MIDAS STOCK TIPS UPDATE: Hargreaves is building sustainable profits

Gordon Banham was 18 when his father, a coalman, died. With a poor mother and two younger brothers to care for, Banham junior took over the family business, delivering coal to homes in Norfolk.

By 2001, Banham had spent nearly two decades moving, selling and mining the black stuff, so he was ideally suited to join Hargreaves Services, then a coal company through and through.

Banham still runs the business, but it has transformed from pitch black to a vibrant shade of green. The road has been rocky at times, but Hargreaves shares are up 28 per cent to £5.14 since Midas tipped them two years ago and the outlook is promising.

Banham recently unveiled a six-fold increase in the interim dividend to 18p and promised a total payout of 36p for the year to May, giving the shares a 7 percent yield. The group is also expected to significantly increase shareholder returns over the next three years.

Hargreaves operates three divisions, each of which can claim its own environmental credentials. Hargreaves Land is taking over old mining sites and transforming them into areas for housing, light industry and renewable energy, from wind farms to battery storage.

Hargreaves Services is breaking ground on major infrastructure projects and has just ordered Britain’s first electric excavator, which is due to go into service early next year.

The division also transports municipal waste to biomass sites and begins using gas-powered trucks instead of diesel vehicles. The third arm of Hargreaves is a Germany-based joint venture that trades raw materials and recycles steel dust by converting it into pig iron.

This division struggled in the first half of Hargreaves’ financial year, due to lower commodity prices and an abundance of Russian pig iron. Europe has now embargoed Russian stocks, and steel dust prices have risen, so a solid turnaround is expected. The German company has also built up strong financial reserves and, despite disappointing results, has transferred twice as much money to Hargreaves than in the past and is expected to continue in the same vein.

The division is also likely to be sold in the coming years, which should raise at least £40 million, money that will be returned to shareholders as a special dividend or through a share buyback program (which reduces the number of shares outstanding and buys back shares) . tends to increase dividend payments).

Banham also plans to sell a large part of Hargreaves Land over time: the residential lots to builders and the renewable acreage to pension funds looking for solid rental income from wind, solar and battery farms. As the sales are completed, more money will flow to investors.

That’s why Hargreaves will make most of its profits in the coming years from the services sector, which has dozens of top clients and a robust order book. The group will also preserve several thousand hectares of woodland fertilized by sewage from Scottish Water and Northumbrian Water. Trees are planted and once they reach maturity, they are turned into wood.

Midas judgment: Hargreaves Services has been good for shareholders over the past two years, but further gains are on the horizon. Banham is committed to generating serious cash returns for investors, through special and regular dividends, supported by organic growth and steady sales of non-core divisions. The strategy is backed by experienced investor Christopher Mills, Hargreaves’ largest shareholder, with a 28 percent stake. For income-seeking investors, the shares should be rewarding at £5.14.

Traded on: GOAL ticker: HSP Contact: hsgplc.co.uk or 0191 373 4485