Hargreaves is all fired up

Hargreaves is all fired up

Investors looking for a resilient, multi-faceted business might cast their gaze over AIM-traded Hargreaves Services, the leading coal importer led by CEO Gordon Banham. It has demonstrated the robustness and diversity of its business by announcing a 96 per cent profits surge for the half to November.

Pre-tax profits came in at £13.9 million, on turnover up 70 per cent at £296.5 million, underpinning a 15 per cent hike in the dividend to 3.8p. More than £200 million of the top line total arose from the energy and commodities division (including coal importing).

The fact that the company, which also has production, transport and industrial services divisions, has long-term contracts in place at fixed margins, meant that energy and commodities divisional profits rose by a relatively modest 28 per cent to £4.5 million on sales improved by 67 per cent.

Hargreaves’ most profitable arm is production, which includes Yorkshire mine Maltby (one of the UK’s last deep mines, acquired in 2007) and coke works Monckton, where operational profitability surged by more than 50 per cent to £8.3 million, on revenues up 12 per cent to £36 million.

In January, the company, which has built in certainty of earnings through long-term coal contracts with blue-chip clients, acquired the remaining 50 per cent of Coal4Energy, a joint venture launched with UK Coal three years ago, in a £9 million deal expected to swell earnings.

For the year to May, City number crunchers have pencilled in a significant PBT increase to £28.5 million (2008: £19 million) on turnover of £524 million (2008: £404.9 million), giving earnings of 75p and a likely 11.8p dividend.

At this morning’s 545p, the shares are trading on an undemanding prospective multiple of 7.3 times, while offering a solidly underpinned and progressive dividend. With a track record of surpassing forecasts and stated Full List ambitions, we consider Hargreaves excellent value.

Production starts at Peninsular

Peninsular Gold, tipped here as one to pick up and lock away at 50p in 2006, has poured the first molten gold from its Raub project in Malaysia. The Jersey-based and Malaysia-focused venture expects to produce 25,000 oz a year from the tailings from previous extraction at Raub at an anticipated average cash cost (before capital expenses) of less than $300 an ounce, against a present gold price of $969 an ounce.

AIM-quoted Peninsular, steered by chairman and chief executive Dato’ Sri Andrew Kam, says Raub’s total gold ‘reserve and resource inventory’ now stands at 435,000 oz, including proven tailings reserves of 202,000 oz, and the company has other nearby gold projects at Tersang and elsewhere.

Seen by many as distinctly slow burning, readers that bought on our advice have seen the shares drop from our recommendation levels to 14p last month. Since then, they have rallied strongly, while the company recently repurchased $20 million (£14.3 million) of 10.5 per cent convertible loan notes for $17 million cash plus ten million warrants.

Now 45p, they value the company at £25 million and could have further to go. If you remain invested, then sit tight.

Telecom Plus – one for tough times

Our tip of the year back in 2005 at 228p, shares in utilities reseller Telecom Plus have performed well over the past year, with investors warming to the business’s defensive bent, the healthy dividend it pays and the fact that the full listed counter is cash rich.

Under CEO Charles Wigoder, the expanding Telecom Plus continues to thrive in today’s under-fire economy and has warmed the cockles of investors’ hearts by reporting ‘exceptionally strong’ recent trading. This one-stop shop selling discounted electricity, gas, broadband, fixed line and mobile phone tariffs under the Utility Warehouse brand saw customer numbers jump above forecasts by 19,082 to 258,840 during the third quarter to December. Strongly cash generative, the company had £36.4 million cash in its coffers at the end of December, since topped up by a net £4.7 million fundraising in February.

Shares in Telecom Plus have trod water since the summer, but at the current 325.5p would yield – at the promised full-year dividend of ‘not less than 17.5p’ – over five per cent, while the current prospective multiple of 12.5 times looks relatively undemanding. We are more convinced than ever that Telecom Plus is an excellent portfolio stock. Keep buying.