Interim progress at Hargreaves Services

16/02/2010 Robert Tyerman

Hargreaves Services CEO Gordon Banham

Energy, mineral and waste support services group Hargreaves Services has hired extra City muscle after encouraging first-half profits.

The Durham-based company, whose chief executive officer Gordon Banham was named Entrepreneur of the Year in the Quoted Company Awards presented by Growth Company Investor and sponsored by accountant Grant Thornton, increased pre-tax profits 20.6 per cent to £14.7 million in the six months to November. AIM-quoted Hargreaves saw turnover fall 28.6 per cent to £211.6 million, but this partly reflected falling commodity prices and enabled the company, which also produces speciality coals and coke, to lift underlying operating margins from 5.5 per cent to 8.7 per cent.

Hargreaves, which says its major Tower opencast coal project in Wales is progressing ‘very satisfactorily’, has also appointed RBS Hoare Govett as joint corporate broker alongside Brewin Dolphin, provoking speculation about potential deals in the offing. In December, the company, whose Rocpower ‘green energy’ side has four operational engines installed a fifth and larger one coming this month, commissioned a seventh methane generator at Maltby in Yorkshire and says its Monckton coke works in Yorkshire ‘performed well’ in the first half year.

Underlying earnings grew 17.5 per cent to 41p a share in the first half year and Hargreaves proposes a 15.8 per cent interim dividend hike to 4.4p a share. Net debt increased 16 per cent to £80.1 million between May and November, but financing costs eased by £300,000 year-on-year to £2 million as lower interest rates worked their way through.

Arguing first-half mechanical and geological problems at Maltby will not repeat themselves, the company says its new coal operation in Belgium generated a small interim profit and stresses the importance for the second half year of opportunities in continental Europe. Hargreaves, which also boasts a ‘successful’ coke and mineral trading operation in Germany, aims to establish a presence in Poland to tap that country’s ‘rapidly evolving’ market.

Hargreaves shares have traded between 405p and 770p over the past year and were recommended by Growth Company Investor in September at 695p. Now 715p, up 20p this morning, they value the company at £190 million and should continue to make progress.