Sam is a trader and one of our lead stock analysts at AskTraders. After starting his career predominantly in the forex markets, Sam now focuses on gold and stocks with a preference for macroeconomic analysis.
Hargreaves Services (LON: HSP) shares are climbing on Christmas eve after the company said it has sold its entire inventory of speciality coal to its German joint venture HRMS, ending its material direct business interests in coal.
Hargreaves said it sold off all of the speciality coal held at its two UK stockholding sites to HRMS for approximately £24 million.
The company’s remaining coal stocks are to be sold to third parties over the remainder of the current financial year, with the group expecting to have no material coal inventory by the end of May 2021.
Hargreaves owns a 50% stake in HRMS and expects the sale to provide a springboard from which it can establish enduring trading relationships with major UK purchasers.
The transaction will see a £3 million impairment to goodwill relating to Hargreaves' coal trading business, but the cessation of coal trading will see its revenue fall by £25 million and £30 million in the years ending 31 May 2021 and 2022 respectively and by £20m for subsequent years.
However, the company said that its profits will be neutral as it will benefit from reduced interest charges and a projected increase in its share of profits from the HRMS joint venture.
“The Board is delighted to have unlocked the capital from its coal business, which was a key strategic goal, whilst supporting the growth of HRMS to deliver future shareholder value. This transaction represents a significant stride away from our legacy in coal as the Group looks to build sustainable growth across our remaining revenue streams,” said Roger McDowell, the company’s chairman.
Shares in Hargreaves are trading 4.88% higher at 260p, after initially reaching highs of 268p.
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