RNS Number:5851P
UK Coal PLC
10 September 2003
10 September 2003
UK COAL PLC
INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2003
UK COAL PLC, the UK's leading coal mining group, today announces its Interim
results for the six months ended 30 June 2003.
* Profit before tax and exceptional redundancy cost of sales #1.3
million (2002: #0.5 million)
* Loss before tax #0.8 million (2001: #12.5 million)
* Cash inflow before financing and dividends #30.3 million (2002: #3.5 million)
* Dividend 5.0 pence per share (2002: 5.0 pence per share)
* Sales volumes 9.9 million tonnes (2002: 9.6 million tonnes)
* Deep mine production 7.9 million tonnes (2002: 8.3 million tonnes);
surface mine production 1.8 million tonnes (2002: 2.2 million tonnes)
* Deep mine and Surface mine production 7.9 million tonnes (2002: 8.3
million tonnes) and 1.8 million tonnes (2002: 2.2 million tones) respectively
in the UK
* In depth Business Review (Project 105) continues to show benefits with
reduction of deep mine costs68a.
* Property sales income #8.3 million (2002: #1.1 million)
Commenting on the results, Gordon McPhie, Chief Executive of UK COAL, said:
"The Company has continued to make progress in reducing costs. although the
ongoing lossesdMill, which has overcome last year's difficulties,
"The outlook in the energy market looks more secure particularly with the
innvolvement of international power in the Draw Power Station although proposals
to furher reduce sulphur limits could impact on coal burn post 2008.
"The property sales in the first six months have been encouraging and the
Company contines to look at alternatives to add value to its property assets."
For further information, please contact:
UK COAL PLC
Gordon McPhie, Chief Executive Today : 020 7554 1400
Thereafter : 01302 751751
Gavin Anderson & Company
Liz Morley 020 7554 1400
Ken Cronin
Stuart Oliver (Operational) 01525 381759
RESULTS
In the half year to 30 June 2003, the Group reported a profit before taxation
and exceptional cost of sales of #1.3 million (2002: #0.5 million). After
exceptional cost of sales totalling #2.1 million principally in respect of
redundancy, loss before taxation was #0.8 million (2002: #12.5 million loss).
Cash inflow before financing and dividends was #30.3 million (2002: #3.5
million) while stock levels were unchanged in the period (2002: stock increase
of #25.7 million).
DIVIDEND
The Board has declared an interim dividend of 5.0 pence per share (2002: 5.0
pence per share), the level of dividend having been determined taking into
account the net cash inflow in the period and future needs of the business
during the Selby closure.
UK MINING
The trading update published on 8 August 2003 explained that competition with
international coal prices and the strength of sterling resulted in income for
the period of #1.15 per gigajoule, which was 6% lower than for the same period
last year (#1.22 per gigajoule). There will be a further small reduction in
prices in the second half-year as deliveries of coal are made against contracts
entered into when imported prices were substantially lower than current imported
prices. Sales volumes in the first half-year were up 3% at 9.9 million tonnes
(2002: 9.6 million tonnes). Sales for the year are expected to be in the region
of 19.0 million tonnes, almost all of which is now contracted.
Deep Mines
Production unit costs in the first half-year have been reduced to #1.18 per
gigajoule (2002: #1.26 per gigajoule) as the benefits of Project 105 initiatives
continue to take effect. The Group is making progress towards its target of
achieving unit production costs running at #1.05 per gigajoule by the end of
2003 at the eight ongoing deep mines.
Deep mine production in the period was 7.9 million tonnes (2002: 8.3 million
tonnes). Six collieries, equalled or bettered output compared to the
corresponding period last year. The output reduction is due to the closure of
Prince of Wales Colliery, which in the first half of last year produced 0.5
million tonnes of coal, and the Selby Complex, where total output for the first
half of 1.9 million tonnes compared to 2.4 million tonnes for the same period
last year.
The Selby Complex has continued to make losses due to poor geological conditions
on some of the final faces. The Complex has incurred an operating loss of #13.5
million in the period (2002: operating loss #14.3 million). Whilst costs will
reduce as development is curtailed, ongoing geological and operating
difficulties may result in further losses in the second half-year.
Daw Mill Colliery has continued to make steady progress. The face is now clear
of the area affected by geological disturbances and output for the period
averaged 35,000 tonnes per week.
Flexible working practices have been introduced at Maltby Colliery. The new
shift working patterns will enable the colliery to reduce unit costs and remain
viable as it focuses mining activities on a single face in the better quality
reserves.
Clipstone Colliery ceased production in mid-April and the lease and licence
returned to The Coal Authority who assumed their responsibility for closing the
mine.
Surface Mines
Surface mines produced 1.8 million tonnes (2002: 2.2 million tonnes). The
reduction is due to the completion of operations at several high production
sites including St Aidans, near Leeds, and Stobswood, near Morpeth. As a result
of these reductions and declining sales revenue the surface mine operations
incurred a loss in the first half year of #1.4 million. Securing planning
consents has remained difficult, with no new planning permissions being received
in the period, though several are awaiting decisions. Further applications have
been submitted and, whilst more will be made in the second half year the absence
of planning approvals will impact on output levels in future years.
Investment Aid
Applications for Investment Aid relating to accessing coal reserves at the
Group's eight ongoing deep mines have been submitted to the Department of Trade
and Industry (Dti) in line with the scheme outlined in the Energy Review White
Paper. The Aid applied for amounts to #79.0 million to assist in accessing over
100 million tonnes of reserves and help safeguard nearly 4,000 jobs. However,
total applications from coal producers amount to #130.0 million and the scheme
is currently capped at #60.0 million for the entire coal industry. Awards will
be made on a discretionary basis and decisions are expected during the last
quarter of 2003. When judging applications, the Dti will take into account
economic viability and the number of jobs created or safeguarded.
EC Large Combustion Plant Directive (LCPD)
UK sulphur dioxide emissions must fall by 50% to below 585 thousand tonnes by
2010 to meet the EC National Emission Ceilings Directive. The bulk of this
reduction will be made at existing coal-fired power stations where sulphur
emissions are expected to fall by over 500 thousand tonnes before 2008 when
these power stations must comply with the LCPD. UK COAL is lobbying the UK
Government to adopt prescribed emission limit values at power stations, rather
than the National Plan, to ensure indigenous UK coal is not displaced by low
sulphur imported coal for no economic or environmental benefit.
AUSTRALIA
In Australia, Gloucester Coal commenced production from the Duralie and Bowen's
Road North surface mines on target, to replace the now completed Stratford Site,
albeit at lower production and sales volumes. The strengthening in the A$
exchange rate against the US$ in 2003 has effectively reduced income levels,
which has significantly contributed to the loss in the period of #1.2 million.
These losses will continue until either the exchange rate moves in a more
favourable direction or prices are renegotiated next April. Meanwhile, the sales
process has commenced, and an information memorandum has been distributed to
interested parties. No firm offers have yet been received.
PROPERTY
Further significant progress has been made in realising value of property
assets, with sales in the first six months of #8.3 million (2002: #1.1 million).
Whilst it is unlikely there will be further significant sales in the second half
of this year, we are continuing to review our strategy to add value to our
extensive property portfolio, consisting of some 49,000 acres, which last year
was valued at #174.0 million.
Sales this year include 36 acres of the Tetron Point development and a further
11 acres to Yorkshire Forward at Rockingham.
Progress has continued on the development of the plans for Orgreave/Waverley
surface mine site, near Rotherham. These plans embrace the development of a "new
community" with the potential to encourage major economic, social and
environmental benefits to Rotherham, Sheffield and surrounding areas. Around
3,500 homes could be developed on this 730-acre former surface mine site. UK
COAL's property division, Harworth Estates, is working with consultants and
Rotherham Metropolitan Borough Council on plans to re-develop this, the largest
single source of brownfield land in South Yorkshire.
Thirty firms have now located to the Business Park at the former Asfordby Mine
in Melton Mowbray, Leicestershire. Discussions are ongoing with the local
authority over the development of a further 400,000 square feet of space to
supplement the 230,000 square feet now almost totally rented. The Whitemoor and
North Selby Business Parks in Yorkshire are also attracting growing interest,
along with the potential for developing one or more of the other mine sites when
the Selby Complex ceases production next Spring.
OUTLOOK
UK COAL is responding positively to the challenges of the market. Overall
performance has improved in our ongoing deep mines, driven by Project 105
initiatives to reduce unit costs.
The investments made at Daw Mill and other ongoing collieries will ensure we
retain the capability to bridge the production gap created by the cessation of
production at the Selby Complex. The introduction of the Government's Investment
Aid programme will also provide encouragement to develop additional new reserves
and provides a clear indication that Britain is investing in its indigenous coal
resource for the longer-term generation of electricity.
Production - 6 months to June 2003
------------------------------------------------------
Deep Mines: 2003 (mt) 2002 (mt)
Ongoing Collieries
Daw Mill 1.0 0.7
Ellington 0.4 0.4
Harworth 0.5 0.4
Kellingley 0.9 0.8
Maltby 0.8 0.6
Rossington 0.5 0.6
Thoresby 0.9 0.8
Welbeck 0.8 0.9
---------- -----------
Sub Total 5.8 5.2
---------- -----------
Selby Complex
Riccall 0.3 0.6
Stillingfleet 1.0 1.0
Wistow 0.6 0.8
---------- -----------
Sub Total 1.9 2.4
---------- -----------
Closed Collieries
Clipstone* 0.2 0.2
Prince of Wales** 0.0 0.5
---------- -----------
Sub Total 0.2 0.7
---------- -----------
Deep Mines Production 7.9 8.3
Surface Mines Production 1.8 2.2
---------- -----------
Total Production: 9.7 10.5
---------- -----------
* ceased production in April 2003
** ceased production in August 2002
Consolidated profit & loss account
for the six months ended 30 June 2003
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
Notes #000 #000 #000
Turnover 2 299,216 310,773 596,602
Cost of sales before (294,855) (299,356) (570,887)
exceptional items
Impairment in value of - - (20,191)
colliery assets
Net closure and redundancy (1,349) (13,016) (55,643)
costs
Provision against amounts (792) - (15,667)
receivable
-------- -------- --------
Cost of sales (296,996) (312,372) (662,388)
Gross profit/(loss) 2,220 (1,599) (65,786)
Other operating income and (4,847) (9,955) (13,686)
expenses
-------- -------- --------
Operating loss (2,627) (11,554) (79,472)
Profit on sale of land and 5,860 987 2,033
buildings
-------- -------- --------
Profit/(loss) on ordinary
activities before interest
and taxation 3,233 (10,567) (77,439)
Interest receivable and 3 1,345 3,730 5,181
similar income
Interest payable and similar 4 (1,773) (1,424) (2,854)
charges
Unwinding of discount on 10 (3,644) (4,270) (7,999)
provisions
----- -------- -------- --------
Net interest (4,072) (1,964) (5,672)
Loss on ordinary activities (839) (12,531) (83,111)
before taxation
Taxation 5 - 1,354 1,351
----- -------- -------- --------
Loss on ordinary activities (839) (11,177) (81,760)
after taxation
Equity minority interest 45 29 82
----- -------- -------- --------
Loss for the period (794) (11,148) (81,678)
Dividends 7 (7,292) (7,292) (14,584)
----- -------- -------- --------
Loss sustained for the (8,086) (18,440) (96,262)
period ----- -------- -------- --------
Loss per ordinary share 6 (0.5p) (7.6p) (56.0p)
Statement of total recognised gains and losses for the six months ended 30 June
2003
Notes 6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Loss for the period after (794) (11,148) (81,678)
minority interest
Exchange adjustments 9 3,521 731 (355)
Surplus arising on - - 4,814
revaluation of tangible ----- -------- -------- --------
property assets
Total recognised gains and 2,727 (10,417) (77,219)
losses for the period ----- -------- -------- --------
Consolidated balance sheet at 30 June 2003
At At At
Notes 30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Fixed assets
Tangible assets 405,897 461,418 427,211
Investment properties 6,500 - 6,500
Investments 25 40 38
---------------------------- ----- ------- ------- --------
412,422 461,458 433,749
Current assets
Stocks 79,201 97,579 79,152
Debtors : amounts falling due after 715 7,771 8,873
one year
Debtors : amounts falling due 73,891 88,888 73,143
within one year
Cash at bank and in hand 8 61,547 73,657 60,893
---------------------------- ----- ------- ------- --------
215,354 267,895 222,061
---------------------------- ----- ------- ------- --------
Total assets 627,776 729,353 655,810
---------------------------- ----- ------- ------- --------
Equity shareholders' funds 9 223,198 301,857 227,763
Equity minority interest 340 418 331
---------------------------- ----- ------- ------- --------
Capital employed 223,538 302,275 228,094
Provisions for liabilities and 10 249,792 266,483 258,699
charges
Creditors: amounts falling due 11 20,500 23,855 22,790
after more than one year
Creditors: amounts falling due 11 133,946 136,740 146,227
within one year
---------------------------- ----- ------- ------- --------
404,238 427,078 427,716
------------------------------ ------- ------- --------
Total funds employed 627,776 729,353 655,810
------------------------------ ------- ------- --------
Consolidated cash flow statement
for the six months ended 30 June 2003
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
Notes #000 #000 #000
Operating activities
Net cash inflow from operating 12 33,300 25,474 8,918
activities
Returns from investments and
servicing of finance
Interest paid (541) (76) (401)
Interest paid on hire (809) (654) (1,853)
purchases and finance leases
Financing costs (63) - (636)
Interest received 1,345 3,730 5,181
---------------------------- -------- -------- --------
Net cash (outflow)/inflow from
returns on investments
and servicing of finance (68) 3,000 2,291
---------------------------- -------- -------- --------
Taxation 393 13 36
Capital expenditure and
financial investment
Development expenditure (1,183) (35) (35)
Purchase of fixed assets (10,687) (27,158) (40,475)
Receipts from sale of fixed 8,507 2,228 4,082
assets
---------------------------- -------- -------- --------
(3,363) (24,965) (36,428)
Cash inflow/(outflow) before 30,262 3,522 (25,183)
financing and dividends
Equity dividends paid (7,255) (7,288) (14,529)
---------------------------- -------- -------- --------
Cash inflow/(outflow)before
use of liquid
resources and financing 23,007 (3,766) (39,712)
Management of liquid
resources
Cash deposited in subsidence (377) (2,153) (2,664)
security fund
Cash expended/(deposited) to 2,353 (302) (2,075)
cover insurance requirements
Other cash security deposits (1,968) - -
---------------------------- -------- -------- ---------
Net cash inflow/(outflow) 23,015 (6,221) (44,451)
before financing
Financing
(Repayment)/drawdown of bank (22,571) (342) 27,994
borrowings
Hire purchase and finance lease (3,219) (7,880) (12,975)
capital repaid
Increase in debt 3,437 8,414 8,414
------------------------------ -------- -------- --------
Net (outflow)/inflow from (22,353) 192 23,433
financing -------- -------- --------
------------------------------
Increase/(decrease) in cash 662 (6,029) (21,018)
------------------------------ -------- -------- --------
Notes to the Financial Statement
1 Preparation of interim statements
The interim financial statements have been prepared on the basis of the
accounting policies set out in the Group's 2002 statutory accounts. The interim
financial statements are not statutory accounts for the purposes of S240 of the
Companies Act 1985. The figures for the full year to 31 December 2002 do not
constitute the statutory accounts for the year. They have been abridged from the
statutory accounts which have been filed with the Register of Companies and
contain the auditors' report, which was unqualified and did not contain a
statement under either S237(2) or S237(3) of the Companies Act 1985. The
half-year figures, which are for a 26-week period (2002: 26 weeks), 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
financial statements on 10 September 2003.
2 Segmental and geographical analysis
6 months to 6 months to Year to
30 June 30 June 31 December
Notes 2003 2002 2002
#000 #000 #000
Turnover
Continuing operations
Coal sales - deep mines 237,778 238,044 445,087
Coal sales - surface mines 36,221 43,909 96,305
Surface mines contract mines 2,670 1,758 4,724
and associated activities
Manufactured fuel and combined 7,692 8,303 15,908
heat and power
Australia - coal sales 13,090 16,961 31,145
Property activities 1,765 1,798 3,433
------------------------- ----- -------- -------- --------
299,216 310,773 596,602
------------------------- ----- -------- -------- --------
Geographical analysis
United Kingdom 282,835 289,503 557,874
European Community Countries 2,557 1,900 2,826
Rest of Europe 2,207 2,409 4,757
Asia - Pacific 11,617 16,961 31,145
------------------------- ----- -------- -------- --------
299,216 310,773 596,602
------------------------- ----- -------- -------- --------
Loss before taxation
Continuing operations
Coal sales - deep mines 2,3 (252) (5,950) (5,904)
Coal sales - surface mines (1,417) 6,966 16,461
Surface mines contract mines 285 (453) (2,270)
and associated activities
Manufactured fuel and combined 310 (98) (635)
heat and power
Emissions trading 1,368 - 4,153
Australia - coal sales (1,222) 1,798 1,834
- hedging losses - (1,511) (2,517)
Property activities - rentals 442 710 907
and other property
activities
- profit on sales 5,860 987 2,033
Net interest payable (4,072) (1,964) (5,672)
Exceptional items (2,141) (13,016) (91,501)
----- -------- -------- --------
(839) (12,531) (83,111)
Note 1: Due to the nature of the groups business, distribution expenses are treated
as part of cost of sales
Note 2: Figures for the six months to 30 June 2002 are stated after crediting #1.4
million, which relates to the release of a provision for concessionary fuel
costs resulting from the decision to close Prince of Wales
Note 3: The column headed "Year to 31 December 2002" includes the effect of #21.1
million net release of provisions
3 Interest receivable and similar income
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Interest receivable 1,345 3,730 5,181
--------------------------- -------- -------- --------
4 Net interest payable and similar charges
Interest paid on hire purchase and
finance leases
- repayable within 5 years 1,048 655 1,908
- repayable after 5 years - 381 -
Amortisation of loan issue costs 184 312 545
On bank loans,overdrafts and other
loans
repayable within 5 years 541 76 401
--------------------------- -------- -------- --------
1,773 1,424 2,854
--------------------------- -------- -------- --------
5 Taxation
On ordinary activities
United Kingdom corporation tax at
30% (2002 : 30 %)
Current - - -
Overseas taxation - - 3
--------------------------- -------- -------- --------
Total current tax on ordinary - - 3
activities
--------------------------- -------- -------- --------
Deferred tax
Origination and reversal of timing - (1,354) 2,514
differences
Adjustment in respect of prior - - (726)
years
--------------------------- -------- -------- --------
Total deferred tax on ordinary - (1,354) 1,788
activities
--------------------------- -------- -------- --------
On exceptional items
United Kingdom corporation tax at
30% (2002:30%)
Origination and reversal of timing - - (3,142)
differences
--------------------------- -------- -------- --------
Total tax on exceptional items - - (3,142)
--------------------------- -------- -------- --------
Total current tax - - 3
Total deferred tax - (1,354) (1,354)
--------------------------- -------- -------- --------
Total tax charge/(credit) - (1,354) (1,351)
--------------------------- -------- -------- --------
6 Earnings per share
Earnings per share have been based on the number of shares in issue and ranking
for dividend being 145,847,454 (June 2002 - 145,847,454 : Dec 2002 - 145,847,454)
6 months to 6 months to Year to
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Loss per ordinary share (0.5p) (7.6p) (56.0p)
-------------------------- --------- -------- --------
There is no difference between basic and diluted earnings per share.
7 Dividends
The ordinary dividend will be paid on 21 November 2003 to shareholders on the
register on 24 October 2003. The interim report will be circulated to all
ordinary shareholders and will be available at the Company's registered office
at Harworth Park, Blyth Road, Harworth, Doncaster, South Yorkshire, DN11 8DB.
2003 2003 2002 2002
Pence per Pence per
share #000 share #000
Interim 5.0 7,292 5.0 7,292
Final 5.0 7,292
-------------------------- ------ ------ ------- --------
10.0 14,584
--------------------------- ------ ------ ------- --------
8 Cash at bank and in hand
30 June 30 June 31 December
2003 2002 2002
Cash deposited to cover insurance 35,008 35,588 37,361
requirements
Subsidence security fund 23,608 22,720 23,231
Other security funds 1,968 - -
Other cash balances 963 15,349 301
------------------------- ----------- ------ --------
61,547 73,657 60,893
------------------------- ----------- ------ --------
9 Movement in shareholders' funds
6 months to
30 June
2003
#000
Shareholders' funds at 1 January 2003 227,763
Loss sustained for the period (8,086)
Exchange adjustment 3,521
---------------------------------- -------------
Shareholders' funds at 30 June 2003 223,198
---------------------------------- -------------
10 Provisions for liabilities & charges
At 1st January Created Released Utilised Unwinding At 30 June
2003 in period in period In period of discount 2003
#000 #000 #000 #000 #000 #000
Provisions 258,699 13,049 (260) (25,340) 3,644 249,792
Deferred - - - - - -
taxation --------- ------- ------- ------- -------- --------
258,699 13,049 (260) (25,340) 3,644 249,792
--------- ------- ------- ------- -------- --------
11 Creditors
The creditors figures shown in the balance sheet include the following liabilities:
30 June 30 June 31 December
2003 2002 2002
#000 #000 #000
Creditors : amounts falling due after more
than one year
Hire purchase and finance lease 17,762 18,793 18,256
liabilities
------ ------ --------
Creditors : amounts falling due within one
year
Bank borrowings * 5,936 510 28,386
Hire purchase and finance lease 7,929 6,354 7,217
liabilities
------------------------------ ------ ------ --------
13,865 6,864 35,603
------------------------------ ------ ------ --------
* Bank borrowings at 30 June 2002 are stated after deduction of unamortised loan
arrangement costs of #435,000(30 June 2002: # 156,000; 31 December 2002
#556,000)
12 Reconciliation of operating loss to net cash inflow from operating activities
6 months to 6 months to Year to
30 June 2003 30 June 2002 31 December
2002
#000 #000 #000
Continuing activities
Operating loss (2,627) (11,554) (79,472)
Depreciation on tangible fixed 31,729 32,405 59,003
assets
Exceptional impairment - - 20,191
Net charge for surface mine
development and
restoration assets 4,760 8,938 11,413
(Increase) in coal and other (92) (25,713) (7,286)
stocks
Decrease/(increase) in debtors 5,284 (2,149) 12,332
(Decrease)/increase in creditors (7,554) 23,547 (7,263)
Government contributions to 1,800 - -
redundancy payments
-------------------------- --------- -------- --------
Net cash inflow from continuing 33,300 25,474 8,918
operating activities
-------------------------- --------- -------- --------
This information is provided by RNS
The company news service from the London Stock Exchange
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