Preliminary Results Year ended 31 May 2020 1
Headlines Underlying Net Debt Underlying* Final Dividend Profit before Tax* EPS Per Share (incl IFRS 16) £4.9m 19.9p 4.5p £28.1m (FY19: 15.3p) (FY19: £6.4m) (FY19: 4.5p) (FY19: £24.5m) Headlines Business s traded resili liently ly through Covid-19 except for completion ion delays s in Hargreav eaves es Land • Revenue decreas ased to £222.2m (FY19: £302.6m) m) due to expected reduction ions s in Earthwo works rks • Underlyi ying EPS increas ased by 30% • Net debt slightly ly higher than a year ago due to increas ases s in inventor ory • Final l dividend unchanged after r interim im cancell lled as Covid-19 precau aution ion • Coal l mining ceased in July, exceptiona onal provisio sion of £4.1m • £25m condition ional al contra ract exchange nged at Unity JV for r commercia ial l developme ment • * Underlying Profit before Tax is defined by the Board as Profit before Tax prior to exceptional items, amortisation and impairmen t of intangible assets and includes the Group’s share of the post -tax profit of its German joint venture excluding fair value gain on acquisition. 2 Preliminary Results – Year ended 31 May 2020
What we do… Distribution and Services Production and Distribution Specialist Earthworks Industrial Services Service ices provided: ed: Service ices provided: ed: Service ices provided: ed: • Sourcin cing, , procur urem emen ent and supply ly of of • Major or line near earthw hwork orks s contract ctor or • Bulk mater erials ials handli ling coal l product ucts • ECI advice ce on major infrast struc uctur ure • Invent ntor ory logis istics ics • Mechanical hanical and elec ectric ical l engine ineerin ering • Bulk haulag lage e of of waste e product ucts Indus ustrie ies s suppor orted: ed: • Acce cess ss servic ices es Indus ustrie ies s suppor orted: ed: • Major or UK infrast struct ucture ure proje ject cts, s, • Cement nt and brick ck product uction ion (coal) l) examp mple les include: lude: Indus ustrie ies s suppor orted: ed: • Sugar refine inerie ies s (coal) l) • A14 bypass ss • Power er genera eration ion • Steel el manufac factur ure • Indus ustrial ial building lding heating ing and heritage e • Heathrow hrow Termina minal l 5 rail l (coal) l) • Olympic ic Park • Port operation ions • Other er indus ustrial ial comple lexes es • Waste e disposal sposal (Trans nspor ort) • HS2 HS2 • Medical ical wast ste e (Trans nspor ort) Geographi hical cal focus us: Geographi hical cal focus us: • UK UK Geographi hical cal focus us: • UK UK • UK – Trans nspor ort focus used in Northe hern n • South East st Asia ia England land 3 Preliminary Results – Year ended 31 May 2020
Major Events Coal Mining – Eff ffic icie ient mining has enabled us to accele lera rate the closu sure of our surfa face e coal l mining activi vitie ies. s. This leads s to £4.1m exceptiona onal l closu sure costs s and changes the Hargreav eaves s coal l business ss to a tradin ing model only, supportin ing critical ical industrie ries s with essential ial speciality ality coal. l. Drakelands Restoration – Follow owin ing the collaps lapse of Wolf Minerals als in October r 2018, the Group acquir ired ed variou ious s freehold old and lease sehold old propertie ies s includin ing the assign ignme ment of the minera ral l lease se at the tungsten mine in Devon n through its subsidiar iary y Dra rakela lands s Restor oration ion Limited (DRL) RL). The Group sold DRL to Tungsten West Limited on 29 November r 2019 for £2.8m. The benefits s of the deal to Hargreave eaves s Group are: £2.4m profit on disposal of DRL; • Ten-year Mining Services Contract (MSC), with a minimum annual fee of £1m for eight years commencing Nov 2021; • Advance payment terms on the MSC – reducing the risk of future credit exposure. • British Steel – Following Jingye Group’s purchase of British Steel in March 2020, £1.4m of redundancy provisio sion has been releas ased. Work is continui uing at a simil ilar ar level to before liquidati ation on. 4 Preliminary Results – Year ended 31 May 2020
Business overview Gordon Banham, Chief Executive Officer
Distribution and Services – Production and Distribution Trading Headlines Margin: 3.9% Solid trading conditions in the UK, with UOP growth of 34% • predominantly driven by improvements in waste Improved from 2.7% transportation Outlook and strategy Operating g profit: UK mining has now ended. The demand for essential speciality coal to • £4.3m support certain critical industries such as cement, brick and sugar will continue and Hargreaves will move towards a lower capital trading model, Increase of 34% initially selling down inventory and then using externally sourced coal to satisfy demand Estima mated d cash inflow ow from cessation on of This will generate substantial cash inflows in FY21 and FY22 resulting from • mining: g: the unwind of the coal inventory and the disposal of surplus assets £30m Transport operations to consolidate position within waste sector and in • particular medical waste with minimal capital investment Major Customers 6 Preliminary Results – Year ended 31 May 2020
Distribution and Services – Industrial Services Industrial Services Underlying Trading Headlines Operating Profit Revenue flat at £86.4m (FY19: £87.4m) • 4.5 4.0 0.6 UK revenue grew by 3% to £59.6m (FY19: £57.9m) • 3.5 1.1 3.0 Overseas revenue down by 9% to £26.8m (FY19: 2.5 • 2.0 £29.5m) due to Covid-19 3.7 1.5 2.7 1.0 Operating profit up 11% to £4.3m (FY19: £3.8m) • 0.5 - Operating margin improved to 5.0% (FY19: 4.3%) May 19 May 20 • UK International Major Customers Outlook and strategy UK business continues to focus on growth of mechanical and electrical • engineering services to complement materials handling Good visibility of UK revenue for next financial year • Hong Kong team focused on organic growth through service and customer • diversification 7 Preliminary Results – Year ended 31 May 2020
Distribution and Services – Specialist Earthworks Focus on Major Infrastructure projects FY20 Headlines Legacy contracts now completed on site • Three major final account discussions ongoing, £11.5m to recover, with one almost finalised • Major linear earthworks A14 programme completed and settled ahead of budget • Outlook Business is now focused solely on major earthmoving projects • A leading earthworks consultancy adviser on major infrastructure schemes • Preferred supplier position to Kier/Eiffage/Ferrovial/BAM consortium on HS2 • Contract negotiations started but precise timing of mobilisation remains uncertain • HS2 heave trial works on site • Leading innovative solutions including the first driverless ADT • 8 Preliminary Results – Year ended 31 May 2020
Specialist Earthworks – HS2 7 Key Infrastructure Packages Allocated to 4 Major Consortia Area South (S1 and S2) - SCS JV (Skanska, Costain, Strabag) • Euston and Northolt Tunnels and Approaches • Area Central (C1, C2, C3) - 2 Consortia • C1 - Align JV (Bouygues Travaux Publics, VolkerFitzpatrick, Sir Robert McAlpine) • North Portal Chiltern Tunnels to Brackley – EKFB JV (Eiffage, Kier, Ferrovial, • BAM) 35kms of overground earthworks Brackley to South Portal of Long Itchington Wood Green Tunnel • Area North (N1 and N2) - BBV JV (Balfour Beatty, VINCI) • Long Itchington Wood Green Tunnel to Birmingham • 9 Preliminary Results – Year ended 31 May 2020
Specialist Earthworks - HS2 - C2/C3 Section 10 Preliminary Results – Year ended 31 May 2020
Investment in Hargreaves Raw Material Services GmbH The Board has supported HRMS in developing an integrated speciality minerals trading and manufacturing business serving German steel, cement and other industries HRMS is 49% owned by Hargreaves but Hargreaves is entitled to 86% of the economic benefit HRMS will be an annualised €300m+ integrated business €100m+ speciality minerals trading (coke, speciality ores, pig iron) • 400kt capacity Carbon Pulverisation Plant • €100m+ steel industry waste recycling plant (DK Recycling und Roheisen GmbH) acquired in December for €1 • DK acquired by HRMS in December 2019 for €1 World’s largest recycler of ferrous waste material from the steel industry • Recycles waste into pig iron • DK is independently financed and ringfenced with no recourse to either HRMS or the Group • 11 Preliminary Results – Year ended 31 May 2020
Investment in Hargreaves Raw Material Services GmbH Results and Outlook £’m May 20 20 May 19 19 Post tax trading profit £1.6m (2019: £1.5m) • Capital 74.9 58.2 Carbon Pulverisation Plant – Construction completed, • employed producing product for DK, trials with other customers in the steel and cement industries expected in the autumn Borrowings (55.9) (42.6) but Covid-19 impact on German industry creates Net Assets 18.9 18 .9 15 15.6 .6 uncertainty DK broken even since acquisition • External borrowings comprise: • Investment in HRMS £15m against fixed assets, including the CPP • 35 £40.9m against trade debtors and inventory • 30 25 20 15 10 5 0 May-19 May-20 Loan Retained earnings PCG 12 Preliminary Results – Year ended 31 May 2020
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