Pre-Close Period Trading Update

RNS Number : 8675I

Hargreaves Services PLC

22 June 2011

 



For immediate release

22 June 2011

HARGREAVES SERVICES PLC 

(the "Group" or "Hargreaves")

Pre-Close Period Trading Update for the year ended 31 May 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 Preliminary Results in mid- September 2011.

The Group is pleased to announce that results are expected to be in line with management expectations. 

Production

The new working practices at Maltby, announced in February, were successfully introduced in April and although only recently implemented, we are pleased to note that production consistency has improved. We will continue to monitor performance over the coming months. We would like to acknowledge the efforts made by staff and management to facilitate these changes.

The harvesting and delivery of pond fines from Maltby has continued to help compensate for the previously inconsistent underground performance.

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

The Group is pleased to note that a meeting date has now been scheduled by Rhondda Cynon Taf County Borough Council for 4^th July 2011 to consider the planning application for the Tower project. Although the delays in the approval process have been disappointing, management is pleased with the progress being made and continues to work closely with the local authorities and other interested parties to try and secure a positive planning decision.

Industrial Services

The Industrial Services division performed in line with management expectations.

In a new development for Hargreaves, the Group is pleased to announce that a management contract has been signed with Hatfield Colliery Limited. Under the agreement the Group will provide management services at Hatfield Colliery in return for a fixed fee on an initial term of 12 months, with provisions to extend beyond that. Although we anticipate expending considerable efforts in the first few months, we are excited by the opportunities presented by this project.

The management contract will utilise all aspects of the Group's expertise and experience and we are in the process of negotiating an incentive scheme with ING Bank, the owners of Hatfield Colliery Limited, which is likely to involve the granting of equity to incentivise and reward Hargreaves for delivering on a number of key performance objectives.

Energy & Commodities

In the Energy and Commodities Division the UK business has continued to trade well, despite soft power station volumes. We are pleased to announce that we have signed a coal contract to trade the first 800kt of coal from Hatfield Colliery with the first material coal deliveries expected to commence in the next few weeks. Although the average margin achieved on this contract will be small, we believe it will position us well to assist Hatfield Colliery maximise their sales proceeds in the future.

The European operations have continued to deliver strong growth as expected.

To date our European coal trading venture has focussed solely on speciality coals, with significant success. Having proved our European operations in speciality coals a decision has been taken to establish a steam coal trading operation. This will create a further new opportunity for the Group and will offer strong synergies with the current speciality coals business.

Transport

Transport has performed in line with expectations for the year. There is however still no sign of an upturn in volumes in the dry bulk sector. The Imperial Tankers operation continues to perform robustly.

Net Debt

Net debt at the end of May was £66m, slightly lower than management expectations.

The Group is pleased to report that working capital levels at the end of May were well below management expectations in volume terms, having benefited from close management in both the UK and Europe. Although stocks were below management expectations in volume terms, it should be noted that commodity prices remain strong and were almost 30% higher at 31^st May 2011 compared to twelve months earlier. 

Although the profit and loss account tax charge for the year is expected to be in line with management expectations, the Group benefited from a one off reduction in cash tax payments of £7m in the second half. An additional smaller cash benefit is expected in the six months ending 30 November 2011.

Outlook

The Board remain confident about the prospects for the Group.

For further details:

Hargreaves Services Gordon Banham, CEO Iain Cockburn, Finance Director	0191 373 4485
Buchanan Tim Anderson James Strong Catherine Breen	0207 466 5000
Brewin Dolphin Matt Davis	0845 213 1000
RBS Hoare Govett Limited Stephen Bowler	0207 678 8000

 

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