Harworth Gp Regulatory News (HWG)

28 Jan 2009 07:00



HARGREAVES SERVICES PLC 

("Hargreaves" or the "Group")Acquisition of Remaining 50% of Coal4Energy Ltd from UK Coal plc

and 

Trading Update

Hargreaves Services plc (AIM: HSP), a leading supplier of products and support services to the energy, mineral and waste sectors, today announces that it has acquired from UK Coal PLC ("UK Coal"), the remaining 50% holding in Coal4Energy Ltd (Coal4Energy) for a total consideration of £9 million, making Coal4Energy a wholly-owned subsidiary of the Group. 

Coal4Energy, located at Kellingley Colliery in West Yorkshire, was formed in March 2006 as a 50:50 Joint Venture between Hargreaves and UK Coal, Britain's biggest producer of coal. Coal4Energy has grown rapidly to become the largest supplier of coal to the UK domestic and industrial markets. In May 2008 Coal4Energy acquired a majority shareholding of 85.2% in Maxibrite Limited, a leading manufacturer of smokeless fuel briquettes.

Based on the last filed statutory accounts, in its first year of operation, the year to 31 May 2007, the profit before tax and management charges was £0.8m, the turnover was £64.8m and the net assets were £0.01m. In the year ended 31 May 2008, based on unaudited management accounts, Coal4Energy made a comparable profit of £1.9m on turnover of £63.4m. Further profit progression is expected in the year to May 2009, together with a full year contribution from Maxibrite Limited. 

Under the terms of the acquisition, UK Coal has granted Coal4Energy the right to market all of its domestic and industrial coal production, currently in excess of 250,000 tonnes per year, under an exclusive 5 year contract. In addition, Coal4Energy will continue to market coal supplied by Hargreaves. Coal4Energy will relocate to Hargreaves' Yorkshire regional office in Glasshoughton, Castleford. The acquisition is funded by a new £9m, 3 year term loan facility supplied by Hargreaves' lead banker, Royal Bank of Scotland.

The Board confidently expects the acquisition of Coal4Energy to be earnings enhancing and cash generative.

Group revenue and profit in the first six months of the year will be ahead of management expectations, particularly in the Energy and Commodities Division. The Group also expects its renewable fuels business to move into profit earlier than expected. The acquisition of Coal4Energy will also have a significant impact on the profit reported in the second half.

As a consequence of this acquisition and the strong performance in the first half, the Board expects the results to exceed management expectations for 2009. 

The Group will announce its interim results on 17 February 2009.

Commenting on the acquisition Gordon Banham, Chief Executive, Hargreaves Services plc, said:

"Coal4Energy has been very successful since its formation in 2006. I would like to thank our partner, UK Coal, for its contribution to building the business so rapidly. Under sole ownership, I believe that Hargreaves will have significant opportunities to drive additional synergies and improve profitability through integrating Coal4Energy and Maxibrite more closely with Hargreaves' production and mineral trading operations, both in the UK and mainland Europe."

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