16th Jan 2008 07:01
UK Coal PLC16 January 2008 16 January 2008 UK COAL PLC - TRADING UPDATE FOR THE YEAR TO 31 DECEMBER 2007 With a positive outlook for all its businesses, the Group continues to be well placed to deliver further growth in shareholder value. UK COAL PLC ("UK COAL" or the "Group") today provides the following tradingupdate in advance of the publication of its preliminary results for the yearended 31 December 2007. Overview We expect to announce continued progress and growth in shareholder value withGroup pre-tax profits for 2007 anticipated to be in line with overallexpectations at around £69 million, an almost four-fold increase from 2006(£17.6 million). Outlook With a positive outlook for all its businesses, the Group continues to be wellplaced to deliver further growth in shareholder value. Our Mining and Power businesses benefit from the high price of internationallytraded energy, driven by global demand. We have an increased ability to accessmarket prices as we continue to make significant progress in reducing theproportion of our total coal output contracted for sale at historic prices. Our Property business, Harworth Estates, is well placed to create value boththrough planning gains over our diversified regeneration portfolio and from thescope to realise property development profits and to build rental streams. Inspite of any short-term volatility, the longer term outlook for property in theUK, with its structural shortage of land for development, remains positive. Mining Production As expected, production from our four on-going deep mines of 6.4 million tonneswas lower than in 2006 (7.5 million tonnes), reflecting principally, at DawMill, the previously announced period of non-production and the slower ramp upto production on its new face in the fourth quarter, and, at Kellingley, thereduction in the rate of production until higher quality reserves are accessedin 2009 in the Beeston seam. Surface mine production of 1.5 million tonnes (2006: 0.6 million tonnes)included the results of three new surface mines which commenced production inthe fourth quarter. Coal output for the year was as follows: 2007 2006 million tonnes million tonnes Daw Mill 2.2 2.7Kellingley 1.8 2.1Thoresby 1.4 1.5Welbeck 1 1.2 On-going deep mines 6.4 7.5Total surface mines 1.5 0.6Ongoing operations 7.9 8.1Closed/sold deep mines 0.2 1.4 Total output 8.1 9.5 Sales Pricing Realised coal prices per gigajoule (GJ) in the period increased by circa 15% toapproximately £1.62 per GJ (2006: £1.41 per GJ). We have been successful in our continued negotiations with customers to move ouroverall sales prices closer to the world market price for coal and areprogressively moving the Group's contracts position towards a balance ofcontracts at floating, capped and collared, and fixed (or RPI linked) prices. As at 31 December 2007, total contracted forward sales to all customers hadincreased to 23.9 million tonnes (31 December 2006: 17.9 million tonnes). As at 31 December 2007, we estimate that the forward price for coal for deliveryduring 2008, including the cost of transport into the UK, was equivalent tocirca £2.60 per GJ. Based upon this forward price, we estimate that ourforecast output in 2008, both contracted and un-contracted, would be sold at aprice in the order of £1.75 - £1.80 per GJ. Redundancy and Closure Costs Redundancy and closure costs were lower than anticipated by circa £6 million,benefiting in particular from the release of provisions following agreement withHMRC on a dispute involving tax deductions arising on redundancies. Property - Harworth Estates Despite significant market turbulence in the final quarter, property valuationgains in the income statement are expected to be circa £69 million (2006: £68.6million).An estimated further £5 million (2006: nil) of valuation gains will betaken directly to reserves, being the gains on properties which have beentransferred during the year from operating to investment property status. Overall the RICS valuation of the property portfolio is expected to show a gainof circa 20% over the period on a like for like basis. Project Worth Further good progress was made on our property development plan with 16 newprojects being added to the programme during the year, now making a total of 76.Management estimates of the worth of our property portfolio in 2012 haveincreased and now stand at £926 million (compared to £800 million estimated atDecember 2006). These estimates are calculated on a consistent basis, beingbased on property values as at the dates of the estimates and excludeparticipation in any development phase profits. Progress Key projects launched in the year included the Eco Town bids for major housingschemes (over the next 15-20 year period) at Rossington near Doncaster and atMarley Hill, south of Newcastle. The Government will shortlist 10 projects, outof the 50 bids received, in the next two months. In early January 2008, a planning application for 250 homes and 160,000 sq ft ofindustrial space was approved at Edlington, Doncaster. Negotiations continuepositively on our major scheme at Prince of Wales, Pontefract, where, followingthe resolution of highway design matters, the Council is expected to grantplanning approval shortly. Group Net Borrowings Net borrowings for the Group at the year end were circa £55 million (December 312006: £51.8 million) including cash balances and deposits of circa £70 million(2006: £45.9 million) of which £49 million was held in respect of insurancerequirements and subsidence security funds. Enquiries: Media:Citigate Dewe Rogerson Tel: 020 7638 9571Anthony Carlisle Mobile: 07973 611 888Laure Lagrange Mobile: 07768 698 731 Analysts and investors:Jon Lloyd Tel: 01302 755002Chief Executive, UK COAL PLC David Brocksom Tel: 01302 755012Group Finance Director, UK COAL PLC Scott Fulton, Citigate Dewe Rogerson Tel: 020 7638 9571 Mobile: 07788 144993 Notes to Editors:- UK COAL is a mining, property and power company employing 3,100 people with itsheadquarters at Harworth Park, Harworth, near Doncaster, South Yorkshire. Britain's biggest producer of coal, UK COAL operates four deep mines in theMidlands and Yorkshire, and is currently operating six surface mines in theNorth East, the North West and the Midlands. Over 90% of UK COAL'S annualoutput of coal is sold to generate around 6% of Britain's electricity. Harworth Estates, the property business, owns around 46,000 acres of land. Thisincludes 76 sites, covering a developable area of 3,680 acres, which have beenidentified for development, creating opportunities for building around 27,000homes and 30 million square feet of employment space over the next decade. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Harworth Gp