Hargreaves Services trading in line as it loses British Steel work

Industrial and property service provider Hargreaves Services updated the market on its first half of trading on Wednesday, saying it expected to report interim results in line with its expectations.

The AIM-traded firm said that revenue and underlying profit before tax in the six months ended 30 November would be lower than the first half of the 2019 financial year, primarily due to the phasing of works on the HS2 project within the specialist earthworks business.

It said that timing gave greater emphasis to the weighting of profitability to the second half, although its expectation of results for the financial year remained unchanged.

Net debt, including debt associated with leased assets, at the half year totalled around £20.5m, compared with £40.3m a year prior, as working capital reduced following the cessation of mining in July.

Hargreaves said net bank debt had reduced to £8.0m compared with £25.4m 12 months ago and £13.5m as at 31 May.

“Following the acquisition of British Steel by Jingye Group earlier this year, Hargreaves has been engaged in commercial discussions with Jingye whilst continuing to provide services under short-term contract extensions,” the board explained in its statement.

“Those discussions have now concluded with an agreement that Jingye will bring certain activities in house leading to approximately 160 group employees transferring their employment to British Steel in January under the transfer of undertakings regulations at no cost to Hargreaves.”

All debts due to Hargreaves and all unbilled work in progress would be recovered in full, the directors said.

Although that would lead to a reduction in revenue of around £9m per year, the outcome had been expected for some time by the company, and that revenue had not formed part of its forecasts beyond March 2021.

“This decision has no impact on the board's view that the group will deliver results in line with expectations for the year ending 31 May.”

Hargreaves said it had been appointed by Drax Power to undertake a “substantial” five-year materials handling, plant operation and maintenance contract at the Drax Power Station in Selby, beginning in April.

The contract had up to two years of extension options, with the board saying the award enhanced the company’s position as a key strategic supplier of such services in the UK.

“In the Hargreaves Land business, the development of land at Hilderthorpe Road, Bridlington, which will deliver 44,000 square feet of pre-let retail floor space, has commenced,” the board said.

“The project is funded independently of the group.

“The scheme is due for completion in summer 2021 and has a gross development value of £9.5m.”

Hargreaves said the development, which was on land owned by a third party, was indicative of the division’s ambitions to create and realise value without committing substantial capital to development projects.

The group said it would report its interim results for the six months ending 30 November on 27 January.

At 1131 GMT, shares in Hargreaves Services were down 4.03% at 262p.