Acquisition by HRMS

HARGREAVES SERVICES PLC

(the "Group" or "Hargreaves")

Acquisition by Hargreaves Raw Material Services GmbH

Hargreaves Services plc (AIM: HSP), a diversified group delivering key projects and services to the industrial and property sectors, is pleased to announce an acquisition by its German associate company, Hargreaves Raw Material Services GmbH ("HRMS") which furthers its strategy of creating an integrated specialist manufacturing and minerals trading business in Germany's industrial heartland.

HRMS has acquired 94.9% of DK Recycling und Roheisen GmbH ("DK") from DK Holdings GmbH. The acquisition cost was €1. Through a combination of this acquisition and the investment in its Carbon Pulverisation Plant ("CPP"), the management of HRMS is seeking to strengthen its business by adding complementary manufacturing process capability to HRMS' specialist commodity trading skills. The integrated German business will provide improved trading visibility and moderate the natural volatility of earnings in the trading business whilst creating tangible value for shareholders.

DK is based in Duisburg, Germany on a site adjacent to HRMS' CPP. DK's unique recycling process produces high quality pig iron and other products from residual waste materials produced by the steel industry's manufacturing process. The pig iron is mainly reused by the foundry industry in an environmentally sustainable production cycle. Recycling waste from the steel industry utilises material which presents an environmental challenge as these residual materials are otherwise frequently simply stockpiled or sent to landfill.

DK is well known to HRMS having been a customer of HRMS for many years and is already a contracted customer for future output from the CPP. Hilmar Eller, Managing Director of HRMS, has been appointed as Managing Director of DK.

Under its previous owner and management, DK has been undergoing an extended period of restructuring with a view to returning it to a sustainable and acceptable level of profitability, but this has not yet been successful. The management of HRMS will focus initially on improving DK's sales and procurement processes, both of which align well with the expertise of HRMS. These immediate actions together with some operational changes and cost reduction measures will be implemented to improve DK's financial performance.

DK's audited accounts for the year ended 31 December 2018 were prepared under German accounting standards. Those accounts showed revenue of €135m and a loss before tax of €2.2m. Those accounts also showed DK to have net assets of €15.8m. After fair value adjustments to comply with IFRS, the Board estimates that the net assets of DK are approximately €1. The principal adjustments relate to the recognition of pension liabilities which have not previously been recognised in DK's balance sheet, provisions against inventory, provisions for taxation liabilities and the write down of certain items of plant and machinery. The latest management expectation is that DK will break even for the year ending 31 December 2019.

DK is separately financed from both HRMS and Hargreaves and there is no recourse whatsoever to either HRMS or Hargreaves in connection with DK's financing arrangements or any other liabilities which DK has or may have in the future. Neither HRMS nor Hargreaves currently provide or will provide any form of financial support to DK. DK is an existing customer of HRMS and balances arising in the ordinary course of trading will continue to exist between the two companies.

As HRMS is an associate company, Hargreaves does not consolidate its results into the Group's results. The Group accounts for the results of HRMS in accordance with IFRS 28, Investments in Associates and Joint Ventures. Hargreaves does not expect any material changes to the expected results of HRMS until such time as the profitability improvement measures at DK can be fully implemented and their impact reliably assessed.

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