LONDON (Alliance News) - Hargreaves Services PLC Thursday said that underlying trading in its recently-ended financial year was broadly in line with management's expectations and said its debt reduction initiative has progressed well with cash generation in the second half slightly ahead of expectations.
However, it warned that challenging market conditions and having to accept a lower sum for its Liverpool Biomass Conversion project will hit profit.
Shares in Hargreaves were trading down 6.4% at 325.38 pence on Thursday following the announcement.
The supplier of solid fuel and bulk material logistics said that after the end of the last financial year, it was forced to accept a reduced amount to conclude its Liverpool Biomass Conversion project with a major UK power generator, at GBP2.4 million less than it had originally expected to collect on the contract. It said that the collection of GBP10 million from the contract has been delayed due to negotiations and the GBP2.4 million shortfall will be charged against profit for the full year 2015.
Hargreaves added that limited revenue visibility from UK power generators and falling coal prices will hit short-term profit and that market conditions in the steel sector continue to deteriorate.
"Market conditions in the coal sector are the most challenging that I have ever seen. The restructuring process at Hargreaves was broad and deep and involved a lot of sacrifice across the organisation. 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," Chief Executive Gordon Banham said in a statement.
Net debt at the year-end of May 31 was GBP1.0 million, which benefited by GBP8 million from the timing of year-end payments and collections, Hargreaves said.
By Karolina Kaminska; karolinakaminska@alliancenews.com @KarolinaAllNews
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Hargreaves Serv (HSP)