2006 preliminary results · harworth estates : key financials 2006 2005 revaluation gains £68.6m...
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2006 PRELIMINARY RESULTS1 March, 2007
David JonesCh iChairman
A year of substantial progress
• Much improved operating and financial performance
• Strengthened balance sheet
• Clear strategic framework
• Mining to access reserves only where clear prospect of creating value
• Considerable store of value confirmed in property business
• Property strategy well received
• Strong platform for further value creation
Si ifi t h h ld l t d i 2006• Significant shareholder value generated in 2006
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Gerry SpindlerG CEOGroup CEO
Headlines
20062005
restated£m £m
Operating Profit (pre-Exceptionals) up £40m 47.8 7.4Including property fair value uplift of 68 6 40 7Including property fair value uplift of 68.6 40.7Exceptional Items (20.1) (31.4)
Operating Profit/(Loss) up £52m 27.7 (24.0)
Including exceptional mine closure costs of (25.4) (26.3)Profit for the year up £50m 17.5 (32.9)y p ( )Net Assets up £94m (63%) 244 150Net Assets per Share up 54% 1.56 1.01
Gearing reduced: Net debt to equity ratio 21% 29%2006 Net Debt (net of ring-fenced deposits) 51.8 43.3
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Clear strategy going forward for mining and property
Jon LloydCEO H th E t t Th UK COAL P t CCEO Harworth Estates - The UK COAL Property Company
Harworth Estates : Key financials
2006 2005Revaluation gains £68.6m £40.7mNet rental income £ 3.3m £ 2.3mProfit on disposals £ 1.4m £ 2.7mProfit before interest & taxation £73.3m £45.7m
• Pre-disposals like for like valuation increase of 33 8%• Pre-disposals like for like valuation increase of 33.8%
Like for LikeDec-06 Dec-05 Dec-05 to Dec-06£000
Business Parks 48,300 36,960 29.7%Commercial with planning 23,200 30,060 17.4%Other commercial & residential 157,312 116,164 34.8%Agricultural 115 110 90 985 31 4%Agricultural 115,110 90,985 31.4%
Total 343,922 274,169 33.8%
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Harworth Estates : Progress towards £800 million
Strategy presentation November
Operating Board established
• CEO. Development Director. Estates Director. Finance Director
Business Park occupancy levels remain near 100%
• Further expansion / build out opportunities during 2007
A t di l £18 6 2005 £15 1Asset disposals £18.6m - 2005: £15.1m
• Disposal assets have no development value or have maximised value
Joint venture development agreementsJoint venture development agreements
• Gazeley. Prologis. Miller Developments. Others in negotiation
Moving to half-yearly revaluations and estimates of worthg y y
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Harworth Estates : Key sites
Waverley Orgreave, J33 M1 Sheffield Parkway • 650,000 sq ft mixed use Business Park approved December 2006
• New sustainable community of up to 4,000 homes plus associated employment development community uses etc. progressing through local plan process
• Land estimate of worth 2012 c£200m
Prince of Wales – The Gateway to Pontefract, J32 M62 / A1M Junction• First phase Planning Application over 900 homes and 250,000 sq ft office / light industrial
• Submitted December 2006. Post submission negotiations continue. Anticipated consent mid 2007
• Anticipated start of infrastructure works late 2007
• Exemplar regeneration project. Strong support from local authority and other key stakeholders
• Land estimate of worth 2010 c£60m
Cutacre, J4 M61 Bolton• 1,000 acres adjoining Greater Manchester motorway network and rail connected1,000 acres adjoining Greater Manchester motorway network and rail connected
• Master Planning and stakeholder consultation underway
• Aim to create 250 acre premium mixed use Business Park for consent 2009/2010
• Land estimate of worth 2010 c£50m
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Land estimate of worth 2010 c£50m
Harworth Estates : Key sites
Lounge, A42 Ashby de la Zouch• 100 acre distribution site. Joint Venture with Gazeley. Planning Application within 3 months. • Land estimate of worth c2010 £25m
Chatterley Valley, A500 Stoke on Trent• 25 acre employment site. JV with Prologis and adjoining owner over larger development area• Outline planning consent for employment development received. Detailed Planning Application to follow, increasing
site density• Land estimate of worth 2008 in excess of £6m• Land estimate of worth 2008 in excess of £6m
Ellistown, South Leicestershire• Distribution Park and industrial development. Initially 28 acres
First phase 250 000 sq ft eco designed distribution warehouse facility JV with Legal & General and Graftongate• First phase 250,000 sq ft eco-designed distribution warehouse facility. JV with Legal & General and Graftongate Developments
• Phase II potential further development or Joint Venture of smaller industrial units• Land estimate of worth 2008 c£10m
Rossington Regeneration, J3 M18 Doncaster• Subject to new road extension between motorway and Robin Hood Airport. • Opportunity for 120 acre distribution park, potential 1.2m / 1.3m sq ft of employment development Further
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pp y p p q p y popportunity for mixed used regenerative development to Rossington village. Negotiations commenced with Local Authority
• Land estimate of worth 2010 c£25m
COAL MARKET OVERVIEWG S i dlGerry Spindler
Current market position : Power generation
2006 UK coal burn remains high
• High coal stock levels and mild winter has reduced short term prices slightly
• Burn for 2006 is still expected to be in excess of 50mt
• UK coal fired stations continue to run at consistently high load factors in spite of lower gas prices
Imports at record levels at around 44mt for 2006 – 2005 37mt
• Imports will remain high. Demand est. to stay at 50mt for next 3 years
Current prices $68per tonne and expected to rise
Government Energy Review in progress
Creation of the Coal Forum to assist economic indigenous coal production
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NW Europe spot steam coal price(Delivered into deep water ports)
80
70Actual
50
60
nne
40
50
$/to
n
Forward
30Jan07
2091 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09
Source: McCloskey Group / TFS Brokers Current 2008 Forward price some 5p/GJ less than November 2006 -
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Basis: <1%S, CIF NW Europe, 6000 Kcal / Kg NAR (25.122 GJ/Tonne)p p
weaker coal price (2p/GJ) and FX effect (3p/GJ)
UK COAL : Market positioning
• Well placed to benefit
• Physical limitations of supply in the UK
• UK COAL seek to increase prices against this background
• UK COAL will position itself as supplier of the last tonne
• Future sales mix will be a blend of
• The residue of long-term contracts
• Market priced spot deals - currently @ c£1.68/GJ for new businessp p y @
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Contracted ESI sales from January 2007
C rrent Contracts 2007 2008 2009 2010 TotalCurrent ContractsIn 2007 money
2007 2008 2009 2010 Total
Customer 1 2,638 2,300 2,300 2,139 9,377£1.48/GJ
Customer 2£1 38 1 54/GJ
2,444 750 500 3,694£1.38 – 1.54/GJ
Customer 3£1.36 – 1.45/GJ
2,338 550 550 550 3,988
Customer 4£1.45 – 1.60/GJ
375 495 870
Total£1.43 – 1.49/GJ
7,795 4,095 3,350 2,689 17,929
To achieve cap in all contracts at an exchange of 1 90$/£ API would need to be $ 71 36/t at £1 90$/£ or $68/t at an
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To achieve cap in all contracts at an exchange of 1.90$/£, API would need to be $ 71.36/t at £1.90$/£ or $68/t at an exchange rate of 1.81 $/£
Deep mines
2006 2005L b f ti l it £29 0 £46 4Loss before exceptional items £29.0m £46.4mCost per GJ before exceptional items £1.54 £1.59
Tonnes 000’s 2006 2005
Daw Mill 2,725 2,000
Kellingley 2,105 2,000
Thoresby 1,450 1,400
W lb k 1 187 1 000Welbeck 1,187 1,000
Total Ongoing Mines 7,467 6,400
Maltby 744 1 100Maltby 744 1,100
Closed Mines 700 1,500
Total 8,911 9,000
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Cost per GJ by quarter
All Mines: Q1 Q2 Q3 Q4 TotalAll Mines: Q1 Q2 Q3 Q4 TotalTonnes 2006 (million) 2.9 2.4 1.5 2.1 8.9
Op. Costs per GJ 2006 (£) £1.40 £1.40 £2.47 £1.26 £1.54C h C t GJ 2006 (£) £1 19 £1 21 £1 92 £1 14 £1 31Cash Costs per GJ 2006 (£) £1.19 £1.21 £1.92 £1.14 £1.31Cash Costs are pre exceptional and exclude central costs of £10 million
• Costs lower than 2005 in all areas excluding impact of Q3
• Lower output drove unit costs higher in Q3
• Actions in place to reduce future impact frequency and severity of similar events
• Total face gaps in 2006 of 26 weeks will be reduced by 50% in 2007
• all face gaps in 2007 are scheduled in the first half year
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Moving forward : How the deep mines are improving
• Projects to improve performance by
• Quicker more consistent cycle times
• Quicker start up at the beginning of shifts
• Detailed delay analysis
• Continued focused on key accountabilities
• Production disciplines extended to
• Development teamsp
• Engineering teams
• Face move teams
• Projects to Spread Best Practice
• Formation of multi disciplined teams
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p
Face production : Some areas of improvement
Improving Cycle Time at Kellingley
52 • Use of Cowls and upgraded rams
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50upgraded rams
• Improved tail gate support systems
46
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Cycle Time
42
44 (minutes)
38
40
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38307 408 404
Face moves : Some areas of improvement
Improvement in Welbeck face moves
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8
10
12
• Detailed planning of resource
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6 Face Moves(weeks)
• Greater availability of vehicles
• Availability of multiple working points
0
2
DS219 DS244 DS209
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Development : Some areas of improvement
• ABM standard operating procedures for 45 LG, 55LG and SG, giving consistent rates in g g gexcess of 120 metres per week.
• Improved material transport systems
P i i f ffi i t idi f iliti• Provision of more efficient man riding facilities
• Extended cut per cycle
Thoresby improving development rates
100
120
Thoresby improving development rates
60
80
100
AverageM t / k
20
40Metres/week
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045SG 55SG 55LG
Deep mines : Maltby disposal
• Sold February 2007 for £21.5m to Hargreaves. Cash consideration
• Mine produced 0.75mt in 2006, generating a loss of £18.2m on a turnover of £32.7m
• Net assets disposed of £6.2m
• Profit on disposal £13m
• Maltby produces a coking coal used by Hargreaves coking facility at Monckton. The purchase helps secure Hargreaves supply chain
• Hargreaves assume all liabilities in relation to the mine• Hargreaves assume all liabilities in relation to the mine
• UK COAL will continue to provide some technical support
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Deep mines : Daw Mill
• Production halted following fall of ground
• Lost output amounting to 280kt
• Mine now producing and ramping production back upp g p g p p
• Ongoing potential of mine not reduced
• Remedial work on current face may marginally limit production up to y g y p pAugust 2007
• New labour agreement in place with supervisors
• Significant management focus on all operational areas of mine to realise full future potential
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Deep mines : Reserve assessment - m tonnes Jan 1, 2007
Operating Mines Reserves Resource Mineral
Potential TotalMines Potential
Daw Mill 21 3 40 64
Kellingley 12 44 5 61
Thoresby 3 20 2 25
Welbeck 4 3 16 23
Total 40 70 63 173Total 40 70 63 173
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Surface mining : Headlines
2006 2005Output tonnes 0.6mt 1.0mtProfit before interest & tax £ 4.6m £ 0.8m
With Planning Awaiting Consent To be submitted in 2007
Reserves (mt) 4.1 5.4 4.6
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Surface mining : Operational review
Increase in activity during 2006
• Two sites commenced operations in H2
— North Stobswood (Northumberland) – mineable reserves of 970kt
— Stony Heap (Durham) – mineable reserves of 257kt
• Cutacre (Lancashire) commenced infrastructure works
— Production will start Q1 – mineable reserves of 1.5mt
• Planning consent to start mining at Steadsburn (Northumberland)
— Production will commence Q4 – mineable reserves 1.08mt
• Restoration works continue on mined areas to allow development of site or return to previous use
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Surface mining : Outlook
• Total surface mine reserves 97mt
• Planning environment remains challenging but 100% success in 2006 with 2 new planning consents and 1 further site consented but subject to a High Court challengeCourt challenge
• Additional planning consents expected in 2007 to secure production volumes going forward g g
• Fully engaged with Local Authorities on forward programme
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Harworth Power : Operational review
• Operating profit £3.2 million (2005: £3.4 million)
• Installed capacity 32MW
• 15% increase electricity generation 119,717 Mwh - 2005:104,526 Mwh
mainly from operating mine sites
• Purchase of Stillingfleet PEDL in order to site 12Mw of new generation
capacity
• Two windfarm planning applications submitted. Three further schemes in g
pre-submission consultation
— Royal Oak final planning awaiting MODy p g g
— Stonish Hill turned down – subject to appeal
— Lynemouth still under consideration
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y
• Management team strengthened to increase renewable expertise
Chris MaweGroup Finance Director
Financial Review
Group Income Statement
2006 2005£000 £000
C ti i tiContinuing operationsRevenue 339,713 341,214 Cost of Sales (381,021) (417,136)Gross Loss (41,308) (75,922)Coal Investment Aid 7,892 14,641 Investment Property Uplift 68,622 40,668 Other Items (7,561) (3,447)Operating Profit/ (Loss) 27,645 (24,060)Operating Profit/ (Loss) 27,645 (24,060)Net finance costs (10,115) (8,761)JV Income 105 Profit/ (loss) before tax 17,635 (32,821)
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Segmental Operating Profit
2006 2005£000 £000
Ongoing Deep Mines (29 2) (27 1)Ongoing Deep Mines (29.2) (27.1) Closed Deep Mines 0.2 (19.3) Surface Mining 0.5 3.3 Property 73.3 45.7 p yPower 3.2 3.4 Other (0.2) 1.4
47.8 7.4 E ti l It (20 1) (31 4)Exceptional Items (20.1) (31.4)
Operating Profit 27.7 (24.0)
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Segmental operating profit 2006 v 2005 Ongoing deep mines (including Maltby)
2006Ongoing • Unit costs reduced on all measuresOngoingDeep mines
Profit/(loss) pre-exceptionals (29.2) Exceptional Items 1.2
• Unit costs reduced on all measures• Improvement held back by Q3• Sales price up 4% to £1.41/GJ• Cash costs at £284 million impacted by powerOperating Profit/(Loss) (28.0)
Sales Price per GJ £1.41Operating Cost per GJ £1.55Cash Cost per GJ £1.31Cash Cost excluding Maltby £1 25
• Cash costs at £284 million impacted by power and steel (2005: £266 million)
• Maltby losses were £18 million in 2006• Exceptional items mainly relate to Maltby Q3Cash Cost excluding Maltby £1.25
2005Ongoing
• Exceptional items mainly relate to Maltby Q3 issues
• Remaining deep mines cash costs were £1.25/GJ
Deep minesProfit/(loss) pre-exceptionals (27.1) Exceptional Items (7.2) Operating Profit/(Loss) (34.3) Sales Price per GJ £1 35
• Depreciation and Amortisation £38.1 million (2005: £ 33.8 million)
Sales Price per GJ £1.35Operating Cost per GJ £1.54Cash Cost per GJ £1.39Cash Cost excluding Maltby £1.35
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Group Cash Flow
Total • Share placing in November realised £29ota
£ 000s
EBITDA and working capital 9,149
• Share placing in November realised £29 million
• Strengthened Balance Sheet
Co ered Q3 lossesg
Joint venture investment (205)Capital and development expenditure (36,550)Restoration and rehabilitation (18,108)
• Covered Q3 losses
• Allowed rationalisation of deep mines
• Gross Debt year-end £98m (2005: £97m)Additonal pension payments (6,393)Claims and other provisions (4,609)Proceeds of sale of assets 24,191 Redundancy (10,180)R i t f l/i d it 9 915
• Cash applied to:
• Rationalisation
I t tReceipts from coal/insurance deposits 9,915 Investment Aid received 11,114 Share Placement 29,067 Cash flow before interest 7,391
• Investment
• Debt & pension liability reduction
• Development & restoration spendNet interest (5,992)
Movement in Debt 1,399
• Investment Aid scheme ceased end 2006
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Group Balance Sheet
Segmental Balance D.Mining S.Mining Property Power Other TotalTotal
restatedSh t D 2006 £ 2006 2006 2006 C t l 2006 2005Sheet: Dec 2006 £m 2006 2006 2006 Central 2006 2005Fixed Assets 189.3 26.2 326.8 8.3 0.2 550.8 510.3Provisions (93.4) (53.4) (0.4) (147.2) (174.1)Pension scheme provisions (95.7) (95.7) (118.0)Concessionary Fuel provisions (24.7) (24.7) (24.3)Deferred Tax asset on retirement provisions 35.7 35.7 0.0Deferred Tax liability (1.2) (1.2) (1.0)Net Debt 31.1 (9.3) (62.3) (1.3) (10.2) (52.0) (43.3)Allocated net assets 42.3 (36.5) 263.3 7.0 (10.4) 265.7 149.6Net working capital 0.0 (3.9) (15.2) (3.9) 1.4 (21.6) 0.4Total Net Assets £m 42.3 (40.4) 248.1 3.1 (9.0) 244.1 150.0
• Balance sheet significantly strengthened• Property now on books at fair value, limited tax liability due to tax shelter which is recognisedp y y g• Full provision made for all current claw back liabilities incurred. Others will crystallise and will be provided as
material development commences• Potential further net tax benefits
Retirement benefits Deficit red ced b £22 3 million to £95 7 million
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• Retirement benefits: Deficit reduced by £22.3 million to £95.7 million• Investment performance. Additional contributions. Deferred tax asset of £35.7 million now recognised –
available to offset against future obligations
Thank you