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 what the company does, Future Build acquisition, highlights from trading update, outlook and what investors should expect going into 2024.
Q1: Brusk, if we could start with you. Hercules Site Services was founded in 2008 and then floated on AIM in February 2022. For those out there that are not yet familiar with the group, could you just give us a brief overview of what the company does?
A1: In 2008, I started the business from a family spare bedroom, as you know that was a recession, quite tough times, but we have been growing every year since then, and a massive achievement for us, we got the business listed on the stock exchange in 2022.
A great achievement for us, and we are looking forward to the journey. We have over 1,000 people employed with us currently, and we have been growing every year.
We are mainly technology-enabled labour supply company in the infrastructure sector. We also have our construction services division where we carry out civil projects for the water sector, and we hire out our suction excavators services for our blue-chip clients.
As I mentioned, we are mainly a labour supply company, we supply labour to the infrastructure projects for the massive projects on the highways, HS2, nuclear energy etc.
The future is looking good as well so we’re excited.
Q2: Now, you recently announced that the group had acquired 60% of Future Build Recruitment, what was the rationale behind that, and how will it add to the group?
A2: When we started our journey on the stock exchange, one of our growth opportunities was about acquisition, and this is our first acquisition so we are really excited about this.
With regards to the white collar recruitment, Future Build operate in the white collar sector supplying engineers, project managers, site agents, project directors to construction companies.
So, there are so many synergies between us and acquiring 60% shows that we want to get into and grow into the white collar sector as well. Our clients have been asking for it and we believe that supplying labour and supplying white collar recruitment is quite similar in their synergies.
They operate for the clients that we don’t work so we believe we can make ‘one plus one three’ by working together and supplying blue collar to them, they’re supplying white collar to our clients.
We believe that there’s a huge opportunity for us to grow together.
Q3: Paul, what can you tell us about the terms of the deal?
A3: It’s a very straightforward deal, we’re buying 60% of the shares in Future Build.
They’ve been around for about 10 years so it’s a well established company. Not only that, but we are also linking it with the first partnership agreement which starts the date of the acquisition, and it runs for up to 10 years.
What that means is after 5 years, and at different time points after that, the current owners of the business who now obviously work for us, who retain that 40% shares, have the opportunity to sell their shares back to us. This is at a pre-arranged formula price based on the performance of the business in the 2 years previous to when they want to call of the shares. At the end of the 10 years, they would all come back to us anyway.
So, this is all about really accelerating our growth into difference areas as Brusk was saying with how much demand there is for white collar.
There’s a number of things like this that we would like to do, and this is the first one and we’re very excited to have got this over the line. It’s taken a lot of work and these are great guys that we’re going to work with, Simon and Richard, they’re well experienced and they’re well up for it.
So, yes, it’s a straightforward deal and we think one that will provide benefits to everybody over the next few years.
Q4: You recently provided a trading update for the year ended 30th September 2023, what were the key highlights from that?
A4: Again, we’ve had a really really incredible year. Brusk & I have been doing interviews explaining how we’ve had yet another record year and here we are, we’ve had yet another record year again in the year ended September 2023.
We told the market best part of a year ago now that we were aiming for £74 million turnover and £3.5 million EBIDTA. We said in the trading update that the turnover is going to be more than £80 million so we’ve smashed that target, and the EBITDA is going to be well ahead of £3.5 million so we’ve beaten that target too.
We’re really pleased with the result, we’ve all worked really hard in a very demanding and very busy sector of the infrastructure market in this country. So, very very very good result, that’s all across the board, all of our three sectors have all done remarkably well and we look forward with excitement for the next few years.
Q5: It sounds like you’re set up well but how do you see the outlook for the company?
A5: I think the outlook for the company is a really really exciting one.
We think, as Brusk has been saying, labour supply is our predominant area of business. The other two areas, where they’re nice, they’re niche parts of the business and they provide a nice income stream to us and are quite profitable, we’ve no intention to grow that in any major way. With labour supply, it’s very very scalable and that’s where the growth is obtainable really for us in the years ahead.
So, with this acquisition and this partnership will develop the while collar side of the business and we’ve recently started a rail division as well following getting a contract with Balfour Beatty Rail.
This, and no doubt some other partnerships and some acquisitions that might come along, will help us build but organically, we’re still doing very well. We’ve got the right team, we’ve got the right people to take us forward and the outlook, I think, is very very good.
Q6: Brusk, what is next for Hercules Site Services? What should investors be looking out for as we move into 2024?
A6: Like Paul said, first of all, organic growth is the main key area for us to grow as there’s a massive span in the infrastructure over the next 15 years in nuclear energy, in rail, on the roads, and we are well placed by supply labour, and now white collar for our blue-chip clients who are working for the government projects.
We are very excited about our organic growth through all of our divisions, and in 2024, in January, we are going to open up our training academy in Nuneaton. That is very strategic for us because, as you know, there is a massive skill shortage in the UK and to upskill and cross-skill our workforce is really really important. We believe that by supplying training for our own staff, they are going to stay with us more, we are going to work with them in the long term.
We want to monetise this opportunity as well by selling construction training and infrastructure training for our clients and other construction companies, and we’re really excited about that.
Also, there are going to be opportunities for us to look into different acquisitions as well in the labour supply sector, we can’t tell you very much about it but there are some targets that we are talking to which hopefully you will hear about soon.
