Close Period Trading Update

RNS Number : 5597V

Hargreaves Services PLC

16 December 2013

 



For immediate release

16 December 2013

HARGREAVES SERVICES PLC 

(the "Group" or "Hargreaves")

Close Period Trading Update

Hargreaves Services plc (AIM: HSP), the UK's leading supplier of solid fuels and bulk material logistics, today issues the following trading update ahead of the announcement of its results for the six months ended 30 November 2013. The Group expects to announce its interim results on Tuesday 11 February 2014.

The Group is trading in line with management's expectations and is well placed to deliver a good second half performance. 

Production

The Group continues to make good progress in its surface mining activities with Tower continuing to produce in line with management expectations. Whilst there have been delays re-starting a number of our newly acquired Scottish sites, the Group is pleased to announce that six sites are now operating with the prospect of starting on two further sites in the next few weeks, which will bring activities in line with plan.

Monckton continues to be exposed to the current volatility in the steel sector. Discussions with our customers over contracts for 2014 are on-going, with some customers seeking to minimise levels of off-take and commitment through quarterly contracts.

As announced on 9 December 2013, the business and assets of Hatfield Colliery Limited were sold to Hatfield Colliery Partnership Limited ("HCPL"), a company ultimately owned and controlled by an Employee Benefit Trust. Hargreaves assisted in the restructure by entering into a new off-take contract, on substantially the same terms as the previous contract, running into the second half of 2015.

The closure programme at Maltby is progressing in line with plan, with the mine shafts expected to have been filled and capped by the end of the financial year as part of Maltby's overall restoration programme. As announced on 9 December 2013, the Group has provided HCPL with a short term option to acquire the underground production assets. The Group remains confident that full value will be obtained in due course.

Energy & Commodities

UK Bulk Coal operations continue to perform ahead of management expectations, benefiting from strong demand from power stations. Volumes are further underpinned by sales of coking coal and PCI coal into the steel sector. We expect these trends to continue and contribute to a strong second half.

Our UK Speciality Coal operations are also performing well and continue to successfully mitigate the loss of supplies as a result of the administration of UK Coal.

In Germany, challenging steel markets have depressed coke volumes and margins in the first half of the year. Whilst the outlook for coke demand and coke prices remains uncertain, existing contract positions and potential contract awards provide us with some confidence that the German operation will enjoy a strong second half.

We are pleased to announce that the Group successfully completed a reorganisation of its European operations on 28 November 2013.  The restructuring caps the exposure of the Group whilst substantially retaining its level of economic interest. The new structure will provide the autonomy and flexibility that the German business needs to arrange its own banking facilities, control day to day trading decisions and to develop and grow coke trading operations. As a result of the Group's lower equity participation, going forward the European operations will be treated as an associate undertaking and no longer consolidated in the Group's financial accounts.

Industrial Services

The performance of our core material handling business has seen some delays in key contract awards. Progress has however been made in this area and the resulting outlook for trading in the second half is positive. In particular, we are pleased to announce that after a long tender process we have been informed by China Light and Power ('CLP') that the Group has been successful in securing a five year maintenance services contract at Castle Peak Power station in Hong Kong. The contract will commence at the start of 2014 and is an exciting first development for the Group in the Far East.

As previously indicated, good progress has been made in refocusing the division away from engineering projects to focus on the core business of material handling. One of the two problematic but non-recurring biomass conversion projects has been completed, with the second forecast to complete in the first quarter of 2014.  Although commercial discussions remain to be concluded, no material financial impact is expected.

Transport

The Transport Division has had a very strong first half and is trading ahead of management's expectations. The Dry Bulk fleet continues to perform well and the Tanker fleet has enjoyed a number of key contract wins.

Net Debt

Net debt at 30 November 2013 was £95.6m, in line with management expectations, and taking account of cash flows associated with the SRG acquisition, working capital fluctuations and the deconsolidation of the European debt of £10m.

Outlook

Although risks continue around coke markets, particularly for Monckton, the Group is pleased with the strong performance in coal trading and the progress in its surface mining operations. The Board considers that the Group is well placed going into the second half of the year and is optimistic of achieving its targets for the full year.

For further details:

Hargreaves Services	0191 373 4485
Gordon Banham, Group Chief Executive
Iain Cockburn, Group Finance Director
Buchanan	020 7466 5000
Mark Court / Fiona Henson / Sophie Cowles
PPS Group	0131 226 1951
Donald Anderson/Jeremy Hamilton
N+1 Singer (Nomad & Joint Broker)	020 7496 3000
Sandy Fraser / Nick Owen
Jefferies International Limited (Joint Broker)	020 7029 8000
Sara Hale / Harry Nicholas

 

END

 

 

TSTZMMMZNFZGFZM