,747 21,450 --------- --------- ---------(Decrease)/increase incash in the period/year (11,234) 17,131 12,389 ========= ========= ========= Reconciliation of net cash flow to movement in net debtfor the six month period ended 30 November 2006 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2006 2005 2006 (unaudited) (unaudited) (audited) £000 £000 £000 (Decrease)/increase incash in the period/year (11,234) 17,131 12,389Net cash outflow/(inflow)from financing 4,061 (4,800) (2,985) --------- --------- ---------Change in net debtresulting from cash flows (7,173) 12,331 9,404Effect of adoption of FRS25 on 1 June 2005 (note 7) - (2,087) -Accrued premium onpreference shares - (367) -Accrued premium onredemption of loan stock - (88) 135New finance leases (1,548) (1,115) (3,880) --------- --------- ---------Movement in net debt inthe period/year (8,721) 8,674 5,659Net debt at the start ofthe period/year (6,414) (12,073) (12,073) --------- --------- ---------Net debt at the end of theperiod/year (15,135) (3,399) (6,414) ========= ========= ========= 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 7). Reconciliations of Group operating profit to net cash flow from operatingactivities for the six month period ended 30 November 2006 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2006 2005 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Group operating profit 3,919 4,060 6,852Depreciation and amortisation 1,981 1,533 3,239Increase in stocks (153) (3,362) (7,916)Increase in debtors (3,553) (4,884) (1,364)Increase/(decrease) increditors 3,803 (393) (1,026) --------- --------- ---------Net cash inflow/(outflow) fromoperating activities 5,997 (3,046) (215) ========= ========= ========= Consolidated statement of total recognised gains and losses for the six month period ended 30 November 2006 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2006 2005 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Profit for the financialperiod/year 2,508 2,018 3,650Effect of adoption of FRS25 on 1 June 2005 (note 7) - (166) (166) --------- --------- --------- 2,508 1,852 3,484Actuarial loss arising onretirement benefit scheme - - (50)Deferred tax arising onlosses in retirementbenefit scheme - - 15 --------- --------- ---------Total recognised gains andlosses relating to the 2,508 1,852 3,449financial period/year ========= ========= ========= Reconciliation of movements in group shareholders' fundsfor the six month period ended 30 November 2006 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2006 2005 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Profit for the financialperiod/year 2,508 2,018 3,650Dividends (1,192) - - --------- --------- --------- 1,316 2,018 3,650Effect of adoption of FRS25 on 1 June 2005 (note 7) - (2,087) (2,087)Conversion of debt toequity - 391 391New share capitalsubscribed (net of issuecosts) - 19,996 19,979Other recognised losses - - (35)Credit in relation toshare based payments (note2) 90 - - --------- --------- ---------Net addition toshareholders' funds 1,406 20,318 21,898Opening shareholders'funds 26,298 4,400 4,400 --------- --------- ---------Closing shareholders'funds 27,704 24,718 26,298 ========= ========= ========= 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 7). Notes to the interim report 1 This interim report has been prepared on the basis of the accounting policiesset out in the 31 May 2006 annual report except as noted below. In this interim report FRS 20 'Share-based payments' has been adopted for thefirst time (see note 2). The financial information does not constitute statutory accounts within themeaning of Section 240 of the Companies Act 1985. The figures for the year ended31 May 2006 have been extracted from the statutory accounts which have beendelivered to the Registrar of Companies. The independent auditors' report onthese accounts was unqualified. These results were approved by the Board of Directors and announced to theLondon Stock Exchange on 27 February 2007. 2 FRS 20 share-based payments In December 2005, the shareholders approved the establishment of a save as youearn ("SAYE") share option scheme under which options were issued over 145,000ordinary shares to employees of group companies. Under FRS 20 the fair value ofoptions granted is recognised as an employee expense with a correspondingincrease in equity. The fair value is measured at grant date and spread over theperiod during which the employee becomes unconditionally entitled to theoptions, in this case over 3 years. The fair value of the options granted hadbeen independently measured taking into account the terms and conditions onwhich the options were granted. The charge in respect of the share basedpayments is matched by an equal and opposite adjustment to profit and lossreserves, thereby having no net impact on the group's closing reserves. The fullmovement on reserves is shown in the reconciliation of shareholders' funds onpage 8. FRS 20 had no material effect on the comparative figures therefore no prior yearadjustment has been made. 3 Taxation is based on the estimated effective rate for each year as a whole,including deferred tax. 4 The dividend of 5 pence per ordinary share, proposed in the 2006 AnnualAccounts, agreed by the shareholders at the Annual General Meeting on 10 October2006 and paid on 18 October 2006, has been charged to the reserves in theseinterim financial statements. The directors have recommended an interim dividend of 3 pence per share, whichwill be paid on 26 March 2007. Interest payable in 2005 includes £367,000 relating to cumulative dividends andother finance charges on classes of share capital (or elements of classes ofshare capital) reclassified as debt from the adoption of FRS 25 on 1 June 2005. 5 The calculation of earnings per share on the ordinary shares is based on theprofit for the period/year and on the weighted average number of ordinary sharesin issue and ranking for dividend in the period. 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2006 2005 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Profit for the period/year 2,508 2,018 3,650 ========= ========= =========Weighted average number ofshares ('000) 23,675 12,280 17,962Earnings per share (pence) 10.59 16.43 20.32 ========= ========= ========= 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. 6 months ended 6 months ended Year ended 30 November 30 November 31 May 2006 2005 2006 (unaudited) (unaudited) (audited) £000 £000 £000 Profit for the period/year 2,508 2,018 3,650 ========= ========= =========Weighted average number ofshares ('000) 23,751 12,280 17,962Earnings per share (pence) 10.56 16.43 20.32 ========= ========= ========= In the period ended 30 November 2005 an exit dividend of £291,000 was payable onthe A ordinary shares upon the flotation of the Company on AIM. The dividendrights of the ordinary shares and A ordinary shares were identical in all otherrespects. The calculation of the additional earnings per A ordinary sharearising on this dividend was as follows: 6 months ended 30 November 2005 (unaudited) Exit dividend for the period (£000s) 291Weighted average number of A ordinary shares ('000) 2,191Additional 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. 6 Acquisition On 1 September 2006 the Company acquired the entire issued share capital ofNorec Limited. The resulting goodwill of £6,336,000 was capitalised and will bewritten off over 20 years. The business is long standing and well establishedand the directors believe that the Group will continue to derive financialbenefit over this period. Book and fair value £000Fixed assetsTangible 764 Current assetsDebtors 4,271Cash 1,371 --------Total assets 6,406 ========LiabilitiesExternal (2,172)creditorsProvisions (3,173) --------Total (5,345)liabilities ========Net assets 1,061Goodwill 6,336 --------Net purchase consideration and costs of 7,397acquisition ========Analysed as:Gross consideration 7,397 ========Satisfied by:Cash 5,897Deferred consideration 1,500 -------- 7,397 ======== 7 Financial instruments In the period ended 30 November 2005 the Group took advantage of thetransitional arrangements of FRS 25 not to restate corresponding amounts inaccordance with FRS 25. The adjustments necessary to implement this policy weremade as at 1 June 2005 with the net adjustment to net assets, after tax, takenthrough the period ended 30 November 2005 reconciliation of movements inshareholders' funds. 8 Post balance sheet event I am delighted to announce the acquisition of Maltby Colliery from UK Coal for atotal consideration of £21.5m plus £8.6m pension deficit assumed. The Groupraised £11.1m by way of a placing at 469p per share to fund part of theconsideration. 9 Copies of this interim report are being 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