Hargreaves Services

18th Oct '21 by turbo

11 comments 1168 reads

Hargreaves Services (LON:HSP) provides industrial services including

outsourced bulk materials handling
logistics and mechanical and electrical engineering

Its principal activities are

provision of haulage services
waste transportation
mineral import
mechanical and electrical engineering
materials handling
dealing in plant and machinery
the development and sale of land
civil engineering and specialist earthworks activities

Its segments are Hargreaves Land and Hargreaves Services Europe. Hargreaves Land segment identifies, develops and then realizes value of properties.

Gordon Frank Colenso Banham, Chief Executive Officer, Hargreaves Services PLC holds 2.6m shares (8.19%)

Jack wrote in the Small Cap Value Report (Weds 2 June 2021):

“For many, it might just be too risky or too complicated to spend time on. Others might spy a potentially attractive special situation. Today’s update is short, and is unlikely to sway your view.”

The share has come off its peak of around 560 during Aug/Sep. I wonder if Hargreaves Services (LON:HSP) may benefit from the opening up of the economy in recent months, with an increase in demand for its services. I do think Hargreaves Services's offering of a attractive special situation, coupled with bullish chart signals suggesting an upside up to 600p makes it worthy of further investigation.

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Rusty2

18th Oct '21

How is the HGV drivers shortage and increase in wages affecting them?

turbo

I think the HGV driver shortage is affecting everybody; had a look at Hargreaves Services (LON:HSP) job openings and noted that 4 out of 13 vacancies are for HGV drivers.

I found this presentation of the company overview of Hargreaves Services plc to be quite informative:

Hargreaves Services plc

Came across this interesting writeup on Hargreaves Services (LON:HSP) by Downing Strategic Micro-Cap Investment Trust plc in their August investor letter:

http://www.downing.co.uk/asset...

muckshifter

I believe that the fluctuations in HSP are a consequence of the dominance of coal in its present and near term future prospects. Although HSP made a very public "exit" from coal mining, I think they are making shrewd moves to genuinely get out of coal in the next year to 18 months. When they announced the £24m (iirc) sale of coal to HRMS last December, ie. 85% to themselves as they own that percentage of the German company, my immediate assumption was that they "sold" the coal cheap with the intention of giving HMRS at least a year of absolute bumper profits so that they could sell it at a good price. When the AR came out recently I studied it to see if they had anything to say on the price HRMS paid, but the only thing I could deduce from the figures was that they sold it on at "book" value which would be the lower of cost or net realisable, ie they made nothing on the sale, which makes sense if you are trying to polish HRMS for sale.

The slow, but considerable, drop in share price during September seemed to me to be an acknowledgement that HSP were still a "coal" company, supplying pulverised coal to such as the German steel industry, at a time when German industry is coming under increasing pressure to decarbonise. Virtually all the German steelworks, cement works etc appear to me to be promising to ditch coal in due course in their quest for green credentials, preferring electric arc, hydrogen, etc, but one way to appear a bit greener in the short term is to allow someone else to pulverise the coal so that you don't have to measure and declare the CO2 emissions, or perhaps much worse the methane emitted, during the processing as part of your greenhouse gas emissions. So, short term this is good for HRMS, but the long term future doesn't, imo, look too bright, ie. they need to sell asap.

As HRMS has been over the past few years probably the most successful element of HSP you would think it should be able to sell it, although the only way that HSP can force a sale would be to threaten the drastic last resort described somewhere in the AR, iirc. As far as I can see, so far HSP have not managed to get any profits paid out of HRMS, so the next set of results should be interesting in that respect as the biggest part of the chunky dividend is expected to come from HRMS. The huge leap in coal prices caused by gas shortages recently should be hugely beneficial to HRMS, making that dividend more secure and perhaps helping with the HRMS sale, and is the main reason, imo, for the revival of the share price over the last week or so.

All just my opinion and from fallible memory of the recent AR.

On the question of how to value HMRS, the Downing Strategic Micro-Cap Investment Trust PLC Investor Letter has this to say:

“We think it is fair to take a reasonable multiple on the trading outcomes of DK Recycling and the CPP plant which in combination might be worth around £50‐60 million based on Hargreaves 86% interest. Recall also that there is significant asset backing in here to support this. The trading business is more volatile and requires a through the cycle view, but we think it could be worth another £10 million or so. Overall, there is considerable value in HRMS. Right now, Hargreaves’ shareholders realise this value through a £3.9 million dividend which is passed straight through to Hargreaves’ shareholders and is supplemented by cash generation from the group. Adding in the Services and Land value we still believe that the intrinsic value sits comfortably above the current share price and there is considerable scope to generate shareholder value here through numerous catalysts”

21st Oct '21

21 October 2021

Hargreaves Services plc (AIM: HSP), a diversified group delivering services to the industrial and property sectors, notes today's admission of shares in Tungsten West plc ("TWL") to trading on the Alternative Investment Market ("AIM").

The Group is party to an exclusive Mining Services Agreement with Drakelands Restoration Limited ("DRL"), a subsidiary of TWL, details of which are disclosed in the Admission Document of TWL which can be accessed at:

https://www.tungstenwest.com/a...

One aspect of this agreement is that independent of any mining activity being carried out at the site, DRL is due to pay Hargreaves £1m on 29 November 2021 and an equivalent sum each year for the following seven years.

The Board congratulates TWL on their admission to AIM and wishes them every success.

2nd Nov '21

Hargreaves Services (LON:HSP) share price seems to be back on an upward trend following a brief pullback. Perhaps the statement issued by the Group's Chairman, Roger McDowell prior to the AGM on 27 Oct 2021 may have had a positive effect:

"I am pleased to announce that all three sectors of the Group, Services, Hargreaves Land and our German Joint Venture, Hargreaves Raw Material Services GmbH, are trading in line with the Board's expectations. The streamlined strategy outlined at the year-end, is progressing well.

The recent admission of Tungsten West plc to AIM provides an exciting opportunity for growth for the Services business unit.

The Board remains confident of delivering results for the full year in line with market expectations."

Westway001

Hargreaves Services (LON:HSP) The dividend has recently been paid which not only means that the stock is no longer marked as ex dividend but also I wondered whether it has led to a spate of share buying as existing share holders reinvest the dividend. Just a thought...

3rd Nov '21

The Half Yearly Financial Report by Downing Strategic Micro-cap Investment Trust (LON:DSM) update on their Portfolio Activity for the six months to August 2021 includes the following:

Hargreaves Services Plc provided an unrealised gain of £2.3m during the period, resulting in a substantial holding (11.7% of NAV at the half-year date). There were no additions or disposals in the period. We remain confident in this position and are supportive of management in their strategic direction of the company, understanding that, due to commodity prices, 2021 may have provided some windfall profits.

15th Nov '21

Worth mentioning that Hargreaves Services (LON:HSP) passes all nine Dreman Low Price to Cash Flow cheklist criteria. Dreman favours cash flow over earnings: "If we take two companies with similar outlooks, markets, products, and management talent, the one with the higher cashflow will usually be the more rewarding stock. In investing, as in your personal finances, cash is king."

Hargreaves Services

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Turbo

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