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 record revenues and EBITDA, their training academy’s early success, the integration of Future Build, the Sizewell project and their expectations for future cross-selling opportunities.
Q1: First off, congratulations on achieving record revenues and EBITDA for H1 2024. Could I just ask though, what strategies do you attribute to this significant financial growth?
A1: We have been growing organically. As you know, there is quite a lot of investment being made in the investment of the infrastructure in the UK, there is around £750 billion investment earmarked across all of our markets. There’s highways, HS2 and rail infrastructure projects and we have been growing on these sectors organically.
Also, AMP7 has been really busy for us, that is the Asset Management Programme 7. As you are aware, there’s £51 billion investment for the last five years and we are coming to an end of it. But the next AMP8 is going to be even busier, £98 billion so there has been quite a lot of investment going on in the water sector.
Also, being on the HS2 Birmingham section, we have been busy. We’ve got over 550 people working there currently, as well as other road projects and I mentioned water projects as well. So it has been a really busy last six months.
And as you’re aware as well, we have acquired a company called Future Build Recruitment. We have been integrating over the last five months, it has been going really well so they are also contributing for our growth as well. We’ve just started exploring the potential cross-selling opportunities between our divisions, which is brilliant, and that is going to help us grow as well.
Q2: The opening of the Construction Academy, it’s generated significant interest. Can you just share more about the academy’s early successes and future plans?
A2: As you mentioned, we opened the training academy at the end of January this year, four months ago.
As you might be aware, there are lots of investments being made in the infrastructure sector, there’s also a huge skills shortage in the UK and it is important for us to have a sustainable approach, which is finding local people for local projects, putting them to work and upskilling and cross-skilling our workforce in order to deliver these massive projects coming up. Therefore, our training academy plays an important role in our sustainable approach.
We would also like to monetise this opportunity as well by selling construction-related training to our clients and colleges and individuals. We’ve already started working really closely with the colleges and our clients as well, started carrying out training courses in our training academy.
So, lots of opportunities coming up.
Q3:Now, the acquisition of Future Build seems to be a pivotal step. How has the integration of Future Build enhanced your overall business operations and growth strategy?
A3: Interesting question. One of the main drivers for the purchase of Future Build was that we needed a white-collar element to our business and we tried to do this on our own. It’s not so easy but strategically, this is a long-term element that we need to have.
So, this business has been run by two great guys, they’re really good at this job, they’ve been doing it for about 10 years and we think they can offer a great deal to the overall Hercules Site Services path over the next few years.
This is a major strategic element because it’s a partnership so we’ve bought an interest in this company, but it’s also a strategic partnership where we work together to build this business within the Hercules group. I think as Brusk alluded to a minute ago, the integration of that business has been taking place since we completed the acquisition at the end of November of last year, and it’s going very, very well.
Now we’re starting to see the benefits, the commercial benefits coming through, The Hill Group in particular is one where it’s a Future Build client and we’ve been able to now get onto their blue-collar framework. So, more cross-selling opportunities like that, we believe will come through and will follow.
Very early days, but a nice element now to be added to our turnover and profits and a great part of our business to have up and running ready for the growth that we expect to get from all sorts of quarters in the next few years.
Q4: Your involvement with major projects like HS2 and Sizewell C is impressive. How do you plan to leverage the Sizewell project like you did with HS2 to further solidify Hercules Site Services’ position in the industry?
A4: Well, I think inherent within your question is a good point. In terms of HS2, we spent a good number of years solidifying our position in the industry over that and how did we do that?
Well, we kept our ear to the ground, we made sure we knew all the right people well in advance, we advertised early on, we got people to be available, we had our app, which of course has helped us enormously to recruit people. So I think we’ve spent a lot of time on that. We’ve built a structure within the business to run the HS2 operation and that’s hardly changed in the last year so we know how to do it and we’ve done it well.
Sizewell C, which is probably going to be of a significant size compared to say the northern section of HS2, which is where we’re engaged, could be up to, I think, 30 billion is the latest government estimates and be running for up to 20 years based in that part of the country and in the Ipswich area. We’ve already got an office there and we’ve already got an Operations Manager operating out of that area so we’ve started that process.
We also know one of the clients, Balfour Beatty is one of our strategic partners, we know them very well, they know us very well and we’re already talking to them about how we’re going to get guys on that site. So as soon as the work starts, we will be there, whether it be through partners like that or directly with one with white collar.
There’s lots of opportunities and we think that operation is going to be a significant part of what we do over the next 20 years, and just like we geared up to deliver HS2, we’ll gear up to deliver Sizewell C, you can be assured of that.
Q5: I think Paul’s touched on this but with new framework contracts signed with Costain and Hill Group, what are your expectations for future cross-selling opportunities and their impact on business growth?
A5: As I had explained earlier, we completed our first acquisition in December. Currently, we are successfully integrating the Future Build team under our umbrella and both companies now started to cross-sell and upsell our services to each other, which is great news. This means that we are all working together to expand our reach to maximise the opportunities and this shows that it was a successfully identified acquisition.
With regards to the Hill Group, they were Future Build’s client, so now we’ve started supplying labour there as a group and we started also opening up our clients for Future Build to supply white collar staff as well. On top of that, there are suction excavators to push it as well and potentially training courses under our academy.
So, we are maximising all these opportunities.
