Trading Statement

RNS Number : 1558Z

UK Coal PLC

16 July 2008

 



16th July 2008

UK COAL PLC ('UK COAL')

Trading Update for the six months to end June 2008

We continue to look forward with confidence

UK Coal today provides the following trading update in advance of the announcement on 28 August 2008 of its interim results for the six months to 30 June 2008.

Mining and Power

Revenues for the first half are in line with expectations, with a higher realised sales price for the first half of the year, expected to be approximately £1.79/GJ (2007 H1: £1.52 /GJ), offsetting the marginally lower than expected production of approximately 3.7m tonnes (2007 H1: 3.8m tonnes, excluding Maltby), due principally to the face change at Kellingley.

Over the first half of the year, we have seen continued increases in the market prices for all forms of energy. For the second half, given the market price for coal and taking into account contractual commitments, we expect to achieve an average selling price of approximately £1.95 to £2.00 /GJ, on expected production for the second half, given the timing of face changes, of approximately 5m tonnes. 

The rise in energy prices is very positive for UK Coal's outlook. In light of the prevailing market price for coal, we are currently undertaking a geological study to determine the viability of re-opening our Harworth mine and accessing its substantial remaining coal reserves. Increased energy costs, however, also impact our own operating costs, particularly the cost of diesel, which accounts for some 40% of surface mine costs. We are therefore reviewing the provisions for the restoration of surface mine sites over the next 3-5 years.

Harworth Estates

The RICS property valuations as at 30 June 2008, are expected to be modestly above the level as at 31 December 2007, with an increase of approximately £20 million expected over the first half of the year. This has been driven by a strong performance in agricultural land values and progress in planning offsetting some weakness in underlying land values.

Net Borrowings

Overall net debt (excluding restricted cash balances) at 30 June 2008 was also in line with expectations at £145m (31 December 2007: £104m).

Outlook for 2008

The outlook for the mining business for the second half remains positive, with the full year expected to be in line with expectations. The second half is expected to benefit from a higher sales price and a higher volume of production, though the latter will be slightly lower than previously expected. In particular, Kellingley will have a longer face gap than originally planned as development for the new face has been delayed as a result of very poor geology at the end of its current seam's life.

Whilst we remain cautious about the property market, given the general turbulence in the sector, we expect to show a further modest uplift in RICS property valuations in the second half, with planning progress and agricultural land rises continuing to offset the market problems. The current turmoil in the housebuilding sector does not immediately affect us since most of our regeneration projects are long term and the structural shortage of land for housing in the UK underpins long term demand. 

Overall, we continue to look forward with confidence.

Ends

Enquiries:

Media:

Citigate Dewe Rogerson            Tel: [phone]

Anthony Carlisle                           Mobile: [phone]

Analysts and investors:

UK COAL PLC                             Tel: [phone]

Jon Lloyd,  Chief Executive

David Brocksom, Finance Director

Citigate Dewe Rogerson            Tel: [phone]

Nick Cox-Johnson                        Mobile: [phone]

 

END

 

 

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