Hargreaves Services: results for the year ended 31 May 2015

A combination of low demand for thermal coal and a decline in the coal price from £44 to £38 per t during the past financial year has made the year difficult for Hargreaves. Yet the company is confident that it is well positioned to work through this difficult time and will find opportunities to develop.

Revenue in the last financial year declined from £869.2 million in 31 May 2014 to £662.2 million. This is largely due to a decline in coal trading volumes and a decline in thermal volumes.

Underlying operating profit from continuing operations reduced from £59.5 million to £42.8 million – almost entirely driven by a reduced contribution from the company’s Third Party Trading business and subdued activity in its European business.

The company’s final dividend saw an increase of 20 pence per share from 16.7 pence, reflecting the previously announced decision to move to a higher payout ratio and the strong cash generation despite the difficult trading conditions.

The group Simplification Programme is now substantially complete, leading to the disposal of Imperial Tankers and the closure of our Monckton coke operation. This first phase of the Simplification Programme resulted in a net, one-off charge of £7.7 million. This second phase of the Simplification Programme was substantially completed before the end of the year and has resulted in further one-off costs and charges totalling £4.5m. The group has reported £12.2 million of net, non-recurring simplification charges across both phases of the programme.

In the year to 31 May 2015, the company’s coal trading dropped to 4.2 million t from 5.4 million t. In the first half of the year, the company sees no prospect of significant third party coal sales to UK power plants as its seek to adjust stock levels but it does expect approximately 1 million t to be traded in the second half of the current financial year.

The newly formed coal production and distribution ('CPD') division revenues reduced by £275.1 million from £761.0 million to £485.9 million during the year. While mining operations saw a y/y increase of £3.5 million and contributed £20 million towards operating profit during the year ended 31 May 2015. This increase reflects the first year's production, at full run rate of Hargreaves’ Scottish opencast mining business; this increased contribution is reported to have helped offset the reduced contribution from Monckton following its closure in December 2014.

Commenting on the results, Chairman Tim Ross said: "The last two years have presented the coal industry with extremely challenging market conditions. The Board has worked hard to ensure controllable risks are managed and to minimise the impact of risks beyond our control. We were clearly right to initiate the Simplification Programme last year. With a significant restructuring exercise largely behind us, we can concentrate on our strategic options to deliver future shareholder value."

Edited from press release Harleigh Hobbs

Read the article online at: https://www.worldcoal.com/coal/11082015/hargreaves-services-results-for-the-year-ended-31-may-2015-2713/