Hargreaves in jobs vow
Mining company aims to ‘protect viability’ of its operations after coal price slump
THE company which owns what is left of Scotland’s coal mining industry has reported a plunge in profits but remains committed to maintaining employment north of the Border.
Hargreaves Services confirmed it will continue to “protect the viability” of its Scottish mining assets even as coal prices remain depressed.
The stock market-listed business employs around 500 in Scotland at sites including Broken Cross in Lanarkshire, Duncanziemere and Netherton in Ayrshire, Glenmuckloch in Dumfries and Galloway and Muir Dean and St Ninian’s in Fife.
But coal prices are far below the £54 a tonne when Hargreaves bought those assets from administrators of ATH and Scottish Coal two years ago.
During the company’s most recent financial year, covering the 12 months to the end of May, prices were around £38 and have since fallen again to £37.
Hargreaves chief executive Gordon Banham said: “At current coal prices, our Scottish coal production activities would be loss making as we will incur losses on the production of thermal coal that we can only partially mitigate by maximising production of higher margin speciality coals alongside the thermal coal. We will clearly seek to maximise the yield of such coals.”
UK coal-fired power stations, including Longannet in Fife and Ferrybridge in Yorkshire, have also announced plans to close, casting further doubt over the domestic market.
Hargreaves said it evaluated options to cease production but has rejected the idea. Coal production has been halved to one million tonnes for the current financial year.
In spite of all that, Mr Banham is still confident in the longer term potential of the Scottish operations. He said: “We see three principal reasons for continuing to invest in sustaining the Scottish surface mining operation. First, we have a duty to our workforce and other stakeholders to invest and sustain the operation through difficult periods, within sensible commercial constraints.
“Secondly, to preserve these important assets so the group can benefit from any improvement in coal prices.
“Finally, we see opportunity to build on synergy value between our production and coal trading and distribution operations, both in the thermal and speciality markets.”
That came as Hargreaves reported a near 24 per cent fall in annual revenue from £869.2m to £662.2m. Underlying profit from continuing operations fell almost 27 per cent from £55.05m to £40.3m in the year to May 31.
Hargreaves sold its Imperial Tankers business for £26.9m in the year, closed the Monckton coke plant and made redundancies as part of a restructuring programme. Those measures helped to trim net debt at the company from £68.8m to £1m. It still employs around 2,000 people.
Underlying pre-tax profit in the coal production and distribution arm fell from £46.3m to £34m as revenue dropped from £761m to £485.9m.
The company said the mining operations had delivered increased volumes and margins as it was the first full year the Scottish mines had operated at a full run rate. The third party trading arm saw a reduction in volumes and margins as a result of the market conditions.
Hargreaves pointed out hedges and fixed price contracts put in place when it bought its Scottish assets came to an end in May this year. Rather than enter into new hedging arrangements it plans to build up its stock levels in anticipation of prices returning to better levels long term.
Transport profits fell from £3.6m to £1.85m while industrial services went from £5.16m to £5.05m.
Mr Banham pointed to planning permission for 55 megawatts of wind energy in South Lanarkshire and its planning application to build 1,600 houses on the Blindwells site in East Lothian as ways in which the group was diversifying its interests.
It also has a joint venture with the Buccleuch Estates to develop Glenmuckloch into an energy park. Plans for community wind turbines have been approved with other projects, including more wind and hydro power, being considered.
Hargreaves has recently signed a new £110m facility provided by a consortium of HSBC, Lloyds and Barclays.
Shares in Hargreaves closed up 35.25p, or 11 per cent, at 355.75p.