Good morning! No amusing Radio 4 stories today, as I woke up one minute before the clock/radio was due to go off - isn't it surprising how often that happens, we obviously have some sort of internal clock (mine works intermittently only!). Apologies for not getting round to finishing off yesterday's report on my return from London, by the time I got to look at it, it was 10pm, and I was just too tired to process any more numbers. Will try to revisit Hyder Services profit warning later in the week.
Hargreaves Services (LON:HSP)
This is a company that cropped up on my radar last year, and they are holding another analysts' lunch today in London, which I've been invited to, so will report back my findings. The last one was very interesting, as it touched on all sorts of issues surrounding coal - HSP is the UK's largest coal distributor, and also has some surface mining interests too.
Rather than repeating the background, let me refer you to my previous reports which outlined the investing case here on 24 Sep 2013, and reported on their positive trading update here on 16 Dec 2013. My feeling is that this is a much mistunderstood company, and various problems have obscured a remarkably good track record of increasing profit in recent years;
The headline figures for the six months ended 30 Nov 2013 look really good - turnover is up 28% to £460.5m, underlying diluted EPS is up 7.4% to 65.0p, which is lower than the 25.1% increase in underlying operating profit, which suggests a higher tax charge this year. The interim dividend has been increased by a healthy 27.5% to 8.8p, which is consistent with what the company said last time I met them, in that the intention is to raise dividends by about 50% from last year's level, over the next couple of years.
Net debt is £95.2m, which is quite material in relation to the £280m market cap (at 850p per share), however I tend to disregard debt where it is matched by freehold property. There is considerable hidden property value within HSP, although I can't put a figure on that, but there will at some point be upside from surplus freehold property…
