Hargreaves Serv Regulatory News (HSP)

HARGREAVES SERVICES PLC 

(the "Group" or "Hargreaves")

Trading Update - Incident at Maltby Decreases 2012/13 Profit Outlook

Hargreaves Services plc (AIM: HSP), the UK's leading supplier of solid fuels and bulk material logistics, today issues the following update.

The current panel in production at Maltby is T15. Development activities have been underway to prepare the next panel (T125) for commencement of production in the first half of next financial year.

Development of T125 had progressed well but at around 1,900m of advancement in the tailgate section, unusual geological conditions were encountered that resulted in increasing ingress of water, oil, gas and other hydrocarbons. Conditions were contained to ensure safe working continued but ingress levels increased significantly on 17th May and work was suspended. These conditions have not materially subsided and following careful consideration of the health & safety and operational risks, a decision has been taken to abandon further development on the tailgate and to pull the face back to a safe point. Maltby has never encountered such conditions before and the issue appears to be localised to this section of the mine.

Although this incident will not affect production and should not affect financial results in the year ending 31 May 2012, following a review of the mining plans it is clear this incident will result in a delay in the commencement of production on the T125 face. We currently estimate that the face gap between completing production on T15 and starting production on T125 could be between 12 and 16 weeks. At this stage we estimate that the likely adverse impact on the Group's profit in the year ending 31 May 2013 will be between £12m and £16m.

The short and medium term mining plans for Maltby will continue to be reviewed, challenged and refined over the coming weeks. Updates will be provided if there are any material changes to our estimates or guidance.

Gerry Huitson, Production Division Director, commented "This is a very unusual situation and to our knowledge this has never happened before in Maltby's long 100 year history. No one on the mining team, including our independent expert geologist with 32 years experience at many different UK mines, has come across these conditions before. We will revise the mining plans to avoid this locality and it is highly unlikely that these conditions will be found again in any subsequent panels."

Gordon Banham, Chief Executive, commented "Whilst we are bitterly disappointed by this development, health and safety concerns far outweigh those of operational or financial performance. I am confident that this was the right decision and also that there was nothing that could have been done by the mining team to foresee or avoid this situation. With the support and help of the staff and unions, the face gap should not reflect on the longer term viability or profitability of the mine and we will work hard to mitigate the resulting impacts. The Group has the depth, breadth and financial strength to work through this and we do not see this event having any material adverse impact on the medium or long term prospects for the Group. Current trading is unaffected and at this time we still anticipate that the Group's performance for the current year will be in line with management's expectations. A full trading update will be provided with our pre-close statement."

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