Hercules Site Services PLC (AIM:HERC) this week announced the sale of its Suction Excavator business to SNC Holdings for £2.4 million, a move the company described as transformational.
Chief executive Brusk Korkmaz explained that while the division accounted for less than 5% of group revenue, it represented 88% of consolidated debt.
The disposal significantly reduces debt and is expected to improve profit before tax and earnings per share.
Korkmaz and Hercules CFO Paul Wheatcroft joined the Proactive studio to update investors.
Here, we take a closer look at what was said.
Proactive: Joining me today are Hercules Site Services CEO Brusk Korkmaz and CFO Paul Wheatcroft. Brusk, Paul, very good to speak with you both. Brusk, could you explain what the announcement this morning means for Hercules?
Brusk Korkmaz: Good morning, and thank you for having us on. The one word I would use to describe this update is transformational.
By selling our Suction Excavator business, the company will significantly reduce its debt levels, resulting in higher profit before tax and improved earnings per share for our shareholders.
Proactive: And can you tell investors a little more about why you wanted to sell the business?
Brusk Korkmaz: Thank you, Stephen. We announced to the market a month ago that we intended to sell the Suction Excavator business.
It represented less than 5% of the group's revenue but accounted for 88% of our consolidated debt.
We ultimately wanted to dedicate greater resources to delivering on our strategy—capitalizing on the continued high-growth opportunities available in our core labour supply business.
As you might have seen from the UK government's recent Heathrow Airport expansion announcement, the country continues to undertake significant infrastructure upgrades.
These projects span nuclear power, energy distribution, aviation, water, and radio sectors. So, there is a lot happening, and we want to focus on these opportunities.
Proactive: Paul, can you take us through some of the financials behind the deal?
Paul Wheatcroft: Absolutely, Stephen. We have sold the business to SNC Holdings for £2.4 million, as announced this morning. As Brusk outlined, this division had high-value assets, which were financed through 90% funding on fixed interest rates—a typical hire-purchase loan model.
One challenge we faced as a public company was how this debt appeared to investors. While the assets supported the debt, it was not always perceived that way.
We have known for some time that this needed to change, and now we have taken that step.
This move improves cash generation by removing ongoing debt repayments that would have continued for years. Additionally, long-term lease liabilities have also been eliminated, resulting in a much healthier balance sheet.
The Suction Excavator business was only just turning profitable, so its removal will enhance earnings for Hercules, which we hope shareholders will appreciate.
Proactive: Brusk, any final thoughts on the announcement? And I understand your construction academy has reached a significant milestone?
Brusk Korkmaz: That’s correct, Stephen. On the disposal, in simple terms, it means Hercules now has a clearer identity moving forward.
You might remember our acquisition of Future Build last year, which expanded our reach into the construction recruitment market alongside our existing infrastructure labour supply business.
Additionally, we raised £8 million last September to acquire labour supply companies in the infrastructure sector.
We are laser-focused on growth in our core sectors while strengthening our balance sheet. To reiterate, we expect earnings per share and profit before tax to improve as a result of today’s announcement.
Regarding the construction academy, it recently turned one year old. We have surpassed expectations by training more than 1,100 people in its first year.
We have also partnered with local authorities to support unemployed individuals in re-entering the workforce.
This initiative demonstrates how proactive and ambitious we are as a company.
Proactive: Gents, thank you for taking the time to speak with us today. I hope you’ll keep us updated with your progress.