Interim Results
UK Coal PLC
06 September 2006
UK COAL
Interim Report
For the six months ended 30 June 2006
UK COAL is Britain's largest producer of coal. Its coal supplies around 7% of
the country's needs for electricity generation.
The Group operates deep and surface mines with access to substantial proven
reserves and directly employs nearly 4,000 people.
UK COAL generates power, utilising waste gas from coal mines and is growing its
portfolio of renewable energy projects, including wind farms.
With extensive land and property interests and large brownfield sites, UK COAL
restores and develops the value potential of its current and former mine sites
and manages a substantial agricultural portfolio.
HIGHLIGHTS
•Return to profitability after comprehensive restructuring plan
•Operating profit after Exceptional Items £12.0m (2005: loss of £26.4m)
•Exceptional net income of £1.2m (2005: net expense of £11.7m)
•Profit before tax £7.0m (2005: loss of £30.5m)
•Coal sales up 19% at 5.7 million tonnes, selling prices up 7% at £1.39
per GJ
•Property sales proceeds £6.5m (2005: £8.2m)
•Surface mining applications granted at two new sites for 1.6 million
tonnes
•Joint venture company formed for marketing domestic and industrial coal
•Power generated 65,000 MWH (2005: 48,000 MWH) with a value of £3.4m
(2005: £1.9m)
•Eight wind farm planning applications in progress totalling 80MW
Commenting on the results, David Jones, Chairman said:
'As expected, the performance of the business has improved throughout the six
months. Face gap production delays at the deep mines were cut and overall
costs reduced contributing to a drop in mining costs of 11%.
These results demonstrate the benefits of management action in reorganising our
deep mines. We now have a mining business which will continue to experience
volatility but that is capable of profitability even at current contracted
prices, which are significantly below current market levels.
The appointment of Jon Lloyd, our new chief executive of property, will give us
the ability to realise significant extra value in our property business over and
above the latest valuation at December 2005 of £274m. This value will be
realised as planning permissions are gained, helped by priority treatment for
brownfield development under Government planning guidelines.
The recent Government energy review announcement has signalled the need for
indigenous sources of fuel. UK COAL is well placed to benefit from this. '
For further information, please contact:
Financial: Ken Cronin/Michael Turner
(Gavin Anderson & Company) Tel: 020 7554 1400
Operational: Stuart Oliver
Tel: 01525 381759
Mob: 07774 231178
CHAIRMAN'S STATEMENT
RESULTS
During the six months ended 30 June 2006, the Group has delivered the improved
performance expected, reporting a profit before tax of £7.0m (2005: £30.5m
loss).
Deep mines made significant progress resulting in a first half year operating
loss of £0.9m (2005: £44.4m loss) after exceptional items, and after bearing
higher costs in the second quarter of over £4m in accessing new reserves at
Welbeck and Kellingley collieries.
Surface mining reported a £1.2m profit after Exceptional Items (2005: £1.4m)
from Orgreave,and the sole current active site at Maidens Hall. Following the
grant of planning permission to extend the mining at Stobswood in
Northumberland, a net release of £3.4m in restoration cost provisions was made.
In all, two planning permissions were granted in the period for 1.6 million
tonnes.
Property net rental income was £1.4m (2005: £1.4m). Property disposal profits
were £4.1m (2005: £4.5m). Investment property valuation gains were £4.7m (2005:
£4.5m) on the three investment properties held at December 2005.
Power generation, including other operations, produced a profit of £1.5m (2005:
£1.2m on a like for like basis) which includes emission trading credits of £1.0m
(2005: £1.2m).
Group operating profit after Exceptional Items was £12.0m (2005: £26.4m loss).
Net exceptional income was £1.2m (2005: £11.7m expense). Exceptional Items
comprise £2.0m of post coaling costs at Rossington and £2.3m of development
costs incurred at Harworth, offsetting £5.1m of Coal Investment Aid income and
£0.4m in redundancy-related items.
Finance costs were £5.0m (2005: £4.1m) including unwinding of discounts of £2.2m
(2005: £2.6m).
As previously reported, the Group has retained £12m of assets relating to
Harworth colliery. The asset values remain under regular review and any
impairment will result in an additional non-cash charge.
The improved Group performance is reflected in reduced deep mine unit costs,
excluding Exceptional Items, of £1.41 per gigajoule (2005: £1.58 per gigajoule)
and increased unit sales prices of £1.39 per gigajoule (2005: £1.30 per
gigajoule). Coal sales volumes also increased to 5.7 million tonnes (4.8 million
tonnes).
CASH FLOW AND DEBT
Total Group borrowings were £104.4m at June, (December 31 2005: £95.5m)
including leasing and hire purchase debt but excluding cash balances held in
respect of subsidence and insurance funds. Net cash outflows reflected
continuing investment across the businesses of over £18m in capital,
development, restoration and pre-coaling, a £14m increase in working capital,
£5m in additional pension contributions, and £4m in redundancy.
The Group has net assets at June of £14.0m (December 2005: £14.7m net
liabilities). The £29m improvement in shareholders' equity arose from £7m in
retained profits, and £22m in reduced pension and retirement liabilities
benefiting mainly from lower liabilities due to higher bond yields, and an
additional £5m pension contribution paid into the scheme. Depreciation amounted
to £24m.
DIVIDEND
Whilst there has been a return to profitability in the first half of 2006, the
Board has decided to defer consideration of a dividend for 2006 until results
for the year as a whole are known.
CONTINGENT LIABILITY
The Report and Accounts for the year ended December 2005 referred to a claim
against the Company to determine whether the Company may be required to provide
certain early retirement pension related benefits on redundancy. The Company
received notification that the claim which was due to be heard in the High Court
on 3 July 2006, will not be pursued and has been permanently stayed with no
payment made by the Company.
ENERGY REVIEW
UK COAL welcomes the DTI's Energy Review report published in July, which
underscores the important long-term contribution of coal-fired generation and
aims to optimise the use of economic domestic coal reserves. In particular, we
are pleased with the Government's decision to convene a Coal Forum, which will
bring together electricity generators and coal producers to help find solutions
to secure the long-term future of domestic coal production.
UK COAL continues to work hard to secure contract terms which will allow the
Company to invest in new mining operations, and help deliver the Government's
energy policy goals.
DAW MILL
The board of UK COAL deeply regrets the loss of two valued and experienced
employees at Daw Mill in July and August 2006 following accidents at the mine.
Mining has always presented hazards which require vigilant management at all
times and we are dedicated to improvement in this area. Once again we express
our condolences to the extended families of those involved.
OUTLOOK
Coal mining in the UK will continue to be a demanding activity but it is clear
that management action has established a robust platform for addressing the
challenges.
Results volatility will remain a feature, and output is estimated to be lower
than expected in the second half, at 4.5 million tonnes due to longer face gaps
at Welbeck and Thoresby, difficult mining at Maltby, and disruption at Daw Mill
following the accidents. The Group's deep mines business has demonstrated it was
able to operate at only a small loss in the first half even at current low
contract prices and it is expected that deep mines will return to profitability
for the last four months of the year following under performance in July and
August.
Although it is not expected that deep mines will return a profit for the second
half as a whole, the medium term outlook for deep mines is attractive, as coal
contracts expire mainly in the next 18 months and underlying demand remains
strong, which is expected to enable a renewal of coal supply contracts based on
the much higher current open market prices.
Surface mining output is set to increase significantly later this year,
reversing the trends of recent years. Planning consent has been received for two
sites covering 1.6 million tonnes which should be mined within three years. Five
further sites containing 4.4 million tonnes are progressing in the planning
process with others foreseen, providing a stable stream of output. The Company
has about 100 million tonnes of recoverable reserves located under its own land.
The property business is well placed to realise significantly more value over
and above its most recent asset valuation at December 2005 of £274m. The
appointment of Jon Lloyd as property chief executive will further sharpen the
focus on this key objective. Jon has already made a material contribution and a
further update on the significant potential within the property portfolio will
be made later in the year.
Harworth Power is developing its wind power and other power generation projects
and is becoming a profitable business in its own right.
David Jones
Chairman
6 September 2006
CHIEF EXECUTIVE'S REVIEW OF OPERATIONS
DEEP MINES
The Group entered the year with seven deep mines, two of which were moving
towards 'care and maintenance' following the operational reviews of 2005.
Deep mines produced 5.3 million tonnes in the first six months compared to 4.0
million tonnes in the same period in 2005, with all the mines either sustaining
or improving output levels. Output more than doubled at Daw Mill to 1.6 million
tonnes (2005: 0.6 million tonnes) with Kellingley producing 1.2 million tonnes
(2005: 1.0 million tonnes). The overall improvement can be attributed to a
period of sustained production and fewer costly face gaps of 15 weeks (2005: 26
weeks). This improvement was gained despite encountering adverse geological
conditions at Kellingley, Maltby and Thoresby collieries.
Operational initiatives are being pursued to reduce costs further. They
include: -
• Closure or mothballing of high risk, uneconomic areas of reserve.
• Reorganisation of Headquarters functions.
• Introduction of project control techniques to improve the management and
accountability through the identification and delivery of critical
activities to time and cost.
• Focus on improving the maintenance regime at the mines in order to
improve machine availability and reduce down time.
• Increasing productivity through cycle time improvements and delay
reduction.
• Integrated workforce and management teams for improved planning and
performance.
The ongoing mines are also in a position of strengthened investment and have new
working agreements. The working practices launched in 2005 are being
consolidated across all the mines giving a much more flexible system of working.
During 2006 all of these initiatives are beginning to bear fruit with the
efficiency at the ongoing mines improving, helping reduce deep mine unit costs
to £1.41 per gigajoule (2005: £1.58 per gigajoule).
Production ceased at Rossington in April, followed by a period of equipment
recovery. Exceptional post-coaling costs of £2.0m have been incurred to date.
Production ceased at Harworth Colliery in August, together with development
activities following the discovery of faulting. Development expenditure for the
period of £2.3m has been charged to exceptional costs representing costs
incurred in developing reserves which subsequently proved unworkable. Harworth
Colliery will be mothballed following salvage of equipment on the current
coalface, pending evaluation of reserves in an alternate coal seam.
Mining Production - 6 months to June
(Million Tonnes)
H1 2006 H1 2005
--------------------------
Daw Mill 1.6 0.7
Kellingley 1.2 1.0
Thoresby 0.9 0.8
Welbeck 0.6 0.5
Maltby 0.4 0.4
Harworth 0.4 0.3
Rossington 0.2 0.2
Other Closed mines 0.0 0.1
--------------------------------------------------------------------------
Total Deep Mines 5.3 4.0
--------------------------------------------------------------------------
Surface Mines 0.2 0.6
--------------------------------------------------------------------------
Total Production 5.5 4.6
===========================================================================
SALES
Coal sales volumes for deep mines in the first six months of 2006 were 5.5
million tonnes (2005: 4.0 million tonnes). Unit income rose to £1.39 per
gigajoule (2005: £1.30 per gigajoule) reflecting improving international market
conditions.
Coal under contract at the end of June, including an estimate of sales to
non-Electricity Supply Industry markets, was 27.4million tonnes. Average
proceeds across all years (in 2006 prices) are projected at between £1.39 and
£1.51 per gigajoule. These prices are subject to full RPI and are partly
dependent on the outturn of international coal prices.
Coal Investment Aid income was £5.1m in the period (2005: £8.1m), with £2.3m of
Coal Aid receivable balances remaining at June 2006. The scheme is due to come
to an end in 2006 with no alternative or replacement scheme announced yet by the
Government.
SURFACE MINING
With the completion of coaling at Orgreave in January, the Group is currently
coaling on only one surface mine, Maidens Hall in Northumberland, giving output
for the period of 0.2 million tonnes (2005: 0.6 million tonnes). Unit costs were
£1.55 per gigajoule (2005: £1.28 per gigajoule) reflecting lower coaling
activity in the period.
Output for the full year is however expected to increase to 0.8 million tonnes
with very encouraging progress in new site development.
Two new planning consents for a total of 1.6 million tonnes were received during
the period at Stobswood North and Long Moor (following a Public Inquiry). A
challenge has since been put forward against the planning decision on Long Moor
which is expected to delay the planned start on site until early 2007.
Preliminary work has commenced at the Cutacre site near Manchester, and
operations are due to start in the second half of the year at two further sites
in the North East, at Stobswood North and Stony Heap. Major restoration work
continues at the Stobswood and Orgreave sites.
Approval is awaited at a further five sites with reserves totalling 4.4 million
tonnes. This includes Lodge House in Derbyshire where a Public Inquiry has
recently been held, with a decision for the 1.0 million tonnes site expected at
the end of the year.
Total surface mine coal reserves held within our property portfolio, including
projects currently being worked and in planning, have a potential of almost 100
million tonnes.
The current status of surface mines is summarised in the table below.
Remaining Site Reserves Remaining
Sites with planning Tonnes Tonnes
------------------------------------------------------------------------------
Maidens Hall 1,700,000 678,000
Cutacre 1,500,000 1,500,000
Stony Heap 257,000 257,000
Stobswood North 920,000 920,000
Long Moor 725,000 725,000
Total 5,102,000 4,080,000
------------------------------------------------------------------------------
Sites awaiting planning decision
Potland Burn 2,000,000 2,000,000
Sharlston 360,000 360,000
Lodge House (Public Inquiry) 1,000,000 1,000,000
Steadsburn 1,000,000 1,000,000
Oxcroft 15,000 15,000
Total 4,375,000 4,375,000
------------------------------------------------------------------------------
PROPERTY
The Group continues to manage its land and property assets to optimise returns
and value, with management strengthened by the appointment of Jon Lloyd from
HBOS as its Chief Executive from July. This appointment to the Board will
increase the focus on the strategic development of the Group's property assets.
The business is split into three main segments: Development Properties, Business
Parks (including investment properties) and Agricultural Land.
An independent valuation of the Groups Investment Properties has been carried
out in the period, in accordance with the 'RICS Appraisal and Valuation
Standards' published by the Royal Institution of Chartered Surveyors. The table
below shows the results of the valuation:
Jun-06 Dec-05 Increase
£000 £000 £000 %
--------------------------------------------------------------------------------
Asfordby 12,250 8,250 4,000 48%
Whitemoor 3,500 3,000 500 17%
Mid Cannock 6,750 6,500 250 4%
-------------------------------------------------------------------------------
Total 22,500 17,750 4,750 27%
-------------------------------------------------------------------------------
The value of investment properties is recorded in the balance sheet and any
valuation change after initial recognition as an investment property is reported
in the income statement. The recognition of further investment properties will
be reviewed during the year-end property revaluation. At June, current
investment properties increased in value by £4.7m which is recorded in the
income statement.
A desktop valuation has been carried out on other key development properties and
has indicated further appreciation in value consistent with progress in
developing these properties. A full valuation of all properties will be carried
out as at 31 December 2006.
Development Property activities have progressed well over the last six months.
The two most significant of these are at Prince of Wales (Pontefract, West
Yorkshire) and Orgreave (Rotherham/Sheffield).
At the former Prince of Wales colliery site, which will form an urban extension
to Pontefract town centre, a working Partnership Agreement has been concluded
with the local authority and parties are progressing towards a detailed
comprehensive planning application at the turn of the year.
At Orgreave coal recovery is now complete and restoration and compaction of the
development area is well progressed.
Adjoining Orgreave, the 100 acre Waverley Advanced Manufacturing Park is subject
to a joint venture with Yorkshire Forward. This site will bring forward both
plot sales and investment opportunities.
Bilsthorpe (Nottinghamshire) continues to develop with the first buildings
completed and the first tenant in place. We continue to work up master plans and
prepare planning applications across our development portfolio to realise the
available opportunities, including the site at Thorne (Doncaster), a former
colliery where land is suitable for mixed use development of 200 acres.
Proceeds from property disposals during the first six months amounted to £6.5m
(2005: £8.2m), this being principally the disposal of 26 acres at the Denby
development. Further property sales are under negotiation and are expected to be
completed during the second half of the year.
Business Parks have continued to grow and perform well. Income is up £0.6m on
the same period last year with this increase coming from new tenancies and
successful rent reviews. We continue to pursue suitable planning permission on
our former Selby deep mines. The principal Selby site, Gascoigne Wood, is a
strategically important rail connected site in the region. The application for
planning on this site was recommended for approval by the local authority but
has now been called in by the Government Office for Yorkshire and the Humber.
Final decision on application will be made at Local Inquiry.
In what remains a difficult rental market in the agricultural sector, our
portfolio has performed in line with expectations. This portfolio remains under
regular review for opportunities to create additional value through further
tenancies, renovation of existing properties, rent reviews and disposals of land
and properties where the Group considers this appropriate. The Agricultural
portfolio includes some 28,000 acres of land which holds significant potential
for future surface mining operations.
POWER GENERATION
The Power generation business continued to grow its generation of electricity
from methane on both its operating and closed deep mines. This amounted to
65,000 MWH (2005: 48,000 MWH) with a value of £3.4m (2005: £1.9m).
Further capacity is to be installed on sites to increase methane generation by
approximately 136,000 MWH.
During the first six months the Group earned income from the UK Emissions
Trading Scheme of £1.0m (2005: £1.2m).
The Group is developing its wind farm at Royal Oak (Darlington) after receiving
planning permission last year and expect this site to be operational in 2007.
Eight further wind farm applications are being progressed totalling 80 MW.
Other renewable energy projects are being evaluated where the business can
leverage its experience of both power generation and methane utilisation to
obtain an acceptable commercial return.
OTHER OPERATIONS
The Group has formed a joint venture company with Hargreaves Services plc
(Hargreaves) to produce, market and distribute domestic and industrial coal
products, building on the market strengths of UK COAL and Hargreaves. The joint
venture company will form an important platform for the development of this
market.
Garold Spindler
Chief Executive
6 September 2006
UK COAL PLC
Consolidated income statement for the six months ended 30 June 2006
6 months 6 months 12 months
to June to June to December
2006 2005 2005
Notes £'000 £'000 £'000
Continuing operations
Turnover 2 193,341 164,118 341,214
Cost of sales 3 (190,800) (205,936) (412,606)
------------------------------------------------------------------------------------------------------------
Gross profit/(loss) 2,541 (41,818) (71,392)
Coal Investment Aid income 4 5,145 8,102 14,641
Appreciation in fair value of investment properties 4,750 4,530 4,530
Profit on disposal of property, plant and equipment 4,320 4,461 10,074
Profit on disposal of business 4 - 2,918 3,100
Other operating income and expenses (4,686) (4,579) (14,286)
------------------------------------------------------------------------------------------------------------
Operating profit/(loss) 12,070 (26,386) (53,333)
Interest payable and similar charges 5 (6,268) (5,668) (11,753)
Interest receivable 5 1,286 1,541 2,992
-----------------------------------------------------------------------------------------------------------
Net finance costs 5 (4,982) (4,127) (8,761)
------------------------------------------------------------------------------------------------------------
Share of post tax loss
from joint ventures (40) - -
Profit/(loss) before tax 7,048 (30,513) (62,094)
Tax 6 - - -
------------------------------------------------------------------------------------------------------------
Profit/(loss) for the period from continuing operations 7,048 (30,513) (62,094)
------------------------------------------------------------------------------------------------------------
Discontinued operations
Loss for the year from discontinued operations 6 - (71) (72)
-----------------------------------------
Total loss from discontinued operations - (71) (72)
------------------------------------------------------------------------------------------------------------
Profit/(loss) for the period 7,048 (30,584) (62,166)
============================================================================================================
Attributable to :-
-----------------------------------
Equity holders of the parent 7,048 (30,584) (62,166)
===================================
Earnings/(loss) per share 8 p p p
From continuing operations:
Basic and diluted 4.7 (20.6) (41.9)
From discontinued operations:
Basic and diluted 0.0 0.0 0.0
From total operations:
Basic and diluted 4.7 (20.6) (41.9)
Consolidated statement of recognised income and
expense for the six months
ended 30 June 2006
6 months 6 months 12 months
to June to June to December
2006 2005 2005
£'000 £'000 £'000
Profit/(loss) for the period 7,048 (30,584) (62,166)
Actuarial gain/(loss) on defined benefit
pension schemes 20,529 (3,722) (10,286)
Actuarial gain/(loss) on
concessionary fuel reserve 1,019 - (3,995)
Accrual for long term incentive plan liabilities 89 87 173
--------------------------------
Net gain/(loss) notrecognised in incomestatement 21,637 (3,635) (14,108)
-------------------------------
Total recognised income/(expense) for the period 28,685 (34,219) (76,274)
================================
Attributable to :-
--------------------------------
Equity holders of the parent 28,685 (34,219) (76,274)
================================
Consolidated statement of changes in equity for the six months ended 30 June 2006
6 months 6 months 12 months
to June to June to December
2006 2005 2005
£'000 £'000 £'000
Total recognised expense for the period attributable to
equity holders of the parent 28,685 (34,219) (76,274)
Dividends - (1,483) (1,483)
Increase in revaluation reserve - 5,565 4,565
Ordinary shares issued in the period 8 1,663 1,672
----------------------------------
28,693 (28,474) (71,520)
Equity at commencement of period (14,731) 56,789 56,789
----------------------------------
Equity at end of period 13,962 28,315 (14,731)
==================================
Consolidated balance sheet
At 30 June 2006
30 June 30 June 31 December
2006 2005 2005
Notes £'000 £'000 £'000
Assets
Non current assets
Property, plant and equipment 310,392 336,263 322,050
Investment properties 22,500 17,750 17,750
Investment in joint venture 60 - -
Trade and other receivables 839 4,627 4,728
---------------------------------
333,791 358,640 344,528
----------------------------------
Current assets
Inventories 46,994 37,067 42,168
Trade and other receivables 59,355 53,576 63,312
Cash and cash equivalents 9 51,004 54,865 53,220
---------------------------------
157,353 145,508 158,700
-----------------------------------
Liabilities
Current liabilities
Financial Liabilities - Borrowings 9 (45,679) (57,330) (55,575)
Trade and other payables (88,474) (87,325) (104,927)
Obligations under hire purchase and
finance leases 9 (6,874) (10,365) (7,411)
Provisions 11 (42,691) (40,323) (52,320)
----------------------------------
(183,718) (195,343) (220,233)
-----------------------------------
Net current liabilities (26,365) (49,835) (61,533)
----------------------------------
Non current liabilities
Financial liabilities
- Borrowings 9 (49,132) - (19,720)
- Derivative financial instruments - - (55)
Trade and other payables (1,370) (44) -
Obligations under hire purchase
and finance leases 9 (9,251) (16,335) (13,835)
Provisions 11 (116,338) (123,911) (121,778)
Retirement benefit obligations 12 (117,373) (140,200) (142,338)
-----------------------------------
(293,464) (280,490) (297,726)
-----------------------------------
Net assets/(liabilities) 13,962 28,315 (14,731)
===================================
Equity
Capital and reserves
Ordinary shares 1,493 1,485 1,485
Share premium 1,771 1,762 1,771
Revaluation reserve 4,565 5,565 4,565
Capital redemption reserve 257 257 257
Fair value reserve 9,280 4,530 4,530
Retained earnings (3,404) 14,716 (27,339)
---------------------------------
Surplus/(deficit) on total shareholders'
equity 13,962 28,315 (14,731)
================================-
Consolidated cash flow statement for the six months ended 30 June 2006
6 months 6 months 12 months
to June to June to December
2006 2005 2005
Notes £'000 £'000 £'000
Cash flows from operating activities
Profit/(loss) for the period 2 7,048 (30,584) (62,166)
Depreciation/impairment of property, plant and
equipment 24,236 26,370 50,119
Fair value appreciation in investment properties (4,750) (4,530) (4,530)
Net interest payable and amortisation of
discount on provisions 4,982 3,884 8,376
Net charge for share based remuneration 89 87 173
Net credit for surface mine development and
restoration costs (3,411) (339) (3,356)
Profit on disposal of property, plant and
equipment (4,267) (4,562) (10,074)
Profit on sale of interest in businesses - (2,918) (3,100)
Share of post tax loss from joint ventures 40 - -
Decrease in provisions (17,375) (22,859) (23,676)
Tax - 71 72
--------------------------------
Operating cash flows
before movements in working capital 6,592 (35,380) (48,162)
(Increase)/decrease in stocks (4,826) 7,105 2,004
Decrease/(increase) in receivables 7,988 8,472 (1,551)
Decrease in payables (16,920) (22,119) (5,936)
----------------------------------
Cash used in operations (7,166) (41,922) (53,645)
Tax paid - (71) (72)
Financing cost (488) - (738)
Interest paid (3,622) (2,596) (5,744)
--------------------------------
Cash used in operating activities (11,276) (44,589) (60,199)
---------------------------------
Cash flows from investing activities
Interest received 1,286 1,541 2,992
Net receipt from insurance and security provision
funds 10,076 786 3,075
Disposal of businesses - 8,844 8,844
Proceeds on disposal of property, plant and
equipment 6,857 8,474 15,861
Purchase of property, plant and equipment (13,386) (10,767) (18,688)
Investment in joint venture (100) - -
--------------------------------
Cash generated from
investing activities 4,733 8,878 12,084
--------------------------------
Cash flows from financing activities
Proceeds from issue of share capital 8 1,663 1,672
New bank loans raised 19,516 44,971 63,464
Proceeds from new finance leases 359 4,939 4,939
Repayment of obligations under hire
purchase and finance leases (5,480) (14,345) (19,799)
Dividends paid to shareholders - (1,483) (1,483)
-------------------------------
Cash generated from financing activities 14,403 35,745 48,793
--------------------------------
--------------------------------
Increase in cash 7,860 34 678
=================================
At commencement of period
Cash 1,004 326 326
Cash equivalents 52,216 55,291 55,291
--------------------------------
53,220 55,617 55,617
Reduction in cash equivalents
(net receipt from insurance and security funds) (10,076) (786) (3,075)
Increase in cash 7,860 34 678
--------------------------------
51,004 54,865 53,220
================================
At end of period
Cash 8,864 360 1,004
Cash equivalents 42,140 54,505 52,216
--------------------------------
Cash and cash equivalents 9 51,004 54,865 53,220
================================
Notes to the Interim Statements for the six months ended 30 June 2006
1. Basis of preparation of interim statements
The interim financial statements have been prepared in accordance with the
accounting policies set out in the Group's statutory accounts.
The Group has adopted IAS 21 'Net investment in a foreign operation' in these
financial statements. The adoption of the requirements had no impact on the
results.
In preparing the interim financial statements, UK COAL has not applied the
following pronouncements for which adoption is not mandatory for the year ending
31 December 2006 and which have not yet been endorsed by the EU:
IFRIC 7 'Applying the restatement approach under IAS 29 - financial reporting in
hyperinflationary economies'
IFRIC 8 'Scope of IFRS 2'
IFRIC 9 'Reassessment of embedded derivatives'
IFRS 4 'Insurance Contracts'
IFRS 7 'Financial Instruments: Disclosures'
The figures for the year ended 31 December 2005 have been extracted from the
statutory accounts which have been filed with the Registrar of Companies.
The auditors' report on these accounts 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 the 26 week period (2005: 26 weeks) ended 30
June 2006, have not been audited,but have been reviewed by the auditors. The
auditors' review report is included with the interim statements. The Board
approved the interim statements on 5 September 2006.
Exceptional Items
Items that are both material and non-recurring and whose significance is
sufficient to warrant separate disclosure and identification within the
financial statements are referred to as Exceptional Items and disclosed within
their relevant income statement category. Items that may give rise to
classification as Exceptional Itemsinclude, but are not limited to, significant
and material restructuring and reorganisation programmes, asset impairments and
income from the Department of Trade and Industry in relation to Investment Aid.
Property related transactions, including changes in the fair value of investment
properties and profits or losses arising on disposals of property assets are not
included in the definition of Exceptional Items as they are expected to recur,
but are separately disclosed on the face of the income statement where material.
2. Segmental analysis
Six months to 30 June 2006 Deep Surface Power Other
Mining Mining Property Generation businesses Total
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Turnover 187,826 2,002 2,748 256 509 193,341
-----------------------------------------------------------------------------------------------------------------------
Operating profit/(loss) before exceptional
items within cost of sales 2,603 1,715 1,493 769 (162) 6,418
Exceptional items within cost of sales (3,733) (144) - - - (3,877)
------------------------------------------------------------------------------------------------------------------------
Gross profit/(loss) (1,130) 1,571 1,493 769 (162) 2,541
CoalInvestment Aid income 5,145 - - - - 5,145
Appreciation in fair value of investment
properties - - 4,750 - - 4,750
Profit on sale of property, plant and
equipment (74) 230 4,127 - 37 4,320
Other operating income and expenses (4,857) (622) (138) 839 92 (4,686)
------------------------------------------------------------------------------------------------------------------------
Operating profit/(loss) (916) 1,179 10,232 1,608 (33) 12,070
Net finance costs (4,982)
Share of post tax loss from joint ventures (40)
------------------------------------------------------------------------------------------------------------------------
Profit before tax 7,048
Tax -
-----------------------------------------------------------------------------------------------------------------------
Profit for the period 7,048
=======================================================================================================================
Segmental assets 293,650 35,827 143,517 9,715 - 482,709
Segmental liabilities (328,060) (66,842) (11,029) (606) - (406,537)
Unallocated liabilities
- Net debt and finance leases (62,210)
------------------------------------------------------------------------------------------------------------------------
Net assets 13,962
=======================================================================================================================
Six months to 30 June 2005 Deep Surface Power Other
Mining Mining Property Generation businesses Total
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Turnover 134,583 14,842 2,534 413 11,746 164,118
-----------------------------------------------------------------------------------------------------------------------
Operating (loss)/profit before exceptional
items within cost of sales (26,086) 2,023 1,372 791 2,758 (19,142)
Exceptional items within cost of sales (22,676) - - - - (22,676)
------------------------------------------------------------------------------------------------------------------------
Gross(loss)/profit (48,762) 2,023 1,372 791 2,758 (41,818)
Coal Investment Aid income 8,102 - - - - 8,102
Appreciation in fair value of investment
properties - 4,530 - - 4,530
Profit on sale of property,
plant and equipment - - 4,461 - - 4,461
Profit on disposal of business - - - - 2,918 2,918
Other operating income and expenses (3,722) (617) - - (240) (4,579)
------------------------------------------------------------------------------------------------------------------------
Operating(loss)/profit (44,382) 1,406 10,363 791 5,436 (26,386)
Net finance costs (4,127)
------------------------------------------------------------------------------------------------------------------------
Loss for the period from continuing operations (30,513)
Tax (relating to discontinued operations) (71)
------------------------------------------------------------------------------------------------------------------------
Loss for the period (30,584)
========================================================================================================================
Segmental(liabilities)/ assets * (15,448) (14,845) 103,113 4,870 (20,209) 57,481
Unallocated liabilities
- Net debt and finance leases (29,166)
------------------------------------------------------------------------------------------------------------------------
Net assets 28,315
=======================================================================================================================
* The segmental liabilities and assets positions are shown separately from December 2005 onwards
Year to 31 December 2005 Deep Surface Power Other
Mining Mining Property Generation businesses Total
£'000 £'000 £'000 £'000 £'000 £'000
Continuing operations
Turnover 299,028 25,203 4,841 862 11,280 341,214
-------------------------------------------------------------------------------------------------------------------
Operating (loss)/profit before exceptional
items within cost of sales (37,337) 6,048 6,754 916 1,380 (22,239)
Exceptional Items within cost of sales (46,649) (2,504) - - - (49,153)
-------------------------------------------------------------------------------------------------------------------
Gross(loss)/profit (83,986) 3,544 6,754 916 1,380 (71,392)
CoalInvestment Aid income 14,641 - - - - 14,641
Appreciation in fair value of investment
properties - - 4,530 - - 4,530
Profit on sale of property,
plant and equipment 305 158 9,611 - - 10,074
Profit on sales of business - - - - 3,100 3,100
Other operating income and expenses (9,398) (2,859) (4,477) 2,446 2 (14,286)
-------------------------------------------------------------------------------------------------------------------
Operating(loss)/profit (78,438) 843 16,418 3,362 4,482 (53,333)
Net finance costs (8,761)
-------------------------------------------------------------------------------------------------------------------
Loss for the year from continuing operations (62,094)
Tax (relating to discontinued operations) (72)
-------------------------------------------------------------------------------------------------------------------
Loss for the year (62,166)
===================================================================================================================
Segmental assets 318,531 71,297 125,167 8,357 - 523,352
Segmental liabilities (377,444) (106,213) (10,061) (330) - (494,048)
Unallocated liabilities
- Net debt and finance leases (44,035)
-------------------------------------------------------------------------------------------------------------------
Net liabilities (14,731)
===================================================================================================================
3. Cost of sales
6 months 6 months 12 months
to June to June to December
2006 2005 2005
£'000 £'000 £'000
Exceptional Items within cost of sales
Redundancy (365) (2,373) (24,249)
Post coaling costs Rossington (Selby and Ellington 2005) (1,966) (5,070) (5,386)
Stores equipment - (1,160) (4,696)
Impairment of assets at Harworth (2,326) (967) (967)
Impairment of assets and closure costs at Rossington - (5,631) (5,634)
Recovery costs at Kellingley and Rossington - (7,475) (12,551)
Surface mine equipment - - (500)
Costs incurred following approach for Company - - (350)
Post retirement benefits 780 - 5,180
-------------------------------------------------------------------------------------------------------------------
(3,877) (22,676) (49,153)
Other cost of sales (186,923) (183,260) (363,453)
-------------------------------------------------------------------------------------------------------------------
Total cost of sales (190,800) (205,936) (412,606)
===================================================================================================================
4. Exceptional Items
6 months 6 months 12 months
to June to June to December
2006 2005 2005
Note £'000 £'000 £'000
Exceptional Items within cost of sales 3 (3,877) (22,676) (49,153)
Other Exceptional Items:
Coal Investment Aid income 5,145 8,102 17,143
Amount provided against Coal Investment Aid claim - - (2,502)
Profit on disposal of business - 2,918 3,100
-------------------------------------------------------------------------------------------------------------------
Total Exceptional Items 1,268 (11,656) (31,412)
===================================================================================================================
-------------------------------------------------------------------------------------------------------------------
Operating profit/(loss) before Exceptional Items 10,802 (14,730) (21,921)
Net credit/(charge) for Exceptional Items 4 1,268 (11,656) (31,412)
-------------------------------------------------------------------------------------------------------------------
Operating profit/(loss) 12,070 (26,386) (53,333)
-------------------------------------------------------------------------------------------------------------------
5. Finance costs
6 months 6 months 12 months
to
to June to June December
2006 2005 2005
£'000 £'000 £'000
Interest payable on bank borrowings (2,953) (1,398) (4,018)
Amortisation of issue costs of bank loans (488) (134) (344)
Interest payable on hire purchase agreements and finance leases (669) (1,067) (1,877)
Discounting of non current receivables 142 (503) (391)
Unwinding of discounts on provisions (2,300) (2,566) (5,123)
--------------------------------------------
Interest payable and similar charges (6,268) (5,668) (11,753)
Interest receivable 1,286 1,541 2,992
--------------------------------------------
Net interest payable (4,982) (4,127) (8,761)
--------------------------------------------
6. Taxation
The tax charge for the six months to 30 June 2005 related solely to winding up
the Australian operations.Due to the availability of substantial brought forward
tax losses for offset against current tax year taxable profits, there is no
taxation charge in the period.
7. Dividends
2005 2005
per share £'000
Final in respect of 2004 paid 17 June 2005 1.0p 1,483
A dividend was not proposed or paid in respect of the year ended 31 December
2005.No interim dividend is proposed for the six months ended 30 June 2006.
8. Earnings per share
Earnings per share has been based on the weighted average number of shares in
issue and ranking for dividend, being 148,941,767 (June 2005: 148,421,290
- Dec 2005: 148,366,638) and on the profit/(loss) after taxation.
At the period end there were no share options outstanding which could dilute
earnings per share in the future.
9. Cash and cash equivalents
31
30 June 30 June December
2006 2005 2005
£'000 £'000 £'000
Cash deposited to cover insurance requirements 18,909 28,353 25,447
Subsidence security fund 23,231 26,152 26,769
Other security funds - - -
Other cash balances 8,864 360 1,004
----------------------------------------
Cash and cash equivalents 51,004 54,865 53,220
Bank loans and overdrafts (97,089) (58,061) (75,295)
Obligations under hire purchase and finance leases (16,125) (26,700) (21,246)
----------------------------------------
Net debt (62,210) (29,896) (43,321)
========================================
Debt at 30 June 2006 is before unamortised borrowing costs of £2,278,000 (June
2005: £731,000 - December 2005:
10. Disposal of subsidiary
On 17 June 2005, the Group disposed of its wholly owned subsidiary, The Monckton
Coke & Chemical Company Limited,for a consideration (before transaction costs)
of £12.0 million plus an incremental adjustment in respect of working capital
in the sum of £ 1.1 million. £ 8.3 million of the proceeds was received in 2005,
£2.5 million was received in the period,with the remainder to be paid in
instalments ending June 2007.
30 June
11. Provisions
1 January Created Released Utilised Unwinding 30 June
2006 in period in period in period of discount 2006
£'000 £'000 £'000 £'000 £'000 £'000
Employer and public liabilities 17,998 1,838 - (2,531) 450 17,755
Surface damage 21,988 705 - (1,518) 329 21,504
Claims 1,538 16 - - - 1,554
Restoration and closure costs of
surface mines 66,362 1,557 (4,968) (5,567) 996 58,380
Restoration and closure costs of deep mines
shaft treatment and pit top 18,494 32 - (1,180) 271 17,617
spoil heaps 5,029 3 - (202) 76 4,906
pumping costs 8,985 - (1,400) - 35 7,620
Ground/groundwater contamination 9,483 - - - 143 9,626
Redundancy 24,221 965 (600) (4,519) - 20,067
--------------------------------------------------------------------
174,098 5,116 (6,968) (15,517) 2,300 159,029
====================================================================
Provisions payable within one year 42,691
Provisions payable after more than one year 116,338
-------------
159,029
-------------
12. Pensions 31
30 June 30 June December
2006 2006 2005
£'000 £'000 £'000
Retirement benefit obligations -Blenkinsopp 1,299 1,299 1,299
Retirement benefit obligations - Concessionary fuel 23,670 22,772 24,309
Retirement benefit obligations - Industry Wide Schemes 92,404 116,129 116,730
-----------------------------------
117,373 140,200 142,338
-------------------------------------
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