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Stronger than expected trading in Germany means sustainably higher earnings
Thursday 17 Mar 2022 Author: Ian Conway

Hargreaves Services (HSP:AIM) 550p

Gain to date: 71.9%

Original entry point: Buy at 320p, 25 February 2021

Property and industrial services firm Hargreaves Services (HSP:AIM) is the gift that keeps on giving for shareholders.

First half results for the period to November blew away estimates thanks to major strategic progress in both the land and industrial businesses.There was also a strong contribution from the German operation HRMS, which trades raw materials, and its DK recycling subsidiary.

Now the firm believes its second half results will be even stronger than the first half thanks to the continuing strong performance of HRMS and the recycling business. On top of higher levels of activity, surging prices for pig iron and zinc are driving a an increase in operating profits.

Analysts are currently forecasting full year pre-tax earnings of £20 million after the firm posted a profit of £10.4 million in the first half. Therefore, they will need to upgrade their estimates on the back of the 15 March announcement.

Moreover, they will need to raise their 2023 forecasts as well as the firm expects strong market conditions to continue until at least the  end of this year.

Even if commodity prices fall back, Hargreaves believes operational improvements at DK will lead to HMRS profits exceeding market forecasts by at least 30% in coming years.

SHARES SAYS: Stick with this great investment. 

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