Hercules Plc (LON:HERC) Chief Executive Officer Brusk Korkmaz and Chief Financial Officer Paul Wheatcroft caught up with DirectorsTalk to discuss the strategic acquisition of Advantage NRG Ltd and its role in Hercules’ entry into the UK power and energy sector.
Q1: Brusk, could you just give us an overview of the Advantage NRG acquisition and why it’s so important for the business?
A1: It has been a very busy period for us at Hercules Plc, and we wanted to take this opportunity to speak to our shareholders directly outside of our usual interim or full-year results updates, because this is a major milestone for us.
Paul and I wanted to share this amazing news by highlighting our latest announcement, the acquisition of Advantage NRG Ltd and why we believe that it’s a major and strategic step forward for the company. We believe that this acquisition is a huge milestone in our growth journey.
As you may know, the UK is about to enter a huge phase of infrastructure investment, and the government plans to spend at least £725 billion over the next 10 years. So, this amount is huge, and we want to be part of this. We have already seen the government’s new 10-year infrastructure plan, and the national infrastructure pipeline is about to come out in July time, so we also expect this national infrastructure pipeline to be a major announcement.
These investments will span in the infrastructure sectors where we operate, and they are transport, power and energy, water, and also transmission and distribution networks. In the power and energy space alone, National Grid has committed to £58 billion of investment to meet a 64 per cent increase in electricity demand by 2035. As you might be aware, the UK’s high-voltage power network already covers around 20,000 km, and it will need thousands more km of transmission lines to meet the future demand.
On top of that, as you might have already seen from a Tuesday announcement that Ofgem approved £24.2 billion worth of investment, with £8.9 billion of that to be spent in electricity and transmission upgrades, where Advantage NRG vastly operates.
So, as you can see the opportunity, we believe that us and NRG over the next 10 years we will be growing together, we will be working together, and we believe that we will be very busy delivering for these projects.
As you might be also aware from our previous recordings, there is a huge demand of skilled workers, especially the overhead lines that operate in the overhead transmission network, and this demand is expected to grow rapidly. However, the UK faces a serious shortage of qualified workers to meet this need, and that’s why we see this as a moment of real opportunity, and we are very excited about this, and that’s why we are positioning Hercules to be at the heart of this once-in-a-generation transformation of the UK’s power infrastructure.
By acquiring Advantage NRG, a specialist provider of overhead linesmen, we are entering the power and energy sector in a meaningful and strategic way. We are genuinely excited about the potential opportunities ahead for our growth as well as NRG’s growth. The acquisition will also help us to grow our Hercules Academy, and also Quality Transport Training, as you might be aware that we have acquired in June. They are a great company as well, and that will also help our Hercules Academy to be able to offer further training to deliver more courses to upskill and cross-skill the workforce in the infrastructure and construction industries.
Q2: Paul, could you just take us through some of the main numbers associated with the deal?
A2: So, as Bruce said, this is very exciting for all of us. We’re all buzzing here, and I think all the people at Advantage NRG are similarly buzzing. They see the opportunities just like we do, which is great. We’re all on the same page.
Hercules is acquiring 100% of the share capital of Advantage NRG, and this will be for an initial cash consideration of £10.2 million, plus there is a deferred payment of approximately £1.5 million, and on top of that, a one-year earn-out. All of that together could result in a maximum total consideration of £15.7 million. The earn-out is based on a multiple of the average EBITDA for the year ended 28 February 2025 and the year ending 28 February 2026. So, it’s an average of those two years’ results.
Crucially, and this is obviously very important to us, is that the acquisition is expected to be margin and earnings enhancing, and it’s also quite cash generative. So, Advantage NRG posted revenues of more than £11 million in the year ending 28 February 2025, and a profit before tax of £1.7 million. So, that’s the nub of it in terms of the basic financial elements of the acquisition.
Q3: Brusk, just before we go, do you have any closing remarks?
A3: As I mentioned at the start, it has been a very busy few months for us, for Hercules.
In June, we announced our interim results, and we had a record for six months since we got Hercules established, achieving £54.6 million turnover and EBITDA of £2.6 million. On top of that, the second half of this year is also looking great too and also, we are trading in line with market expectations.
As I mentioned, we have got two acquisitions over the line, QTT and Advantage NRG. These two companies will help us with our Hercules Training Academy as well as supplying overhead linesmen for the transmission lines for key grid and power upgrade projects.
You might have already seen one of our announcements that we changed our name, our brand, to Hercules Plc. We simplified it from Hercules Site Services PLC, this was to simplify our brand, to reflect a business which is focused on labour supply and expanding our blue and white-colour labour supply services into construction and infrastructure sectors in the UK. From now on, we will be simply known as Hercules.
Our commitment to shareholders, clients and our employees will be unchanged, but our ambition for Hercules will continue to grow.
