Hargreaves Services (HSP) has battled the mining downturn by reining in capital spending and focusing on the more profitable segments of the business. Unfortunately, the bleak prevailing wind for the UK coal industry may continue to chill investor interest.
The market reacted favourably to a 28 per cent hike in the half-year dividend - the shares rose 3.5 per cent on the morning these results were announced - even though the reported profit growth was largely down to a £26m write-down on the closure of Yorkshire's Maltby Colliery in the previous year. At the operating level, the group's underlying operating profits were up by a quarter to £31m.
The successful refocusing of the business is reflected in a 44 per cent increase in revenues generated by the key energy and commodities division to £332m. Underlying profit margins were squeezed by a change in business mix and falling coal prices, but a step-up in volumes offset any negative effects. The top line was also buoyed by improving dry bulk volumes at Hargreaves' transport division, and the contribution from seven newly acquired Scottish surface mines.
Coal prices remain under pressure, but management insists the group is capable of delivering "acceptable returns" at current levels. Broker WH Ireland expects full-year EPS of 135p.
| HARGREAVES SERVICES (HSP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 869p | MARKET VALUE: | £288m | |
| TOUCH: | 867-869p | 12-MONTH HIGH: | 910p | Low: 713p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 7 | |
| NET ASSET VALUE: | 421p | NET DEBT: | 70% | |
| Half-year to 30 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2012 (restated) | 360 | 21.0 | 55.2 | 6.9 |
| 2013 | 460 | 29.7 | 70.0 | 8.8 |
| % change | +28 | +41 | +27 | +28 |
Ex-div: 19 Feb Payment: 21 Mar | ||||
