Hargreaves estimated that it has a current net exposure of roughly £4.5mln to British Steel from trade debt and work in progress, with a much higher potential impact on revenues in the coming year if British Steel stops trading.
The Durham-headquartered company, which has been supplying materials handling and other services to British Steel for the past eight years, employing approximately 170 people in those operations, said “until the future of British Steel is clarified, the potential impact on Hargreaves cannot be fully determined”.
Including the £4.5mln current exposure to British Steel, some or all of which may prove to be irrecoverable if the fallen steel giant goes to the wall, Hargreaves said there could be a £9mln charge against profits from redundancy and other associated employment costs, together with asset write downs and leasing obligations.
Furthermore, if British Steel stops trading, Hargreaves said it could reduce group revenue in the next financial year by roughly £11mln and its profit before tax by about £1.3m.
Named after the former state monopoly, British Steel was set up by Greybull in 2016 after it bought the Scunthorpe steelworks and other sites for just one pound from Tata Steel.
Following news from the Official Receiver that the steel producer had been wound up in the High Court on Wednesday morning, shares in Hargreaves fell more than 12% to 250.6p, around its lowest since December 2016.