24th Dec 2020 09:06
(Alliance News) - Hargreaves Services PLC said Thursday it has sold its entire inventory of specialty coal to its German joint venture HMRS for GBP24 million.
The diversified industrial and property services group currently holds a 50% stake in HRMS but holds an 86% economic interest. Hargreaves expects the sale to provide a springboard for HMRS to establish trading relationships with major UK purchasers.
Shares in Hargreaves Services were up 4.7% at 259.60 pence on Thursday in London.
Durham, England-based Hargreaves said its remaining coal stocks are now made up of heavy industrial coal, which is expected to be sold to third parties over the remainder of its current financial year ending May 31. Looking ahead, the company expects to have no coal inventory by the end of its financial year.
Hargreaves also has already entered a sales agency agreement by which it will market and arrange for the sale of the coal inventory on behalf of HMRS on a commission basis.
The transaction will result in a GBP3 million impairment to goodwill relating to Hargreaves's coal business. In addition, the ending of coal will reduce the group's projected revenue by GBP25 million and GBP30 million for its 2021 and 2022 financial years respectively.
For its 2020 financial year, revenue was at GBP222.2 million, with pretax profit of GBP2.2 million.
However, the sale's effect on underlying pretax profit is anticipated to be neutral as Hargreaves will benefit from a reduction in interest charges and an increase from its share of profits from the joint venture.
"The board is delighted to have unlocked the capital from its coal business, which was a key strategic goal, whilst supporting the growth of HRMS to deliver future shareholder value. This transaction represents a significant stride away from our legacy in coal as the group looks to build sustainable growth across our remaining revenue streams," said Chair Roger McDowell.
By Dayo Laniyan; [email protected]
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