Hargreaves Services reaping rewards of colliery teamwork

The group, which owns Yorkshire’s Maltby Colliery and operates the Hatfield deep mine near Doncaster, reported profits of £37m in the year to May 31, up from £31m the year before.

Hargreaves’ chief executive Gordon Banham said the group had faced difficulties at Maltby, but the close working relationship between workers and the unions had helped resolve the issues.

“Maltby has challenging geology. It’s had a difficult time, but we have moved to new working patterns and a fifth shift has been implemented now, that’s another 80 people,” he said.

“We’ve faced challenges to get it right, but the unions are behind us.

“The geology is very difficult, it has thin seams, which means we are bringing up a lot of rock and less and less coal.

“The unions are rising to the challenge. We work together as a team. There isn’t the old confrontation.”

Mr Banham said Hargreaves won the contract to run Hatfield colliery on the back of the successful teamwork at Maltby.

He added that Hatfield, which was going to be closed, is now profitable.

“Hatfield has a very long term future. It has reserves for 50 years,” he said.

Analysts at Brewin Dolphin said in a note: “We have said this several times over the years, but these results represent another step change in profitability for Hargreaves Services.

“With a proven track record and industry expertise that is second to none, we continue to see significant undervaluation in the current price.” Total saleable production at Maltby increased by 460k tonnes, from 1,057k tonnes to 1,517k tonnes.

This increase was largely accounted for by an increase of 414k tonnes in the amount of coal fines harvested and conditioned to support the new blending activities.

Although underground production improved from 827k tonnes to 873k tonnes, production was inconsistent and resulted in the implementation of new working practices with the fifth shift.

Analyst Nick Spoliar, at Arbuthnot Securities, said: “Hargreaves’ results demonstrate that this is a well-managed company operating in attractive markets.

“With energy supplies tightening, the need for Hargreaves’ expertise in energy commodities is increasingly pervasive.

“The group’s ‘green’ energy credentials are being restated. With planning achieved on Tower, we are upgrading our pre-tax profit forecasts and raising our target price to 1,500p.”

All standard power station coal produced at Maltby continues to be sold to North Yorkshire power station Drax under the current long-term contract.

External coal sales from Maltby generated £53m of revenue, up from £39m the previous year.

Increased coal sales and an improvement in the average selling price from £52.37 to £59.75 resulted in coal revenues increasing from £34.3m to £40.6m.

The improved price reflects higher market prices for the surplus coking coal and an improvement in the average sales price to Drax.

Coking coal is processed into coke at Monckton, which continues to perform well.

Production at Monckton remained consistent and revenues increased by £4.8m from £42.8m to £47.6m.

Coke sales increased by £4.3m from £39.1m to £43.4m, whilst the sale of by-products improved by £0.4m from £3.7m to £4.1m reflecting improving prices.

The average coke price was £199 per tonne on the sale of 217k tonnes, compared to £171 per tonne on 229k tonnes sold in the prior year.

Volumes from the previous year benefited from the sale of the excess stock.

The average sales price benefited from higher market prices working through into current sales contracts.

Revenues climbed 20 per cent to £552m.

Strong demand for coal

Hargreaves Services’ sales were boosted by robust coke and coal sales in Europe.

The company said it also expects strong demand for high-grade coal from steel producers.

Hargreaves said it would pay a final dividend of 10.4p per share, bringing the full-year dividend to 15.5p a share, up about 15 per cent from last year.

The firm, which was established in 1994 as a specialist bulk haulier, said it expects its Tower Colliery project in South Wales to contribute significant profits, after the planning permission for the project was finalised.

Hargreaves Services operates through four divisions – production, energy and commodities, transport, and industrial services.