Hargreaves Services Share Discussion Threads

[castleford tiger] 20/2/2016 17:57

So as I thought its Bad news all round.

Going forward we may NOT dig any coal next year. We will be selling off the coke stocks for cash that will almost all go in write downs.
World coal prices are very low and oil is at a 4 year low.

Cannot see HSP making much next year if at all.

Sub 400p at the very least.

Just don't fancy it until its turned a corner.

Tiger

THIS POST FROM DECEMBER 2014

I have been negative for over 15 months.
Yes I was a holder but when I sold having looked forward I was accused of being a shorter.
You make some good points but

[wigwammer] 20/2/2016 17:23

CT - on the basis of the last 3-6 months you have called the stock correctly. Well done. But given the share is trading near all time lows, it is stretching the truth to state you have got this spot on. Like anyone who has put money here at some stage or other - I strongly suspect you have lost money here. The only difference is the extent of the loss - given I've caught the last £1 fall on the way down from £10, I suspect i'm among the smaller losers. Not saying this to attack - but I'm quite used to losing 30-50% on a trade only to find I average down and make a decent profit. Being wrong over a few months doesn't bother me at all. I suggest your terminology is dramatic, because whereas it chimes with the headlines one might read in the likes of the DM - it doesn't quite ring true reading the financials. The company has maintained its equity ratio, is profitable, is generating cash from a substantial wc position, is paying a div etc.. It's not exactly deaths door stuff. Yes the co has deteriorated from a position of high profitability to a position of limited or zero profitability, but that's not quite the same as suggesting it will disappear. Given the equity base is currently double the market value, it only has to sustain itself to have a decent chance of realising value from those assets.The tower assets may be written down, but reading the report it appears they have opportunities to mitigate the risk. Yes they may sell inventory below cost, but the point is the cost is already sunk ie what they sell from here loses profit but realises cash. Nor do I don't blame management for buying back shares near multi year lows - waste of time. Few punters saw this collapse coming and even under current conditions the balance sheet remains viable. Along with you and others I don't like the acquisition. That bothers me. Limited visibility on the history of the assets. That and tower are the biggies. But I'm hardly breaking new ground pointing to these problems. Far more mileage pointing to the evident strengths, given consensus appear oblivious to them.

[castleford tiger] 20/2/2016 13:33

great post thanks

[muckshifter] 20/2/2016 13:18

Copy of a post I made elsewhere recently:

I found your take on Hargreaves, a company that has been on my personal “bargepole list” for probably the last four years, interesting Paul.

The main justification for its “bargepoleR21; status in my view is that I see no future for coal. Everyone knows that coal burning produces more global warming emmissions than other fossil fuels, as well as other pollutants, but its excavation and processing also releases methane which is twenty five times more damaging in this respect than carbon dioxide, a fact which you rarely see mentioned by enthusiasts of Carbon Capture projects. Nearly twenty years ago I talked to the coal handling managers of every coal fired power station in the UK about stockpile handling, and almost to a man they predicted closure of their coal fired power stations before, or around, now. Haven’t read Hargreaves recent reports, but I expect that they have a large element of coal stockpile value which may not be realiseable. But the cost of coalsite reinstatement ie. a serious liability, which was originally anticipated to be recovered in advance through profitable coal production which has now been cancelled, will still be required if the company is to survive. So I’m far from convinced that the wind down of working capital would produce a large benefit.

Also, recently HSL bought C A Blackwell, which didn’t impress me at all, as I’ve dealt with both in the past and fail to see any synergies, or much chance of the staff of the two companies integrating painlessly. It reminded me of one or two companies I’ve known in the past desperately trying to change the nature of their business, unsuccessfully.

And finally, I noticed the bit in your report about the land holdings. I’m sceptical about their potential, just as I was perhaps ten years ago when shareholders in UKCoal were enthusing about the huge (half a billion £ IIRC) potential from their vast landbank. HSP own, IIRC, loads of opencast coal sites, many of which closed perhaps fifteen to twenty years ago, which probably represents most of their landholdings. The ones I particularly remember are Dalquandy, which was the Crouch operated biggest opencast mine in Scotland, Blindwells, a Fairclough Parkinson site near Edinburgh, and Westfield which was originally a Costain site and the deepest opencast in Europe I believe. On opencast sites there are usually quite large areas reserved for offices, overburden heaps, soils heaps, coal handling etc. – perhaps as much as 30% of the overall site area. This portion of the land is clearly ideal for any type of development. But the remaining 70% or more has huge variations in the depth of backfill it contains as well as the type of backfill, method of replacement, settlement time since it was reinstated (not forgetting that many of these coal sites ran for twenty years or more), and whether or not any attempt was made to compact the backfill as it was placed ( not usual) which will have a huge bearing on the value of the land to a developer. So, have HSP actually sold any of that sort of land to developers, or are they just getting planning permissions etc. and ”hoping”.
Regards.
PS. Many of the coal fired stations where I talked to the coal handling managers have indeed closed as they predicted, and a few more are now winding down.

[castleford tiger] 20/2/2016 11:39

Wigwammer in December you said in reply to my question.

Do you see value here Wigwammer?"

Current market cap £85m. NOW 60.00 so a 30% fall.

Net liquid assets £88m.
Significant land assets.
Significant operating assets.
A business with half a billion+ sales.
Little debt.

So yes, I think there may well be value here.

Now you pick me up on

I think risk reward is too much risk as we don't know what will be left.

I AM expressing my opinion and to be fair I have been spot on.
The shares are 190p.
If you want me to pick holes in your latest post I can for example

70%+ of the balance sheet is current assets, the reported tangible equity has hardly budged over a year, and the equity ratio has risen.

Well what about TOWER? that we now find out about a cross party loan of 20 odd million that lets be frank will not be paid. They probably need more cash to keep going.
Producing coal that you cannot sell ,at a price below cost will not pay off a loan.
The BOD were buying their own shares and wasting millions. The same BOD that you want to believe now?
Turnover by the way means nothing. 1/2 billion to make what? ZIP?
there may well be no or not enough market left for coal by 2018 to make the underlying business viable.

The one gem of course is land and its potential. I feel in the scramble for cash that's coming that may be sold at a fire sale.
If not and the business can stabilise and we can see a business at the end of this then yes there may be an investment case.
Which brings me to Risk/reward.
You need big rewards here to justify the risk. In my opinion.

Tiger

[wigwammer] 19/2/2016 20:29

"I think risk reward is too much risk as we don't know what will be left."Bit dramatic. 70%+ of the balance sheet is current assets, the reported tangible equity has hardly budged over a year, and the equity ratio has risen. For all the headlines - they look robust. Have to disagree with the poster who suggested their predicament is down to poor management - the balance sheet resilience is testament to the fact they moved quickly in a bad market.

[castleford tiger] 19/2/2016 08:29

I think Beeks that's a good policy. Miss 100p is nothing if it looks like it will re rate.
I think risk reward is too much risk as we don't know what will be left.
They are trying to unload a site producing smokeless to CPL. Retail season has been dreadful.
Need to see just what is left in the UK coal market come late summer 2016

tiger

[beeks of arabia] 18/2/2016 23:10

I don't see anything on any chart which would compel me to buy at any price currently. The 5 year looks horrid!

If it survives (and that is an if at the moment) I would want confirmation higher up rather than try to bottom fish.

[meijiman] 16/2/2016 15:27

Alot of the damage here is self inflicted by poor management decisions.Its like blasting your foot with a shotgun -deciding its not painful enough so blasting your other foot.The government has simply abandoned the carbon world. Never come across a company where everything that could go wrong has gone wrong -mostly at the same time.

[bamboo2] 16/2/2016 12:32

The neckline of the long term H&S can be placed in various different positions, each of which result in different targets. Lowest is 120.

[castleford tiger] 16/2/2016 11:34

Well guys where now?

Market getting worse and a possible 20 plus million loan write off at Tower.
More customers closing and will have 300,000 tonnes of coal on Scottish soil by y/e.
That will hurt cash flow.
Transport division down on loss of Rock salt ( warm winter ), waste losses and Bio loss.
Nothing at all is going right for them.

Full year will now be a certain loss after exc items.
Surprised they paid any dividend. However they wasted all that money on share backs so a small div is nothing.
lets hope this new division pays off.
Land looks a great asset if they had no other debts etc.
Might attract a bidder ( Ex uk coal land company).


I see 150p as a new target.

Tiger

[dozey1] 16/2/2016 11:32

Just had a nibble at these, down 17.5% at the moment, though I know all about falling knives. Rather liked the realistic tone of the interim report:

Also like the idea of the property portfolio taking centre stage at some time in the future, with a good deal of the remediation and restoration before sale within the capabilities of the company itself.
Seems financially sound despite the demise of coal, and hope to have caught near the bottom.

[wigwammer] 16/2/2016 09:19

Rather be in @£3 than £5.50+.Lol. Beeks of Arabia - 10 Oct 2014 - 15:24 - 1218 of 1544 - 0Looks like we have hit a bottom here - £5.50 seemed to be the spot.

[jonwig] 16/2/2016 08:29

If this is anything, it should be a potential asset value proposition - is that right?

Are the receivables secure? If so, they and the cash should cover the debt.
Inventories are stuck, by the looks of it - are these mostly coal stocks?

Are the property assets potential development land? If so, they won't be freely realisable, as they will be contaminated. Is that so?

Would welcome comments on these ideas, please.

[beeks of arabia] 16/2/2016 08:15

wigwammer - you still here?

[cc2014] 19/1/2016 21:34

Artemis have picked up 300,000 shares in the last month which must be a fair proportion of everything sold in the last month.

I have seen Artemis quietly picking up an number of commodity stocks at the moment.

It looks to me that this share is stuck between 250 and 260 at the moment with volume drying up as the sellers don't want to go any lower and the buyers not inclined to go any higher

[muckshifter] 11/1/2016 21:01

Good luck with that view. I've dealt with both companies, can't see any real synergies and feel that the cultures of the two companies are so far apart that it will be a miracle if this takeover produces any benefits.

But that's just my view, so we'll have to wait and see.
Regards.

[cc2014] 11/1/2016 19:57

£5.25m to be held in escrow pending outcome of the claims. Basically HSP has ringfenced them.

I am finding the RNS difficult to digest without researching Blackwell. On the face of it, it looks like HSP have bought this cheap and then will gain some synergies with their existing business but also diversify their portfolio which can only be good.

Provided they have paid the right price this seems a good acquisition at this point in the economic cycle

[muckshifter] 11/1/2016 19:44

Not sure if any of the Blackwell family are still involved bench2, but I would imagine they are still substantial shareholders. The youngest member of the family that I've met who was involved in contracting would be 50ish now, but the company had a strong contractual "culture" running through the company over decades.
Regards.

[bench2] 11/1/2016 18:24

Thanks for the warning Muckshifter , given the reference to historic claims it sounds as though the Blackwell family are up to their old tricks .. I remember London & Northern which was a dodgy outfit and the Blackwell's may well take HSP for a ride

[muckshifter] 11/1/2016 16:48

This acquisition looks to me like a jump out of the frying pan into the fire. Within the muckshift industry Blackwell's best know characteristic has always been their ability to squeeze every possible penny out of clients using a highly contractual approach.

Chris Blackwell, many years ago, got into financial difficulties and sold his company, on the basis, I believe, of substantial outstanding contractual entitlements (claims) to a conglomerate, London & Northern Securities. I don't know how much of that prospective contractual entitlement came through, as claims are almost always a protracted and uncertain asset, but I don't think L& N ever did very well out of CAB. On the other hand, the staff at CAB did very well, I'm sure, out of buying the company back out of L&N when L&N had had enough of them. On that occasion, my belief is that the outstanding contractual entitlements were undervalued, ie. the CAB staff ran rings round L&N, probably receiving claims settlements far in excess of the purchase price, within a year or so of the buyout.

The numbers given look distinctly odd and give me the feeling of deja vue.
Regards.

[gfrae] 11/1/2016 15:40

What do we think the value of this share is ? A very broad question I know !

[bench2] 11/1/2016 15:10

interesting small acquisition at a cheap price , away from coal but earth shifting the same skill set . Having cut and run at 480p , a 130p loss , I have stayed away , but this will be an interesting value play when oil and coal prices bottom .

[cc2014] 05/1/2016 13:23

L2 is rather curious today. Someone is desperately trying to keep the price down.

Fingers crossed a rise is on the way as there don't seem to be many sellers around