14th Dec 2005 07:01
UK Coal PLC14 December 2005 14th December 2005 UK COAL PLC TRADING UPDATE Ahead of entering the close period, UK COAL PLC ("UK COAL" or the "Company") isgiving the following pre close trading update covering the period up to the endof November 2005. It is anticipated that the results for the year ended 31stDecember 2005 will be announced on Thursday 2nd March. Deep Mines Good progress on operational initiatives has continued to improve performanceand better average selling prices have been achieved in the five months to theend of November as higher priced contracts take effect. Selling prices in thefive months have been £1.36 per gigajoule (first half year: £1.30 pergigajoule). The Deep Mines have been returned to profitability in the three months toNovember and, in this period, unit costs have been reduced to £1.30 pergigajoule. The full five month period to the end of November however includes a period oflow production in July and August when the new faces installed in the secondquarter were being commissioned. As a result, total output in the five months tothe end of November is 3.8 million tonnes and unit cost of production has been£1.58 per gigajoule (first half year: £1.68 per gigajoule). Total exceptional items in the second half year are anticipated to be around £24million (first half year: £23 million, excluding investment aid and profit onsale of businesses), principally comprising certain costs of mothballingRossington and Harworth which, in accordance with accounting standards, were notprovided in the first half. Other exceptional items relate to head office redundancy costs, following anoverhead reduction programme, costs for recovery projects following forcemajeure events announced in January, provision for the potential repayment ofcertain investment aid in respect of closed and closing collieries andimpairment of fixed assets, mainly in respect of the closing collieries. Net debt is £105 million at the end of November (June 2005: £85 million),including leasing and hire purchase agreements but excluding balances held inrespect of insurance requirements and subsidence security funds. Coal stocks have been increased by 103,000 tonnes since June 2005 to give moreoperational flexibility, and at the end of November amounted to 472,000 tonnes(November 2004: 699,000 tonnes). Surface Mines Overall, surface mining made a profit of £0.2 million in the five months toNovember 2005 (2004: Loss of £2.2 million). Additionally, the surface miningbusiness has incurred £5.4 million of costs on restoration and rehabilitation offormer surface and deep mine properties. The cost of this work has been eithercapitalised or charged against previously reserved liabilities set up on theinception of the mining schemes. Surface mine output in the five month period to the end of November fell to377,000 tonnes (first half year: 570,000 tonnes). Unit costs were £1.31 pergigajoule (first half year: £1.28 per gigajoule). There still remains 920,000 tonnes to extract from current operations togetherwith a further 1.5 million tonnes from schemes which already have planningapproval. Whilst no new planning approvals were received in the five month period, threesites containing 2.7 million tonnes have been submitted to Public Inquiry onappeal and, subject to approval, would be available to start extraction in late2006. The Company, which has a land bank containing up to 100 million tonnes of coal,has submitted planning applications for a further three new sites containing 1.6million tonnes of reserves. We hope to start production on these sites in 2006. The main sites with permission to extract coal or which are also in the planningprocess are listed below. Site Tonnage Remaining tonnage Maidens Hall Extension 1,700,000 920,000Cutacre 1,500,000 1,500,000 Sites with Planning 3,200,000 2,420,000 Stoney Heap 257,000 257,000Sharleston Colliery 360,000 360,000Stobswood North 920,000 920,000Steadsburn 1,000,000 1,000,000Long Moor 725,000 725,000Lodge House 1,000,000 1,000,000 Sites in Planning 4,262,000 4,262,000 Property Property proceeds in the five month period to the end of November were £5.0million (2004: Nil). This reflects the disposal of land following the extractionof value after appropriate development or receipt of planning approval. Rental income on the commercial and business park portfolio continues to growand planning applications in respect of 235 acres of land are awaiting approval.Total profit in the five month period to the end of November amounts to £4.9million, including profit on disposals of £3.9 million. Power Generation Harworth Power, UK COAL's power generation subsidiary, has 32 MW of installedmethane power generation capacity, and planning permission to erect 3 windturbines. Planning applications in respect of a further 37 turbines are inprogress. Power generation continues to increase and the business generated a profit,including emissions trading credits, of £1.1 million in the five month period tothe end of November 2005. Outlook The continuing five deep mines are expected to return to overall profitabilityin 2006, dependent on the continuation of the mining conditions experienced inthe three months to November 2005. At the end of November 2005, total coal under contract to 2009, including anestimate of sales to non Electricity Supply Industry markets, was 33.1 milliontonnes, with average maximum expected proceeds across all years (in 2005 prices)of £1.45 per gigajoule and minimum proceeds of £1.35 per gigajoule. These pricesare subject to inflation at full RPI and are dependent upon the out-turn ofinternational coal prices. We are committed to maintaining a significant surface mining business and willcontinue to actively pursue planning applications in respect of our extensivesurface mining land bank. We will continue to develop our property business by investing sales proceeds toenhance the value of the property portfolio through development, marriage andplanning gains. Harworth Power will continue to pursue its interest in renewable and greenenergy generation, building capacity through direct investment and jointventure. During 2006, payments of around £15 million in respect of redundancy costsprovided at the end of 2005 will be made, along with additional payments toreduce the pension deficit (£10 million). A further £15 million will be paid torestore former surface and deep mines, but this should further enhance theproperty value. Enquiries:Gavin Anderson & Company 020 7554 1400Ken CroninMichael Turner Note 1 5 months to 5 months toProduction Nov 05 (mt) Nov 04 (mt) Ongoing CollieriesDaw Mill 1.0 1.2Kellingley 0.7 0.5Maltby 0.6 0.8Thoresby 0.4 0.5Welbeck 0.4 0.3 Sub Total - ongoing collieries 3.1 3.3 Other closed or closing mines 0.7 0.8 Total Deep Mines 3.8 4.1 Surface Mines 0.4 0.7 Total Production 4.2 4.8 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Harworth Gp