Good afternoon, and welcome to the Hargreaves Services plc interim results investor presentation. Throughout this recorded presentation, investors will be in listen-only mode. Questions are encouraged, and they can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Simply type in your questions and press Send. The company may not be in a position to answer every question received during the meeting itself, however, the company can review all questions submitted today and publish responses where appropriate to do so. Before we begin, I would like to submit the following poll, and I would now like to hand you over to CEO, Gordon Banham. Good afternoon to you, sir.
Yes, good afternoon. Good afternoon, everyone. Pleased to have such a high attendance. Thank you for taking the time to listen on how the story's developing at Hargreaves. Quite a lot to tell you about today. I think most of you know me after the last 20 years. I think, again, some of you who have known Stephen, as group FD, and obviously, we've got Simon, my successor, who has been with us nearly 12 months now, just under. So we'll talk about that in a bit more detail through the presentation. So I'd just like to hand over to Stephen, who'll just talk through the financial highlights of the last six months.
Thanks, Gordon. First slide here really talks through the key highlights of the last six months, and it's been a really busy and exciting period of time at Hargreaves. The first thing to stick out on here is we sold the first tranche of renewables back in October. This is something we've trailed for quite a while, and we highlighted we'd realize value out of these renewable energy assets, and we've done so. First tranche sold for upfront cash of just under GBP 9 million, with a trail of additional payments coming out through September 2029, of up to five-- anywhere up to GBP 5 million. This is in line with the valuation we got from Jones Lang LaSalle.
That renewables tranche sale has helped to us end the period with high cash, GBP 37 million in the bank as at the end of November. I would highlight that number is somewhat swelled by some beneficial working capital movements, and that's not our normal cash levels. That high level of cash and the renewables sales led the board to make the decision to return up to GBP 15 million back to shareholders by means of a tender offer. That'll be tendered at between 12%-15% premium to share price, and we expect to make that transaction in April. So doing what we said we would do, returning capital back to shareholders once we complete these sales of renewable assets. Elsewhere in the group, the services business has traded exceptionally well, with 41% growth in revenue, improvement in PBT.
We've seen good growth across our work at HS2 and Sizewell and other major infrastructure projects, and tellingly also, AMP8 is starting to ramp up, which has seen increased revenues across our water services businesses. That's collectively led us to improve our forecasts for FY 2026, the current year we're in, and next year, which are reflected in brokers' notes. This improvement in profitability and cash flow has led the board to increase their dividend over and above what we had out in the market, so 5.5% increase to the dividend, getting it up to 19.5p for the half year, and intention for that to be 39p for the full year, so beating inflation on our progressive dividend. And last, but by no means least, we announced the succession of the CEO.
So Gordon, who you'll hear from later, and have already heard from, and many of you know very well, has been with the business over 20 years, led the business, been integral to this story thus far, and is stepping away from his role as CEO and stepping off the board, leaving the business in good health for Simon Hicks to take over. Simon is our current Chief Operating Officer, and he'll take over from Gordon on the first of August this year. The great part of this news, though, is Gordon's not leaving the business. He remains employed by the group, and he will lead the German joint venture, and importantly, the group's new zinc processing plant investment, and Gordon will talk about that in a lot more detail in a future slide.
The next slide is just a reminder, really, of what the group's strategy is. So the group's organized into three main pillars: services, land, and our investment in HRMS. So the focus on services is growth. Growth into our investment into the infrastructure market more generally, particularly within the U.K., focusing on high-quality contracts that are inflation resistant with blue chip clients. That's seen us be successful over the last 5-6 years of growth, and in the current year, we've seen revenues growing by over 41%, maintaining margins at 7%. This is really the engine of what we do. This is where everyone is employed, delivering the dividend for shareholders.
In terms of the land pillar, we've got GBP 80 million of cash tied up in land, all in at historic book cost, and the strategy behind this is to realize particularly the larger schemes and deliver off cash of between GBP 60 million-GBP 80 million, run that business to a smaller, leaner, strategic land and specific land development business, delivering between GBP 3 million- GBP 4 million of PBT per annum for that GBP 20 million cash remaining. Then, in terms of HRMS, the focus is to repatriate cash out from Germany for that business. In the current year, we've received GBP 4 million dividend from them thus far. That's a partial payment, and we expect that to be up to GBP 7 million by the year end.
That business continues to trade reasonably well, and Gordon will focus on the exciting opportunity in zinc in a future slide, as I said before. So if we focus on the specifics of the numbers for the last few years, I think certainly with the news of Gordon stepping away, it's quite a nice time to reflect on where the business has been and where it's come to, because you can often lose sight of that. And whilst that doesn't look forward, it's important to see the trajectory. So all of these graphs are moving in the right direction. We're going upwards. Dividend per share, as I said, has increased by 5.5% in this period, and when I wrote this slide, it was a 6% yield.
We've had a good result for the share price thus far, so that, that has come down somewhat, but nevertheless, an improving and progressive dividend beating inflationary growth. Our return on capital employed is up at 7.5% currently. The services business on its own is even higher than that, but the group, in general, still has high capital in the land business and HRMS, which suppresses the overall group's return on capital. But nevertheless, over the last five years, significant improvement on that front. And then for services revenue and services profitability, we've seen growth year-on-year for the last five years. Revenue growth of 25% per annum, and profit, and profit growing at nearly 40% per annum. So not only are we growing our volume, we're also improving our margins within that services business over that time.
Which takes me onto the current year. What have we seen in the first half? Well, we've seen an increase in services revenue from GBP 121 million to GBP 171 million, 41% growth. What's driven that? Several things. First of all, an increased presence on major infrastructure projects, but particularly at Sizewell. But not just delivering earthmoving, which we've done on HS2, we're also bringing other skills to that project, particularly aggregate sourcing, low carbon and aggregate sourcing, and civil engineering, which is a subcontractor's service. Additionally, I mentioned previously, the water services business has improved as AMP8 has come on stream. So that's all led to that revenue growth.
In terms of the margin for the services business, we've, we were at 7.3, we're now at 6.8, so broadly in line. The reason why it's ever so slightly down is because the aggregates work and the subcontracted civils has a lower margin, just the risk profile of that, of that operation. So we're still very happy those margins are above, certainly in upper quartile for the sectors in which we operate in. In terms of Hargreaves Land, the revenue's gone from GBP 4 million to GBP 12 million. That's reflective of the first sale we made at Blindwells this financial year.
Those of you who were tracking our sale of the renewable energy assets might wonder why the revenue's not higher, and that's because the sale of the renewable assets was a fixed asset disposal and doesn't affect revenue, but does affect profit. If you look further down there, you'll see profit from Hargreaves Land of GBP 4 million, compared to a loss of GBP 1.4 million last year. Last year, we didn't have any major sales in the first half. This year, we've had two major sales, one at Blindwells, plus the sale of the renewable energy assets, which yielded a profit of GBP 3 million or so. Moving down, profit after tax to HRMS, which is our German joint venture, has improved from what was a breakeven position to a nice little GBP 1 million profit in the first half.
I'll touch on how that breaks down between the trading side and the recycling side in a moment. Corporate costs are slightly increased, but broadly in line. Brings us to a profit before tax of GBP 14 million. After tax, that's a profit for the year of GBP 11 million and EPS of 33p. The dividend I've already touched on, but one thing I would highlight is the EBITDA has increased by 23%, you know, demonstrating the cash generative nature of this business. Just over the page, quick review of the balance sheet. If I take it from left to right, just to show where the cash is allocated, the services business overall, equity invested there is only GBP 0.5 million. I would stress this is not a normal level.
The working capital, as I mentioned earlier, we received a payment just before the half year, which really suppressed that. A more normal level is somewhere between GBP 10 million and GBP 15 million in terms of total capital employed. If you compare that balance sheet, though, to the equivalent balance sheet from the year-end or the prior half year, you'll notice that the fixed assets, this is plant machinery, has increased up to GBP 62 million, and the leasing debt, finance lease debt, has also increased up to GBP 43 million. That investment is what has driven the growth in the revenue, and therefore the growth in the profit within that services business. In terms of Hargreaves Land, the capital employed is just under GBP 84 million, and it's laid out there as to where that's sitting.
The top line relates to our renewables assets and another long-term investment we have up in Scotland. That renewables asset value has come down because of the first sale of the tranche 1 renewables. Elsewhere in the balance sheet, the other big number is the inventory, which includes GBP 45 million in relation to the Blindwells site. Blindwells site, we sold a plot earlier this year, and we have another plot that we expect to sell in the second half, all built into brokers' numbers. So the scheme is where we want it to be, and we'll see cash realizations coming from that scheme over the next three to four years, as we run that down to a GBP 15million-GBP 20 million pound capital employed business, delivering GBP 3 million-GBP 4 million of PBT from strategic lands and specific developments.
In terms of HRMS, total capital employed has increased from GBP 68 million to GBP 72 million. That's just a reflection of the profitability that's been made in that business, plus a bit of a movement on FX. The reason why it hasn't come down is because the dividend they paid us, they didn't pay until January 2026. So once we received the cash, it wasn't in time for the half year, so it's merely a timing thing, and, and we've got the money in the bank now. On the unallocated column, not really anything to take out, other than to just remind everybody, the group has no bank debt, we have no debentures, and that GBP 37 million worth of cash was in the bank at the half year.
Moving onwards, just a quick reminder for those who are fairly new to the story of Hargreaves, around some things to look at when considering valuation. So a sum of the parts feels appropriate, given the different nature of the three strands to the business. Services business on the left there, high contract bank, contract selectivity, good visibility, good pipeline. Some sort of multiple is a sensible place to start, and we've listed revenue, EBIT, EBITDA there, as in line with broker forecasts. So take your choice out of those. In terms of lands, as I said earlier, GBP 80 million in the balance sheet is historic cost. There's no profit built into that number whatsoever. As we realize that value over time, there will no doubt be a profit that comes out of those assets.
And then we've also flagged previously the renewables uplift. The renewable assets of which we've sold, the first tranche has a hidden profit in there of around about GBP 20 million, some of which we've realized already, and have yet to return to shareholders, but will do in April. And then on HRMS, joint venture, book value is GBP 70 million. I think historically we've said, just treat that as book value, although Gordon will give you reasons to think why we could get better, the zinc project being one of those reasons. However, in the meantime, we're getting paid a dividend of between GBP 6 million and GBP 7 million per annum, all of which are paid from the trading entity, and we've received GBP 4 million thus far this year.
If I move on to the cash flow, this is the simplest one that I've ever had to present in terms of the cash flow. We started the year with GBP 23 million in the bank. We had an EBITDA of GBP 18 million, which was on the previous slide, fairly straightforward. Working capital, slight movement, inflow of GBP 2.2 million. Negligible movement on interest and taxation. And then we've got net CapEx, which is an inflow of GBP 9.3 million, and this is because of the sale of the first tranche of the renewable energy assets, which brought in just under GBP 9 million and a few other small, modest sales, all CapEx has been funded by leasing debt, which doesn't affect our cash position.
The lease payments of GBP 10.4 million neatly match off with the GBP 10.6 depreciation, which is exactly what you'd expect if we're depreciating in line with the, the term of the finance lease, which is what we should be doing. So that nets off, and then we've got our dividends paid, which reflects the final dividend from FY 2025 of GBP 6.2 million, which brings us to the closing position of GBP 37 million. And then the final slide from me, just, we've had this a few years in a row now relating to a bit, a bit more detail on HRMS, because it's a joint venture, you don't get that visibility necessarily from the, from the statement. So the dark blue line highlights the revenue in the HRMS trading business.
Revenues in there are down GBP 20 million, and this is a this is predominantly due to volume reductions, as Germany continues to see a bit of a difficult trading environment. But despite that, they've continue to be able to obtain positive commodity pricing, and in general, have put an extra EUR 1 per ton onto their margin, which has meant that in the lighter green bars, you can see HRMS has maintained its PBT, despite the reduced revenue. So margins on that have increased as a percentage. Turning to DK, which is the, the steel waste recycling facility, revenue is broadly in line, but what we're seeing is the loss before tax has actually improved by GBP 2 million. That's euros, apologies, EUR 2 million.
That has improved, as a result of an improvement in zinc pricing, and also, securing good quality and lower prices of input materials, such as coke, which we've seen previously. You might ask, why it's made a loss in the first half, why is that a positive thing? Well, DK would typically make a loss in the first half of the year, due to the seasonality of it. Within the summer months, we have a shutdown, where it's non-productive, and therefore, loss-making during that period. It's profitable in the second half of the year, so we expect DK to come back full year to be a small profit for the full year, which would be an improvement on the breakeven position it had last year. And with that, I will hand over to Simon to talk you through services.
Thank you, Stephen. If you can just flip to the next one. For me, ongoing services, a business that's providing contracted services into infrastructure and industrial assets. What's key, and this is a quick reminder of our operating model that we introduced into the capital markets day, back end of last year in November. For me, it's about getting the right people in the right place, doing the right things at the right time. So we, we've got it under three pillars: inspire our people, which means, getting more people and investing in our own people, and developing that talented pipeline of skilled individuals who are gonna deliver for our customers. Back end of last year, I think it was in October, we brought Rachel Ovington into the business as our Chief People Officer.
She's gonna be driving that work stream forward, so that we make sure we've got the right folk in the business, and we're investing in our folk. Sean Hager, who you met at the Capital Markets Day, he's gonna be driving the excellence stream, though it's getting the right standards, enhancing our reputation, which is already very good in the marketplace, starting to innovate and develop different services and different solutions for our customers. And that positions us right square and center into the market, where we'd like to win, which is in connecting people, delivering clean energy for the country and the environment. If we flip over to the next slide. Let's not forget that we're building up a very firm, strong base here.
We've got a base of 70+ relationships and contracts that we've built up over the last 15, 20 years, some really long-term relationships with some blue-chip customers. What does that mean? It means we can be selective in how we enter into new contracts. We can make sure that we're not taking unnecessary risks. We can make sure the business and contracts we pick are inflation-resistant, they give us limited credit exposures, and that top-line revenue, which is the driver of the EBITDA, is resistant, and that gives us that opportunity to grow. The first half, we're very pleased to see the margin is holding up 7% in the services business. Really strong free cash flows and an excellent return on capital employed.
The margins of the markets we're focused on, connectivity, as I said, connecting people, which is ports, airports, rail, roads, and indeed, data centers. Across our footprint, we're active in many places, from Asia, where we're moving into operating on projects, potentially in the airport, connecting people there. In the East Coast, we're operating ports and terminals, really good presence there. And in the infrastructure space HS2, still there. We keep saying another two seasons, that keeps moving forwards. You'll notice I'm gonna come on and talk about a little bit about Lower Thames Crossing and our position there, and Heathrow coming towards us, and the government's recent announcements for Northern Powerhouse Rail. So connectivity, we still see a build there.
In the clean energy space, we're building the temporary construction area, supporting Sizewell in that construction with our earthmoving business. We can see SMRs and nuclear fusion coming towards us as we clear the ash fields at West Burton, and we've got a very strong presence supporting the energy from waste operators, not only supporting them in operating their existing assets, but also moving the waste into the plants, using our logistics business and our environmental business, which supports in sourcing waste and diverting waste, and blending that waste to make sure it's suitable to go into energy waste assets. Renewables, we'll talk about in the land business, and energy storage, we'll talk about in the land business, and things like carbon capture and the Great Grid coming towards us, and of course, since we last spoke, the government's announced Wilton and Hartlepool as investments.
Environmental space, Lincolnshire and Thames Reservoirs, we've already done some trial pits on the Lincolnshire Reservoir, and we'll be doing the other one in the spring. AMP8, we're now starting to see that move. It's taken a little bit of time to get that moving for the water companies, but we're starting to see that move, and we're having good conversations over the strategic reservoir for Thames. Talked about our waste management services. Really strong land remediation business up in Scotland, where we're taking biosolids, and Sean talked you through this at the Capital Markets Day, how we're taking waste biosolids up to Scotland to remediate our land bank. And our minerals business has seen some good progress in finding secondary aggregate projects to take into some of these infrastructure projects.
What we thought we'd do now is show you how that flows out in terms of time. At the left-hand side, there are the projects we're active in. We're active in the AMP8 cycle. Our land remediation process is moving forward and will continue for a number of years, and we're actively looking to increase that land bank to extend that project there. As I said, we've started some trial digs for reservoirs, and we've been on the enabling works at Sizewell for some time now. Carbon capture coming towards us, Great Grid Upgrade coming towards us. Lower Thames Crossing, I'll talk about on the next slide.
Heathrow and Luton, a bit further ahead, and HS2, we're on and continue to see those volumes moving forward, and beyond that, of course, Northern Powerhouse Rail. So I think for me, if you look at where we are now, 2025, 2026, move forward to the late 2020s, 2030s, real strong pipeline of opportunities in infrastructure for us to take advantage of. Lower Thames Crossing, the road to the north of the Thames in the southeast of England. We've been working with Mainline there since 2024 on some of the advisory services. We believe the first works will commence very shortly into quarter two 2026, and we are in agreed terms. We haven't signed a contract yet, but we're in an agreed position with Balfour Beatty on those enabling works.
The future of that project moves forward. We'll see potentially, if we're successful in this space, 150 items of our plant deployed, up to 200 personnel from Blackwell, our earthmoving business. So a really exciting project for us to be part of. It suits us in terms of timing, really works well as we come off HS2 and move down to Lower Thames Crossing. So really well placed for that and really enthusiastic. And really importantly for us, is the credentials on ESG for this project. It's our first scale deployment of battery electric, heavy earthmoving equipment, which is driving us in that direction towards carbon-free earthworks by 2040, and we're sourcing low-carbon primary aggregates to support that project. So really positive direction, in ensuring that we're delivering against that pipeline of opportunities.
In the next slide, what we've been trying to do here was demonstrate to shareholders the strength and depth of our customer base. So if you look at this, we've got a really strong base of customers. Our customer concentration, as you would expect with those scale infrastructure projects, is a top five of our customers account for 65% of those top line revenues, contracted in long-term contracts with high-quality customers. If you move across to the top 20, that covers 80% coverage, and that's delivering around about 70% of our revenues. But a long, strong tail of customers underneath that, delivering that core business, so a good long tail of 30 customers delivering the balance of those revenues, those 30% revenues.
Another interesting thing to look at, I'm especially proud of, for us, is the length of the relationship we have with customers. So if you look at those that we've known for three years or more, two-thirds of our business is long-term relationships with customers that we've known for three years or more, and they typically award contracts in an average duration of four years, 3.9 years. So we're seeing strong secured customer base from which we will build, and looking into FY 2026, we've got a 90% order coverage on what we have on our books, and into 2027, FY 2027, 55% coverage. Really importantly, as we've mentioned before, we've said this a few times, we thought we'd put a number to it, 94% of those contracts provide us with inflation protection.
So a really strong base of customers and a good outlook for this business, which is testament to all the hard work that our teams are putting in across the land. So on that, I'll hand back to Gordon.
Thank you very much, Simon. So as everyone knows, Simon's coming in to drive the services business. I think, to be honest with all of you as shareholders, I think he'll do a much better job than I do. That's what he's good at. I've transitioned us from coal to this point in time, and therefore, I think it's right that he'll take it. It'll be really fascinating to see how he develops the business from this platform. But in the meantime, the two other areas of the business I wanna focus on are Hargreaves Land and Germany. Both have very clear strategies, very clearly measured deliverables. So remember, the first one is Hargreaves Land, so let's talk about that. So Hargreaves Land effectively has two parts, well, three parts, actually, if you count renewables.
So there's we've been this master developer, tied up a lot of capital, we've done bespoke commercial development, and that's where you can see in the balance sheet that Stephen mentioned earlier, about GBP 80 million of cash tied up. We've said to people, though, the plan is to move that to much more your planning promotional work. Now, that will have about GBP 20 million of capital employed, make about a 20% return on, return on capital. So we're moving to that. What does that mean? Well, that means that you've got GBP 20 million left in, let's say, five years' time. So we're gonna throw off GBP 60 million of cash from the land business, plus the profits, because remember, all that land is just held at cost.
So as shareholders, you'll see GBP 60 million of cash as our plan over the next five years coming to you, plus the profits, and then we'll be doing a planning promotion business of about GBP 20 million, tied up, delivering about 20% ROCE. Alongside that sits the renewables, and I have a separate slide to talk about that, and I'll pick that up in a second. So this next slide, this key events. So we did sell that first renewables tranche. Important point, we sold it at the value that was in Jones Lang LaSalle, so that should reassure you. We got up front nearly GBP 9 million, GBP 5 million deferred, out to 2029. So we did what we said we were gonna do.
We are in negotiations to look at selling the next tranche, and we're hoping to deliver something to shareholders in the current calendar year. Blindwells, this is a big site now, over 450 people living there. It's a place where people want to live. It's just on the outskirts of Edinburgh, and again, as it builds out, you'll get your cash coming back, and that's part of this flow of GBP 60 million. Now, this is the project pipeline, and this is really just a KPI for you to understand that, yes, it's easy to see how you're releasing all that cash, but are you getting that pipeline of GBP 20 million tied up that's giving you a return of about 20%? And this shows that that pipeline has grown by 17%.
So hopefully it reassures you that not only will we harvest all the cash from the business that we've promised to do, but then we'll be able to deliver this GBP 20 million of cash tied up, delivered about a 20% ROCE. People have said to me, "You know, oh, God, why did you do Blindwells? Why did you do that master development? Why did you tie up capital?" But if you think about it, we had to prove concept that we were good at this. It's now very credible to talk to people about developing their own land banks, having done the exemplar projects we've done. For instance, when we talk about Blindwells, it's the first new town in Scotland since 1966. So our skill sets are there, they're very credible, and we're now very much an established property developer. So that's really pleased to see. So renewables.
Remember, renewables is a finite resource. So when we talked this time last year, we'd have said GBP 28 million was the valuation. We've got that GBP 13 million for you, so tick, okay, some of it's deferred. And there's GBP 15 million left to go at, and we're having a go at getting that turned into cash for you over the next few years. We hope to announce something in this calendar year. But below that sits another 800 MW of assets that are being built on our sites, if they get planning. So they're in the process. They're probably five or six years away. Their book value is negligible now, because we've taken all the book value out on the previous assets. So, you know, some people are attributing a value, but remember, it's six, seven years away of about GBP 15 million further.
Look, they've got to get planning, so let's be clear, but if they do and they get developed, then, you know, there's another potential upside, which isn't in the books. So when you add all the land together, you're gonna end up with a GBP 20 million business, delivering a ROCE of about 20%, and then you're gonna get cash of GBP 60 million, plus the profits, plus the renewables realizations. So I think that's quite exciting, and that's the business you'll end up with. A much smaller land business, and it's a land services business. So I, I'm very confident that it'll integrate very well into the business that Simon has. So Germany, so I think most of you know this, but again, we're getting followed by a lot of people who haven't seen us before. Two businesses, DK Recycling and the trading business.
They work in combination, so we trade lots of material, and we trade around that asset. But I'll talk about each individually. So the first one is the trading business. Fantastic team that I've worked with over 15 years. Now I have been told, "Will this carry on forever?" The trading team, I've known personally, I trust them very much, but when they retire. My suggestion to the board is we then close the business down and liquidate the balance sheet. Now, they haven't told me when they want to retire. Simon jokingly said, "If you're over there in Germany a lot, they'll probably want to retire earlier." But the plan is that I will work alongside that team, keep the checks and balances. They're a great team.
When they decide to close, so I sit on the capital markets day, they usually have about three months inventory in flight. So let's say we decided on the first of January to close it down, there'd be three months of inventory, which isn't in the books. That has, as you can see, about GBP 1 million a month profit. That would deal with all of the closure costs, redundancy, and then you'd just liquidate the stock in that process. So you can see very easily that you'd get your money back from that business. So the next side of it is DK Recycling. So, most of you, again, know this, but for new people, we take coal and coke, iron ore. We combine it with steel dust.
Now, steel dust is getting less over time because as they close the blast furnaces in Europe, there'll be less and less dust. So that's one driver. We're okay at the moment, but longer term, it's a pressure. The opposite side was pig iron, zinc, and energy. So energy means we produce our own energy from our own power station, so we're insulated from spikes in energy. Zinc, prices are very good. We hedge it. Very happy with the proceeds we get for our zinc concentrate. But pig iron has been on the floor, all to do with Trump and tariffs, et cetera. But we believe it's reached the bottom, and actually, we said to everyone, we'll start to see prices move on, driven by two things, which I explained at the capital markets day, about CBAM and the embargo on Russian imports.
We're now starting to see the prices move up. So today, let's say pig iron has a price of EUR 450. For every EUR 10 increase, you add GBP 2.5 million to the bottom line. So we're now starting to see the uptick. So this business is getting back to where it should be. Key issue, of course, is always a blast furnace, so you've always got to manage that correctly. So there's operational challenges, but the markets we work in have reached the dip, and now they're moving back up. So we think the outlook's quite positive, except for the slight caveat of there will be less and less dust over time, which takes us over the page.
So really fascinating, this area, and this is the reason that I decided to step down to spend the time in Germany, because my job is to deliver value. As I said earlier, Simon is much better at running the services business than I am, and he'll deliver good all the value. So I will step down, but I will report to Simon. So, my job is to commercialize this, zinc recycling. Now, the zinc recycling project is gonna cost us, as shareholders, about GBP 18 million. But fortunately, German government has already given us a GBP 2 million free grant. They've also agreed to give us a state guarantee, which we're just negotiating, which is another GBP 4 million. So as shareholders, the maximum risk is if this all blows up in our face, it's gonna be GBP 12 million, it's gonna cost us, and that's it.
Nobody's gonna put any more in. We're not gonna, you know, run the risk. It's. That's the number that I've agreed with the board that we will get to. So we spend that money. When do we start spending it? We start spending it in March, when we start building the building. And we've made it very transparent, so this is consolidated into the group's numbers. It's 86% owned by the PLC, 14% by local management, and Stephen and Simon, after July, will keep reporting on this every six months to tell you on progress. This is a very exciting opportunity. So the risk of the downside, you know, is GBP 12 million. There is no recourse to the rest of the PLC on the state loans or anything else. So that's your downside.
Your upside, if it works, is that this plant takes zinc from electric arc furnaces, blends it with chemicals. It's a leaching process that's patent pending, and you get out zinc oxide and waste dust. Now, it's very fortunate because the low barrier to entry, we're building it on the DK site, so we've got all the permits, et cetera, et cetera. With the decarbonization of steel, there's some huge electric arc furnaces being built, which I did explain on the Capital Markets Day. And they're now producing a dust which is 8% zinc. Too high for DK, which runs on typically 3%, but too low for the technology for existing electric arcs, which are called Waelz Kiln.
So this sits in the sweet spot, and if it works, when we turn it on, and I can guarantee you the first day we turn it on, it won't work, because these things never do. But if it does work, and we make a success of it, we can not only deal with the new electric arcs, of which I have a queue of customers wanting to fill our capacity, but also I can deal with existing ones. And that gives us a business which, you know, conservatively, we're saying a 20% ROCE. So you do the math, and you go, "Okay, you know, you're spending GBP 18 million," so it's gonna make GBP 3 million-GBP 4 million, is, is what we think, once it's running, subject to it working.
We've been working on this project for three years, so, you know, we've had it stress tested by Imperial. We've had it stress tested by professors. We've had it stress tested. We've run it through a pilot plant. It's now all about... So the chemistry works. Will it work at scale? I've now recruited the guys who are gonna run the plant. I trust them very much. I'm gonna be working very closely with them. It's gonna be a lot of late nights and spanners and fixing things when we start it, but if we can prove concept, we will then have to very quickly build two more plants, because we have a pile of customers, and then this can be taken to other parts of the world as well.
So it's a really exciting opportunity, and to be honest, and I've always prided myself, I've been honest with you, as shareholders, this is a moment for you to think about. If it goes wrong, and it might do, I disappear with the damn squib, and it costs you GBP 12 million, costs me personally 8% of that number. If it succeeds, you know, people are given indicative valuations for GBP 100 million or, or significantly higher of that. So, that's your risk profile. I believe it's the greatest opportunity sitting in front of the group in the short term, so that's why I made the decision to step down and focus, and my focus will be here, where I think I can, I can deliver best value, and Simon will do a much better job than I doing in U.K.
So just, let's tell you what we're doing. So next, Stephen. Thank you. Outlook. So hopefully, and I always welcome the opportunity to engage with retail shareholders, please, you're just as important as, as the people we meet in the city, so, you know, you can always contact, Steve and Simon, myself, for any feedback, even outside of this. So please don't sit there and wonder about something. Ask us, and if we're allowed to tell you, we will. So group outlook, I think I jokingly say at the start of this presentation, you saw three smiley faces. I think you understand why there was three smiley faces at the start. We have a very strong outlook. This is the start of the cash repatriation.
It's GBP 15 million of cash, but if you do the math on what I've said, if everything executes as planned, there's about GBP 150 million to come over the next five years, so significant opportunity to repatriate cash to the shareholders. Dividend is important to some of you, so remember, when we do this tender offer, that will reduce the number of shares in issue, which will concentrate up the dividend. But as Stephen's already said, we've got this progressive dividend where we plan to beat inflation for you as we deliver that, hopefully GBP 150 million of cash. Services, every faith in Simon, I'm backing him with my own money. Land, remember, as I said, you've got the GBP 80 million turning into 20, you've got the renewables profit, you've got the profit on the sale of the land.
Easy, and it's on a five-year time horizon, we've set ourselves a target. In Germany itself, we think, the moving up of pig iron prices will help DK, but the really interesting thing is DK Zinc. One other thing that I didn't mention earlier is, it then produces a waste product, which can go into DK, so it helps replace some of the steel dust that may disappear in the next few years. So I think that's a great opportunity and exciting. So finally, again, for new people, really, you have an experienced board. You will still have me as a shareholder, and I will still maintain my 8% share because I believe in this business, so that's a strong message for you. I will be reporting to Simon, but I'll still be here, so I'm not running away.
And one of the joking things I do say to shareholders down here is, if I'd appointed Stephen as the CEO, you'd have many problems, as he jokingly said, but Simon's come in and looked at the business, and says he's happy with what's there. So again, you're not gonna have that transition, where the new CEO comes in and goes, "Oh, great, it's a pile of rubbish," and we have a reset. We've unfortunately, or I have unfortunately put him in a position where he's had the opportunity to cry wolf. He hasn't found anything hidden anywhere, so I think that should reassure you that everything is clean in our balance sheet. And on that note, I would close and hand over for questions, which will come through Stephen. So, Stephen, if you could pass the questions to us. Thank you.
We've got, thanks, Gordon. We've got a handful in. There's one pre-submitted one, which I think we answered in the statement, but I'm gonna read it out anyway for completeness: What's the plan for the return to shareholders of the proceeds from the recent renewables disposal? That was sent through to us yesterday before the announcement went out this morning, so I hope we've cleared that up in the announcement, but for completeness, GBP 50 million tender offer back to shareholders in April is what we are doing to deal with that one. Next question is from Peter; he's asking about the Unity scheme. Given that Unity is one of the largest infrastructure schemes in the U.K., why has there been so little mention of it in Hargreaves' last 12-18 months of announcements?
Happy to-
Those are land, aren't they? Sorry.
You could take that.
Oh, you want to take it?
I'm happy to take it. Yeah, I think, I think on, on Unity, the reason we haven't announced too much is because we haven't completed particularly too many sales in there, Peter, to be honest with you. Gordon talked about in his slide, although he sort of skipped over it a bit on the market outlook. While the market for real estate has improved somewhat, it's not back to where it was. We've seen success in Blindwells, in particular, on sales, but Unity has been a little bit quieter. But in terms of what's happening at Unity, we have a website and a LinkedIn feed, so you can see progress there. We've recently seen the opening of a McDonald's. A new McDonald's has opened there. There's construction starting on a Starbucks, both of which were sales made by the joint venture.
And we made a sale three or four years ago to T.J. Morris, who are currently building out a large distribution warehouse there. So if you do drive past, you'll see that going on there. So in terms of RNS and market-adjusting announcements, we haven't made many, but in terms of the website and updates, the general productivity, we have done. So focus on the future is around getting residential interest in the site. We've seen an element of that, but it hasn't popped up in the same way as we've seen at Blindwells. Positive thing about Unity is, it's not going anywhere. The land is still there. It's on our books. Net book value is around about GBP 5 million-GBP 6 million.
So scalability, it's not the same scale as Blindwells, but it is still sizable and something that we're looking to realize. No concerns from the board over realization. It's just a little bit slower than maybe it had been, and it's indicative of the market more generally, I would say.
I think my comment to yourself would be one of, you know, you know how big that site is, and it's only on our half of it is on our books at GBP 5 million-GBP 6 million.
Yes.
So I think you know that there's some profit coming when it moves. We're not in distress. We have cash, so we're not gonna give it away.
... we're gonna harvest the money when it's appropriate. Yeah.
So the next question is from Christopher, which I'll take this one. "Thanks for the results. For the foreseeable future, are you committed to the AIM market?" The short answer to that is yes, we are. There's no discussions currently, no ideas to shift marketplace, and it's all, AIM's been good to us. It's allowed the business to grow, transition, as Gordon's outlined, from where we were to where we are now, and given us a really solid platform for growth in the future. So the board sees no reason to move at the moment and remains committed to the market. Next question, I think, Simon, it's probably one for you from David: "Can you comment on how landfill tax and the government's habit of increasing landfill taxes at intervals impacts upon the business?
How do we try and manage this?
So, Landfill Tax, of course, is a government regulator trying to avoid putting stuff to landfill, which, for me, having been involved in this sector for many years, is the right direction of travel. What does it mean for us? We do quite a lot of movement of waste. We do movement of sewage sludges, we do movement of hazardous waste, we do movement of materials that are difficult to deal with unless they go to landfill. And the more increasing Landfill Tax becomes, the more it pushes customers, our customers, to solve those problems, and it more pushes us as Hargreaves to help and support them find solutions. We're already on that journey.
We're investing in pieces of equipment, particularly in the Central B elt of the country, where we can provide things like a bale and wrap service or a shredding service or a blending service, where we can use the material that's pushed out of landfill and blend it in, and make sure that it goes to the right home, it's disposed of in the right way. Some will go to incineration or indeed driven up in terms of recycling. And some of the co-products we're getting into our aggregates work stream is material that's been recovered from those lines of waste that would have ordinarily gone to landfill.
So I think personally, it's the right direction of travel for the industry, and Hargreaves are there to support and provide solutions in the long term for the customers that are impacted by that.
Thank you. The next two questions are from Ilva, and they're both sort of related. I think you joined the session a little bit late, which is why you've asked the questions, but they're quite long. First one is around about the renewables, in terms of the price that we achieved. So you've asked, "What price did we get versus what the independent valuation is, and what do we expect future valuation to be?" So if I can just quickly cover it, 'cause we have already done that. We received valuation. The cash we received is in line with what the third-party valuation is, albeit some of it is deferred over the next four years.
And then in terms of future valuation of the remaining of the six near-term renewable schemes, we've got an independent valuation of GBP 15 million on that, which is in a previous slide. Given our past experience, no reason to believe we won't achieve at least that. Not in a position to say we'll do better than that at the moment. And then you're also asking around timing. We will time it when we're able to maximize or optimize the value. I'd expect the next tranche, as Gordon mentioned previously, to occur within the next 12 months or so, but we'll maximize value for shareholders rather than grabbing the cash as quickly as possible. And then Ilva has also asked, where the, what the source of the GBP 150 million cash is. So again, some of it is the land sales.
I think Gordon outlined GBP 60 million-GBP 80 million coming out of the land business, and then the remainder of, I guess, the other GBP 70 million-GBP 80 million is coming out of the German business. So effectively, realizing the land assets and then realizing the HRMS investment, which is either through an organized wind down or a disposal of some sort in the future, would be what generates that return of cash. So, next question is possibly for you, Simon, from Brian. "Good to see sustainability piece at the in place in the business in the current business. What are the plans of the management team to move into the next phases, including North Sea wind, airlines, biofuels, green methane, ammonia, hydrogen, et cetera?
Well, I guess we provide, in particular, in our services, we provide the service to our customers who are investing in many of those things. It's important for us to be across that, providing a service when it's necessary, and following ESG of decarbonization of our customers, or being ahead of it. For example, we run biofuel vehicles in the North East for moving one of the county council's wastes around, and we've got renewable assets on at our facilities. We're moving petroleum coke around for P66, which goes into batteries and into EV cars. So we're following other people's decarbonization journey. What we're encouraging in the teams is to anticipate that, and innovate and provide solutions in advance.
So if biofuels, for instance, biosolids, can't continue to go to land, as we talk about landfill, it's up to Hargreaves to work with itself and its partners to find solutions for our customers, so that they can modify or invest in their assets. Absolutely lots going on in that space, and we're across lots of it. So that's where we add the value in a sustainable way to our customers.
Thank you. And we've only got one more question left, which is from Jagdish: "Why not do share buybacks rather than a tender offer?" Which I'm happy to take. The challenge is we have such a wide shareholder base. Some shareholders want a buyback, some would like a tender offer, some would like a special dividend, so we have to land at some sort of a balance. The benefits... The challenge of doing a buyback with the shares in Hargreaves, we have a challenge around liquidity, which you may or may not have noticed in the market, getting your hands on Hargreaves shares. If we do a buyback, what we risk doing is hoovering up some of those-
... liquid shares and parking them and further damaging liquidity. So the view is the tender offer gives all shareholders the opportunity to equally participate, rather than a sobering of loose shares in the market. So on balance, the board felt the tender offer was the fairest approach, but we're not doing that in isolation. Don't forget, we've also increased the dividend by more than inflation and more than brokers had in their forecasts. So we're trying to treat shareholders as equally and fairly as possible, while acknowledging we have quite a wide base of shareholders. So that's the main reason we came to that decision.
That's great, Stephen, Gordon, Simon, if I may just jump back in there. I see I've addressed all those questions from investors today, so thank you very much indeed for that. Of course, the company can view all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. But Gordon, before I redirect investors to provide you with their feedback, which is particularly important to the company, could I please just come back to you for some final comments?
Yeah, I'd just like to say, look, thank you to all the people that have supported me and the company over the years. We've had an interesting journey, I think, for those that have been with us long term. I welcome new people to the story because obviously that's important. We are a very approachable management team. We've seen the value in retail investors, so please feel free to contact us anytime. In terms of, I think it's really exciting. I think with Simon's leadership, we've got some great opportunities to take forward. I will still be here at the full year because I'm responsible for this year with delivering the numbers. So I hope to go out on a high and hand it over in a good place to Simon.
But then I also hope to come back sometime and go out on a high for you with the zinc project. But I'm sure everyone will keep you aware of progress on that over the next couple of years, 'cause in a couple of years, it will either be going or it won't. So it's gonna be a big focus for me. But look, thank you for taking the time to listen to us, and have a good evening.
Fantastic. Thank you once again for updating investors today. Could I please ask investors not to close this session, as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations. This will only take a few moments to complete and I'm sure will be greatly valued by the company. On behalf of the management team of Hargreaves Services plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.