Unaudited H1 2015 Results

London, 20 August 2015

Unaudited H1 2015 Results

New World Resources Plc ('NWR' or the 'Company') today announces its unaudited financial results for the first six months of 2015. Comparative information, unless otherwise stated, is for the first six months of 2014.

H1 2015 Financial summary

§ Revenues of EUR 286 million, down 17%.

§ Coking coal average realised price of EUR 93/t, up 7%.

§ Thermal coal average realised price of EUR 52/t, down 10%.

§ Cash mining unit costs[1] of EUR 71/t, up 11% on 20% lower production. On target for mid EUR 60s for FY 2015.

§ Selling and administrative expenses down 26% to EUR 53 million.

§ EBITDA of EUR 3 million, down from EUR 19 million in H1 2014.

§ Non-cash gain of EUR 49 million on fair value revaluation of mandatory convertible notes booked in Q1 2015.

§ Basic earnings per A share of 0.17 eurocents compared to a basic loss per A share of 7.25 eurocents for H1 2014.

§ Net debt of EUR 286 million.

§ Cash of EUR 89 million as of 30 June 2015.

H1 2015 Operational summary

§ Regrettably, three miners lost their lives in August 2015 following an isolated incident.

§ Safety metrics LTIFR[2] of 5.54 vs. 8.18 in FY 2014.

§ Coal production of 3.6Mt, down 20% and coal sales of 3.3Mt, down 17%.

§ Coal sales mix of 62% coking coal and 38% thermal coal.

§ CAPEX of EUR 22 million, down 11%.

§ Coal Inventory of 938kt, up 9% year on year.

§ Total headcount including contractors down 4%.

2015 Prices and targets[3]

§ Average price for 74% of 2015 expected coking coal production agreed at EUR 93/t.

§ Average price for thermal coal production agreed at EUR 52/t.

§ Production and sales volume of 7.5 - 8.0Mt and 8.0Mt respectively.

§ 60% coking coal in the sales mix.

§ Cash mining unit costs of around EUR 65 per tonne.

§ CAPEX of EUR 30-40 million.

§ Improvement in LTIFR towards the target of below 5.

Director changes[4]

§ Mr. Boudewijn Wentink joins the Board of NWR as Finance and Legal Director and Executive Director from 19 August 2015, succeeding Marek Jelínek.

§ Mr. Colin Keogh, Independent Non-Executive Director, has resigned from the Board of NWR with effect from 19 August 2015.

Chairman's statement

The stand out metric for NWR during the first six months of this year was our safety performance, with a LTIFR of 5.54. This is a record for the Company and represents a year-on-year improvement of 23%, which is testament to the focused and relentless work that the team at OKD has put into fostering a safety-first culture among our miners. Tragically, during August three fatalities occurred in a single accident. This comes at a time when we have been making good progress with safety at OKD. This will not diminish our effort to achieve the vision where every OKD employee and contractor returns home safely each day. This commitment is unwavering. Safety is by far the most important aspect of our operations, and we are now within sight of our target LTIFR of less than 5.

Our first half production was 3.6 Mt of coal, which was 13% ahead of our budgeted output. Production will continue to ramp up in accordance with our planned longwall sequencing as we move through the rest of the year, and we remain on track to reach our full year target production of approximately 7.5 - 8 M/t. Lower sales volumes with subdued pricing had an impact on our revenues, which were EUR 286 million in the first half, down by 17% on the same period last year.

Although our ability to influence the price of our coal is somewhat limited, we are fully in command of those aspects of the business that we can control. We continue to focus on cost containment and margin optimization, and in the period under review our cost of sales fell by 15% while our selling and administrative expenses fell by 26%. Our cash mining costs were EUR 71 per tonne, up 11% year-on-year, which is a good result considering our lower production. We registered a positive EBITDA of EUR 3 million. Overall, NWR is operating within its 2015 budget and is broadly on track to reach all of its full year targets.

The market in which we are operating remains tough. The international benchmark price of coking coal has dropped by 60% in three years and this year alone it has fallen by around 20%. However, Central Europe remains substantially short of coking coal, and the cost of transporting international coking coal from the ports of northern Europe into our region is high. We therefore have some, albeit limited, leeway in price negotiations with our customers. As previously announced, we have agreed an average price of EUR 93 per tonne to sell 74% of our coking coal production in 2015 and we remain cautiously optimistic with regard to where the price of coking coal will go as we move towards 2016.

The market for thermal coal does not show signs of improvement. Polish oversupply of thermal coal and a relatively warm first half of the year have combined to keep prices down. This trend is likely to continue as we move through the summer and into the autumn, nevertheless we expect to reach our sales targets as planned for this year.

During the first half of 2015 we decided to combine the management structures of NWR and its wholly owned Czech subsidiary OKD to provide greater alignment. This followed the decision by our CFO of eight years, Marek Jelínek, to move on to new challenges. Marek leaves on 1 September and will be succeeded by Boudewijn Wentink, in the new post of Finance and Legal Director. And from 1 January 2016 Dale Ekmark will become the Group's Chief Executive Officer while retaining his position as Managing Director of OKD. I will continue as Chairman of NWR.

These changes to the structure of our management are a natural follow-on to the successful balance sheet and capital restructuring that we undertook in 2014. This leaner executive team will deliver greater efficiency and synergies across the Group as we continue to manage the business through severe market conditions.

Mr. Colin Keogh, an Independent Non-Executive Director of NWR who was nominated by the pre-restructuring bondholders, has resigned from the Board with effect from 19 August 2015, due to the number of non-executive directorships that may be held by a director of some regulated entities. I have always appreciated Colin's professional input and thank him for his contribution to the Board since the restructuring.

The coal business continues to be difficult. But with the support we have from the shareholders, bondholders, Board and other stakeholders, and the dedication and hard work of everyone within the Company, we will weather the continued depressed coal market environment.

Gareth Penny

Executive ChairmanSelected financial and operational data [5]

H1 2015 earnings call and webcast:

NWR's management will host an analyst and investor conference call on 20 August 2015 at 10:00 BST (11:00 CEST). The presentation will be made available via a live audio webcast on www.newworldresources.eu and then archived on the Company's website.

For those who would like to join the live call, dial in details are as follows:

UK: +44(0)20 3427 1904

Europe: +31(0)20 716 8295

US: +1212 444 0896

Confirmation Code: 2923129

Investor and Media Contact:

Radek Nemecek

Tel: +420 727 982 885

[email protected]

Website: www.newworldresources.eu

About NWR:

New World Resources Plc is a Central European hard coal producer. NWR produces quality coking and thermal coal for the steel and energy sectors in Central Europe through its subsidiary OKD, the largest hard coal mining company in the Czech Republic.

Appendix

As announced in June, Mr. Boudewijn Wentink joined the Board of Directors of NWR (the 'Board') as an Executive Director on 19 August 2015. The Nomination Committee of the Board has agreed that Mr. Wentink has the necessary qualification and has recommended his appointment. He will serve until the next Annual General Meeting when he will be eligible for election by shareholders.

Mr. Wentink joined NWR in March 2013 as the Chief Legal Officer and has since been instrumental in maintaining the financial stability and good stakeholder relationships of the Company. On 2nd July 2015 he was appointed as executive director of New World Resources N.V. Before he joined NWR, he worked as Chief Compliance Officer at TNT Express N.V. in Amsterdam where he also served as Chairman of the Ethics and Compliance Committee. In that role, Mr. Wentink modernised compliance programme in all 200 countries in which TNT operated and was also involved in material legal matters. Mr. Wentink was a key member of the team executing the split of TNT N.V. (later renamed to PostNL) and TNT Express N.V. in 2010 and arranging their listings on the Amsterdam Stock Exchange. From 2000 until 2005, he was Managing Partner and a member of the Executive Board at Bosselaar & Strengers in Utrecht, a well-established top 50 commercial law firm in the Netherlands, where he started his career in 1995. He also co-headed the corporate and finance department advising on mergers and acquisitions, banking, securities and insolvency. Mr. Wentink graduated from Erasmus University in Rotterdam in 1994 with a degree in private law and from the Henley Management College in Henley-on-Thames in 2008.

Work Experience:

2013-2011 TNT Express N.V. (Chief Compliance Officer)

2011-2006 TNT N.V. (Group Legal Director)

2005-1995 Bosselaar & Strengers law firm (Managing Partner)

1994-1995 Erasmus University (Lecturer)

NWR further announces that Mr. Colin Keogh has resigned from the Board with effect from 19 August 2015. He was an Independent Non-Executive Director of NWR nominated by the pre-restructuring bondholders and appointed by shareholders on 3 November 2014. He has decided to stand down due to the requirements of Capital Requirements Directive IV, which restricts the number of non-executive directorships that may be held by a director of some regulated entities.

Operating and financial review and

New World Resources Plc

Consolidated statement of comprehensive income

All activities were with respect to continuing operations.

1Includes gain on revaluation of Convertible Notes for the six months ended 30 June 2015 of EUR 49,218 thousand (2014: nil) and for the three months ended 30 June 2015 a loss of EUR 95 thousand (2014: nil).

The notes on pages 12 to 22 are an integral part of these condensed consolidated interim financial statements.

New World Resources Plc

Consolidated statement of financial position

The notes on pages 12 to 22 are an integral part of these condensed consolidated interim financial statements.

New World Resources Plc

Consolidated statement of cash flows

The notes on pages 12 to 22 are an integral part of these condensed consolidated interim financial statements.

New World Resources Plc

Consolidated statement of changes in equity

The notes on pages 12 to 22 are an integral part of these condensed consolidated interim financial statements.

1. Corporate Information

New World Resources Plc ('NWR' or the 'Company') is a public limited liability company with its registered office at One Silk Street, London EC2Y 8HQ, United Kingdom.

These condensed consolidated interim financial statements comprise the Company and its subsidiaries (together the 'Group'). The Group is primarily involved in coal mining. The objective of the Company is to act as a holding company and to provide management services for the Group. 

2. Financial Results Overview

Revenues. The Group's revenues decreased by 17% from EUR 346 million in the 6M 2014 to EUR 286 million in the 6M 2015. This is mainly attributable to lower sales volumes of both coking coal and thermal coal, due to lower production.

Cost of sales. Cost of sales decreased from EUR 299 million to EUR 253 million or by 15% in the 6M 2015 compared to the 6M 2014. This is mainly attributable to:

§ lower depreciation following the impairment charge recognised in 2014;

§ lower production and lower input costs per equipped coal panel resulting in lower consumption of mining material and spare parts;

§ lower maintenance works undertaken in 2015; and

§ decrease in headcount, resulting in lower personnel expenses.

Selling expenses. Selling expenses decreased from EUR 34 million to EUR 22 million or by 34% in the 6M 2015, attributable to lower sales volumes and lower transport prices.

Administrative expenses. Administrative expenses of EUR 30 million decreased from EUR 37 million or by 18%, attributable to a decrease in administrative headcount, resulting in lower personnel expenses and to lower donations paid compared to 6M 2014.

EBITDA. The 6M 2015 saw a positive EBITDA of EUR 3 million, representing a decrease of EUR 16 million compared to EBITDA of EUR 19 million recorded in the 6M 2014, attributable mainly to the decrease in revenues, partially offset by the decrease in operating expenses.

Finance income. Increase in finance income of EUR 53 million is principally attributable to the EUR 49 million decrease in the fair value of the Convertible Notes (financial instrument recognised at fair value through profit or loss) between 31 December 2014 and 30 June 2015.

Profit for the period and underlying loss. The reported profit for the period was EUR 13 million, compared to the loss of EUR 57 million in 6M 2014. Excluding the impact of the movement in the fair value of the Convertible Notes, the Group would have recorded a loss of EUR 36 million in the 6M 2015.

Senior Secured Notes PIK Interest. On 1 May 2015 the Group exercised its option to pay PIK interest on the Senior Secured Notes. The result was the issue of a further EUR 16.5 million Senior Secured Notes at a fair value of EUR 10.7 million and with the same terms and conditions of the original Senior Secured Notes. This resulted in a gain of EUR 1.3 million being recorded in the three months ended 30 June 2015. Please refer to note 13 Contingencies and Other Commitments for further information.

3. Basis of Presentation

The condensed consolidated interim financial statements (the 'financial statements') presented in this document are prepared:

§ for the six-month period ended 30 June 2015, with the six-month period ended 30 June 2014 as the comparative period;

§ based on the recognition and measurement criteria of International Financial Reporting Standards as adopted by European Union ('adopted IFRS') and on the going concern basis (see further on next page); and

§ in accordance with IAS 34 Interim Financial Reporting.

The financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements as at and for the year ended 31 December 2014, which are contained within the 2014 Annual Report and Accounts of the Company, available on the Company's website at www.newworldresources.eu.

Going concern basis of accounting

The Group manages its liquidity through cash (EUR 89 million (31 December 2014: EUR 128 million)) and receivable financing. The new Senior Secured Notes and the new Convertible Notes have features which would result in interest being able to be paid in kind rather than in cash in certain circumstances.  

At the present market prices for coal, the Group is currently cash flow negative and the current low coal price environment has placed significant pressure on the Group's liquidity position and also on its solvency resulting in the Group having net liabilities of EUR 147 million at 30 June 2015.

Based on the current projections, the Directors consider that the Group has sufficient cash available to meet its funding requirements for at least the next 12 months following the date of this report.

However, there is a risk that the cash available to the Group is not sufficient for funding requirements over this period. In particular, in the event of unexpected production or other operating issues, or further deterioration in coal prices (although coal prices are fixed for most of the Group's anticipated 2015 sales, the Group is exposed to prices on approximately 25% of its coking coal sales in 2015 and to all sales in 2016), the Group could fall below its required minimum cash balance or even run out of cash in Q2/Q3 2016. The EUR 35 million Super Senior Credit Facility, which is fully drawn, requires the Group to maintain a minimum cash balance of EUR 40 million and this is first tested as at 31 October 2015 and thereafter quarterly on a calendar-year basis. Although the Group's projections indicate that it would have more than this minimum cash balance, the excess over this amount is limited and the Group would have very little flexibility to manage the position. If this were to occur, the ECA Facility would also be capable of acceleration and, should that acceleration be reasonably probable, all of the remaining debt of the Group could become immediately repayable. In those circumstances, if it were able to, the Group would most likely repay any amount outstanding under the Super Senior Credit Facility prior to 31 July 2016 which would result in a minimal amount of cash being available.

In the event that it becomes likely that there will be a shortfall in available cash, the Group proposes to seek alternative sources of liquidity, which could include the sale of certain of the assets of OKD and NWR Karbonia, or raising additional debt (to the extent permitted by the New Senior Notes Indenture, the Super Senior Credit Facility and the ECA Facility) or equity or, if no viable alternative solutions are then available, attempting to sell the businesses of OKD and NWR Karbonia thus effectively liquidating the Group's assets.

The Directors recognise that these circumstances represent a material uncertainty that may cast significant doubt as to the Group's ability to continue as a going concern and that it may be unable to realise all of its assets and discharge all of its liabilities in the normal course of business. Nevertheless, the Directors expect that the risks associated with a deterioration in coal prices and/or other operating issues have been appropriately taken into consideration and accordingly the financial statements have been prepared on a going concern basis and do not include the adjustments that would result if the Group were unable to continue as a going concern.

4. Significant Accounting Policies

The financial statements have been prepared under the historical cost convention, except for certain financial instruments, which are stated at fair value.

The financial statements have been prepared on the basis of accounting policies and methods of compilation consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2014, with the exception described below.

New standards and interpretations

The Group adopted the following new interpretation, which are effective for its accounting period starting 1 January 2015:

§ IFRIC 21 Levies (effective 17 June 2014)

The adoption of the new interpretation has no impact on the recognised assets, liabilities and comprehensive income of the Group.

Estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these financial statements, the significant judgements made by the management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements of the Company as at 31 December 2014 and for the year then ended. 

5. Non-IFRS Measures

The Company defines:

§ EBITDA as net profit/loss before income tax, net finance costs, depreciation and amortisation, impairment of property, plant and equipment ('PPE') and gains/losses from the sale of PPE;

§ Underlying profit/loss as profit/loss before material one-off impacts;

§ Net debt as total debt (carrying amounts of all its issued bonds and long-term interest-bearing borrowings) less cash and cash equivalents.

While the amounts included in EBITDA are derived from the Group's financial statements, it is not a financial measure determined in accordance with adopted IFRS and should not be considered as an alternative to net income or operating income as a sole indication of the Group's performance or as an alternative to cash flows as a measure of the Group's liquidity. The Company currently uses EBITDA in its business operations to, among others, evaluate the performance of its operations, develop budgets and measure its performance against those budgets.

6. Exchange Rates

Throughout this document, financial results and performance in both the current and comparative periods are expressed in Euros. Financial results and performance could differ considerably if presented in CZK. The Company may where deemed relevant, present variances using constant foreign exchange rates (constant currency basis), marked 'ex-FX', excluding the estimated effect of currency translation differences. These are non-IFRS financial measures.

7. Financial Performance

Revenues

The Group's largest source of revenue is the sale of coking coal, which accounted for 67% of total revenues in the 6M 2015, whilst the sale of thermal coal accounts for 23% of total revenues in this period.

*For the purpose of this analysis, where the Group sells products on an EXW or similar basis, the notional transport element is shown separately in order to separate the impact of changing transport revenues from changes in the underlying achieved price for the products sold.

Total revenues decreased by 17% mainly as a result of lower sales volumes of both coking coal and thermal coal, due to lower production. Lower sales volumes and lower transport charges also resulted in a decrease of transport revenues, with a similar decrease in transport costs, for no material impact on profitability.

The majority of both coking coal and thermal coal sales are priced on a calendar year basis in 2015, while in 2014 the Group's coking coal sales were priced on quarterly basis.

Total production of coal in 6M 2015 decreased by 20% compared to 6M 2014, while sales volumes decreased by 17%.

Coal inventories increased by 270kt in 6M 2015, compared to an increase by 478kt in 6M 2014.

* Inventory consists of coal available for immediate sale and coal that has to be converted from raw coal. Opening and closing inventory balances do not always reconcile due to various factors such as production losses.

Cost of Sales

Excluding the EUR 5 million year on year impact in change in inventories driven by the lower build-up of stock, cost of sales decreased by EUR 50 million, as a result of:

§ lower depreciation following the impairment charge recognised in 2014;

§ lower production and lower input costs per equipped coal panel resulting in lower consumption of mining material and spare parts;

§ lower maintenance works undertaken in the 6M 2015; and

§ a 6% decrease in the number of employees, resulting in lower personnel expenses.

Selling Expenses

Lower sales volumes combined with lower transport charges resulted in a reduction in transport costs by 44%, with a similar decrease in transport revenues, resulting in no material impact on profitability.

Administrative Expenses

The decrease in administrative expenses is attributable to a decrease in administrative headcount, resulting in lower personnel expenses, lower donations paid and saving in advisory services.

Total Personnel Expenses and Headcount

Total personnel expenses decreased through lower headcount (see below) and partially offset by the costs associated with reducing this headcount.

EBITDA

The Group's EBITDA decreased by EUR 16 million compared to the 6M 2014 mainly as a result of the decrease in revenues, partially offset by the decrease in operating expenses.

As EBITDA is a non-IFRS measure, the following table provides a reconciliation of EBITDA from the net profit/loss after tax.

Finance Income and Expense

The main impact on finance income is through the Convertible Notes, which are designated at fair value through profit or loss ('FVTPL') and the EUR 49 million impact represents the decrease in their fair value between 31 December 2014 and 30 June 2015.

The decrease in interest expenses reflects the exchange of existing notes (nominal EUR 775 million) for new notes (nominal EUR 317 million as at 30 June 2015) as part of the Capital Restructuring completed in October 2014. For more information about the terms and conditions of this indebtedness please refer to note 13 Contingencies and Other Commitments.

Profit / Loss before Tax

The profit before tax in the 6M 2015 was EUR 12 million, an increase of EUR 78 million compared to a loss of EUR 66 million in the 6M 2014.

Income Tax

The Group recorded a net income tax benefit of EUR 1 million in the 6M 2015, compared to a net income tax benefit of EUR 9 million in the 6M 2014.

The Group has accumulated tax losses for which no deferred tax asset is recognised as it is not probable that these losses will be recoverable within the timeframe for utilising these losses.

Profit / Loss for the period

The Group recognised a profit of EUR 13 million in the 6M 2015, which represents an increase of EUR 70 million, compared to the loss of EUR 57 million in the 6M 2014.

8. Earnings / Loss per Share

The calculation of earnings/loss per share is based on profit/loss attributable to the shareholders of the Company and a weighted average number of shares outstanding during the respective periods:

*On 7 October 2014, the Company completed a EUR 150 million capital increase via a 1:19 fully underwritten rights issue and a placing. The number of ordinary A shares issued under the Rights Issue was 5,030,100,717. The prior period basic and diluted earnings per share have been adjusted by the bonus element associated with the Rights Issue.

9. Cash Flow

Cash Flow from Operating Activities

Cash outflows arising from operating activities, after working capital changes and before interest and tax in the 6M 2015 were EUR 14 million, EUR 6 million higher compared to cash outflows of EUR 8 million in the 6M 2014, following lower EBITDA partially offset by higher level of receivable factoring (when compared to both 31 December 2014 and 31 March 2015).

Cash Flow from Investing Activities

Capital expenditures amounted to EUR 22 million in the 6M 2015, a decrease of EUR 3 million when compared to the 6M 2014. Cash flow from investing activities in the 6M 2014 was positively influenced by a release of EUR 7 million from an escrow account related to the sale of the coke subsidiary in 2013.

Cash Flow from Financing Activities

Cash flow from financing activities reflects the transaction costs in relation to the Capital Restructuring.

10. Borrowings, Liquidity and Capital Resources

The principal uses of cash are anticipated to fund planned operating expenditures, working capital requirements, capital expenditures, scheduled debt service requirements, and other distributions.

Indebtedness and liquidity

As at 30 June 2015, the Group held cash and cash equivalents of EUR 89 million and had indebtedness of EUR 374 million (carrying value), of which EUR 3 million is contractually repayable in the next 12 months. This results in a net debt position for the Group of EUR 286 million, 2% higher when compared to EUR 281 million as at 31 December 2014.

For more information about the liquidity and going concern basis of accounting please refer to note 3 Basis of Presentation. For more information about the terms and conditions of this indebtedness please refer to note 13 Contingencies and Other Commitments.

11. Financial Instruments

Financial assets and liabilities by category

The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value where the carrying amount is a reasonable approximation of fair value (for example accounts receivable or accounts payable).

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

In order to determine the fair value of the financial instruments, the Company implements valuation techniques used by banks or uses third party professional valuers, in which all significant inputs were based on observable market data.

12. Segments and Divisions

The Group is organised into two divisions: the Mining Division ('MD') and the Real Estate Division ('RED'). The Company had A Shares and B Shares outstanding for the presented periods. The A Shares and B Shares are tracking stocks, which are designed to reflect the financial performance and economic value of the MD and RED, respectively. Due to the public listing of the Company's A shares, the Group provides divisional reporting showing separately the performance of the MD and RED. The main rights, obligations and relations between the RED and MD are described in the Divisional Policy Statement, available at the Company's website www.newworldresources.eu. The divisional reporting, as such, is essential for the evaluation of the equity attributable for the listed part of the Group. The Group is primarily involved in coal mining and as such presents only one segment. The whole Mining Division represents the Coal segment.