Hargreaves Services Share Discussion Threads

[red ninja] 10/2/2023 13:52

Downing Strategic Micro Cap I.T January factsheet comment :-


"Hargreaves Services (+12.8%) reported an in-line set of interim results.
Some one-offs aided performance but overall, a strong performance from services and
a robust performance from land are reassuring going forwards.
The main catalyst will be a return of value from the German associate and potentially also the non-core renewables portfolio."

[...]

[castleford tiger] 08/2/2023 16:02

452/454 hard to buy today

[castleford tiger] 07/2/2023 15:59

added again

[castleford tiger] 06/2/2023 09:47

It’s coming

[castleford tiger] 03/2/2023 17:48

could this be about to break out?

[gargoyle2] 01/2/2023 13:54

Agreed. The presentation had several references to the company being in the 'delivery' phase currently, with 'realization of value' flagged as being the next step. Renewables clearly being lined up fr that imo.

[harrogate] 01/2/2023 13:48

Yes - like everyone I have been a bit fixated with the need to beat this year. I think we might but it is possible we won't. But we should be focusing on the NAV here - especially land. That renewable portfolio probably adds £1 to the NAV and all land is in at cost in the current £6 NAV. The key I think is how that value is chrystalised and how soon. The last couple of presentations suggest that is front of mind at board

[gargoyle2] 01/2/2023 10:00

Totally agree, tiger. The recent results webinar well worth a watch.

I was particulaly interested in the potential valuation they place on the renewables portfolio, which will generate around £2-2.5 million revenue within the next few years. Call that a 5% yield and you're looking at valuation of £40 million plus, yet it's in the books at £12 million. Once developed, that could well be a tasty asset to spin off to a renewables/income fund imo. And the company has other sites available that could be used for renewable projects, although as I understand it, none of the other sites is permitted yet. I would expect that to change imo, increasing the value even further.

[castleford tiger] 01/2/2023 05:41

rimau

I cannot disagree with him.
Singer has just 19p eps in second half which looks very light to me.
Anyone think the same?

We made circa 80p eps in the same period last year.
Now i know that was very strong and might not be repeated but just 19p !!!

I think even allowing for no land sales and a smaller contribution from Germany the company has left lots of wriggle room.

However ST quotes those figures and still the case is a compelling buy.

I think we will do rather better than forecast and expect the company/brokers to upgrade those numbers.

Anyone think differently?

tiger

[castleford tiger] 28/1/2023 15:19

cheers for the brief on this.
tiger

[muckshifter] 28/1/2023 13:14

A bit of an explanation of the Blackwell situation that I posted elsewhere which might be of interest to some here:

What Hargreaves Services (LON:HSP) have done with Blackwells, after a lot of pain over several years which I'm sure that they didn't anticipate when buying them, looks about right to me, as someone who knew Blackwells for many years. Blackwells used to act as a subcontractor to the big contractors on motorways etc and as a main contractor to local authorities on pure muckshift jobs such as regrading old colliery waste mountains. But the ethos of the organisation was originally formed when Chris Blackwell took on the main claims QS from I think it was Laing after the original M1 contract. They became infamous for their claims culture and ability to take advantage of clients with poor understanding of the various "Methods of Measurement" applied to contracts, and believe me there are many such clients.

Eventually they found many local authority clients preferred to exclude them from tender processes and main contractors, apart from those such as BB who were just as contractual as Blackwell, preferred other subbies. Gradually they then moved into becoming a main contractor on jobs which were much more than muckshift, which was their downfall, imo, despite having good claims people. Enter HSP, buying a company with a huge "work in progress" book, ie lots of outstanding claims which Blackwell had confidently put into their books, and then came the pain.

But what HSP have done is stop all the "main contracting" rubbish and restrict Blackwell to subbie roles in the major civils contracts, which are all awarded on ideal forms of contract for Blackwell. These contracts are based on one of the Civil Engineering forms of contract, which although their are about half a dozen varieties, are more than fair to the contractor and usually guarantee cost plus for most of the contract period. This usually leaves the risk of breaching a target cost late in the project, after which things become painful for the contractor, but along the way the Blackwell contractual expertise, assuming they have saved most of it, allows them to identify contract changes that enable them to negotiate increases in the target figure. So I personally would expect them to never have a problem in that respect. In fact that form of contract can end up with a bonus at the end if you can keep raising the target and end up below it on completion. So well done HSP for steering Blackwell into the correct niche, now all they need is continuity of major projects.

[harrogate] 27/1/2023 14:36

It seems logical that a further .5m was repaid after July to total the 12.5 m they report in the 6months to Nov 22. The May 22 accounts state that amounts due from connected entities which includes Germany and the Unity JV earn interest at between 2% and 10%.

[smithie6] 27/1/2023 14:33

HRMS
...I guess it is not a good/viable option for HRMS to get commercial bridging loans for orders, or get extended payment for the payment going out of HMRS, so that payment from the client to HMRS pays the debt of HRMS, without HRMS needing to borrow to cover that
...but I guess they wld already be doing it if it was possible

[smithie6] 27/1/2023 14:29

...good point...if this 1 repayment was already noted in previous accounts

[muckshifter] 27/1/2023 10:51

Thanks Harrogate & CT for attempts to clarify things, but just to show why I find HSP accounts so confusing, I would suggest reading the preliminary results RNS for last year given in an RNS on 27th July, which says "Excludes GBP15m loan made to HRMS, GBP12m of which was repaid in July" as a note to cash heading. Presumably if HRMS have now repaid £12.5m they have paid back another half million, but I haven't bothered to go back to Hargreaves website to search through the notes to the accounts to find out if there is indication of interest charges or not - do you know?

[castleford tiger] 27/1/2023 07:15

Muckshifter
Harrogate only confirmed the 12.5m coming back

tiger

[muckshifter] 26/1/2023 17:15

Thanks for that explanation Harrogate, are you sure the whole of the short term loan was repaid? I thought the loan was £15m and they repaid £12.5.

[harrogate] 26/1/2023 17:04

Yes the cash from HRMS is frustrating The £12.5m was repaid and shows in the reduction in working capital in the cash flow as the loan was in debtors. I am not sure it was a struggle to the £4m pass through last year and that is a sure thing for a good while. If you look at the stock that HRMS still hold you can see that the trading business there has a huge thirst for working capital at current activity levels. Let's see when that subsides how the cash comes back

[muckshifter] 26/1/2023 16:58

Perhaps the usual lack of cash from the German JV makes them dubious. Hargreaves have just over £80m tied up in HRMS aiui (mostly retained profits), and it seemed to be a struggle to get just the £3+m pass through dividend last year, during a year when HRMS made a profit of £20m+ and received an extra "short term" £15m loan from HSP, of which they have repaid £12.5m apparently, although I couldn't find it in the cashflow statement. Still find HSP results very hard to understand I'm afraid - but then again I'm no accountant.

[smithie6] 25/1/2023 18:57

Connacord (Vancouver) have reduced a bit & gone down thru 12.00%.

....I guess they phps dont like H2 being expected to be less profitable than H1.....even though H1 profit was good.

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[gargoyle2] 25/1/2023 18:54

hxxps://www.investormeetcompany.com/investor/meeting/interim-results-investor-presentation-14

[castleford tiger] 25/1/2023 18:40

have you got the link please

[harrogate] 25/1/2023 18:16

The IMC today is worth watching. Clear that HS2 work is much lower in H2 and £2m asset sale profit benefitted H1 in engineering. Plus clear HRMS is much lower in H2. But I agree - I feel there will be a beat once full visibility for Germany is there. But not like last year where they upgraded a lotThe presentation really brought home the value here. The NAV has land in at cost for example

[castleford tiger] 25/1/2023 18:04

thanks.

Do we all think just 20p eps in second half|?

I cant see that I have 80p pencilled in