Hargreaves Services plc (AIM: HSP), a diversified group delivering services to the industrial and property sectors, notes the media commentary regarding British Steel Limited and the reported uncertainty over its financial position. Hargreaves supplies materials handling and other services to British Steel’s operations and has been doing so for almost 8 years, employing approximately 170 people in those operations.
Until the future of British Steel is clarified, the potential impact on Hargreaves cannot be fully determined. However, the Board estimates that the Group has a current net exposure of approximately £4.5m to British Steel comprising trade debt and work-in-progress balances, some or all of which may prove to be irrecoverable were British Steel to be unable to continue trading.
Redundancy and other associated employment costs may result in a further non-recurring charge of up to £3.0m against Group profits. Potential asset write downs and leasing obligations amount to an additional £1.5m, resulting in a possible total exceptional charge of £9.0m. Additionally, if British Steel ceases to trade, this could reduce the Group’s revenue in the next financial year by approximately £11m and its profit before tax by about £1.3m.
The Board will issue a further statement as appropriate and in the meantime is taking all possible steps to mitigate the Group’s exposure.
Separately, the Board intends to issue a period end trading update on Tuesday 5 June 2019 following the end of its financial year on 31 May 2019.