Mining coal in an era of rapidly falling global demand was always going to be tough. That’s why Hargreaves Services (HSP) took the decision to diversify its operations in 2016 and use its land and expertise to build property, earthworks and industrial services businesses. The problem is coal mining still contributes 46 per cent of revenues and revenue here fell 12 per cent in the year to June 2018.
More worrying is that fact that the specialist earthworks division – previously marked by management as one of the growth opportunities – reported a 38 per cent decline in revenues to £79m, while underlying operating profits crashed from £2.4m to £0.5m, dragging group underlying operating profits down 15 per cent to £9.4m.
But it’s not all bad news. Hargreaves is in the process of capitalising value from its legacy mining portfolio and management is confident that the remaining £29m-worth of assets will have been turned into cash by the year-end. This will help reduce debt and strengthen the balance sheet. More importantly, £18m-worth of land is being held for development and could ultimately be worth more than £60m.
Broker N+1 Singer has forecast pre-tax profits of £9.4m and EPS of 22.1p in the year to May 2019 (2018: £6.5m and 14.8p).
| HARGREAVES SERVICES (HSP) | ||||
| ORD PRICE: | 354p | MARKET VALUE: | £ 114m | |
| TOUCH: | 350-357p | 12-MONTH HIGH / LOW: | 385p | 310p |
| DIVIDEND YIELD: | 2.0% | PE RATIO: | 492 | |
| NET ASSET VALUE: | 424p | NET DEBT | 23% | |
| Year to 31 May | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2014 | 869 | 52.1 | 123.0 | 25.5 |
| 2015 | 662 | 24.9 | 65.3 | 30.0 |
| 2016 | 341 | -10.6 | -33.0 | 2.3 |
| 2017 | 343 | 4.7 | 16.1 | 7.2 |
| 2018 | 297 | 0.5 | 0.7 | 7.2 |
| % change | -13 | -90 | -96 | - |
| Ex-div: | 20 Sep | |||
| Payment: | 02 Nov |
