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Hargreaves Servs PLC (HSP)

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Thursday 19 October, 2017

Hargreaves Servs PLC

Capital Investment by German Associate

RNS Number : 0456U
Hargreaves Services PLC
19 October 2017
 

For immediate release                                                                                        19 October 2017

 

 

Hargreaves Services plc

("Hargreaves" or "the Group")

Capital Investment by German Associate

Hargreaves Services plc (AIM: HSP), a diversified group delivering key projects and services to the infrastructure, energy and property sectors, is pleased to announce a new capital investment project by its German associate, Hargreaves Raw Materials Services GmbH ("HRMS"), the Group's European raw materials trading business.

HRMS Background

HRMS, which was established in June 2006, is based in Duisburg, Germany, and is a key supplier of specialist raw materials to major European customers in the steel, foundry, smelting, ferroalloy, sugar, limestone, insulation, refractory and ceramic industries.  Favourable market conditions in the past 12 months have allowed HRMS to expand the range of products it trades and distributes and in the past financial year the business delivered an operating profit of £10.3m. HRMS adopts a flexible and low-risk trading model, sourcing and supplying product on spot or short-term contracts. The combination of experienced management and a low fixed cost base provide the flexibility to increase or decrease the volume of trading to match market conditions. 

Recently, HRMS has focused on short term trading opportunities which, by their nature, offer limited forward trading visibility. Historically, HMRS benefited from more predictable trading based around the raw material inputs and production outputs of the Group's Monckton Coke production facility in the UK which closed in December 2014. Therefore, securing a trading position connected to an alternative strategic production asset represents a major strategic opportunity for HRMS to improve forward trading visibility.

Carbon Pulverisation Plant ("CPP")

The Board of HRMS has identified the opportunity to build a CPP with a capacity of 400,000 tonnes per annum. It will provide a backbone of long-term contracts around which the business can trade. Both the HRMS management and the Board of Hargreaves believe that the project, together with its associated long-term contracts, will add resilience to future trading prospects and augment the growth of HRMS.

The CPP will be constructed in Duisburg, Germany, a key hub for Central Europe which enjoys numerous logistical advantages.  The CPP will process carbon-based raw materials, including coal and coke, into a pulverised carbon product which offers customers logistical, technical and cost advantages over alternative materials.

Agreements are in place with a key strategic customer to provide technical, logistical and operational support, including a guaranteed minimum off-take volume. Further agreements will be negotiated with a portfolio of other customers from a range of heavy industries operating blast furnaces in Germany and Western Europe. Production is expected to commence in Q4 2018.

The total capital cost of the project will be €27.5 million, of which €22 million is fixed under the terms of an Engineering, Procurement and Construction contract with Claudius Peters Group. Claudius Peters Group has an extensive and proven track record and is the manufacturer of the key components of the plant. The board of HRMS plans to fund the project through a combination of cash reserves and new and existing debt facilities. The investment will have no material impact on the Group's current banking arrangements in the UK. The banking arrangements for the Group and HRMS will continue to be run as largely independent facilities.

Hilmar Eller, Managing Director of HRMS, commented: "The HRMS team has worldwide expertise in raw material sourcing and logistics and the carbon pulverisation plant will be a valuable addition to our portfolio, helping to ensure the predictability of our profit streams."

Gordon Banham, Chief Executive Officer of Hargreaves, commented: "Our European trading division was the star performer of the Group in the last financial year and the Board continues to be impressed by the deep quality and knowledge of the HRMS team.  As we continually strive to maximise long-term shareholder value through the strategic deployment of capital, this project represents a carefully targeted investment in a resilient market with strong potential returns."

 

For further details:

 

  Hargreaves Services

  Gordon Banham, Chief Executive Officer

  Iain Cockburn, Finance Director

 

0191 373 4485

  Buchanan

  Mark Court  / Sophie Cowles / Henry Wilson

 

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 5970

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
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