Rising costs take their toll on H&H Group’s bottom line

Rising costs have seen Carlisle-based H&H Group report lower profits for the half year, despite a 10% increase in turnover for the six months to December 31, 2022.

The group’s unaudited EBITDA amounted to £1.5m, which resulted in a profit before tax of £900,000 against £1.3m for the corresponding period in 2021 on turnover which increased by more than 10% from £8.5m to £9.4m.

Group chair, Michael Scott, said: “First and foremost in announcing these interim results I would like to congratulate every member of the whole team for achieving such a positive performance in conditions so far beyond our experience or control.

“In the face of historically high cost inflation we have grown the group’s turnover by more than 10%, and limited the downturn in our profits to a similar level.

“I cannot stress enough how unprecedented the increase in costs has been, not just in the headline rises in energy prices, but also in fundamental aspects of our financial management such as interest rates.”

He added: “The scale and impact of these cost rises is starkly highlighted by the contrast between our growth in turnover and dip in profit margin, and the group has risen to the challenge of adapting to these conditions to safeguard our performance in the second half the year.

“Despite strong headwinds in the economy, H&H Insurance Brokers and H&H Land & Estates have managed to hit or exceed their first six months’ budget to 31st December 2022.

“After an exceptional half-year in last year’s results the group’s livestock marketing sector, Harrison & Hetherington has been unable to replicate the same financial performance this year. Although volumes have grown, some stock values have fallen and the exceptional dry summer was a major detrimental factor on the autumn sales. In addition to this, costs have inevitably been higher than budgeted predictions.”

He said H&H Insurance Brokers, which last year acquired Tynedale Insurance Services, continue to expand geographically and offer new products and services.

Also, H&H Land & Estates has had a very positive start to the year with several farms and blocks of land brought forward for sale, the most notable a block of Cumbrian land selling for a staggering £20,000 per acre.

Mr Scott said: “The group’s design, print and signage division, H&H Reeds, continues its recovery post-COVID back to pre-pandemic levels, but the impact of significant input cost rises cannot all be passed on to customers and are, therefore, felt in our bottom line. The digital and web development business continues to grow and attract national interest and clients.”

He announced payment of the group’s interim dividend will be deferred to protect cash flow: “The average share price in the period was £20.24 against £21.25 for the same period last year. This is actually tracking against the increase in net assets of the group, which have increased to £23.5m from £22.5m at the same point last year.

“The board are very mindful of the increased costs facing all aspects of our businesses, over and above that anticipated, for example interest costs which have doubled in recent months.

“With no sign of any change to this situation before our year end but acknowledging the need to recognise our shareholders, the board are pleased to recommend an interim dividend of 5p per share. However, to act responsibly and remain prudent, payment of this will be deferred to protect the group’s cash flow in these uncertain times.”

Looking ahead, he said: “We continue to be faced by rising interest costs and inflation, and our executive team is conscious of the need to keep operating costs down as much as possible. All our businesses are proactively seeking new ways to reduce costs while at the same time adding even greater value to the outcomes we deliver for our customers and clients.

“We serve a predominantly rural business base profoundly affected not only by the same economic pressures we face, but also by changes in government policy that threaten their future viability. So our services and support have never been more important, and we will adapt our businesses to be fit for a successful future at the same time as we are helping our customers to secure a sustainable future for theirs.”