Broker snap: Panmure downgrades Hargreaves Services to sell

Date: Monday 28 May 2012

Energy, waste and transport services group Hargreaves Services saw shares plummet on Monday after a profit warning; Panmure Gordon didn't help much either after downgrading its rating on the stock from hold to sell.

The UK supplier of coal said further development on T125 (at its Maltby coal mining operation) has had to be abandoned on health and safety grounds, and this will ultimately result in an adverse affect on profits for the year ending May 31st 2013 of between £12m and £16m.

"Production problems encountered at its Maltby coal mining operation lead us to reduce our May 2013 forecast markedly, given what are likely to be production problems and delays in the commencement of the next coal face in the year to May 2013," Panmure said.

"Sadly, this update reminds us of the geological risk associated with Hargreaves, despite the rapid development in the growth in profits from other divisions, which have reduced this risk markedly in recent years. While this kind if incident is rare at Maltby, it does little to dispel medium-term concerns that issues out of its control may always affect the share price and profitability of the company."

The broker has left its current-year forecasts unchanged, but has cut next year's earnings per share (EPS) estimate by 28% based on the assumption of worst-case delays. The target price has been cut from 1,209p to 811p.

Shares were trading 31.03% lower at 730.4p by 11:03.

BC

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