North East services and property company Hargreaves Services has seen profits rise despite seeing revenues dip as it moved away from coal.
The Durham firm has issued a trading update to shareholders ahead of reporting its interim results for the six months ended November 30 2021, saying it anticipates reporting strong interim results as all of its business segments are trading in line with its expectations.
The company this year completed its transformation away from coal – after shipping the last ‘coals from Newcastle’ from the Port of Tyne to Europe – and says revenue will be lower than the comparable period in 2020, due to the disposal of coal trading activities in December 2020.
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It says pre-tax profit will be higher compared to the previous period, thanks to good trading in its German joint venture, but it warmed of uncertain market conditions ahead.
The firm said: “In particular, the group’s German joint venture, Hargreaves Raw Materials Services GmbH (HRMS) has benefited from forward trading positions in the first half of the financial year.
“Those positions mean that the results of HRMS for the first half of this financial year are expected to be broadly similar to those reported for the second half of last financial year.
“The board has also previously noted that the favourable market conditions, characterised by strong commodity prices which have prevailed throughout most of this calendar year, might not endure.
“Looking forward, these market conditions are uncertain and as a result the management of HRMS is currently adopting a cautious approach to trading following the expiry of its forward positions.
“The impact on the likely trading results of HRMS for the year as a whole should become clearer by the end of January 2022 but the board expects that they will be substantially weighted to the first half.”
The group said it reduced its net debt from £20.8m in November 2020 to £3m as of November 30 2021, following the strategic move to dispose of all material coal stock at the end of last year.
Hargreaves also held cash balances of £8.5m compared with a net bank debt of £8m twelve months ago.
It added that cash balances have reduced from £28.3m at 31 May 2021 after making an additional short term loan of £15m to the German joint venture, to help the business take advantage of the current strong market conditions. The loan will be repaid in the second half of the financial year.
