Hercules Site Services (HERC) 

Hercules’ H1 results confirm another excellent performance culminating in record revenues, EBITDA and PBT. The Group is on track to meet market expectations for the full year. All three businesses reported double-digit growth for H1, benefiting from underlying market demand, Hercules’ investment in new service lines and technology, as well as a maiden contribution from the Future Build acquisition. 

With scope for outperformance in the second half, we reiterate our 55p Fair Value estimate, whilst noting the attraction of a 4.7% dividend yield. 

Impressive H1 performance 

Hercules’ interims confirm another period of strong growth, continuing its excellent track record. Revenue for the six months to 31st March increased by 32% year-on-year to £48.8m, comfortably ahead of recent guidance (10th May: “over £47m”). Adjusted EBITDA increased by 91% to £2.1m. Contract momentum continues, with over £5m in civil projects and new framework agreements signed with Costain and Hill Group. The integration of Future Build is progressing well, and the Hercules Construction Academy is already developing a reputation for first class training. Importantly, H1 was a period of strong operational cash generation, supporting an interim dividend of 0.6p per share. All three divisions delivered strong double digit % growth in the period (see page 3). 

In-line outlook, seasonality underpins confidence in H2 

The outlook statement indicates that Hercules is on track to meet market expectations and anticipates further strong demand for the Group’s services. We note the Group’s traditional H2 weighting and believe our forecasts look prudently positioned with 52% of our FY’24 revenue already delivered in H1 (versus prior year weighting of 44:56). We also take confidence from recent market indicators with April’s PMI survey highlighting the strongest pace of expansion since February ‘23 (see page 4). 

Reiterating 55p Fair Value estimate 

In our view, Hercules is a business with good trading momentum, an ambitious management team and a focus on the most attractive segment of the construction market. Notwithstanding the uncertainties that a General Election can bring, we see scope for forecast outperformance in the second half and reiterate our 55p / share Fair Value estimate. We also note the attraction of a 4.7% dividend yield, unusually high for a smaller company with Hercules’ growth profile.

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