Hargreaves Services warns over exposure to possible British Steel collapse
By Michele Maatouk
Date: Wednesday 22 May 2019
(Sharecast News) - Hargreaves Services warned on Wednesday that if steel producer British Steel - which it has been supplying for nearly eight years - collapses, its revenue and pre-tax profit for the next financial year would suffer.
The AIM-listed group, which supplies materials handling and other services to British Steel, said that if the steel manufacturer were to cease trading, this could reduce the company's revenue by around £11m in the next financial year, while pre-tax profit would take a £1.3m hit.
"Until the future of British Steel is clarified, the potential impact on Hargreaves cannot be fully determined," it said. "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."
Hargreaves said redundancy and other associated employment costs could result in a further non-recurring charge of up to £3m against group profits.
Potential asset write downs and leasing obligations amount to an additional £1.5m, resulting in a possible total exceptional charge of £9m.
"The board will issue a further statement as appropriate and in the meantime is taking all possible steps to mitigate the group's exposure."
At 0945 BST, the shares were down 11% at 262.00p.
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