Post-Close Trading Update and Results Notification

RNS Number : 1296K

Hargreaves Services PLC

05 July 2017

 

For immediate release

5 July 2017

Hargreaves Services plc

("Hargreaves", "the Group" or "the Company")

Post-Close Trading Update and Notification of Preliminary Results

Hargreaves Services plc (AIM: HSP), a diversified group delivering key projects and services to the infrastructure, energy and property sectors, provides the following update on trading ahead of reporting its preliminary results for the year ended 31 May 2017.

The Group is pleased to report that overall trading in the run up to the year end was consistent with management expectations and consequently the Group expects underlying operating profit for the year ended 31 May 2017 to be in line with current market expectations. Underlying profit before tax is expected to be ahead of market expectations due to the net interest charge being £0.4m lower than anticipated for the full year.

Distribution and Services Operations

The Coal Distribution Division, which includes results from our German operating associate, is expected to report profits above management expectations. Favourable market conditions and an expanded local trading team have combined to deliver significant outperformance from our German associate more than offsetting the continued softness in the UK coal distribution and production operations. This outperformance has allowed the Group to accelerate the repositioning of its UK operations; exiting its Immingham port terminal space and undertaking preparations for investment in new low-cost briquetting products at Maxibrite.

Good progress has been made since the acquisition of Blackwell, moving the Earthworks business away from complex "design and build" civil engineering contracts to focus on its core competence of earthworks. Exceptional losses incurred in the year on legacy contracts have been partially mitigated by gains and profits from the realisation of plant. Excluding exceptional losses on legacy civil engineering contracts, the underlying operating profit for the Earthworks business is expected to be £1.0m below management expectations reflecting the expenses and margin impacts of withdrawing from civil engineering activities. All legacy contracts are now largely complete.

Operating profit in the Industrial Services Division was in line with management expectations.

A highly competitive market and low volumes combined to create an unusually poor final quarter performance for the Logistics Division and, as a result, the Division will report a full year break-even result, £1.3m below initial management expectations for the year. Management is focused on reducing overhead and re-scaling the operation to align to the current market conditions.

Property & Energy

The Group expects to report profits for the Property and Energy Division that are in line with management expectations for the year end 31 May 2017. Following the grant of planning permission at Blindwells in East Lothian, the Group continues to make good progress towards generating between £35m to £50m of incremental value from its property and energy portfolios. The independent property valuation is continuing and the Group expects to report the results of that valuation with its preliminary results. Positive progress continues to be made in the development of the plans announced on 14 June 2017 to form an independent energy business.

Legacy Asset Realisations and Exceptional Items

The Group is pleased to report that excellent progress has been made in the realisation of cash from legacy assets. The contract for the sale of underground assets from Maltby represented an important milestone. Remaining legacy assets consist largely of mobile plant and loans due from the Tower joint venture, both of which are expected to convert fully into cash in future periods.

The Group expects to book a net exceptional charge of £0.5m relating to various non-recurring trading items, asset impairment adjustments and discontinued activities.

Net Debt 

Net Debt at 31 May 2017 was £15.7m (Net Debt at 30 November 2016: £36.9m). Working capital performance across the Group remained in line with expectations.

Notification of Preliminary Results

The Group expects to report its preliminary results for the year ended 31 May 2017 on 8 August 2017. A briefing for analysts will be held at 10.00am on the morning of the results announcement. For more information on the briefing, please contact Buchanan on 020 7466 5000.

For further details:

Hargreaves Services Gordon Banham, Chief Executive Officer Iain Cockburn, Finance Director	0191 373 4485
Buchanan Mark Court  / Sophie Cowles	020 7466 5000
N+1 Singer (Nomad and Joint Broker) Sandy Fraser / Nick Owen	020 7496 3000
Investec (Joint Broker) Sara Hale / Robert Baker	020 7597 4000

 

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