Shares in Hargreaves Services (HSP) slumped 6 per cent after the UK coal miner revealed a 7 per cent fall in underlying EPS. It blamed a prolonged period of low coal prices.
Last week, Hargreaves updated the market on its strategy to combat "uncertainty about the quantity of coal that will continue to be burned by power generators to satisfy UK energy market demands". The market didn't like the sound of that either, sending its share price down 14 per cent on the day of the announcement.
Hargreaves plans to sell non-core assets and is considering closing one of its cash-hungry mines, Monckton, which produces coking coal for use in steelmaking. Combined with recent sale proceeds - like the £27m achieved on the disposal of subsidiary Imperial Tankers, as announced last week - that should rid Hargreaves of most of its debts by the end of next year.
Slimming down the business will reduce profits in the short term, but it's the group's medium-term prospects that investors are fretting about. Hargreaves says it is assessing a number of opportunities to redeploy capital. If it can't find any, then it could return excess cash to shareholders instead.
Broker N+1 Singer expects adjusted EPS to fall from 125p to 110p this year, and stay there in 2016.
HARGREAVES SERVICES (HSP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 655p | MARKET VALUE: | £217m | |
| TOUCH: | 655-659p | 12-MONTH HIGH: | 910p | LOW: 655p |
| DIVIDEND YIELD: | 3.9% | PE RATIO: | 5 | |
| NET ASSET VALUE: | 453p | NET DEBT: | 46% | |
| Year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 460 | 30.7 | 77.5 | 13.5 |
| 2011 | 552 | 36.9 | 91.9 | 15.5 |
| 2012 | 618 | 45 | 117 | 17.8 |
| 2013 | 843 | 43.1 | 113 | 20.5 |
| 2014 | 869 | 52.1 | 123 | 25.5 |
| % change | +3 | +21 | +9 | +24 |
Ex-div: 23 Oct Payment: 21 Nov | ||||
