The market is not in a forgiving mood at this time......Sold fuel supplier and logistics company Hargreaves Services (AIM: HSP) made a trading statement today in which it revealed two thingshttp://www.investegate.co.uk/Article.aspx?id=201205280700181...The Group's performance for the current year will be in line with management's expectations.Unprecedented geological conditions at the Groups Maltby open cast coal mine will delay production in 2012/13, knocking £12m - £16m off profits for next year.The share price is down 30% knocking £85 million off market capitalisation. Hargreaves now trades on a prospective P/E for the current year of 6.1
I think £12/16 million is equivalent to roughly half of the current year profits , so if the current year P/E ratio is 6.1 times , next year is going to be about 12 times.So maybe the Market has not been too harsh? And the divi is not too generous. And there's the question of what this unworkable face does for the future prospects of the mine. It's bad luck for a well run company.Former holder not going back in
Forecasts for 2012 are for £47.55M pre-tax, and for 2015 were £62.45M. Don't forget that there are profits coming through from the new opencast Tower Project which should help offset this mishap. An impact of between £12M and £16M on profits would put profits for next year at a similar level to those for the current year, which work out at 119.5p/share. So, in a nutshell, assuming the impact is no worse than the management think, and that they can otherwise work around the problem and meet forecasts, I think the fall has probably been overdone. I hold and have done for a while; whilst obviously not happy with the fall, I would rather have a problem like this than that which occurred at Cape - this is bad luck, as opposed to sheer carelessness. I shan't be adding to my holding yet as there are a number of assumptions that need to be proven, but I am still relatively confident for the company.Cheers,Steve.
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