Hargreaves Services, which owns the rump of Scotland’s coal mining industry, saw operating profit fall by 86per cent last year to £5.2million.
The accelerated closure of coal-fired power stations drove writedowns of £12.4m, with coal and coke sales plummeting from seven million to under two million tonnes in two years, turning a £49m profit for the business into a £400,000 loss.
Hargreaves said last month that the fall in the pound would provide some relief. But it expects to be producing coal from just one site in Scotland by the end of the summer, with six other sites in wind-down, as it is now impossible to produce power station coal at a profit. Thermal coal prices have dropped from around $180 a tonne in 2008 to about $50.
The group bought seven sites in Scotland from administrators of ATH and Scottish Coal in 2013. The surviving House of Water site in Ayrshire has switched to producing specialist coal for the industrial and domestic market.
The group said: “The reductions in gas prices and the increases in UK carbon taxes have significantly reduced electricity generation from coal and have precipitated the announcement of the early closure or changes to operating regimes that will significantly reduce coal usage.
"Stations closed or otherwise likely to be burning less coal include Longannet, Rugeley, Fiddlers Ferry, Eggborough and Ferrybridge. A strengthening of government sentiment against coal fired generation increases the probability of further closures.”
Meanwhile Hargreaves has set “aggressive” new business targets for its industrial services operations.
Over the next five to seven year the company is hopeful of generating between £35m and £50m of value from its property and energy project portfolio, as it continues to reduce its focus on thermal coal.
The group was reporting a drop in continuing revenue to £341m from £662m the previous year.
Chairman David Morgan said: “After two challenging years, we have a clear opportunity in front of us to develop and deliver significant shareholder value.
“Our portfolio of property and energy projects offer an exciting platform for significant value creation that is incremental to that created from our distribution and services operations.”
He added: “The £60m of legacy assets that we aim to convert to cash will strengthen a balance sheet that is already strong and allow consideration of a wide range of options to return value or capital to shareholders.”
Hargreaves has been through a radical restructuring and repositioning programme that has included a “significant” number of redundancies, which is now“fundamentally complete”.
The group said last month that the uncertainty associated with Brexit presented potential risks for its earthworks and logistics businesses, which had a significant exposure to construction activity and capital investment projects. But there was also “potential upside from government-sponsored public sector works to reflate the economy”, and the medium-term impacts were not yet clear.
The shares fell 3.25p to 190p.
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here