Good afternoon and welcome to the Hargreaves Services plc 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 it is 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.
Good afternoon. Good afternoon, everybody, and thank you for taking the time to listen to our presentation. We'll try and pitch it. Some of you know us, I'm sure, very well if you could bear with us because potentially new shareholders want to understand the model. So let's just talk about the strategic overview of Hargreaves. What are you either bought into or buying into? So there are three pillars to the business we always talk about. First of all, you have the Services business, driven by organic growth. We'll talk about that. Helps deliver the dividend. It's focusing on winning new contracts in our areas of competency. And again, I'll talk about that in some detail later.
David Anderson, who is head of property, will talk about the renewable assets and the land assets and our journey towards not only realising the GBP 80 million down to GBP 20 million, so taking GBP 60 million out of the land balance sheet, but also the exciting journey that is taking us down in terms of realising quite a lot of hidden potential in the renewables. Finally, we'll talk about our German business and how it's turned around and how we think the outlook is positive for the next 12 months. Just over the page, obviously, these are the results. So the profit, as you can see, GBP 16.9, lower than the previous year, as expected on the back of the challenging period that's taken place in Germany.
Key thing for a lot of you, I'm sure, will be the fact that we've now rebased the dividend to this GBP 0.36. T hat will continue to grow now forward organically, so not as big a jump as you saw this year, but you have this new baseline of GBP 0.36. Remember, that's the services income added together with we no longer have to contribute to the pension and also this sustainable dividend coming from Germany. So we have this GBP 0.36. What we say to people is there's quite a lot of work to do in terms of getting the business profiled and delivering this cash realization.
So we're paying people effectively GBP 0.36 plus organic growth to hang around while we do the final part of the transformation. Cash, nearly GBP 23 million of cash, so we're in a strong position. Stephen and his team very successfully bought out the pension, which has again helped to clarify the position in the group. So as you look at it, as I said, you've got services, over 65 framework contracts, more than we had this time six months ago, and we'll talk about what's happened. David will talk about the land disposals, and I will give you some clarity on what's happening in Germany. So hand over to Stephen Craigan, who will just talk you through the financial review.
Great. Thanks, Gordon. So just the usual P&L slide to just run down what's happened in the last 12 months. Running down top to bottom on the right-hand side, revenue within services is up 1.6%, so steady growth in our Services business. And as I've often said, revenue within land is not really that meaningful a metric because the land business is made up of joint venture arrangements and maybe the sale of some investment properties, which don't affect revenue. So that's not a helpful metric, really, and we'll talk about the PBT in a second. If we drop down below revenue to the underlying PBT within services, really pleasing to see that number growing from 9.1 to 11.4. Part of that is the revenue growth, but really what we're seeing is a margin improvement. We're now above 5% margin.
A lot of that's coming from improved plant utilisation on some of our earth-moving contracts and, again, continued focus on contract selectivity. So low-margin contracts is not where we're playing. Hargreaves Land has delivered a record year, GBP 8.2 million PBT coming from land. David will talk through some of the key factors behind that, but chief amongst them is the sale of our ground rent interest at the EFW at Westfield, which was a big transaction he completed earlier this year. The one negative, I would say, in the P&L this year, although I think we flagged it reasonably clearly, is the reduction in profitability from HRMS, coming down from GBP 15.5 million to GBP 1.3 million. I'll talk about the details in a couple of slides' time, but needless to say, that is a bit of a downside compared to good performance in services and land.
Overall, giving you a PBT of GBP 16.9 million, small amount of amortization and the tax rate coming back to a more normalized rate this year, GBP 4.5 million, to give an overall PBT of GBP 12.2 million. Other things to pick out on this slide, really, the growth in the dividend, which Gordon's already highlighted, and then particularly important is the continued improvement in the EBITDA, which continues to show the sustainability, I guess, and the cash-generative nature of the business and the increased profits coming through from services. So just over the slides, if we talk about that was the P&L. This is now the balance sheet. Where do the group's assets lie at the end of May 2024?
Working left to right in total, the services balance sheet looks very similar to how it has done for quite some time. Very low overall capital employed, GBP 5.1 million. That's probably artificially low at the moment just due to a bit of timing. Typically more likely to be in around about GBP 10 million range. Why is it so low? Well, all of our fixed assets that we put to work, we HP or finance or outlease them, so we are using non-equity to fund those assets. And we have an extremely tight working capital model. You can see on their negative working capital, we're getting paid before we have to pay our suppliers in many cases. Moving across to land. So land capital employed has increased from GBP 73 million to GBP 79 million.
That increase is due to additional spend on the Blindwells site as we continue to infrastructure that site ready for sales. I think we're at a peak now in Blindwells. GBP 44.6 million of the GBP 48 million inventory relates to the Blindwells site outside of Edinburgh. We should see some sales coming through in the next 12 months-18 months to start to pull that down and start to unwind. Looking at the top of the land list, GBP 16 million of tangible fixed assets, of which GBP 7.4 million relate to our renewable energy land assets.
These assets have been independently valued again by Jones Lang LaSalle and valued at GBP 27 million-GBP 29 million. So we've got a clear visibility of GBP 20 million of upside on those renewable energy land assets. Point to remember, all of these assets are held at historic cost. There's no marking to market, and so when not affected, should property prices take a dive, we won't see an unwind of value in our balance sheet. This is the pure cost to get them to this state.
In terms of HRMS, GBP 70 million invested in HRMS and very pleasingly a decrease of nearly GBP 6 million from the previous year. So for many years, if you followed the story, you might have seen that our exposure to HRMS, which is our German joint venture, increasing over time. We're now starting to see that come back as they start to repatriate cash back to us. We received a dividend of just under GBP 8 million, which has helped to pull down the investment in the JCE, which, as a reminder, is just their historic profits that they've built up over time and have not yet distributed back to us as a dividend because they've reinvested it in the balance sheet. In a couple of slides time, I'll talk through what that balance sheet looks like.
And then included within unallocated, we've got net cash, gross cash even, of GBP 22.7 million, remaining free of any bank debts. We've got GBP 11.3 million of deferred tax asset. What is that? It's historic tax losses that we can use to offset future profits. I expect that to certainly cover the next five to six years worth of profits comfortably. And we have a remaining GBP 1.3 million in relation to the pension scheme. So as Gordon mentioned, one thing we said 12 months ago, we were aiming to buy out the pension scheme. Well, I can say we've bought in the pension scheme now. So what does that mean? We paid GBP 3.7 million to buy effectively an insurance policy, which matches the liability.
It'll take 2 years probably for the insurer to work through all of their details, all of the data, and effectively then buy it out. Once the buyout is complete, that's when it removes from the balance sheet completely. That GBP 1.3 million asset is effectively cash that the trustees and the pension scheme will use to fund costs as they go forward. So there's no more cash to come out of Hargreaves to fund the pension scheme. One thing I think is helpful to just highlight to people is potential value drivers behind Hargreaves.
Typically, Hargreaves might not have been the most straightforward business to consider for valuation, so just trying to lay out some things that we think about when we're considering how we value the business. So services business is a 65+ term and framework contract delivering over GBP 200 million of revenue, consistently growing profits. So it's a multiple on earnings, whether it's EBIT, EBITDA, through cash flow, or whatever your preferred metric is. So we've just put a few up there.
It's EBITDA GBP 26.1 million. Apply your multiple, and you get to a number. We saw on the previous slide, the HP debt is similar to the cash position, so it shouldn't affect too much in terms of net debt. Land, all held at historic book cost. We talked six months ago, certainly, about reducing the capital employed within land from 80, which we saw on the previous slide, down to 20, fundamentally through the phased sale of the Blindwells site, among other assets that are slightly higher in capital. So that will realize at GBP 60 million of cash. We also have the GBP 20 million upside from the renewable assets, which I mentioned just before. And so we expect to see at least GBP 80 million coming out of the land balance sheet.
That doesn't include any upside from profits made on the way, and neither does it include any future profits from other lower capital schemes. What will be left within land is a GBP 20 million roughly capital employed generating GBP 3 million-GBP 4 million PBT per annum. Finally, on HRMS, probably the most difficult aspect to value independently. So what we look at is effectively book value, GBP 70 million on the balance sheet. No reason to believe that value isn't recoverable. It's all asset-backed. And in the meantime, while we're looking to recover that value, we have got an agreement to receive GBP 7 million minimum dividend from HRMS, which is helping to fund the onward dividend to shareholders. That's GBP 0.36. We received that value last year in FY 2024, and that helped fund the first dividend.
And we've already received the equivalent value in FY 2025, which means that we've got the cash in ready to pay this year's dividend, and no reason to believe that's not sustainable. And if we just quickly look at the cash flow, hopefully, this will be the quickest slide of the presentation, reasonably straightforward this year. We started the year with just under GBP 22 million of cash, PBT of GBP 16.7 million. Don't forget, we talked at the start about GBP 16.9 million. The difference is amortization, which is not underlying. We then strip out the share of profit from JCE and add back depreciation and net CapEx to effectively get to that EBITDA figure of GBP 26 million we saw before.
We need to take off the leasing payments, which this year are slightly abnormally high because of the way the timing's worked on old leases coming out and new leases coming in, about GBP 6.17 million. Very small working capital movement. And then pension contributions of GBP 5.4 million. That is the normal deficit reduction contributions from the start of June through to March and then the GBP 3.7 million buy-in that we've already flagged. We received just under GBP 8 million from HRMS and paid out a dividend of just under GBP 12 million to leave us at GBP 22.7 million at the year-end. And then finally, just on the finances, a slide I've been through a couple of times, really just to sort of highlight what's going on in the HRMS business, try and help you get an understanding of what's going on there.
So top left is a simple P&L. The green lines are the revenue for the two main elements, the HRMS trading business and the DK recycling business, both of which have seen a significant reduction in revenue, partly due to volumes but also due to a reduction in commodity prices, particularly pig iron and zinc. Then the purple bit is the PBT. If I take PBT in turn, PBT for HRMS was GBP 10 million for the last year compared to GBP 24.5 million in the previous year. The previous year had significant superprofits in the first half as we started to see them come down from May 2022, which was an exceptional year. This year has seen volumes right down during a recession in Germany, which GBP 10 million return is still a very good number.
And it's that GBP 10 million PBT that is funding the GBP 7 million return to shareholders, well, to ourselves and then on to shareholders. So that sustainability of the GBP 7 million is secure through the HRMS trading business. And yes, margins are down, but 4.5% margin on this business is still very good. So we're very pleased to see the result that they delivered, and hopefully, we'll see a bit of an uptick in the coming year. DK made a loss this year of GBP 7.4 million compared to profits in the previous year. So people who followed us in January will have heard us talking about the impact of Russian sanctions, which have impacted on the PBT of DK. That is predominantly that the EU did not, following the invasion of Ukraine, Russian excuse me.
Following the invasion of Ukraine, the EU put a sanction on all energy products coming out of Russia. So that meant Russia could no longer import or export coke into the EU. That kept coke prices high. Coke is one of the key inputs into DK in order for them to produce pig iron and zinc. Pig iron is not or was not an embargoed product out of Russia, and therefore, those prices came down because Russia were able to dump pig iron in. And that really squeezed the margins within DK, and that's what led them to make a loss in the full year. However, pleasingly, what we said six months ago when DK was posting a half-year loss of GBP 9.9 million, we said, "Well, we expect it to come back to profit as zinc prices hopefully move back.
We negotiate improved gate fees for the steel waste dusts, and we secure better coke prices." That's been proved right. We've been able to do GBP 2.5 million of profit in the second half, and that gives us confidence going into the new year. Gordon will talk in more detail about specifically what we've done, what we've done to achieve that. The balance sheet on the right-hand side just sets out what's gone on in the year in terms of their allocation of cash.
You will notice that inventories are down from GBP 136 million to GBP 86 million, and that cash has been used to pay off local debts in HRMS with the PBT they've made in the year funding the dividend they paid to us. Bottom left, just finally, one thing that we often get asked is around there might be upside in certain areas of the balance sheet, but what about the risks? Well, one of the risks is obviously the recoverability of the balances in Germany and how exposed are we over there?
Well, this time last year, we had GBP 84 million worth of exposure being our share of their undistributed dividends, loans we'd paid to them, but also, there was an off-balance sheet EUR 10 million guarantee, which was used to secure their local funding. So in addition to receiving a significant dividend from Germany this year, we've also been able to renegotiate their facilities and remove that off-balance sheet EUR 10 million guarantee. And so the remaining exposure to HRMS is just the balance sheet value of GBP 70.2 million. So good progress on reducing that exposure. Gordon, over to you on services.
So, services. So remember, services group, one of the issues here is we worked a lot of the coal power stations around the U.K. The last of those, Ratcliffe, closes in September, October. So the loss of contracts due to our old coal business coming to an end is no longer a feature of the services business. So you're going to benefit from seeing the growth from the long-term business. What is the long-term business? Well, it's a number of blue-chip customers, as you can see here. Those are the type of customers we want. So we're looking to make sure our credit exposure is protected. And then when we contract, it's very important we don't chase volume.
There has to be some contract selectivity to make sure that we go for upper-quartile margin, so where we add value, typically margins of + 5%, but also, there needs to be some inflation protection. Now, a lot of people said, "Is that true?" Well, if you remember when inflation spiked at 10% or whatever it was, Hargreaves still delivered the profits that they said they were going to do. And that, to me, shows that the type of contract we have are resilient to deal with inflation. Just for those of you who have not been shareholders in Hargreaves previously, this is what we do in the services sector. So bulk material handling, land remediation, waste, transport, specialist engineering. We have some small quarrying operations. The sectors we're exposed to are energy, environmental, infrastructure, and industrial, so clearly not exposed to the retail markets. So that's where we focus.
That's our core competencies deployed in those sectors. Like I said, many of you know that. One of the challenges so we talk about having over 65 contracts, and please don't forget that. In fact, we mention here about contract successes. I think all three of these demonstrate the type of contract Hargreaves likes to enter into. So we've secured a three-year contract with Stirling Council. It fits the core competency of logistics and transport of bulk waste. Counterpart is correct. It's council duration three years. So you can see how it fits there. We also won a materials handling contract, again, within our core competencies, to Yorkshire Water. That is a five-year contract, roughly revenue GBP 4 million.
So you can see that we're slowly growing it. The third one I mention in here just to show what I call the stickiness of the services team. So this is our third contract-awarded CLP. Five-year contracts, this is the third. So it means we'll have been there for 15 years. And I think it's a credit to the team that once we get embedded into an organization, it's not easy in, easy out. It is hard in to get into the businesses, but when we're in, we tend to stay there.
So that's the underlying, shall we say, 64 contracts of the 65 contracts. But everyone focused in and says, "Yeah, Gordon, know that, but just talk to me about HS2." Well, HS2 has probably another couple of years to run for us. And people are saying, "Well, when that falls away, what's going to be the impact?" Well, I'm pleased to say for shareholders that we have a very good relationship with Sizewell. We're working there now direct with the client. Last year, we did revenue, I think, Stephen, GBP 10 million.
Yeah. Yeah.
And probably be GBP 12 million this year. We are not under contract for the big major contract. That still has to come up. But we feel confident that we will win work down at Sizewell based on the fact that we are local, we are working there with the client, and we offer real value. So I think, in my head, I'm looking to HS2 winding down as Sizewell winds up. So that sort of gives you a constant level, and you go, "Okay, I've got it now, Gordon. Services has got a constant pipeline. We're not really too worried about when HS2 comes to an end, as we all knew it was going to." There are two other contracts, though, that, again, I talked about last time I was around, which were Lower Thames and Tungsten West.
So I just want to update you on that. First one is Lower Thames. Now, it's a GBP 9 billion project. I think the decision will be made this year in terms of what's going to happen. We've taken some comfort from the fact that when the government announced they were scrapping certain infrastructure projects, one of them was Stonehenge Bypass. They didn't talk about this one. And we think what drives that is the fact that this is a toll road and, therefore, will be able to raise funding itself as well. So we think it's a project that will probably go ahead. It's not in any of the broker's forecasts. So if it goes ahead, you'll see an uplift, and we'll announce it at the appropriate time. But in terms of probability, I'm more likely it'll happen now than I probably was six months ago.
Tungsten West, again, if you remember, this is listed, so you could track it independently yourself. Tungsten West is being funded to go through the feasibility, and their plan is to raise funds in June to go into full production. If they raise the funds, that'll be great for you as shareholders because we have a 10-year mining services contract. It's open book, cost + 7.5%. Revenue will be between GBP 20 million and GBP 30 million. And the important point is that there is no credit exposure because, under the terms of the contract, we have to be paid in advance.
So, therefore, you are not exposed. It had a tortuous past. Remember, Wolf went bankrupt. So people might be concerned and say, "Are we taking on credit exposure?" I think this discipline in terms of making sure we're not exposed to a credit risk is important. It was the only way that we would enter into a contract if there was no credit exposure with Tungsten West. So I think that sets a very strong position for services. And I think in the next 12 months, hopefully, we'll give you an update on Thames and Tungsten. At that point, I'll hand over to David, who'll chat you through about land business.
Thanks, Gordon. So just as a reminder, Hargreaves Land, we work in three spaces. One is as a master developer. That's on both commercial and residential sites where we effectively deliver plots fully serviced and remediated and sell on to house builders and commercial operators. The second one was where we promote land through the planning process, secure planning. Typically, a lot of that land is not owned by us, but we hold it under planning agreement. And then we sell it straight through to house builders and others and take a margin plus recovery of costs.
And then finally, we've got the renewables piece, which is really on the historic mining land where we enable renewables developers to undertake developments of wind farms and battery storage and solar. We don't get involved in the development of these. We simply grant a long lease on these and take a rental income, which creates an annuity stream going forward. In terms of market conditions for last year, the first half of last year, obviously, residential and commercial markets were very subdued. There were only a limited number of house builders in the market at the time, and very few commercial operators were generally active.
When we got into H2 of last year, the number of house builders who re-entered the market did increase, and we did see an uptick, rather, in the commercial operators looking to become active again in the market. But values have remained below peaks as seen in FY 2022. In terms of our largest schemes, turning over the slide, these are the multi-phase schemes. So at Unity, we're making good progress there. So just to remind you, that's 650 acres. It's got planning set for 3,000 homes and 2.4 million sq ft of commercial space. We've already sold 79 acres for a large distribution hub to TJ Morris. We did a forward-sold design build for 191,000 sq ft logistics unit for a fund. And more recently, we've contracted to sell two plots for a total of GBP 1.2 million to a couple of drive-thru restaurant operators.
We're expecting planning for those to come through September this year. At Blindwells, which is our flagship residential scheme, just about half an hour from Edinburgh, we've now got 260 homes occupied, a further 340-odd plots under contract, and then a further 350 plots, which are subject to additional head-to-terms agreements and with solicitors. And then we're currently progressing further allocation of additional 1,500 homes through the local plan process. Turning over the page, on the renewables portfolio, this has made good progress in the year. And the best sort of indication of that is really that the rental income in the year has trebled from around about GBP 25 million to about GBP 800,000 per year as leases have been taken up.
What we've seen here is that we've got the first tranche of renewables, which is six of the 11 schemes shown in the green on the slide, which is going to market imminently. The 11 schemes that we've had valued, these are ones where we've got leases either in place or imminently about to be in place, and we have very clear visibility on the income and, therefore, it can be valued. These have been independently valued by Jones Lang LaSalle at GBP 27 million-GBP 29 million, which was a similar valuation to the one they did last year. The book cost of those is GBP 7.4 million, so obviously, it gives you a significant lift on the book cost. Then in addition to that, we've got three further assets which contracted. They're in the pre-planning stage. They have grid connections, but they're going through the planning process.
That's one access agreement, one wind farm, and one battery storage. So we don't have precise timings on when they'll come forward, but we anticipate they'll have some clout over the next couple of years. And then beyond that, we've got further seven schemes that are now subject to heads of terms and legals, which are a mix of solar, battery storage, and wind, which, again, gives us visibility of further schemes which run through to around about 2030. And as all of these become very clear in terms of the level of income they'll generate, then we'll get these valued by Jones Lang LaSalle to give you an idea of the likely values. The first tranche, as I said, has been taken, is about to be taken to the market. It'll have a lot size of in excess of GBP 10 million.
We're expecting that to have a favorable response to the market when they see it. In terms of the outlook, we're finding in the residential markets, while house builder confidence is relatively fragile, all major house builders are now back in the market. We're seeing average sales rates improving, albeit consumer confidence has been relatively weak but is improving. Values are definitely below their peaks by about 10%, but we're still seeing volumes moving forward, so we don't have difficulty selling the sites. On the commercial market, the speculative funding market hasn't returned, but where we're seeing activities in the commercial owner-occupier market, where we're getting good traction on a number of projects.
And then finally, in the renewables markets, we've got this long pipeline of opportunities which have proven to be quite interesting to investors who are looking to green their portfolios, and we expect to see some progress on that in the year. Then finally, in terms of the land development pipeline, new projects we're generally holding under promotion agreements or development agreements rather than owning the land out. That's a much more efficient capital allocation from our point of view. We've got a significant number, circa 3,000 plots in the pre-planning stage covering over 290 acres. That's got a gross development value of GBP 120-odd million. There, we see those coming forward over the next five years-10 years as planning works its way through the process. With that, I'll hand over to Gordon.
Thank you very much, David. So just tracking you through on our joint venture in Germany, HRMS. So remember, that business has two parts, effectively. It has a trading business, and it has DK Recycling as the asset there. Both businesses are ring-fenced from each other, but they do trade together. So the trading business supplies the coke and trades out some of the pig iron. Just next slide, what we explain to everyone and the team over there have a very strong discipline in terms of they do not look to take risk. And over time, there's a great team out there, but they have never made a loss, but it's been quite volatile, the earnings. Sometimes it's been up to GBP 10. Sometimes it was down as low as GBP 3.
That was because the lead trader there has a very strong discipline, as in, "If I don't see visibility in the market, I'm not taking a risk." So that was great because they've never made a loss, but it also means volatility of earnings, which was not really rated in the market. We then said that when we purchased DK, that gave the team the opportunity to trade around the asset supply, take product off, and sell. And we said that would rebase the profit for trading from minimum three up to a minimum 10. On what has been a very bad year in Germany, as everyone's aware of due to recession pressures, you can see that that's what's happened. So it's dropped down to 10. That's driven the dividend. And that's why we've put this minimum dividend from Germany, which our partners in there are well aligned with.
Now, if in the future we get back up to something like 25, there's no need for the capital to be there, and management and us are aligned in terms of we would just repatriate that as a surplus additional. But you can see that this base GBP 7 million is underpinned by the trading business. Just to take you to the next slide, just for those of you who do not know the group, this is what DK does. It takes waste dusts in Europe from most of the major steel plants. We are unique, so we deal with dusts that are effectively maximum 10% zinc content. So normally, a steel plant will either supply to us or put to landfill. There isn't really another alternative. We then mix it with coal, iron ore, stick it in the blast furnace, and out you come with pig iron and zinc.
And we also generate power, which means we're actually an exporter, so we're protected from spikes in the energy market. And then we sell on to a number of high-profile foundry customers. So that was all great to take you over the page. So I think when we talked about this before, what happened last year was really simple, two dynamics. And you can imagine that in producing pig iron, nearly everyone in Europe except Brazil produces pig iron from coke. So when coke prices go up, guess what? Pig iron prices go up. So it's a fairly symbiotic relationship. So, therefore, DK would normally be protected. What happened was there was an embargo on Russian imports of energy products, in this case, coke. Therefore, there was a shortage of coke. Coke price flew up.
But the problem for European producers was that there wasn't an embargo on Russian pig iron into Europe. And therefore, there was over 1,000,000 tonnes of pig iron dumped for foreign exchange into Europe at very low cost. That drove prices down. Fortunately, the EU saw the error of its ways and has brought in an embargo, which is ratcheted in, to be fair. So it's not as we'd have liked all in one go. So a third of their volume stopped this year. So two-thirds remaining. It goes down a third, a third, a third to zero. So that will take this, what I regard as unfair competition at the market, and will allow pig iron prices to move up. So the budget for this year, we think, is not a bad budget in terms of where the targets are.
But what we've done to protect it is, first of all, we've hedged 90% of the zinc output. So tick, you've got certainty there. I will have called it wrong, I'm sure. Prices will probably skyrocket up, and people will complain at me, but I've given you certainty. What I've also done with the team is purchased most of the coke at the end of the year. So that's the numbers that's in the budget. So you look at it, and we've also put gate fees up for the dusts that come in. So we've locked three things. The issue that's still open is the 250,000-tonne pig iron that's sold effectively monthly. Now, that, to give you an idea of scale, 250,000 tonnes at EUR 500 a tonne is what it sells at.
You only need a movement of EUR 10, and it'll add EUR 2.5 million to the bottom line. So we are currently selling at the price as expected in budget. I hope over the next 12 months, you'll see prices move up as the embargo starts to kick in. But for every EUR 10 it moves up off EUR 500 current price, you'll add EUR 2.5 to the bottom line. So we think we're in a good place to deliver the budget at DK and prove the turnaround for everyone and get everyone comfortable with the position. Next page, ESG, important issue for institutional investors. And maybe as far as a retail investor, some of you might say, "Well, actually, am I really interested in that? I'm looking for a return for my investment." Some of you, I have a sympathy with you on that.
But what I would say in Hargreaves and let's be honest, I jokingly say we deserve the Olympic gold medal for carbon transition because we started in the left-hand corner of the field and ended up in the right-hand corner of the field. I mean, it's been a massive move. But this is not a tick-box exercise. The type of client that we have values ESG very highly. It's a brand differentiator. So the effort we've put into it, it's what allows us to get these upper-quartile margins in the sector. So, for instance, we have the only electric digger in the U.K. that's deployed down at Sizewell at the moment. So it's powered by a hydrogen generator. And that's the way we're taking the business. Of course, it has to be taken with client support, as in they will pay more money.
But those are the type of customers who we proceed, and that's where ESG is important. So just quickly, what's the outlook? Well, hopefully, you can see it's a solid core services business. If there's anything in the next 12 months, it will be an update on Tungsten West and Lower Thames Crossing. And if there are updates, I'm hoping to be able to tell you the positive ones because they're not in the forecasts. In terms of land, one of the mismatches, you might see the sharp-eyed ones will go, "Well, Gordon, I'm looking at broker's forecasts, and in 2027, you're talking about selling the renewables. But hang on a minute.
I've read your statement, and you're going to market this year." Really simple answer, which I'm sure you'll all understand, is, "I don't want to be sitting in front of a negotiation to sell my renewables and someone seeing that I have to sell them this year." So look, I'm hoping that we will be able to sell them this year, but I don't want to put myself in a corner or David. So don't be surprised if we sell the renewables early, but we've got latitude. So we've put a number out there in 2027. I'm sure they'll be gone by then. And that's important because it proves concept. And David is going down this journey of releasing the EUR 60 million of cash that's tied up in the property business, still leaving us with a property business, just the low-capital model.
Germany, it's all about proving the DK model. And again, to reassure you, I spend 50% of my time in Germany now working closely with the team there to underpin the changes that are needed to underpin the DK business. The trading's fine. Trading team, they're great. They don't need my help, but I am working with them on DK. Just final slide to remind everyone, you should take a large amount of reassurance that I'm an 8% shareholder in the group, so my shareholding drives my behavior much more than my CEO role. I am there to protect shareholder value. We are also ably represented on the board with Nick Mills from Harwood Capital, again, our largest shareholder. So nearly 40% of the business sits around the board table. And therefore, I think we are very much aligned with shareholders.
We have an excellent board, the strongest board I've had. We have a strong balance sheet, no debt, cash in the bank. The dividend, as we say to people, is, "As we're going through this transition, selling the renewables, selling down the land assets, etc., establishing the service business, stabilizing Germany, we're effectively, while we're delivering value, paying you, as I like to say, GBP 0.36 per share to give us the next four or five years to finish all of this." What you're going to end up with is a big lump of cash, services business, and some others, but basically a big lump of cash, which we will then discuss with shareholders as we're in a year's time, maybe. When the cash pile is of a certain size, we'll then talk to you about whether share buybacks or special dividend is appropriate.
But that will depend on what the share price is at the time. That concludes the formal part of the presentation. I really encourage a lot of you to engage and ask us questions because we know it intimately, and sometimes we miss putting things across clearly. Please don't be embarrassed to ask any question. If after today there is anything you'd like to ask, we regard retail shareholders as equally as important as our institutional investors. We are contactable at any time outside of this. If there's any questions, don't speculate. Don't necessarily look at the boards. Actually, just ring the people who run the business, and we'll give you the straight answers to the questions. For now, please, any questions you would like to ask us, we're here to engage. Thank you very much.
That's great, Gordon, Stephen, David. Thank you very much indeed for your presentation. As Gordon mentioned, please do continue to submit your questions using the Q&A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed via your investor dashboard. Gordon, Stephen, David, as you can see, we have received a number of questions throughout today's presentation. Stephen, if I may, now hand back to you to chair the Q&A and kindly ask you to read out the questions where appropriate to do so. I'll pick up from you at the end.
Yeah. No, thank you very much. I'll just start at the top and work down the questions so they're not in a particular order of groupings. First question's from Alan, which I think has been answered since you put the question in. So I'll take this one. But within HRMS, which is the more important to us by value between pig iron and zinc? And therefore, which of the two commodity price movements are we more sensitive to? So I think Gordon picked this up when he talked about HRMS. In general, we do 250,000 tonnes of pig iron and 6,000 tonnes of zinc. So that should give you an idea of which one has more impact on certainly on the revenue and the bottom line. In the coming year, we've already hedged 90% of the zinc.
So if you're looking in the next 12 months, movements in zinc price shouldn't affect us too much. But movements in pig iron will because that's not a product we are able to hedge. So if you see pig iron or iron ore is not a bad comparator because pig iron's not a quoted price, if you see that starting to go up, then expect us to do well. Next question, probably one for you, Gordon, from Brandon. Do we have the resources to be able to perform all of the major infrastructure projects in the services business if they come off as per expected timescales? I think that's relating to Lower Thames and so on.
So that's actually a very good question. And Niall Fraser, who leads the earthworks business, that's the discussion. The answer is genuinely yes. He's convinced me that we can. The Blackwell business has a very good brand. We're now working at Sizewell. I think we said there's EUR 10 million of revenue. So there's already a team there, a leadership team. It will all be about, as the work ramps up, finding operators.
But we have the same challenge on HS2. And I think, as people said, in one respect, it works quite well because as HS2 slows down, it's going to free up resource, which can be deployed on Sizewell. So the fact we're there, I think, will allow us to pick up people and the fact we have relationships. We have, I think, over 300 people working on HS2. So as it ramps down, we'll see them move across. So we have challenged Niall and the team, and they have convinced me that, yes, we have.
Thank you. David, I think this next one's for you from Mark. Do you expect any change to the value of the renewable lease portfolio following the recent Bank of England base rate cut?
Well, generally, the investment portfolio renewables is sensitive to interest rate cuts. Having said that, because it's long-term income, therefore, it tracks long-term interest rates, it has less sensitivity. But clearly, as interest rates track down, that will have a positive effect. But it won't be a dramatic effect in the near term, I think it's fair to say.
Thanks. Another one for you, David, from Nigel. When you say new entry of house builders, what size of builders are you targeting?
In terms of what we found in certainly last year was we had a number of smaller private house builders who basically delivered sort of several hundred homes a year. These were private. They weren't the listed ones. They would remain quite active in the market. What we've seen this year is that the listed house builders who generally sat on their hands last year, did very limited transactions, they've come back into the market. So we've got quite a diverse range of both large listed house builders plus the smaller regional ones that generate several hundred units a year.
Thanks. I'll take the next question. So David's asking, despite reduced profitability, the final dividend has been raised to GBP 0.18. Can you explain the reason behind this? So I understand the question, and it's a good one because it's not necessarily completely intuitive with a reduction in profit but increase in dividend. So last year, our dividend was GBP 0.21 for the full year. We've increased it to GBP 0.36, which is a GBP 0.15 increase. Why have we increased it? First of all, we bought out the pension scheme, which we were paying previously GBP 1.8 million a year into, approximately GBP 0.05 a share that works out at in terms of a dividend.
So because we've been able to stop that payment, that cash that we were paying to the pension scheme was not required in the business. And therefore, that can go straight through onto a dividend. That's GBP 0.05 of the increase. The remaining GBP 0.10 increase relates to Germany. So despite the fact that the German overall profits have dropped, the trading business has still been able to deliver profitably and therefore distribute cash to us. Two years ago, we had an agreement with them to pay GBP 4 million a year over to us, which funded approximately GBP 12 million of the dividend. We've increased that to GBP 7 million.
So that additional GBP 3 million of recurring income equates to around about GBP 0.10 a share. And so because they're still able to fund that across to us annually through the trading business alone, that's where we'll be able to get that extra GBP 0.10. And that gives you the base of GBP 0.36 per share going forward, regardless of the underperformance, particularly within the DK business, which doesn't affect the cash flow from HRMS. The next one, while it's a property point, I will pick it up because it maybe is a bit more accounting. So Brandon's asking, it's very difficult to understand how the book value of the land assets, excluding renewables, relates to the GDV of over GBP 1 billion. Can it be clarified in any way?
Well, yes. So it's really, I guess, part and parcel of moving towards a lower-capital model. So a lot of the schemes that David has been working on previously, where we've put the funds in and we look to receive 15% margin on that, Blindwells being a particular example, that's where we're funding basically the GDV. We're funding it all. The go-forward schemes and the vast majority of that GBP 1 billion schemes is going to be effectively option agreements or profit-share arrangements whereby we don't buy the land.
So if there's a deal for GBP 20 million, we wouldn't buy the land for GBP 20 million and hold onto it on book and then sell it for GBP 22.5 million to realise that percentage. What we would do is we just wash it straight through. So we'd buy back to back and sell with the ultimate owner. And that GDV is dealt with in that way. So if you're trying to ascribe value to that pipeline, it's all about building up that GBP 1 billion pipeline and being able to deliver it in a low-capital way, which might mean we take a slightly lower margin on that larger number, but we're not having that level of cash out for a long period of time.
Yeah. I think, say, on the GDV side, the profit target is around about 15% of the GDV. That's the sort of gross sales value that we expect.
Yeah. Yeah. And it's fair to say that GBP 1 billion, if that 15% is not all next year, that's going to take 10 years-12 years to work through. So that's the ongoing land business, really. Next one is for you, David. So Alan is asking, the commercial land we own has a GDV of GBP 769 million. When you've talked of residential before, you've referenced 15% margin on GDV. Can that also be applied to commercial?
Yeah. That's a fair estimate, really, of the same where we expect about 15% margin on GDV of the commercial land as well as the residential.
Yeah. I would point out the question says, "We own it." We don't own it. We have options over the land at present, which is why it's not in the balance sheet linked to the previous question. Gordon, I think I might have missed another land question. Sorry, Vaughn. Vaughn is asking, Hargreaves Land residential plot sales, are there any differences between the Scottish markets and the English markets at present?
Fundamentally, no. We haven't really seen any particular difference in terms of the appetite of house builders or the activity of house builders. So I think the answer is no, slightly different legal systems, slightly different planning systems, but fundamentally, there is no difference.
Great. Question from Brandon for Gordon, I think. One of the realization of value elements will be the sale of HRMS. How easy will this be given the restricted voting rights of Hargreaves shareholders?
Any decision on Germany will be done in collaboration with the management team. We have a very strong relationship. We have worked closely with them for over 20 years. We're actually very good friends. So I think the final decision on Germany will be collaborative. The management team and I have worked together, and we're aligned. So they are 14% shareholders effectively in value. So whatever we do will be done together as a team.
Great. Paul's asked, what is the total size of the land bank? I think the answer to that is GBP 1.1 billion being the GDV pipeline, David, is fair to say?
Yeah. In terms of the acreage, we hold about 6,000 acres in terms of actually owned land. But as I say, we hold a lot more under control by way of option agreements, development agreements.
Great. Last question at the moment from John. This is one for you, David. How does your proposed land business model compare with Gleeson and Hallam Land models?
Gleeson Land, similar where they promote, that's the non-house building side. That's the land promotion side. That's the direction we're moving where they hold all their land, other options, promotion agreements. And it is the Hallam Land Management model where, again, they hold a vast majority, not all, but the vast majority of their land under promotion agreements. So when we talk about these land with GDV figures, most of that is held in that similar form.
Great. Any other questions for them?
Perfect. That's great. David, Gordon, Stephen, I believe you have addressed all those questions for investors today. So thank you for that. And of course, the company can review all questions submitted today, and we'll polish those responses on the Investor Meet Company platform. But before redirecting investors to provide you with their feedback, which one is particularly important to the company? Gordon, could I please ask you for a few closing comments?
Yes. Well, look, thank you very much for taking the time to attend. My key message to you, as always, is we found this forum very useful. I think we did have a gap in our communications. We regard the retail shareholders as important. So please use this platform or contact us directly. And we're here to make sure you're educated. Whatever you decide to do with Hargreaves shares, we want to make sure that you make that decision based on the facts as opposed to speculation. And we're here to help you make that decision, whichever way you decide to go. So thank you for your time. That's it. Thank you.
Fantastic. Gordon, Stephen, David, 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. Good afternoon to.