Boasting huge turnover and a healthy order book, Hargreaves Services proves that the economic downturn doesn’t necessarily affect every sector
By Ian Armitage
The Hargreaves Group transports millions of tonnes of raw materials every day, importing, processing and selling mineral and biomass products to a range of customers. It also produces domestic and industrial coke and offers an ever-widening range of services to Britain’s waste and power industries. “We move mountains every day,” claims the firm.
Hargreaves Services was formed in 1994 and is a rapidly expanding minerals and support services group. “We source, produce, process and handle carbon based and other bulk minerals throughout the UK and Europe,” says Chief Executive Gordon Banham, part of the team that completed a £19.2 million management buyout of the company from owner and founder Bob Young in April 2004. The buyout heralded a period of impressive diversification at the firm.
“Quite a lot has happened since we last spoke,” he says, referring to the first instance Exec’s and Hargreaves’ paths crossed in 2007.
Indeed, the company recently posted a huge increase in turnover to £404 million for the year to May 31 2008, up from £265.3million in 2008 and £147 million in 2006.
“We’ve shown phenomenal growth,” says Banham. “Hargreaves is now well positioned in the resilient energy, waste and mineral sectors and continues to have a strong forward order book,” he adds.
Hargreaves Services has long been established as a bulk haulage company. From its headquarters in Co. Durham and through its national network of depots, the company had generated substantial waste haulage contracts. It was also a major supplier and processor of carbon based minerals from its specialist facilities at Immingham and Newport and had biomass and ash handling facilities at several Yorkshire power stations, giving the company a strong grounding for expansion and diversification.
“Hargreaves is a very interesting business,” says Banham. “We’re involved in very basic industries – haulage, raw materials and waste.
“We decided to develop our bulk haulage and waste businesses in Britain and to place a much stronger emphasis on coal activities.
“At the time, many argued that the decision to move into coal was crazy, and it certainly took guts. But it is an excellent long term prospect for this company.”
Now, if you’ll excuse our frankness, that’s a bit of an understatement – coal prices have almost doubled in the last 12 months and continue to rise. “The coal price has shot up,” admits Banham.
Hargreaves has shown a strong pedigree for acquisition. It has made major ones in recent times, acquiring both Monckton Coke Works and Maltby Colliery in separate acquisitions, which have since been described as “inspired.” The Monckton deal set Hargreaves back just £12 million, while the Maltby deal, which further expanded the firm’s coal activities, was just £31 million.
“Maltby gives us underground mining capabilities to the tune of 1.25 million tonnes a year and is an ideal strategic fit within the Hargreaves range of services.
“The funny thing is that we didn’t actually know coal, and subsequently coke, prices would skyrocket,” adds Banham. “Having already agreed to fixed term contracts, we are kicking ourselves slightly. But those fixed contracts were necessary as part of our loans – although I do tell the bank manager ‘I told you so’ every so often.
“Disappointing it might be, but we aren’t greedy and recognise that we have got secured contracts and those businesses are looking like great acquisitions.”
Hargreaves Services also acquired AJS Contracts Limited, a profitable provider of niche general engineering maintenance services to the power generation industries, for £4.64 million. “AJS is a quality engineering services business and is a highly complementary to our portfolio,” says Banham. “This acquisition will allow us to improve both the range and quality of services provided to our power station customers.
“We also brought Imperial Tankers Limited, which put us into the top five chemical tanker companies in the UK,” he adds. “That was a really, really good acquisition for us and we were able to merge it with Hargreaves Bulk Liquid Tankers to create a nice revenue stream for the business.
“Just mentioning what we have done in Europe, because that is a huge market for us too – we set up our Duisburg operation in June of last year to cover the European market and we have achieved sales of over €100 million in the first year alone,” says Banham.
Despite the company’s rapid growth, Hargreaves tends to take a conservative approach when it comes to risk management. “We de-risk everything because we’re very cautious people.
“But that being said, the energy and commodities division has great potential and we are really pleased.
“I said when we floated that we aren’t sexy, in fact, we are a dirty and unloved sector of industry,” concludes Banham. “Of course, we think that is great because people have tended to neglect this part of industry. They have, traditionally, tended to be smaller family operators and we have always said these sectors are ripe for consolidation. That has been proved true.”