5th Sep 2007 07:01
UK Coal PLC05 September 2007 September 5th 2007 UK COAL PLC ("UK COAL") Financial Results for the six months ended 30 June 2007 Strong growth. Strong outlook FINANCIAL HIGHLIGHTS • Operating Profit up 108% to £45.1 million (H1 2006 restated: £21.7 million) • Pre-tax profit up 143% to £40.6 million (H1 2006 restated: £16.7 million) • Net assets per share up 32% to £2.06 (December 2006: £1.56) • Strong growth in value of land and property portfolio - RICS valuation up 16% to £398 million (December 2006: £344 million) - Estimate of worth in 2012 up 12% to £900 million (December 2006: £800 million) • Gearing reduced to 19% (December 2006: 21%) • Earnings per share 34.2 pence (H1 2006: 11.2 pence) Commenting, David Jones, Chairman said: "These good results demonstrate the considerable progress UK COAL has made inthe first half of the year. We have significantly increased the value of ourproperty business, strengthened the operating performance and prospects of ourmining businesses, more than doubled pre-tax profits and significantly grown thevalue of net assets per share. "In mining, since June, our deep mines have been generating operating profit. Inparallel, production and profit from our surface mines have grown considerably.We have also made considerable progress both in reducing the proportion of ourtotal output that is contracted for sale at historic prices and in negotiatingnew contracts at today's much higher world market prices. There will always berisks in mining; but these are very positive developments. In property, wecontinue to identify new opportunities and to make very good progress insecuring the appropriate planning consents and progressively executing ourdevelopment strategy. These actions have resulted in significant increases inboth the RICS property valuation and in our estimate of the future value of ourproperty portfolio. "We view UK COAL's future with considerable confidence and look forward todelivering further good growth in shareholder value for the full year andbeyond." Enquiries: Media: Citigate Dewe Rogerson Tel: + 44 (0)207638 9571Anthony Carlisle Mobile: 07973 611 888Laure Lagrange Mobile: 07768 698 731 Analysts and investors:Chris Mawe Mobile: 07778 780 884Group Finance Director, UK COAL PLC KEY PERFORMANCE INDICATORS (KPIs) H1 H1 Year 2007 2006 2006Financial Actual Restated (5) ActualNet Assets per Share (£/share) 2.06 1.26 1.56Profit Before Taxation (£ millions) 40.6 16.7 17.6Net Debt (£ millions) 61.0 59.9 51.8Net Assets (£ millions) 323.9 188.3 244.1 PropertyRICS Valuation (£ millions) 398 293 344Estimate of land value in 2012 (£ millions) (1) 900 n/a 800 MiningCoal Sales Price (£/GJ) 1.52 1.39 1.41Contractual supply commitments (million tonnes) 15.2 24.1 17.9Price of forward contractual supply commitments (£/GJ) (2) 1.53 1.51 1.51Period end comparative spot prices (£/GJ) (3) 1.84 1.58 1.62 Deep MiningOutput (million tonnes) 3.3 5.3 8.9Full Cost of Production (£/GJ) (4) 1.73 1.41 1.56Cash Cost of Production (£/GJ) (4) 1.48 1.24 1.32 Surface MiningOutput (million tonnes) 0.7 0.2 0.6Full Cost of Production (£/GJ) (4) 1.29 1.55 1.93Reserves with Planning (million tonnes) 4.9 4.1 4.1Reserves in Planning (million tonnes) 3.3 4.4 5.3To be submitted for planning in 2007 (million tonnes) 4.9 5.9 4.6 Power GenerationMW Hours Generated (thousand MWh) 80 65 120Number of wind turbines in planning process 9 9 9 (1) Value in 2012 in money of the reporting period(2) Subject to the outturn of international coal prices and RPI(3) Including delivery premium. Source: Argus McCloskey coal price index report(4) Costs exclude Exceptional/non-recurring Items(5) H1 2006 restated results reflect the 2006 accounting policy change to widen the Group's definition of an investment property Half year profit performance by individual business segments is summarisedbelow. Profit summary by segment H1 2007 H1 2006 Year 2006 Restated £m £m £mDeep mining (15.3) (0.9) (53.2)Surface mining 4.5 1.2 4.6Property 54.0 19.9 73.3Power generation 2.0 1.6 3.1Joint venture and other 0.2 (0.1) (0.1)Group profit before interest 45.4 21.7 27.7Net finance costs (4.8) (5.0) (10.1)Profit before tax 40.6 16.7 17.6 Overview UK COAL has delivered a strong set of results, demonstrating the considerablefurther progress it has made during the first half of the year in building thevalue of its property, mining and power generation businesses. Group pre-taxprofits have been more than doubled to £40.6 million (H1 2006 restated: £16.7million) and net assets per share have been increased by 32% to £2.06. We have significantly increased the estimated worth of our property portfolio.Its estimated future worth by 2012, with the benefit of planning consents, hasincreased by some £100 million to £900 million. Property value gains recognisedin half year profits increased to £51.0 million (2006 restated: £18.5 million). Allowing for the period of non-production at Daw Mill, which we announced inJanuary, our deep mines performed in line with our forecasts. Their performancehas been turned around, and they have achieved operating profit since June. Theyare now well placed to benefit from new sales contracts which we expect to signat significantly higher prices reflecting the continued high world demand forcoal. Surface mines performed well, more than tripling output to 700,000 tonnes andoperating profits to £4.5 million (2006: £1.2 million) at four active sites.Consent was also gained for a further three sites, giving us a total of 4.9million tonnes in permitted reserves. Our power generation business increased output by 23% and profit by 25%. We nowhave 29 MW of installed generation capacity. Planning applications have beensubmitted for 19 MW of wind turbines, and we intend to apply for a further 6 MWof turbines by the end of this year. In May, we announced the intention of Gerry Spindler to step down from the Boardof UK COAL on 1 September and to leave the Group at the end of the year. We alsoannounced that Jon Lloyd, the Group's Property Director, would succeed Gerry andhe was appointed Chief Executive designate with effect from 1 June 2007. Thishandover is proceeding very smoothly. Under Gerry's leadership, UK COAL hasmanaged transformational change and delivered an outstanding performance. Jon isalready demonstrating the leadership skills and expertise which leave the Boardin no doubt that he will very successfully build on the strong platform theGroup has created. The Board was further strengthened by our appointment, also announced in May, ofKevin Whiteman as a non-executive director. Kevin has extensive managementexperience in mining from his time with British Coal, and he is also ChiefExecutive of Kelda Group PLC. We have also today announced the intention ofChris Mawe to step down from the Board on September 17 and to leave the Group atthe end of the year. Chris has played a central role in the establishment ofour strong value creation platform; but now that the first stages of thisplatform are established, he has decided to look for new opportunities. Weunderstand and respect his decision. We are delighted, however, to welcomeDavid Brocksom, formerly Finance Director of Pace Micro Technology, who willjoin our Board as Finance Director on September 18, 2007. David has an idealmix of skills and experience, and we are confident he will make a powerfulcontribution to our team and the continued delivery of our strategy. We view the future of UK COAL with considerable confidence and look forward tocreating further significant shareholder value during the second half andbeyond. Review of operating and financial performance Property: Our property business continues to grow strongly, delivering half yearprofits of £54.0 million (2006 restated: £19.9 million). Property valuationgains were £51.0 million (2006 restated: £18.5 million), and net operatingincome from rental and disposals was £3.0 million (2006: £1.4 million). During the first half year, we received planning consents on three sites,including a 500,000 sq ft business park at Chatterley Valley in Staffordshire.In August, we also received consent for around 250,000 sq ft to develop a railconnected business park at our former Gascoigne Wood mine in North Yorkshire. Following the receipt of further planning permissions and progress indevelopments, the RICS valuation of our property portfolio grew by £54 millionto £398 million, a 16% increase since the end of last year and a 36% increasesince the first half last year. During this period, an additional 11 sites were added to the 60 originallyidentified, giving a total pipeline of 71 projects with a net developable areaof 3,326 acres. These sites provide land for an estimated 29 million sq ft ofemployment space along with 20,000 residential units. This has added a further£100 million to our property portfolio estimate of worth by 2012 which expressedin today's prices, is now expected to be £900 million. During the period we have submitted two major Joint Venture planningapplications in Leicestershire at Lounge, Ashby de la Zouch (850,000 sq ft) andat Coalville (600,000 sq ft). Further significant planning applications are inprogress. In the near future, we expect to receive consents for five otherschemes, including Phase 1 of our major Prince of Wales scheme in Pontefract toprovide 900 houses and 250,000 sq ft of employment space. We have responded positively to the Government White Paper on the future of theplanning system and a Green Paper on the approach to delivery of an additional240,000 homes per year through to 2016. We have confirmed that our developmentportfolio can play a very substantial role in meeting Government planning andhousing targets in the medium term. We expect both the RICS valuation and management's estimate of worth, measuredon a half yearly basis, to grow further in the medium term as planning consentsprogressively come through. Coal contracts: In accordance with our strategy, we have reduced the level ofcontractual commitments to electricity generators, which had been mainly athistorical fixed rates, to 15.2 million tonnes (2006: 24.1 million tonnes). Thishas helped us access rising market prices, and, as a result, we have increasedour average coal sales price by 9%. Discussions with electricity generators are progressing well and we expect tosecure further contracts in the second half of the year on terms reflective ofcurrent market prices. External support for mining investment through the CoalInvestment Aid scheme has now ended and there are no indications from Governmentof a replacement scheme. As a result, further investment decisions will dependon market conditions and risks involved. Deep Mining: The period of non-production at Daw Mill in the early part of theyear reduced profit by £20 million against budget expectations and masked anotherwise satisfactory performance. Our other deep mines met expectations,despite difficult challenges, including concurrent face changes, major equipmentmoves and the introduction of changes in working practices. In line with our strategy of reducing operating risk in our mining activities,we sold Maltby Colliery in February to Hargreaves Services PLC for a cashconsideration of £21.5 million. This resulted in a profit on disposal of £12million following the assumption by the purchaser of associated liabilities,including the projected pension deficit. The sale has enabled the new owner toaccess current market prices in a way that our historic contracts meant we couldnot, and this has supported the continued production at Maltby. Overall, deep mines recorded a loss of £15.3 million (2006: £0.9 million loss)in the first half, including a £3.0 million charge for redundancy and closurecosts. By May, however, Daw Mill returned to normal operations and our deepmines have delivered operating profit since June. Surface Mining: Surface mining performed well despite adverse weather conditionsand has continued to increase output and improve operating performance. We nowhave four sites in production and first half output of 700,000 tonnes exceededthe total output produced during 2006 (570,000 tonnes). Operating profitincreased to £4.5 million (2006: £1.2 million). Planning consents for threesites have been received in the year, and production is expected to commence atfour new sites by the year-end. Reserves with planning consent amount to 4.9million tonnes (2006: 4.0 million tonnes). Power generation: Harworth Power expanded its new mines gas capacity in theperiod, increasing power generation by 23% and operating profits to £2.0 million(2006: £1.6 million). We now have a further 19 MW of wind energy projects in theplanning phase, and we continue to investigate other renewable energy projectsin conjunction with our property business. Joint ventures: Coal4Energy, our joint venture with Hargreaves Services PLC,earned profits of £0.3 million (2006: £0.1 million loss). This has progressedwell despite domestic demand being restrained by the mild winter. Finance costs: Group net finance costs were £4.8 million (2006: £5.0 million)and include the unwinding of discounts of £2.0 million (2006: £2.2 million).Costs have benefited from fixed interest rates which cover 69% of ourborrowings. Taxation: The Group paid nil corporation tax (2006: £nil) in the period. TheGroup holds gross capital losses of £411 million, gross trading losses of £242million and gross timing differences of £146 million available for offsetagainst future taxable profits. In December 2006 UK COAL recognised a deferredtax asset of £36 million in relation to pension deficit timing differences. InJune 2007, reflecting the reduction in the pension deficit this related deferredtax asset fell by £13 million, which is reported through reserves. Since theoverall value of the tax asset has not changed, tax relief of £13 million ontrading losses is reported in the income statement. Earnings per share: Earnings per share increased by 205% to 34.2 pence. Thisincludes the effect of £13 million of tax relief on trading losses. Adjustedearnings per share, excluding tax, were 25.9 pence (2006: 11.2 pence). Net Assets: Net assets increased by £79.8 million to £323.9 million (December2006: £244.1 million), and net assets per share increased by 32% to £2.06(December 2006: £1.56), predominantly as a result of the growth in value of ourproperty portfolio and the reduction in our pension deficit. Pensions: Our pension schemes' deficit reduced in the half year to £51 million(December 2006: £94 million). This reflected benefits from higher forecast longterm interest rates reducing the level of liabilities, good asset returns -though these have partly reversed since the half year - and £5.2 million ofadditional contributions. We have now paid additional pension contributions of£24 million since 2005. Gearing: Gearing reduced to 19% (December 2006: 21%). Net debt and cash flow: Group net debt was £61.0 million (December 2006: £51.8million). The main cash flows were as follows: £21.5 million was received fromthe sale of Maltby Colliery; £9.1 million was invested in deep mines capitalequipment (2006: £10.3 million); a further £5.1 million (2006: £4.5 million) waspaid in redundancy mainly as a result of the final phase of the Harworth andRossington rationalisations carried over from 2006; and £5.2 million (2006: £5.2million) of additional pension contributions were paid. Our land assets are incertain cases under restoration or remediation and, in the six months £11.2million (2006: £11.0 million) was spent on this area and claims. A further £5.8million (2006: £3.1 million) of capital investment was made in property, powergeneration and surface mining. At the end of June the Group had unutilised borrowing facilities of £41.3million. Since the end of the period, certain elements of our funding packagehave been renegotiated. The Group now has assured borrowing and leasingfacilities of £182 million with an average life of 3.1 years. Dividend: The Group continually seeks to conserve cash to invest in ourproperty, mining and related businesses. This strategy has been adopted toimprove further shareholder value, preserve financial flexibility and continueto reduce overall risk. Therefore, the Board is not declaring an interimdividend, and will review this position as our plans progress further. CONSOLIDATED INCOME STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2007 6 months to 6 months to 12 months to June 2007 June 2006 December 2006 Notes £'000 £'000 £'000Continuing operations RestatedTurnover 2 146,167 193,341 339,713Cost of sales 3 (164,285) (190,800) (381,021)Gross (loss)/profit (18,118) 2,541 (41,308)Coal Investment Aid 4 1,460 5,145 7,892Net appreciation in fair value of investment 51,043 18,516 68,622propertiesProfit on disposal of operating property, plant 1,345 156 416and equipmentProfit on disposal of investment properties 889 37 1,406Profit on sale of business 4 12,227 - -Other operating income and expenses (3,767) (4,686) (9,383)Operating profit 45,079 21,709 27,645Finance costs 5 (6,234) (6,268) (12,376)Finance income 5 1,391 1,286 2,261Finance costs - net 5 (4,843) (4,982) (10,115)Share of post-tax profit/(loss) from joint 337 (40) 105venturesProfit before tax 40,573 16,687 17,635Tax 6 12,994 - (143)Profit for the period 53,567 16,687 17,492 Attributable to :Equity holders of the parent 53,567 16,687 17,492 Earnings per share 8 pence pence pence RestatedBasic and diluted 34.2 11.2 11.7 The June 2006 figures have been restated following a change in accounting policy to widen the Group'sdefinition of an investment property. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSEFOR THE SIX MONTHS ENDED 30 JUNE 2007 6 months to 6 months to June 12 months to June 2007 2006 December 2006 £'000 £'000 £000 RestatedActuarial gain on defined benefit pension schemes 35,569 20,529 12,478Actuarial gain/(loss) on concessionary fuel reserve 2,294 1,019 (855)Movement on deferred tax asset relating to (12,986) - 35,752retirement benefit liabilitiesProperty revaluation on transfer to investment 1,231 - -propertiesNet gain recognised directly in equity 26,108 21,548 47,375Profit for the period 53,567 16,687 17,492Total recognised income for the period 79,675 38,235 64,867 Attributable to :Equity holders of the parent 79,675 38,235 64,867 CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFOR THE SIX MONTHS ENDED 30 JUNE 2007 Ordinary Share Other Retained Total equity shares premium reserves earnings account £'000 £'000 £'000 £'000 £'000Group Restated Restated RestatedAt 1 January 2006 1,485 1,771 181,965 (35,233) 149,988New shares issued 8 - - - 8Profit: six months to June 2006 - - - 16,687 16,687Actuarial gains on post retirement benefits - - - 21,548 21,548Accrual for long term incentive plan - - - 89 89liabilitiesFair value gain on revaluation of investment - - 18,516 (18,516) -propertiesAt 30 June 2006 1,493 1,771 200,481 (15,425) 188,320New shares issued 73 28,985 - - 29,058Profit: six months to December 2006 - - - 805 805Actuarial losses on post retirement benefits - - - (9,925) (9,925)Accrual for long term incentive plan - - - 109 109liabilitiesMovement on deferred tax asset in relation - - - 35,752 35,752to retirement benefit liabilitiesFair value gain on revaluation of investment - - 53,158 (53,158) -propertiesAt 31 December 2006 1,566 30,756 253,639 (41,842) 244,119Profit: six months to June 2007 - - - 53,567 53,567New shares issued 3 - - - 3Actuarial gains on post-retirement benefits - - - 37,863 37,863Accrual for long term incentive plan - - - 112 112liabilitiesMovement on deferred tax asset in relation - - - (12,986) (12,986)to retirement benefit liabilitiesFair value gain on revaluation of investment - - 51,043 (51,043) -propertiesProperty revaluation on transfer to - - 1,231 - 1,231investment propertiesDisposal of investment properties - - (2,370) 2,370 -At 30 June 2007 1,569 30,756 303,543 (11,959) 323,909 CONSOLIDATED BALANCE SHEETAT 30 JUNE 2007 30 June 2007 30 June 2006 31 December 2006 Notes £'000 £'000 £'000 RestatedAssetsNon-current assetsOperating property, plant and equipment 227,107 242,729 237,942Investment properties 9 360,560 265,296 311,677Investment in joint venture 142 60 205Deferred tax asset 35,747 - 35,752Trade and other receivables 964 839 964 624,520 508,924 586,540Current assetsInventories 43,691 46,994 36,640Trade and other receivables 37,666 59,355 47,604Derivative financial instruments 1,467 - 675Cash and cash equivalents 10 46,526 51,004 45,928 129,350 157,353 130,847LiabilitiesCurrent liabilitiesFinancial liabilities - Borrowings 10 (32,532) (52,553) (19,281)Trade and other payables (100,195) (88,220) (106,284)Provisions 12 (35,360) (42,691) (27,931) (168,087) (183,464) (153,496)Net current liabilities (38,737) (26,111) (22,649) Non-current liabilitiesFinancial liabilities - Borrowings 10 (75,038) (58,383) (78,484)Trade and other payables (231) (1,370) (312)Deferred tax liabilities (1,172) (1,029) (1,172)Provisions 12 (105,771) (116,338) (119,309)Retirement benefit obligations 13 (79,662) (117,373) (120,495) (261,874) (294,493) (319,772)Net assets 323,909 188,320 244,119 EquityCapital and reservesOrdinary shares 1,569 1,493 1,566Share premium 30,756 1,771 30,756Revaluation reserve 140,873 141,040 141,040Capital redemption reserve 257 257 257Fair value reserve 162,413 59,184 112,342Retained earnings (11,959) (15,425) (41,842)Total equity 323,909 188,320 244,119 CONSOLIDATED CASH FLOW STATEMENTFOR THE SIX MONTHS ENDED 30 JUNE 2007 6 months to 6 months to 12 months to June 2007 June 2006 December 2006 Notes £'000 £'000 £'000 RestatedCash flows from operating activitiesProfit for the period 53,567 16,687 17,492Depreciation/impairment of property, plant and 23,005 24,236 45,577equipmentNet fair value appreciation in investment properties (51,043) (18,516) (68,622)Net interest payable and amortisation of discount on 4,843 4,982 10,115provisionsNet charge for share based remuneration 112 89 198Net capitalised surface mine development and (6,970) (3,411) (5,382)restoration costsShare of post-tax (profit)/loss from joint venture (337) 40 (105)companyProfit on disposal of investment property (889) (37) (1,406)Profit on disposal of operating property, plant and (1,345) (156) (416)equipmentProfit on sale of business (12,227) - -Decrease in provisions and retirement benefit (11,066) (17,375) (36,246)obligationsTax (credit)/charge (12,994) - 143Operating cash flows before movements in working (15,344) 6,539 (38,652)capital(Increase)/decrease in stocks (7,051) (4,826) 5,528Decrease in receivables 9,938 8,041 18,797Decrease in payables (6,170) (16,920) (5,073)Cash used in operations (18,627) (7,166) (19,400)Financing cost (967) (488) (1,028)Interest paid (3,280) (3,622) (6,939)Cash used in operating activities (22,874) (11,276) (27,367) Cash flows from investing activitiesInterest received 1,391 1,286 2,261Net (payment to)/receipt from insurance and security (2,475) 10,076 9,915provision fundsNet proceeds from sale of business 21,500 - -Proceeds on disposal of property, plant and equipment 5,279 6,857 24,191Net receipts from/(investment in) joint venture company 400 (100) (100)Development costs of investment properties (2,579) - (3,256)Purchase of property, plant and equipment (12,327) (13,386) (33,312)Cash generated from/(used in) investing activities 11,189 4,733 (301) Cash flows from financing activitiesProceeds from issue of ordinary shares 3 8 29,067Net drawdown of bank loans 12,552 19,516 8,829Proceeds from new finance leases 2,663 359 359Repayment of obligations under hire purchase and (5,410) (5,480) (7,964)finance leasesCash generated from financing activities 9,808 14,403 30,291 (Decrease)/increase in cash (1,877) 7,860 2,623 At commencement of periodCash 3,627 1,004 1,004Cash equivalents 42,301 52,216 52,216 45,928 53,220 53,220Reduction in cash equivalents (net receipt from 2,475 (10,076) (9,915)insurance and subsidence security funds)(Decrease)/increase in cash (1,877) 7,860 2,623 46,526 51,004 45,928At end of periodCash 1,750 8,864 3,627Cash equivalents 44,776 42,140 42,301Cash and cash equivalents 10 46,526 51,004 45,928 NOTES TO THE INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2007 1. BASIS OF PREPARATION OF INTERIM FINANCIAL STATEMENTS The interim financial statements have been prepared in accordance with theaccounting policies set out in the Group's statutory accounts. The half-year figures to June 2006 have been restated to reflect changes inaccounting policy introduced in the financial statements for the year ended 31December 2006 to widen the Group's definition of an investment property. Thedirectors have adopted this change as they believe it provides more relevantinformation on the position of the Group. The effect of the change on June 2006 results was to increase net appreciationin fair value of investment properties by £13.8 million, decrease profit ondisposal of property, plant and equipment by £4.1 million and increase profitafter tax by £9.7 million. In preparing the interim financial statements, UK COAL has not applied thefollowing pronouncements for which adoption is not mandatory for the yearending 31 December 2007 and which have not yet been endorsed by the EU: IFRIC 11 'Group and treasury transactions'IFRIC 12 'Service concession agreements'IFRIC 13 'Customer loyalty programmes relating to IAS 18, Revenue'IFRIC 14 'The limit on a defined benefit asset, minimum funding requirements andtheir interaction'IFRS 8 'Operating segments' The Group has chosen not to adopt IAS34 'Interim financial statements' inpreparing its 2007 interim financial statements. The figures for the year ended 31 December 2006 have been extracted from thestatutory accounts which have been filed with the Registrar of Companies. Theauditors' report on these accounts was unqualified and did not contain astatement under either S237(2) or S237(3) of the Companies Act 1985. Thehalf-year figures, which are for the 26 week period (2006: 26 weeks) ended 30June 2007, have not been audited, but have been reviewed by the auditors. The auditors' review report is included with the interim financial statements. The Board approved the interim financial statements on 4 September 2007. Exceptional Items Items that are both material and non-recurring and whose significance issufficient to warrant separate disclosure and identification within thefinancial statements are referred to as Exceptional Items and disclosed withintheir relevant income statement category. Items that may give rise toclassification as Exceptional Items include, but are not limited to, significantand material restructuring and reorganisation programmes, asset impairments andincome from the Department of Trade and Industry in relation to Investment Aid. Property related transactions, including changes in the fair value of investmentproperties and profits or losses arising on disposals of property assets, arenot included in the definition of Exceptional Items as they are expected torecur, but are separately disclosed on the face of the income statement, wherematerial. 2. SEGMENTAL ANALYSIS INCOME STATEMENT - six months to 30 June 2007 Ongoing Deep Closed / Total Surface Property Power Others Total Mining sold Deep Deep Mining Generation Mines * Mining £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000ContinuingoperationsTurnover 112,668 7,345 120,013 21,572 2,522 1,547 513 146,167Operating (loss)/ (10,139) (1,667) (11,806) 4,937 744 1,708 (71) (4,488)profit beforeexceptional itemswithin cost of salesExceptional items (13,006) (589) (13,595) (35) - - - (13,630)within cost of salesGross (loss)/profit (23,145) (2,256) (25,401) 4,902 744 1,708 (71) (18,118)Coal Investment Aid 1,402 58 1,460 - - - - 1,460Net appreciation in - - - - 51,043 - - 51,043fair value ofinvestmentpropertiesProfit on disposal - - 22 1,323 - - 1,345of operatingproperty, plant andequipmentProfit on disposal - - - - 889 - - 889of investmentpropertiesProfit on sale of - 11,989 11,989 - - 238 - 12,227businessOther operating (3,377) 9 (3,368) (469) - 6 64 (3,767)income and expensesOperating profit/ (25,120) 9,800 (15,320) 4,455 53,999 1,952 (7) 45,079(loss) INCOME STATEMENT - six months to 30 June 2006 Ongoing Closed / Total Surface Property Power Others Total Deep Mining sold Deep Deep Mining Generation Mines * Mining £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Restated RestatedContinuingoperationsTurnover 143,553 36,396 179,949 9,879 2,748 256 509 193,341Operating profit/ 14,319 (11,716) 2,603 1,715 1,493 769 (162) 6,418(loss) beforeexceptional itemswithin cost of salesExceptional items 559 (4,292) (3,733) (144) - - - (3,877)within cost of salesGross profit/(loss) 14,878 (16,008) (1,130) 1,571 1,493 769 (162) 2,541Coal Investment Aid 4,571 574 5,145 - - - - 5,145Net appreciation in - - - - 18,516 - - 18,516fair value ofinvestmentpropertiesProfit/(loss) on (74) - (74) 230 - - - 156disposal ofoperating property,plant and equipmentProfit on disposal - - - - 37 - - 37of investmentpropertiesOther operating (4,998) 141 (4,857) (622) (138) 839 92 (4,686)income and expensesOperating profit/ 14,377 (15,293) (916) 1,179 19,908 1,608 (70) 21,709(loss) INCOME STATEMENT - Year to 31 December 2006 Ongoing Deep Closed / Total Surface Property Power Others Total Mining sold Deep Deep Mining Generation Mines * Mining £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000ContinuingoperationsTurnover 253,473 57,468 310,941 21,661 5,990 293 828 339,713Operating (loss)/ (10,777) (8,330) (19,107) 1,197 3,286 1,726 (413) (13,311)profit beforeexceptional itemswithin cost of salesExceptional Items 241 (32,365) (32,124) 4,127 - - - (27,997)within cost of salesGross (loss)/profit (10,536) (40,695) (51,231) 5,324 3,286 1,726 (413) (41,308)Coal Investment Aid 7,118 774 7,892 - - - - 7,892Appreciation in fair - - - - 68,622 - - 68,622value of investmentpropertiesProfit/(loss) on (73) - (73) 489 - - - 416disposal ofoperating property,plant and equipmentProfit on disposal - - - - 1,406 - - 1,406of investmentpropertiesOther operating (10,335) 554 (9,781) (1,185) (14) 1,429 168 (9,383)income and expensesOperating profit/ (13,826) (39,367) (53,193) 4,628 73,300 3,155 (245) 27,645(loss) * Closed/ sold Deep Mines comprise Rossington and Harworth Collieries as statedin the 2006 Annual Report, and Maltby Colliery, which was sold in February 2007 The 2006 comparatives include Maltby Colliery within closed/sold deep mines BALANCE SHEET - As at 30 June 2007 Ongoing Closed / Total Surface Property Power Others Total Deep Mining sold Deep Mining Generation Deep Mining Mines * £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000AssetsNon-current assetsOperating property, 169,004 - 169,004 30,939 17,650 9,511 3 227,107plant and equipmentInvestment - - - - 360,560 - - 360,560propertiesInvestment in joint - - - - - - 142 142ventureDeferred tax asset 35,747 - 35,747 - - - - 35,747Trade and other - - - 475 489 - - 964receivables 204,751 - 204,751 31,414 378,699 9,511 145 624,520Current assetsInventories 35,781 - 35,781 7,910 - - - 43,691Trade and other 26,256 31,761 3,030 384 1,004 37,666receivables 5,505 1,487Derivative - - - - - - 1,467 1,467financialinstrumentsCash and cash 44,815 - 44,815 - 1,280 - 431 46,526equivalents 106,852 5,505 112,357 9,397 4,310 384 2,902 129,350 LiabilitiesCurrent liabilitiesFinancial (1,703) - (1,703) (2,754) 264 (4,696) (23,643) (32,532)liabilities -BorrowingsTrade and other (70,854) (444) (71,298) (8,869) (15,906) (62) (4,060) (100,195)payablesProvisions (12,403) (3,568) (15,971) (18,747) - (132) (510) (35,360) (84,960) (4,012) (88,972) (30,370) (15,642) (4,890) (28,213) (168,087)Net current 21,892 1,493 23,385 (20,973) (11,332) (4,506) (25,311) (38,737)liabilities Non-currentliabilitiesFinancial (4,070) - (4,070) (4,690) (64,786) (1,405) (87) (75,038)liabilities -BorrowingsTrade and other - - - (49) (182) - - (231)payablesDeferred tax - - - - (1,172) - - (1,172)liabilitiesProvisions (60,402) (6,497) (66,899) - - - (105,771) (38,872)Retirement benefit (74,157) (5,505) (79,662) - - - - (79,662)obligations (138,629) (150,631) (43,611) (66,140) (1,405) (87) (261,874) (12,002)Net assets/ 88,014 (10,509) 77,505 (33,170) 301,227 3,600 (25,253) 323,909(liabilities) BALANCE SHEET - As at 30 June 2006 Ongoing Closed / Total Surface Property Power Others Total Deep Mining sold Deep Mining Generation Deep Mining Mines * £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Restated RestatedAssetsNon-current assetsOperating property, 189,395 14,968 204,363 23,407 10,435 4,521 3 242,729plant and equipmentInvestment - - - - 265,296 - - 265,296propertiesInvestment in joint - - - - - - 60 60ventureDeferred tax asset - - - - - - - -Trade and other - - - 475 364 - - 839receivables 189,395 14,968 204,363 23,882 276,095 4,521 63 508,924Current assetsInventories 36,434 8,372 44,806 2,188 - - - 46,994Trade and other 50,991 1,142 52,133 2,031 900 (151) 4,442 59,355receivablesDerivative - - - - - - - -financialinstrumentsCash and cash 48,710 2 48,712 - 1,043 - 1,249 51,004equivalents 136,135 9,516 145,651 4,219 1,943 (151) 5,691 157,353 LiabilitiesCurrent liabilitiesFinancial (3,366) - (3,366) (2,262) - (920) (46,005) (52,553)liabilities -BorrowingsTrade and other (68,909) (2,287) (71,196) (5,123) (9,744) (690) (1,467) (88,220)payablesProvisions (22,099) (6,475) (28,574) (14,117) - - - (42,691) (94,374) (8,762) (103,136) (21,502) (9,744) (1,610) (47,472) (183,464)Net current 41,761 754 42,515 (17,283) (7,801) (1,761) (41,781) (26,111)liabilities Non-currentliabilitiesFinancialliabilities - Borrowings (7,794) - (7,794) (631) (49,132) (826) - (58,383)Trade and other - - - (85) (1,285) - - (1,370)payablesDeferred tax - - - - (1,029) - - (1,029)liabilitiesProvisions (56,877) (13,578) (70,455) (45,883) - - - (116,338)Retirement benefit (117,373) - (117,373) - - - - (117,373)obligations (182,044) (13,578) (195,622) (46,599) (51,446) (826) - (294,493) Net assets/ 49,112 2,144 51,256 (40,000) 216,848 1,934 (41,718) 188,320 (liabilities) BALANCE SHEET - As at 31 December 2006 Ongoing Closed / Total Surface Property Power Others Total Deep Mining sold Deep Mining Generation Deep Mining Mines * £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000AssetsNon-current assetsOperating property, 177,841 11,481 189,322 25,708 14,585 8,324 3 237,942plant and equipmentInvestment - - - - 311,677 - - 311,677propertiesInvestment in joint - - - - - - 205 205ventureDeferred tax asset 35,752 - 35,752 - - - - 35,752Trade and other - - - 475 489 - - 964receivables 213,593 11,481 225,074 26,183 326,751 8,324 208 586,540Current assetsInventories 27,847 5,330 33,177 3,463 - - - 36,640Trade and other 36,682 106 36,788 2,874 277 764 6,901 47,604receivablesDerivative - - - - - - 675 675financialinstrumentsCash and cash 42,335 2 42,337 - 1,042 - 2,549 45,928equivalents 106,864 5,438 112,302 6,337 1,319 764 10,125 130,847 LiabilitiesCurrent liabilitiesFinancial (3,564) - (3,564) 1,034 (950) (12,774) (19,281)liabilities - (3,027)BorrowingsTrade and other (68,380) (1,530) (69,910) (10,144) (15,247) (4,737) (6,246) (106,284)payablesProvisions (15,875) (3,382) (19,257) (8,310) - - (364) (27,931) (87,819) (4,912) (92,731) (21,481) (14,213) (5,687) (19,384) (153,496)Net current 19,045 526 19,571 (15,144) (12,894) (4,923) (9,259) (22,649)liabilities Non-currentliabilitiesFinancialliabilities - Borrowings (7,576) - (7,576) (6,203) (64,383) (344) 22 (78,484)Trade and other - - - (130) (182) - - (312)payablesDeferred tax - - - - (1,172) - - (1,172)liabilitiesProvisions (60,909) (13,340) (74,249) (45,060) - - - (119,309)Retirement benefit (120,495) - (120,495) - - - - (120,495)obligations (188,980) (13,340) (202,320) (51,393) (65,737) (344) 22 (319,772)Net assets/ 43,658 (1,333) 42,325 (40,354) 248,120 3,057 (9,029) 244,119(liabilities) * Closed/ sold Deep Mines comprise Rossington and Harworth Collieries as stated in the 2006 AnnualReport, and Maltby Colliery, which was sold in February 2007. The 2006 comparatives include Maltby Colliery within closed/sold deep mines. CASH FLOW STATEMENT - Six months to 30 June 2007 For comparative periods see Consolidated Cash Flow Statement Ongoing Closed / Total Surface Property Power Others To June 30 Deep Mining sold Deep Mining Generation 2007 Total Deep Mining Mines * £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 Cash flows fromoperatingactivitiesProfit for the (12,307) 9,800 (2,507) 3,467 51,133 1,850 (376) 53,567periodDepreciation / 17,036 529 17,565 4,933 92 415 - 23,005impairment ofproperty, plant andequipmentNet fair value - - - - (51,043) - - (51,043)appreciation ininvestmentpropertiesNet interest 181 - 181 989 2,867 102 704 4,843payable andamortisation ofdiscount onprovisionsNet charge for - - - - - - 112 112share basedremunerationNet capitalised - - - (6,970) - - - (6,970)surface minedevelopment andrestoration costsShare of post-tax - - - - - - (337) (337)(profit)/loss fromjoint venturecompanyProfit on disposal - - - - (889) - - (889)of investmentpropertiesProfit on disposal - - - (22) (1,323) - - (1,345)of operatingproperty, plant andequipmentProfit on sale of - (11,989) (11,989) - - (238) - (12,227)businessDecrease in (14,773) (6,657) (21,430) 10,364 - - - (11,066)provisions andretirement benefitobligations.Tax (12,994) - (12,994) - - - - (12,994)Operating cash (22,857) (8,317) (31,174) 12,761 837 2,129 103 (15,344)flows beforemovements inworking capital(Increase)/decrease (7,934) 5,330 (2,604) (4,447) - - - (7,051)in stocksDecrease/(increase) 10,426 (5,399) 5,027 1,387 (2,753) 380 5,897 9,938in receivablesDecrease in 2,474 (1,086) 1,388 (1,356) 659 (4,675) (2,186) (6,170)payablesCash (used in)/ (17,891) (9,472) (27,363) 8,345 (1,257) (2,166) 3,814 (18,627)generated fromoperationsFinancing cost - - - (2) (442) - (523) (967)Interest paid (434) - (434) (294) (2,529) (103) 80 (3,280)Cash (used in) / (18,325) (9,472) (27,797) 8,049 (4,228) (2,269) 3,371 (22,874)generated fromoperatingactivities Cash flows frominvestingactivitiesInterest received 1,428 - 1,428 117 104 1 (259) 1,391Net receipt from (2,475) - (2,475) - - - - (2,475)insurance andsecurity provisionfundsDisposal of - 19,579 19,579 466 - 1,455 - 21,500businessesProceeds on - - - 58 5,221 - - 5,279disposal ofproperty, plant andequipmentInvestment in joint - - - - - - 400 400venture companyDevelopment costs - - - - (2,579) - - (2,579)of investmentpropertiesPurchase of (8,073) (1,040) (9,113) (326) (109) (2,779) - (12,327)property, plant andequipmentCash (used in) / (9,120) 18,539 9,419 315 2,637 (1,323) 141 11,189generated frominvestingactivitiesNet operating cash (27,445) 9,067 (18,378) 8,364 (1,591) (3,592) 3,512 (11,685)flow by segment * Closed/ sold Deep Mines comprise Rossington and Harworth Collieries as stated in the 2006 Annual Report, and Maltby Colliery, which was sold in February 2007. The 2006 comparatives include Maltby Colliery within closed/sold deep mines. 3. Cost of sales 6 months to 6 months to 12 months to June 2007 June 2006 December 2006 £'000 £'000 £'000Exceptional Items within cost of salesHarworth - mothballing costs (1,120) (2,326) (10,264)Harworth - write off of assets - - (3,589)Rossington - mothballing/closure costs - (1,966) (4,809)Rossington - write off of assets - - (203)Stores equipment provision - - (6,527)Redundancy (1,924) (365) (1,995)Post retirement benefits 419 780 4,355Maltby - recovery costs - - (6,973)Daw Mill -recovery costs (11,005) - (2,392)Surface mining- reversal of impairment charge - - 4,400 (13,630) (3,877) (27,997)Other cost of sales (150,655) (186,923) (353,024)Total cost of sales (164,285) (190,800) (381,021) 4. Exceptional Items 6 months to 6 months to 12 months to June 2007 June 2006 December 2006 Note £'000 £'000 £'000Exceptional Items within cost of sales 3 (13,630) (3,877) (27,997)Other Exceptional Items:Profit on sale of business 12,227 - -Coal Investment Aid 1,460 5,145 7,892Total Exceptional Items 57 1,268 (20,105)Operating profit before Exceptional Items 45,022 20,441 47,750Net credit/(charge) for Exceptional Items 57 1,268 (20,105)Operating profit 45,079 21,709 27,645 5. Finance income and costs 6 months to 6 months to 12 months to June 2007 June 2006 December 2006 £'000 £'000 £'000Interest Expense- Bank borrowings (3,757) (2,953) (6,377)- Hire purchase agreements and finance leases (466) (669) (1,204)- Unwinding of discount on provisions (1,987) (2,300) (4,550)- Discounting of non-current receivables - 142 142- Amortisation of issue costs of bank loans (967) (488) (1,028)Fair value gain/(loss) on financial instruments- Interest rate swaps: fair value hedges 151 - (34)- Fair value of interest rate swaps 792 - 675Finance costs (6,234) (6,268) (12,376)Finance income 1,391 1,286 2,261Net interest costs (4,843) (4,982) (10,115) 6. Taxation The tax credit for the six months to 30 June 2007 relates solely to the recognition of previouslyunrecognised tax losses. These losses have been recognised at 30 June 2007 due to the reduction inthe deferred tax asset relating to the pension liability and not any change in forecast Groupprofitability. The credit recognised in the consolidated income statement is equal to the charge recognised in thestatement of recognised income and expense, reflecting the fact there is no overall change in theamount of deferred tax asset being recognised. Due to the availability of substantial brought forward tax losses for offset against current tax yeartaxable profits, there is no further taxation charge in the period. 7. Dividends No dividends have been paid or proposed in relation to 2006. No interim dividend is proposed for thesix months ended 30 June 2007. 8. Earnings per share Earnings per share has been calculated by dividing the earnings attributable to ordinary shareholdersby the weighted average number of shares in issue, adjusted for the dilutive effect of share optionspotentially issueable under the Group's share option plans, and ranking for dividend during the year,being 156,673,616 (June 2006: 148,941,767 ; Dec 2006: 150,047,213). At the period end there were noshare options outstanding which could dilute earnings per share in the future. Adjusted earnings per share, excluding tax, for the six months to 30 June 2007: 25.9 pence (June2006: 11.2 pence ; Dec 2006: 11.7 pence). 9. Investment properties 6 months to 6 months to 12 months to June 2007 June 2006 December 2006At valuation £'000 £'000 £'000 RestatedAt 1 January 311,677 251,161 251,161Additions 2,579 828 3,256Disposals (2,879) (5,209) (14,023)Fair value uplift 51,043 18,516 71,674Transfer from operating property, plant and 8 - -equipmentRevaluation gain on transfer from operating 1,231 - -property, plant and equipmentTransfer to operating property, plant and equipment (3,099) - (391)At period end 360,560 265,296 311,677 The investment properties comprise all properties which are not designated as operating properties.The properties were valued at 30 June 2007, in accordance with the Appraisal and Valuation Standardsof the Royal Institution of Chartered Surveyors, by Atisreal, Smiths Gore and Bell Ingram,independent firms with relevant experience of valuations of this nature. The valuation excludes anydeduction of rehabilitation and restoration costs which are stated within provisions in the balancesheet. 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 oradjoining sites, or where this is present the sites will be remediated by UK COAL to a standardconsistent with the intended use; and - No deduction or adjustment has been made in relation to clawback provisions, or other taxes whichmay be payable. Certain of the Group's borrowings are secured by a fixed charge over the investment properties. 10. Cash and cash equivalents 30 June 2007 30 June 31 December 2006 2006 £'000 £'000 £'000Cash deposited to cover insurance requirements 22,029 18,909 19,553Subsidence security fund 22,747 23,231 22,748Other cash balances 1,750 8,864 3,627Cash and cash equivalents 46,526 51,004 45,928Bank loans and overdrafts (96,676) (94,811) (84,124)Obligations under hire purchase and finance leases (10,894) (16,125) (13,641)Net debt (61,044) (59,932) (51,837) Debt at 30 June 2007 is stated after unamortised borrowing costs of £2,381,000 (June 2006: £2,278,000; December 2006: £3,331,000). 11. Sale of business On February 26 2007, the Maltby Colliery was sold to Hargreaves Services PLC (Hargreaves) with atransfer of operational assets and liabilities, together with the workforce. Hargreaves was thesecond largest customer for Maltby. The consideration of £21.5 million resulted in a profit ondisposal of £12.2 million. This includes an estimate of the value of pension liabilities to betransferred to Hargreaves which will be updated in the financial statements for the year ended 2007. 12. Provisions 1 January Created in Released in Utilised Unwinding of 30 June 2007 period period in period discount 2007 £'000 £'000 £'000 £'000 £'000 £'000Employer and public liabilities 19,856 1,460 - (2,068) 450 19,698Surface damage 19,820 3,361 (1,707) (854) 320 20,940Claims 1,541 7 (750) (11) - 787Restoration and rehabilitation 51,749 11,661 (1,880) (5,596) 811 56,745costs of surface minesRestoration and rehabilitationcosts of deep mines - shaft treatment and pit top 17,635 940 (3,022) (2,497) 234 13,290 - spoil heaps 4,221 350 (1,062) (205) 52 3,356 - pumping costs 6,614 - (494) - - 6,120Ground/groundwater contamination 9,768 - (2,545) - 120 7,343Redundancy 16,036 2,577 (653) (5,108) - 12,852 147,240 20,356 (12,113)* (16,339) 1,987 141,131Provisions payable within one year 35,360Provisions payable after more than 105,771one year 141,131* Provisions released of £12,113,000 include £6,193,000 relating to the sale of Maltby Colliery 13. Pensions 30 June 30 June 2006 31 2007 December 2006 £'000 £'000 £'000Retirement benefit obligations - Blenkinsopp 1,299 1,299 1,299Retirement benefit obligations - Concessionary fuel 21,974 23,670 24,727Retirement benefit obligations - Industry Wide Schemes 56,389 92,404 94,469 79,662 117,373 120,495 Retirement benefit obligations (Industry Wide Schemes) include £5,505,000 relating to Maltby Colliery whichare expected to be transferred to Hargreaves Services PLC later in the year. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Harworth Gp