Hargreaves Services (LSE:HSP) — Final Results

0:01 Good afternoon, and welcome to the HARGREAVES SERVICES PLC final results investor presentation. For this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the q and a tab situated on the right hand corner of your screen. Simply type as type in your questions and press send. Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO designate, Simon Hicks. Good afternoon to you. Good afternoon. Good afternoon all, and welcome to our results presentation for financial year twenty six. I'm joined here with Stephen Cregan, our Chief Financial Officer. And, Gordon may or may not join us later on, in in the presentation, just to make you all aware.

0:50 So what have we achieved? And first of all, a real big thanks to to the teams. I know a number of our our own teams joined this presentation. So as I said on the on the on the video we recorded, yesterday, we'll be back to what's been a a really fantastic year, for HARGREAVES, continuing to grow and advance our strategy delivering value. The highlights for the year, we've returned 32,600,000 in total to shareholders. That included the £20,000,000, tender offer as promised, driven by the first and second sales of our renewables asset, first and second tranche sold. Services revenue as as as last year as its interim is going well.

1:36 Volumes are up and margins are being maintained at that 6%, which is great news and testament to all the hard work that goes out there in the field. The delivery of those things delivered us a strong cash position despite returning 32,600,000. We've ended the year with a strong cash position of 21,600,000,000, and we've delivered a full year dividend, which is up 8% to 40 p. And as is evidence of me sitting here, we've delivered the CEO succession. So just to recap on what is our strategic value proposition, we're in three divisions as as folk know. The first division, the service division, which is our contracted services business. This is the business that operates out there in critical infrastructure, really focused on contract wins and areas where we can grow our core competencies.

2:29 The message for services is continuing to grow that business, is growing the revenue and maintaining the margin. From the land business, we've done that first realization of our own renewable assets, and we've continued to realize plot sales at blind wells. The strategy for this business is to reduce the capital that we have have got employed in there, and that is what we're doing. That's allowed us to return that value to shareholders. We're continuing to reduce that capital, and that will take us more towards a contracted services business for land, which I'll touch on later in the presentation. We see a transfer of those skills and learning into doing that work for others who have the same land challenges.

3:14 And then Germany, our third division, delivered well this year. We got the dividend through, which is great news. The trading business is doing well. That's where the profit contribution has come from. We'll touch more detail on on this asset further in the presentation. But the strategy for Germany is to optimize that asset, maximize the returns by way of dividends, which we are doing. Steven's now gonna talk about the numbers in detail. Steven? Right. Thanks, Simon. So first slide is really an overview of what the business has achieved over the last five years. All bars moving in the right direction on here. If I start top left bar table, we've got a dividend per share. We've we've spoken a lot in the past about having a progressive dividend policy, moving that return to shareholders up over the years, and that's what exactly what we've done.

4:06 You can see that in those bars culminating in the current year, increasing the full year dividend by 8%. And in terms of return on capital employed, that again moving in the right direction, it's benefited in the year by a couple of one offs, most notably the set of the renewable energy land assets in the settlement with Tungsten West, but it is nevertheless moving in the right direction, still subdued by the impact of the high capital employed in our land operations and the capital employed within Germany, which we'll look at later on. The bottom two charts show broadly the same picture, which is a growth in our services operation, both in terms of revenue as the group over time has become more and more exposed to large scale infrastructure projects and start to bring more services onto those sites and also in terms of PBT, which has grown at a quicker rate than revenue as our margin has improved over those five years as well by bringing higher higher margin work such as earthmoving and engineering services into the picture.

5:05 In terms of the year that we currently the the year we've just ended rather, this is the usual run through the p and l left on a few times now. The first top line relates to revenue from our services business unit, which is up 35% year on year. What's driven that growth? Well, there's additional work we've done at our major infrastructure projects of HS 2 and Sizwell, but it's worth pointing out that it's not all earth moving activity at those sites. We're bringing additional services onto those locations. So particularly the provision of building materials in terms of aggregates. Third part, we're we are subcontracting civils works, so managing that process in terms of particular key access roads onto sites and managing logistics and materials handling on-site as well. So bringing the full package of what HARGREAVES can deliver on at these major infrastructure sites. In addition to that, we're also got a presence on Lower Thames Crossing, which we announced a few months back. We started open trial pits at some of the reservoir projects, and we're also seeing growth in water engineering services as well. So overall, significant growth in the air revenue, which we're really pleased to see.

6:11 That scroll down into our profit from services, which is now up 27% to 20,200,000. You'll notice that the margin year on year is ever so slightly suppressed. That's really because the provision of aggregates into these projects just doesn't come out that high margin that the engineering works does, but nevertheless is a good ancillary service to provide those projects. If we look at HARGREAVES LAND, that's grown by 443%, which is quite the growth. The 12,500,000 PBT delivered in the air really benefited from this first two tranches of the renewable energy land asset sales, which contributed around about £9,000,000 of additional profit in the air. Taking that out, we were fairly flat year on year with continued sales coming out of our Blind Well site.

6:57 The German operation profit after tax for Germany was 6,300,000, growth by 54% really benefit from additional volumes in the trading aspect of that business. And I'll pick that up in detail a little bit later on. Corporate costs slightly up, part of that's inflation, part of it is additional investment in order to support the growth in the overall business, brings us to a profit before tax of 34,000,000. That excluded the one off gain with Tungsten West where we set up the long standing mining services contract for a one off gain of 7,000,000. Not really fair to include that as underlying because we can't do that again. Amortization takes a stamp to the profit before tax for the year of just over 40,000,000. Tax at the usual rate gives us 31,000,000 for the full year.

7:42 If I just skip down to the EBITDA number, which has grown by 8.6%, obviously, that's whilst that's strong growth, it's not reflected in the profit before tax growth, which is significantly higher. So worth just pointing out EBITDA doesn't include the sales of the renewable assets, neither does it include the one off gains from Tungsten West. In terms of the balance sheet, just to give everyone a sense of what we where the capital is invested, Not a huge change from what you've seen on here before. I'll just work left to right. So on the left hand side of the page, we've got our services business unit, which delivered about 20,200,000 profit in the year. The big change here is that fixed assets investment is higher than it was this time last year. Correspondingly, the finance lease debt is also higher because we fund all of that yellow plant machinery.

8:29 Reason for the investment in that plant is really to support that growth in revenue we saw on the previous page. Otherwise, working capital continues to be extremely well managed within services and overall capital employed or equity employed is less than £10,000,000. Moving to the right, the land business of £88,000,000 employed in there. The top line includes the renewable energy land assets plus other investment properties up to 12,000,000. The largest asset in that balance sheet there sits with an inventory, and that is the the the investment we have in Blindwells, which is £44,000,000 in the on the balance sheet there. We've once we've sold two plots at Blindwells during the year, we've also reinvested some of those proceeds back into the site in order to open up the remainder of the site and also fulfill some of our statutory obligations on that project.

9:21 Going to Germany on the left, so 75,000,000 of cash tied up in Germany. The new line in here is the top one, that £3,600,000 of the fixed assets. That represents the group's current investment into the zinc recycling project, which we'll go through in a bit more detail later on and originally presented to the market back in November. Approximately half of that 3.6 relates to land that's been acquired upon which the plant will ultimately sit, and the remainder relates to design planning, permitting, licensing, works that have been done so far. Spades won't go into the ground on that until late this year. In terms of the unallocated column, fairly straightforward. The only thing I would point out is we entered the year with £21,600,000 in the bank after having returned over £32,000,000 back to shareholders, and we end the year again without any bank borrowings outside of specific leasing debts.

10:17 This slide is one we've had in for a few years now in terms of just trying to give some structure to how you might want to think about valuing this business or certainly how we consider valuing this business. So on the left hand side, we've got services business. The numbers in here have changed quite a bit over the last few years, always in the right direction, which is really pleasing to see. But long term contracts over 75 in the order book, 75 contracts in the book, solid margins at over 6%. So some sort of multiple on your chosen metric would be the way to go on that one. In terms of land, when we saw that when you've seen this slide previously, we've had a renewable uplift of 20,000,000. It's now 10,000,000 because we've already sold some of that renewable uplift, realized that value, and returned that to shareholders by the tender offer in May.

11:09 The boot value is at historic costs. We don't value it to fair value, and so we believe there's some hidden value within that over and above that 80,000,000. So an asset valuation of that land value is probably that that land portfolio is is is the most sensible way to look at that. And then the German joint venture, key thing from this, from our perspective, as Simon pointed out a few slides ago, is to optimize the cash return from this business. We've received in the air cash of 6,600,000 out of the German JV. We expect to receive a similar amount in the coming year. That's a regular recurrence now. And so some sort of multiple on that would be a sensible way to value that with no doubt floor, which is our book value because it's under underpinned by solid assets. And then going through the cash flow left to right, we started the end with £23,300,000 in the bank. We've had a very strong operating year as you've seen of 35,000,000, add back our depreciation, which is non cash.

12:08 We then take off any one off sales so that the gain on the fixed assets, so that includes the profit from the sale of the renewable energy land assets, but also some other assets were sold. The other working capital expenditure would appear on here of 10,900,000, basically reflects the unwind of an extremely strong working capital position we had last year. Anyone who was on the call last year will have heard me saying we got paid quite early by a couple of clients and that the working capital was abnormally low due to timing. This 10.9 outflow is just that unwinding, and you'll still see if you look back at services, that working capital tied to and they're still extremely good. Interest and tax is low. The net CapEx is an income of 14,200,000, again, reflecting the fact that we received 15,500,000 for selling the renewable energy land assets with a small amount of additional CapEx going the other way.

13:01 We received a 6,600,000 dividend from Germany during the year, and that completes the investing element. Lease payments we made against our lease obligations of 21,000,000 broadly matches off with the depreciation, which is what you would expect to see if we're maintaining a relatively stable fleet. The last two columns reflect dividends paid of 12,800,000 and 20,000,000. As Simon mentioned earlier, we returned 32,600,000 back to shareholders. That's those two columns. The eagle eyed amongst you will notice that that adds to 32,800,000. And the reason for the slight 200,000 difference is because we paid £200,000 dividend to a noncontrolling interest. So 32.6 went to shareholders of HARGREAVES SERVICES PLC, 200,000 went to a minority interest holder. And then we ended the year with 21,600,000.

13:50 Simon, can you take us through services? Yeah. Okay. So now we'll take shareholders and viewers through service by service. We'll look at the services business first. That's our contracted provision of skilled personal equipment in in major critical infrastructure and operational of major critical infrastructure assets. So the sorts of services we do, land remediation, major earthmoving, management of people's waste, materials processing, industrial services, minerals trading, and logistics and bulk haulage. The way we're starting to look at this business, this contracted services business, and this assists us with how how we develop our land provision as we go through to be a capital light business is on the left hand side towards the top left of that that oddly shaped picture, which is shaped like a a whoopee ball because in my mind, that's the the only game you should play with it all.

14:54 So the whoopee ball, why are we looking at it like that is because each of our individual businesses are really good, strong players, and we want them to start thinking about playing more as a team and giving value across the entire service provision. So if you look at the top, left hand side, it's where we are sourcing, opportunities. So the land team are looking at remediating land for other people. We've done a lot of land remediation and value creation on our own land and developed a a really strong skill set. There is the opportunity for the land team to do that for others where others are providing the funding or own the land, and we're seeing some of that moving forward. We'll talk about that when we get into the land business. We we often move material, muck shifting for other people. We move that material with our earthmoving business. We're developing new large infrastructure projects with earthmoving, which is our blackwell business, and we were moving waste as these sites are upgraded using our waste management business, and all of that goes on our vehicles. So on the left hand side, we're seeing that creation of value in in brown and greenfield land for major infrastructure projects.

16:08 On the right hand side, where you see us turning up, is operating the assets for others that own the assets. So we'd be operating a waste from energy plant or we'd be taking the material to them on our vehicles or moving waste sludges around for auto companies. So generating value from creation and and and land and operating those assets on the other side. So that gives us about two dimensions to the business. The operating business tends to be long term maintenance contracts. Then as we move back again, it's back into remediation where land or promoting land and investing in new assets that come into that land. The little people doing the investment, we're providing the services. And throughout that cycle, what we see is a demand for a recycled or recovered or a secondary aggregate.

17:00 And that is where we're growing our minerals trading business, growing it well over the course of this year and see a good outlet for that business. So not only can we provide the service of moving the earth or, moving the waste or transporting the aggregates, we're actually sourcing and providing those aggregates into these large scale projects. So we see that coming together of those services businesses as well as operating independently. And because we have a strong base of customers, 75 this year, which is five over last year, with long term relationships in that operational side, that industrial side where we do the engineering maintenance services, it allows us to be selective. So we can select contracts that fit with the services we wanna provide, fit with our skill set, and give us the ability to not enter into EPC lump sum type arrangements. So we operate under contracts that we protected on cost, deliver strong margins for the sector, which is over 6%, gives us good, strong free cash flows because we get reasonable payment terms, and that all drives that really strong, return on capital employed.

18:13 So inflation resistant contracts with very limited credit exposure gives us the opportunity to continue to grow this business segment into a market which has a very positive outlook. And as I said, we're in critical infrastructure and that investment cycle across connecting people, clean energy, and the environment, the outlook for that remains strong. We haven't changed our views on the outlook. In fact, if anything, they've, they've they've hardened because we're seeing more more investment, more projects coming out of engineering and into construction. As Stephen said, we mobilized at Lower Thames Crossing North Of The Thames. We're seeing progress at Westburnt where we're clearing ash from that site. We've strengthened our position in the energy from waste sector over the course of the year. And we're seeing things now like pumped hydro in Scotland to in order to store the excess energy that the country's wind portfolio delivers for for for Scotland. So we're seeing pumped hydro schemes potentially.

19:18 We're seeing the grid being upgraded with Eastern Greenlink coming forward. We've got a presence with Anglia, as we said, digging those trial pits. So we're seeing the reservoir work, and we're continuing with to work to advance our positions in waste management, land remediation, and that provision of sustainable resources. So the message to take here is a strong position in infrastructure with a with a with a strong outlet. So progress we've made in FY '26. We've made progress in all of our markets, but notably, our position on Lower Thames. We're doing a very interesting project for power and minerals at the Drax Power Station where we are recovering the the ash out of the ash fields. This is a waste left behind by the generation over many years at that asset, And we're building and engineering the plant which converts that material into a into a fuel for onward sale. So we're doing the capital work there, and and we're doing the movement of the materials. We've extended our position with Fortis, which is removing the waste from energy from waste plants. We're hauling that waste, RBA waste to to their storage facilities.

20:31 And as I said, Anglian water, we're doing the observational trial pits already. Pipeline that we shared in the in the in the previous session at HARGREAVES SERVICES, remains in Capital Markets Day. Shared this. This remains buoyant, as we said, a lot of volume, some slight movement on reservoirs moving out a bit. We expect carbon capture moving out. No surprise there with the with the with the the change in regime in The US. Carbon capture slowed down a bit. There are still progress we see being made particularly in the Northwest. And HS 2, continues to to to see, some some delays towards completion, but we are starting then to hand over some of those some of those areas at HS 2, which will free us up to move down and mobilize as we have done at Lower Thames Crossing and and take advantage of the this pipeline of work coming towards us.

21:28 Order coverage, in a good shape entering the year with 70% contracted into f y twenty seven. 51, we can see already for f y twenty eight, which typically for us around that 65, 70% when we enter a year is is where we'd like to be. The duration of contracts, three point six years, that sort of masks the fact that these relationships we have with those 75 customers lasts ten, fifteen, twenty years. So long relationships on contract durations that are sort of three three to four years, and 90% of them protected from inflation, both inflation and fuel inflation. So in a in a strong position there. And customer concentration, yes, Sizwell, EKFB, our largest customers, what's pleasing to see is that eighty twenty rule that when you get to the top 20, that's giving us 78% of our revenue. So not too much concentration with those customers and and a reasonably sized tail, which gives us confidence in in customer base.

22:34 Moving on to land, just a refresher of what we do, the multiphase, master developer on our own assets, blind roles in particular, where we've got the first blind roles phase one with 1,600, plots consented. We've got 500 families on-site now. I was up there a few weeks ago. You can feel that is now starting to turn into a community. You can see the school there, the playing fields. We're talking about development of the town center. Access roads are absolutely there, and there are people living on that on that site and and and making lives in that community. So that is moving forward as is Unity. We've got the TJ Morris investment on Unity building a very large distribution center there. The McDonald's is open. The Starbucks is open. So that site is progressing.

23:23 Yes. It's slow. It's it's commercial development slower than we anticipated, but it's still moving forward. We then move into where we're doing bespoke commercial development, which is on a smaller scale. We do that for others. We've got a scheme moving in Glasgow where we're taking two tower blocks and turning them into student accommodation. We're doing that through other people's equity and debt. We're providing those technical contracted services to realize value, and we take a percentage when that flips progressing well. Our strategic land is something we're pleased about. It's how we're taking this business down into a capital light region area, and that is progressing. We've got a slide later to talk about that pipeline, but that's where we're promoting planning and consenting for other landowners.

24:13 Particularly, these are focused on small areas where you sort of get them under the radar so that the planning isn't a problem so we can move those through in a in an efficient way. And, of course, that renewables and clean energy skills that we have is continuing to advance. Steve, do you wanna pick up the key of Yeah. Of course. So we might have mentioned this once or twice already, but a key event that occurred during the year, particularly within land was the sale of the first two tranches of the renewable energy land assets. We've mentioned it a few times. Think it's worth mentioning Real significant milestone in the in the evolution of that idea and and really nice to see it turn into actual cash back into the group and then return back to shareholders, which is what we said we would do right from the outset.

25:04 So we're really pleasing to get that under our belts. In addition to that, Blindwells continues apace. We've sold two plots in the year combined proceeds of over 20,000,000. So as Simon's already mentioned, turning into a real thriving community up there, the key key movements in the current year. In terms of the pipeline, so as we've mentioned previously within land, over £80,000,000 worth of our capital tied up in land, the plan is to release that capital over the next four to five years from large schemes like blind wells and then re return some of that and reinvest some of it into a more modest capital invested into things like land promotion or deliberate development sites.

25:54 So the big plan here, you can see on the screen the pipeline, the strategic land aspect Simon mentioned a couple of slides ago is is called residential promotion on here. You can see we've got 25 sites under option in that area, 95,000 plots. The plot pipeline is up 50 16%, so we're seeing this growing. And I it'll take a while for that business unit to get into a consistent profit delivery because it's from from inception to realization, probably five to eight years. But the level of capital employed per scheme is substantially lower than we've seen in the other development schemes, more like 2 to 400,000 per scheme depending on the complexity of planning. We expect to see the first one of our strategic land schemes complete in the next twelve months. It's already contracted, so it should be a matter of time, which will be the first one we've done and therefore a bit of a bit of a milestone again in that land business. So, yeah, pleasing to see that growing.

26:55 Hope to hope to update in the June course about that. And in terms of the renewables portfolio, I won't I won't repeat it again, but they've been sold two of them at the bottom there. And they talk about what's left. Okay. What's next is probably more important. So we still have five schemes of wind farms and access agreements over our land for which we are receiving rental income. And we they're on the books at 3,300,000, which is the historic cost of those sites. And we've had them recently independently valued by Jones Langmisau at 9,100,000. That's a slightly increase on the 8,700,000 that we had them valued up in the prior year. No real change to the scheme. That's just really a function of the market sentiment at the moment.

27:41 When will they be sold? Well, not in the near term is the short answer. So what we've learned from the first two sales, whilst we're very pleased with the values that we got on them and they're in line with the independent evaluation that we received, the level of interest was somewhat reduced because the schemes are fairly early stage. So whilst they were operating, they hadn't been operating for a long time. And one of the key considerations of these schemes is how windy is the wind farm. So how much electricity and therefore revenue will it generate? So the plan going forward would be to leave the schemes for a little bit longer, let them mature, see how the wind flow is going, and then go to the market. And at that point, we think we should be able to optimize value by bringing in a wider variety of potential purchases.

28:31 In terms of beyond those five schemes, there are still seven schemes that we can see on the horizon. None of them have planning and only three of them are currently contracted with us, which is why we're keen to not put out an independent value on them Cause the last thing I wanna be to say is here's some value, and then for whatever reason, it falls away because it's not contracted yet or there's a problem with planning. Once they move through through those stage gates, receive planning, then we'll get the values and pop them into the pipeline there. But there is a bit of ready reckoning you can do in terms of valuation regarding the megawatt age and what the independent value is on those that we currently have. So you can make of that what you will in terms of where where they may end up in the future. Okay. Germany. Remind you on Germany.

29:18 What do we do? We have a we have a joint venture in Germany where we have we're entitled to 86% of the economic value, but we own 49.9%. Germany is broken into three divisions. HRS Trading, which is a trading business, which trades our commodities on a on a back to back basis, so we don't have any risk in that business. DK Recycling is a is a large blast furnace, which we'll talk a bit more detail about in subsequent slides. And the zinc recycling project, which is owned by us, 86 owned by us, is what we're really excited about. We're developing here a pretreatment plant in effect that works in in support of the DKA recycling asset. And now Gordon's knit and joined me when we get to that slide, he'll give a lot more detail into zinc recycling. But before that, Steven's gonna talk about more detail on the results of Germany because in our numbers, it's just one line. Yeah. Thanks.

30:22 Yeah. And that one line is probably not enough to make much of a judgment on. So just broken out the two elements of the joint venture here. There's no zinc on here yet because it hasn't really started. We've we've done some CapEx as you saw earlier, but that's about it. So the revenue HRMS relates to the trading business, the commodity trading business. That's had a good year compared to the last couple of years. Improvement in volumes, 12% up in volume. The commodity prices that are trading are broadly in broadly stable, which has meant that we've been able to maintain margins of a little under 6% there. So the 54% improvement in the joint venture's results is all really coming from that increase of activity in the in the German trading business. If we look at DK, the there's increased sorry, the steel waste recycling facility, it has improved from 1,400,000 loss to 1,100,000 loss. And then the main driver behind that is the the control and slight improvement on input fuel costs.

31:22 But what we haven't seen, which we might have hoped to see with the fair wind, was an improvement in pig iron prices beyond what we've seen. They are staying stubbornly low at the moment. Gordon will pick up some some some reasons as to why that might improve as we go forward, but we haven't seen that improvement that we would that we would have hoped. And it only takes a slight improvement in the pig iron price to to push the profits up. So we're still hopeful to see that come through. So, Pika, thank you. Pika, thank you very Very timely, Gordon. Great army. So just as far as, you know, there's three parts of the business, everyone. The HRMS has a trading history. It's always popped along. We've said between this, lowercase and uppercase, it continues to do that. The business has never, lost money. It's always about back to back trade. It's all about a volume.

32:15 Great bunch of traders. They own the other 14% of the business, so they're specifically aligned with shareholders. So nice, steady, recurring, income stream, which generates dividend, really, and have done for a number of years that they passed back to drive into our dividend. So nothing to be concerned about here. It will move within that range. Next is DK recycling. Now remember there is existing blast furnaces across Europe. We process about a half a million tons of waste dust. If they didn't come to DKA, they'd go into landfill. So this is very environmentally friendly. The output of that is you basically get energy zinc from pig iron. So you recycle about 98% of the dust that come to you.

33:02 Pig Island trades at about €500 a ton, and we produce 250,000 tons. So an incremental move of €10, that's 2,500,000 to the bottom line. So you can see we're nearly there not quite. Why do we believe prices will move up? Well, really three things. First of all, there's a thing called C band, which has put a tax on the import of pig iron. Secondly is that as big electric arc furnaces get turned on, you will see the demand for scrap will increase. And when that does scrap, prices should move up. The we've mentioned it before. There's been an embargo on Russian pig iron into Europe. So we see those prices moving, and when they do, we'd see DK moving back into profit. At the moment, not particularly concerning. But just flipping on to the other page, so what we said to everyone, this is the really well, I regard as exciting bit, and there's a bit of an update here for for shareholders.

33:56 We said this plant's gonna cost about €20,000,000 to, build. What we also said to you, we were hoping to get German government support. Really pleased to report that the German government have actually given us effectively a 2,000,000, development ground, but they've also given us €12,500,000 as a loan. And what that means to me as a shareholder and alongside yourselves is that if this plant doesn't work and something goes wrong, the risk is 8,000,000. So, personally, I I look at it. I've got about 800,000 that I'm betting on this will work. So that's the downside if this doesn't work. We do think it'll work because it's not new technology. It's making mixing things chemically. You should be reassured that the German German government has stress tested it, and they've put money in.

34:46 So they they're confident it's gonna work. And we have a number of customers keen to work with us. Now the interesting thing about this is it targets the new big electric arc furnaces that are being built. So they produce a zinc, which is typically 10%. Two two high end zinc for DK, but too low for the existing technology called a valence kiln, which deals with traditional small electric arcs. And that means that we are the only technology available for these new plants that are being built. And so those new plants, costing 2,000,000,000 to build green technology, will, either put material into landfill, about 30,000 tons per plant, or they'll send it to us to process.

35:33 The great thing about that is we already have, one of the steel plants approached us and said, will we sign an LOI, Contracts we're drawing up with the big three. And what we're hoping is we have the money. The plant is gonna get start and build at the end of the summer. It will be operational targeting for January 28 when the first big EAF comes on stream. And then, when the concept is proved, we'll look to add an even bigger one for the other two plants that come online. Now just in context, the big zinc recycler for existing electric arc fences company for Buffaza has a market cap of 1,000,000,000. This technology is very, disruptive.

36:19 It is not like gasification or something that hasn't been tried and tested. This is about mixing all the chemicals. It's a leaching process, mixing in a particular way, of course, in different temperatures and pressures, but we're quite excited about the opportunity. So at the moment, I would like to look at what's the downside. Well, the downside is this might have been exceptional right off of 8,000,000. The upside is very, very significant. And the good thing is this isn't Manjana. Simon is taking over running the business. I'm gonna go to Germany and lead this project. So think it's really exciting. And the plan will either be working or not in 2028. And if it does, it's gonna introduce a significant value for shareholders, And that's where I would provide the best focus, I think. So that's do you have any other I think these guys are going to do the outlook. And then at the very end, I'm just going to say goodbye.

37:13 Thank you, Gordon. So outlook in summary, the services business grow. We're growing that business. We've got 70% of revenue secured and we continue to focus on major infrastructure projects. Where you see us turn up is the type of projects that society needs to be delivered. So we're turning up in that space, which delivers a sustainable underlying growth in our profits. Land, it's about reducing our capital employed in that business and then taking that skill and knowledge that we've learned and transforming that into a contracted services provision for others. So using the knowledge we've already got in our land team. In the short term, it's about that first strategic land sale, further development of the renewables and continued progress at Blindwells Phase one. So reduce our investment in that portfolio. Germany, as Gordon's talked about, that's about optimization, return of the dividend, investing in a plan to increase its value in that asset and and thinking about what we do with the German asset once we've proven that technology. So the angle for us is strong, under those three divisions.

38:26 The next page is really us summarizing what we believe is our investment case. The drivers for that on the right hand side, as we said, strong ten year infrastructure strategy in our dominant market, which is The UK, That super cycle of investment that we're seeing, housing planning reforms, so land needs to be unlocked for new communities to to be developed upon and all underpinned by strong UK engineering skills. The water investment cycle, we're seeing that coming towards us, particularly on on inside the AMP eight, nine, ten, eleven frameworks, but also within that capital investment into strategic reservoirs. Waste is a constant. Our industrial logistics and waste businesses are all focused now in the waste sector. The waste sector is something that won't go away.

39:16 That removal of municipal waste and biosolids from water treatment companies is a long term, play in there. The nuclear world map is now, we've seen that broadening just from H. Hinkley into Sizwell into SMRs into nuclear fusion. We're seeing more and more investment going into that space. And indeed, the the the drive for data centers in The UK, which requires clean energy. So all those drivers, and and we are well positioned with our people, with our services, with the skills that we have, and the clear growth strategy into those sectors. So our investment case is clearly positioned to drive into those markets, and that's underpinned by what we believe is a is a very strong and robust balance sheet. And and with that in mind, I'll hand back to the person who I see is responsible for getting us in our position over the last twenty five years going back. Hello. Thank thank you very much. I just wanted to use this opportunity to say to everyone who's dialed in, look. Thank you for your support that I've had over the years.

40:24 It's been great fun, working with the team, but also having the support of the shareholders. It's good to go out on the second best year we've ever had in the twenty years I've run this listed company. We I think we leave in a strong place. 21,000,000 in cash, a very clean balance sheet. One of the important things I would say to you is that I spent a long time finding Simon. I think he will do a better job than I would running services. You know where I came from, coal company, into a services business. We created the platform, but now he's gonna take it and fly it with the support of Steven. Steven's been been with me for a number of years. And I think the most reassuring thing I can say to you all is, you know, I'm I'm not selling into my my shareholding. I'm gonna back this team because I believe in them, and I think that's hopefully reassuring for you.

41:14 But I would like to take this opportunity to thank everyone who's backed me over the years. It's been a pleasure, and I will try and add significant value for all of us in Germany before I finally hand up my boots. So thank you very much, and over to questions. Yep. Thank you, guys. So we've had a few questions through. One presubmitted. Unfortunately, I don't know who's who submitted it, but I think there's probably one for you, Simon. Many recent reports of near grid outages won't be is one factor being that poor grid connectivity, particularly in rural areas. Does this affect HARGREAVES either directly or indirectly in the demand for the lab aimed at solar or wind installations? Wow. Are we impacted by I see it as, I guess, but I don't think we're impacted by the outages per se, but I think it's an opportunity.

42:05 I'm picking up a term when I when I when I went around large scale investors, powered land. It's lands that has power connections and grid connections, and a a a number of the land assets we have have power well, the people have put renewables on them, solar on them. There are assets with grid connections nearby or in proximity, which adds additional value. If if you go and Google public domain information about what does that mean, powered land. So if you think back when we when we had coal mines, we put power stations on top of them and industry was built around that. The same will apply to powered land. So data centers will demand for that. You just have to be careful that you don't go into those that are not gonna move things forward. So, yeah, it's an opportunity for the group is my answer to that question.

42:56 Thanks. Probably another one for you, Simon. Mark s is asking, do you have any thoughts on how the new labor leadership policies might impact the company? I guess, the early days for me, but what we're hearing is from a from a if if you think about getting projects away locally and and local mayors have control of their budgets, makes sense for what we do, makes sense for regional developments. But when it comes to those major critical large scale infrastructure projects, my experience of this in in the last thirty, thirty five years is we've got the most robust UK infrastructure trust strategy we've seen for many years. It's got host parties, a board. I cannot see how any change in leadership of a in a political party would say, I'm not gonna build a reservoir that gives London water.

43:48 I'm not gonna invest in things that connects people to the regions. So it's a long term strategy. We're seeing boots in the ground. I wouldn't say that it would impact us in the short term for sure. Thanks. Germany one, Gordon from Alan. You previously referenced three reasons why the price of pig iron might be expected to increase. The r and s today only mentions two of them with sanctions on Russia being excluded. Was it deliberate? And then are Russian sanctions no longer expected to be a factor? No. No. And I did say that on in the presentation that that it it it's probably something we should have put into that, but I've mentioned that, yes, it's an impact. Fine. Matt's asked which parts of the portfolio do we believe are remain undervalued by the market?

44:35 And I think because of the the makeup of the business being three areas of services, land, and HRMS, it's quite difficult to say which specific one is particularly undervalued. I think my personal view is that the German joint venture is not fully valued partly because it's a joint venture, partly because it's quite involved. I think that's probably quite clear. And then secondly, the significant amount of capital we have tied up in land of nearly 90,000,000, I suspect the market doesn't fully value that asset. My own personal view is I think the services business is also probably undervalued, but that's because I think so highly of it. I think it can grow. I think all of Look. I'm optimistic for the future of the business, and I think I think I think every aspect can grow.

45:26 But the two key things, I think, probably the German investment followed by land in terms of the discount that's probably going on in the market. Which I guess is why we're driving our strategy. Correct. Yeah. There's an interesting one from Rob. In the past, management's talked about realizing assets over the medium term. Would would you consider a set of services division as a standalone entity? We're a PLC. It's it's the answer to that, isn't it? People can buy and trade our insurance, so we are always for sale. Yeah. I think at that level, yes. But it it's certainly not part of the strategy in any way, Rob. The strategy, as as Simon said, is to grow the services business, not sell it, to reduce the capital employed in the land business down to a a sort of leaner capital light model and then optimize the cash out of Germany.

46:16 There's no plans to No. Sell services business. This one's for you, Simon, in terms of from Steven. Regarding waste and recycling, are are we separating commodity aggregates or higher value separated materials? If we are, can we describe? I don't think we have to I think I understand the question. So if you take commercial waste or municipal waste, when when when you separate it out into its constituent parts in in in what's called a material recycling facility or wash plant, you get the higher value materials out of it. And one of the sources of recycled aggregates is exactly that. So if you if you have a level of skip delivered and you're clearing out something in your house, what will end up at the bottom of that is some construction materials.

47:01 Take away the wood, take away the glass, take away any metals, and you're left with what we can turn into an aggregate by polishing it and cleaning it. At processing sites, we have one operation on Selby. So, yes, we are doing that. And then we resell that back into new infrastructure projects. K. Thanks. Alan's got another question on Germany, but I'll take it because it's more of a accounting question. So when you talk about a change in pig iron pricing being worth 2,500,000 to us, is that 2,500,000 after tax and after our 86% share, or is it the gross amount in the joint venture before deducting the tax and the minority share? So really simply, when Gordon talks about 2,500,000 improvement, he's talking about improvement in the joint venture, the 100% improvement in the joint venture, which would then filter down to us via our share after tax back into sterling. So it's our top line that we were talking about gold. Yeah.

47:55 Next question is from RW. Do we have any patents for the zinc facility being built in Germany, or could somebody come along and copy it? That's a very good question, and some of that's commercially sensitive. So, we we know the value is in the intellectual capital, and we are taking all the necessary steps to protect it. I think that's probably the best way of putting it. As shareholders, the last thing you want is is one of our competitors listening to this and hearing what's going on. So I will make sure we protect that intellectual capital in the best way appropriate. I think that's the Yeah. Best answer. Fine with that. That's the end of the questions. We've got two oh, hold on. There might be the last one. One last one last minute question, Matthew. You squeaked in. Do you see any acquisitions as a key strategy over the next two to three years?

48:47 I I think our job as as as the executive is to present the board and shareholders with options on the funds that return to us. And the way my motto is up around is it is driven by the numbers. If it demonstrates more value in investing, we should look at it. If it demonstrates that there isn't, we should return the money to shareholders. We don't have anything on the table as we sit here today, but we'll look at all options going forward. It's not just acquisitions that grow our business. Everybody talks about, oh, get some acquisitions in. I mean, there's a huge amount of organic growth in there and investment in things that we do for our customers without acquiring just as we've done with the zinc plant. So if, for example, if we're gonna treat waste sludges from sewage, we can invest in a modest amount of capital to do that and provide that as a contracted service. So we will invest in the business when the numbers make sense.

49:41 Thank you. There's two other comments. They're both thank yous, Gordon, for you not stepping down. I'll not embarrass you by reading them out any more. Guess I know you wouldn't like it. But nice messages from Miles and Rob there. So thank you very much. Thank you, Miles and Rob. The end of the q and a. Great. Gordon, Simon, Steven, thank you. If I may just jump back in there and thank you for addressing those questions. But, Simon, if I may just ask you for a few closing comments to wrap up. Thank you. Yep. I mean, coming into the business, as I said yesterday, on a recorded video, a lot of the credit for for this business does does go, of course, to to Gordon and and over twenty five years, but also the wider teams that work within our business. They put the work in that delivers these numbers. Not only do our financial numbers look good this year, our safety numbers are the best we've seen in five years. So the teams are doing great work. Thank you to our investors for their continued support.

50:39 I'm sure I won't be here in twenty five years. It's going to have to pay for for a few years longer. So we have privilege to take care of this business, and I look forward to the continued support from our investors as we continue to deliver on our strategy. Fantastic. Well, look. Thank you once again for updating investors today. Could I please ask investors not to close the session? As you know, we'll automatically redirected to provide you feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation, and good afternoon to you