North East-based haulier Hargreaves Services plc has sold its Imperial Tankers Limited business in a £26.9m deal.
The Durham firm’s Stockton-headquartered Imperial Tankers Limited business has been sold to Suttons Transport Group as part of a scheme to refocus Hargreaves’ activities.
Imperial had been part of the Hargreaves Services Group since 2007, when it was acquired for £6.3m.
The division generated profit after tax of around £1.6m from revenue of £29.7m in the year ended May 31, 2014.
Imperial will be sold inclusive of cash balances of £1.6m and £2.7m of asset finance debt, resulting in an effective enterprise value and reduction in overall net debt of £28.1m. The book value of Imperial Tankers in the Group accounts was approximately £9.5m.
Gordon Banham, chief executive officer of Hargreaves, said: “Imperial Tankers is a quality business and I would like to commend and thank the staff and management for their hard work and commitment in developing Imperial into one of the strongest tanker brands in the country.
“The very favourable valuation reflects the quality of the business and strong recent growth. I am pleased that the business has been sold to a high calibre operator who is seeking to invest in expansion and is well placed to drive synergies from the business, which the Hargreaves Group is unable to access.
“This is a good outcome both for the Group and for the management and employees of Imperial Tankers. Following the disposal we will be left with the fleet of dry bulk vehicles. This will remain a key part of the Group to drive synergies with our trading and production activities.”
Hargreaves says emerging opportunities in its main fields of coal mining and bulk material logistics has prompted a change in strategy to concentrate on the business’ core activities.
The firm said it was exiting “profit streams that are deemed to represent the lowest risk-weighted returns and weakest prospects for sustainable long term growth whilst strengthening the Group’s longer-term position in its core markets.”
In a wider update, the Group noted its short and medium term priorities are to focus on securing and under-pinning its core UK coal trading, production and distribution business.
The firm remains confident that power generation demand for coal will continue to feed its coal production and distribution business for “many years to come.”
However, it said increasing uncertainty around Government policy, weakness in international coal prices and volatility in gas prices are leading UK power generators to delay purchase contracts or source coal on shorter term contracts.
Recent falls in the international coal price have been compounded by a strengthening of sterling against the US dollar - meaning the sterling price of thermal coal in the UK is reduced.
The Hargreaves Board said it was confident that current prices levels are artificially low and expects some recovery in the foreseeable future.
The firm also warned that a review of its Monckton coke plant, near Barnsley, would determine whether spending on the operation was worthwhile.
Other non-core activities are also under review, including Hargreaves’ tyre crumbing operation: the joint venture with MIR Trade in Europe and the Rocpower operation. Notice has already been given to the firm’s joint venture partners to wind down the activities of the MIR Trade joint venture in an orderly fashion.
Commenting on the review Gordon Banham added: “The global and UK coal markets are going through a period of significant change and challenge which has led us to review both the market and strategic landscape and to move quickly to address potential threats and challenges in our core UK market.
“We remain of the view however that the coal market in the UK still offers the Group significant longer term opportunities, when the market settles back into a more normalised state.”