Coal miner Hargreaves Services (HSP) has spent the past year implementing its simplification programme in the face of terrible market conditions. This included selling off chemical transport business Imperial Tankers and closing its Monckton coke works, the proceeds of which went towards reducing net debt to just £1m. "What we have done is get the business into a safe place," says chief executive Gordon Banham.
A fall in demand for and the price of coal - the group's core product - as well as the UK 'carbon price support' tax have weighed heavily on margins. The group's underlying operating profit fell by more than a quarter to £42.8m.
The core coal production and distribution division traded 4.2m tonnes of coal in the year to 31 May, down a fifth on full-year 2014. The significant reduction in third-party thermal coal volumes dragged down distribution revenue by almost a third to £337m. Management also halved its production target to 1m tonnes for this year. The Scottish mines bought in 2013 are loss-making at current coal prices, but management is reluctant to close them.
The industrial services division, which provides site support services to industries including steel and power, held up slightly better, with underlying profit flat at £5.7m.
Prior to these results, house broker N+1 Singer expected pre-tax profit of £20.1m for the year to May 2016, giving EPS of 49p.
HARGREAVES SERVICES (HSP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 347p | MARKET VALUE: | £111m | |
| TOUCH: | 347-350p | 12-MONTH HIGH: | 815p | LOW: 280p |
| DIVIDEND YIELD: | 8.6% | PE RATIO: | 5 | |
| NET ASSET VALUE: | 462p | NET DEBT: | 0.7% | |
| Year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2011 | 552 | 36.9 | 91.9 | 15.5 |
| 2012 | 618 | 45.0 | 117 | 17.8 |
| 2013 | 843 | 43.1 | 113 | 20.5 |
| 2014 | 869 | 52.1 | 123 | 25.5 |
| 2015 | 662 | 24.9 | 65.3 | 30.0 |
| % change | -24 | -52 | -47 | +18 |
Ex-div: 24 Sep Payment: 23 Oct | ||||
