Hercules Site Services plc (LON:HERC) Chief Executive Officer Brusk Korkmaz and Chief Financial Officer Paul Wheatcroft caught up with DirectorsTalk for an exclusive interview to discuss the main operational & financial highlights from 2024, and what exciting plans & news investors can expect in 2025.
Q1: Bruce, if I can start with yourself. It’s been a fantastic year for Hercules Site Services, can you tell me about your year and perhaps the main highlights?
A1: We had a fantastic 2024 and yet again we exceeded the market expectations. We are very excited to announce that we hit over £100 million in revenue, which is a record result for us.
We have achieved these strong results through growth in our labour supply and our civil projects divisions. We are also pleased that the cross-selling between divisions and subsidiaries remained a key factor in 2024.
We made a strategic decision to divest our suction excavator business to increase our cash flow, profit before tax and earnings per share so we can deliver better returns for our shareholders.
As you might remember, we have completed our acquisition just over a year ago, a company called Future Build Recruitment, adding white-collar supply to our successful blue-collar supply business, and this added around £1.5 million of revenue to our overall turnover.
About a year ago, we secured a five-year contract with Balfour Beatty Rail for our rail labour supply division, and since then we have added more clients to our portfolio.
We established our Hercules Construction Academy in January last year and since then we have started generating our first revenues while upskilling and cross-skilling our workforce.
Last year, we paid a dividend of 1.72 pence per share to our shareholders, and we are pleased to confirm that we will be paying dividends again this year.
Lastly, in September, we raised £8 million to invest in acquiring companies within the labour supply sector enabling us to grow further.
Q2: Paul, some interesting developments. Can you guide us through your financial highlights?
A2: Well, as Brusk said, it was another record year and yet another year of exceeding market expectations. In fact, measured over three years, our revenue compound average growth rate is 48%. We are very, very pleased with that.
Looking at the revenue, revenue from continuing operations increased by 28% year-on-year to just shy of £102 million, it was just shy of £80 million last year. If you include the discontinued operations, our revenue in the year was just shy of £107 million.
Similar success story on adjusted EBITDA, again, continuing operations for the year delivered £4.7 million, which is up 34% from 2023. Again, looking at that same measure, including discontinued operations, we achieved £5.1 million adjusted EBITDA, which was an increase of a full £1 million on the figure we reported in 2023.
Adjusted pre-tax profit on continuing operations increased by 43% to £2.6 million. Revenue growth was actually accompanied by quite strong cash conversion. Best way to look at this is that because we’ve got increasingly effective credit management, we actually generated from continued operations during the year £7.5 million. If you compare that to the same figure last year, that was £3.3 million.
So very, very important in our business to generate positive cash and if you take that and put that up against the invoice discounting facility that we have, which we’re still only using half of, and the recent fundraising that we have that Brusk referred to, I think it bodes well for cash.
The concept of us moving forward with growth puts us in a very good position for the years ahead.
Q3: Great results there and a fantastic 2024. Brusk, I guess investors are going to ask what exciting plans or news can they look forward to from Hercules Site Services in 2025?
A3: We are really excited about this financial year also. The divestment of our suction excavator business will reduce our debt levels and increase our cash flow and also deliver a higher profit before tax and earnings per share. This move will also help us to dedicate more resources to capitalise on significant growth opportunities in our labour supply division.
The infrastructure and construction sectors are still thriving, which is great for our organic growth following the July 2024 election and the recent budget investment in these sectors is expected to increase even further, putting us in a strong position in the market. It’s also important to mention that most of the national insurance cost increases announced in the recent budget will be passed on to our clients.
We started this year really strong with successful fundraising, bringing three well-respected investors on board. This gives us a solid financial position to grow both organically and by acquiring other labour supply companies in the infrastructure sector. This first quarter of the financial year started really well, we have a strong pipeline of projects, and we are confident that all of our divisions will continue to grow organically.
It’s important to mention that our approach has always been to under-promise and over-deliver, and we are confident that we’ll achieve that again this year.
Lastly, we have been growing consistently every year for the past 17 years and we are committed to maintaining that same mindset moving forward.
