Interim Results
UK Coal PLC
13 September 2001
13TH September 2001
UK COAL PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2001
UK COAL PLC, the UK's leading coal mining company, today announces its interim
results for the six months ended 30 June 2001.
2001 2000
Turnover £340.1m £381.7m
Loss before tax £(10.8)m £(10.2)m
Loss per share, after tax and exceptionals (5.4p) (6.7)p
Dividend 5.0p 5.0p
* Cash flow before Coal Operating Aid, financing and dividends of
£12.3 million
* Dividend held at 5.0p (cost £7.3 million)
* In-depth Business Review (Project 105) launched, to return company
to competitiveness and profitability
* Strong market demand for coal
* Planned investment of around £60 million for the year - new mining
areas at Daw Mill and Riccall and production resumed at Ellington
Commenting on the results, Gordon McPhie, Chief Executive of UK COAL, said:
'The Group is focused on improving productivity and reducing its costs. By
changing the way we work and in achieving the goals we are setting ourselves,
we believe that we will transform the business to create a long-term,
profitable and competitive business.'
For further information, please contact:
UK COAL PLC
Gordon McPhie, Chief Executive 020 7457 2345
Today
Thereafter
01302 751751
Gavin Anderson & Company
Liz Morley 020 7457 2345
Fiona Grant Duff
RESULTS
In the half year to the end of June 2001, net cash inflow from operating
activities was £96.0 million (2000: £71.6 million) which included £54.7
million of Coal Operating Aid (2000: nil). The cash generation has enabled
ongoing capital expenditure on both development of new reserves and continued
investment in new equipment.
The Group has reported a loss before tax of £10.8 million, including a £19.9
million credit in respect of Coal Operating Aid (2000: loss £10.2 million: nil
Coal Operating Aid).
DIVIDENDS
The Board has declared an interim dividend of 5.0 pence per share (2000: 5.0
pence per share). The cost of this dividend is £7.3 million which compares
with cash flow before Coal Operating Aid, financing and dividends of £12.3
million. This is consistent with our focus on cash generation and maximising
returns to shareholders.
DIRECTORS
Gordon McPhie was made Chief Executive in July 2001, having previously taken
on the role of Acting Chief Executive in February. Gordon, who was previously
Group Finance Director, joined the company in 1992 and has been on the Board
since its flotation in 1993.
BUSINESS REVIEW
As indicated in the trading statement published on the 9th July, the market
for coal has remained strong. However, production volumes have limited our
ability to take advantage of the improved market conditions. Sales volumes in
the first half of the year were 10.4 million tonnes (2000: 12.0 million
tonnes), which has resulted in a reduction in stocks to a level of 0.75
million tonnes at 30 June 2001 (30 June 2000: 2.1 million tonnes), which is
below normal efficient operating levels.
Deep mine production in the period was disappointing at 7.6 million tonnes
(2000: 7.9 million tonnes). As reported in the previous trading statements,
there has been a shortfall in production at Daw Mill due to adverse geological
conditions in the first half which we are targeting to recoup in the second
half of the year. We have also lost production on commencement of new faces
at Thoresby and Wistow due to geological problems, which continued into the
third quarter. These difficulties will affect the results, however the
Company is anticipating an improvement in production in the second half year.
Underlying deep mine unit costs are running at a slightly higher level than
for the same period last year due to reduced output and the recommencement of
development at Ellington and Clipstone (additional costs of £5.3 million) and
cost inflation.
Surface mining operations have produced 2.1 million tonnes (2000: 2.1 million
tonnes) in the first six months. Planning approval has been received for a
1.9 million tonnes site at Cutacre near Bolton, where production should
commence in 2002. Work has also started at three new sites in the first half.
Capital expenditure has increased in the period to £30.2 million (2000: £11.2
million) which included £7.4 million on strategic development at deep mines
(2000: £5.1 million). Levels of expenditure will be higher than last year as
we complete the development and equipping of new mining areas at Daw Mill and
Riccall and installing new equipment at Ellington to recommence full
production.
The operations in Australia, which predominantly comprise CIM Resources,
produced sales of £17.7 million (2000: £12.5 million) from 1.2 million tonnes
of coal (2000: 0.8 million tonnes). The Australian activities produced an
operating profit of £1.6 million but made an overall loss of £1.2 million.
This was due to the decline in the Australian Dollar, with the hedge contracts
that CIM entered into prior to acquisition which producing a loss on hedging
of £2.8 million. We anticipate an improvement in the financial performance,
with increased export prices and a reduction in hedge contracts in the second
half of the year.
The Group has received several approaches from parties who have expressed an
interest in CIM Resources and its assets, which may or may not lead to an
offer being made for CIM Resources.
Monckton Coke & Chemicals sales in the first half were £8.9 million (2000:
£8.6 million) giving a pre-tax loss of £0.1 million (2000: £0.3 million loss).
The market for Monckton's products has improved with the increase in
international prices. Several initiatives have been undertaken to reduce
costs which should be fully implemented by the end of the year.
OPERATIONAL REVIEW - PROJECT 105
The Company has launched a major new initiative, Project 105, with the
emphasis on improving productivity and reducing unit costs to 105p per
gigajoule, which the Board believes will transform the business. An in-house
team, supported by specialists from the management consultants Bain & Company,
are focusing on the measures needed to reduce unit costs. A start has been
made at Headquarters by integrating activities within Mining Services to their
respective operational functions in Deep Mines and Surface Mines, removing
duplication, increasing accountability and improving operational
effectiveness.
Changes to working practices, designed to achieve greater utilisation of plant
and equipment, are also being reviewed. We have commenced discussions with
mining union representatives and we expect them to continue and broaden in the
run-up to their implementation.
COAL OPERATING AID SCHEME
The Coal Operating Aid Scheme as outlined by the Government in April 2000 was
approved by the European Union in July 2000, whereby the maximum aid payable
under the scheme for any one company was £75.0 million. This aid would be
paid to those undertakings that reduced costs in line with proposed mine
business plans. UK Coal received £54.7 million of operating aid in February
2001. A further £20.3 million was approved by the European Union in July 2001
of which £15.2m was received at the end of July with the balance due in the
fourth quarter. Of the total operating aid receivable £19.9 million related
to the first half year.
ENERGY REVIEW
In June 2001, the Prime Minister announced a review of the strategic issues
surrounding energy policy for Great Britain. The review is being undertaken
by the Cabinet Office's Performance and Innovation Unit and is chaired by the
Minister for Industry and Energy. A report is scheduled for the end of this
year. The review is set within the context of meeting the challenge of global
warming while ensuring secure, diverse and reliable energy supplies at
competitive prices and will aim to develop a long term energy strategy.
Running concurrently with the energy policy review, the Dti is examining
cleaner coal technologies including assessing the value of a demonstration
plant within the UK. UK COAL believes these two reviews are a positive step,
and that the long term benefits coal brings to energy security and diversity
will be clearly identified.
PROPERTY PORTFOLIO
The current land and property annualised rate of rental income has increased
to £3.4 million per annum (2000: £3.1 million per annum) with increased
letting, particularly at the Asfordby Business Park, Warwickshire.
During the first half, the sale of land at Rosewell in Scotland was agreed for
housing development at a minimum price of £2.1 million (2000 property sales
£3.6 million). Planning approvals have been received for a 64 acre Business
Park at Denby Hall in Derbyshire and a 20 acre Advanced Manufacturing Park at
Waverley, near Sheffield, South Yorkshire.
OUTLOOK
The market for coal has remained strong during 2001. Power station coal
consumption of 27.0 million tonnes in the first six months was an increase of
19.2% on the same period in the previous year, whilst electricity generation
increased by around 3.0%. The increase in coal demand was attributed to a
reduction in gas and nuclear power output, together with the ending of the
electricity Pool arrangements. The introduction of the new electricity
trading arrangements (NETA) at the end of March 2001 provides a level playing
field for coal generation and recognises the flexibility that it offers.
Although production difficulties in the first half year have limited the
company's ability to take advantage of the improved market conditions, we
anticipate an improvement in production over the next 6 months. Although the
majority of sales in this period have been contracted, there should be
opportunities for additional sales. During the first half of the year, a five
year 5 million tonne supply contract was finalised for British Energy, the new
owners of Eggborough power station. A 0.5 million tonnes power station spot
market sale has also been secured, taking advantage of the current market
conditions and the planned increase in output in the second half of the year.
Project 105 is evolving into a far reaching and powerful initiative to improve
our business performance and competitiveness. We do need to change the way we
work and achieve the goals we are setting ourselves to create the base for a
long-term, profitable, and competitive business.
John Robinson
Chairman
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the six months ended 30 June 2001
6 months 6 months Year
to to to
30 June 30 June 31 December
2001 2000 2000
restated
(Note 1)
Notes £'000 £'000 £'000
Turnover 2 340,066 381,683 705,185
Cost of sales (359,183) (381,398) (717,534)
_________ ________ ________
Gross (loss)/profit (19,117) 285 (12,349)
Coal Operating Aid Scheme 19,886 - 53,342
Other operating income and (10,063) (8,851) (18,531)
expenses
----------- ------------- -------------
Operating (loss)/profit (9,294) (8,566) 22,462
Profit on sale of land and 1,225 3,344 3,644
buildings
----------- ------------- ------------
(Loss)/profit on ordinary (8,069) (5,222) 26,106
activities before interest and
taxation
Net interest payable and similar 3 (2,716) (4,973) (8,345)
charges
----------- ------------- -----------
(Loss)/profit on ordinary (10,785) (10,195) 17,761
activities before taxation
Taxation 4 2,798 - (3,757)
----------- ------------- ------------
(Loss)/profit on ordinary (7,987) (10,195) 14,004
activities after taxation
Equity minority interest 98 409 777
------------ ------------- ------------
(Loss)/profit for the period (7,889) (9,786) 14,781
Dividends 6 (7,292) (7,292) (14,584)
---------- ------------- ------------
(Loss)/retained profit for the 7 (15,181) (17,078) 197
period
(Loss)/earnings per ordinary 5 ====== ======== ========
share (5.4p) (6.7p) 10.1p
====== ======== ========
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 30 June 2001
6 months 6 months Year
to to to
30 June 30 June 31 December
2001 2000 2000
£'000 £'000 £'000
(Loss)/profit for the period after (7,889) (9,786) 14,781
minority interest
Exchange adjustments (389) (468) (1,337)
--------- ------------- -----------
Total recognised gains and losses for the (8,278) (10,254) 13,444
period
-------- ------------- -------------
CONSOLIDATED BALANCE SHEET
for the six months ended 30 June 2001
At At At
30 June 30 June 31 December
2001 2000 restated 2000
Notes £'000 £'000 £'000
Fixed assets
Tangible assets 492,585 521,684 502,121
Investments 39 57 40
----------- ------------- -------------
492,624 521,741 502,161
Current assets
Stocks 64,805 100,316 77,693
Debtors: amounts falling due 1,508 2,490 3,183
after one year
Debtors: amounts falling due 120,928 115,077 158,529
within one year
Cash at bank and in hand 11 78,981 45,342 25,412
----------- ------------- -------------
266,222 263,225 264,817
----------- ------------- ------------
Total assets 758,846 784,966 766,978
===== ===== =====
Equity shareholders' funds 7 337,641 336,805 353,211
Equity minority interest 371 482 1,224
----------- ------------- ------------
Capital employed 338,012 337,287 354,435
Provisions for liabilities and 8 261,742 271,166 271,974
charges
Creditors: amounts falling due 9 12,554 17,704 14,198
after more than one year
Creditors: amounts falling due 9 146,538 158,809 126,371
within one year
---------- ------------- -----------
420,834 447,679 412,543
--------- ------------- ----------
Total funds employed 758,846 784,966 766,978
===== ===== =====
CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2001
6 months 6 months Year
to to to
30 June 30 June 31 December
2001 2000 2000
Note £'000 £'000 £'000
Operating activities
Net cash inflow from operating 10 95,957 71,555 82,223
activities
----------- ----------- ------------
Returns from investments and
servicing of finance
Interest paid (78) (531) (740)
Interest paid on hire purchase and (895) (1,238) (2,150)
finance leases
Interest paid on corporation tax - (2,700) (2,644)
Interest received 2,617 1,939 4,246
--------- ------------- ----------
Net cash inflow/(outflow) from 1,644 (2,530) (1,288)
returns on investments and
servicing of finance
Taxation (466) (6,110) (6,166)
Capital expenditure and financial
investment
Development expenditure (7,405) (5,070) (11,660)
Purchase of fixed assets (23,729) (6,132) (16,011)
Receipts from sale of investments - - 32
Receipts from sale of fixed assets 1,026 4,214 5,628
----------- ----------- -----------
(30,108) (6,988) (22,011)
----------- ----------- -----------
Cash inflow before financing and 67,027 55,927 52,758
dividends
Equity dividends paid (7,287) (6,559) (13,845)
---------- ----------- ----------
Cash inflow before use of liquid 59,740 49,368 38,913
resources and financing
---------- ------------- ------------
Financing
Repayment of bank borrowings (437) (27,949) (28,733)
Hire purchase and finance lease (5,708) (11,983) (20,419)
capital repaid
---------- ------------- -------------
Net cash outflow from financing (6,145) (39,932) (49,152)
----------- ------------- -------------
Increase/(decrease) in cash 53,595 9,436 (10,239)
----------- ------------- -------------
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 30 June 2001
1. Preparation of interim statements
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's 2000 statutory accounts, except as
set out below. The interim financial statements are not statutory accounts
for the purposes of S240 of the Companies Act 1985. The figures for the full
year to 31 December 2000 do not constitute the statutory accounts for the
year. They have been abridged from the statutory accounts which have been
filed with the Registrar of Companies and contain the auditors' report, which
was unqualified and did not contain a statement under either S237(2) or S237
(3) of the Companies Act 1985. The half year figures which are for a 26 week
period (2000: 27 weeks), have not been audited, but have been reviewed by the
auditors. The auditors' review report is included with the interim
statements. The interim financial statements were approved by the Board on 12
September 2001.
During the period the Group has adopted Financial Reporting Standard 19
'Deferred tax'. As a result, full provision is now made for deferred tax
arising on all timing differences. The Group previously provided for deferred
tax on timing differences, to the extent that there was a reasonable
profitability that such tax would become payable in the future. This
approximated to a full provision basis and adoption of FRS19 does not
therefore give rise to any material impact on current or prior period deferred
tax provisions.
Following the introduction of FRS 15 'Tangible fixed assets' in 2000, assets
relating to deferred surface mine expenditure and restoration and closure
costs created in previous years and shown as debtors at 30 June 2000 have now
been reclassified as fixed assets. The comparative figures for June 2000 have
been re-stated resulting in a transfer from debtors to fixed assets at 30 June
2000 of £63.0 million. This change has no impact on the profit and loss
account for the year or for the previous year.
The profit and loss account and segmental analysis at 31 December 2000
included for the first time, the results of the property segment. In line
with this segmentation, the profit and loss account for the period to 30 June
2000 has been restated by showing profit on sale of land and buildings as a
separate item below operating profit.
2. Segmental and geographical analysis
6 months 6 months Year
to to to
30 June 30 June 31 December
2001 2000 2000
restated
£'000 £'000 £'000
(a) Turnover
Coal sales - deep mines 242,003 293,278 513,405
Coal sales - surface mines 63,977 58,490 138,460
Surface mines contract mining and
associated activities 5,600 7,352 9,628
Manufactured fuel and combined heat and
power
8,972 8,647 16,700
Australia - coal sales 17,695 12,541 24,357
Property activities 1,819 1,375 2,635
---------- ----------- -----------
340,066 381,683 705,185
===== ==== ====
Geographical Analysis
United Kingdom 321,273 366,715 676,480
European Community Countries 167 192 764
Rest of Europe 931 2,235 3,584
Asia - Pacific 17,695 12,541 24,357
---------- ------------- -----------
340,066 381,683 705,185
==== ==== ====
6 months 6 months Year
to to to
30 June 30 June 31
2001 2000 December
restated 2000
£'000 £'000 £'000
(b) (Loss)/profit before taxation
Coal sales - deep mines (35,160) (17,750) (40,245)
- deep mines coal operating aid 19,886 - 53,342
Coal sales - surface mines 7,443 6,950 10,309
Surface mines contract mining and associated 74 2,456 142
activities
Manufactured fuel and combined heat and power (55) (279) (647)
Australia - coal sales 1,595 (409) 138
- hedging losses (2,788) (326) (1,744)
Property activities - rentals and ongoing 1,191 692 1,062
- profit on sales (Note 2) 1,225 778 1,078
Exceptional items (Note 3) (1,480) 2,666 2,671
Net interest payable (2,716) (4,973) (8,345)
--------- ---------- ----------
(Loss)/profit before taxation (10,785) (10,195) 17,761
==== ==== ====
Note 1 - Due to the nature of the Group's business, distribution expenses are
treated as a part of cost of sales.
Note 2 - Profit on sales at 30 June 2000 and 31 December 2000 is stated after
allocation of £2.6 million to surface mining.
Note 3 - Subsequent to the period end a debtor entered into liquidation
arrangements. The directors have taken a prudent view and made full provision
for the balance due from this debtor.
The exceptional items at June 2000 and December 2000 comprise the release of
redundancy cost provisions.
3. Net interest payable and similar charges
6 months 6 months Year
to to to
30 June 30 June 31
December
2001 2000 2000
£'000 £'000 £'000
On bank loans, overdrafts and other loans 78 369 612
repayable within 5 years
Amortisation of loan issue costs (FRS 4) 357 357 713
Interest paid on hire purchase and finance leases 906 1,506 2,407
Other interest payable - 224 125
Unwinding of discount on provisions 4,360 4,456 8,854
Interest receivable (2,985) (1,939) (4,366)
-------- ---------- ---------
2,716 4,973 8,345
==== ==== ====
4. Taxation
6 months 6 months Year
to to to
30 June 30 June 31
December
2001 2000 2000
£'000 £'000 £'000
On ordinary activities
United Kingdom corporation tax at 30% (2000: 30%)
Current - - (16,510)
Deferred (2,705) - 3,043
Overseas taxation (93) - 575
Under/(over) provision in respect of prior years
Current - - 411
Deferred - - (1,659)
---------- --------- ---------
(2,798) - (14,140)
---------- --------- ----------
On exceptional items
United Kingdom corporation tax at 30% (2000: 30%)
Current - - 17,096
Deferred - - 801
-------- -------- ----------
- - 17,897
-------- -------- ---------
(2,798) - 3,757
===== ==== ====
5. Earnings per share
Earnings per share have been based on the number of shares in issue and
ranking for dividend, which is unchanged at 145,847,273.
6 months 6 months Year
to to To
30 June 30 June 31 December
2001 2000 2000
pence pence pence
(Loss)/earnings per ordinary share (5.4) (6.7) 10.1
6. Dividends
The ordinary dividend will be paid on 22 October 2001 to shareholders on the
register on 21 September 2001. The interim report will be circulated to all
ordinary shareholders and will be available at the Company's registered office
at Harworth Park, Blyth Road, Harworth, Doncaster, South Yorkshire DN11 8DB.
2001 2001 2000 2000
pence pence
per share £'000 per share £'000
Interim 5.0 7,292 5.0 7,292
Final 5.0 7,292
------ ---------
10.0 14,584
==== ====
7. Movements in Shareholder's funds
6 months
to
30 June
2001
£'000
Shareholders' funds at 1 January 2001 353,211
Loss sustained for the period (15,181)
Exchange adjustment (389)
-------------
Shareholders' funds at 30 June 2001 337,641
-------------
8. Provisions for liabilities and charges
At Created in Released Utilised in Unwinding of At
period in period period discount
1 Jan 2001 30 June
2001
£'000 £'000 £'000 £'000 £'000 £'000
Provisions 266,233 7,222 (1,089) (18,020) 4,360 258,706
Deferred
taxation 5,741 - - (2,705) - 3,036
---------- ---------- ---------- ----------- ------------ ----------
271,974 7,222 (1,089) (20,725) 4,360 261,742
==== ==== ==== ==== ==== ====
9. Creditors
The creditors figures shown in the balance sheet include the following
liabilities:-
30 June 30 June 31
December
2001 2000 2000
£'000 £'000 £'000
Creditors - amounts falling due after more than
one year
Hire purchase and finance lease liabilities 8,096 11,942 8,473
=== ==== ===
Creditors - amounts falling due within one year
Bank borrowings * 665 1,481 801
Hire purchase and finance lease liabilities 5,368 15,666 10,699
-------- ---------- ---------
6,033 17,147 11,500
=== ==== ====
*Bank borrowings at 30 June 2001 are stated after deduction of FRS4
unamortised costs of £802,000 (December 2000: £1,158,000).
10. Reconciliation of operating (loss)/profit to net cash inflow from
operating activities
6 months 6 months Year
to to to
30 June 30 June 31 December
2001 2000 2000
restated
£'000 £'000 £'000
Continuing activities
Operating (loss)/profit (9,294) (8,566) 22,462
Depreciation on tangible fixed assets 31,283 35,437 62,707
Net charge for surface mine development and 5,891 8,554 16,581
restoration assets
Decrease in coal and other stocks 12,882 44,130 66,750
Decrease/(increase) in debtors 6,889 (20,277) (12,880)
Increase/(decrease) in creditors 13,516 12,277 (20,055)
Decrease/(increase) in Coal Operating Aid 34,790 - (53,342)
receivable
--------- ------------- -----------
Net cash inflow from operating activities 95,957 71,555 82,223
==== ==== ====
11. Cash at bank and in hand
30 June 30 June 31
December
2001 2000 2000
£'000 £'000 £'000
Restricted deposits to cover insurance 32,031 32,854 33,437
requirements
Other cash balances 46,950 12,488 (8,025)
-------- -------- ---------
78,981 45,342 25,412
==== ==== ====
On 11 July 2001, the security provision arrangements referred to in the Annual
Report and Accounts were completed. £16.9 million was transferred to a
security fund in respect of subsidence. At the same time the contingent
liability provided for subsidence and shaft treatment was reduced from £56.0
million to £24.0 million.
Independent review report to the Board of Directors of UK COAL PLC
We have been instructed by the company to review the financial information
which comprises the consolidated profit and loss account, the consolidated
balance sheet, the consolidated cash flow statement and the related notes. We
have read the other information contained in the interim report and considered
whether it contains any apparent misstatements or material inconsistencies
with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by the directors. The directors
are responsible for preparing the interim report in accordance with the
Listing Rules of the Financial Services Authority which require that the
accounting policies and presentation applied to the interim figures should be
consistent with those applied in preparing the preceding annual accounts
except where any changes, and the reasons for them, are disclosed.
The maintenance and integrity of the UK COAL PLC website is the responsibility
of the directors; the work carried out by the auditors does not involve
consideration of these matters and, accordingly, the auditors accept no
responsibility for any changes that may have occurred to the interim report
since it was initially presented on the website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial information may differ from legislation in other jurisdictions.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4
issued by the Auditing Practices Board for use in the United Kingdom. A
review consists principally of making enquiries of group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies
and presentation have been consistently applied unless otherwise disclosed. A
review excludes audit procedures such as tests of controls and verification of
assets, liabilities and transactions. It is substantially less in scope than
an audit performed in accordance with United Kingdom Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2001.
PricewaterhouseCoopers
Chartered Accountants
Nottingham
12 September 2001
Friday, 22nd November 2024
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