Interim Results

RNS Number : 1687C

UK Coal PLC

28 August 2008

 



UK COAL PLC

('UK COAL' or the 'Group')

Financial Results for the six months ended 30 June 2008

On track to meet full year expectations

Increased coal price creates strong economic environment

Property gains from planning progress and agricultural land values

• Revenue up 18% to £172.9m (H1 2007: £146.2m)  

• Average sales price per gigajoule (GJ) up 18% to £1.79 (H1 2007: £1.52)

  • Expected average sales price for H2 2008 of £1.95 to £2.00/GJ

• Total sales H1 2008 3.7m tonnes (H1 2007: 3.8m tonnes excluding Maltby)

  • Expected output for H2 2008 circa 5m tonnes (H2 2007: 4.1m tonnes)

• RICS like-for-like valuation of land and property portfolio up 5% to £438.4m (December 2007: £410.7m)

  • Further modest increase expected for H2 2008

• Group operating loss before non-trading exceptional items £(4.2)m (H1 2007: operating profit £35.5m) reflecting lower property valuation gains in the current year

• Loss before tax £(9.9)m (H1 2007: profit before tax £40.6m)

• Loss per share (6.5)p (H1 2007: earnings per share 34.2p; 25.9p excluding tax credit)

• Net assets £319.8m (December 2007: £358.2m) after pension movement of £28.5m

David Jones, Chairman, said

'These results show the robustness of UK COAL's growth platform and place us on track to meet full year expectations. They also demonstrate the changing financial profile of our business as higher coal prices now start to deliver increased cash flows and we progressively reduce the proportion of our production needed to fulfil low-priced, legacy contracts.

'While overall the reported result for the first half is lower than for the same period last year, this is not unexpected bearing in mind the scheduled timing of our mining production over this year and the unsurprisingly reduced level of non-cash property valuation gains achieved for the first half of 2008 given the current property environment.

'We lay primary emphasis upon safety, and I am pleased to say we have made good progress in reinforcing the safety culture of our Group.  We are particularly pleased with the reduction in the major injury accident rate in the deep mines over the period.

'In mining, our first half output was proportionately more committed to satisfying older contracts, muting the positive impact of the increased market price for coal. In addition, first half production was constrained and was marginally lower than original expectations, principally reflecting the timing of face changes at Kellingley and Welbeck. For the second half, while there may always be unpredictabilities, we expect significantly higher production at a significantly higher sales price.

'The sharp increase in the market price of coal, up around 45% from the start of the year to the end of July, and its strong forward curve, transforms the outlook for our mining operations.

'In our deep mines, Daw Mill is working through its two year long panel and, while Kellingley and Thoresby continue to face difficult coal conditions as they work their way through the last of their current seams, the investment programmes are well on track to enable access to their further substantial reserves from mid and late 2009, respectively. We have also begun the geological work to enable us to decide on the economic viability of re-opening our Harworth mine.

'Our surface mines performed well, increasing production in the first half by 29% to 0.9m tonnes (H1 2007: 0.7m tonnes).

'In our property business, Harworth Estates, we are differentiated from others in the sector as our property portfolio is at an early stage in its development life, with milestone planning gains, some rental appreciation, and the good performance of agricultural land values in the period more than offsetting current general property market conditions. Longer term, we believe that the UK's structural shortage of land for development benefits our estate and that the locations of our brownfield sites fit well with both local and national government's vision of sustainable communities.

'We were pleased to receive, planning approval from the Local Authority Planning Committee for the first phase of the Prince of Wales project in August.

'While last year's rate of increase in property valuations could not be maintained, it is notable that, despite difficult market conditions for the property industry as a whole, our further progress in securing planning permissions and the strength of agricultural land values mean that we have achieved a modest valuation increase in the first half of the year and expect to do so again in the second half.

'Overall, we have made further good progress in realising the substantial potential of the Group. We continue to be confident of meeting expectations for the full year and view the future with optimism.'

Enquiries:

Media:

Citigate Dewe Rogerson

Anthony Carlisle Tel: [phone]. Mobile: [phone]

Analysts and investors:

Jon Lloyd, Chief Executive, UK COAL PLC Tel: [phone]

David Brocksom, Group Finance Director, UK COAL PLC Tel: [phone]

Citigate Dewe Rogerson

Nick Cox-Johnson Tel: [phone]. Mobile: [phone]

Notes to Editors:

UK COAL is Britain's biggest producer of coal, supplying around 15% of all the coal burned in the country, which is equivalent to the energy needed to provide around 5% of the country's electricity requirements. UK COAL is one of Britain's largest brownfield site property developers, owning some 46,500 acres of land across the country, of which some 3,696 acres are currently targeted for development.

Financial highlights

Income Statement	H1  2008	H1 2007	Full Year 2007
Revenue (£m)	172.9	146.2	328.5
Group (loss) / profit before non-trading exceptional items and finance costs (£m)	(3.6)	35.8	72.6
(Loss) / profit before tax (£m)	(9.9)	40.6	69.0
(Loss) / earnings per share (pence)	(6.5)	34.2	59.9
(Loss) / earnings per share excluding deferred tax (pence)	(6.5)	25.9	44.0

Divisional breakdown - (losses) / profits before non-trading exceptional items	H1 2008	H1  2007	Full Year 2007
	£m	£m	£m
Deep mines	(25.7)	(24.7)	(14.6)
Surface mines	5.0	4.5	8.5
Surface mines - additional restoration provision	(5.6)	-	-
Power	1.5	1.7	4.3
Others	0.1	-	0.7
Property - Other income less expenses	0.6	2.1	2.7
- Net gains from investment properties	19.9	51.9	70.5
Group operating (loss)/profit before non-trading exceptional items	(4.2)	35.5	72.1
Share of profit from joint ventures	0.6	0.3	0.5
Group (loss)/profit before non-trading exceptional items	(3.6)	35.8	72.6

Balance sheet	June  2008	Dec  2007
Net assets (£m)	319.8	358.2
Net assets per share (£)	2.04	2.28
Net debt excluding restricted funds (£m)	145.3	104.3

Chairman's Statement

Results Overview

These results show the robustness of UK Coal's growth platform and place us on track to meet full year expectations. They also demonstrate the changing financial profile of our business as higher coal prices now start to deliver increased cash flows and we progressively reduce the proportion of our production needed to fulfil low-priced, legacy contracts.

We lay primary emphasis upon safety, and I am pleased to say we have made good progress in reinforcing the safety culture of our Group. We are especially pleased with a reduction in the major injury/fatality accident rate in the deep mines from 3.3 per 100,000 manshifts in 2007 to 1.7.  On behalf of the Board I would like to thank all of our employees for their dedication, not just on safety matters, but for the progress made within our operations. We are very fortunate in having a very skilled workforce with tremendous belief in our businesses.

Group revenue has increased 18.3% to £172.9m during the first half of the year, reflecting the higher average realised coal sales price, which rose 17.8% to £1.79 per gigajoule (GJ) compared with £1.52/GJ for the same period in 2007.

In mining, our first half output was proportionately more committed to satisfying older contracts, muting the positive impact of the increased market price for coal. In addition, first half production was constrained and was marginally lower than original expectations, principally reflecting the timing of face changes at Kellingley and Welbeck. For the second half, while there may always be unpredictabilities, we expect significantly higher production at a significantly higher sales price.

Our surface mines performed well, increasing production in the first half by 28.5% to 0.9m tonnes (H1 2007: 0.7m tonnes).

While the increased market value of coal is highly positive to the business, cost inflation, in particular in other fuel and steel prices, is affecting our businesses. Diesel fuel is a significant element of surface mine operating costs and overall performance in the period was affected by increases in its cost. The sharp increase and long term outlook for the price of 'red diesel' has also led us to review the provisions required for the restoration of surface mine sites over the next 3-5 years, and for us to make an exceptional charge to the income statement of £5.6m. 

In our property business, Harworth Estates, we are differentiated from others in the sector as our property portfolio is at an early stage in its development life, with milestone planning gains, some rental appreciation, and the good performance of agricultural land values in the period more than offsetting current general property market conditions. Longer term, we believe that the UK's structural shortage of land for development benefits our estate and that the locations of our brownfield sites fit well with both local and national government's vision of sustainable communities.

Harworth Estates performed well in the tough conditions for the property market as a whole, achieving a 5% like-for-like increase in RICS property valuations since the end of 2007 to £438.4m.  While last year's rate of increase in valuations could not be maintained, it is notable that, despite difficult market conditions for the property industry as a whole, our further progress in securing planning permissions and the strength of agricultural land values mean that we have achieved a modest valuation increase in the first half of the year and expect to do so again in the second half.

We were pleased to receive, planning approval from the Local Authority Planning Committee for the first phase of the Prince of Wales project in August.

Reflecting the lower scale of property valuation gains and the surface mines restoration provision, the Group made an operating loss before non-trading exceptional items of £(4.2)m in the first half of the year compared to profit of £35.5m in the same period in 2007. 

The Group loss before tax in the first half of the year was £9.9m (H1 2007: profit before tax £40.6m). Loss per share was 6.5 pence (H1 2007: earnings per share 34.2 pence, or 25.9 pence excluding the tax credit in the period).

While overall the reported result for the first half is lower than for the same period last year, this is not unexpected bearing in mind the scheduled timing of our mining production over this year and the unsurprisingly reduced level of non-cash property valuation gains achieved for the first half of 2008 given the current property environment.

Net assets on the balance sheet were £319.8m compared to £358.2m at the end of 2007, primarily a result of a £28.5m increase in the Group's pension schemes' deficits to £101.7m. This increase mainly reflects a reduction in the market value of the schemes' assets of £43.5m, partially offset by an actuarial gain of £12.5m resulting from an increase in the interest rate used to discount the liabilities, both reflecting market conditions at the end of June 2008. 

Overall net debt (excluding restricted cash balances) at 30 June 2008 was in line with expectations at £145.3m (December 2007: £104.3m).

Dividend

The Group is making significant investments in its businesses to take advantage of opportunities to maximise shareholder value. For this reason and to preserve financial flexibility, the Board is not declaring an interim dividend.

Outlook

In our deep mines, Daw Mill is working through its two year long panel and, while Kellingley and Thoresby continue to face difficult coal conditions as they work their way through the last of their current seams, the investment programmes are well on track to enable access to their further substantial reserves from mid and late 2009, respectively. Welbeck will continue to mine its remaining resources until these are exhausted at the end of 2009.  We have also begun the geological work to enable us to decide on the economic viability of re-opening our Harworth mine.

The sharp increase in the market price of coal, up around 45% from the start of the year to the end of July, and the strong forward price curve, transforms the outlook for our mining operations. For the second half, we expect to achieve both a significantly higher average sales price and, absent any disruption, a significantly higher volume of production, delivering strong positive cash flows. While we expect the difficulties in the commercial and residential property market to continue, we also expect to achieve a further modest increase in RICS property valuations in the second half. 

Longer term, the proportion of our coal production needed to meet legacy contract commitments will now progressively fall, and we have made good progress in putting in place a balance of new contracts at floating, capped and collared and fixed prices, leaving a proportion of our production available to take advantage of short term market prices. This will progressively move our overall sales prices closer to world market price and is changing the economics of our mining business. 

In property, it will take time for the current difficult market conditions to work through but we believe the longer term outlook, with the UK's structural shortage of land for development, remains positive. We also believe we are well positioned given the strength of agricultural land values, the impact of the planning permissions we are pursuing, the location of our development sites and the timing of the construction phase, the latter not being significant until after the end of 2009.

Overall, we have made further good progress in realising the substantial potential of the Group. We continue to be confident of meeting expectations for the full year and view the future with optimism.

Operating review

SAFETY

Safety in all aspects of the Group's operations remains key and we are pleased to have made good progress in reinforcing the safety culture across the Group.

We continue to reinforce our links with the Health and Safety Executive through industry liaison committees on both surface and deep mines. Direct liaison between all unions, management and mines inspectors has been carried out collaboratively as well as individually at senior levels, at all sites within the deep mine sector.

A significant improvement has been made in respect of safety in the deep mine operations where a major injury/fatality accident rate of 1.7 per 100,000 manshifts was achieved in the first six months of 2008, compared to 3.3 in 2007. Overall the major injury/fatality accident rate in the first half was 3.0 per 100,000 manshifts, a similar level to 2007, although overall the severity of accidents has diminished. The Group's rate for accidents reported under RIDDOR in the first half was 25.9 per 100,000 manshifts, compared to 23.9 in 2007.

MINING AND POWER

Coal Market

The coal market has continued to perform strongly during 2008, notwithstanding recent market corrections, with a further sharp increase in the world coal price, following its almost doubling in 2007.  As with all commodities, the price of coal is a balance between increasing world demand (2007 up around 3% compared to 2006) against both the supply of mineable reserves and, perhaps more pertinently, logistical difficulties and the costs of getting coal into the appropriate market. Overall, we believe the pricing environment looking forward will remain strong, and that it is unlikely that there will be a major downward shift in the near term in the price of energy generally and of coal in particular.  

Coal Sales

Demand for our core product remains strong, not least because, given the high price of gas, coal burn for electricity generators in the UK market remains more profitable than gas, leaving aside the security of supply issues which were reflected in the difficulties encountered over the last winter in the UK obtaining imported gas supplies.

Although a significant portion of our coal production is still contracted, generally under old fixed price contracts, a small portion of our production for the first half has been available for sale at market prices, at times realising in excess of £4.00/GJ. As a consequence, the realised price for all sales in the first half was £1.79/GJ, up 10.5% over the price realised for the whole of 2007 of £1.62/GJ, and up 17.8% over the price for the first half of 2007 of £1.52/GJ.

At 30 June 2008, we had 21m tonnes of coal contracted to be sold, with 4.5m - 5m tonnes due for delivery in the remainder of 2008, 6m - 7m tonnes in 2009 and the balance in subsequent years.

Of our total commitments, 10.5m tonnes is under older 'legacy' contracts at an average (fixed or capped) price of c.£1.55/GJ. The balance of the 21m tonnes contains fixed, capped and floating rate commitments.  

There will be a significant reduction over the next 18 months in the amount of this 'legacy' contracted coal, with some 7m tonnes due for delivery by the end of 2009. Providing the coal price remains strong, this will have a marked effect on the profitability and cashflows of the business. It is noteworthy that this reduction in legacy contracted coal will also coincide with an improvement in the expected production at Kellingley and Thoresby as we start to mine their new reserves in the Beeston and Deep Soft seams respectively, although the closure of Welbeck will also take place over this period. 

In the short term, we have indicated our expectation for the second half of 2008 of a overall realised sales price of between £1.95 to £2.00/GJ, based upon a market price for the half of approximately $175/tonne (c.£3.50/GJ at an illustrative $2:£1) and production of approximately 5m tonnes. This would give an overall realised sales price for the full year of £1.90 to £1.95/GJ.  Given the contractual commitments for 2009, and assuming no significant change in market conditions, we would expect this to rise to over £2.10/GJ for that year.

The seasonality of sales volumes is not particularly marked, with sales being driven by the timing of production faces rather than customer demand. In contractual terms, the delivery under older contracts tends to be more focussed in the earlier part of the year, although other deliveries and spot sales may obviate this in any given period.

Deep Mines 

Colliery performance summary	Production (m tonnes) H1 2008	Production (m tonnes) H1 2007	Operating cost* (£m) H1 2008	Operating cost* (£m) H1 2007
Ongoing deep mines
Daw Mill	1.6	1.2	42.4	33.0
Kellingley	0.5	0.8	35.1	35.0
Thoresby	0.3	0.6	32.9	28.8
Welbeck	0.4	0.6	25.9	22.1
Total ongoing deep mines	2.8	3.2	136.3	118.9
Closed/sold deep mines	-	0.1	-	8.3
Total deep mines	2.8	3.3	136.3	127.2

* Operating cost before non-trading exceptional items and depreciation costs, with central costs absorbed.

Overall the deep mines generally met our expectations in the period, with the exception of Kellingley where unexpectedly difficult geological conditions were encountered in the development of the final 900 metres of one of the two gates for the new panel. As a consequence, the roof had to be supported with steel arches for over 500 metres, instead of using the more conventional and significantly faster roof bolting technique and this has resulted in a face gap which lasted until 16 August 2008. This was disappointing, especially given that production rates on the old face had actually been in advance of our expectations.

Daw Mill is now set well, exploiting the current panel, which contained over 6m tonnes at the start of 2008, and will continue through until the end of 2009. Thoresby which, along with Kellingley, is working its way through some very difficult coal until it can reach its new reserves, had a good first half given the resources available to be mined.

The developments to extend the lives of Kellingley and Thoresby are both progressing well and are on target for production from the new reserves in line with our expectations of mid and late 2009 respectively.

Welbeck had a slightly disappointing first half of the year with production of 0.4m tonnes, below the first half of 2007 (0.6m tonnes). This is a result of a delay in the start date for the new face in the aftermath of the previously reported fatality at the mine last year.

At Harworth, we have begun seismic studies to assess the quality and extent of the reserves in the Top Hard seam that we are considering accessing. Bore holes will be sunk in the second half of the year, once planning consent is obtained for the drilling operations. It is intended that these feasibility studies will be completed in order to make a decision in early 2009 as to whether to re-open Harworth.

As expected, overall operating costs in the business have risen reflecting the impact of above RPI inflation increases being felt especially in steel and other material prices, with increased working hours, especially at Daw Mill, also contributing to the rise.

Surface Mines

		H1 2008	H1 2007
Production (m tonnes)		0.9	0.7
Cost before depreciation (£m)		31.6	15.5
Cost per gigajoule before depreciation (£/GJ)		1.52	1.07
Additional provision re fuel increases (£m)		5.6	-
Total cost before depreciation (£m)		37.2	15.5

Surface mines had a good first half, meeting expectations with production up 28.5% at 0.9m tonnes (H1 2007: 0.7m tonnes). Production has progressed well at sites successfully opened in the second half of 2007 at Steadsburn, Long Moor and Sharlston.

Planning delays continue to frustrate the development of the business although this has not impacted on production this year. In particular delays on the new Park Wall site have resulted in the deferral of that scheme which was previously expected to start in 2008, although the production shortfall in 2008 will be made up from other sites.

Operating costs, before depreciation (but after amortisation of restoration provisions), in the first half at £1.52/GJ were at the top end of our expectations, reflecting most notably an increase in the cost of 'red diesel' from 47 pence per litre at the start of the period to 66 pence at the end of June 2008, although this has subsequently fallen back to circa 60 pence. 

As we believe that we have seen a more permanent shift in the cost of energy, notwithstanding some recent market corrections, we have reviewed upwards the provisions required to restore the mine sites at the end of their operating lives to reflect the diesel cost component of these provisions, resulting in an exceptional charge to the income statement of £5.6m in the period. 

Harworth Power 

We generated 84,193 MWh (H1 2007: 80,356 MWh) of electricity from mines methane pumped from both operational and closed deep mines. This is enough to power around 37,000 homes, and equivalent to about 60% of the deep mines' electricity requirements in the period. Our generating station at the former Stillingfleet deep mine, which was commissioned in 2007, has consistently generated at over 90% utilisation, although output at the operating mines was more variable as the methane released from mining operations varies with activity levels.

We are continuing with the lengthy process of gaining planning permissions for wind farms to be built on a number of our sites. Currently we have consent for a 9MW wind farm at Lynemouth, Northumberland, and are seeking to fulfil planning conditions on this.  We have applications for a further 16 MW in the planning system, and we are undertaking planning applications and studies at a number of other sites. 

HARWORTH ESTATES

The first half of 2008 has been the most difficult period for the property industry since 1990. Notwithstanding this, our property business has delivered profits in the first half of the year of £20.5m (December 2007: £54.0m) including investment property valuation gains of £19.8m (December 2007: £51.0m).

Although we are certainly not immune from the market we believe that we are differentiated from most of our property peer groups as our land portfolio is at an early stage in its development life and also contains a significant agricultural element.  For these reasons, the RICS valuation, produced by external valuers, of our property portfolio increased from £410.7m at the end of 2007 to £438.4m at 30 June 2008. After allowing for purchases, depreciation and development spend, the net gain in the first half of the year on a like-for-like basis was 5%.

We have not, for this half year, undertaken a review of our Project Worth estimates which will be done at the end of the full year.

Portfolio RICS Valuation as at 30 June 2008

VALUATION SUMMARY BY CLASSIFICATION
		Jun-08	Dec-07	Like-for-like
		£m	£m	% change*
Business Parks		60.4	53.3	10%
Commercial with planning		30.6	28.0	8%
Other commercial and residential		235.7	224.7	3%
Agricultural		111.7	104.7	7%
Total		438.4	410.7	5%

* The like-for-like percentage change and December 2007 comparatives are after property reclassifications and take into account adjustments for asset sales and development expenditure.

In July we received confirmation that several of our residential schemes in Project Worth now sit in areas confirmed as Housing Growth Points under the latest Government plans for meeting demand for additional new homes over the next decade.  As a result, we will make a stronger case for increased housing numbers on our various mixed use projects in the North East, West and South Yorkshire and the East Midlands.

Over the past six months we have continued the promotion of our Eco-town project at Rossington, Doncaster and have had several meetings with Government, its Eco-town Challenge Panel and, most recently, on site with the Housing Minister. The project now consists of 5,000 homes, 3,500 of which are on our own brownfield land, the former pithead of Rossington Colliery. The balance is on adjoining previously developed land in single third party ownership, making our ability to deliver this project, from a land assembly perspective, a key differentiator for us in the Eco-town contest. Successful sites will be awarded special planning status in the first quarter of 2009.

In the period we have continued to promote several major planning applications including particularly the joint venture project, G-Park at Lounge, Ashby de la Zouch, (850,000 sqft with Gazeley) and at Coalville (589,000 sqft joint venture with Graftongate Developments).  

Whilst our planning consent for a major rail-related business park at Gascoigne Wood in North Yorkshire has been challenged in the courts, the Secretary of State (and Harworth Estates) had the consent confirmed at High Court in May this year. Although the third party challenging the decision has sought leave to refer that decision to the Court of Appeal, we believe that this challenge will not be sustained. Gascoigne Wood can deliver a major community regeneration and job creating project for the Selby area and development there has all party support from the Local Authority.  

At Cutacre, Bolton, our major premium business park proposal, on part of the current surface mining project, has been identified as the Council's Preferred Option for its employment site in the Local Development Framework.  

At the turn of the half year, we submitted the planning application for a community of approximately 3,900 new homes at Waverley in Rotherham (an area now designated by Government as a Housing Growth Point) and we will shortly be submitting an application for the adjoining circa 650,000 sqft Helical Governetz joint venture scheme, providing Government with environmentally sound and cost effective relocation offices.

At the Prince of Wales Colliery, Pontefract, our scheme to provide initially 913 houses and 250,000 sqft of employment space, has received approval from the Planning Committee of Wakefield Council and will now be referred to the Government Office for Yorkshire to confirm that the Council can proceed to issue the planning consent.  

We will continue to report on the progress of the RICS valuation on a half yearly basis and the management estimate of Project Worth on an annual basis.  Notwithstanding the current market turbulence, we continue to believe both these measures are likely to increase in the medium term as planning milestones are achieved.

FINANCIAL REVIEW

Profit performance

A review of the profit performance of the individual businesses is contained in the Operating Review and further detailed disclosures are contained in the financial statements accompanying this report

Finance costs

Group net finance costs were £5.4m (H1 2007: £4.8m) including the non-cash cost for the unwinding of discounts on provisions of £2.0m (H1 2007: £2.0m), and a credit in respect of the mark to market on our interest rate hedges of £2.1m (H1 2007: £0.9m).  The increase in net finance costs reflects the general increase in the level of net debt of the Group.

We have started applying hedge accounting on our interest rate swaps progressively during the first half of the year once this has been possible on a case by case basis. The need to revalue hedges, up to the date when hedge accounting could be implemented and in respect of others where this has not been possible, has resulted in a mark to market gain of £2.1m in the income statement. A credit to reserves of £0.5m was made in respect of movements in the market value of hedges from the dates when hedge accounting was implemented.

Joint ventures

Coal4Energy, our joint venture with Hargreaves Services PLC, earned profits of £0.6m in the first of the year (H1 2007: £0.3m).

We have also entered into a new joint venture, UK Strategic Partnership, with Strategic Sites Limited, which has acquired a small parcel of land at the Waverley AMP site, for development.

Taxation

Corporation tax of £309,000 (H1 2007: £nil) has been charged in respect of the power generation business: the taxable profits of part of this business not being allowed to be offset against other losses.  There have been no further tax charges or credits during the period due to the availability of substantial brought forward tax losses for offset against profits expected in the second half year.  

There have been no movements in respect of deferred tax in the period (H1 2007: £13.0m credit).

Retirement Benefit Obligations

The Group's defined benefit obligations comprise two funded Industry Wide Schemes and an unfunded concessionary fuel scheme.

The Industry Wide Schemes have a combined deficit of £78.0m (30 June 2007: £57.7m; 31 December 2007: £49.8m) on these schemes, which are closed to new entrants but are required to be open for future service.  The deficit has increased over the first half by £28.2m, primarily as a result of a fall of £42.8m in the fund value as compared to the expected return, partially offset by an increase in the  rate used to discount the liabilities of the scheme, which reduced `the scheme liabilities by £12.3m. During the first half there were payments to the scheme, in excess of current service costs, of £2.3m. 

The overall post service obligations also include an unfunded liability in respect of the concessionary fuel scheme of £23.7m (30 June 2007: £22.0m; 31 December 2007: £23.4m).

	Pension £m	Concessionary fuel £m	Total £m
1 January 2008	(49.8)	(23.4)	(73.2)
Change in fund value compared to expected return	(42.8)	(0.7)	(43.5)
Actuarial gains in respect of liabilities	12.3	0.2	12.5
Contributions paid less current service cost	2.3	0.2	2.5
30 June 2008	(78.0)	(23.7)	(101.7)

CONSOLIDATED INCOME STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2008
		Unaudited	Unaudited		Audited
		6 months	6 months		12 months
		to June	to June		to December
		2008	2007		2007
	Notes	£000	£000		£000
Revenue	2	172,854	146,167		328,485
Cost of sales		(193,814)	(164,285)		(319,218)
Gross (loss)/profit		(20,960)	(18,118)		9,267
Net appreciation in fair value of investment properties		19,828	51,043		66,799
Profit on disposal of investment properties		62	889		3,688
Gains on investment properties		19,890	51,932		70,487
Profit on sale of business		-	12,227		8,481
Other operating income and expenses		(4,052)	(962)		(5,579)
Operating (loss)/profit	2	(5,122)	45,079		82,656
Finance costs	3	(6,749)	(6,234)		(17,121)
Finance income	3	1,349	1,391		2,951
Finance costs - net	3	(5,400)	(4,843)		(14,170)
Share of post tax profit from joint ventures		623	337		537
(Loss)/profit before tax		(9,899)	40,573		69,023
Tax	4	(309)	12,994		25,000
(Loss)/profit for the period	13	(10,208)	53,567		94,023
Attributable to:
Equity holders of the Company		(10,208)	53,567		94,023
(Loss)/earnings per share		pence	pence		pence
Basic and diluted	6	(6.5)	34.2		59.9
The attached notes are an integral part of the condensed consolidated interim financial statements.

CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE
FOR THE SIX MONTHS ENDED 30 JUNE 2008
	Unaudited	Unaudited	Audited
	6 months	6 months	12 months
	to June	to June	to December
	2008	2007	2007
	£000	£000	£000
Actuarial (loss)/gain on Industry Wide schemes	(30,971)	35,569	35,733
Actuarial gain on Blenkinsopp pension scheme	58	-	464
Actuarial gain on concessionary fuel reserve	174	2,294	1,280
Movement on deferred tax asset relating to retirement benefit liabilities	-	(12,986)	(22,012)
Impact of change in UK tax rate on deferred tax	-	-	(2,383)
Property revaluation on transfer to investment properties	1,747	1,231	6,733
Cash flow hedges	492	-	-
Net (loss)/gain recognised directly in equity	(28,500)	26,108	19,815
(Loss) / profit for the period	(10,208)	53,567	94,023
Total recognised (expense)/income for the period	(38,708)	79,675	113,838
Attributable to:
Equity holders of the Company	(38,708)	79,675	113,838

CONSOLIDATED BALANCE SHEET
AT 30 JUNE 2008
		Unaudited	Unaudited	Audited
		30 June	30 June	31 December
		2008	2007	2007
	Notes	£000	£000	£000
Assets
Non current assets
Operating property, plant and equipment		190,963	210,443	199,551
Surface mine development and restoration assets		31,065	16,664	20,111
Total operating property, plant and equipment	7	222,028	227,107	219,662
Investment properties	8	413,877	360,560	384,291
Investment in joint ventures	14	1,869	142	342
Deferred tax asset		36,000	35,747	36,000
Trade and other receivables		1,615	964	1,613
		675,389	624,520	641,908
Current assets
Inventories		46,150	43,691	39,756
Trade and other receivables		41,453	37,666	29,953
Derivative financial instruments		928	1,467	424
Cash and cash equivalents	9	40,300	46,526	70,068
		128,831	129,350	140,201
Liabilities
Current liabilities
Financial liabilities
- Borrowings	10	(7,066)	(32,532)	(27,320)
Trade and other payables		(103,190)	(100,195)	(100,213)
Provisions	11	(31,221)	(35,360)	(31,061)
		(141,477)	(168,087)	(158,594)
Net current liabilities		(12,646)	(38,737)	(18,393)
Non current liabilities
Financial liabilities
- Borrowings	10	(141,148)	(75,038)	(97,921)
- Derivative financial instruments		(55)	-	(2,148)
Trade and other payables		(98)	(231)	(73)
Deferred tax liability		(815)	(1,172)	(815)
Provisions	11	(99,174)	(105,771)	(91,141)
Retirement benefit obligations	12	(101,678)	(79,662)	(73,171)
		(342,968)	(261,874)	(265,269)
Net assets		319,775	323,909	358,246
Equity
Capital and reserves
Ordinary shares		1,571	1,569	1,571
Share premium		30,756	30,756	30,756
Revaluation reserve		143,893	140,873	143,014
Capital redemption reserve		257	257	257
Fair value reserve		197,746	162,413	177,851
Hedging reserve		492	-	-
Retained earnings	13	(54,940)	(11,959)	4,797
Total equity	13	319,775	323,909	358,246

CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 30 JUNE 2008
		Unaudited	Unaudited	Audited
		6 months	6 months	12 months
		to June	to June	to December
		2008	2007	2007
	Notes	£000	£000	£000
Cash flows from operating activities
(Loss)/profit for the period	2	(10,208)	53,567	94,023
Depreciation/impairment of operating property, plant and equipment		20,268	19,637	38,500
Amortisation of surface mine development and restoration assets		5,726	3,368	8,723
Net fair value appreciation in investment properties		(19,828)	(51,043)	(66,799)
Net interest payable and amortisation of discount on provisions		5,400	4,843	14,170
Net charge for share based remuneration		237	112	284
Share of post tax profit from joint ventures		(623)	(337)	(537)
Profit on disposal of investment property		(62)	(889)	(3,688)
Profit on disposal of operating property, plant and equipment		(15)	(1,345)	(1,598)
Profit on sale of business		-	(12,227)	(8,481)
Capitalised surface mine restoration costs		(11,269)	(6,178)	(14,490)
Increase/(decrease) in provisions and retirement benefit obligations		3,983	(11,066)	(38,818)
Tax charge / (credit)		309	(12,994)	(25,000)
Operating cash flows before movements in working capital		(6,082)	(14,552)	(3,711)
Increase in stocks		(6,394)	(7,051)	(3,116)
(Increase)/decrease in receivables		(11,502)	9,938	17,253
Increase/(decrease) in payables		2,693	(6,167)	(4,304)
Cash (used in)/generated from operations		(21,285)	(17,832)	6,122
Interest paid		(6,140)	(4,247)	(13,188)
Cash used in operating activities		(27,425)	(22,079)	(7,066)
Cash flows from investing activities
Interest received		1,349	1,391	2,951
Net receipt from/(payment to) insurance and security provision funds		11,711	(2,475)	(6,794)
Net proceeds from sale of business		-	21,500	21,500
Proceeds from disposal of fixed assets		909	5,279	14,122
Net (investment in)/receipts from joint ventures		(904)	400	400
Development costs of investment properties		(6,167)	(2,579)	(7,547)
Precoaling expenditure for surface mines		(5,411)	(792)	(4,650)
Purchase of operating property, plant and equipment		(14,356)	(12,327)	(23,046)
Cash (used in)/generated from investing activities		(12,869)	10,397	(3,064)
Cash flows from financing activities
Net drawdown of bank loans		27,152	12,552	27,223
Net (repayments)/proceeds of obligations under hire purchase and finance leases		(4,915)	(2,747)	253
Cash generated from financing activities		22,237	9,805	27,476
(Decrease)/increase in cash		(18,057)	(1,877)	17,346
At commencement of period
Cash		20,973	3,627	3,627
Cash equivalents		49,095	42,301	42,301
		70,068	45,928	45,928
(Decrease)/increase in cash equivalents (net receipt from insurance and subsidence security funds)		(11,711)	2,475	6,794
(Decrease)/increase in cash		(18,057)	(1,877)	17,346
		40,300	46,526	70,068
At end of period
Cash		2,916	1,750	20,973
Cash equivalents		37,384	44,776	49,095
Cash and cash equivalents	9	40,300	46,526	70,068

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 

FOR THE SIX MONTHS ENDED 30 JUNE 2008

1.  Basis of preparation of the condensed consolidated interim financial statements

UK COAL PLC is a company domiciled in the UK. The condensed consolidated interim financial statements as at and for the six months ended 30 June 2008 comprise the Company and its subsidiaries (together referred to as the 'Group').

The Group financial statements for the year ended 31 December 2007 were approved by the Board of Directors on 17 April 2008 and delivered to the Registrar of Companies.

The report of the auditors on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under section 237 of the Companies Act 1985.

These condensed consolidated interim financial statements do not comprise statutory accounts within the meaning of section 240 of the Companies Act 1985.

These condensed consolidated interim financial statements for the period ended 30 June 2008 are unaudited but have been reviewed by the auditors and their Independent Review Report is included with these statements.

The Board approved the condensed consolidated interim financial statements on 27 August 2008.

Statement of compliance

The condensed consolidated interim financial statements for the six months ended 30 June 2008 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS34 'Interim Financial Reporting' as adopted by the European Union ('EU'). The condensed consolidated interim financial statements should be read in conjunction with the annual financial statements for the year ended 31 December 2007 which have been prepared in accordance with IFRS's as adopted by the EU.

Accounting policies

Except as described below, the accounting policies applied are consistent with those of the annual financial statements for the year ended 31 December 2007, as described in those annual financial statements.  Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected annual earnings.

The following standard is effective for the first time in 2008:

IFRIC 14, 'IAS 19 - The limit on a defined benefit asset, minimum funding requirements and their interaction' (effective from 1 January 2008). IFRIC 14 provides guidance on assessing the limit in IAS 19 on the amount of the surplus that can be recognised as an asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding requirement. The Group has applied IFRIC 14 from 1 January 2008, but it has not had any impact on the Group's accounts. 

The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2008, but are not currently relevant to the Group:

  - IFRIC 11 'IFRS2 - Group and treasury share transactions'

  - IFRIC 12 'Service concession arrangements'

Trading and non-trading exceptional items

Items that are both material and non-recurring and whose significance is sufficient to warrant separate disclosure and identification within the consolidated 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 items include, but are not limited to, significant and material restructuring closures and reorganisation programmes, asset impairments, and profits or losses on the disposal of businesses.

Exceptional items are divided into non-trading and trading exceptional items, depending upon the impact of the event giving rise to the cost or income on the ongoing trading operations and the nature of the costs or income involved. Non-trading exceptional items include costs and income arising from closure, rationalisation and business disposals. 

Property related transactions, including changes in the fair value of investment properties, and profits and losses arising on the disposal 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 consolidated income statement, where material.

Going concern

In forming its opinion as to going concern, the Board prepares a working capital forecast based upon its assumptions as to trading as well as taking into account the available borrowing facilities in line with the Treasury Policy disclosed in the Directors' Report in the Group's Annual Report and Accounts for the year ended 31 December 2007. The Board also prepares a number of alternative scenarios modelling the business variables and key risks and uncertainties, both as summarised in the Operating and Financial Review within the Annual Report and Accounts.

Based upon these, the Board has concluded that the Group has adequate working capital and has therefore concluded that it is appropriate to use the going concern basis of preparation for the condensed consolidated interim financial statements of the Group.

Estimates and judgements

The preparation of the condensed consolidated interim financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.

In preparing these condensed consolidated interim financial statements, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements as at and for the year ended 31 December 2007.

2.  Segmental Reporting

Revenue	6 months	6 months	12 months
	to June	to June	to December
	2008	2007	2007
Revenue from operations arises from:	£000	£000	£000
Sale of goods	164,914	140,044	318,671
Rendering of services	5,354	3,622	5,037
Rental income	2,586	2,501	4,777
	172,854	146,167	328,485

Primary reporting format - business segments

Six months ended 30 June 2008

	Ongoing Deep Mines	Closed/sold Deep Mines	Deep Mining	Surface Mining	Power	Property	Other	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Continuing operations
Revenue - gross	128,818	-	128,818	41,541	3,790	2,592	1,149	177,890
Revenue - intra Group	-	-	-	(3,625)	(1,156)	-	(255)	(5,036)
Revenue	128,818	-	128,818	37,916	2,634	2,592	894	172,854
Operating (loss)/profit before non-trading exceptional items	(25,682)	-	(25,682)	(603)	1,476	20,452	195	(4,162)
Non-trading exceptional items
- Rationalisation, closure and other costs	(347)	(541)	(888)	(72)	-	-	-	(960)
Operating (loss)/profit after non-trading exceptional items	(26,029)	(541)	(26,570)	(675)	1,476	20,452	195	(5,122)
Finance costs								(6,749)
Finance income								1,349
Finance costs - net								(5,400)
Share of post-tax profit from joint ventures								623
Loss before tax								(9,899)
Tax								(309)
Loss for the period								(10,208)
Other segmental items
Capital expenditure	12,267	-	12,267	1,199	2	7,055	-	20,523
Depreciation	18,188	-	18,188	1,338	650	81	11	20,268
Surface mines development costs and restoration assets capitalised	-	-	-	16,680	-	-	-	16,680
Amortisation of surface mining development and restoration assets	-	-	-	5,726	-	-	-	5,726
Provisions - non-cash charge	3,673	-	3,673	16,915	-	-	23	20,611

Property operating profit includes the gains on investment properties of £19,890,000 being net appreciation in fair value of investment properties of £19,828,000 and profit on disposal of investment properties of £62,000.

Trading exceptional items

Deep mines operating loss includes Coal Investment Aid income of £1,554,000. Surface mines operating loss includes a one off charge of £5,574,000 to increase the surface mines restoration provision following a sharp increase in fuel prices.

Non-trading exceptional items

Rationalisation, closure and other costs are predominantly associated with the deep mines operations and include costs in respect of Harworth colliery of £541,000 and redundancy costs of £419,000.

All trading and non-trading exceptional items are included in cost of sales except for Coal Investment Aid which is included within other operating income and expenses.

Six months ended 30 June 2007

	Ongoing Deep Mines	Closed/sold Deep Mines	Deep Mining	Surface Mining	Power	Property	Other	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Continuing operations
Revenue - gross	112,668	7,345	120,013	25,517	3,939	2,522	721	152,712
Revenue - intra Group	-	-	-	(3,945)	(2,392)	-	(208)	(6,545)
Revenue	112,668	7,345	120,013	21,572	1,547	2,522	513	146,167
Operating (loss)/profit before non-trading exceptional items	(23,119)	(1,600)	(24,719)	4,491	1,714	54,000	(9)	35,477
Non-trading exceptional items
- Profit on sale of business	-	11,989	11,989	-	238	-	-	12,227
- Rationalisation, closure and other costs	(1,470)	(1,120)	(2,590)	(35)	-	-	-	(2,625)
Operating (loss)/profit after non-trading exceptional items	(24,589)	9,269	(15,320)	4,456	1,952	54,000	(9)	45,079
Finance costs								(6,234)
Finance income								1,391
Finance costs - net								(4,843)
Share of post-tax profit from joint ventures								337
Profit before tax								40,573
Tax								12,994
Profit for the period								53,567
Other segmental items
Capital expenditure	8,073	1,040	9,113	326	2,779	2,688	-	14,906
Depreciation	17,036	529	17,565	1,566	415	91	-	19,637
Surface mines development costs and restoration assets capitalised	-	-	-	10,338	-	-	-	10,338
Amortisation of surface mining development and restoration assets	-	-	-	3,368	-	-	-	3,368
Provisions - non-cash charge/(credit)	5,857	(6,724)	(867)	9,103	-	-	7	8,243

Property operating profit includes the gains on investment properties of £51,932,000 being net appreciation in fair value of investment properties of £51,043,000 and profit on disposal of investment properties of £889,000.

Trading exceptional items

Deep mines operating loss includes Coal Investment Aid income of £1,460,000 and recovery costs for Daw Mill colliery of £11,005,000. 

Non-trading exceptional items

Rationalisation, closure and other costs are predominantly associated with the deep mines operations and include costs in respect of Harworth colliery of £1,120,000, redundancy costs of £1,924,000 and pension curtailment gains of £419,000. The profit on sale of business relates to the sale of Maltby colliery in February 2007.

All trading and non-trading exceptional items are included in cost of sales except for Coal Investment Aid which is included within other operating income and expenses.

Year ended 31 December 2007

	Ongoing Deep Mines	Closed/sold Deep Mines	Deep Mining	Surface Mining	Power	Property	Other	Total
	£000	£000	£000	£000	£000	£000	£000	£000
Continuing operations
Revenue - gross	258,404	7,375	265,779	60,399	8,575	4,803	1,286	340,842
Revenue - intra Group	-	-	-	(7,542)	(4,430)	-	(385)	(12,357)
Revenue	258,404	7,375	265,779	52,857	4,145	4,803	901	328,485
Operating (loss)/profit before non-trading exceptional items	(14,037)	(600)	(14,637)	8,543	4,333	73,200	694	72,133
Non-trading exceptional items
- Profit on sale of business	-	8,243	8,243	-	238	-	-	8,481
- Rationalisation, closure and other costs	4,078	(1,811)	2,267	(225)	-	-	-	2,042
Operating (loss)/profit after non-trading exceptional items	(9,959)	5,832	(4,127)	8,318	4,571	73,200	694	82,656
Finance costs								(17,121)
Finance income								2,951
Finance costs - net								(14,170)
Share of post-tax profit from joint ventures								537
Profit before tax								69,023
Tax								25,000
Profit for the year								94,023
Other segmental items
Capital expenditure	16,374	1,040	17,414	1,447	3,422	8,116	194	30,593
Depreciation	33,664	529	34,193	3,079	1,056	172	-	38,500
Surface mines development costs and restoration assets capitalised	-	-	-	19,140	-	-	-	19,140
Amortisation of surface mining development and restoration assets			-	8,723	-	-	-	8,723
Provisions - non-cash (credit)/charge	(245)	(8,633)	(8,878)	12,086	-	-	17	3,225

Property operating profit includes the gains on investment properties of £70,487,000 being net appreciation in fair value of investment properties of £66,799,000 and profit on disposal of investment properties of £3,688,000.  

Trading exceptional items

Deep mines operating loss includes Coal Investment Aid income of £2,926,000 and recovery and related costs for Daw Mill colliery of £11,505,000. 

Non-trading exceptional items

The profit on sale of business relates to the sale of Maltby colliery in February 2007.

Rationalisation, closure and other costs are predominantly associated with the deep mines operations and include a net credit of £8,767,000 following settlement of a dispute on tax deductions arising on redundancies with HMRC, costs in respect of Harworth colliery of £1,811,000, redundancy costs of £3,065,000, write down of stores equipment in connection with a strategic review on closure of deep mine operations of £1,737,000, pension curtailment gains of £668,000 and other costs of £780,000.

All trading and non-trading exceptional items are included in cost of sales except for Coal Investment Aid which is included within other operating income and expenses.

3. Finance income and costs

	6 months	6 months	12 months
	to June	to June	to December
	2008	2007	2007
	£000	£000	£000
Interest expense
- Bank borrowings	(5,581)	(3,757)	(8,868)
- Hire purchase agreements and finance leases	(559)	(466)	(810)
- Unwinding of discount on provisions	(1,977)	(1,987)	(3,933)
- Amortisation of issue costs of bank loans	(736)	(967)	(1,610)
Gain/(loss) on interest rate swaps not eligible for hedge accounting	2,104	943	(1,900)
Finance costs	(6,749)	(6,234)	(17,121)
Finance income	1,349	1,391	2,951
Net interest costs	(5,400)	(4,843)	(14,170)

The Group has adopted hedge accounting for its interest rate swaps where possible for the first time during the period to 30 June 2008.

4. Tax

The tax charge in the period of £309,000 relates to a charge on the profits of the power generation business. No tax payments have been made during the period.

5. Dividends

No dividends have been paid or proposed in relation to 2007. No interim dividend is proposed for the six months ended 30 June 2008.

6.  (Loss)/earnings per share

(Loss)/earnings per share has been calculated by dividing the (loss)/earnings attributable to ordinary shareholders by the weighted average number of shares in issue and ranking for dividend during the year.

In calculating the diluted (loss)/earnings per share, the weighted average number of ordinary shares is adjusted for the diluting effect of share options potentially issuable under the Group's employee share option plans.

	6 months	6 months	12 months
	to June	to June	to December
	2008	2007	2007
	£000	£000	£000
(Loss)/profit before tax	(9,899)	40,573	69,023
Corporation tax	(309)	-	-
(Loss)/profit before deferred tax	(10,208)	40,573	69,023
Deferred tax	-	12,994	25,000
(Loss)/profit for the year	(10,208)	53,567	94,023

Weighted average number of shares used for basic and diluted (loss)/earnings per share calculations	157,128,220	156,673,616	156,839,338
Basic and diluted (loss)/earnings per share (pence)	(6.5)	34.2	59.9

Adjusted loss per share, excluding deferred tax, for the six months ended 30 June 2008 is 6.5 pence (six months ended 30 June 2007: earnings per share 25.9 pence; year  ended 31 December 2007: earnings per share 44.0 pence). This adjusted (loss)/earnings per share is stated to enable comparability to the previous period.

7.  Operating property, plant and equipment - Net book value

	Operating	Surface mine
	property	development
	plant and	and restoration
	equipment	assets	Total
	£000	£000	£000
At 1 January 2007	228,248	9,694	237,942
Additions	12,327	10,338	22,665
Disposals	(13,586)	-	(13,586)
Net transfer from Investment Properties	3,091	-	3,091
Depreciation charge	(19,637)	(3,368)	(23,005)
At 30 June 2007	210,443	16,664	227,107
Additions	10,719	8,802	19,521
Disposals	(48)	-	(48)
Net transfer to Investment Properties	(2,700)	-	(2,700)
Depreciation charge	(18,863)	(5,355)	(24,218)
At 31 December 2007	199,551	20,111	219,662
Additions	14,356	16,680	31,036
Disposals	(31)	-	(31)
Net transfer to Investment Properties	(2,645)	-	(2,645)
Depreciation charge	(20,268)	(5,726)	(25,994)
At 30 June 2008	190,963	31,065	222,028

In addition to the above the Group is committed to a further £7,900,000 of expenditure for operating property, plant and equipment.

8. Investment properties

	6 months	6 months	12 months
	to June	to June	to December
	2008	2007	2007
At valuation	£000	£000	£000
At 1 January	384,291	311,677	311,677
Additions	6,167	2,579	7,547
Disposals	(801)	(2,879)	(8,074)
Fair value uplift	19,828	51,043	66,799
Transfer from operating property, plant and equipment	2,645	8	1,256
Revaluation gain on transfer from operating property, plant and equipment	1,747	1,231	6,733
Transfer to operating property, plant and equipment	-	(3,099)	(1,647)
At period end	413,877	360,560	384,291

In addition to the above the Group is committed to a further £1,300,000 of expenditure for investment properties.

All investment properties were valued at 30 June 2008, in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors, by three firms, Atisreal, Smiths Gore and Bell Ingram, all independent firms with relevant experience of valuations of this nature. The valuation excludes any deduction of rehabilitation and restoration costs which are stated within provisions in the balance sheet.

Key assumptions within the basis of fair value are:

- The sites will be cleared of redundant buildings, levelled and prepared ready for development

- The values are on a basis that no material environmental contamination exists on the subject or adjoining sites, or where this is present the sites will be remediated to a standard consistent with the intended use, the costs for such remediation being separately provisioned and

- No deduction or adjustment has been made in relation to clawback provisions, or other taxes which may be payable in certain events

9.  Cash and cash equivalents 

	30 June	30 June	31 December
	2008	2007	2007
	£000	£000	£000
Cash deposited to cover insurance requirements	19,696	22,029	25,692
Subsidence security fund	17,688	22,747	23,403
Total 'restricted' cash balances	37,384	44,776	49,095
Other cash balances	2,916	1,750	20,973
Cash and cash equivalents	40,300	46,526	70,068

10. Financial liabilities - borrowings

	30 June	30 June	31 December
	2008	2007	2007
	£000	£000	£000
Current	7,066	32,532	27,320
Non current	141,148	75,038	97,921
	148,214	107,570	125,241

Debt at 30 June 2008 is stated after deduction of unamortised borrowing costs of £3,431,000 (30 June 2007: £2,381,000; 31 December 2007: £3,255,000).

During the period, the Group made repayments of £1,086,000 against borrowings. Additional facilities of £10,584,000 have been secured during the period. Of these, £4,584,000 has been through the increase of an existing facility and is repayable on expiry of the facility in February 2010. A further £6,000,000 was secured through an increase on the renegotiation/renewal of a former facility of £20,000,000, which was due to have expired in August 2008. Following renegotiation the facility has been increased to £26,000,000 and the term extended to May 2011. The balance of the movement in borrowings relates to the outstanding balance on a revolving credit facility which is due for repayment in September 2010 and is disclosed as non current.

11. Provisions

	1 January	Created	Released	Utilised	Unwinding	30 June
	2008	in period	in period	in period	of discount	2008
	£000	£000	£000	£000	£000	£000
Employer and public liabilities	18,875	1,375	-	(1,897)	282	18,635
Surface damage	16,405	2,066	(106)	(4,970)	241	13,636
	35,280	3,441	(106)	(6,867)	523	32,271
Claims	39	23	-	(13)	-	49
Restoration and closure costs of surface mines	54,598	16,843	-	(3,862)	1,032	68,611
Restoration and closure costs of deep mines
- shaft treatment and pit top	12,193	-	(7)	(1,057)	183	11,312
- spoil heaps	3,224	-	(2)	(8)	48	3,262
- pumping costs	6,304	-	-	-	94	6,398
Ground/groundwater contamination	6,465	-	-	-	97	6,562
Redundancy	4,099	419	-	(2,588)	-	1,930
	122,202	20,726	(115)	(14,395)	1,977	130,395

The nature of the Group's obligations is as disclosed in the Annual Report and Accounts for the year ended 31 December 2007. The restoration and closure costs created for surface mines in the period includes costs in respect of new sites and a one off charge to reflect increasing fuel costs.

Restricted funds of £37,384,000 have been set aside to meet the liabilities due on the employer and public liabilities and surface damage provisions above.

Provisions have been allocated between current and non current as follows:

	30 June	30 June	31 December
	2008	2007	2007
	£000	£000	£000
Provisions payable within one year	31,221	35,360	31,061
Provisions payable after more than one year	99,174	105,771	91,141
	130,395	141,131	122,202

Provisions are expected to be settled within the timescales set out in the following table:

				More than
	Within 1 year	1-2 years	2-5 years	5 years	Total
	£000	£000	£000	£000	£000
Employer and public liabilities	5,469	5,305	5,969	1,892	18,635
Surface damage	3,000	2,727	6,000	1,909	13,636
	8,469	8,032	11,969	3,801	32,271
Claims	49	-	-	-	49
Restoration and closure costs of surface mines	19,726	21,975	19,193	7,717	68,611
Restoration and closure costs of deep mines
- shaft treatment and pit top	640	1,014	1,571	8,087	11,312
- spoil heaps	407	587	574	1,694	3,262
- pumping costs	-	-	-	6,398	6,398
Ground/groundwater contamination	-	-	-	6,562	6,562
Redundancy	1,930	-	-	-	1,930
	31,221	31,608	33,307	34,259	130,395

12.  Retirement benefit obligations

			30 June	30 June	31 December
			2008	2007	2007
			£000	£000	£000
Retirement benefit obligations - Blenkinsopp			820	1,299	835
Retirement benefit obligations - concessionary fuel			23,741	21,974	23,443
Retirement benefit obligations - Industry Wide Schemes			77,117	56,389	48,893
			101,678	79,662	73,171

13. Statement of changes in shareholders' equity

		Share
	Ordinary	premium	Other	Retained	Total
	shares	account	reserves	earnings	equity
	£000	£000	£000	£000	£000
At 1 January 2007	1,566	30,756	253,639	(41,842)	244,119
Profit for six months to June 2007	-	-	-	53,567	53,567
New shares issued	3	-	-	-	3
Actuarial gains on post retirement benefits	-	-	-	37,863	37,863
Accrual for long term incentive plan liabilities	-	-	-	112	112
Movement on deferred tax asset in relation to retirement benefit liabilities	-	-	-	(12,986)	(12,986)
Fair value gain on revaluation of investment properties	-	-	51,043	(51,043)	-
Property revaluation on transfer to investment properties	-	-	1,231	-	1,231
Disposal of investment properties	-	-	(2,370)	2,370	-
At 30 June 2007	1,569	30,756	303,543	(11,959)	323,909
Profit for six months to December 2007	-	-	-	40,456	40,456
New shares issued	2	-	-	-	2
Actuarial losses on post retirement benefits	-	-	-	(386)	(386)
Accrual for long term incentive plan liabilities	-	-	-	172	172
Movement on deferred tax asset in relation to retirement benefit liabilities	-	-	-	(11,409)	(11,409)
Fair value gain on revaluation of investment properties	-	-	15,756	(15,756)	-
Property revaluation on transfer to investment properties	-	-	5,502	-	5,502
Disposal of investment properties	-	-	(3,679)	3,679	-
At 31 December 2007	1,571	30,756	321,122	4,797	358,246
Loss for six months to June 2008	-	-	-	(10,208)	(10,208)
Actuarial losses on post retirement benefits	-	-	-	(30,739)	(30,739)
Accrual for long term incentive plan liabilities	-	-	-	237	237
Fair value gain on revaluation of investment properties	-	-	19,828	(19,828)	-
Property revaluation on transfer to investment properties	-	-	1,747	-	1,747
Disposal of investment properties	-	-	(801)	801	-
Hedging reserve created - Fair value gains in period	-	-	492	-	492
At 30 June 2008	1,571	30,756	342,388	(54,940)	319,775

14.  Related party transactions

During the period the group acquired 50% of the issued shares in UK Strategic Partnership Limited, as a joint venture company with Strategic Sites Limited for the development of certain Investment Properties. The first development will be at the Advanced Manufacturing Park at Waverley, South Yorkshire.

Investments in joint ventures

	30 June	30 June	31 December
	2008	2007	2007
	£000	£000	£000
Coal4Energy	965	142	342
UK Strategic Partnership	904	-	-
	1,869	142	342

Transactions with joint ventures 

The following transactions were carried out with joint ventures:

	30June	30June	31December
	2008	2007	2007
	£000	£000	£000
UK Strategic Partnership
Sale of land to related party	1,292	-	-
Coal4Energy
Sale of goods and services to related party:
- Coal	12,041	15,738	29,114
- Services	338	274	516
	12,379	16,012	29,630
Coal4Energy
Purchases of goods and services from related party:
- Coal	5	-	24
- Finance costs	2	23	23
	7	23	47

Sales and purchases to and from the joint ventures were carried out on commercial terms and conditions and at market prices. Profit of £62,000 has been recognised in the period on the sale of land to UK Strategic Partnership.

Balances owing from/(to) joint ventures

Coal4Energy

The balance arising from sales of goods and services at 30 June 2008 was £1,143,000 (30 June 2007: £1,979,000; 31 December 2007: £2,332,000) owed from the joint venture, and the balance arising from purchase of goods and services at 30 June 2008 was £nil (30 June 2007: £nil; 31 December 2007: £nil).

UK Strategic Partnership 

There are no balances outstanding at the period end

PRINCIPAL RISKS AND UNCERTAINTIES

UK COAL PLC operates in an industry which carries inherent risk, and is subject to market and other external risks which cannot be fully controlled, mitigated or insured against.

The principal risks and uncertainties identified by the Directors which exist within the Group remain those disclosed on pages 36 and 37 in the Annual Report and Accounts for the Group for the year ended 31 December 2007. 

The key risks fall into the following categories: 

Mining risks:

  - Health, safety and environment 

  - Major unforeseeable production shortfalls or geological constraints

   - Fluctuations in coal prices

Property risks:

  - Property market downturn or volatility

  - Planning approvals

The Outlook section of the Chairman's statement provides commentary concerning the remainder of the financial year.

RESPONSIBILITY STATEMENT OF THE DIRECTORS IN RESPECT OF THE HALF YEARLY FINANCIAL REPORT

The Directors' confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 as adopted by the European Union and that the interim management report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

  - an indication of important events that have occurred during the first six months and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

  - material related parties transactions in the first six months and any material changes in the related party transactions described in the last annual report.

The Directors of UK COAL PLC are listed in the UK COAL PLC Annual Report for 31 December 2007. A list of current Directors is maintained on the UK COAL PLC 

website: www.ukcoal.com

By order of the Board

Jon Lloyd                      David Brocksom

Chief Executive            Finance Director

27 August 2008            27 August 2008

 

END

 

 

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