Legacy contracts from the 2016 acquisition of earthmoving services company CA Blackwell have buried returns for Hargreaves Services (HSP) under a mound of exceptional charges. On an adjusted basis, the picture is more positive. Underlying operating profit was up 10 per cent to £2.3m in the six months to November 2017, while earnings per share increased to 2.7p, from 0.3p for the corresponding period in 2016. The group is claiming against the vendors of the business for breach of warranty, but warns that the matter "may take some time” to resolve.
In the meantime, management is focused on maximising the value of the property portfolio. An independent valuation around the time of the last results showed the group was sitting on assets with a development value of £83m. The group is looking to generate £35m from its portfolio by offloading assets for sale, where it doesn’t believe it can add significant value, or through developing those it can. Management points to the successful development of its Blindwells site outside Edinburgh as an indicator of the potential of its land assets. The sale of the site’s first development plot – originally slated for this financial year – has been pushed into next year following planning delays, but the group mentioned “substantial interest” from developers.
Analysts at Investec are forecasting full-year adjusted pre-tax profit of £6.7m, giving EPS of 16.4p (from £7.8m and 17.9p in 2008).
| HARGREAVES SERVICES (HSP) | ||||
| ORD PRICE: | 346p | MARKET VALUE: | £ =110.7m | |
| TOUCH: | 345-350p | 12-MONTH HIGH: | 385p | LOW: 250p |
| DIVIDEND YIELD: | 2.1% | PE RATIO: | 29 | |
| NET ASSET VALUE: | 422p | NET DEBT: | 15% | |
| Half-year to 30 Nov | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2016 | 171 | 0.2 | 0.03 | 2.7 |
| 2017 | 150 | -1.9 | -3.96 | 2.7 |
| % change | -12 | - | - | - |
| Ex-div: | 22 Feb | |||
| Payment: | 6 Apr |
