Hargreaves Services Share Discussion Threads

[ayl30] 06/5/2021 07:16

Cannacord rns re holding

[red ninja] 26/4/2021 11:19

More good news on land sale completions from HSP :-

Chairman, Roger McDowell, commented : "The Unity scheme is one of the most exciting developments in Hargreaves Land's portfolio and it is encouraging that our purchaser has perceived the benefit of early completion to accelerate their project delivery. This will undoubtedly further enhance the attractiveness of the Unity development to other commercial users."

[tole] 23/4/2021 13:03

https://masterinvestor.co.uk/equities/small-cap-round-up-featuring-rbg-holdings-brickability-discoverie-and-more/Hargreaves Services (LON:HSP) – now looking in much better shapeThe shares of this support services group closed almost 7% better last night at 331.5p, after issuing a trading update reflecting improved results from its German joint venture, as well as boosted cash to close the year in the black.This unexpected update was a positive surprise. The year ends on 31st May, so it proves the market standard that says that good news always comes faster than bad.2020 was not an easy year for the group and it has done some necessary reshuffling on the corporate front.Analyst James Tetley at house broker N+1 Singer forecasts that the current year to end-May will see £191m sales (£222.2m) but adjusted pre-tax profits could come in at £9.9m (£4.9m), jacking earnings up to 27.5p against 19.5p per share previously. He also sees a massive uplift in the dividend from 4.5p to 20p per share.Reflecting the sell-off of various parts of the business he goes for sales next year of £175m, with £11.9m profits, 32.4p of earnings and a 20.5p dividend per share.Those estimates support the upward share price move – I think they will go even higher yet.

[meijiman] 20/4/2021 09:42

Yes indeed..on valuation grounds for sure.

[harrogate] 20/4/2021 08:21

Great trading update. Think it shows at last that the land element is not the key value driver here. Really should be close to £4 now on the back of this

[1tx] 24/3/2021 14:52

LOL!Judging by our previous contract "errors" problems in this area are not unknown.I suppose it depends if we are just digging where we are told by the overall contactor or using our own judgement.I must admit that the potential value in Hargreaves land portfolio attracted me more to the shares than its existing businesses where performance has been patchy.So far my investment here has gone well but I agree we need to watch out for "unknown unknowns".

[ayl30] 24/3/2021 07:16

There maybe problems with the contract announced today. There are major concerns about the cutting through of an aquifer near Aylesbury I understand with changes to water courses resulting. Hope company is aware. I am a holder.

[castleford tiger] 09/3/2021 18:33

investor 73 I have some I like them

[red ninja] 01/3/2021 12:14

I have free access to Shares via a broker.

HSP was tipped as a Buy in Shares Mag. (25/2/21), see below:-

Hargreaves Services is primed for growth after exiting coal

A major shift in the business means now is an excellent time
to buy small cap Hargreaves Services (HSP:AIM). The group
delivers projects and services in the infrastructure, energy and
property services, principally in the UK but also in South
East Asia. Its main division, Distribution
and Services, provides waste handling and logistics to
various sectors together with specialist earthworks for major
infrastructure projects.
Hargreaves Land develops brownfield sitesfor both residential and
commercial construction and works with all the major UK housebuilders.
The group also used to own a mining business, producing and selling coal to industrial customers, but in July 2020 it ceased operations and in
December it sold all of its specialty coal inventories to its
German joint venture HRMS for £24 million. Hargreaves was left with
a small inventory of heavy industrial coal, which it will
have sold by the end of the current financial year in May,
and a 49.9% stake in HRMS but importantly an 86% economic stake.

WHAT THE COAL EXIT MEANS
Ending coal trading means turnover will be lower by £25 million this year and £30 million next year, but pre-tax earnings will be unaffected as Hargreaves
will have lower working capital costs and will take the bulk of the
profits generated by HRMS as a ‘share of associates’.
Longer-term, HRMS aims to grow to €300 million ofannualized revenue serving the
steel, cement and other heavy industrial sectors in Germany
and the UK, making Hargreaves’s stake a valuable long-term asset.
In the interim, the coal disposal makes the group’s results much less seasonal while the receipt of £24 million makes it debt-free
and allows it to negotiate much improved borrowing terms.
The core business has just been boosted by a five-year deal with biomass energy producer Drax (DRX) for materials handling, plant operation and
maintenance at Selby, starting in April, cementing its position as a key supplier.

Work on HS2 had been delayed, but the firm is close to signing a revised four-year
contract on a cost-plus basis with the main contractors. Having been bitten in the past, Hargreaves no longer works on a fixed-price basis.
Meanwhile the property business is moving at pace with the sale of two plots at its
Blindwells development near Edinburgh to house builders Bellway (BWY) and Persimmon
(PSN), a first sale at its Unity site in Doncaster and the signing of a
new site at Bridlington. As a cherry on top, the firm has reinstated its annual
dividend and will pay a 12p per share special dividend from the
proceeds of the coal sale later in 2021. [IC]

[investor73] 25/2/2021 18:49

castleford tiger,

What do you think about Harworth Group. It owns a lot of land like Hargreaves and seems to be very succesfull at developing it.

[castleford tiger] 25/2/2021 17:58

beeks

how could you not find me.
please do next time

[muckshifter] 25/2/2021 07:59

meijiman, I couldn't understand how the ceo managed to keep his job for years, while he bought further and further into opencast coal, deep mines etc. at a time when all the big opencast contractors were getting out or going bankrupt, deep mines were closing year after year, coal fired power stations were closing one by one, and most expected to close within a few years (and did). It looked to me like an absolute gamble that government policy would change and everyone else would be proved wrong.

At various times around 2000, I had talked to just about all the coal handling managers at UK coal fired power stations, some of which were already in the process of closing, and the remainder were expecting to. In the 80s 90s and 00s I had dealings with opencast coal contractors such as Miller, Fairclough Parkinson (Amec), Taylor Woodrow, Wimpey, Kier, Mowlem,Norwest Holst, etc. who were winding down their mining operations, and others such as RJB, Crouch, R&A Young, etc. who went bang. Hargreaves knew, and had dealings with, nearly all the same people at that time I would think, and also set up in the 00s, iirc, big coal import facilities at Immingham or that area, and coal ventures in Poland and Russia. At the time, UK Coal were, year after year, having efficiency drives to try to bring their deep mine costs, and even their opencast costs to some extent, down to world coal price levels, without success. I just couldn't see the logic of pushing more and more into mining coal with a very precarious international long term coal price, while at the same time having what looked a much more logical import facility.

[smithie6] 24/2/2021 18:21

'probably sold the coal at a discount'

phps
but personally I still like the deal, making HSP free of any bank debt

(yes, it would be nice/interesting to see the draft accounts for HRMS, incl. for debt etc)

[smithie6] 24/2/2021 18:16

fair pts Muckshifter

a 22 million€ accounting fraud in 2013...I didnt know about that

(I think that normally the financial dirs would have to walk the plank for that, not the MD
but I think that neither of us are big fans of the MD; the dir. of land div. & the chairman seem good from what I can see)

[meijiman] 24/2/2021 15:01

Do you think in most companies the ceo would be still in charge after that?....had rather forgotten about it.

[smithie6] 24/2/2021 14:25

I dont think it so complicated

HSP loans....expensive, perhaps because of many different businesses & as you say, various hits in past years, inferring risk, hence higher interest rate.

HMRS imo doesn't have those risks or history....& in Germany
...access to money at lower % rate

cost of the debt has fallen a lot, very good for HSP

[muckshifter] 24/2/2021 14:08

Afternoon CT, I believe that the figure in 2282 above for HRMS retained earnings, including HSP’s 86%, as of May 20, at £9.35m is reasonably correct, although I’d welcome any accountancy trained posters assessment for comparison.
HSP / HRMS clearly have a plan, which I suspect involves HRMS taking on a big asset based loan from German banks, on the coal stocks, to fund: the coal purchase, the promised “pass through” dividend, and perhaps the additional working capital requirement that use of the pulveriser will incur.

So, imo, HSP are simply passing debt from one pocket to the other, at an unknown but probably significant cost, for an unrevealed purpose.

My best guess is that this action has been effectively driven by the UK banking relationship.
Over the last few years there seem to me, from memory, to be quite a few references to renegotiation of bank facilities in RNSs and reports, some of which look to put HSP in a slightly uncomfortable position. Why this is the case, if I’m right, is anybody’s guess. It could be that the banks have become increasingly troubled by the never ending succession of expensive write offs of failed businesses, bad debt provisions, etc, over the last ten years, or it might just be that the banks are becoming nervous about lendings to “dirty” industries because of growing environmental related pressure. Another possibility is that HSP don’t really believe the hype about the German business, hope to sell it soon, are getting whatever cash they can out of it in the meantime, and feel more comfortable with the “non recourse debt” if HRMS did get into trouble (so far, I believe HSP have guaranteed just £5m of HRMS debt), but without access to any detailed accounts for HRMS, who knows?

[cjohn] 24/2/2021 13:12

They have gone beyond coal, whilst still retaining an 86% share of the subsidiary they off-loaded to go beyond coal.

[castleford tiger] 20/2/2021 17:22

Confusing this, isn’t it? And I wonder how the £3.86m needed for the 12p/share extra dividend passed through from HRMS to HSP shareholders will be financed.

My understanding is that there were retained earnings.

There is a note somewhere.

page3 and 4 annual accounts

tiger

[beeks of arabia] 20/2/2021 16:24

Cas - popped in earlier but you looked a bit busy! Got myself a nice bottle of grapefruit gin liqueur and a Mars bar though :)

[smithie6] 20/2/2021 16:23

"smoke & mirrors"
well definitely some accounting stuff to think about

On one hand it looks good since it looks like it has been cleverly structured.

----

financing the 12.5p divi from HMRS
a fair chunk of money
I guess they see no problem in funding it since HSP keeps stating that it will be paid.

[smithie6] 20/2/2021 16:11

interesting & well done for reading accounts & trying to sort out the numbers

your point that 86% of HMRS is HSP, good/fair point

'retained profit', not sure that I see that as a key value, since it can be held in 'intangibles' which, well, its not tangible !

Debt
HSP was paying a high price for its bank debt, 2 million/year. a very -ve impact on the annual profit number.

HMRS is in German so one assumes they can obtain loans at very cheap rates in Euros (with the ECB providing billions to industry at close to 0% to prop it up) & such a loan can be backed up by the assets of HMRS (incl. its new coal stocks & its pulverising facilities) & phps its EBITDA.

removing the debt cost from the HSP accounts increases its annual profit.
The lower interest cost will appear in the HMRS accounts but I'm sure that asset equity accounting is used in the HSP accounts for the treatment of the investment in HMRS (because !!, HSP owns less than 50.0% of the votes; interesting ) so the interest cost inside HMRS is effectively/almost not seen in the HSP accounts. Instead the HMRS accounts will state the shareholder nett assets (which is after the interest cost of course) & the HSP accounts will state 86% of that for the value of that asset.

With various items of debt I'm not sure how HMRS manages to pay a divi. If I remember correctly a divi can only be paid if the shareholder assets are greater than the amount raised by issuing shares. Maybe only a tiny amount was raised by issuing shares & hence removing that problem/risk, recalling that the cash to fund HMRS was provided as a loan (also providing HSP with the advantage of owning the HMRS assets, while owning <50% of the votes, if there were problems).

[muckshifter] 19/2/2021 17:00

OK Smithie6, I’ll attempt to explain my jaundiced view of the HRMS purchase transaction to you, but bear in mind that I’m not an accountant, just someone who reads annual reports carefully and does his best to understand them – so I may make mistakes.

At the time that the coal pulveriser construction was contracted by HRMS, it was budgeted to cost 27.5 million Euros – we have no access to any HRMS accounts to see the final outcome but aiui the contract completion was a few months behind schedule, which as a lifetime contractor makes me expect that the budget may well have been busted, but I’ll ignore that in the absence of figures. This was financed by a 3m Euro loan from HSP, a German bank loan taken by HRMS of 15m Euros (86% HSP) and 9.5 m Euros from retained profits of HRMS (86% HSP). I had a look at that time to see if I could work out the retained profits HRMS held, to see if they would be comfortable after the 9.5m Euros, and I’ve updated the retained profit figure from then using AR numbers to May 20. My updated figure came to approx 20.25m Euros, without any additional funds from depreciation because I don’t think HRMS had almost any depreciable assets before the Coal pulveriser.
Deducting the 9.5m Euro funding for the crusher contract leaves 10.75m Euros (86% HSP), say £9.35m in HRMS retained profit.

Note that the £24m coal purchase by HRMS was announced in December but payment had not occurred by the interims late in January - the reason, imo, is that HRMS haven’t enough cash. So, what comes next? Perhaps more borrowing by HRMS in Germany to raise the funds, but that would be borrowing by HSP for 86%. That seems to me to mean that HSP are transferring ownership of £24m worth of coal 86% to themselves, paying themselves from funds which are 86% theirs, and taking ownership of 86% of additional German bank loans to the tune of at least 16.7M Euros – very “smoke and mirrors” imo.

The alternative is that HSP “declare”; the sale but get paid over a prolongued period during which HRMS sell the coal. That would be more like my understanding of the relationship between the two parties to date, when, as I understand it, HSP declare their portion of HRMS net profit in the Annual Report in the profit and loss statement and then deduct it in the cashflow statement, ie. the cash stays in HRMS.

Confusing this, isn’t it? And I wonder how the £3.86m needed for the 12p/share extra dividend passed through from HRMS to HSP shareholders will be financed.

[sphere25] 19/2/2021 12:39

Some coverage of HSP here, along with a few other companies: