HARGREAVES SERVICES PLC

M&A Activity • Jan 11, 2016

National Storage Mechanism | Additional information

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RNS Number : 3723L

Hargreaves Services PLC

11 January 2016

For immediate release	11 January 2016

Hargreaves Services plc

("Hargreaves", "the Group" or "the Company")

Acquisition

Hargreaves Services plc (AIM: HSP), the UK's leading supplier of solid fuels and bulk material logistics, is pleased to announce the acquisition of C A Blackwell Group Limited ("Blackwell") for a consideration of up to £11.85m. The consideration will be settled by a net cash payment of £8.5m and the transfer to the Blackwell shareholders of a property at Earls Colne with a market value of £3.35m. The property was owned by Blackwell.

Of the £8.5m net cash payment, £5.25m will be held in escrow pending the settlement of a number of historic claims and the realisation of proceeds from the disposal of two other investment properties, which will be marketed post-acquisition and have a book value of £6.5m. These property disposals are expected to be completed by 31 December 2016.

Blackwell has been operating in the field of bulk earthmoving and civil engineering for over 50 years. In addition to having a leading reputation in earthworks and civil engineering, Blackwell also operates a number of mining and quarrying services contracts. The operations of Blackwell are highly complementary to those of Hargreaves in terms of skills, experience and, critically, the equipment that they utilise. In the opinion of the Directors, the integration of Blackwell into Hargreaves creates new and exciting opportunities to deploy one of the largest heavy plant fleets in Europe within a large and well-funded Group.

Based on unaudited management accounts and forecasts, in the year ended 31 December 2015 Blackwell is expected to generate an operating profit of £3.3m on £89.0m of revenues. Included within these amounts are £1.2m of operating profit and £12.2m of revenue relating to exceptional non-recurring activity. Excluding these exceptional non-recurring profits, adjusted EBITDA for the period is expected to be approximately £4.1m.

The net assets of Blackwell at the date of acquisition after the disposal of the Earls Colne property are expected to be approximately £10.9m. The net debt of Blackwell at the date of the transaction, adjusted for normal working capital levels, was £13.0m, giving a headline enterprise value of £24.9m. After all the property disposals are completed the underlying enterprise value is expected to fall by £9.9m to £15.0m, representing an implied EV/EBITDA entry multiple for Hargreaves of approximately 3.7 times.

Gordon Banham, Chief Executive Officer of Hargreaves, commented: "The acquisition of Blackwell extends the reach of Hargreaves into the UK earthworks and civil engineering sector bringing further diversification to the Group and offering an attractive return on capital. The business is complementary to and synergistic with our existing mining operations and offers flexibility with our existing fleet of heavy plant, providing further opportunities to diversify the Group's operational focus.

"We are delighted to welcome the Blackwell team into the Group and look forward to combining our expertise to work with them on the growing market opportunities in the UK, including the enhancement and renewal of the nation's critical infrastructure."

For further details:

Hargreaves Services Gordon Banham, Chief Executive Officer Iain Cockburn, Finance Director	0191 373 4485
Buchanan Mark Court  / Anna Michniewicz / Sophie Cowles	020 7466 5000
N+1 Singer Sandy Fraser / Nick Owen	020 7496 3000
Jefferies Hoare Govett Harry Nicholas	020 7029 8000

This information is provided by RNS

The company news service from the London Stock Exchange

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