Interim Results 6 months ended 30 November 2015

Glensanda Quarry, Western Highlands, Scotland Headlines

Continuing Underlying Continuing Underlying Dividend Per Share Net Debt Operating Profit Diluted EPS (proposed) £4.1m 7.0p 1.7p £30.8m -81.3% -85.1% -83.0% Increase of £29.8m

Results • Decreased profits reflect continuing weak thermal coal price and low demand • Profits impacted by closure announcements of Redcar, Eggborough and LBT • Net debt of £30.8m at the half year in line with management expectations • Cash generation set to be strong as stock and plant positions unwind Outlook • Extreme wet and mild weather since end of first half set to further affect operations • Further power station closures announced since half year end • Board focused on transition away from challenging UK thermal coal markets • Acquisition of CA Blackwell in January 2016 represents positive strategic step

Interim Results – 6 months ended 30 November 2015 2 Strategy & Market Update Gordon Banham, Chief Executive Officer

Interim Results – 6 months ended 30 November 2015 Restoration at Muir Dene, Fife Update on Recent Market Developments

• Significant fall in international coal prices has made mining operations loss making

• Fall in gas price has significantly undermined the profitability of UK coal fired generation

• High stock levels at generators have persisted following mild temperatures and reduced burn; UK demand has therefore reduced to negligible levels

• Speciality markets remain resilient and profitable, despite short term competitive pressures and fall in demand due to mild weather

• Steel plant and various power station closures have impacted on the future profit streams for the Group

Interim Results – 6 months ended 30 November 2015 4 Transition from Thermal Coal Markets

• Significant progress already made in reducing Group’s exposure to coal and coke markets o Closure of Monckton Coke Works o Wind down of thermal coal JV in Europe o Reduction in scale of Scottish operations

• Goals for the next eighteen months

o Further reduce thermal coal exposure o Focus Scotland on one site producing speciality coal o Identify options for shortened mining plan for Tower

Interim Results – 6 months ended 30 November 2015 5 Strategy Continues to be Refined

Against a backdrop of sustained downturns in key markets, we continue to concentrate on our strategic options whilst seeking to enhance shareholder value

Speciality Coal Industrial Services Property & Energy Projects

• Focus production on single site • Support UK generation customers but • Hold and invest in properties offering operation to maximise speciality coal prepare for run-down of UK coal value accretion opportunity generation base • Focus import model on serving • Develop renewable energy value on balance of speciality markets • Target power station sector in Asia to and around key sites build on success of Hong Kong • Maintain capability to import power • Look for opportunities to drive cash station coals • Selectively target international steel generation from sites that do not offer • Identify options to adjust Tower mining sector expansion strategic value or minimum investment and business plan to mitigate • Target mining services into growing return opportunity customer specific risks India underground mining market

Earth Moving Transport Protecting Shareholder Value

• Maximise heavy plant synergies • Grow customer base to previous • Carefully appraise any investment activity levels alongside the need for free cash flow • Use Group strength to target major to support dividends and/or further strategic infrastructure projects • Target gradual UK geographic and waste sector expansion share buybacks • UK only focus • Liquidate stock/plant to cash • Continue to challenge overhead

Interim Results – 6 months ended 30 November 2015 6 Acquisition of CA Blackwell

We recently announced the acquisition of CA Blackwell, a bulk earthmoving and civil engineering business, which represents a significant step in the Group’s strategy

Business Key Transaction Rationale for Overview Metrics Purchase

• Leading UK earthworks • Net consideration £11.9m • Take Group plant and skills into contractor (settled £8.5m cash plus £3.4m non-coal sectors • Plant fleet ~£10m property transfer) • Leverage plant synergies • Broad sector exposure • Net debt £13.0m • Sector trends and macro- • o Mining (non-coal) & Quarrying EV £24.9m economics positive • • o Development Net assets £10.9m Favourable transaction • economics o Flood defence Targeting disposal of investment properties £6.5m o Infrastructure • EV post property disposals ~£15.0m

Interim Results – 6 months ended 30 November 2015 7 Overview of Property Portfolio

• Following initial rationalisation the Group controls over 18,500 acres of land in the UK of which ~3,000 acres will be required for operational use

• The remaining ~15,500 acres of development land can be categorised as follows: o Housing: 530 acres o Energy generation: 350 acres o Industrial: 1,170 acres o Retail: 70 acres o Agricultural: 2,340 acres o Forestry: 990 acres o Low grade: 10,050 acres

• Development of the land portfolio is a key focus for future value creation

• Property will be reported as a separate Division from FY17

Interim Results – 6 months ended 30 November 2015 8 Key Sites

Blindwells Westfield Monckton

• 350 acre site 10 miles from Edinburgh • 350 developable acres near Glenrothes • 30 acre site of the former Monckton Coke & Chemical works near Barnsley • Area identified in local council plans for • Site identified by Fife for waste housing development treatment • Planning application currently being prepared for the development of the • Planning permission for the first phase • Regeneration of the site subject to a of 1,600 units expected by May 2016 master planning exercise site for housing • Potential development could include • Phase 2 could follow including an • Includes the development of an EfW up to 400 units following site additional 1,600 units facility as anchor development of a green energy park remediation • In-house capability to execute civils and infrastructure works • Solution to Fife’s residual waste disposal

North Killingholme St Ninians/Loch Fitty Eggborough

• Development located next to the • Large former opencast mining site in • 10 acre site in Eggborough, North Immingham port facility Fife, in close proximity to the M90 and Yorkshire in close proximity to • Planning permission obtained in 20 miles from Edinburgh Eggborough Power Station October 2015 for an additional 200,000 • Master planning exercise in progress to • Site has planning permission for the square feet of industrial warehouse develop the site for leisure and housing construction of an EfW facility space • Local council supportive of the • Close proximity to the motorway • Planning permission expands on proposed scheme network (M62, A1, M1) existing warehouse space under • 40MW on site grid connection ownership of the Group

Interim Results – 6 months ended 30 November 2015 9 International Opportunities

• Thermal Coal o Continued expansion of Hong Kong activities o Selective consideration of other Asian geographies

• Steel

o Expansion of South Africa activities o Selective consideration of other geographies

• Mining

o Focus on exporting UK deep mining skills and expertise – including opportunities in India o High impact / high value add

Interim Results – 6 months ended 30 November 2015 10 Financial & Segmental Performance Iain Cockburn, Finance Director

Interim Results – 6 months ended 30 November 2015 Hargreaves Surface Mining, Muir Dene, Fife Income Statement Highlights

Nov 2015 Nov 2014 Movement £m £m % Continuing Revenue 174.8 351.2 -50.2% Continuing Underlying Operating Profit 4.1 21.9 -81.3% Continuing Net Interest Expense (0.9) (1.6) -43.8% Continuing Underlying Profit Before Tax 3.2 20.3 -84.2% Loss for the period from Discontinued Operations (0.2) (1.1) -81.8%

Effective Tax Rate 23.9% 22.7% n/a Continuing Underlying Diluted EPS 7.0p 46.9p -85.1% Dividend Per Share 1.7p 10.0p -83.0%

Interim Results – 6 months ended 30 November 2015 12 Overview by Business

Coal Production & Distribution Industrial Services Transport Underlying Operating Profit Underlying Operating Profit Underlying Operating Profit £1.1m £2.4m £0.6m (FY15: £17.5m) (FY15: £2.8m) (FY15: £1.6m)

• Falling coal prices have led to surface mining operations becoming loss making Thermal coal production loss-making - stock and sales position open and unhedged H1 production volumes on plan at circa 300k tonnes - record levels of rainfall have impacted the start of H2 Robust performance from Tower joint venture where sales increased from 335k tonnes to 416k tonnes

• Continuing headwinds in UK bulk coal market Negligible thermal volumes with little evidence of new sales demand from customers UK speciality business has remained resilient though some softness in heating markets Metallurgical volumes reduced significantly following closure of Redcar steelworks

• Reduction in UK Industrial Services business following site closures; steady international growth • Transport impacted by closure of major NE landfill site

Interim Results – 6 months ended 30 November 2015 13 Net Debt Highlights

Nov 2015 Nov 2014 £m £m EBITDA 9.6 20.4 Working capital (16.3) (4.4) (6.7) 16.0 Interest (3.7) (1.3) Taxation – normal (1.0) (2.2) Taxation – advanced payment notice (4.4) - Capital expenditure – investment in mining assets (2.4) (4.5) Capital expenditure – other (including finance leases) (5.1) - Disposal proceeds 0.8 - Net Dividends (5.6) (3.9) Share buyback (0.6) (1.5) Acquisition (0.3) - Discontinued Cash Flows (0.8) (0.9) Disposal of Imperial Tankers - 27.5 Other - (0.8) Total Movement in Net Debt (29.8) 28.4

Interim Results – 6 months ended 30 November 2015 14 Balance Sheet Highlights

Nov 2015 May 2015 £m £m Goodwill and Intangibles 9.5 9.4 Investments in JVs 4.2 6.0 Property (at cost & including property held in inventory) 24.4 23.9 Plant and equipment 23.5 23.8 Transport fleet 9.1 8.0 Other (includes mining assets) 9.9 9.6 Assets held for resale (Discontinued) 5.0 5.0 Working Capital (excluding property held in inventory) 104.5 90.3 Derivative Financial Instruments (1.8) (4.3) Retirement Benefit Obligations (4.9) (5.5) Provisions (5.2) (5.8) Deferred Tax 2.6 2.5 Corporation Tax (8.7) (13.4) Net Assets Before Borrowings 172.1 149.5

Net Debt (30.8) (1.0) Net Assets 141.3 148.5

Interim Results – 6 months ended 30 November 2015 15 Summary & Outlook Gordon Banham, Chief Executive Officer

Interim Results – 6 months ended 30 November 2015 Glenmuckloch, Dumfries & Galloway Summary

The Group faces continuing low commodity prices, low coal demand and the threatCurrent of trading further is power station closures progressing substantially in line •withThe management underlying Group performance continues to be profitable expectations • Steps taken to adapt our production and import models to maintain profitability and leverage our core speciality market share • Profit outlook for next 18 months will be challenging but cash generation will be strong • We are carefully reviewing plans to optimise the balance between risk and value at Tower • Strategic focus on new sectors, including international growth • Acquisition of CA Blackwell and development of value in the property portfolio demonstrate progress • Surplus assets expected to lead to strong cash unwind • Reinvestment in the business will be carefully weighed against return of capital to shareholders

Interim Results – 6 months ended 30 November 2015 17 Appendices

Interim Results – 6 months ended 30 November 2015 Cape Gate Steel Works, Johannesburg, South Africa Appendix 1: Coal in the UK Power Market

Hargreaves Installed Industrial Station Operator Capacity Services** MW* Cottam EDF 2,008  Drax Drax 1,935  Three of six units now converted to biomass Fiddlers Ferry SSE 1,980  Three of four units to close in April 2016 Ratcliffe on Soar E.ON 2,000  West Burton EDF 2,012  Aberthaw RWE 1,586 Unique low volatility coal from Welsh coalfields (incl. Tower) Longannet Scottish Power 2,304 Due to close in March 2016 Rugeley Engie 1,006  Due to close in summer 2016 Eggborough EPH 1,960  12 month contract under Supplementary Balancing Reserve Ferrybridge (1 of 4 units) SSE 500  Due to close in March 2016 Uskmouth Simec Group 130 17,421

* Coal fired generation capacity only (excludes capacity converted to biomass)

** Hargreaves Industrial Services has a significant onsite presence at 8 of the 11 stations listed above

Interim Results – 6 months ended 30 November 2015 19 Appendix 2: International Coal Price

Apr-Jul 2013 Sep 2014 Feb 2015 Aug 2015 Feb 2016 Acquisition of ATH/SRG FY14 results announcement Interim results announcement FY15 results announcement Interim results announcement

£60.00GBP/USD: GBP/USD: GBP/USD: GBP/USD: GBP/USD: 1.53 £55 1.63 1.55 1.55 1.45

£55.00 £25 fall in API2 £50.00 spot price since April 2013

£45.00

£40.00 £30 £35.00

£30.00

£25.00 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Aug-15 Oct-15 Dec-15 Feb-16

FY15: ~1.3m tonnes locked in FY16 API2 forward price: £50 FY16 API2 forward price: £41 FY16 API2 forward price: £37 Cal17 API2 forward price: £25 through hedges & fixed price contracts at £55 per tonne

Interim Results – 6 months ended 30 November 2015 20