TIDMHSP
RNS Number : 6031G
Hargreaves Services PLC
09 August 2016
For Immediate Release 9 August 2016
HARGREAVES SERVICES PLC
(the "Company" or the "Group" or "Hargreaves")
Preliminary results for the year ended 31 May 2016
Hargreaves Services plc (AIM: HSP) announces its preliminary
results for the year ended 31 May 2016.
Key Financials
Year
Year ended ended
31 May 31 May Change
2016 2015 %
Continuing Revenue GBP340.7m GBP662.2m (48.6)
Continuing Operating Profit(1) GBP5.2m GBP38.1m (86.4)
Continuing Underlying Operating
Profit(2) GBP4.6m GBP42.8m (89.3)
Exceptional Costs(3) GBP(12.4)m GBP(12.2)m (1.6)
Continuing (Loss)/Profit
Before Tax GBP(10.6)m GBP24.9m (142.6)
Continuing Underlying Profit
Before Tax(4) GBP3.0m GBP40.3m (92.6)
Continuing Diluted EPS (30.0)p 64.2p (146.7)
Continuing Underlying Diluted
EPS(4) 5.6p 93.9p (94.0)
Dividend (including proposed
final dividend) 2.3p 30.0p (92.3)
Net Debt(5) GBP32.3m GBP1.0m 3,130.0
Highlights
-- The Group has delivered Continuing Underlying Operating Profit of GBP4.6m
-- Trading since Interim results in line with management's expectations
-- Coal production and trading successfully reduced and now focussing on speciality markets
-- Decision taken to shorten mine life at the Tower project with
mining due to finish March 2017; the Group expects full repayment
of loans after write off of equity investment and other balances of
GBP4.7m
-- Charge of GBP12.4m for exceptional costs arising from re-structuring activities
-- Successful acquisition of CA Blackwell in January 2016
broadens Group's Services operations and delivers significant heavy
plant synergies
-- Establishment of Property & Energy Division to drive
GBP35-50m of value creation in next five to seven years
-- Aggressive targets set for new business for Industrial
Services operations in face of accelerated UK coal fired station
closures
-- Coal stocks built to GBP26.0m in face of negligible demand
from UK coal stations, confident of sale of surplus stocks this
financial year
-- Balance sheet remains strong and well financed to allow
orderly run-out of GBP60m of coal stocks and other legacy assets
which include land, property, equipment, stocks and loans, into
cash
-- Final dividend of 2.3 pence in line with Group's 40% pay-out ratio target
Commenting on the results, Chairman David Morgan said:
"After two challenging years, we have a clear opportunity in
front of us to develop and deliver significant shareholder value.
The Group's core business operations have been enhanced following
the acquisition of CA Blackwell. Our portfolio of property and
energy projects offer an exciting platform for significant value
creation that is incremental to that created from our Distribution
& Services operations. We have targeted GBP35-50m of
incremental value creation from development and energy projects
related to these property assets. The GBP60m of legacy assets that
we aim to convert to cash will strengthen a balance sheet that is
already strong and allow consideration of a wide range of options
to return value or capital to shareholders."
(1) Continuing Operating Profit is stated before exceptional
costs of GBP12,378,000 (2015: GBP9,130,000).
(2) Continuing Underlying Operating Profit is stated excluding
the exceptional costs, the impact of the Biomass conversion project
settlement, the amortisation of acquired intangibles and impairment
of goodwill, impairment of non-current assets, and including share
of profit in associates and joint ventures before tax.
(3) Exceptional costs for the year ended 31 May 2015 are stated
after including an amount of GBP3,080,000 in respect of unrealised
fair value losses on derivative financial instruments.
(4) Continuing Underlying Profit before Tax and Continuing
Underlying Diluted EPS are stated excluding the exceptional costs,
the impact of the Biomass conversion project settlement, the
amortisation and impairment of acquired intangibles, impairment of
non-current assets and gain on disposal of subsidiaries.
(5) Net debt comprises cash and cash equivalents, bank
overdrafts and other interest bearing loans and borrowings.
Hargreaves Services plc
Gordon Banham, CEO
Iain Cockburn, Finance Director 0191 373 4485
Buchanan (Financial PR)
Mark Court / Sophie Cowles 0207 466 5000
N+1 Singer (NOMAD and Joint
Corporate Broker)
Sandy Fraser / Nick Owen 020 7496 3000
Investec (Joint Corporate
Broker)
Sara Hale / Rob Baker 020 7597 4000
CHAIRMAN'S STATEMENT
Results
The period just ended has once again seen a significant
transition in our business and this is reflected in these results.
Underlying Profit before Tax from Continuing Operations decreased
by GBP37.3m from GBP40.3m to GBP3.0m. The reported Loss before Tax
from Continuing Operations was GBP10.6m after a net exceptional
charge of GBP12.4m arising from the continuing restructuring, the
accelerated closure of a number of significant customer sites and
the decision to impair our equity investment in the Tower project.
Underlying Diluted EPS from Continuing Operations decreased from
93.9p to 5.6p.
Net debt increased by GBP31.3m to finish the year with net debt
of GBP32.3m. The Blackwell acquisition accounted for GBP13.4m of
this increase in net debt. The collapse in thermal coal demand in
the UK resulted in an unplanned build of coal stocks which we are
confident will be cleared in this financial year.
Strategy
Faced by very challenging market conditions we have spent the
last two years making changes to the very nature of the Group and
have been successful in achieving a fundamental re-positioning. In
the year ended 31 May 2014, the Group generated revenues of
GBP761.0m and operating profit of GBP49.3m from coal and coke
production and trading where we produced and traded over seven
million tonnes. In the year to 31 May 2016 revenues and operating
profits/losses from coal and coke trading and production fell to
GBP179.3m and a GBP0.9m loss respectively. We produced or traded
less than two million tonnes and are on track to reduce activity
further as we respond to reduced thermal coal demand and
consequently focus greater efforts on specialised coal products and
markets.
The management team have been proactive and have responded well
to these challenges. Excellent progress has been made and a clear
strategy has been set out to develop long term value through a
portfolio of complementary Services businesses and through the
development of value in a property and energy project portfolio
that is rich with opportunity. Over the last two years, we have
established a strong team with a focus on developing and delivering
value from that portfolio. Looking forward, we will start to see
that investment generating and demonstrating value. The acquisition
of C.A. Blackwell Group Limited ("Blackwell") in January 2016 was
an exciting and positive step to building our long term Services
offering.
Throughout this process, we have maintained a strong balance
sheet and as we move forward the business will utilise this to
generate significant amounts of cash from the realisation of
various assets related to our legacy operations. These steps are
outlined in more detail in the Strategic Report, which is included
within the Annual Report and Accounts.
Dividend
The Board proposes a final dividend of 0.6p, consistent with the
targeted 40% pay-out ratio. If approved at the Annual General
Meeting, this will result in a dividend for the full year of 2.3p
compared with 30.0p in the previous year, an overall decrease of
92.3%. The proposed final dividend will be paid on 21 October 2016
to all shareholders on the register at the close of business on 23
September 2016.
People
Our staff will always play a key role in the development and
operation of the Group. This last financial year has been another
tough and challenging year during which further significant
redundancies have been necessary. Whilst such redundancies are
highly regrettable, the Group's restructuring programme is
fundamentally complete and the acquisition of Blackwell
demonstrates the Group's ability and appetite to invest in the
future. I would also like to make special note of the contribution
and achievements by our team in Hong Kong as their skills and
teamwork have increased our revenues from that operation by 104% to
GBP11.0m.
Board
During the year there were a number of Board changes. I assumed
the role of Chairman following the retirement of Tim Ross after the
AGM on 7 October 2015. I would like to thank Tim for his
contribution to the Group since its flotation in 2005. As a result
of my planned succession to Chairman, Nigel Halkes joined the Board
on 21 August 2015. I would like to welcome Nigel Halkes to the
Board as Non-executive director and Chair of the Audit Committee. I
am pleased to see how quickly Nigel has integrated into the Board
and developed his understanding of the Group's operations.
Summary
In the last two years the Group has been through a radical
restructuring and re-positioning programme, undertaken in the face
of tumultuous market conditions. With the restructuring and
re-positioning of the Group fundamentally complete, our objective
and priority is to demonstrate the intrinsic value of the business
as reflected in the Group's considerable asset base. We now have a
clear strategy to generate significant shareholder value through
the development of a profitable services offering that leverages
our core skills, as well as the significant value that can be
unlocked in our property and energy portfolio. As we recently
announced, our target is to generate between GBP35m and GBP50m of
incremental value from our property and energy project portfolio
over the next five to seven years. Across the transition the Group
has protected and maintained its strong balance sheet. The
successful conversion of over GBP60m of legacy assets into cash
will further improve the Group's flexibility and allow us to
consider strategic options to enhance shareholder value.
David Morgan
Chairman
8 August 2016
GROUP BUSINESS REVIEW
Results
Group revenues decreased from GBP662.2m to GBP340.7m, reflecting
the actions taken to reduce the scale of our coal production and
coal trading activities. Underlying Continuing Group Operating
Profit reduced from GBP42.8m to GBP4.6m reflecting the reduction in
coal trading volumes and the impact of falling coal prices on the
profits of our residual mining activity. Underlying Continuing
Profit before Tax fell in line with Operating Profit from GBP40.3m
to GBP3.0m. The transformation of the Group has required
significant actions, which in the period incurred exceptional costs
of GBP12.4m. These charges related to scaling down the Group's
mining activities, the impairment of the Group's equity investment
in the Tower joint venture and provisions taken for redundancy and
contract demobilisation costs at a number of client sites following
early closure announcements. These exceptional costs are reviewed
in more detail in the Financial Review below. The reported
Continuing Loss before Tax was GBP10.6m compared with a Profit
before Tax of GBP24.9m in the prior year.
Coal Exposure Successfully Reduced
Our key focus in the last two years has been to reduce exposure
to thermal coal production, trading and related ancillary services.
The recent power station closure announcements, continuing falls in
coal prices and low UK demand has hastened our scaling-down of
operations. The reductions in gas prices and the increases in UK
carbon taxes have significantly reduced electricity generation from
coal and have precipitated the announcement of the early closure or
changes to operating regimes that will significantly reduce coal
usage. Stations closed or otherwise likely to be burning less coal
include Longannet, Rugeley, Fiddlers Ferry, Eggborough and
Ferrybridge. A strengthening of Government sentiment against coal
fired generation increases the probability of further closures.
Whilst these developments have presented more challenges to us
in the last year, they have also validated our decision to reduce
our exposure to the thermal coal markets through trading and
production operations. Although coal prices have firmed slightly
over the last few months, helped by the weakening of Sterling
following the "Brexit" vote, we see no evidence of any market
trends in coal price or market demand that would cause us to
re-consider the decisions we have taken.
Strategy
In the last year we have started to see the benefits materialise
from two years of restructuring, simplification and repositioning.
On the 27 April 2016 we published an update on the progress we had
made with repositioning the Group; this statement marks an
important turning point for the Group. Following the actions taken,
we are now focused on developing and demonstrating the value within
the Group.
As outlined in the recent update, we now have three clear areas
of focus to generate value:
-- Distribution & Services
-- Property & Energy
-- Legacy Asset Realisation
These focus areas clearly identify the long term, on-going
business opportunities which offer medium term development and
value creation opportunities and the short term process to release
cash from the significant amount of legacy assets which we have
protected as our businesses have been closed or activities stepped
down.
Reflecting the anticipated momentum and importance of Property
and Energy, this will become a segment in its own right from the
start of this financial year 1 June 2016. It is currently reported
under the Coal Distribution Division. Profits and losses and cash
flows related to legacy assets will also be reported in a separate
Legacy segment, until such times as these have run to a de minimis
level. From 1 June 2016, we will also separately report central
group overhead and this will no longer be allocated between
individual operations and will also not be allocated between
Distribution & Services, Property & Energy and Legacy Asset
Realisation. Central group overhead spend was GBP6.1m in the year
ended 31 May 2016 compared with GBP7.1m in the prior year. The
reductions made during the year should reduce the overhead to
around GBP5.0m in the next financial year.
We believe this enhanced segmentation will provide greater
transparency on profits, cash flows and capital allocation leading
to a clearer understanding of the development of underlying
business and the release of cash from legacy asset
realisations.
DISTRIBUTION & SERVICES
Supplementing our Coal Distribution operation, we have a
portfolio of three complementary Services businesses. We have set
ourselves the aspiration of achieving an Operating Profit of
between GBP10m and GBP15m from these operations in the medium term.
These businesses are reviewed in more detail below.
Specialist Earthworks Services
Our heritage in coal production left us with the skills and
plant necessary to undertake contract mining and earthworks
projects. The acquisition of Blackwell, which was completed in
January 2016, complements that capability and provides a
significant step forward in the Group's transition plan. The
acquisition establishes our new Specialist Earthworks Division and
offers an important opportunity for the Group to grow its Services
operations in the UK. A new internal team was established to manage
and optimise the utilisation of heavy plant across the Group. The
synergies between Blackwell's operations and the Group's mining and
restoration experience are very compelling and give us confidence
that we can grow the size and scale of our activities in this area.
The backing and financial support available from the Group will
allow Blackwell to tender, resource and deliver larger scale
projects that were not possible as a standalone operation.
Logistics Services
Our Logistics business had a difficult year, however we are
confident it is a business with long term profit potential. The
recent acquisition of Blackwell offers both synergies and a number
of joint bidding opportunities. In the period the business was
impacted by a combination of low coal movements and a major change
in waste flows following an HMRC landfill tax ruling. These
pressures are continuing but the team are working hard to re-build
routes and flows. Logistic volumes have not returned to the level
enjoyed in the previous financial year and it is unlikely that
these will fully recover before the end of this financial year,
however the team is confident that the opportunity is there to
re-build revenues and profits. In the meantime, every effort is
being made to manage overheads and optimise fleet operations to
protect profits in the short term. We are encouraged by recent
trading. A lease signed in April on a new depot in Harlow, Essex
presents a first opportunity for the Division to start to build
significant operations in the South East.
Industrial Services
The Industrial Services Division operates a number of key
contracts at coal power stations, steel-works and ports in the UK,
Hong Kong and South Africa. Although UK coal fired generation has
been facing a limited life for a number of years, the recent
announcements of closure or reductions in coal burn have been
earlier than expected.
Over recent years the Industrial Services Division has made good
progress with its strategy of expanding its international
activities; in particular its operation in Hong Kong generated
revenues of GBP11.0m in the year. The establishment of Hargreaves
South Africa (Pty) Limited in 2014, which followed the Algol
acquisition, provided a foothold in the South African steel sector,
a market that offered long-term opportunities to deploy the
Division's skills. Over the last twelve months the world steel
sector has faced considerable challenges, therefore we have decided
to suspend any further capital investment to support a larger
market share in the steel market in South Africa until the outlook
becomes more stable.
The key focus for Industrial Services is to deliver quality
services from an efficient cost base. The division has set itself
an ambitious target of delivering GBP2.0m of operating profit from
new business in the next financial year to replace the business
lost through recent closures. This represents a significant
challenge and every care will be taken to ensure that business is
only taken on if the risk weighted return is deemed acceptable. The
outlook for the Division's operations in Hong Kong and other key
Asian markets is encouraging and development of these operations is
key to achieving the Division's new business target.
Coal Distribution
The Coal Distribution operation will focus on the supply of
specialist coal and coal products (briquettes) into the speciality
markets. These markets include:
-- Domestic home heating
-- Space heating (including prisons, schools and hospitals operating coal boilers)
-- Industrial markets
-- Cement manufacturers
-- Steam railways
For a long time the Group has been the leading supplier of
specialist coals to markets in England and Wales. Our geographical
reach was increased three years ago by the acquisition of the
Scottish mining assets that provided a platform to supply parts of
the Scottish market. Although we have more work to do to align
overheads with activity levels and we see significant short term
challenges in disposing of inferior coals that arise from the
production of speciality coals, we also see potential for
sustaining a profitable distribution business servicing these
diverse specialist coal markets. The Group expects to that losses
on disposal of inferior coals in the current challenging market
could reduce profitability of speciality coal trading by around
GBP2m per annum in current market conditions. Fixed costs of around
GBP1m will add further pressure until leases and other fixed
overheads can be cut.
The Group will work to minimise the cost of the coal that we
supply into these markets through our expertise in coal sourcing
and carefully managing the balance between indigenous and imported
coals. The Group will also work to minimise the amount of inferior
coal that arises from the production and preparation of speciality
coals and the investment at KIlloch in improved coal preparation
equipment is a key action. The coal that we supply into the
specialist markets will be from a combination of sources; our own
mining operation at the House of Water site in East Ayrshire, other
UK producers and imported coal. The average cost of acquiring
specialist coal will increase for several reasons. These reasons
include, the loss of bulk coal volumes over which fixed overheads
can be recovered and the reduced value of non-speciality coal that
arises in the process, particularly in the current difficult
thermal coal markets.
Imported coal is generally cheaper but can generate significant
quantities of lower grade finer coals that may prove difficult to
sell in the UK given the challenges of low demand in the thermal
sector. Although we will retain the ability to import significant
volumes of coal, we will continue to seek to manage and optimise
our fixed cost base that supports coal imports. These efforts to
reduce the fixed cost base and finding channels to dispose of the
non-speciality coal that arises will continue through the current
financial year, with the Group working to have an optimal cost
structure in place before the start of the financial year ended 31
May 2018 to support a speciality focussed business. Although we
believe that the speciality coal markets offer a long term return
that justifies the capital deployment, we are aware that the
visibility of prices, costs and margins in the next two years is
very low.
We expect the House of Water site in East Ayrshire to offer a
supply of around 350,000 tonnes of coal for at least the next five
years. An investment of GBP1.0m was made at our railhead in Killoch
to improve the processing of speciality coals.
PROPERTY & ENERGY PROJECTS
As a legacy of our coal operations we have a diversified 18,500
acre portfolio of property, which includes a range of agricultural
and development land including a number of sites with grid
connections. We have built a team to focus on the development of
value in that portfolio with a view to optimising the conversion of
these assets into cash over the next five to seven years and have
set ourselves the target of creating between GBP35m and GBP50m of
value over and above the GBP24.9m book value of these assets. The
initial focus will be on developing value and realising cash from
the assets we currently own.
We have been working on this portfolio over the last two years
and we are confident that there is very significant value that will
be delivered. We will continue to challenge the allocation of
capital but we are confident that the returns from development more
than justify the cost of holding these sites and taking them
through at least the early stages of the development cycle. We are
confident that the incremental return on capital compared with an
outright sale would far exceed our hurdle rate and compare very
favourably with the 10-15% Return on Capital Employed ("ROCE") rate
found in typical property development operations.
The Blindwell site, East of Edinburgh, represents a particularly
exciting development opportunity. A planning application for a
major residential scheme is currently under consideration by the
local authority. The table below lists some of the key development
sites that present the greatest immediate opportunity for value
creation through development:
Project Location Acres Development Focus
Blindwell East Lothian 390 Large scale residential
development
Westfield Fife 390 Renewable energy through
EfW and mixed industrial
St Ninians Fife 1,155 Leisure led, mixed
use development
North Killingholme Lincolnshire 33 Industrial
Eggborough Yorkshire 10 Energy, including existing
consent for a EfW plant
Maltby Yorkshire 84 Mixed residential and Industrial
development
Monckton Yorkshire 35 Mixed residential and Industrial
development
In the energy space, the key focus of development effort at this
time is around the two flagship Energy-from-Waste (EfW) projects,
where we continue to progress planning and development; one at the
Earls Gate Energy Centre at Grangemouth and one on the Westfield
site. These projects are complex but offer a very significant value
creation opportunity for the Group. Both projects have been
carefully appraised and the Board is confident that they are both
well founded and deliverable.
In addition, our energy team continue to appraise carefully the
opportunities for the 75MW of grid connections that are owned by
the Group. Our portfolio also includes 70MW of consented wind
energy in South Lanarkshire and we have a number of other sites
that offer significant wind potential. All of these key sites
benefit from high wind speed and whilst market conditions and
prices do not allow commercial development at this time, if onshore
sites do become financeable, many of these sites will be very
attractive. Like most other operators, we have suspended the bulk
of speculative investment in solar and onshore wind whilst the
market evolves.
LEGACY ASSET REALISATION
The Group also owns a portfolio of surplus assets obtained
through our coal and coke trading and extensive mining operations.
All of these assets are marketable and represent an opportunity to
generate a significant amount of cash for the Group. Many of the
markets into which these assets are sold are however depressed or
illiquid at this time.
These assets comprise largely of stock, plant and equipment and
loans to the Tower joint venture and are held on the balance sheet
at the lower of cost and net realisable value. The estimated net
realisable value is based on our assessment of the fair market
value that could be expected from the sale of these assets in an
orderly manner. Whilst the realisation of cash is likely to be
lumpy, the recent weakness of Sterling should improve prospects for
a speedy realisation.
The carrying value of legacy assets as at 31 May 2016 was
GBP60.1m, following the GBP4.7m impairment of the Tower equity
investment and other asset balances. The translation of these
assets into cash is a key priority for the Group and we see this as
an area of focus over the remainder of the project.
The most significant balances are the GBP22.4m of loans and
balances relating to the Tower joint venture and GBP19.7m of coal
and coke stocks. It is our current view that as Tower completes its
final seven months of mining and two years of restoration, the
joint venture will generate enough cash to repay these loans. A
large proportion of these loan repayments will be achieved through
the sale of plant, equipment and land. We are currently looking at
options to achieve plant sales as early as possible, both to pay
down debt and reduce the interest cost to the Tower joint venture
itself.
SHAREHOLDER VALUE
As we manage these areas of activity we will remain focussed on
shareholder value. At this time, we believe that the operational
and value generation objectives we have set ourselves can be
achieved with relatively little incremental investment. The cash
that we will realise from legacy assets will create significant
opportunity to look at delivering shareholder value through
dividends, special dividends or share-buy backs. The Board remains
open to the re-investment of capital should the right opportunities
arise and provided such opportunities clearly offer a better
investment return compared with the return of surplus capital to
shareholders. As we review options, we will be careful to maintain
a strong balance sheet position with an appropriate level of
leverage.
OUTLOOK
The reduction in thermal coal distribution and production
combined with our exit from coke production and coke and coking
coal trading has significantly reduced the risk and volatility of
the business. Whilst the streamlining process has been long and
hard and the profitability of the Group has significantly reduced,
the Group emerges from this process with a clear strategic and
operational focus and a strong balance sheet.
The biggest challenge to delivering our profit expectations for
the coming year is the need for our Industrial Services Division to
contract new business to replace that lost in the UK through the
early closure of its customers' sites. Pleasingly, the Division is
already making good progress in this regard. Compensating that
risk, we have an exciting opportunity to grow the Specialist
Earthworks Division. Whilst many of our recent statements have
focussed on the challenges around the wider coal markets, the
specialist coal markets have consistently remained robust. The
operational opportunities presented by these markets in the coming
years should not be overlooked and we will work hard to maximise
the profit opportunity. We have budgeted for profits from Property
& Energy and Industrial Services to be second half
weighted.
Turning to the balance sheet, the net assets at the end of the
year were GBP131m, equivalent to GBP3.96 pence per share. As noted
above, we have set ourselves the medium term target of adding
GBP35m to GBP50m of value to the property assets included within
these net assets and at the same time converting our legacy assets
into cash. Whilst, by their nature, the delivery of the increased
development value and legacy cash realisations is likely to be
lumpy, we are confident that very significant value can be
delivered. This represents an exciting opportunity to create
significant shareholder value that is very material in the context
of the size and scale of the Group.
Gordon Banham
Group Chief Executive
8 August 2016
REVIEW OF OPERATING PERFORMANCE BY BUSINESS UNIT
Review of Underlying Performance
Revenues from Continuing Operations during the year reduced by
GBP321.5m from GBP662.2m to GBP340.7m, reflecting the significant
decrease in coal sales caused by low UK coal demand for both
imported and indigenous coals and through the cessation of supply
of metallurgical coals following the closure of Redcar Steelworks.
Underlying Group Operating Profit from Continuing Operations for
the year reduced by GBP38.2m from GBP42.8m to GBP4.6m. Underlying
Profit before Tax was GBP3.0m, a decrease of GBP37.3m on the prior
year, due largely to the impact of reduced trading volumes on
revenues and margins in Coal Distribution. Reported Profit before
Tax of the Group reduced by GBP35.5m from GBP24.9m to a loss of
GBP10.6m after exceptional costs totalling GBP12.4m. The bulk of
the exceptional costs related to the early closure of a number of
mining sites to support a move towards a single operating site
model and redundancy and contract demobilisation costs following
the closure of major steel, coal and port sites at which the Group
provided industrial services as well as impairment of the equity
investment and other assets in Tower.
The commentary below reflects the continuing underlying
performance of the four Divisions.
Industrial Specialist Total Coal
Services Logistics Earthworks Services Distribution Total
2016 2016 2016 2016 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Segment Continuing
Operating Profit/(Loss) 3,297 1,173 1,076 5,546 (341) 5,205
Intangible amortisation/impairment - - - - 584 584
Share of loss in jointly
controlled entities
(net of tax) - - - - (1,792) (1,792)
Share of tax in associates
and jointly controlled
entities - - - - 628 628
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Underlying Continuing
Operating Profit/(Loss) 3,297 1,173 1,076 5,546 (921) 4,625
Net financing costs
- Continuing Operations (211) (356) (71) (638) (994) (1,632)
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Underlying Continuing
Profit/(Loss) before
Tax 3,086 817 1,005 4,908 (1,915) 2,993
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Industrial Specialist Total Coal
Services Logistics Earthworks Services Distribution Total
2015 2015 2015 2015 2015 2015
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Segment Continuing
Operating Profit 3,260 2,267 - 5,527 32,547 38,074
Intangible amortisation/impairment - - - - 143 143
Impact of Biomass conversion
project settlement 2,400 - - 2,400 - 2,400
Share of profit in
jointly controlled
entities (net of tax) - - - - 1,504 1,504
Share of tax in associates
and jointly controlled
entities - - - - 634 634
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Underlying Continuing
Operating Profit 5,660 2,267 - 7,927 34,828 42,755
Net financing costs
- Continuing Operations (609) (421) - (1,030) (1,435) (2,465)
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Underlying Continuing
Profit before Tax 5,051 1,846 - 6,897 33,393 40,290
----------------------------------- ---------- --------- ----------- --------- ------------- -------
Coal Distribution Division
As the Group's coal mining activities reduced, the focus of the
Division shifted last year to Coal Distribution. The table below
shows the breakdown of operating profit within the Coal
Distribution Division by key activity.
Bulk Industrial Total
and Domestic
------------- ---------------- -----------------
2016 2015 2016 2015 2016 2015
Third Party Traded
Volumes ('000s tonnes) 602 4,157 556 515 1,158 4,672
Profit per tonne (GBP) 0.89 1.39 9.26 16.78 4.91 3.09
----- ------ ------- ------- -------- -------
Third Party Trading
(GBP'000) 534 5,792 5,147 8,644 5,681 14,436
----- ------ ------- -------
Mining Operations (GBP'000) (8,089) 19,972
Germany (Associate)
(GBP'000) 1,776 663
Property and Energy
(GBP'000) 395 767
Monckton (GBP'000) (341) (139)
Other (GBP'000) (343) (871)
Division Underlying
Continuing Operating
(Loss)/Profit (GBP'000) (921) 34,828
-------- -------
Coal Distribution revenues fell from GBP485.9m to GBP179.3m
principally due to the lower volumes of third party coal being
traded, as demand for coal in the steel and thermal markets fell
significantly. Following the decisions to reduce levels of thermal
coal imports and to cease importing metallurgical coals, third
party bulk coal volumes traded by the Division fell from 4,157,000
tonnes to 602,000 tonnes. The Operating Profit generated from coal
trading fell from GBP14.4m to GBP5.7m.
The volume of speciality coal traded was 556,000 tonnes compared
with 515,000 tonnes, whilst the average Operating Profit per tonne
achieved fell from GBP16.78 to GBP9.26 in the comparative year. The
pressure on margins reflected the impact of a number of factors
including strong competition in the cement sector, a significant
quantity of stock remaining unsold in the market following the
closure of Kellingley Colliery by its operator UK Coal and a second
successive exceptionally mild winter. The Board expects market
supply and demand balance to improve in the coming years and is
focussed on managing the future acquisition cost of speciality
coals to support the Coal Distribution business.
Revenues from coal production activity also fell sharply, from
GBP96.4m to GBP46.0m, as the Group scaled down its production
activity in the face of low coal prices. Mining Operations recorded
a GBP8.1m operating loss during the year ended 31 May 2016 compared
with GBP20.0m operating profit in the prior year. This performance
reflected the impact of lower coal prices combined with the
decision to reduce output levels in response to the low coal
prices. The mining operations supplied 126,000 tonnes of speciality
coal to support the Third Party Trading operations.
Coal production was 506,000 tonnes compared with 1,399,000
tonnes in the prior year. The Division started the year producing
coal at six sites and finished the year producing coal at only two;
Glenmuckloch and House of Water. Production activity at
Glenmuckloch will be concluded by the end of September 2016 due to
low coal prices and low demand, at which time the only active coal
production site operated by the Group will be House of Water.
During the year, coal production ended at Netherton, Duncanziemere
and St Ninians. Following the announcement of Longannet's closure
the decision was taken to cease mining early at Muir Dean. The
Group incurred an exceptional charge of GBP4.0m to support the
early closure of Glenmuckloch and Muir Dean. As the mining
operations have reduced in scale, mining operations will no longer
be separately reported and instead will be reported as part of the
residual Coal Distribution operation.
The Group retains options and planning permissions over a number
of sites. These sites represent the best and most cost effective
options available to the Group. The balance sheet contains GBP2.1m
of development costs in respect of these sites and options which
are held as strategic assets and represent reserves of
approximately 4.1 million tonnes.
The Group continues to provide mining services to Tower
Regeneration Limited ("TRL"), a joint venture in which the Group
owns a 35% beneficial stake. Mining operations at Tower performed
satisfactorily last year and 813,000 tonnes of coal were sold
compared with 713,000 tonnes in the previous year. TRL, however,
had a challenging year due to low coal prices and posted a loss of
GBP8.4m. The Group's 35% share of that loss was GBP2.9m. Overall,
the Tower project contributed a net profit at the operating level
of GBP0.3m compared with GBP5.5m in the prior year.
Although the UK and European steel sectors continue to face
significant challenges, our European associate performed well last
year and exceeded its targets. The European operation generated
revenue of GBP89m from the trading of 652,000 tonnes of product
compared with GBP64m of revenue from 304,000 tonnes in the prior
year. The Group's 86% share of Operating Profit increased from
GBP0.7m to GBP1.8m. Revenue visibility remains low but we note that
the operation continues, as it always has, to manage its fixed cost
base closely.
Property and Energy
The Property and Energy results for the year ended 31 May 2016
were reported within the Coal Distribution Division and are shown
in the table above. The Property team generated an Operating Profit
in the year ended 31 May 2016 of GBP0.4m. This figure was lower
than the GBP0.8m reported in the prior year simply due to the
timing of sundry non-core property sales.
Beyond the Operating Profit generated, the Group has continued
to invest in the development of its Property and Energy portfolio.
The team supporting these development projects has been grown from
eight to twelve. The operation delivered a net Operating Profit of
GBP0.4m, arising from sundry trading property sales. The key focus
of the Property team has been the development of seven key sites
listed in the table in the Group Business Review. Investment of
GBP2.1m on property and project development was capitalised during
the year.
The Group is pleased with the progress being made in the
development of the Earls Gate Energy Centre project in the last
financial year and notes that the planning application was formally
submitted in May 2016. The project aims to deliver a 75MW
replacement Combined Heat and Power plant using refuse derived
fuels at a chemical complex in Grangemouth in Scotland.
The Group has continued to complete and formalise their consents
for the three wind projects that have received planning consent in
the last twelve months. These are Dalquhandy, Broken Cross and
Poniel and total 70MW. Financial investment in these projects in
the prior year was negligible and restricted to the formalisation
of the planning permissions to preserve the option value in these
schemes.
Specialist Earthworks Division
On 11 January 2016, the Group completed the acquisition of
Blackwell, establishing the Group's Specialist Earthworks Division.
In the four and a half months between acquisition and 31 May 2016,
the Division reported an Operating Profit of GBP1.1m from revenues
of GBP31.3m. The performance was slightly ahead of management's
expectations. Since the acquisition, good progress has been made
with the Blackwell team in developing the short term contract
pipeline. The Board was encouraged by the news in April that the
Division has been selected as the preferred provider for the
earthworks related to two sections of the Government's GBP1.5
billion A14 improvement scheme.
Industrial Services Division
The Industrial Services business faced a number of significant
challenges in the UK in the last financial year as a consequence of
the pressures in the coal and steel sectors. The last year also saw
announcements or closure decisions at a number of key client sites
including Liverpool Bulk Terminal and Ferrybridge. Changes in
operating regimes that will result in reduced coal burn have taken
place at both Fiddlers Ferry and Eggborough.
In October 2015, the Redcar steelworks was forced to close
whilst both the Scunthorpe and Port Talbot steelworks were the
subject of sale processes during the year. We continue to provide
services at Port Talbot and Scunthorpe, however the closure of the
Redcar operation resulted in an exceptional charge for the Group of
GBP1.6m in respect of redundancies and other contract
demobilisation costs. Excellent stewardship and structuring of
trading arrangements ensured that bad debts and losses on stock
positions were avoided.
Revenue for the Division reduced by GBP44.3m from GBP127.8m to
GBP83.5m in the prior year. The table below shows the split of
revenue by geography. The challenges in the UK market were
reflected by a GBP51.9m reduction in revenues rising from the
various site closures. Excellent progress and development in the
Hong Kong operation saw revenues increase by GBP5.6m or 104% from
GBP5.4m to GBP11.0m.
Total revenue
by destination
GBPm FY14 FY15 FY16
----------------- ------ ------ -----
UK 119.8 120.9 69.0
Hong Kong 2.8 5.4 11.0
Other - 1.5 3.5
----------------- ------ ------ -----
Total 122.6 127.8 83.5
----------------- ------ ------ -----
The bulk of the reduction in UK revenue was attributable to the
closure of Redcar Steelworks and Liverpool Bulk Terminal. Orders
for additional works at coal power stations and other steel sites
were also lower than the prior year due to the economic and
business challenges faced by many of our key customer sites and
operations.
Six key customer sites were closed or announced closure in the
last financial year. These operations contributed GBP20.2m of
revenue and GBP2.1m of gross margin in the year ended 31 May 2016.
In addition to the loss of revenue and profits, the closures
resulted in exceptional charges in respect of redundancy and other
contract demobilisation costs which are outlined in the Financial
Review.
Offsetting the challenges faced by the UK business, good
progress was made in developing operations in Hong Kong. Revenues
in Hong Kong grew from GBP5.4m to GBP11.0m, an increase of 104%.
The operating profit generated from international operations
accounted for GBP0.3m. Efforts continue to develop the business,
particularly in Hong Kong where ambitious targets have been set for
growth.
Logistics Division
The Logistics Division had a challenging year. Revenues for the
operation fell from GBP68.3m to GBP54.5m. GBP7.3m of that fall
related to Imperial Tankers which was disposed of in the prior
year. The balance of the reduction in revenues stemmed from a major
change in the movement of waste flows following a clarification of
waste classification for landfill tax purposes by HMRC. The
Division's activity levels were also impacted by very low seasonal
flows of coal and rock salt following the mild winter. As a result
of reduced activity levels and the disruption to established waste
routes, Operating Profit for the Division fell by GBP1.1m from
GBP2.3m to GBP1.2m.
Safety, Health and the Environment
Our vision is to create an environment where all employees can
work with zero harm to them. To achieve this, the Group takes a
proactive approach to Safety, Health and the Environment and
remains committed to the highest practicable standards of safety
and health management and the minimisation of adverse environmental
impacts.
The Board ensures that Health and Safety issues for employees,
customers and the public are of foremost concern in all Group
activities. The Group Chief Executive, supported by external
advice, is charged with overall responsibility. All divisions have
formulated safety management systems. We continue with the
programme to achieve OHSAS 18001 Occupation Health and Safety
Assessment Series for health and safety management systems and ISO
14000 environmental management.
During the previous year, we continued to strengthen our
approach to behavioural safety training, with emphasis on raising
the awareness and understanding of our supervisory staff, who form
the 'front line' in delivering our standards within the workplace.
This is being achieved through internal safety champions and
external accredited training providers.
We have also developed our Senior Manager Safety Engagement
Programme to deliver leadership across our operating sites. This
Programme is led by the Board members and involves all senior
managers undertaking site based safety visits, engaging directly
with the workforce to discuss issues that impact on them. This
Programme has proved to be effective in delivering a consistent
approach across the Group and will continue to be a cornerstone of
our safety strategy.
It is disappointing to report that, despite our best efforts,
our safety performance deteriorated slightly during the year, as
measured by Lost Time Incident Frequency Rate ("LTIFR"). This
performance was in some part influenced by the period being a year
of transition for the Group, with a number of operating units
closing and others downsizing their workforce. Notwithstanding
these influences, this remains a disappointing result and
addressing the challenges of the changing environment remains a key
focus for the Group.
Iain Cockburn
Group Finance Director
Gordon Banham
Group Chief Executive
8 August 2016
FINANCIAL REVIEW
Revenue
The Group has continued to be faced with significant challenges
within the coal sector in the UK with continued coal price weakness
and lower levels of demand for power station grade coal, arising
from the accelerated programme of coal generation plant closures.
These market pressures together with the Group's decision to scale
down its coal activities have resulted in a reduction in revenue of
GBP321.5m from GBP662.2m to GBP340.7m in the current year.
Operating Profit and Margins
Underlying Operating Profit from Continuing Operations reduced
by GBP38.2m from GBP42.8m to GBP4.6m, mainly driven by a reduced
contribution from our Third Party Trading business, due to the
aforementioned challenges within the coal markets. Additionally,
underlying operating profit within the Industrial Services division
has reduced in the year, linked to the closure of Redcar Steelworks
and the accelerated closure programme of many UK coal power
generation plants.
The initial period of operation within the newly established
Specialist Earthworks division has been promising, delivering an
Underlying Operating Profit of GBP1.1m in the first period of
operation. This contribution has helped to offset the reduction in
Underlying Operating Profit of GBP1.1m delivered by our Logistics
division. The Logistics division was impacted by a reduction in
coal and rock salt volumes combined with some significant
challenges within the waste sector. These factors contributed to
the reduction in Underlying Operating Profit from GBP2.3m in the
prior year to GBP1.2m in the year ended 31 May 2016.
Reported Group Continuing Operating Profit before exceptional
costs fell from GBP38.1m to GBP5.2m whilst Continuing Profit before
Tax fell more sharply from GBP24.9m to a loss of GBP10.6m
reflecting GBP12.4m of exceptional costs as the Group continues to
transition the business away from thermal coal exposure within the
UK.
Acquisition of Blackwell
On 11 January 2016, the Group completed the acquisition of
Blackwell for a consideration of up to GBP11.85m. The consideration
was settled by a net cash payment of GBP8.5m and the transfer to
the Blackwell shareholders of a property at Earls Colne with a
market value of GBP3.35m. The property was owned by Blackwell. Of
the GBP8.5m net cash payment, GBP5.25m was placed in escrow pending
the settlement of a number of historic claims and the realisation
of proceeds from the disposal of two other investment properties,
which will be marketed post-acquisition. These property disposals
are expected to be completed by 31 December 2016. The net debt of
Blackwell at the date of the acquisition was GBP4.9m.
In our calculation of fair value, we have impaired the value of
assets to which the escrow relates and assumed that the balance of
GBP5.25m is returned to the Group. This has resulted in the
establishment of a GBP5.25m debtor and an investment of GBP6.6m.
The value of net assets acquired was GBP5.8m, resulting in goodwill
of GBP0.8m.
Following the acquisition of Blackwell, a new Specialist
Earthworks Services Division was established and will be managed
and reported as a new separate business segment. The operation will
continue to trade as "Blackwell".
Exceptional Costs
The Group continued its re-structuring to reduce exposure to
thermal coal volatility and production within the UK. The various
port, power station and steel plant closures that were announced
last year required further steps to restructure and reduce costs.
As a direct result of this, the Group has incurred non-recurring
costs relating to redundancy and asset write downs of GBP12.4m.
Included within these exceptional costs in the year to 31 May 2016
is a one off impairment on the Tower project of GBP4.7m. This
impairment has arisen following the announcement from Aberthaw
power station to cease the purchasing of Welsh coal at the end of
the current contract, which has in turn led to the decision to
shorten the mine life at Tower.
Item GBPm
------------------------------------- ----
Impairment of investment and
other assets relating to the
Tower project 4.7
Redundancy and related site closure
cost at Redcar Steelworks 1.6
Redundancy and related site closure
costs in Industrial Services 1.1
Cost associated with early closure
of certain mining operations 4.0
Cost attributable to the acquisition
of Blackwell 0.7
Redundancy costs from central
overhead cost reduction programme 0.3
------------------------------------- ----
12.4
------------------------------------- ----
As a result of the strategic move to transition away from
exposures to thermal coal, in light of continued price and volume
pressures, the Group took the decision in the prior financial year
to cease operations at a number of our mining sites in Scotland.
This led to a write off of mining assets and associated redundancy
costs. The Group will now only operate coal extraction from a
single site at House of Water.
These costs do not form part of the Group's ongoing activities,
are considered exceptional by size and nature, and are therefore
excluded from the Group's underlying result.
Interest
In the year to 31 May 2016, continuing net finance expenses for
the Group reduced by GBP0.9m from GBP2.5m to GBP1.6m. This is
driven partially by the success of the simplification programme in
the prior year, which has led to a reduced level of average net
debt.
Taxation
The income tax credit for the year is GBP1.1m compared with a
tax charge of GBP3.6m for the year ended 31 May 2015; including the
share of tax of equity accounted investees of GBP0.6m (2015:
GBP0.6m) this results in a total tax credit of GBP0.5m (2015:
charge of GBP4.2m). Whilst this credit represents a reported
effective tax rate for the Group of 4.5% (2015: 16.4%), this rate
is affected by a number of exceptional costs that are not tax
deductible, including the write off of certain Tower balances and
acquisition of Blackwell.
Dividend
The Board is proposing a final dividend of 0.6p per share (2015:
20.0p), bringing the dividend for the full year to 2.3p per share
(2015: 30.0p). Whilst this reflects a decrease of 92.3% in the
total dividend for the year, this increases the dividend pay out
ratio to 40% (2015: 31.9%) of underlying diluted earnings per
share. The proposed final dividend will be paid on 21 October 2016
to all shareholders on the register at the close of business on 23
September 2016.
Share buybacks
The Group has continued the programme of purchasing its own
shares as a means of returning value to shareholders. In the year
to 31 May 2016 the Group purchased 175,000 (2015: 1,053,072) shares
for a total consideration of GBP0.6m (2015: GBP6.3m). The Group now
holds 1,228,072 of its own shares in treasury.
Pensions
Our former deep mining operation at Maltby Colliery was a member
of two industry wide defined benefit pension schemes. Whilst our
operations at the mine have ceased, the obligation to fund the
schemes remains within the Group, and the Directors remain
committed to funding the schemes.
In addition to the two industry wide defined benefit pension
schemes, Maltby Colliery also operates an unfunded concessionary
fuel scheme. The combined liability of both elements as at 31 May
2016 is GBP5.7m, increased from GBP5.5m at 31 May 2015.
Contributions in the year of GBP1.2m (2015: GBP2.1m) have been
offset by interest and expenses of GBP0.3m (2015: GBP0.3m) and a
net re-measurement loss of GBP1.0m (2015: GBP2.1m).
In the prior year, the Group also maintained a concessionary
fuel scheme for former employees of The Monckton Coke &
Chemical Company Limited. As noted in the prior year Annual Report
and Accounts, the scheme has ended and a final settlement was made
in June 2015. The Group has no further obligation in relation to
this scheme.
Earnings per Share
Reported basic earnings per share from Continuing Operations
decreased from 65.3p to a loss of 30.0p reflecting the impact of
the reduced underlying profits and the exceptional costs.
Underlying diluted earnings per share decreased by 94.0% from 93.9p
to 5.6p. The weighted average diluted number of shares reduced
slightly during the year from 33.1m to 32.3m. The share buy-back
programme, which was approved on 5 November 2014 resulted in the
purchase of 1,228,072 shares as at 31 May 2016, and therefore
reduced the weighted average number of shares.
Net Debt
Net debt increased by GBP31.3m from GBP1.0m at 31 May 2015 to
GBP32.3m at 31 May 2016. The net debt figure has increased
following the Group's acquisition of Blackwell, as well as plant
and mining asset investment.
Group net assets decreased from GBP148.5m at 31 May 2015 to
GBP131.4m at 31 May 2016. Gearing (measured as net debt compared
with net assets) at the end of May 2016 was 24.6%, compared with
0.7% at 31 May 2015.
Movement in Net Debt
2016 2015
Item GBPm GBPm
----------------------------------------------- ------ -----
EBITDA 14.9 46.1
Movement in working capital 5.3 22.9
----------------------------------------------- ------ -----
Cash from operating activities before interest
and tax 20.2 69.0
Interest payable (4.0) (1.4)
Taxation payable (6.7) (4.7)
Net capital expenditure (13.5) (8.3)
New finance leases (3.5) (2.1)
Business combinations (13.7) 26.9
Dividends received 0.8 2.2
Dividends paid (6.9) (8.7)
Purchase of own shares (0.6) (6.3)
Discontinued cash flows (3.4) 1.2
----------------------------------------------- ------ -----
Total movement in cash and cash equivalents (31.3) 67.8
----------------------------------------------- ------ -----
Net cash flow from continuing operating activities before
interest and tax generated a cash inflow of GBP20.2m during the
year. This cash generation reflected positive EBITDA of GBP14.9m,
despite the significant pressures faced across the group on
profits. The cash impact of exceptional costs in the year, included
within the GBP14.9m was GBP2.9m.
The movement within the Group's working capital balances was a
GBP5.3m inflow. Reductions in coking coal, coke and PCI coal,
following the closure of Redcar Steelworks offset the impact of
increased coal stocks in Scotland. The release of working capital
was lower than expected in the last year due to the lack of demand
last winter. The Group is confident that these stocks will be
saleable during the coming year, although visibility of demand
remains low.
Interest payments included amounts of GBP3.0m in respect of the
cash settlement of ineffective derivative financial instruments,
for which the cost had been provided within the previous year's
Income Statement.
Tax payments in the year included GBP6.3m in respect of a
disclosable tax planning scheme implemented in 2011. An additional
amount of GBP5.2m was paid in June 2016. Following this payment the
Group has no further cash payment obligations in relation to the
scheme. The Group and its advisors, KPMG are still confident that
the scheme was sound and lawful. Should HMRC ultimately accept the
Group's view on how this arrangement should be treated for
corporation tax purposes, the GBP11.5m of cash paid will be repaid
by HMRC. As previously reported, no profit benefit was taken at the
time the scheme was enacted. No provision has been made for
approximately GBP1m of interest that would be payable should to
planning not be successful.
Net capital expenditure in the last financial year was GBP13.5m
(2015: GBP8.3m) and includes disposal proceeds of GBP1.6m (2015:
GBP2.9m). Gross cash on capital expenditure was GBP15.1m (2015:
GBP11.2m) and related to investment of GBP8.5m to supplement our
existing plant fleet and further investment in mine development
assets across our Scottish operations of GBP3.0m to develop the
House of Water site. The Group have also continued to invest in its
property portfolio as assets are developed for future use or
sale.
The acquisition of Blackwell resulted in an increase in net debt
of GBP13.4m. This was made of cash payments to settle the
acquisition consideration of GBP6.6m, an amount of GBP5.25m paid
into escrow, net debt included in the acquisition balance sheet of
GBP4.9m, less the GBP3.35m received in relation to the disposal of
the head office property. Additionally, the Group also acquired
Earls Gate Energy Centre Limited for net cash of GBP0.3m.
In addition to the cash flows described above, the Group paid
dividends totalling GBP6.9m, reflecting the prior year final
dividend of 20.0p and the current year interim dividend of 1.7p.
The Group have also purchased a number of shares as part of the
share buy back programme for GBP0.6m (2015: GBP6.3m) and reduced
the long term loans balance by GBP1.6m (2015: GBP53.9m).
Coal stocks are expected in to increase by around 100k tonnes in
the first half of the current financial year before sales commence
in earnest during next winter. The Group also expects to offer
stocking deals to coal merchants of around GBP6m in the first half,
in line with normal practice.
Capital Management and Bank Facilities
The Group manages its capital to ensure that entities in the
Group will be able to continue as a going concern, whilst
maximising the return to shareholders. The capital structure of the
Group consists of debt, which includes borrowings, cash and cash
equivalents, and equity attributable to equity holders of the
parent, comprising capital, reserves and retained earnings.
The capital structure is reviewed regularly by the Group's Board
of Directors. The Group's policy is to maintain gearing at levels
appropriate to the business. The Board principally reviews gearing
determined as a proportion of debt to earnings before interest, tax
and depreciation. The Board also takes consideration of gearing
determined as the proportion of net debt to total capital. It
should be noted that the Board reviews gearing taking careful
account of the working capital needs and flows of the business.
The Group's current UK banking arrangements consists of a GBP70m
borrowing base facility ("BBF") and a GBP40m revolving credit
facility ("RCF"). The arrangement was concluded with a three bank
group comprising of HSBC, Lloyds and Barclays and is committed
through to August 2018. The change in structure of the facility has
resulted in improved pricing, which has had a positive impact on
the net finance expense for the year. The new structure was also
designed to provide a greater degree of flexibility for the Group
in financing working capital. This was judged to be important given
the reductions that were anticipated to occur with Group EBITDA.
Although the Group's RCF is subject to a Debt:EBITDA leverage
covenant maximum of only 2:1, the Group's BBF facility sits outside
the leverage test and leverage test parameters as it is secured
against the underlying working capital assets.
As a result of this innovative arrangement the Group benefits
from a flexible facility structure, and with the reduced need to
finance significant coal stocks and plant assets, the Board does
not foresee any covenant stress or pressure, in light of the
reduced current profitability.
Summary of Net Debt
2016 2015
GBP000 GBP000
-------------------- -------- --------
Cash and
cash equivalents (21,161) (43,853)
Interest
bearing borrowings 37,593 32,772
Finance lease
liabilities 15,906 12,049
-------------------- -------- --------
Net Debt 32,338 968
-------------------- -------- --------
Going Concern
The Group has considerable financial resources together with
long-term contracts with a number of customers and suppliers across
different geographic areas and industries. As a consequence, the
directors believe that the Group is well placed to manage its
business risks successfully despite the current uncertain economic
outlook.
After making enquiries, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going concern basis in
preparing the annual report and accounts.
Iain Cockburn
Group Finance Director
8 August 2016
Consolidated Statement of Profit and Loss and Other
Comprehensive Income
for year ended 31 May 2016
2016 2015
Continuing operations Note GBP000 GBP000
----------------------------------------------- ---- --------- ---------
Revenue 2 340,665 662,161
Cost of sales (299,764) (588,390)
----------------------------------------------- ---- --------- ---------
Gross profit 40,901 73,771
Other operating income 265 733
Administrative expenses (48,339) (45,560)
----------------------------------------------- ---- --------- ---------
Operating (loss)/profit (7,173) 28,944
Analysed as:
Operating profit (before exceptional costs) 5,205 38,074
Exceptional costs - Cost of sales (3,473) -
Exceptional costs - Administrative expenses (8,905) (9,130)
----------------------------------------------- ---- --------- ---------
Exceptional costs (12,378) (9,130)
Operating (loss)/profit (after exceptional
costs) (7,173) 28,944
----------------------------------------------- ---- --------- ---------
Financial income 1,153 1,152
Financial expenses (2,785) (3,617)
Unrealised fair value gains and losses
on derivative financial instruments - (3,080)
Share of (loss)/profit in associates and
joint ventures (net of tax) (1,792) 1,504
----------------------------------------------- ---- --------- ---------
(Loss)/profit before tax (10,597) 24,903
Income tax credit/(expense) 3 1,082 (3,554)
----------------------------------------------- ---- --------- ---------
(Loss)/profit for the year from continuing
operations (9,515) 21,349
Discontinued operations
Loss for the year from discontinued operations (940) (779)
----------------------------------------------- ---- --------- ---------
(Loss)/profit for the year (10,455) 20,570
----------------------------------------------- ---- --------- ---------
Other comprehensive income/(expense)
Items that will not be reclassified to
profit or loss
Remeasurements of defined benefit pension
plans (1,098) (1,733)
Tax recognised on items that will not
be reclassified to profit or loss 3 181 368
Items that are or may be reclassified
subsequently to profit or loss
Foreign exchange translation differences 149 (1,766)
Effective portion of changes in fair value
of cash flow hedges 1,119 (4,769)
Tax recognised on items that are or may
be reclassified subsequently to profit
or loss 3 (40) 862
----------------------------------------------- ---- --------- ---------
Other comprehensive income/(expense) for
the year, net of tax 311 (7,038)
----------------------------------------------- ---- --------- ---------
Total comprehensive (expense)/ income
for the year (10,144) 13,532
----------------------------------------------- ---- --------- ---------
2016 2015
Note GBP000 GBP000
-------------------------------------------------- ---- -------- -------
(Loss)/profit attributable to:
Equity holders of the Company (10,498) 20,454
Non-controlling interest 43 116
-------------------------------------------------- ---- -------- -------
(Loss)/profit for the year (10,455) 20,570
-------------------------------------------------- ---- -------- -------
Total comprehensive (expense)/income attributable
to:
Equity holders of the Company (10,187) 13,416
Non-controlling interest 43 116
-------------------------------------------------- ---- -------- -------
Total comprehensive (expense)/income for
the year (10,144) 13,532
-------------------------------------------------- ---- -------- -------
Basic earnings per share (pence) 4 (32.96) 62.91
Diluted earnings per share (pence) 4 (32.96) 61.88
Basic earnings per share from continuing
operations (pence) 4 (30.01) 65.31
Diluted earnings per share from continuing
operations (pence) 4 (30.01) 64.24
-------------------------------------------------- ---- -------- -------
Non GAAP Measures
Basic underlying earnings per share from
continuing operations (pence) 5.70 95.41
Diluted underlying earnings per share
continuing operations (pence) 5.63 93.85
-------------------------------------------------- ---- -------- -------
Consolidated Balance Sheet
at 31 May 2016
Group
--------------------
2016 2015
GBP000 GBP000
--------------------------------------------- --------- ---------
Non-current assets
Property, plant and equipment 68,095 57,144
Investment property 5,126 5,126
Intangible assets 9,475 9,472
Investments in associates and joint ventures 1,043 5,963
Deferred tax assets 3,207 2,512
---------------------------------------------- --------- ---------
86,946 80,217
--------------------------------------------- --------- ---------
Current assets
Assets held for sale 5,040 5,040
Inventories 46,983 57,803
Derivative financial instruments 32 1,088
Trade and other receivables 117,310 108,750
Cash and cash equivalents 21,161 43,853
---------------------------------------------- --------- ---------
190,526 216,534
--------------------------------------------- --------- ---------
Total assets 277,472 296,751
---------------------------------------------- --------- ---------
Non-current liabilities
Other interest-bearing loans and borrowings (46,098) (7,165)
Retirement benefit obligations (5,699) (5,516)
Provisions (4,189) (5,762)
Derivative financial instruments (66) (1,308)
(56,052) (19,751)
--------------------------------------------- --------- ---------
Current liabilities
Other interest-bearing loans and borrowings (7,401) (37,656)
Trade and other payables (75,096) (73,078)
Income tax liabilities (6,271) (13,414)
Provisions (867) -
Derivative financial instruments (430) (4,351)
---------------------------------------------- --------- ---------
(90,065) (128,499)
--------------------------------------------- --------- ---------
Total liabilities (146,117) (148,250)
---------------------------------------------- --------- ---------
Net assets 131,355 148,501
---------------------------------------------- --------- ---------
Group
----------------
2016 2015
GBP000 GBP000
-------------------------------------- ------- -------
Equity attributable to equity holders
of the parent
Share capital 3,314 3,314
Share premium 73,955 73,955
Other reserves 211 211
Translation reserve (3,582) (3,731)
Merger reserve 1,022 1,022
Hedging reserve (62) (1,141)
Capital redemption reserve 1,530 1,530
Retained earnings 54,582 72,999
--------------------------------------- ------- -------
130,970 148,159
Non-controlling interest 385 342
--------------------------------------- ------- -------
Total equity 131,355 148,501
--------------------------------------- ------- -------
Consolidated Statement of Changes in Equity
for year ended 31 May 2016
Capital Total
Share Share Translation Hedging Other redemption Merger Retained parent Non-controlling Total
capital premium reserve reserve reserves reserve reserve earnings equity interest equity
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ------- ------- ----------- ------- -------- ---------- ------- ---------- ---------- --------------- ----------
Balance at
1 June 2014 3,309 73,952 (1,965) 2,766 211 1,530 1,022 69,073 149,898 226 150,124
------- ------- ----------- ------- -------- ---------- ------- ---------- ---------- --------------- ----------
Total
comprehensive
income for
the year
Profit for
the year - - - - - - - 20,454 20,454 116 20,570
Other
comprehensive
income/(expense)
Foreign exchange
translation
differences - - (1,766) - - - - - (1,766) - (1,766)
Effective portion
of changes
in fair value
of cash flow
hedges - - - (4,769) - - - - (4,769) - (4,769)
Remeasurements
of defined
benefit pension
plans - - - - - - - (1,733) (1,733) - (1,733)
Tax recognised
on other
comprehensive
income - - - 862 - - - 368 1,230 - 1,230
------------------ ------- ------- ----------- ------- -------- ---------- ------- ---------- ---------- --------------- ----------
Total other
comprehensive
expense - - (1,766) (3,907) - - - (1,365) (7,038) - (7,038)
------------------ ------- ------- ----------- ------- -------- ---------- ------- ---------- ---------- --------------- ----------
Total
comprehensive
(expense)/income
for the year - - (1,766) (3,907) - - - 19,089 13,416 116 13,532
------------------ ------- ------- ----------- ------- -------- ---------- ------- ---------- ---------- --------------- ----------
Transactions
with owners
recorded directly
in equity
Issue of shares 5 3 - - - - - - 8 - 8
Equity settled
share-based
payment
transactions - - - - - - - (89) (89) - (89)
Dividends paid - - - - - - - (8,744) (8,744) - (8,744)
Purchase of
own shares - - - - - - - (6,330) (6,330) - (6,330)
------------------ ------- ------- ----------- ------- -------- ---------- ------- ---------- ---------- --------------- ----------
Total
contributions
by and
distributions
to owners 5 3 - - - - - (15,163) (15,155) - (15,155)
------------------ ------- ------- ----------- ------- -------- ---------- ------- ---------- ---------- --------------- ----------
Balance at
31 May 2015 3,314 73,955 (3,731) (1,141) 211 1,530 1,022 72,999 148,159 342 148,501
------------------ ------- ------- ----------- ------- -------- ---------- ------- ---------- ---------- --------------- ----------
Capital Total
Share Share Translation Hedging Other redemption Merger Retained parent Non-controlling Total
capital premium reserve reserve reserves reserve reserve earnings equity interest equity
Group GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Balance at
1 June 2015 3,314 73,955 (3,731) (1,141) 211 1,530 1,022 72,999 148,159 342 148,501
Total
comprehensive
(expense)/income
for the year
Loss for the
year - - - - - - - (10,498) (10,498) 43 (10,455)
Other
comprehensive
income/(expense)
Foreign exchange
translation
differences - - 149 - - - - - 149 - 149
Effective portion
of changes
in fair value
of cash flow
hedges - - - 1,119 - - - - 1,119 - 1,119
Remeasurements
of defined
benefit pension
plans - - - - - - - (1,098) (1,098) - (1,098)
Tax recognised
on other
comprehensive
income - - - (40) - - - 181 141 - 141
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Total other
comprehensive
income/(expense) - - 149 1,079 - - - (917) 311 - 311
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Total
comprehensive
income/(expense)
for the year - - 149 1,079 - - - (11,415) (10,187) 43 (10,144)
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Transactions
with owners
recorded directly
in equity
Equity settled
share-based
payment
transactions - - - - - - - 520 520 - 520
Dividends paid - - - - - - - (6,924) (6,924) - (6,924)
Purchase of
own shares - - - - - - - (598) (598) - (598)
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Total
contributions
by and
distributions
to owners - - - - - - - (7,002) (7,002) - (7,002)
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Balance at
31 May 2016 3,314 73,955 (3,582) (62) 211 1,530 1,022 54,582 130,970 385 131,355
------------------ ------- ------- ----------- ------- -------- ---------- ------- -------- -------- --------------- --------
Consolidated Cash Flow Statement
for year ended 31 May 2016
Group
------------------
2016 2015
GBP000 GBP000
------------------------------------------- -------- --------
Cash flows from operating activities
(Loss)/profit for the year from continuing
operations (9,515) 21,349
Adjustments for:
Depreciation of property, plant and
equipment 9,261 10,009
Impairment of property, plant and
equipment - 10,078
Depreciation of mining assets 7,263 8,901
Amortisation and impairment of goodwill
and intangible assets 1,026 5,567
Net finance expense 1,632 2,465
Share of loss/(profit) in associates
and joint ventures (net of tax) 1,792 (1,504)
Impairment of Tower investment and
other balances 4,302 -
Profit on sale of property, plant
and equipment (265) (733)
Profit on disposal of subsidiaries - (16,253)
Equity settled share-based payment
expenses 520 (123)
Income tax (credit)/expense (1,082) 3,554
Loss on derivative financial instruments - 3,080
Translation of non-controlling interest
and investments (5) (298)
-------------------------------------------- -------- --------
14,929 46,092
Change in inventories 15,541 37,627
Change in trade and other receivables 10,696 11,257
Change in trade and other payables (21,775) (22,666)
Change in provisions and employee
benefits 754 (3,334)
-------------------------------------------- -------- --------
20,145 68,976
Interest paid (4,011) (1,362)
Income tax paid (6,702) (4,716)
-------------------------------------------- -------- --------
Net cash from continuing operating
activities 9,432 62,898
Net cash from operating activities
in discontinued operations (3,156) 1,055
-------------------------------------------- -------- --------
Net cash from operating activities 6,276 63,953
-------------------------------------------- -------- --------
Cash flows from investing activities
Proceeds from sale of property, plant
and equipment 1,613 2,927
Dividends received 839 2,153
Disposal of subsidiaries - 24,807
Acquisition of subsidiaries (net of
cash acquired) (4,110) (637)
Acquisition of property, plant and
equipment (15,075) (11,263)
-------------------------------------------- -------- --------
Net cash from investing activities
in continuing operations (16,733) 17,987
Net cash from investing activities
in discontinued operations - 1,677
-------------------------------------------- -------- --------
Net cash from investing activities (16,733) 19,664
-------------------------------------------- -------- --------
Cash flows from financing activities
Proceeds from the issue of share capital
(net of directly attributable expenses) - 8
Payment of finance lease liabilities (6,591) (5,636)
Payment of other loan balances (2,890) -
Dividends paid (6,924) (8,744)
Purchase of own shares (598) (6,330)
Proceeds from/(repayment of) Group
banking facilities 5,000 (48,000)
-------------------------------------------- -------- --------
Net cash from financing activities
in continuing operations (12,003) (68,702)
Net cash from financing activities
in discontinued operations (282) (1,578)
-------------------------------------------- -------- --------
Net cash from financing activities (12,285) (70,280)
-------------------------------------------- -------- --------
Net (decrease)/increase in cash and
cash equivalents (22,742) 13,337
Cash and cash equivalents at 1 June 43,853 30,768
Effect of exchange rate fluctuations
on cash held 50 (252)
-------------------------------------------- -------- --------
Cash and cash equivalents at 31 May 21,161 43,853
-------------------------------------------- -------- --------
1. Basis of preparation and status of financial information
The financial information set out above has been prepared in
accordance with the recognition and measurement criteria of
International Financial Reporting Standards as adopted by the EU
(Adopted IFRSs).
The financial information set out above does not constitute the
Group's statutory accounts for the years ended 31 May 2016 or 2015.
Statutory accounts for 2015 have been delivered to the Registrar of
Companies, and those for 2016 will be delivered in due course. The
auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
These results were approved by the Board of Directors on 8
August 2016.
2. Segmental Information
The following analysis by industry segment is presented in
accordance with IFRS 8 on the basis of those segments whose
operating results are regularly reviewed by the Board of Directors
(the Chief Operating Decision Maker as defined by IFRS 8) to assess
performance and make strategic decisions about allocation of
resources.
The sectors distinguished as operating segments are Coal
Distribution, Industrial Services, Logistics and Specialist
Earthworks. Specialist Earthworks has been identified as a new
operating segment following the acquisition of Blackwell during the
year ended 31 May 2016. A short description of these sectors is as
follows:
-- Coal Distribution: Provides coal, coke, minerals, smokeless
fuel and biomass products to a range of industrial, wholesale and
public sector energy consumers.
-- Industrial Services: Provides quality assured contract
management services to clients in materials handling and a wide
range of other industrial sectors.
-- Logistics: Provides bulk logistics to customers across the UK.
-- Specialist Earthworks: Provides earth moving, civil
engineering and infrastructure services across the UK.
These segments are combinations of subsidiaries, jointly
controlled entities and associates. They have separate management
teams and provide different products and services. The four
operating segments are also reportable segments.
Transactions between divisions are carried out at rates that do
not give a competitive advantage to a particular division of the
Group.
The segment results, as reported to the Board of Directors, are
calculated under the principles of IFRS. Performance is measured on
the basis of underlying operating (loss)/profit, which is
reconciled to (loss)/profit before tax in the tables below:
Industrial Specialist Total Coal
Services Logistics Earthworks Services Distribution Total
2016 2016 2016 2016 2016 2016
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Revenue
Total revenue 83,512 54,512 31,338 169,362 179,316 348,678
Inter-segment revenue (2,333) (4,680) (5) (7,018) (995) (8,013)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Revenue from external customers 81,179 49,832 31,333 162,344 178,321 340,665
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Underlying operating (loss)/profit 3,297 1,173 1,076 5,546 (921) 4,625
Amortisation of intangibles (256) - - (256) (328) (584)
Taxation on associates
and joint ventures - - - - (628) (628)
Net financing costs (211) (356) (71) (638) (994) (1,632)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Profit/(loss) before taxation
(pre-exceptional) 2,830 817 1,005 4,652 (2,871) 1,781
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Exceptional costs (12,378)
Loss before taxation (10,597)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Depreciation charge (2,411) (2,674) (1,013) (6,098) (12,860) (18,958)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Capital expenditure 2,172 4,573 - 6,745 11,969 18,714
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Net assets
Segment assets 37,816 23,095 42,789 103,700 162,520 266,220
Segment liabilities (20,755) (12,178) (30,662) (63,595) (46,760) (110,355)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Segment net assets 17,061 10,917 12,127 40,105 115,760 155,865
Associates and joint ventures - - - - 1,043 1,043
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Segment net assets including
share of associates and
joint ventures 17,061 10,917 12,127 40,105 116,803 156,908
Unallocated net assets (25,553)
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Total net assets 131,355
----------------------------------- ---------- --------- ----------- --------- ------------- ---------
Unallocated net assets include goodwill and intangibles
(GBP9.5m), Group banking facilities liability (GBP37.6m), cash and
cash equivalents (GBP4.5m liability), derivative financial
instruments (GBP0.4m liability), deferred tax asset (GBP3.2m) and
other corporate items (GBP4.2m).
2 Segmental Information continued
Coal
Industrial Specialist Total Production
Services Logistics Earthworks Services & Distribution Total
2015 2015 2015 2015 2015 2015
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Revenue
Total revenue 127,769 68,309 - 196,078 485,948 682,026
Inter-segment revenue (6,840) (11,693) - (18,533) (1,332) (19,865)
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Revenue from external customers 120,929 56,616 - 177,545 484,616 662,161
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Underlying operating profit 5,660 2,267 - 7,927 34,828 42,755
Loss on Biomass conversion
project (2,400) - - (2,400) - (2,400)
Amortisation of intangibles - - - - (143) (143)
Taxation on associates and
joint ventures - - - - (634) (634)
Net financing costs (609) (421) - (1,030) (1,435) (2,465)
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Profit before taxation (pre-simplification) 2,651 1,846 - 4,497 32,616 37,113
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Simplification costs (9,130)
Unrealised fair value gains
and losses on derivative financial
instruments (3,080)
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Profit before taxation 24,903
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Depreciation charge (3,427) (2,411) - (5,838) (13,120) (18,958)
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Capital expenditure 397 1,864 - 2,261 11,163 13,424
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Net assets
Segment assets 46,012 17,111 - 63,123 186,300 249,423
Segment liabilities (23,150) (10,649) - (33,799) (67,929) (101,728)
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Segment net assets 22,862 6,462 - 29,324 118,371 147,695
Associates and joint ventures - - - - 5,963 5,963
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Segment net assets including
share of associates and joint
ventures 22,862 6,462 - 29,324 124,334 153,658
Unallocated net assets (5,157)
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Total net assets 148,501
------------------------------------------- ---------- --------- ----------- --------- --------------- ---------
Unallocated net assets include goodwill and intangibles
(GBP9.5m), revolving credit facility (GBP32.8m), cash and cash
equivalent (GBP19.8m) derivative financial instruments (GBP4.6m
liability), deferred tax asset (GBP2.9m) and other corporate items
(GBP1.2m).
Information About Key Customers
Included in revenue is an amount of GBP12,751,000 (2015:
GBP95,236,000) arising from sales to the Group's largest customer,
relating to the Coal Distribution division.
The following table analyses revenue by significant
category:
2016 2015
GBP000 GBP000
----------------------- ------- -------
Sale of goods 178,321 484,616
Rendering of services 131,011 177,545
Construction contracts 31,333 -
----------------------- ------- -------
340,665 662,161
----------------------- ------- -------
3. Taxation
Recognised in the Income Statement
2016 2015
GBP000 GBP000
---------------------------------------------------- ------- -------
Current tax (credit)/expense
Current year 213 5,777
Adjustments for prior years (738) (107)
Current tax (credit)/expense (525) 5,670
---------------------------------------------------- ------- -------
Deferred tax credit
---------------------------------------------------- ------- -------
Origination and reversal of temporary differences (831) (2,262)
Adjustments for prior years (128) 56
Reduction in tax rate 402 90
---------------------------------------------------- ------- -------
Deferred tax credit (557) (2,116)
---------------------------------------------------- ------- -------
Tax (credit)/expense in income statement (excluding
share of tax of equity accounted investees) (1,082) 3,554
Share of tax of equity accounted investees 628 634
---------------------------------------------------- ------- -------
Total tax (credit)/expense from continuing
operations (454) 4,188
Tax expense/(credit) from discontinued operations 199 (1,605)
---------------------------------------------------- ------- -------
Total tax (credit)/expense (255) 2,583
---------------------------------------------------- ------- -------
Recognised in Other Comprehensive Income
2016 2015
GBP000 GBP000
------------------------------------------- ------- -------
Deferred tax (expense)/income
Effective portion of changes in fair value
of cash flow hedges (40) 862
Remeasurements of defined benefit pension
plans 181 368
------------------------------------------- ------- -------
141 1,230
------------------------------------------- ------- -------
Reconciliation of Effective Tax Rate
2016 2016 2015 2015
Rate GBP000 Rate GBP000
-------------------------------------------------- ------ ------- ------ -------
(Loss)/profit for the year from continuing
operations (9,515) 21,349
Total tax (credit)/expense from continuing
operations (including tax on equity
accounted investees) (454) 4,188
-------------------------------------------------- ------ ------- ------ -------
(Loss)/profit excluding taxation from
continuing operations (9,969) 25,537
-------------------------------------------------- ------ ------- ------ -------
Tax using the UK corporation tax rate
of 20.0% (2015: 20.83%) 20.0% (1,994) 20.8% 5,319
Effect of tax rates in foreign jurisdictions (2.8%) 276 0.4% 95
Unrecognised tax losses (3.9%) 389 - -
Non-deductible (income)/expenses (6.4%) 644 (5.4%) (1,376)
Reduction in tax rate on deferred
tax balances (4.2%) 417 0.4% 90
(Over)/under provided in prior years 1.9% (186) 0.2% 60
-------------------------------------------------- ------ ------- ------ -------
Effective tax rate and total tax (credit)/expense 4.6% (454) 16.4% 4,188
-------------------------------------------------- ------ ------- ------ -------
The UK corporation tax rate reduced to 20% on 1 April 2015,
giving an effective base rate of 20% (2015: 20.83%).
Factors That May Affect Future Current and Total Tax Charges
Reductions in the UK corporation tax rate from 23% to 21%
(effective from 1 April 2014) and 20% (effective from 1 April 2015)
were substantively enacted on 2 July 2013. Further reductions to
19% (effective from 1 April 2017) and to 18% (effective from 1
April 2020) were substantively enacted on 26 October 2015. A
reduction to 17% has been announced but has not been substantively
enacted. This will reduce the Group's current tax charge
accordingly. The deferred tax balances at 31 May 2016 has been
calculated based on the rate of 18% substantively enacted at the
balance sheet date.
4. Earnings per Share
2016 2015
------------------------------------------- -------------------------------------------
Continuing Continuing
and discontinued Continuing Discontinued and discontinued Continuing Discontinued
------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
Ordinary Shares
Basic earnings per
share (32.96)p (30.01)p (2.95)p 62.91p 65.31p (2.40)p
Diluted earnings
per share (32.96)p (30.01)p (2.95)p 61.88p 64.24p (2.40)p
------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
The calculation of earnings per share is based on the
(loss)/profit for the year attributable to equity holders and on
the weighted average number of shares in issue and ranking for
dividend in the year.
2016 2015
------------------------------------------- -------------------------------------------
Continuing Continuing
and discontinued Continuing Discontinued and discontinued Continuing Discontinued
----------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
(Loss)/profit for
the year attributable
to equity holders
(GBP000) (10,498) (9,558) (940) 20,454 21,233 (779)
Weighted average
number of shares 31,851,053 31,851,053 31,851,053 32,511,083 32,511,083 32,511,083
Basic earnings per
share (32.96)p (30.01)p (2.95)p 62.91p 65.31p (2.40)p
----------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
The calculation of weighted average number of shares includes
the effect of own shares held of 1,228,072 (2015: 1,053,072). The
calculation of diluted earnings per share is based on the
(loss)/profit for the year and the weighted average number of
ordinary shares in issue in the year adjusted for the dilutive
effect of the share options outstanding (effect on weighted average
number of shares is 400,444 (2015: 540,262)); effect on earnings
per ordinary share is nil p (2015: 1.03p). Effect on continuing
earnings per ordinary share is nil p (2015: 1.07p). The effect on
earnings per ordinary share and continuing earnings per ordinary
share is nil p in the year due to the loss reported.
2016 2015
------------------------------------------- -------------------------------------------
Continuing Continuing
and discontinued Continuing Discontinued and discontinued Continuing Discontinued
----------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
(Loss)/profit for
the year attributable
to equity holders
(GBP000) (10,498) (9,558) (940) 20,454 21,233 (779)
Weighted average
number of shares 32,251,497 32,251,497 32,251,497 33,051,345 33,051,345 33,051,345
Diluted earnings
per share (32.96)p (30.01)p (2.95)p 61.88p 64.24p (2.40)p
----------------------- ----------------- ---------- ------------ ----------------- ---------- ------------
Continuing underlying basic and diluted earnings per share are
calculated on the diluted weighted average number of shares of
32,251,497 (2015: 33,051,345) and on underlying (loss)/profit after
tax, as reconciled below:
2016 2015
GBP000 GBP000
------------------------------------------------ ------- -------
(Loss)/profit for the year attributable to
equity holders from continuing operations (9,558) 21,233
Amortisation/impairment of intangibles/goodwill 584 143
Exceptional items 12,378 12,210
Loss on Biomass conversion project settlement - 2,400
Tax effect of above items (1,587) (4,967)
------------------------------------------------ ------- -------
Underlying Profit after Tax from Continuing
Operations 1,817 31,019
------------------------------------------------ ------- -------
5. Dividends
The aggregate amount of dividends comprises:
2016 2015
GBP000 GBP000
---------------------------------------------- -------- --------
Final dividends paid in respect of prior
year but not recognised as liabilities in
that year
(20.0p per share (2015: 16.7p)) 6,382 5,534
Interim dividends paid in respect of the
current year (1.7p per share (2015: 10.0p)) 542 3,210
---------------------------------------------- -------- --------
6,924 8,744
---------------------------------------------- -------- --------
Proposed dividend (0.6p per share (2015:
20.0p)) 191 6,417
---------------------------------------------- -------- --------
The proposed dividend has not been included in liabilities as it
was not approved before the year end.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR EAAPPEEAKEAF
(END) Dow Jones Newswires
August 09, 2016 02:01 ET (06:01 GMT)