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Britain is at a crossroads when it comes to major infrastructure improvements.
In fact, while Hinkley Point C and Sizewell C continue to be built, a new fleet of small modular reactors (SMR) is among a score of projects promised for the coming decades.
HS2 has also steadily appeared in the spotlight, with the latest reports suggesting that the new British government is considering an ‘HS2 lite’ replacement for the railway’s scrapped northern link.
Water companies are on the verge of a new regulatory repression, which will require heavy investments from 2025 to repair obsolete networks.
Hired: Hercules Site Services is working on the HS2 and Hinkley Point C projects
In February this year, the UK already had a total of 660 projects in the pipeline across the public and private sectors, according to the Infrastructure and Projects Authority (IPA).
Together, they promised investments worth between £700 and £775 billion over the next decade, the bulk of which relates to energy, followed by transport, social infrastructure and water.
Threat of labor shortage
However, this wide range of projects will require an increasingly skilled workforce, needing between 543,000 and 600,000 people over the next two years alone, the IPA estimated.
This is because the construction industry is facing a growing labor shortage, the IPA said, leaving questions about where all these workers will come from.
So it is not surprising that Hercules Site Serviceswhich offers training and job opportunities, is on track to achieve a record year.
AIM-listed Hercules said earlier this month that full-year profits would beat market expectations with a 24 per cent rise in revenue to more than £105m.
Hercules’ record year
From civil engineering work and rail projects to administrative work and even suction excavator rentals, Hercules said it had continued to take advantage of opportunities throughout the year, leaving the door open for “many things to look forward to in 2025”.
“It is now widely accepted that the UK needs to improve many aspects of its infrastructure,” said chief executive Brusk Korkmaz.
“We recognize that to do this, having the right talent is critical.”
The company officially launched its Hercules Construction Academy in the West Midlands in January to support the development of this talent.
While key to addressing the UK’s labor shortage, it would also offer Hercules a pool of workers to deploy across its growing project portfolio, Korkmaz said.
Growing portfolio of important jobs
Hercules already provides labor for major projects including Sizewell C and HS2.
The Suffolk nuclear plant is expected to need workers for at least 20 years, which Hercules is prepared for, having recently opened an office in Saxmundham, near the site.
Some 600 Hercules workers are currently working on the northern section of the first phase of the high-speed railway near Birmingham, with demand said to be growing week on week.
Hercules is also involved in other work for Network Rail, Transport for Wales and London Underground through a five-year deal with Balfour Beatty.
And this is before Ofwat’s new five-year regulatory framework for the water sector, AMP8, comes into effect next year.
The other way around
Hercules’ involvement in high-profile projects has not gone unnoticed, and the news that 2024 will be a record year for the company will prompt updates from brokers.
Calling the update “excellent”, property broker Cavendish raised his target price on Hercules shares to 70p, forecasting a potential gain of 61 per cent at the time.
Analysts at investment research group Equity Development followed suit, raising their share price target from 60p to 70p.
“Performance has been supported by Hercules’ own growth initiatives and its ability to respond to opportunities as they arise,” analysts at Equity Development said.
They also highlighted an £8m fundraising round by Hercules last month, putting it on track to further leverage M&A opportunities.
“We… see room for further outperformance as 2025 progresses, with M&A being an obvious potential earnings and share price catalyst,” Equity Development added.
Opportunities ahead
That’s not to say that Hercules isn’t blessed with an abundant array of opportunities thanks to the experience gained through the work he’s already involved in.
In Korkmaz’s words: “We are also working with other companies as we become better known in the (railway) sector.”
Demand is expected to increase due to “well-documented issues within the water treatment sector,” he added.
Promises of a fleet of SMRs, along with the Sizewell C and Hinkley Point C, should also keep the Hercules in demand well into the next decade.
“Like any infrastructure project, they will need labor to build the SMRs,” Korkmaz said.
“We feel very well placed to help businesses and government when the time is right.”
The shares are up 81.8 per cent so far this year to 44.55p. But as analysts say, the stock may have even further to go.
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