Experimental feature

Listen to this article

Experimental feature

Coal and coke processor and distributor Hargreaves Services has predicted significant growth in profit and revenues in Europe and Asia after securing a string of new contracts.

The Aim-listed company, which also specialises in bulk materials handling, is building its growth on a resource which, in the UK, is often seen as a cornerstone of the past, not the future.

“It’s a great opportunity for us that it’s an underestimated sector,” said Gordon Banham, chief executive. “Around the world people are more focused on coal.”

Hargreaves, he said, expects to double its pre-tax profits on continental European activities to £20m over the next three years. New contract wins by its energy and commodities division include a deal to supply thermal coal to a generator in Germany through a joint venture with MIR Trade AG, a Russian coal supplier, and orders for coal from the steel sector.

The company is also moving into power station consultancy work in Asia and has advised China Light & Power on flue gas desulphurisation at its Castle Peak station in Hong Kong.

In the six months to November 30, pre-tax profit dropped 16.1 per cent to £13.6m – a fall attributed to geological issues at Hargreaves’ Maltby mine. Its revenues rose 27.1 per cent to £322.8m. Diluted earnings per share was 37.2p, down 17.4 per cent, but the interim dividend was lifted 17.6 per cent to 6p.

It announced that production at Tower, its Welsh surface mine joint venture, was starting earlier than expected and all Tower’s 2012 thermal coal output had been contracted.

Hargreaves’ industrial services division has clinched contracts worth more than £80m at three major UK steel plants, including the Redcar site on Teesside. The company is also proposing new surface mine developments in north-east England, to replace some imports with UK-produced coal. The shares closed down 28p at 1,192p.

FT Comment

As Hargreaves grows, so too do its opportunities in a world hungry for energy commodities and for technical expertise in how to operate power plants efficiently and, increasingly, to environmentally acceptable standards.

N+1 Brewin made the company one of its twelve key picks for 2012 and is forecasting current year pre-tax profit of £47.6m on £691m of sales, rising in 2012/13 to £62.5m on revenues of £736m. Its prospective price/earnings ratio for 2012/13, when Tower will be fully operational, is less than eight times. This seems to undervalue Hargreaves, which is one of an increasingly rare breed.

Copyright The Financial Times Limited 2017. All rights reserved.

Follow the topics mentioned in this article