3rd Sep 2007 07:00
Hargreaves Services PLC03 September 2007 For Immediate Release 3 September 2007 HARGREAVES SERVICES plc Preliminary results for the year ended 31 May 2007 Hargreaves Services plc (AIM:HSP), a leading provider of transport and supportservices to the energy and waste sectors announces its preliminary results forthe year ended 31 May 2007. HIGHLIGHTS • Group turnover including share of joint ventures up 71% to £265.3m (2006: £155.0m) • Total operating profit up 44% to £10.4m (2006: £7.2m) • Profit before tax up 56% to £8.6m (2006: £5.5m) • Final Dividend of 6p per share • Strong organic and acquisitive growth delivered with three key acquisitions and one new business formed • Expansion into growing European raw materials markets • Current trading and order books at record levels Chairman, Tim Ross commented: "Following a very good result for the financialyear, I am pleased to report that the early months of the new financial year arefully up to expectations. We are proceeding in line with broker's forecasts." EnquiriesHargreaves Services plc 0191 373 4485Gordon BanhamPeter Dillon Buchanan Communications 0207 466 5000Tim AndersonKaren Morrison Brewin Dolphin Securities 0113 241 0130Andrew Kitchingman Chairman's statement I am delighted to report an excellent result for the year ended 31 May 2007,driven by strong organic growth and successful acquisitions. Group turnover (including share of joint ventures) of £265.3m (2006: £155.0m)and operating profit of £10.4m (2006: £7.2m) illustrate the considerableprogress that has been achieved. Highlights of the year were the acquisition of Norec Limited, in September 2006,for a gross purchase consideration (including expenses) of £7.4m and theacquisition of the Maltby Colliery, in February 2007, for a consideration(including pension deficit and expenses) of £31.0m. Finally, the acquisition ofthe business and assets of Simon Bulk Warehousing and Distribution was made inApril 2007 at a cost of £4.2m (including expenses). As the result of these and other smaller acquisitions we welcomed more than1,000 new employees to the Group. All these acquisitions have been dulyintegrated and have performed in accordance with expectations. We look forwardto a full year's contribution from each in 2007/2008. During the year we established a new presence in Dusseldorf and commencedtrading operations in coal, coke and other minerals, to customers in Germany andother European markets. The newly-acquired Maltby Colliery is the leading UK supplier of low-sulphurcoal, with Monckton Coke Works, the only independent UK coke producer, one ofits principal outlets. Each operates as a Division in its own right and,combined with the various operations in our established Minerals, Transport andIndustrial Services Divisions, together make up an unrivalled supply chain inthe provision of carbon-based and related minerals. The Group remains strongly focused on services to the energy sector and nowcomprises the largest independent supplier of solid fuels to the generators,whilst additionally enjoying very strong market positions in supplies to thefoundry, cement and chemical industries. The Group's excellent port facilitiesat Immingham and Newport enable extremely efficient distribution of importedproducts by road, rail and water as well as the export of specialist products,notably to Scandinavia. I continue to be greatly impressed by the work ethic, motivation and loyalty ofour employees at all levels. I would like to thank each and every one of them,whose skills and efforts are at the heart of the Group's success. In the light of the Group's continuing success, the Board has recommended afinal dividend of 6p per share payable immediately after the Annual GeneralMeeting on 3 October 2007, in addition to the interim dividend of 3p per sharepaid earlier in the year. We continue to enjoy good visibility of earnings, with order books at recordlevels and with additional long term contracts already secured with major bluechip companies. We remain firmly committed to expansion and anticipate furthersignificant progress, both by organic growth and selective acquisition, in theyear ahead. Tim RossChairman 3 September 2007 Group Chief Executive's statement It gives me pleasure to announce that the Group turnover (including share ofjoint ventures) for the year ended 31 May 2007 was a record at £265.3m (2006:£155.0m), an increase of 71.2%. Total operating profit was £10.4m (2006: £7.2m), an increase of 44.4%, which metDirectors' expectations. The Board have recommended the payment of a final dividend of 6p per share, inaddition to the interim dividend already paid of 3p per share. Review of operations During the year the Group grew significantly both organically and byacquisition. In September 2006, Norec Limited, a successful industrial services provideremploying in excess of 500 people, was purchased. In February 2007 the Groupacquired the assets of Maltby Colliery from UK Coal. In April 2007 the Groupacquired the business and assets of Simon Bulk Warehousing and Distribution.This company has a long term contract with ConocoPhillips for the transport andstorage of petroleum coke. This activity is being integrated into the IndustrialDivision. The Group now operates in five reporting divisions thus giving a clear focussedmanagement structure with defined lines of reporting. The Group has successfullyintegrated the new acquisitions which are contributing to profits. The Group also achieved expansion in the year within its pre-existing Divisions,making excellent progress in market share and profitability. Minerals Division The Minerals Division is principally concerned with the import and subsequentsale of carbon based materials to end users. The main areas of site operationsare the ports of Immingham and Newport. The majority of imported material is forthe power generation industry. In September 2006 the Group commenced trading from a new office in Dusseldorf,Germany, through a new company, Hargreaves Raw Material Services GmbH. I ampleased to report that this operation has been successful and substantialquantities of material have been imported, principally from China, throughEuropean ports for distribution throughout Continental Europe. In addition,quantities of blast furnace coke have been imported from Poland to satisfymarket demand. The results of this venture have exceeded expectations andcontributed to profits earlier than expected. Coal remains a competitive fuel for power generation and despite the mildwinter, supply volumes have been maintained. The strategic locations atImmingham and Newport, helped by the recent new terminal facility opened byAssociated British Ports at Immingham, have allowed the Group to import andcontract for sale additional tonnage. This Division has substantially increasedits volumes during the year and contained its overheads. This has produced anexcellent result with operating profits considerably increased. The Division is headed by Steve Anson and is now believed to be the largestimporter of coal into the UK (excluding direct imports by generators and steelproducers). It adds value to products by processing prior to despatch by road,rail or water. Increasing variety and volume of materials comprising coal, anthracite, coke,petcoke, pumice, shale, ash and aggregates all contribute to the growthachieved. Group Chief Executive's statement (continued) Industrial Division The Industrial Division, headed by Greg Kelley, Managing Director of NorecLimited, is principally concerned with providing labour and expertise in thepower generation, chemical and port industries around the UK. The acquisition ofNorec Limited allowed the existing Industrial Division to be integrated toprovide a larger and more efficient operation with sizeable activitiesthroughout the UK. During the year Norec Limited was successfully integrated leading to salesincreases, margin improvement and reduced overheads. The result was verysatisfactory progress. Transport Division This Division is principally concerned with bulk haulage and is the largest bulkhaulier in the UK. The Division is headed by Paul Young. The customer base islargely major blue chip companies for whom dedicated haulage often on long-termindex-linked contracts provides a substantial base load of work. The year produced a good result despite cost pressures particularly diesel fueland tyres. The market was reasonably buoyant but remained competitive. In February 2007 the Group acquired the remaining 50% of the share capital ofHargreaves (Bulk Liquid Transport) Limited and integrated it into main fleetoperations. The tanker operation has successfully integrated the business ofGilbraith Tankers Limited, acquired in May 2006. The Division has considerably benefited from haulage of materials for the otherpart of the Group. The ability to react swiftly to market opportunities plusinvestment in modern vehicles and leading technology to control vehiclemovements together with increased volumes from the tanker business allcontribute increased efficiency and economies of scale. The Monckton Coke & Chemical Company Limited ('Monckton') The Company, headed by Mick Gore, is the last independent coke producer in theUK and has long term contracts for the supply of its specialist product to amajor UK customer and substantial exports to Scandinavian customers. Thecombined heat and power plant produces electricity for sale to the National Gridfrom excess gas generated by the coking process. The Company has operatedsuccessfully during the year and produced a satisfactory profit. The Monckton Rubber Technologies tyre crumbing plant which was purchased for£1.0m has been commissioned in the latter part of the financial year and isprocessing waste tyres which are now restricted from input into landfill.Revenue is generated by charging for tyre disposal and by sale of processedrubber crumb produced. The operation is about to complete commissioning trialsand is expected to make a full contribution for the financial year 2007/2008. Maltby Colliery Limited In February 2007 the Group acquired the business and assets of Maltby Collieryfrom UK Coal plc. Maltby Colliery is a deep mine producing specialist coal,mining approximately 1,250,000 tonnes per annum. The Group negotiated athree-year contract, at close to international prices, with Drax Power Stationfor approximately 60% of production. A further 25% of production is used byMonckton Coke and Chemical Company Limited, due to the specialist cokingproperties of the coal. The Group has recruited Alan Houghton OBE, to act as adviser and director atMaltby. It is expected that the mine will achieve production targets for 2007/2008 and is already making a worthwhile contribution to operating profits. Group Chief Executive's statement (continued) Joint Ventures Hargreaves Coal Combustion Products Limited, which assists coal fired generatingstations by the sale of ash as a bi-product, has continued to grow and is nowrecognised as the UK leader in this field. During the year a further developmentwas the obtaining of the UK licence for Lytag from Cemex. Lytag is a lightweightaggregate used in the construction industry. Coal4Energy Limited, our joint venture with UK Coal plc, commenced trading inApril 2006. The Company is selling to the light industrial and domestic markets,previously supplied independently by each partner. The synergy, by way of moreefficient distribution, reduced overhead and common marketing, has allowed theCompany to prosper. It is the largest UK supplier to these markets and hasproduced satisfactory results. ThyssenKrupp Metallurgical Services Limited had a satisfactory year ofoperations however with the advent of Hargreaves Raw Material Services GmbH theGroup is now able to directly source the relevant raw materials from its ownGerman operations, accordingly this joint venture was dissolved with effect from31 May 2007. Employees Numbers employed have increased from 585 in 2006 to 1,900 in 2007. The principalreasons for this very large increase have been the acquisition of Norec Limited,Maltby Colliery and Simon Distribution together with organic growth. I wouldlike to take the opportunity to welcome all new employees and I am pleased toreport that the integration into the Group has been successful. Our work is often hard and dirty and only by the efforts of our people at alllevels are our customer expectations fully met. The Group Board joins me inthanking both our new and existing employees for the major part they have playedin the continuing growth and success of the Group. By the nature of what we do, we operate to tight deadlines over widegeographical areas and the growth and future prosperity of the Group relies onthe skills, dedication and motivation of all our employees. Group Board The Group Board has remained unchanged during the year, however we expect ourFinancial Director, Peter Dillon, to retire at 31 December 2007 and active stepshave been put in place to recruit his replacement. Current trading and outlook The markets in which the Group trades and has core competencies are subject tofluctuations but remain strong. Further consistent and profitable growth of theGroup is anticipated. The Group Board remains committed to a policy ofsubstantial and continued growth within the areas of its expertise. I amconfident of being able to report continued growth across all companies anddivisions in the future. Gordon BanhamGroup Chief Executive 3 September 2007 Financial review The trading results for the year ended 31 May 2007 are a record for the Group.Group turnover (including share of joint ventures) was £265.3m (2006: £155.0m)and total operating profit was £10.4m (2006: £7.2m), increases of 71.2% and44.4% respectively. As well as organic expansion, the Group made major acquisitions during the year.These are as fully explained in the Chairman's and Group Chief Executive'sstatements. Part of the funding for the Maltby acquisition was raised by a share placingwhich realised £10.0m after expenses. The joint venture, Coal4Energy Limited, which commenced in April 2006 inpartnership with UK Coal plc, became firmly established and achievedexpectations. Finally the establishment of Hargreaves Raw Material Services GmbHin Dusseldorf, Germany, in September 2006 has been successful and hascontributed to Group profits within the current financial year. The Group operates as five trading divisions, three of which are withinHargreaves (UK) Services Limited. Additionally there are currently three jointventure companies. The Minerals Division which imports, processes, handles and delivers carbonbased minerals has achieved a very significant growth in volume, aided byimprovements to our facilities at Immingham and Newport. The Industrial Division now incorporates Norec which has been successfullyintegrated. It provides equipment and labour on site for major industrialcustomers, particularly power generators and ports. The Division has shown goodgrowth and reinforces the view that blue chip clients continue to wish tooutsource material handling and maintenance. The Transport Division, which includes waste haulage and tanker operations, isthe largest bulk haulier in the UK. It has a number of depots and operationalcentres which allows the fleet to be cost effectively deployed over a widegeographic area. The Division increased its turnover, client base and operatingprofits. Monckton, which was acquired in June 2005, is the sole independent coke works inthe UK. The long-term index-linked contract with a major UK customer has beensuccessfully supplied. In addition, exports to Scandinavian clients are madedirectly and have increased in volume. Operating profits of £2.8m reflect theactions taken. The tyre crumbing plant, purchased for £1.0m in August 2006, has beenrefurbished and is currently starting to produce significant quantities ofmaterial. Changes in legislation mean that used tyres can no longer be put intolandfill. Substantial revenues are generated from both receipts for used tyredisposal and from sales of the subsequently crumbed product. The plant will befully operational in the 2007/08 financial year. Hargreaves Coal Combustion Products Limited, a joint venture companyspecialising in the disposal of ash for generators, further extended itsactivity by obtaining the UK licence for Lytag to distribute lightweightaggregates exclusively in the UK. Trading volumes increased and the Company madea very worthwhile contribution to the Group profits. The joint venture company, Coal4Energy Limited, in partnership with UK Coal plctraded well. The amalgamation of light industrial and domestic coal sales ofboth companies has made it the largest UK supplier to these markets. Thecombined volume, more efficient distribution and reduced overhead have allplayed a part in the successful trading of this Company. Hargreaves (Bulk Liquid Transport) Limited which operates a fleet of roadtankers and acquired, in May 2006, the fleet and assets of Gilbraith TankersLimited has, in February 2007, become a wholly-owned subsidiary of the Group,and is now managed as part of the Transport Division. This has resulted in anability to give wider geographic coverage and reduced overhead cost, the majorbenefits of which will be felt in 2007/08. The joint venture, ThyssenKrupp Metallurgical Services Limited, has tradedsuccessfully during the year. However, it was dissolved by mutual consent at 31May 2007. The products previously supplied by ThyssenKrupp will in future besupplied by Hargreaves Raw Material Services GmbH, the Group's Germanysubsidiary. Financial review (continued) 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 Group 134,321 25,039 44,105 27,411 9,229 240,105turnover =========== =========== ========== ========= ========= ============ Segmentoperatingprofit 3,018 1,080 2,425 2,785 1,159 10,467 =========== =========== ========== ========= ========= ============ Segmentprofit 3,036 944 2,327 2,437 1,086 9,830before tax =========== =========== ========== ========= ========= Common (1,203)costs ------------Groupprofitbefore 8,627taxation ============ 2006 2006 2006 2006 2006 2006 Minerals Industrial Transport Monckton Maltby Total £000 £000 £000 £000 £000 £000 Group 75,040 8,292 41,564 22,088 - 146,984turnover ============ ============ ========= ========= ========= ============ Segmentoperatingprofit 2,130 539 2,394 2,143 - 7,206 ============ ============ ========= ========= ========= ============ Segmentprofit 2,063 420 2,277 2,033 - 6,793before tax ============ ============ ========= ========= ========= Common (1,320)costs ------------Groupprofitbefore 5,473taxation ============ Profitability during the year was increased due to volume increases against alargely fixed overhead base, together with acquisitions. Key financial performance indicators The group monitors a range of key performance indicators. Group wide examplesare: 2007 2006 • Turnover (including group share of joint £265.3m £155.0m ventures) • Gross margin 11.2% 11.6% • Interest cover 5.0 3.9 • Profit before tax/turnover 3.6% 3.7% • Effective tax rate 33.8% 33.3% • Cash generated from/(absorbed by) operations £8.4m (£0.2m) Further comment on a number of the above key performance indicators can be foundin this Financial Review. Financial review (continued) In addition there are a significant number of further key performance indicatorswhich are used to measure the business on a more detailed basis, and these arelisted here for information. • Tonnage handled per week/month • Revenue and contribution per vehicle• Tonnage sold • Road traffic accident analysis• Purchase price per tonne • Non-road traffic accident analysis• Sales value per tonne • Staff turnover levels• Quality of coal • Injury claims• Waste handled by type and average weight • Daily and weekly coke production• Number of loads per month • Daily and weekly crumb production• Aged debtor analysis • Daily and weekly coal production• Debtor day reports Gross profit Overall gross profit percentage of 11.2% (2006: 11.6%) represents a smallreduction from the previous period. This is entirely due to the continuingchange in mix of sales, particularly the high volume, low margin, quantity ofmineral sales. In absolute terms gross profit of £26.9m (2006: £17.0m) sees anincrease of 58.2%. Total operating profit Total operating profit of £10.4m (2006: £7.2m) represents an increase of 44.4%due to increased volumes, contained overheads and the acquisition of Norec,Maltby Colliery and Simon Distribution. Interest and profit before taxation Net interest charges of £1.7m (2006: £1.8m) reflect the cost of acquisitionsless cash generated by operations. Interest is covered 5.0 times by totaloperating profits and 7.7 times EBITDA (Earnings Before Interest, Tax,Depreciation and Amortisation). The record Group profits of £9.2m (2006: £5.8m), before goodwill and taxation,exceeded Directors' expectations. Included were contributions from NorecLimited, Maltby Colliery and Simon Distribution for part of the financial year. Cash flow EBITDA of £16.0m (2006: £10.1m) was generated from operational activities.During the year £10.0m was raised (net of expenses) from a share placing and wasused to meet part of the purchase consideration of Maltby Colliery. Financial review (continued) Net worth The capital and resources of the Group have increased to £41.8m (2006: £26.3m)due to both retained earnings and the proceeds from a share placing. Dividend The Group's stated policy is to pay an interim and final dividend splitone-third/two-thirds each year. Accordingly the Board authorised the payment ofan interim dividend of 3p per share paid in February 2007 and propose a finaldividend for the year of 6p (2006: 5p per share), an increase of 20%. Peter DillonGroup Financial Director 3 September 2007 Consolidated profit and loss accountfor the year ended 31 May 2007 Note 2007 2006 £000 £000 £000 £000 Turnover: group and share of 265,274 155,001joint venturesLess: share of turnover ofjoint venturesContinuing operations (25,169) (8,017) --- ---Group turnover 240,105 146,984 === ===Group turnoverContinuing operations 173,881 146,984Acquisitions 66,224 - --- --- --- --- 240,105 146,984Cost of sales (213,164) (129,955) --- ---Gross profit 26,941 17,029Administrative expenses (17,049) (10,177) --- ---Group operating profitContinuing operations 7,265 6,852Acquisitions 2,627 - --- --- --- --- 9,892 6,852Share of operating profitin:joint ventures 413 380associates 76 - --- ---Total operating profit 10,381 7,232Profit on sale of fixedassets - continuing 25 60operationsGroupJoint ventures 30 -Interest receivable 358 74Other finance costs - group (97) (20)Interest payable and similarcharges - groupFinance costs on sharesclassified as - (455)liabilities(pre-flotation financecosts)Other (1,971) (1,382) --- --- --- --- (1,971) (1,837)Interest payable and similarcharges - joint (99) (36)ventures --- ---Profit on ordinary 8,627 5,473activities before taxationTax on profit on ordinary 2 (2,918) (1,823)activities --- ---Profit on ordinary 5,709 3,650activities after taxationMinority interests (73) - --- ---Profit for the financial 5,636 3,650year === ===Earnings per share 4Ordinary shares 23.12p 20.32pA ordinary shares - 29.71p Consolidated profit and loss account (continued)for the year ended 31 May 2007 Note 2007 2006 £000 £000 £000 £000 Diluted earnings per share 4Ordinary shares 22.73p 20.21pA ordinary shares - 29.71p The group had no discontinued operations. Earnings per share relate entirely tocontinuing operations. Consolidated balance sheetat 31 May 2007 2007 2006Fixed assets £000 £000 £000 £000 Intangible assets - goodwill 13,052 5,745 - negative goodwill (73) -Tangible assets 63,178 21,146InvestmentsInvestments in joint venturesShare of gross assets 5,000 7,328Share of gross liabilities (4,119) (6,431) --- --- 881 897Investments in associates 58 -Other investments 20 83 --- --- --- --- 959 980 --- --- 77,116 27,871Current assetsStocks 35,027 15,055Debtors 38,406 21,167Cash at bank and in hand 11,779 15,022 --- --- 85,212 51,244Creditors: amounts falling due (63,096) (26,904)within one year --- ---Net current assets 22,116 24,340 --- ---Total assets less current 99,232 52,211liabilitiesCreditors: amounts falling due after (38,477) (21,521)more than oneyearProvisions for liabilities and (12,339) (4,064)charges --- ---Net assets excluding pension 48,416 26,626liabilities Net pension liability (6,588) (328) --- ---Net assets including pension 41,828 26,298liabilities === ===Capital and reservesCalled up share capital 2,627 2,368Share premium account 29,177 19,082Other reserves 29 29Merger reserve 1,022 -Capital redemption reserve 1,530 1,530Profit and loss account 7,293 3,289 --- ---Shareholders' funds 41,678 26,298Minority interest 150 - --- --- 41,828 26,298 === === Consolidated balance sheet (continued)at 31 May 2007 These financial statements were approved by the board of directors on 3September 2007 and were signed on its behalf by: GFC Banham PM Dillon Director Director Consolidated cash flow statementfor the year ended 31 May 2007 Note 2007 2006 £000 £000 Cash flow statement Cash flow from operating activities 5 8,405 (215)Returns on investments and servicing of finance (1,647) (2,508)Taxation (2,245) (895)Capital expenditure (7,869) (2,067)Acquisitions (33,616) (3,376)Dividends paid on shares classified in shareholders'funds (1,972) - --- ---Cash (outflow)/inflow before financing (38,944) (9,061) Financing 25,877 21,450 --- ---(Decrease)/increase in cash in the year (13,067) 12,389 === ===Reconciliation of net cash flow to 6movement in net debt (Decrease)/increase in cash in the year (13,067) 12,389 Net cash inflow from financing (15,205) (2,985) --- ---Change in net debt resulting from cash flows (28,272) 9,404Release of premium on redemption of loan - 135stockRelease of loan arrangement fees 46 -New finance leases (1,931) (3,880)Loans and finance leases acquired with subsidiary (1,867) - --- ---Movement in net debt in the year (32,024) 5,659Net debt at the start of the year (6,414) (12,073) --- ---Net debt at the end of the year (38,438) (6,414) === === Consolidated statement of total recognised gains and lossesfor the year ended 31 May 2007 2007 2006 £000 £000Profit for the financial yearGroup 5,308 3,377Share of joint ventures 272 273Share of associates 56 - --- --- 5,636 3,650Effect of adoption of FRS 25 on 1 June - (166) 2005Exchange differences on consolidation (4) - --- --- 5,632 3,484Actuarial gain/(loss) arising on retirement benefitscheme 108 (50)Deferred tax arising on gains/(losses) in retirementbenefit scheme (32) 15 --- ---Total recognised gains and losses relating 5,708 3,449to the financial year === === Reconciliations of movements in shareholders' fundsfor the year ended 31 May 2007 Group Company 2007 2006 2007 2006 £000 £000 £000 £000 Profit for the financial year 5,636 3,650 8,217 2,707Dividends on shares classified inshareholders' funds (1,972) - (1,972) - --- --- --- ---Retained profit 3,664 3,650 6,245 2,707Effect of adoption of FRS 25 on 1 June - (2,087) - (2,087) 2005Other recognised gains/(losses) 76 (35) - -Conversion of debt to equity - 391 - 391New share capital subscribed (net of 11,376 19,979 11,376 19,979issuecosts)Credit in relation to share based 268 - - -paymentsExchange differences on consolidation (4) - - - --- --- --- ---Net addition to shareholders' funds 15,380 21,898 17,621 20,990Opening shareholders' funds 26,298 4,400 24,221 3,231 --- --- --- ---Closing shareholders' funds 41,678 26,298 41,842 24,221 === === === === 1 Accounting policies This announcement has been prepared on the basis of the accounting policies setout in the 31 May 2006 financial statements, except that the following newstandards have been adopted for the first time: FRS 20 'Share based payments'; The accounting policy under this new standard is set out below. FRS 20 has hadno material effect on the comparative figures therefore no prior year adjustmenthas been made. Share based payments The share option programme allows employees to acquire shares of the Company.The fair value of options granted is recognised as an employee expense with acorresponding increase in equity. The fair value is measured at grant date andspread over the period during which the employees become unconditionallyentitled to the options. The fair value of the options granted is measured usingan option pricing model, taking into account the terms and conditions upon whichthe options were granted. The amount recognised as an expense is adjusted toreflect the actual number of share options that vest except where variations aredue only to share prices not achieving the threshold for vesting. 2 Taxation Analysis of charge in period 2007 2006 £000 £000 £000 £000UKcorporationtaxCurrent tax 2,443 1,580on incomefor theperiodShare of 71 49jointventures'current taxShare of 20 -associates'current taxAdjustment (294) (145)in respectof prioryears ------- ------- 2,240 1,484Foreign taxCurrent tax 243 -on incomefor theperiod -------- --------Total 2,483 1,484current tax Deferred taxOrigination 209 317of timingdifferencesShare of 37 22jointventures'deferred taxShare of - -associates'deferred taxAdjustment 189 -in respectof previousyears ------- -------Total 435 339deferred tax -------- --------Tax on 2,918 1,823profit onordinaryactivities ======== ======== 2 Taxation (continued) Factors affecting the tax charge for the current period The current tax charge for the period is lower (2006: lower) than the standardrate of corporation tax in the UK of 30% (2006: 30%). The differences areexplained below. 2007 2006 £000 £000Current tax reconciliationProfit on ordinary activities before tax 8,627 5,473 ------ ------Current tax at 30% (2006: 30%) 2,588 1,642 Effects of:Finance charges on shares classified as - 115liabilitiesExpenses not deductible for tax purposes 424 243Capital allowances for period in excess ofdepreciation - (387) (315)group - share of joint ventures (1) (52)Small companies tax rates (32) (49)Higher tax rates on overseas earnings 73 -Tax losses utilised (41) -Tax losses carried forward in joint venture - 31Chargeable gain - 14Other timing differences 153 -Adjustment in respect of prior years (294) (145) ------ ------Total current tax charge (see above) 2,483 1,484 ====== ====== Factors affecting the tax charge for future periods The group has unrelieved UK corporation tax losses of approximately £nil (2006:£nil) available to carry forward against profits from the same trade. 3 Dividends and finance costs The aggregate amount of dividends on ordinary shares comprises: 2007 2006 £000 £000Dividends on ordinary sharesFinal dividends paid in respect of prior year but notrecognised as 1,184 -liabilities in that yearInterim dividends paid in respect of the current year 788 - --- ---Aggregate amount of dividends paid in the financial year 1,972 - === ===Proposed dividend of 6p per share (2006: 5p per share) 1,576 1,184 === === The above amount has not been included within creditors as it was not approvedbefore the year end. 2007 2006 £000 £000Dividends and finance charges on other classes of sharesPremium payable on redemption of A preference shares - 76Dividends on A preference shares - 76Dividends on B preference shares - 12Dividends on A convertible preferred ordinary shares - 291 --- --- - 455 === ===Charged to interest payable and similar charges - 455Charged to shareholders' funds - - --- --- - 455 === === 4 Earnings per share All earnings per share disclosures relate to continuing operations as the grouphad no discontinued operations in either 2006 or 2007. Up until 30 November 2005 two classes of ordinary share were in existence, £1ordinary shares and £1 A ordinary shares. With effect from 30 November 2005 theA ordinary shares converted into ordinary shares. Also on this date the ordinaryshares (including those arising on the conversion of the A ordinary shares) wereeach subdivided into 10 ordinary shares of 10p each. Earnings per share for each class of ordinary share are as follows: 2007 2006 Ordinary sharesBasic earnings per share 23.12p 20.32pDiluted earnings per share 22.73p 20.21p ======= =======A ordinary sharesBasic earnings per share - 29.71pDiluted earnings per share - 29.71p ======= ======= The calculation of earnings per share is based on the profit for the year and onthe weighted average number of shares in issue and ranking for dividend in theyear. Ordinary shares 2007 2006 £000 £000 Profit for the year 5,636 3,650 =========== ===========Weighted average number of shares 24,372,457 17,962,000Earnings per ordinary share (pence) 23.12p 20.32p =========== =========== On 30 November 2005 the company's ordinary shares of £1 each were subdividedinto ten ordinary shares of 10p each. The weighted average number of shares in2006 has been adjusted as if the subdivision had occurred at the beginning ofthe earliest period presented. The calculation of diluted earnings per share is based on the profit for theyear and on the weighted average number of ordinary shares in issue in the yearadjusted for the dilutive effect of the share options outstanding. 2007 2006 £000 £000 Profit for the year 5,636 3,650 ========== ========== Weighted average number of shares 24,798,490 18,058,000Diluted earnings per ordinary share 22.73p 20.21p(pence) ========== ========== A ordinary shares Immediately prior to flotation on 30 November 2005 an exit dividend of £291,000was payable on this class of share in accordance with the Articles ofAssociation. The dividend rights of the Ordinary and A ordinary shares wereidentical in all other respects. The calculation of the additional earnings perA ordinary share arising on this dividend is as follows: 2006 Exit dividend £291,000Weighted average number of A ordinary shares in issue 2,191,000Additional earnings per A ordinary share 13.28p ========= The earnings per A ordinary shares for the 2006 year comprises the earnings pershare to 30 November 2005 (the date on which they were converted) of 16.43p(based on a half year profit of £2,018,000 and a weighted number of shares of12,280,000), plus the additional earnings per A ordinary share of 13.28p above.There was no dilutive effect on the A ordinary shares. 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. 5 Reconciliation of group operating profit to operating cash flows 2007 2006 £000 £000 Group operating profit 9,892 6,852Depreciation and amortisation 5,605 3,239Increase in stocks (13,254) (7,916)Increase in debtors (4,914) (1,364)Increase/(decrease) in creditors 10,808 (1,026)Credit in relation to share based payments 268 - ------- -------Net cash inflow/(outflow) from operating 8,405 (215)activities ======= ======= 6 Analysis of net debt Acquisition At beginning (excluding cash Non-cash At end of of year Cash flow and overdrafts) changes year £000 £000 £000 £000 £000 Cash inhand, 15,022 (3,243) - - 11,779at bankOverdrafts - (9,824) - - (9,824) --- --- --- --- --- 15,022 (13,067) - - 1,955Finance (5,582) 1,947 (1,119) (1,931) (6,685)leasesInvoicediscountingadvances (10,834) (3,656) (748) - (15,238)Bank and otherloans duewithin oneyear (14) 14 - (15) (15)Bank and otherloans dueafter morethan one year (5,006) (13,510) - 61 (18,455) --- --- --- --- ---Total (6,414) (28,272) (1,867) (1,885) (38,438) === === === === === Non-cash changes arise from the inception of finance leases and the release ofloan arrangement fees. 7 Acquisitions The Group acquired the entire issued share capital of Norec Limited on 1September 2006. The resulting goodwill of £6,336,000 was capitalised and will beamortised over 20 years, the period over which the directors anticipate thegroup to derive continuing economic benefit. Book and fair value £000Fixed assetsTangible 764 Current assetsDebtors 4,271Cash 1,371 ---Total assets 6,406 ===LiabilitiesExternal creditors (2,172)Provisions (3,173) ---Total liabilities (5,345) ===Net assets 1,061 Goodwill 6,336 ---Net purchase consideration and costs of acquisition 7,397 ===Analysed as:Gross consideration 7,397 ===Satisfied by:Cash 5,897Deferred consideration paid by 31 May 2007 1,500 --- 7,397 === The group also acquired the trade and assets of Maltby Colliery, on 26 February2007 resulting in goodwill of £nil. Book value Revaluations Fair value £000 £000 £000Fixed assetsTangible 12,694 17,839 30,533 Current assetsStock 5,171 (1,358) 3,813 ------- ------- -------Total assets 17,865 16,481 34,346 ======= ======= =======LiabilitiesProvisions (6,186) (7,656) (13,842) ------- ------- -------Total liabilities (6,186) (7,656) (13,842) ======= ======= =======Net assets 20,504 Goodwill - -------Net purchase considerationand 20,504costs of acquisition =======Satisfied by: Cash 20,504 ======= This subsidiary undertaking acquired during the year contributed £4,112,000 tothe group's net operating cashflows, paid £nil in respect of net returns oninvestments and servicing of finance and utilised £4,150,000 for capitalexpenditure. Prior to the acquisition, Maltby Colliery was part of a division of UK Coal. The Group also acquired an additional 50% of the issued share capital ofHargreaves (Bulk Liquid Transport) Limited taking its shareholding to 100%. Theresulting goodwill of £1,529,000 was capitalised and will be amortised over 20years, the period over which the directors anticipate the group to derivecontinuing economic benefit. Book and fair value £000Fixed assetsIntangible 14Tangible 856 Current assetsStock 17Debtors 855Cash 5 ---Total assets 1,747 === LiabilitiesExternal creditors (1,389)Provisions (78) ---Total liabilities (1,467) ===Net assets 280 Goodwill 1,529 ---Net purchase consideration and costs of acquisition 1,809 ===Satisfied by: Cash 764Shares 1,045 --- 1,809 === The Group also acquired the entire issued share capital of Mineral ResourcesEurope GmbH, through it 77.5% owned subsidiary, Hargreaves Raw Material ServicesGmbH. The resulting negative goodwill of £84,000 is being written off over 5years in line with the estimated life of the attributable assets. Bok and fair value £000Fixed assetsTangible 15 Current assetsStock 2,870Debtors 6,345Cash 1,083 ---Total assets 10,313 === LiabilitiesExternal creditors (9,566) ---Total liabilities (9,566) ===Net assets 747 Goodwill (84) ---Net purchase consideration and costs of acquisition 663 ===Satisfied by: Cash 663 === The group also acquired the trade and certain assets of the Simon BulkWarehousing and Distribution division from Humber Sea Terminal Limited on 30March 2007 resulting in goodwill of £nil. Book value Revaluations Fair value £000 £000 £000Fixed assetsTangible 3,000 1,215 4,215 ------ ------ ------Net assets 4,215 Goodwill - ------ ------ ------Net purchase considerationand 4,215costs of acquisition ======Satisfied by: Cash 4,215 ====== 8 Status of accounts The financial information set out above does not constitute the Group'sstatutory accounts for the years ended 31 May 2007 or 31 May 2006 but is derivedfrom those accounts. Statutory accounts for the year ended 31 May 2006 have beendelivered to the Registrar of Companies, and those for the year ended 31 May2007 will be delivered following the company's Annual General Meeting. Theauditors have reported on those accounts; their reports were unqualified and didnot contain statements under Section 237(2) or (3) of the Companies Act 1985. These results were approved by the Board of Directors on 3 September 2007. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Hargreaves Serv