Hargreaves Services profits hit by closures but revenues jump

24th Sep 2013 07:22

Hargreaves Services, the AIM-listed supplier of fuel and bulk material logistics, swung into the red in the year ended May 31st despite impressive top-line growth as the company felt the impact of a closure in Belgium and the mothballing of its Maltby colliery.Revenues from continuing operations jumped by 36.5% from £617.9m to £843.3m, helped by strong performances from its coal distribution business in the UK and core material handling services unit.Underlying profit before tax from continuing operations increased by 5.9% from £49.3m to £52.2m.However, discontinued operations - relating to Belgium and Maltby - made a total loss of £81.8m for the year, meaning that the group recorded a net loss of £49.6m, compared with a profit of £30.8m previously.Hargreaves discovered discrepancies in December relating to its Belgium business with the value of stock and other balance-sheet values being "fraudulently reported". Following the subsidiary's closure, the company took an exception charge of £17.3m as well as recognising operating losses of £4.7m.Meanwhile, the closure of underground operations at Maltby - on the back of health & safety, geological and financial grounds - led to a post-tax loss of £59.8m, which including operating losses, redundancy costs, closure costs and write-offs.Nevertheless, the company declared a final dividend of 13.6p a share, taking the full-year payout to 20.5p, up 15.2% on the 17.8p paid to shareholders the year before."It has been both a challenging and rewarding year," said Chairman Tim Ross."Whilst the group suffered setbacks at both Maltby and in Belgium, we have made significant strategic progress. Following a successful equity raise in April, the group has accelerated the development of its surface mining business to become the key coal producer and distributor in the UK market."The company raised £42m earlier in the year to fund its acquisition of surface mining assets of ATH Resources and Scottish Resources.The stock gained 0.65% in early trading on Tuesday to 814.28p.Analysts at Jefferies said that continuing profits came in 4% ahead of consensus expectations as it maintained its 'buy' recommendation and 1,030p target price. It said that Hargreaves should be "positive re-rated" by the market.The broker said: "We view these reassuring FY13 results following two recent surface mine acquisitions as further progress in evolving the Hargreaves group to a lower risk business with: 1) more consistent operational performance; 2) improved quality of earnings; and 3) increased dividend payout to shareholders."BC