21st Dec 2023 16:38
(Alliance News) - Hargreaves Services Group PLC on Thursday revealed unpromising results from its German joint venture, but still intends to increase shareholder dividends.
Hargreaves, a Durham-based provider of industrial and environmental services reported "subdued" results from its joint venture with the German company Hargreaves Raw Material Services GmbH.
The group now expects that HRMS will record a net loss in the first half of the year, and full year profit after tax of around a quarter what was originally expected, "materially lower than the contribution in the comparative period of £15.5m".
Due to reduced commodity prices and an "economic slowdown" in Germany, HRMS has been able to return GBP8.0 million of surplus cash to the group, received in November. The group has agreed with HRMS management that an annual distribution of GBP7.0 million is sustainable, and this will become a regular receipt from the joint venture.
The group's services business posted more promising results, and Hargreaves anticipates services profits for the full year to be around GBP2.0 million higher than previously expected.
This is largely thanks to the volume of earthmoving activities at the HS2 rail project. Activity in this area is expected to remain at high levels throughout 2024.
Revenue from the group's services section was GBP162.8 million for the full year ended in May 2022.
The group also announced the sale of its interest in the Energy from Waste plant at the Westfield development site in Fife, Scotland for a cash consideration of GBP7.6 million.
Hargreaves said it was making progress on the buy-out of its defined benefit pension schemes. "Current indications suggest that the cost of closing out the Group's obligations under the scheme will be no higher than GBP9.0 million, materially lower than our original estimate of GBP15.0 million," the group said.
As a result of the anticipated positive cashflow from this buyout, as well as the cash receipts from HRMS, Hargreaves intends to increase shareholders' dividend to 36 pence per share. This represents an increase of 70% from the prior year's dividend of 21 pence.
Hargreaves intends to pay 50% of this dividend at the interim stage, and the remaining 50% as a final dividend.
The group will release its interim results for the six months ended November 30 2023 on January 24.
As of November 30, the group had cash and cash equivalents of GBP18.7 million, down 15% from GBP21.9 million in May. The group also had leasing debt of GBP28.8 million, down 21% from GBP36.4 million over the same period.
The group has a current market capitalisation of GBP135.01 million.
Shares in Hargreaves Services were down 5.2% at 412.61 pence each in London on Thursday afternoon.
By Hugh Cameron, Alliance News reporter
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