Hargreaves Services PLC Capital Investment by German Associate (0456U)
19 October 2017 - 5:00PM
UK Regulatory
TIDMHSP
RNS Number : 0456U
Hargreaves Services PLC
19 October 2017
For immediate release 19 October 2017
Hargreaves Services plc
("Hargreaves" or "the Group")
Capital Investment by German Associate
Hargreaves Services plc (AIM: HSP), a diversified group
delivering key projects and services to the infrastructure, energy
and property sectors, is pleased to announce a new capital
investment project by its German associate, Hargreaves Raw
Materials Services GmbH ("HRMS"), the Group's European raw
materials trading business.
HRMS Background
HRMS, which was established in June 2006, is based in Duisburg,
Germany, and is a key supplier of specialist raw materials to major
European customers in the steel, foundry, smelting, ferroalloy,
sugar, limestone, insulation, refractory and ceramic industries.
Favourable market conditions in the past 12 months have allowed
HRMS to expand the range of products it trades and distributes and
in the past financial year the business delivered an operating
profit of GBP10.3m. HRMS adopts a flexible and low-risk trading
model, sourcing and supplying product on spot or short-term
contracts. The combination of experienced management and a low
fixed cost base provide the flexibility to increase or decrease the
volume of trading to match market conditions.
Recently, HRMS has focused on short term trading opportunities
which, by their nature, offer limited forward trading visibility.
Historically, HMRS benefited from more predictable trading based
around the raw material inputs and production outputs of the
Group's Monckton Coke production facility in the UK which closed in
December 2014. Therefore, securing a trading position connected to
an alternative strategic production asset represents a major
strategic opportunity for HRMS to improve forward trading
visibility.
Carbon Pulverisation Plant ("CPP")
The Board of HRMS has identified the opportunity to build a CPP
with a capacity of 400,000 tonnes per annum. It will provide a
backbone of long-term contracts around which the business can
trade. Both the HRMS management and the Board of Hargreaves believe
that the project, together with its associated long-term contracts,
will add resilience to future trading prospects and augment the
growth of HRMS.
The CPP will be constructed in Duisburg, Germany, a key hub for
Central Europe which enjoys numerous logistical advantages. The CPP
will process carbon-based raw materials, including coal and coke,
into a pulverised carbon product which offers customers logistical,
technical and cost advantages over alternative materials.
Agreements are in place with a key strategic customer to provide
technical, logistical and operational support, including a
guaranteed minimum off-take volume. Further agreements will be
negotiated with a portfolio of other customers from a range of
heavy industries operating blast furnaces in Germany and Western
Europe. Production is expected to commence in Q4 2018.
The total capital cost of the project will be EUR27.5 million,
of which EUR22 million is fixed under the terms of an Engineering,
Procurement and Construction contract with Claudius Peters Group.
Claudius Peters Group has an extensive and proven track record and
is the manufacturer of the key components of the plant. The board
of HRMS plans to fund the project through a combination of cash
reserves and new and existing debt facilities. The investment will
have no material impact on the Group's current banking arrangements
in the UK. The banking arrangements for the Group and HRMS will
continue to be run as largely independent facilities.
Hilmar Eller, Managing Director of HRMS, commented: "The HRMS
team has worldwide expertise in raw material sourcing and logistics
and the carbon pulverisation plant will be a valuable addition to
our portfolio, helping to ensure the predictability of our profit
streams."
Gordon Banham, Chief Executive Officer of Hargreaves, commented:
"Our European trading division was the star performer of the Group
in the last financial year and the Board continues to be impressed
by the deep quality and knowledge of the HRMS team. As we
continually strive to maximise long-term shareholder value through
the strategic deployment of capital, this project represents a
carefully targeted investment in a resilient market with strong
potential returns."
For further details:
Hargreaves Services
Gordon Banham, Chief
Executive Officer
Iain Cockburn, Finance
Director 0191 373 4485
Buchanan
Mark Court / Sophie Cowles
/ Henry Wilson 020 7466 5000
N+1 Singer (Nomad and
Joint Broker)
Sandy Fraser / Nick Owen 020 7496 3000
Investec (Joint Broker)
Sara Hale / Robert Baker 020 7597 5970
This information is provided by RNS
The company news service from the London Stock Exchange
END
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