UK COAL PLC Interim Report for the Period Ended 30 June 2008 Interim Report 2 0 0 8
Total Page:16
File Type:pdf, Size:1020Kb
UK COAL PLC Interim Report for the period ended 30 June 2008 Interim Report 2 0 0 8 MINING AND POWER HARWORTH ESTATES BRITAIN’S BIGGEST PRODUCER OF COAL, UK COAL SUPPLIES 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. ONE OF BRITAIN’S LARGEST BROWNFIELD SITE PROPERTY DEVELOPERS, UK COAL OWNS A SUBSTANTIAL LAND PORTFOLIO, WHICH HAS MAJOR POTENTIAL FOR REDEVELOPMENT. MINING AND POWER DEEP MINING The Group operates 4 deep mines, located in Central and Northern England. The Group has reserves and resources of over 100 million tonnes at these mines. SURFACE MINING At 30 June 2008, the Group had 5 active surface mines and planning consent to mine a further site. The Group has applied for planning consents for a further 5 mines and expects to make applications for a further 4 sites during 2008. Total surface mining reserves available for planning are estimated at approximately 97 million tonnes. MINES METHANE UK COAL has 29 MW of electrical power generation capacity, utilising waste gas from mines. WIND POWER UK COAL is actively pursuing the development of alternative power generation opportunities, including wind farms, and has recently acquired planning consent for its first 9 MW wind farm. UK COAL owns some 46,500 acres (18,818 hectares) of predominantly agricultural land. Within this, some 3,696 net acres have been identified as offering prime prospects for development into a mix of residential, business park, distribution and community developments over the medium to longer term. At 30 June 2008, the Group’s property interests, excluding the deep mine sites, had a current open market value of £438 million. HARWORTH ESTATES DAW MILL’S LONGWALL COAL FACE - ON TARGET FOR A RECORD ANNUAL OUTPUT. CONTENTS Highlights 1 Chairman’s Statement 2 Operating and Financial Review (OFR) Safety 6 Mining and Power 9 Deep mines 10 Surface mines 11 Harworth Power 11 Harworth Estates 13 Financial review 16 Principal risks and uncertainties 17 Responsibility statement of the Directors 17 Independent review report 18 Consolidated income statement 19 Consolidated statement Maidens Hall of recognised income and expense 20 Steadsburn North Stobswood Consolidated balance sheet 21 Consolidated cash flow statement 22 Newcastle Notes to the condensed consolidated interim financial statements 23 York MINING AND POWER Leeds Kellingley Sharlston Manchester Cutacre Sheffield Welbeck Thoresby Lodge House Nottingham Long Moor Leicester Daw Mill Birmingham Coventry Ellington Newcastle York Leeds Riccall Whitemoor Gascoigne Wood Prince of Wales Manchester Gawber Yorkshire Main Sheffield Rossington Harworth Waverley/Orgreave Bilsthorthe HARWORTH ESTATES Chatterley Bennerley Nottingham Asfordby Tetron Point Lounge Mid Cannock South Leicester Leicester Birmingham Coventry 15442UKCOAL:Layout 1 17/9/08 06:37 Page 1 UK COAL PLC Interim Report for the half year ended 30 June 2008 HIGHLIGHTS H1 H1 Full Year Income Statement 2008 2007 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 June Dec Balance sheet 2008 2007 Net assets (£m) 319.8 358.2 Net assets per share (£) 2.04 2.28 Net debt excluding restricted funds 145.3 104.3 Key performance Coal mined Operating costs before Operating loss before indicators depreciation and non-trading exceptional exceptional items items Deep Mines 2.8 million tonnes £137.9m £(25.7)m Key performance Coal mined Operating costs before Operating loss before indicators depreciation and exceptional non-trading exceptional items per gigajoule items Surface Mines 0.9 million tonnes £1.52/GJ £(0.6)m Key performance Coal mined Coal sales indicators Price per gigajoule Mining 3.7 million tonnes £1.79/GJ Key performance Power generated Proportion of deep mines’ Operating profit before indicators electricity requirements exceptional items generated Mines Methane 84,193 MWh 60% £1.5m Key performance RICS valuation of Other income less Net gains from indicators property portfolio expenses investment properties Harworth £438.4m £0.6m £19.9m Estates Like-for-like increase in RICS Gross acreage held valuation of property portfolio 5.3% 46,500 acres 1 15442 15/09/2008 Proof 12 15442UKCOAL:Layout 1 17/9/08 06:37 Page 2 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 DAVID JONES 100,000 manshifts in 2007 to 1.7. On behalf of the Board I Chairman 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 £172.9 million during These results demonstrate the first half of the year, reflecting the higher average realised coal sales price, which rose 17.8% to £1.79 per gigajoule (GJ) “the changing financial profile of compared with £1.52/GJ for the same period in 2007. In mining, our first half output was proportionately more our business as higher coal prices committed to satisfying older contracts, muting the positive impact of the increased market price for coal. In addition, first now start to deliver increased half production was constrained and was marginally lower than original expectations, principally reflecting the timing of face cash flows. 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 0.9 million tonnes (H1 2007: 0.7 million 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 £5.6 million. 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 We were pleased to receive planning approval from the Local current general property market conditions. Longer term, we Authority Planning Committee for the first phase of the Prince believe that the UK’s structural shortage of land for of Wales project in August. development benefits our estate and that the locations of our brownfield sites fit well with both local and national Reflecting the lower scale of property valuation gains and the government’s vision of sustainable communities. surface mines restoration provision, the Group made an operating loss before non-trading exceptional items of £4.2 Harworth Estates performed well in the tough conditions for the million in the first half of the year compared to profit of £35.5 property market as a whole, achieving a 5% like-for-like increase million in the same period in 2007. in RICS property valuations since the end of 2007 to £438.4 million. While last year’s rate of increase in valuations could not The Group loss before tax in the first half of the year was £9.9 be maintained, it is notable that, despite difficult market million (H1 2007: profit before tax £40.6 million). Loss per share conditions for the property industry as a whole, our further was 6.5 pence (H1 2007: earnings per share 34.2 pence, or 25.9 progress in securing planning permissions and the strength of pence excluding the tax credit in the period). agricultural land values mean that we have achieved a modest While overall the reported result for the first half is lower than valuation increase in the first half of the year and expect to do for the same period last year, this is not unexpected bearing in so again in the second half. 2 15442 15/09/2008 Proof 12 154 15442UKCOAL:Layout 1 17/9/08 06:37 Page 3 AROUND 95% OF UK COAL’S DEEP MINE OUTPUT IS DELIVERED TO POWER STATIONS BY LINER-TRAINS LIKE THIS BEING LOADED AT THORESBY COLLIERY IN NORTH NOTTS. mind the scheduled timing of our mining production over this year and the unsurprisingly reduced level of non-cash property 5% of the country’s valuation gains achieved for the first half of 2008 given the current property environment. Net assets on the balance sheet were £319.8 million compared electricity is to £358.2 million at the end of 2007, primarily a result of a £28.5 million increase in the Group’s pension schemes’ deficits to £101.7 million.