Shares of Hargreaves Services Plc (HSP.L) declined around 7 percent in London trading after the supplier of solid fuel and bulk material logistics said Thursday that it will record a charge of 2.4 million pounds against profits in its fiscal 2015 related to Liverpool Biomass Conversion project. The company also said that underlying trading, excluding this charge, for the year has continued to be broadly in line with management's expectations.
In its period end trading update for the financial year ended May 31, the company said it has agreed to accept a reduced amount to conclude the Liverpool Biomass Conversion project with a major UK power generator. Whilst this will fall 2.4 million pounds short of the amount that the Group expected to collect on the contract, the decision will allow the firm to conclude the long running negotiations and move on and will result in a cash inflow to the Group of approximately 10 million pounds, the collection of which had been delayed by the negotiations.
Further, the company said its previously announced simplification programme is now substantially complete and the debt reduction initiative has progressed very well with cash generation in the second half slightly ahead of management expectations.
The company added that a number of power stations have announced potential closure decisions and conditions in the coal markets have continued to deteriorate. There remains very limited revenue visibility from UK power generators.
A reduction in coal price, a key driver of the profit in coal production and distribution division, will impact short term profits, while the company continues to take the view that it is right to continue to protect the viability of its current Scottish operations, subject to reviewing mining plans and reducing forecast production volumes where necessary.
Market conditions in the steel sector have also further deteriorated.
With the simplification programme largely complete, the Board is focussing on the strategic options for the Group going forward. These include the continued evaluation of share buybacks and selective expansion of the Industrial Services division. The Board expects to provide an update in conjunction with the preliminary results.
Gordon Banham, Chief Executive Officer, said, "Although we continue to see downward pressure on our profits, the Group has a secure and strong balance sheet position from which we can assess market movements and strategic options."
The company expects to release its preliminary results on August 11.
In London, Hargreaves shares were losing 7.33 percent to trade at 322.25 pence.
For comments and feedback contact: editorial@rttnews.com
Business News