For immediate release |
27 October 2014 |
HARGREAVES SERVICES PLC
("Hargreaves" or "the Group")
UPDATE ON REVIEW OF STRATEGY
Hargreaves Services plc (AIM: HSP), the UK's leading supplier of solid fuel and bulk material logistics, is pleased to provide the following update on the Board's review of strategy initially announced on 9 September 2014.
As a result of the review, the Board has agreed a simplification plan, which is expected to release further capital. With no near term requirement for major capital investment, the Board has also decided to increase the dividend payout and implement a programme to return excess capital to shareholders through a share buy-back scheme.
The Board's intention is to accelerate the previously stated rate of increase in dividends by raising the dividend payout level to 40% of underlying profit after tax, such that the Group will be targeting dividend cover of 2.5 times in the financial year ending 31 May 2016.
Even taking account of the potential short-term impact of volatile market conditions and after allowing for this accelerated dividend distribution, the Board remains confident that, as it implements its simplification plan, it will release further funds in excess of its near term capital requirements. Therefore the Board is announcing its intention to implement a rolling share buy-back programme with any shares purchased being held as treasury shares. The programme will be undertaken under the Group's general authority to make market purchases of up to 10% of its issued share capital, subject to the renewal of this authority, which is being sought at the Group's Annual General Meeting on 5 November 2014. The buy-back programme ("the programme") is expected to commence shortly after the renewal of this authority with the objective of reducing the issued capital of the Group. The programme is expected to remain open until such time as the capital reduction objective is met. The maximum price payable for any Ordinary Share under the programme will be an amount equal to 105% of the average market value of the Company's Ordinary Shares as derived from the London Stock Exchange Daily Official List for the five business days immediately preceding the day on which such share is contracted to be purchased.
Due to liquidity constraints, in order to ensure that the reduction in capital is efficiently implemented over an appropriate timescale, the purchase of Ordinary Shares under the programme on any trading day is likely to represent a significant proportion of the daily trading volume in the Ordinary Shares on the Exchange. This may materially exceed the 25% and 50% limits of the average daily trading volume as referred to in the safe harbour provisions.
In conjunction with the ongoing simplification of the Group, and reflecting the need to optimise the Group's risk profile, a number of investment opportunities have been evaluated that would broaden the base of the business in the energy sector and provide greater control over the sourcing of coal for major power stations. Over the past six months, the Group has comprehensively reviewed a number of investment opportunities. No initiatives are currently being pursued although the Group remains open to considering further projects in the energy sector on a collaborative or joint venture basis providing any investment does not compromise the new dividend policy or the share buy-back programme outlined above.
The Board remains confident of continuing cash generation from its core trading and is pleased to report that underlying performance and cash generation for the financial year continue to be in line with management expectations. The Group continues to allocate modest capital amounts to support growth opportunities in its Industrial Services business and will also continue to seek to acquire modest and appropriately priced surface mining assets.
The Board remains committed to generating attractive returns for shareholders by maintaining strong capital discipline and will continue with the announced simplification programme. In this connection the Group has today announced the commencement of a consultation process in relation to the potential closure of Monckton and will continue to provide further announcements on the detail of the programme as appropriate. Once the outcome of the process at Monckton that was announced today is known, consideration will be given to increasing the share buy-back authority level or considering special dividends.
Hargreaves Services Gordon Banham, CEO Iain Cockburn, Finance Director |
0191 373 4485 |
Buchanan Mark Court / Fiona Henson / Sophie Cowles |
0207 466 5000 |
N+1 Singer Sandy Fraser / Nick Owen |
0207 496 3000 |
Jefferies Hoare Govett Limited Sara Hale / Harry Nicholas |
0207 029 8000 |
