Market conditions for Hargreaves Services (HSP) have gone from bad to worse to abysmal. In the six months to November, the coal miner faced weak commodity prices, falling coal demand, and surprise power station closure plans. Much of the same is expected this year.
This grim picture was exacerbated by bad weather in December and January, which has hit production, and contributed to a 16 per cent share price fall on the release of the figures. In response, management will continue to reduce its exposure to thermal coal and now thinks it could be operating just one plant in 18 months' time.
Further bad news is likely before then. The profitability of coal remains very slim, and Hargreaves may have to book a debt impairment charge relating to an accelerated wind down of the group's activities in Tower Colliery, Wales. Nonetheless, finance director Iain Cockburn believes the balance sheet is stronger than at any time in his eight years at the company. Indeed, the board spoke of its excitement at the possible new profit streams from the development of the company's 18,500 acres of land in the UK, as well as moves into adjacent and international markets.
Broker N+1 Singer expects full-year adjusted pre-tax profit of £4.5m and EPS of 11.4p, against £40.3m and 93.9p in the 12 months to May 2015.
HARGREAVES SERVICES (HSP) | ||||
|---|---|---|---|---|
| ORD PRICE: | 200p | MARKET VALUE: | £63.8m | |
| TOUCH: | 196.5-203.8p | 12-MONTH HIGH: | 579p | LOW: 200p |
| DIVIDEND YIELD: | 10.9% | PE RATIO: | 8 | |
| NET ASSET VALUE: | 443p | NET DEBT: | 22% | |
| Half-year to 30 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2014 | 351 | 15.2 | 38.7 | 10 |
| 2015 | 175 | 0.8 | 0.49 | 1.7 |
| % change | -50 | -94 | -99 | -83 |
Ex-div: 25 Feb Payment: 8 Apr | ||||
