Shares in coal producer Hargreaves Services slumped almost 10% yesterday as it revealed it was exploring streamlining options.
The Durham-based firm – whose sites include St Ninian’s near Kelty and Muir Dean by Crossgates – laid out a number of “potential simplification opportunities” as it announced the £26.9m disposal of its Imperial Tankers business.
The company said the offloading of the business – which it acquired for £6.3m in 2007 – was a “first step” in a new strategy to focus the group on its core strengths by simplifying its operations.
“As the review progresses and the outcome of the current strategic initiatives take shape, the board will consider the optimal capital structure and distribution policy for the group, ensuring that they are properly aligned to the long term expectations and requirements of both shareholders and the group,” the company said in a statement yesterday.
“With regard to the capital that is liberated by the review, consideration will be given to reducing debt, distributing it to shareholders or re-investing it in the business. Any re-investment would be focussed on attractive and value enhancing projects related to the group’s core business activities.”
The firm has significantly increased its presence in Scotland since swooping for the assets of Scottish Coal and ATH Resources after they both slumped into administration last year.
In July, Hargreaves Surface Mining revealed that it had taken on its 500th employee in Scotland and the firm said it had long-term plans to invest and build its business in the region. One of its major customers is the coal-fired power station at Longannet on the Forth.
In its strategy update yesterday, Hargreaves said it would review operations at its Monckton coke plant in South Yorkshire and its tyre-crumbing business and said it had given notice to its joint venture partners to seek to wind down activities at its MIR Trade joint venture. There was no specific mention of the firm’s Scottish operations in the statement.
The firm said it would further update the market on the review process when it published its full year financial results next week.
It said its there had been “no material change to the udnerlying trading outcome” since its last financial update on May 30.
“Since acquiring the Scottish assets, the price of coal has fallen significantly,” a company spokesman said yesterday.
“These surface assets were acquired at a level that represent good long term value for the group and the group remains committed to the development of surface mining opportunities in the UK and building on its strong pipeline of sites.
“To date the impact of the falling coal price has been minimised by fixing the price of coal that was planned to be extracted.
“In the longer term, for future sites, the challenge of low coal prices can be partially mitigated by redesigning mining schemes to focus on the lower ratio coals, reducing production costs but also reducing the amount of coal that can be extracted.
“The group would only commence operations at new sites if the output can be fixed at an economic level.”
Shares in Hargreaves closed the day down 9.6% at 715.5p.