Final Results

UK Coal PLC 06 March 2003 6 March 2003 UK COAL PLC PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2002 UK COAL PLC, the UK's leading coal mining company, today announces its preliminary audited results for the year ended 31 December 2002. • Final dividend maintained at 5 pence per share giving total dividend for the year of 10 pence per share • Underlying improvement in deep mines performance, despite geological difficulties at Daw Mill • Cost cutting initiatives progressing well • Cash flow reduced by stock build and turmoil in generator market • Latest property portfolio value increased to £174.0 million, £95.6 million above book value • Good progress at Daw Mill in the first two months of 2003 2002 2001 Turnover £596.6m £662.5m Profit/(Loss) before tax and exceptionals £8.4m** £(10.7)m* Loss for the year after tax and exceptionals (£81.7)m** £(18.3)m* Dividend for the year 10.0p 10.0p Earnings/(loss) per share pre exceptionals 4.6p (1.7p) Loss per share after tax and exceptionals (56.0p) (12.5p) * Includes Operating Aid income £21.7 million. **Includes net provision release of £21.1 million. Commenting on the results, Gordon McPhie, Chief Executive of UK COAL, said: 'Turmoil in the UK electricity generating industry, low international coal prices, a weakening US dollar, closure costs and unexpected adverse geological conditions, particularly at the Daw Mill and Selby collieries, all impacted on UK COAL's performance and results in 2002. 'In 2003 we should benefit from the initiatives we have taken in the last two years to improve efficiency and reduce costs in all our mines. We are making good progress towards achieving the target of 105 pence per gigajoule by the end of 2003. This together with our substantial property interests should provide the basis for a long-term successful future. 'Increased coal sales and output improvements at Daw Mill have improved cash flow in the first two months of 2003.' For further information, please contact: UK COAL PLC Today 020 7554 1400 Gordon McPhie, Chief Executive Thereafter 01302 751 751 Financial Gavin Anderson & Company Liz Morley 020 7554 1400 Ken Cronin .. .. Operational Stuart Oliver 01525 381 759 07774 231 178 PRELIMINARY RESULTS STATEMENT Introduction Turmoil in the UK electricity generating industry, low international coal prices, a weakening US dollar, closure costs and unexpected adverse geological conditions, particularly at the Daw Mill and Selby collieries, all impacted on UK COAL's performance and results in 2002. In 2002 coal produced 32% of total UK electricity generation (2001: 34%) and UK power stations consumed some 47.5 million tonnes (2001: 50.8 million tonnes). UK COAL's share of the market, at 18.9 million tonnes (2001: 20.0 million tonnes), increased from 36% to 37%. Coal imports into the UK fell by 18%, from 27.1 million tonnes to 22.1 million tonnes. Results Turnover for the year was £596.6 million (2001: £662.5 million), and profit before exceptionals was £8.4 million (2001: loss £10.7 million). The loss on ordinary activities before tax was £83.1 million (2001: £26.5 million), including exceptional items of £91.5 million (2001: £15.8 million). During the year UK COAL carried out a review of deep mines cost provisions for shaft treatment, pit top, spoil heaps and pumping. The net value of provisions created and released, excluding exceptional redundancy and concessionary fuel items, was £21.1 million, which has reduced cost of sales in the year. Exceptional items include £55.6 million of closure and redundancy costs relating to Selby and Prince of Wales Collieries, together with an asset impairment for Selby of £20.2 million. The Group has also provided for a potential bad debt of £6.4 million due to the collapse of TXU. Provision has also been made for £9.3 million in respect of work in progress at a surface mine site, which was prematurely terminated, and is the subject of a legal dispute with claims and counter claims. Net cash inflow from operations at £8.9 million (2001: £115.5 million including Coal Operating Aid of £75 million) was affected by reduced demand from the generators and the TXU bad debt write-off in the second half of the year. The cash outflow before financing and dividend of £25.2 million (2001: net inflow of £75.9 million) reflects the cost of increasing coal stocks by 0.8 million tonnes (£20.3 million) and lower coal sales to the troubled generator market. Increased coal sales and output improvements at Daw Mill have improved cash flow in the first two months of 2003. Dividend In view of the improving Group cash position and the return to substantive production at Daw Mill, the Board has decided to recommend to shareholders maintenance of the final dividend at 5.0 pence per share, bringing the total dividend for the year to 10 pence per share (2001: 10 pence per share). Subject to approval at the AGM on 29 April 2003, the dividend will be paid on 20 June 2003 to shareholders on the register on 23 May 2003. Balance Sheet Capital employed in fixed assets (excluding surface mine development and restoration costs) was significantly reduced, with fixed asset additions of £35.9 million (2001: £71.3 million) compared to a depreciation charge for the year of £59.3 million (2001: £59.4 million). In addition there has been an exceptional impairment of £20.2 million in respect of the carrying value of the Selby assets to reflect its phased closure. Group output levels remained similar to the previous year, while coal burn by the generators reduced from the high levels of a year earlier; our coal stocks increased from 1.1 million tonnes to 1.9 million tonnes. As a consequence of reduced sales (particularly during October and November when the generating industry was in some turmoil) and with the bad debt from TXU of £6.4 million, the year-end bank balance was reduced to £60.9 million (2001: £77.2 million). The bank balance represents the funds deposited to cover insurance requirements of £37.4 million (2001: £35.3 million) and funds deposited with the Coal Authority in respect of subsidence obligations of £23.2 million (2001: £20.6 million). At the year-end bank borrowings were £28.4 million (2001: nil) and hire purchase and finance lease liabilities were £25.5 million (2001: £22.7 million) in respect of surface and underground equipment. An extension to the Group's banking facilities was agreed on 24 September for two years, providing total facilities of £63.3 million. £25 million of this is provided as Letters of Credit to the Coal Authority for security for shaft treatment and subsidence liability and £38.3 million as a revolving credit facility. The significant fall in equity markets during 2002 has resulted in a decline in the net assets of the defined benefit pensions schemes. As a result, the gross shortfall under FRS 17 'Retirement Benefits' transitional arrangements is £108.1 million (2001: £43.5 million). The next actuarial valuation will be carried out at December 2003, which will review future funding levels from 2004 forward. During the year a Court Order was obtained to release the Company from the undertakings given in 1994 and 1999 in respect of the creation of the Special Reserve which amounted to £191.8 million, allowing the reserve to be transferred in its entirety to the profit and loss account. A shareholders' resolution will be proposed at the Annual General Meeting asking shareholders to approve a request to the Courts to order a further reduction in capital of £290.9 million. If the resolution is passed and the Court Order is obtained it is envisaged that this will be transferred in its entirety to the profit and loss account, which will be used to eliminate goodwill arising on consolidation and will create additional distributable reserves. Property Valuation An updated valuation of the land and property assets was conducted by Fuller Peiser in 2002 It concluded that the overall market value of the Group's property interests before rehabilitation and aftercare costs has increased to £174.0 million (£95.6 million in excess of book value). OPERATIONAL REVIEW Introduction Coal output for the Group was 19.5 million tonnes (2001: 19.6 million tonnes) in the UK, and 2.4 million tonnes (2001: 2.7 million tonnes) in Australia. Production at Daw Mill Colliery in the West Midlands was severely affected by geological conditions not previously encountered in a fully developed panel of coal. These geological conditions reduced output at Daw Mill in the second half of the year to an average of 4,000 tonnes per week. However, since the turn of the year, conditions have markedly improved, resulting in weekly output averaging 35,000 tonnes for the first two months. Deep Mines A number of actions during the year have been taken to strengthen the Group's position, with the focus on lower-cost, higher productivity pits extracting coal from seams with a lower risk of geological disturbance. On 30 January 2002 the Group announced the phased closure of Prince of Wales Colliery, West Yorkshire, and the mine subsequently ceased production at 30 August 2002. UK COAL also announced on 16 July 2002 that operations at the Selby complex would be phased out over a 20-month period due to deteriorating geological conditions and continuing financial losses. The closure of a part of the complex several months ahead of the original schedule may however be necessary if geological conditions in some areas still to be worked make the reserves too costly to mine. The Group will cease mining at Clipstone Colliery, Nottinghamshire in mid-April. The facility will be returned to the care of The Coal Authority, which holds the lease and mining licence for the colliery. Following an operational review of all the remaining deep mines, measures have been introduced to improve the performances of other collieries, principally Harworth, Maltby and Ellington. Harworth and Maltby both have a high geological risk. Following discussions with the unions, management and workforce a viable business plan has been agreed for the continuing operations at Harworth. This is subject to the result of seismic surveys, which should be completed by April 2003. We are discussing a viable, ongoing plan for Maltby that is dependent on the unions and workforce agreeing to different working arrangements. Surface Mines Surface mine operations at the St Aidans site near Leeds and Eldon Deep, near Bishop Auckland ceased during the year. Production began at the Southfield site near Shildon, where 580,000 tonnes of coal and 180,000 tonnes of fireclay will be recovered over a 28-month period. Production also commenced at other sites containing a total of 1.4 million tonnes of coal. Plans to recover an additional 430,000 tonnes of coal and ancillary fireclay from the Stobswood site, near Morpeth, were also approved during the year. The application to recover 320,000 tonnes of coal on the Shipley West site in Derbyshire has been re-activated following delays caused by securing a suitable access to and from the site. Project 105 The benefits of the Project 105 initiative are becoming apparent, with increasing productivity and purchase cost savings on equipment and materials during the year. Unit costs of production reduced in 2002 despite the severe negative impact due to the geological problems at Daw Mill. The average unit operating cost for the year was 118 p/gj (2001: 130 p/gj) excluding exceptional items. Sales Results for the year were adversely affected by the interruption in supplies to AES Drax during the collapse of TXU Energy in the fourth quarter. Some replacement sales have subsequently been achieved so mitigating the loss of sales following the administration of TXU. Despite the collapse of TXU and its impact in the electricity generating market, we remain convinced there will continue to be market opportunities for coal, in particular for the UK-mined coal the power stations were designed to burn, providing we continue to drive down costs by improving machine utilisation and efficiency. Coal Production 2002 2001 DEEP MINES (mt) (mt) Clipstone** 0.3 0.4 Daw Mill 0.8 1.2 Ellington 0.7 0.6 Harworth 1.2 1.1 Kellingley 1.6 1.5 Maltby 1.4 1.6 Prince of Wales* 0.7 1.3 Riccall*** 1.3 1.3 Rossington 0.7 0.4 Stillingfleet*** 1.9 1.7 Thoresby 1.5 1.3 Welbeck 1.7 1.5 Wistow*** 1.4 1.5 SUB TOTAL 15.2 15.4 SURFACE MINES 13 Mines in total 4.3 4.2 TOTAL UK PRODUCTION 19.5 19.6 Gloucester Coal (Australia) 2.4 2.7 TOTAL PRODUCTION 21.9 22.3 * Ceased production 30 August 2002 **To cease production in April 2003 *** To cease production by March 2004 Property The Group has continued to add value to its property portfolio by obtaining planning permissions for a number of sites. During the year, 124 acres of land received planning permission for various types of development, including 50 acres having detailed permission. Infrastructure works have been completed on the first phase of the Advanced Manufacturing Park which is being developed in conjunction with Yorkshire Forward on 100 acres of our land on the former Waverley surface mine site near Rotherham. Further discussions are taking place with the local authority on the potential development of another large part of the 700-acre site. Premises at the Asfordby Business Park in north-east Leicestershire have now been substantially let, and as such, the development is now classed as ' investment properties,' (market value £6.5 million) resulting in a revaluation reserve in the balance sheet of £4.8 million, that being the excess of market value over book value. The rental income from properties in the year was £3.4 million (2001: £3.9 million which included £0.5 million received in respect of land sterilised during the foot and mouth crisis), generating an operating profit of £0.9 million (2001: £1.9 million). Income from property sales in the year was £2.5 million (2001: £2.9 million). Further sales are anticipated in 2003. Fuller Peiser were commissioned to update the valuation of land and property assets in the UK following their previous valuation in July 2000. The overall value of the property has increased to £95.6 million in excess of book value (2000: £44.2 million in excess of book value); the valuation excludes operating colliery sites. As in the previous report the valuation excludes any taxation or claw back liability that would be incurred on the sales of these land assets at the estimated market value. In accordance with the Companies' Act and FRS 15 the directors will continue to adopt a policy of reflecting these land assets at the lower of cost and net realisable value. Market Value Rehabilitation/ Market Value Before Deduction Aftercare After Deduction Of Costs Costs Deducted Of Costs £ £ £ Disposal Points 13,207,192 3,514,323 9,692,869 Surface Mines 132,069,819 30,739,331 101,330,488 Closed Collieries 17,445,783 4,545,783 12,900,000 Other Operational 11,249,824 1,786,824 9,463,000 Properties Total 173,972,618 40,586,261 133,386,357 The costs deducted from the valuation largely comprise the costs of restoration and closure, remediation and aftercare included within the provisions for liabilities and charges disclosed in the accounts. Australia Gloucester Coal (previously CIM Resources), our mining activity in New South Wales, achieved sales of 2.4 million tonnes in the year; reducing from 2.7 million tonnes in 2001 as coal extraction from the Stratford Mine deposit nears completion before moving on to the extension at Bowens Road. In March 2003 production will commence at the new Duralie site, which, together with Bowens Road, will produce an annual combined tonnage of circa 2.0 million tonnes of coking and thermal coals. Gloucester Coal incurred a loss of £0.7 million (2001: £0.2million). The hedging and loan agreements were completed in December 2002, leaving Gloucester Coal externally debt free, which has removed an impediment to future profits. Other Sales Monckton Coke & Chemicals' sales of £15.9 million (2001: £18 million) resulted in an operating loss of £0.6 million (2001: £0.1 million). Activities were affected by low output from the combined heat and power plant due to temporary boiler failure, a steep fall in electricity prices and the collapse of TXU Energy, Monckton's principal electricity customer. However, the operation has now secured substantial orders at increased prices for 2003. Emissions Trading During the year we were successful in bidding to join the UK emissions trading scheme, designed to reduce the volume of greenhouse gases emitted. Engines to utilise methane gas have now been installed at five collieries which will generate about a third of the electricity required to operate our mines and reduce greenhouse gas emissions. The Company has qualified for payments of £3.9 million in respect of 2002 under the emissions trading scheme. This amount is included in other operating income in the profit and loss account. The Company is developing other methane utilisation schemes, which will secure additional emission credits for future sale. Energy White Paper The Energy White Paper was released by the Government on 24 February 2003. We welcome the inclusion in the White Paper of the proposals for an investment aid scheme for accessing viable new coal reserves. Health, Safety and Environment The year was one of continued improvement in health and safety, with an 18.5 per cent reduction in the major injury rate and the award of the British Safety Council's Five Star accreditation - the highest possible - for the fourth consecutive year. UK COAL was again awarded a top prize in the County Durham Environmental Awards for the successful restoration of the Woody Close Drift Mine and waste transfer station. For the fourth successive year, UK COAL participated in the Regional Index of Environmental Engagement established by Business in the Community for Yorkshire and Humber. It provides a benchmark against 119 businesses and other organisations in the region. UK COAL were ranked 11th overall, eight places ahead of the ranking of the previous year and 2nd behind BP in our business sector of Oil, Gas, Chemical and Minerals. Directors John Robinson will be retiring as Chairman, and from the Board, following the Annual General Meeting on 29th April. The Board would like to take this opportunity of thanking him for his support and dedication. His successor is David Jones, a previous Chief Executive at National Grid Company plc and South Wales Electricity plc. Outlook Initiatives taken by UK COAL to increase efficiency and reduce costs have improved results early in 2003. Daw Mill Colliery is now achieving increased levels of production after working through adverse geological conditions and has the potential to be a consistent low-cost producer. We are continuing to work towards further reducing deep mine costs and minimising the risks associated with geologically complex reserves with the target of achieving unit production costs running at 105p/gj by the end of 2003. Improving performance in our deep mines, together with the benefits to be derived from our substantial property interests are putting the building blocks in place for a long-term successful future. CONSOLIDATED PROFIT AND LOSS ACCOUNT For the year ended 31 December 2002 Before Group Group Exceptional items Exceptional items 2002 2001 Notes £'000 £'000 £'000 £'000 Turnover 2 596,602 - 596,602 662,499 Cost of sales before exceptional items (570,887) - (570,887) (671,090) Exceptional cost of sales Prince of Wales Colliery Went 3 - - - (15,771) Edge write-down Impairment in value of 3 - (20,191) (20,191) - colliery assets Net closure and 3 - (55,643) (55,643) - redundancy costs Provision against amounts 3 - (15,667) (15,667) - receivable ------------ ------------ ------------ ------------ Cost of Sales (570,887) (91,501) (662,388) (686,861) ------------ ------------ ------------ ------------ Gross profit / (loss) 25,715 (91,501) (65,786) (24,362) UK Coal Operating Aid Scheme - - - 21,658 Other operating income and expenses 4 (13,686) - (13,686) (20,640) ------------ ------------ ------------ ------------ Operating profit / (loss) 12,029 (91,501) (79,472) (23,344) Profit on sale of land and buildings 2,033 - 2,033 1,857 ------------ ------------ ------------ ------------ Profit / (loss) on ordinary activities 14,062 (91,501) (77,439) (21,487) before interest and taxation Interest receivable and similar income 5 5,181 - 5,181 5,644 Interest payable and similar charges 6 (2,854) - (2,854) (2,697) Unwinding of discount on provisions 12 (7,999) - (7,999) (7,944) Net interest payable and similar (5,672) - (5,672) (4,997) charges ------------ ------------ ------------ ------------ Profit/(loss) on ordinary activities 7 8,390 (91,501) (83,111) (26,484) before taxation Taxation 8 (1,791) 3,142 1,351 8,112 ------------ ------------ ------------ ------------ Profit/(loss) on ordinary activities 6,599 (88,359) (81,760) (18,372) after taxation Equity minority interest 82 - 82 96 ------------ ------------ ------------ ------------ Profit/(loss) for the year 6,681 (88,359) (81,678) (18,276) Dividend 9 (14,584) - (14,584) (14,584) ------------ ------------ ------------ ------------ Loss sustained for the year (7,903) (88,359) (96,262) (32,860) ============ ============ ============ ============ Earnings/(loss) per ordinary share 4.6p (60.6p) (56.0p) (12.5p) ============ ============ ============ ============ STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES for the year ended 31 December 2002 2002 2001 £'000 £'000 Loss for the financial year (81,678) (18,276) Exchange adjustments (355) (785) Surplus arising on revaluation of tangible property assets 4,814 - ------------ ------------ Total recognised gains and losses for the financial year (77,219) (19,061) ============ ============ CONSOLIDATED BALANCE SHEET for the year ended 31 December 2002 Group Group Company Company 2002 2001 2002 2001 Notes £'000 £'000 £'000 £'000 Fixed assets Tangible fixed operating assets 427,211 485,787 - - Investment properties 6,500 - - - Investments - - in subsidiaries - - 491,213 595,920 - other 38 40 - - ------------ ------------ ------------ ------------ 433,749 485,827 491,213 595,920 Current assets Stocks 79,152 71,866 - - Debtors: amounts falling due after 8,873 8,318 20,154 20,154 one year Debtors: amounts falling due within 73,143 86,055 199,264 171,221 one year Cash at bank and in hand 14 60,893 77,181 - 35,444 ------------ ------------ ------------ ------------ 222,061 243,420 219,418 226,819 ------------ ------------ ------------ ------------ Total assets 655,810 729,247 710,631 822,739 ============ ============ ============ ============ LIABILITIES Capital and reserves Called up share capital 1,458 1,458 1,458 1,458 Share premium account 290,872 290,872 290,872 290,872 Revaluation reserve 4,814 - - - Special reserve account - 18,919 - 191,847 Capital redemption reserve 257 257 257 257 Profit and loss account (69,638) 8,060 164,174 59,054 ------------ ------------ ------------ ------------ Shareholders' funds, 227,763 319,566 456,761 543,488 attributable to equity interests Equity minority interest 331 416 - - ------------ ------------ ------------ ------------ Capital employed 228,094 319,982 456,761 543,488 Provisions for liabilities and 12 258,699 257,408 - - charges Creditors: amounts falling due after 13 22,790 20,066 - - more than one year Creditors: amounts falling due within 13 146,227 131,791 253,870 279,251 one year ------------ ------------ ------------ ------------ 427,716 409,265 253,870 279,251 ------------ ------------ ------------ ------------ Total funds employed 655,810 729,247 710,631 822,739 ============ ============ ============ ============ CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2002 2002 2001 £'000 £'000 Operating activities Net cash inflow from operating activities 8,918 115,497 --------- --------- Returns from investments and servicing of finance Interest paid on bank borrowings (401) (157) Interest paid on hire purchase and finance leases (1,853) (1,729) Financing costs (636) - Interest received 5,181 5,644 --------- --------- Net cash inflow from returns on investments and servicing of finance 2,291 3,758 Taxation 36 (481) Capital expenditure and financial investment Development expenditure (35) (9,980) Purchase of fixed assets (40,475) (37,243) Receipts from sale of fixed assets 4,082 4,344 ----------- ----------- (36,428) (42,879) ----------- ----------- Cash (outflow)/inflow before financing and dividends (25,183) 75,895 Equity dividends paid (14,529) (14,573) ----------- ----------- Cash (outflow)/inflow before use of liquid resources and financing (39,712) 61,322 ----------- ----------- Management of liquid resources Cash deposited in subsidence security fund (2,664) (20,567) Cash deposited to cover insurance requirements (2,075) (1,849) ----------- ----------- Net cash (outflow)/ inflow before financing (44,451) 38,906 Financing Drawdown/(repayment) of bank borrowings 27,994 (896) Hire purchase and finance lease capital repaid (12,975) (8,609) Increase in debt 8,414 - ----------- ----------- Net cash inflow /(outflow) from financing 23,433 (9,505) ----------- ----------- (Decrease)/increase in cash (21,018) 29,401 =========== =========== NOTES TO THE FINANCIAL STATEMENTS for the year ended 31 December 2002 Reconciliation of operating loss to net cash inflow from operating activities 2002 2001 £'000 £'000 Continuing activities Operating loss (79,472) (23,344) Depreciation on tangible fixed assets 59,299 59,419 Exceptional impairment 20,191 - - 15,771 Went Edge impairment Net charge for surface mine development and restoration assets 11,413 9,135 Profit on disposal of plant and machinery (296) (246) (Increase )/decrease in coal and other stocks (7,286) 5,817 Decrease in debtors 12,332 13,877 Decrease in creditors (7,263) (18,274) Decrease in Coal Operating Aid receivable - 53,342 ------------ ------------ Net cash inflow from continuing operating 8,918 115,497 activities ============ ============ Reconciliation of net cash flow to movement in net funds Cash flow Exchange Other non cash At 31 At 1 January adjustment changes December 2002 2002 £'000 £'000 £'000 £'000 £'000 Net cash at bank 21,328 (21,018) (9) - 301 Liquid resources 55,853 4,739 - - 60,592 Bank borrowings (492) (27,994) 9 91 (28,386) Hire purchase and finance (22,698) 4,561 - (7,336) (25,473) leases ----------- ----------- ----------- ----------- ----------- 53,991 (39,712) - (7,245) 7,034 =========== =========== =========== =========== =========== Major non cash transactions During the year the group entered into finance lease arrangements in respect of assets with a total capital value at the inception of the lease of £7,336,000 (2001: £12,135,000). 1. Accounting policies The financial statements are prepared under the historic cost convention as modified by revaluation of investment properties in accordance with SSAP 19 ' Accounting for Investment Properties', and in accordance with applicable accounting standards in the United Kingdom. 2. Segmental and geographical analysis 2002 2001 £ '000 £ '000 Turnover Continuing operations: Coal sales - deep mines 445,087 488,924 Coal sales - surface mines 96,305 101,806 Surface mines contract mining and associated activities 4,724 10,598 Manufactured fuel and combined heat and power 15,908 18,046 Australia - coal sales 31,145 39,226 Property activities 3,433 3,899 ----------- --------- 596,602 662,499 =========== ========= Geographical Analysis United Kingdom 557,874 615,526 European Community Countries 2,826 3,020 Rest of Europe 4,757 4,727 Asia - Pacific 31,145 39,226 ----------- --------- 596,602 662,499 =========== ========= (Loss)/profit before taxation Coal sales - deep mines (Note d) (5,904) (46,745) - deep mines coal operating aid - 21,658 Exceptional items (Note 3) (91,501) (15,771) Coal sales - surface mines (Notes a & c) 16,461 17,935 Surface mines contract mining and associated activities (2,270) (572) Emissions Trading 4,153 - Manufactured fuel and combined heat and power (635) (81) Australia - coal sales 1,834 4,246 - hedging losses (2,517) (4,440) Property activities - rentals and other property activities 907 1,906 (Notes b & c) - profit on sales 2,033 1,857 Provision for debtor in liquidation - (1,480) Net interest payable (5,672) (4,997) ------------ ------------ (Loss) before taxation (83,111) (26,484) =========== ========= Net assets/(liabilities) Continuing operations: Deep Mines 149,298 195,607 Surface Mines 12 (27,019) Surface mines contract mining and associated activities (15,049) 8,253 Manufactured fuel and combined heat and power (1,107) 2,411 Australia 11,916 13,275 Property activities 83,256 80,810 ------------ ------------ 228,326 273,337 Unallocated net assets/(liabilities): Dividend payable (7,292) (7,346) Net funds and finance leases 7,060 53,991 ----------- ------------ 228,094 319,982 =========== ====== Note a: Includes income of £6.0 million in respect of Business Rates refunds on various surface mine sites in 2001 (2002: nil) Note b: Includes a receipt of £0.5 million for Land Sterilisation in 2001 (2002: nil) Note c: Costs associated with operating the property segment are now recognised in the property segment; previously these were treated as part of the cost of the surface mining operation. Comparatives have therefore been restated to show the impact of including these costs in the appropriate segment in the prior year. Note d: Includes the effect of net release of provisions of £21.1 million. 3 Exceptional items comprise the following: 2002 2001 Note £'000 £'000 £'000 Impairment a 20,191 - Net redundancy and closure cost Redundancy b 60,378 Stores equipment and asset write - off c 9,765 DTI contribution d (10,000) Concessionary fuel e (4,500) ------ 55,643 - Provision against TXU debtor f 6,358 Provision against amounts recoverable under long-term contracts g 9,309 ------ 15,667 - Colliery write -down h - 15,771 ------ ------ 91,501 15,771 ------ ------ Notes a Following the announcement of the closure of mining operations at Selby , the carrying value and estimated useful economic lives of the mines and surface works has been reviewed , giving rise to an impairment in value. b Costs predominantly associated with the closure of Prince of Wales colliery and the announced closure of the Selby mines and surface works. c Equipment and stores which are unlikely to be used once Selby closes . d Government contribution to redundancy costs arising at Selby mines . e Reduction in liability to provide concessionary fuel deliveries . f Provision against non-payment by ESI customer , TXU , for fuel deliveries. g Provision has been made against certain amounts recoverable under long-term contracts where settlement is dependent on future planning permission and contractual negotiation. h Write-off of Went Edge development costs at Prince of Wales Colliery . 4 Other operating income and expenses 2002 2001 £'000 £'000 Administrative expenses 18,164 20,830 Other operating income (4,478) (190) --------- -------- Other operating income & expenses 13,686 20,640 ========= ======== Due to the nature of the Group's business, distribution expenses are treated as a part of cost of sales. Administrative expenses include £3.0 million(2001: £2.6 million) in respect of fees paid to Bain & Co, the consultants engaged to assist with Project 105. 5. Interest receivable and similar income 2002 2001 £'000 £'000 Interest receivable from short-term deposits 5,181 5,276 Discounting of long-term receivables - 368 ---------- ---------- 5,181 5,644 ========== ========== 6. Interest payable and similar charges 2002 2001 £'000 £'000 On bank loans, overdrafts and other loans repayable within 5 years 401 157 Amortisation of loan issue costs (FRS4) 545 691 On finance leases and hire purchases, repayable within 5 years 1,908 1,828 On finance leases and hire purchases, repayable after 5 years - 21 ---------- ---------- 2,854 2,697 ========== ========== 7. Profit/(Loss) on ordinary activities before taxation 2002 2001 £'000 £'000 Profit/(loss) on ordinary activities before taxation is stated after crediting: Rent receivable 3,433 3,899 Profit on disposal of tangible fixed assets - plant and equipment 296 246 - land and buildings 2,033 1,857 And after charging: Depreciation - tangible owned assets 50,661 48,335 Depreciation - assets held under hire purchase and finance leases 8,638 11,084 Went Edge impairment - 15,771 Net charge for surface mine development and restoration assets 11,413 9,135 Auditor's remuneration (Company, £35,000, 2001: £50,000) 241 301 8. Taxation 2002 2001 £'000 £'000 On ordinary activities United Kingdom corporation tax at 30% (2001: 30%) - (6,497) Adjustment in respect of prior years - (3,634) Overseas taxation 3 (91) ----------- ----------- Total current tax on ordinary activities 3 (10,222) Deferred tax Origination and reversal of timing differences 2,514 (3,150) Adjustment in respect of prior years (726) 3,494 ----------- ----------- Total deferred tax on ordinary activities 1,788 344 ----------- ----------- On exceptional items United Kingdom corporation tax at 30% (2001: 30%) - 6,497 Origination and reversal of timing differences (3,142) (4,731) (3,142) 1,766 Total current tax 3 (3,725) Total deferred tax (1,354) (4,387) Tax on profit of ordinary activities (1,351) (8,112) ====== ====== 9. Dividends 2002 2002 2001 2001 pence pence per share £'000 per share £'000 Interim 5.0p 7,292 5.0p 7,292 Final 5.0p 7,292 5.0p 7,292 --------- --------- --------- --------- 10.0p 14,584 10.0p 14,584 ========= ========= ========= ========= The number of shares in issue at 31 December 2002 was 145,847,454 (2001: 145,847,454). Subject to approval at the AGM, the final dividend of 5.0 pence per share (2001: 5.0 pence per share) will be paid on 20 June, 2003 to shareholders on the register at 23 May, 2003. The total dividend recommended for the year is 10.0 pence per share (2001: 10.0 pence per share). 10. Reconciliation of movements in shareholders' funds Group Group Company Company 2002 2001 2002 2001 £'000 £'000 £'000 £'000 (Loss)/profit for the financial year (81,678) (18,276) (72,143) 784 Dividends (note 9) (14,584) (14,584) (14,584) (14,584) Surplus on revaluation 4,814 - - - Exchange differences (355) (785) - - ----------- ----------- ----------- ----------- Movement in shareholders' funds (91,803) (33,645) (86,727) (13,800) Opening shareholders' funds 319,566 353,211 543,488 557,288 ----------- ----------- ----------- ----------- Closing shareholders' funds 227,763 319,566 456,761 543,488 =========== =========== =========== =========== 11. Pensions Financial Reporting Standard 17 on Retirement Benefits requires certain disclosures this year under the transitional arrangements. The standard takes full effect in 2005 when any surplus or deficit in the pension fund will be incorporated as an asset or liability in the company's balance sheet. UK COAL has a mixture of pension funds including money purchase and two defined benefit schemes in respect of TUPE employees transferred at the time of the acquisition of British Coal. The defined benefit schemes have been effectively closed to new entrants since January 1995. A full actuarial valuation of the defined benefit schemes was carried out as at December 2000 when one scheme was 101% funded and the other scheme was 87% funded. The company agreed to increase contributions by 2% (annual cost £0.9 million) from 1st April 2002 to cover the deficit in the underfunded scheme. Using the more onerous calculation of liabilities, and valuing the assets at 31st December 2002 in accordance with FRS 17, a liability of £108.1 million (2001: £43.5 million) would have been included in the balance sheet. These amounts are stated without taking account of deferred tax that would offset these liabilities if the Company generated sufficient profits before the actual pension liabilities fall due. This deficit will not affect the funding rate for 2003. 12. Provisions for liabilities and charges At 1 January Created in Released in Utilised in Unwinding of At 31 2002 year year year discount December 2002 £'000 £'000 £'000 £'000 £'000 £'000 Employer and public 28,974 6,660 (191) (7,260) 1,346 29,529 liabilities Surface damage 34,497 5,192 (11,955) (4,930) 1,035 23,839 Concessionary fuel 29,426 - (5,164) (437) 1,249 25,074 Claims 527 6,391 - (5,943) - 975 Restoration & closure costs - surface mines 89,962 1,872 (7,807) (2,309) 2,699 84,417 Restoration & closure costs Deep mines-shaft 35,035 1,380 (10,739) (713) 950 25,913 treatment and pit top Spoil heaps 11,809 233 (6,483) (312) 326 5,573 Pumping costs 14,594 116 (4,604) - 63 10,169 Ground/groundwater 11,036 500 (1,000) 331 10,867 contamination - Gas plant 194 - - (41) - 153 decommissioning Redundancy - 60,378 - (18,188) - 42,190 ----------- ----------- ----------- ----------- ----------- ----------- 256,054 82,722 (47,943) (40,133) 7,999 258,699 Deferred taxation (note 1,354 - - (1,354) - - 8) ----------- ----------- ----------- ----------- ----------- ----------- 257,408 82,722 (47,943) (41,487) 7,999 258,699 =========== =========== =========== =========== =========== =========== Changes to provisions that arise as a result of redundancy programmes are treated as exceptional items in the profit and loss account, consistent with the nature of the underlying event, which is usually the closure of a mine. Other provision changes relate to revisions in estimates arising in the ordinary course of business and are charged / credited within the appropriate caption in the profit and loss account. During the year exceptional items of £60.4 million and (£4.5 million) were charged / (credited) to the profit and loss account in respect of redundancies and concessionary fuel releases respectively. 13. Creditors 2002 2001 £'000 £'000 Creditors - amounts falling due after more than one year Hire purchase and finance lease liabilities 18,256 15,373 Retentions 4,534 4,693 ---------- ---------- 22,790 20,066 ---------- ---------- Creditors - amounts falling due within one year Trade creditors 55,209 58,104 Other taxation and social security 13,697 14,268 Hire purchase and finance lease liabilities 7,217 7,325 Bank borrowings 28,386 492 Dividends payable 7,401 7,346 Accruals and deferred income 33,191 43,666 Corporation tax 1,126 590 ---------- ---------- 146,227 131,791 ========== ========== 14. Cash at bank and in hand 2002 2002 2001 2001 Change in year Change in year £'000 £'000 £'000 £'000 Monies deposited to cover insurance 37,361 2,075 35,286 1,849 requirements Subsidence security fund 23,231 2,664 20,567 20,567 Other cash balances 301 (21,027)* 21,328 29,353* ----------- ----------- ----------- ----------- 60,893 (16,288) 77,181 51,769 =========== =========== =========== =========== * Includes, £ 9,000 (2001: £48,000) of exchange differences. Included within the cash balance of £60.9 million are amounts totalling £37.4 million (2001: £35.3 million) held by the Group's insurance subsidiary and £23.2 million (2001: £ 20.6million) deposited to cover subsidence securities liabilities. This information is provided by RNS The company news service from the London Stock Exchange

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