Pre-Close Period Trading Update

RNS Number : 2009U

Hargreaves Services PLC

19 December 2011

 



For immediate release

19 December 2011

HARGREAVES SERVICES PLC 

(the "Group" or "Hargreaves")

Pre-Close Period Trading Update for the six months ended 30 November 2011

Hargreaves Services plc (AIM: HSP), the UK's leading supplier of solid fuels and bulk material logistics, today issues the following trading update prior to the Group entering its close period. The Group expects to announce its Interim Results on 14 February 2012.

We are pleased to announce that overall the Group has performed broadly in line with management expectations and is well placed to deliver a strong second half performance. Further details on the Group's trading are provided below. 

Production

At Tower, the Group is delighted to announce that the planning certificate was issued on 16 December by Rhondda Cynon Taf County Borough Council. This will allow the project to commence. Despite the delays no material planning conditions or assumptions have changed. We remain confident that the site will be in full production by the end of this financial year. This is a very exciting project for the Group and we look forward to helping to maximise the opportunities to profit from the marketing of coal to both the generation and steels sectors. Further updates will be provided in due course. On the back of this project success, the Group is continuing to work to develop other surface coal opportunities at potential sites with a further 1 million tonnes of estimated reserves on track for planning applications during 2012.

The new working practices at Maltby, announced in February, are operating successfully and have delivered the expected increase in machine availability time. During the first half a successful scheduled face change took place and production is now operating on Panel T11. The new coal face is now established and is operating satisfactorily. However, the coal production from this panel has been disappointing due to geology. We will be working with management and unions to attempt to recover some of this shortfall in the second half of the year. T11 is the last of the panels that we plan to mine in this section of Maltby. Good progress is being made in developing the next T125 coal panel in an area of the mine with a proven 25% thicker coal seam. As we have previously stated, we are confident that this will benefit performance significantly from the end of the first quarter of the next financial year.

Our management contract at Hatfield continues to progress well and we are in advanced contractual discussions to extend the management contract by at least a further two years.

At Monckton, coke production remains consistent. Coke markets remain strong and the Group's price and forward contract positions are in line with management expectations.

Industrial Services

The Industrial Services division performed slightly ahead of management expectations. We are pleased to announce that a number of new long term contracts have been won since we announced our results in September. These contracts will produce approximately £5m of revenue per annum from the steel, power station and renewable sectors. The tender pipeline remains strong and we are confident of announcing some significant contract wins in the coming weeks. We would expect the division comfortably to outperform its targets for the current year.

Energy & Commodities

The Energy & Commodities Division continues to outperform our original expectations. The contracted sales plan for the current year was heavily weighted towards the second half and the Group is well placed in terms of order book and stock positions as we enter the second half.

The UK coal trading operations have traded very strongly even with the mild winter experienced so far.

The European markets were quiet during the first quarter but a number of larger deals secured by our European coke trading team have resulted in a healthy order book that promises to deliver a very strong second half. We are also pleased to announce that the European business has secured its first contract to supply thermal coal into the German market. This coal will be supplied through our joint venture with our Russian suppler MIR Trade AG.

Transport

We are very pleased with the performance of both the Tankers and Dry Bulk transport fleets, and provided performance continues at the current levels, we would expect the Transport Division to exceed our expectations for the full year.

Net Debt

Net debt at the end of November was £102m, slightly lower than internal expectations. As usual, management expect stocks to reduce significantly over the second half.

Outlook

The Board is pleased with the continuing overall performance and development of the Group. We remain cautiously optimistic that performance for the rest of the year at Maltby will improve and we remain very confident that output will increase when we move to thicker coal seams during the next financial year.  The rest of the Group is well set for a strong second half performance and will provide a good opportunity to mitigate any negative performance from Maltby. We are delighted that Tower has received planning permission and will look to commence the project as soon as possible with a goal that it will contribute positively to the second half.

In summary, the Board remains very confident about the prospects for the Group and of achieving management's targets for the full year.

For further details:

Hargreaves Services Gordon Banham, CEO Iain Cockburn, Finance Director	0191 373 4485
Buchanan Tim Anderson Isabel Podda	0207 466 5000
Brewin Dolphin Nick Owen Sandy Fraser	0845 213 1000
RBS Hoare Govett Limited Sara Hale Harry Nicholas	0207 678 8000

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