Final Results
UK Coal PLC
04 March 2004
4 March 2004
UK COAL PLC
PRELIMINARY RESULTS FOR THE YEAR ENDED 31 DECEMBER 2003
UK COAL PLC, the coal mining and property group, today announces its preliminary
audited results for the year ended 31 December 2003.
• Loss before tax and operating exceptional items £7.6 million (2002:
profit £8.4 million) (Note a)
• Profit after tax £3.9 million (2002: loss £81.8 million) (Note a&b)
• Cash inflow before use of liquid resources, financing and dividends of
£39.1 million (2002: outflow £25.2 million)
• Final dividend maintained at 5 pence per share, giving total dividend
for the year of 10 pence per share
• UK sales volumes maintained at 18.9 million tonnes (2002: 18.9 million
tonnes)
• Unit costs in deep mines reduced despite continuing losses at the Selby
Complex
• Property sales increased, generating a profit of £5.8 million (2002:
£2.0 million)
• Investment aid accepted worth £35.4 million over the period 2003/05
Note a Includes net provision charge of £7.5 million (2002: Release £21.1 million)
Note b After crediting £4.4 million in respect of operating exceptional items (2002:
£88.4 million charge)
Commenting on the results, Gordon McPhie, Chief Executive of UK COAL, said:
'The sharp rise in world coal prices in September 2003, offset to some degree by
the reduced value of the US$, has been maintained. However, with forward
contracted sales of 90% of production in 2004 and 50% of planned output in 2005
there will be limited benefit from the current high international prices over
the next two years.
'Progress was made during the year in reducing unit operating costs, with costs
of circa £1.09 per gigajoule being achieved at the ongoing collieries in the
last quarter. Costs for 2004 will be affected by increases in line with
inflation and the effect of geological problems at Rossington and Welbeck,
resulting in revised mining plans which are expected to add around 3% to unit
costs.
'The Company continues to focus on its extensive property portfolio, with
proceeds from sales and rental income both showing increases.
'We have had a slow start to production in 2004, but expect to recover this
later in the year. The continued efforts to reduce unit costs with our Project
105 initiatives and the closure of the loss-making Selby complex of mines, augur
well for the future. In addition the year ahead should see further progress in
adding value to the Company's property assets'.
For further information, please contact:
UK COAL PLC Today: 020 7554 1400
Gordon McPhie, Thereafter 01302 751 751
Chief Executive
Financial
Gavin Anderson & Company
Liz Morley 020 7554 1400
Ken Cronin 020 7554 1400
Operational
Stuart Oliver 01525 381 759
PRELIMINARY RESULTS STATEMENT:
RESULTS
Turnover for the year was £563.9 million (2002: £596.6 million). The profit on
ordinary activities after tax was £3.9 million (2002: loss £81.8 million),
including a net operating exceptional gain of £4.4 million (2002: net
exceptional loss £88.4 million).
UK COAL carried out its annual review of cost provisions for shaft treatment,
the remediation of operational land, the restoration of spoil heaps and pumping.
The net value of provisions created and released, excluding exceptional
redundancy and concessionary fuel items, resulted in a net charge of £7.5
million, which has increased the cost of sales in the year (2002: net release of
£21.1 million, which reduced cost of sales).
Coal Investment Aid income of £3.5 million was recognised in the period (2002:
nil).
Net cash inflow from operating activities at £46.0 million (2002: £8.9 million)
benefited from a reduction in coal stocks equating to £19.3 million (2002: coal
stock increase £20.3 million). Cash flow has also benefited from the receipt of
£8.4 million in respect of the sale of UK COAL's claim against TXU in
Administration (see note 3f).
The cash inflow before use of liquid resources, financing and dividends of £39.1
million (2002: net outflow of £25.2 million) reflects proceeds from property
sales, which increased to £9.7 million (2002: £2.2 million), and reduced capital
expenditure of £19.1 million (2002: £40.5 million). Capital expenditure will
increase in 2004 to circa £50 million, which includes significant investment on
new face equipment at Daw Mill and Kellingley Collieries.
DIVIDEND
Taking into account the net cash inflow in the period, the improved performance
of Daw Mill Colliery and the future needs of the business during the Selby
closure, the Board has decided to recommend to shareholders maintenance of the
final dividend at 5.0 pence per share, bringing the total dividend for the year
to 10.0 pence per share (2002: 10.0 pence per share). Subject to approval at the
AGM on 27 April 2004, the dividend will be paid on 18 June 2004 to shareholders
on the register on 21 May 2004.
OPERATIONAL REVIEW
Sales
Coal sales volumes in the UK for the year at 18.9 million tonnes were at similar
levels to 2002 but average income of £1.12p per gigajoule was 7p per gigajoule
lower than in the previous year as a consequence of the low international prices
prevailing at the time of contract negotiations.
Coal burn for power generation yet again exceeded expectations, with 34% of the
UK's electricity being sourced from coal (2002: 32%). UK power stations consumed
some 53.2 million tonnes of coal during the year (2002: 47.7 million tonnes).
During the year, the price of internationally traded coal almost doubled in US$
terms, ending 2003 on a record high. However, with most of our sales tied to
contracts negotiated or agreed earlier, the Company was unable to capitalise on
the increase in international prices.
Mining
Coal production for the Group was 17.9 million tonnes (2002: 19.5 million
tonnes) in the UK and 1.7 million tonnes (2002: 2.4 million tonnes) in
Australia.
The reduction in deep mine production, down to 14.8 million tonnes (2002: 15.2
million tonnes) was largely due to the continuing poor performance of the Selby
Complex, where output of 3.6 million tonnes was a million tonnes less than the
previous year, reflecting ongoing geological and engineering difficulties. The
Selby mines will cease production by the summer of 2004. Daw Mill, however,
continued to make good progress producing 2.2 million tonnes.
Flexible working arrangements have been introduced at Maltby Colliery, where a
new British and European record for driving underground roadways was recently
established.
Surface mine production of 3.1 million tonnes (2002: 4.3 million tonnes)
reflected the completion of coaling at long-standing sites and the increasing
difficulty in securing new planning consents for replacement capacity.
Planning applications submitted in the year totalled 2.7 million tonnes, these
rest with the Mineral Planning Authority. Further schemes, which would access a
total of 3.5 million tonnes of reserves, have been identified for submission for
planning consent in 2004.
Geological problems at Ellington, Rossington and Welbeck, together with the poor
performance at Selby and increased surface mine costs, resulted in total
operating costs for all mining operations in 2003 of £1.16p per gigajoule (2002:
£1.18p per gigajoule). Operating costs of circa £1.09p per gigajoule were
achieved at the eight ongoing deep mines in the last quarter.
Coal Investment Aid
Applications for Coal Investment Aid relating to the accessing of coal reserves
at the eight ongoing deep mines within the Group were submitted to the
Department of Trade and Industry in line with the scheme outlined in the Energy
Review White Paper.
The Company was offered some £36.5 million in aid for schemes at all eight
ongoing collieries. The Company has now accepted offers of aid worth around
£35.4 million.
Production output
2003 2002
Deep Mines (mt) (mt)
Ongoing Mines
Daw Mill 2.2 0.8
Ellington 0.6 0.7
Harworth 1.2 1.2
Kellingley 1.6 1.6
Maltby 1.4 1.4
Rossington 0.9 0.7
Thoresby 1.5 1.5
Welbeck 1.6 1.7
------------------- --------------- -----------------
Sub Total 11.0 9.6
------------------- --------------- -----------------
Closed or Closing
Clipstone* 0.2 0.3
Prince of Wales** - 0.7
Riccall ++ 0.9 1.3
Stillingfleet ++ 1.6 1.9
Wistow + 1.1 1.4
------------------- --------------- -----------------
Sub Total 3.8 5.6
------------------- --------------- -----------------
Deep Mines Total: 14.8 15.2
------------------- --------------- -----------------
Surface Mines Total 3.1 4.3
------------------- --------------- -----------------
Total UK Production 17.9 19.5
------------------- --------------- -----------------
Gloucester Coal (Australia) 1.7 2.4
------------------- --------------- -----------------
Total Production 19.6 21.9
------------------- --------------- -----------------
* Ceased production April 2003
** Ceased production August 2002
+ Ceasing production March 2004 (Selby Complex)
++ Ceasing production July 2004 (Selby Complex)
Property
Proceeds from property sales were £9.7 million (2002: £2.2 million), generating
a profit of £5.8 million (2002: £2.0 million). The major area of activity has
been the Tetron Point development in South Derbyshire where, further sales are
anticipated.
Rental income from properties in the year was £3.8 million (2002: £3.4 million)
generating an operating profit of £1.1 million (2002: £0.9 million).
The Company has maintained its strategy of creating added value by seeking
planning permissions to develop former surface mines and collieries, converting
brownfield sites to clean compacted areas suitable for development and active
management of its property portfolio and agricultural holdings.
Australia
Gloucester Coal, the Group's mining activity in New South Wales, achieved sales
of 1.9 million tonnes in the year, compared with 2.4 million tonnes in 2002, as
coal extraction from the Stratford Mine has been completed.
Production began at the extension to the Bowens Road site and, in March 2003,
production also started at the new Duralie site which, together with Bowens
Road, will produce an annual combined tonnage of some 2.0 million tonnes of
coking and thermal coals.
The movement in the year of the A$/US$ exchange rate from 56 cents to the
current rate of 77 cents caused a significant shortfall in revenues on the
Japanese coking coal contracts which were agreed when the exchange rate was at a
lower level. These contracts will be renewed in April 2004 for 12 months and
agreements have been reached with significant price increases, and currency
rates have been fixed for circa 65% of the income. Gloucester Coal incurred a
loss in the year of £4.0 million (2002: loss £0.7 million). The increased
revenue from sales post April 2004 should ensure that the company returns to
profitability during the year.
Discussions are ongoing with parties who have expressed an interest in making an
offer for Gloucester Coal.
BALANCE SHEET
Capital employed in fixed assets (excluding surface mine development and
restoration costs) was reduced, with fixed asset additions of £23.0 million
(2002: £35.9 million) compared to a depreciation charge for the year of £52.6
million (2002: £59.3 million).
At the year-end hire purchase and finance lease liabilities were £23.9 million
(2002: £25.5 million) in respect of surface and underground equipment. Asset
financing has been secured for £27.5 million to acquire plant and equipment for
new coal faces at Daw Mill and Kellingley collieries.
Bank borrowings reduced by the year-end to £7.2 million (2002: £28.4 million)
PENSIONS
The net deficit under FRS 17 'Retirement Benefits' transitional arrangements is
£102.7 million (2002: £108.1 million). Whilst there has been an improvement in
equity markets during 2003, salary increases, particularly for the staff members
of the National Association of Colliery Overmen, Deputies and Shotfirers
(NACODS) and the British Association of Colliery Management (BACM) have
increased the liability, which has offset the gains in the equity markets. We
anticipate future salary increases will be more in line with inflation
increases.
The actuarial valuation at December 2003 for the two main pension schemes is
under way, but will not be completed until later this year. Any new funding
rates will come into effect in 2005.
ENVIRONMENTAL LEGISLATION
Two significant new pieces of environmental regulation affecting potential coal
use and consumption continue to be the subject of extensive discussion and
debate.
Government decisions are expected by May on which route is to be pursued to
implement the Large Combustion Plant Directive (LCPD) by 2008.
The Government is undertaking further analysis before deciding whether to opt
for a National Emission Reduction Plan (NERP), which we have warned will
substantially reduce the market available for the UK coal industry, or
prescribed Emission Limit Values (ELV) to reduce sulphur emissions. We, together
with other coal producers, have campaigned for the introduction of ELVs that
will encourage generators to equip their stations with flue-gas desulphurisation
plant, produce a better environmental outcome and preserve the potential market
for UK mined coal in power stations.
The Government has also issued the draft National Allocation Plan indicating how
they intend to implement the EU Emissions Trading Scheme from January 2005. This
scheme will involve the trading, across Europe, of CO2 emission allowances. The
draft allocation for coal burning power stations in the UK would allow average
annual consumptions of around 38 million tonnes of coal from 2005 to 2007,
before any trading of allowances is taken into account.
DIRECTORS
David Jones succeeded John Robinson as Chairman following the AGM in April 2003
and was joined on the Board by new Non-Executive Directors Peter Hazell and
James Murray on 22 September 2003, both having significant experience in the
property sector, and who will assist in further developing the Group property
strategy. Christopher Mawe joined the Company on 1 March 2004 as Finance
Director.
Brian Staples resigned as a non-Executive Director with effect from 31 December
2003, while Robert Shrager has informed the Board that he will not be seeking
re-election at the AGM having been a Non-Executive Director with the Company for
the past 10 years. Melvin Garness, Company Secretary and Commercial Director,
gave the Board notice in October 2003 of his intention to retire from the Board
in October 2004.
OUTLOOK
The sharp rise in world coal prices in September 2003, offset to some degree by
the reduced value of the US$, has been maintained. However, with forward
contracted sales of 90% of producion in 2004 and 50% of planned output in 2005
there will be limited benefit from the current high international prices over
the next two years.
Costs for 2004 will be affected by increases in line with inflation and the
effect of geological problems at Rossington and Welbeck, resulting in revised
mining plans which are expected to add around 3% to unit costs.
The Company continues to focus on its extensive property portfolio, with
proceeds from sales and rental income both showing increases.
We have had a slow start to production in 2004, but expect to recover this later
in the year. The continued efforts to reduce unit costs with our Project 105
initiatives and the closure of the loss-making Selby complex of mines, augur
well for the future. In addition the year ahead should see further progress in
adding value to the Company's property assets.
4 March 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 31 December 2003
Before Before
Operating Operating Operating Operating
Exceptional Exceptional Group Exceptional Exceptional Group
Items Items 2003 Items Items 2002
Notes £'000 £'000 £'000 £'000 £'000 £'000
------------------- ------ -------- -------- ------- -------- -------- -------
Turnover 2 563,854 - 563,854 596,602 - 596,602
------------------- ------ -------- -------- ------- -------- -------- -------
Cost of sales
before exceptional items (558,982) - (558,982) (570,887) - (570,887)
Exceptional cost of sales
Impairment in
value of
colliery
assets 3 - - - - (20,191) (20,191)
Net closure
and redundancy
costs 3 - (1,983) (1,983) - (55,643) (55,643)
Amount
recovered/(pro
vided) against
TXU 3 - 6,467 6,467 - (6,358) (6,358)
Provision against other
amounts receivable 3 - (1,681) (1,681) - (9,309) (9,309)
------------------- ------ -------- -------- ------- -------- -------- -------
Cost of Sales (558,982) 2,803 (556,179) (570,887) (91,501) (662,388)
------------------- ------ -------- -------- ------- -------- -------- -------
Gross profit /
(loss) 4,872 2,803 7,675 25,715 (91,501) (65,786)
------------------- ------ -------- -------- ------- -------- -------- -------
Coal
Investment Aid 3 - 3,522 3,522 - - -
Other
operating
income and
expenses 4 (11,359) - (11,359) (13,686) - (13,686)
------------------- ------ -------- -------- ------- -------- -------- -------
Total other
operating
income &
expenses (11,359) 3,522 (7,837) (13,686) - (13,686)
------------------- ------ -------- -------- ------- -------- -------- -------
Operating
(loss)/profit (6,487) 6,325 (162) 12,029 (91,501) (79,472)
Profit on sale
of land and
buildings 5,830 - 5,830 2,033 - 2,033
------------------- ------ -------- -------- ------- -------- -------- -------
(Loss)/profit
on ordinary
activities
before interest and
taxation (657) 6,325 5,668 14,062 (91,501) (77,439)
------------------- ------ -------- -------- ------- -------- -------- -------
Interest
receivable and
similar income 5 3,141 - 3,141 5,181 - 5,181
Interest
payable and
similar
charges 6 (3,486) - (3,486) (2,854) - (2,854)
Unwinding of
discount on
provisions 11 (6,570) - (6,570) (7,999) - (7,999)
------------------- ------ -------- -------- ------- -------- -------- -------
Net interest
payable and
similar
charges (6,915) - (6,915) (5,672) - (5,672)
------------------- ------ -------- -------- ------- -------- -------- -------
(Loss)/profit
on ordinary
activities (7,572) 6,325 (1,247) 8,390 (91,501) (83,111)
before taxation
Taxation 8 7,007 (1,898) 5,109 (1,791) 3,142 1,351
------------------- ------ -------- -------- ------- -------- -------- -------
(Loss)/profit
on ordinary
activities (565) 4,427 3,862 6,599 (88,359) (81,760)
after taxation
Equity minority interest 138 - 138 82 - 82
------------------- ------ -------- -------- ------- -------- -------- -------
(Loss)/profit
for the
financial year (427) 4,427 4,000 6,681 (88,359) (81,678)
Dividend 9 (14,591) - (14,591) (14,584) - (14,584)
------------------- ------ -------- -------- ------- -------- -------- -------
(Loss
sustained)/pro
fit for the
year (15,018) 4,427 (10,591) (7,903) (88,359) (96,262)
------------------- ------ -------- -------- ------- -------- -------- -------
(Loss)
/earnings per
ordinary share (0.3p) 3.0p 2.7p 4.6p (60.6p) (56.0p)
------------------- ------ -------- -------- ------- -------- -------- -------
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
for the year ended 31 December 2003
2003 2002
£'000 £'000
--------------------------------------------------------- --------- --------
Profit/(loss) for the financial year 4,000 (81,678)
--------------------------------------------------------- --------- --------
Exchange adjustments 4,721 (355)
Surplus arising on revaluation of investment properties 220 4,814
--------------------------------------------------------- --------- --------
Total recognised gains and losses for the financial year 8,941 (77,219)
--------------------------------------------------------- --------- --------
CONSOLIDATED BALANCE SHEET
for the year ended 31 December 2003
Group Group Company Company
2003 2002 2003 2002
Notes £'000 £'000 £'000 £'000
-------------------------- ------- --------- --------- -------- ---------
ASSETS
Fixed assets
Tangible fixed operating assets 393,148 427,211 - -
Investment properties 6,720 6,500 - -
Investments - in subsidiaries - - 491,213 491,213
- other 27 38 -
399,895 433,749 491,213 491,213
Current assets
Stocks 59,496 79,152 - -
Debtors: amounts falling due after
one year 637 8,873 20,154 20,154
Debtors: amounts falling due within
one year 81,772 73,143 173,218 199,264
Cash at bank and in hand 13 60,350 60,893 252 -
-------------------------- ------- --------- --------- -------- ---------
202,255 222,061 193,624 219,418
-------------------------- ------- --------- --------- -------- ---------
Total assets 602,150 655,810 684,837 710,631
-------------------------- ------- --------- --------- -------- ---------
LIABILITIES
Capital and reserves
Called up share capital 1,460 1,458 1,460 1,458
Share premium account 2 290,872 2 290,872
Revaluation reserve 5,034 4,814 - -
Capital redemption reserve 257 257 257 257
Profit and loss account 215,489 (69,638) 439,329 164,174
-------------------------- ------- --------- --------- -------- ---------
Shareholders' funds, attributable
to equity interests 222,242 227,763 441,048 456,761
Equity minority interest 262 331 - -
-------------------------- ------- --------- --------- -------- ---------
Capital employed 222,504 228,094 441,048 456,761
Provisions for liabilities and
charges 11 226,987 258,699 - -
Creditors: amounts falling due
after more than one year 12 15,302 22,790 - -
Creditors: amounts falling due
within one year 12 137,357 146,227 243,789 253,870
-------------------------- ------- --------- --------- -------- ---------
379,646 427,716 243,789 253,870
-------------------------- ------- --------- --------- -------- ---------
Total funds employed 602,150 655,810 684,837 710,631
-------------------------- ------- --------- --------- -------- ---------
CONSOLIDATED CASH FLOW STATEMENT
for the year ended 31 December 2003
2003 2002
£'000 £'000
----------------------------------------------------- --------- ---------
Operating activities
Net cash inflow from continuing operating activities 46,026 8,918
----------------------------------------------------- --------- ---------
Returns from investments and servicing of finance
Interest paid on bank borrowings (1,171) (401)
Interest paid on hire purchase and finance leases (1,933) (1,853)
Financing costs (203) (636)
Interest received 2,577 5,181
Inland Revenue interest received 564 -
----------------------------------------------------- --------- ---------
Net cash (outflow)/inflow from returns on investments
and servicing of finance (166) 2,291
Taxation 3,967 36
Capital expenditure and financial investment
Development expenditure (3,778) (35)
Purchase of fixed assets (15,300) (40,475)
Receipts from sale of fixed assets 10,410 4,082
----------------------------------------------------- --------- ---------
(8,668) (36,428)
Acquisitions and disposals
Purchase of trade and assets (2,076) -
----------------------------------------------------- --------- ---------
Cash inflow/(outflow) before use of liquid resources,
financing and dividends 39,083 (25,183)
Equity dividends paid (14,521) (14,529)
----------------------------------------------------- --------- ---------
Cash inflow/(outflow) before use of liquid resources
and financing 24,562 (39,712)
Management of liquid resources
Cash deposited in subsidence security fund (792) (2,664)
Cash expended/(deposited) to cover insurance 4,471 (2,075)
requirements
Other cash security deposits (2,053) -
----------------------------------------------------- --------- ---------
1,626 (4,739)
Net cash inflow/(outflow) before financing 26,188 (44,451)
Financing
Issue of ordinary share capital 128 -
(Repayment)/drawdown of bank borrowings (21,343) 27,994
Hire purchase and finance lease capital repaid (8,690) (12,975)
Increase in finance lease debt 4,737 8,414
---------------------------------------------------- --------- ---------
Net cash (outflow)/inflow from financing (25,168) 23,433
---------------------------------------------------- --------- ---------
Increase /(decrease) in cash 1,020 (21,018)
---------------------------------------------------- --------- ---------
NOTES TO THE FINANCIAL STATEMENTS
for the year ended 31 December 2003
Reconciliation of operating loss to net cash inflow from operating activities
2003 2002
£'000 £'000
Continuing activities
Operating loss (162) (79,472)
Depreciation on tangible fixed assets 52,616 59,299
Exceptional impairment - 20,191
Net charge for surface mine development and restoration
assets 7,045 11,413
Loss/(profit) on disposal of plant and machinery 138 (296)
Decrease/(increase) in stocks 19,711 (7,286)
(Increase )/decrease in debtors (2,851) 12,332
Decrease in creditors (35,271) (7,263)
DTI contribution to redundancy payments 4,800 -
------------------------------------- --------- --------
Net cash inflow from continuing operating activities 46,026 8,918
------------------------------------- --------- --------
Exceptional operating cash flows
Included within net cash inflow from continuing operating activities are amounts
of £11.9 million paid in respect of redundancy payments, £8.4 million received
in respect of the sale of UK Coal's claim against TXU (in administration) and
£0.6 million paid in settling long-term contracts.
Reconciliation of net cash flow to movement in net funds
At 1 January Cash flow Exchange Other non At 31
adjustment cash December
changes 2003
2003
£'000 £'000 £'000 £'000 £'000
-------------------- ------------ --------- --------- -------- --------
Net cash at
bank 301 1,020 63 - 1,384
Liquid
resources 60,592 (1,626) - - 58,966
Bank
borrowings (28,386) 21,343 - (181) (7,224)
Hire purchase
and finance
leases (25,473) 3,953 - (2,387) (23,907)
-------------------- ------------ --------- --------- -------- --------
7,034 24,690 63 (2,568) 29,219
-------------------- ------------ --------- --------- -------- --------
Major non cash transactions
During the year the Group entered into finance lease arrangements in respect of
assets with a total capital value at the inception of the leases of £2,387,000
(2002: £7,336,000).
1.Accounting policies
The financial statements are prepared in accordance with applicable accounting
standards in the United Kingdom.
2.Segmental and geographical analysis
--------------------------------------- --------- --------
2003 2002
£ '000 £ '000
--------------------------------------- --------- --------
Turnover
Continuing operations:
Coal sales - deep mines 447,351 445,087
Coal sales - surface mines 66,236 96,305
UK Mining 513,587 541,392
Manufactured fuel and combined heat and power 16,965 15,908
Other associated activities 3,856 4,724
Australia - coal sales 25,633 31,145
Property activities 3,813 3,433
--------------------------------------- --------- --------
563,854 596,602
--------------------------------------- --------- --------
Geographical Analysis
United Kingdom 530,287 557,874
Europe 9,525 7,583
Asia - Pacific 24,042 31,145
--------------------------------------- --------- --------
563,854 596,602
--------------------------------------- --------- --------
Loss before taxation
Coal sales - deep mines (Note a) (8,552) (5,904)
Coal sales - surface mines 668 16,461
Exceptional items (Note 3) 6,325 (91,501)
--------------------------------------- --------- --------
UK Mining (1,559) (80,944)
Manufactured fuel and combined heat and power 360 (635)
Emissions Trading 3,230 4,153
Other associated activities 738 (2,270)
Australia - coal sales (3,992) 1,834
- hedging losses - (2,517)
Property activities - rentals 1,061 907
- profit on sales 5,830 2,033
Net interest payable and similar charges (6,915) (5,672)
--------------------------------------- --------- --------
(Loss) before taxation (1,247) (83,111)
--------------------------------------- --------- --------
Net assets/(liabilities)
Deep Mines 128,946 149,298
Surface Mines (13,729) 12
UK Mining 115,217 149,310
Manufactured fuel and combined heat and power (1,664) (1,107)
Other associated activities (10,553) (15,049)
Australia 10,312 11,916
Property activities 88,023 83,256
--------------------------------------- --------- --------
201,335 228,326
--------------------------------------- --------- --------
Unallocated net assets/(liabilities):
Dividend payable (7,299) (7,292)
Net funds and finance leases 28,468 7,060
--------------------------------------- --------- --------
222,504 228,094
--------------------------------------- --------- --------
Note a: Includes the effect of net increase of provisions of £7.5 million (2002:
net release of provision of £21.1 million)
3.Exceptional items comprise the following:
2003 2002
Note £'000 £'000
Impairment a - (20,191)
Net redundancy and closure cost
Redundancy b (2,672) (60,378)
Stores equipment and asset write-back/(write-off ) c 689 (9,765)
DTI contribution d - 10,000
Concessionary fuel e - 4,500
---------------------------------- ----- ----------- --------
(1,983) (55,643)
---------------------------------- ----- ----------- --------
Amounts recovered /(provided) against TXU debtor f 6,467 (6,358)
Provision against other amounts receivable g (1,681) (9,309)
Coal Investment Aid h 3,522 -
---------------------------------- ----- ----------- --------
6,325 (91,501)
---------------------------------- ----- ----------- --------
Notes
a. Following the announcement of the closure of mining operations at Selby, the
carrying value and estimated useful economic lives of the mines and surface were
reviewed, giving rise to an impairment in value in 2002.
b. Costs predominantly associated with the closure of the Selby mines and
surface works and head office reorganisation (2002: Costs predominantly
associated with the closure of Prince of Wales Colliery and the closure of the
Selby mines and surface works.)
c. Equipment and stores at Clipstone and Selby, and a claim accrual provided for
in 2002, released in 2003.
d. Government contribution to redundancy costs arising at Selby mines.
e. Reduction in liability to provide concessionary fuel deliveries.
f. A major customer, TXU Europe Energy Trading Ltd, with which UK COAL had a
contract for fuel deliveries up to March 2009, went into administration in
November 2002. UK COAL agreed with the administrator to fix the Company's
liability in respect of claims at £28 million covering unpaid invoices for fuel
delivered (£6.4 million provided at December 2002) and future losses under the
contract. In 2003 UK COAL sold its claim under an agreement providing an
immediate payment to UK COAL of £8.4 million with the two parties to the
agreement sharing equally in distributions above 40% and below 30% down to a
minimum of 15% (giving UK COAL a minimum of 22.5% of the final agreed debt).
When TXU goes into liquidation, while the level of distribution is uncertain,
the Board are confident that the gross level of debt agreed with the
administrator will be accepted by the liquidator and accordingly, the profit and
loss account includes, as an exceptional item, the minimum amount payable under
the agreement for the sale of the debt, £6.3 million (which is 22.5% of £28
million).
g. Provision against fuel debtor and amounts settled in relation to long-term
contracts (2002: provision against certain amounts recoverable under long-term
contracts where settlement is dependent on future planning permission and
contract negotiations).
h. Coal Investment Aid receivable under the Government Aid Scheme.
4.Other operating income and expenses
2003 2002
£'000 £'000
---------------------------------- -------------- --------
Administrative expenses 16,286 18,164
Other operating income (4,927) (4,478)
---------------------------------- -------------- --------
Other operating income & expenses 11,359 13,686
Due to the nature of the Group's business, distribution expenses are treated as
a part of the cost of sales. Administrative expenses include £0.7 million (2002:
£3.0 million) in respect of fees payable to Bain & Co., the consultants engaged
to assist with Project 105.
5.Interest receivable and similar income
2003 2002
£'000 £'000
---------------------------------- -------------- --------
Interest receivable from short-term deposits 2,577 5,181
Interest receivable from Inland Revenue 564 -
---------------------------------- -------------- --------
3,141 5,181
6.Interest payable and similar charges
2003 2002
£'000 £'000
----------------------------------- ------------ --------
On bank loans, overdrafts and other loans repayable
within 5 1,171 401
years
Amortisation of loan issue costs (FRS4) 384 545
On finance leases and hire purchases, repayable within 1,931 1,908
5 years ------------ --------
-----------------------------------
3,486 2,854
7.Loss on ordinary activities before taxation
2003 2002
£'000 £'000
----------------------------------- ------------ --------
Loss on ordinary activities before taxation is stated
after charging/(crediting):
Depreciation - tangible owned assets 46,344 50,661
Depreciation - assets held under hire purchase and
finance 6,272 8,638
leases
Net charge for surface mine development and restoration
assets 7,045 11,413
Loss/(profit) on disposal of tangible fixed assets
- plant and equipment 138 (296)
Profit on disposal of tangible fixed assets (5,830) (2,033)
- land and buildings
Auditor's remuneration (Company, £35,000, 2002: 245 241
£35,000)
Rent receivable (3,814) (3,433)
8.Taxation
2003 2002
£'000 £'000
---------------------------------- ------------ --------
On ordinary activities
United Kingdom corporation tax at 30% (2002: 30%) (1,898) -
Adjustment in respect of prior years (5,109) -
Overseas taxation - 3
---------------------------------- ------------ --------
Total current tax on ordinary activities (7,007) 3
---------------------------------- ------------ --------
Deferred tax
Origination and reversal of timing differences - 2,514
Adjustment in respect of prior years - (726)
---------------------------------- ------------ --------
Total deferred tax on ordinary activities - 1,788
---------------------------------- ------------ --------
On exceptional items
United Kingdom corporation tax at 30% (2002: 30%) 1,898 -
Origination and reversal of timing differences - (3,142)
---------------------------------- ------------ --------
Total tax on exceptional items 1,898 (3,142)
---------------------------------- ------------ --------
Total current tax (5,109) 3
Total deferred tax - (1,354)
---------------------------------- ------------ --------
Tax credit on loss on ordinary activities (5,109) (1,351)
---------------------------------- ------------ --------
The tax credit of £5.1 million arose as a result of the Group reaching agreement
with the Inland Revenue on the open issues relating to prior years.
9.Dividends
2003 2003 2002 2002
------------------ ------------ ----------- ----------- ---------
pence £'000 pence £'000
per share per share
------------------ ------------ ----------- ----------- ---------
Interim 5.0p 7,292 5.0p 7,292
Final 5.0p 7,299 5.0p 7,292
------------ ----------- ----------- ---------
10.0p 14,591 10.0p 14,584
The number of shares in issue at 31 December 2003 was 145,988,490 (2002:
145,847,454).
Subject to approval at the AGM, the final dividend of 5 pence per share (2002:
5.0 pence per share) will be paid on 18 June 2004 to shareholders on the
register at 21 May 2004. The total dividend recommended for the year is 10 pence
per share (2002: 10.0 pence per share).
10.Reconciliation of movements in shareholders' funds
Group Group Company Company
2003 2002 2003 2002
£'000 £'000 £'000 £'000
-------------------------- -------- -------- ---------- ----------
Profit/(loss) for financial year 4,000 (81,678) (1,251) (72,143)
Dividends (14,591) (14,584) (14,591) (14,584)
Exchange differences 4,721 (355) - -
Surplus on revaluation 220 4,814 - -
Shares issued during the year 129 - 129 -
-------------------------- -------- -------- ---------- ----------
Movement in shareholders' funds (5,521) (91,803) (15,713) (86,727)
Opening shareholders' funds 227,763 319,566 456,761 543,488
-------------------------- -------- -------- ---------- ----------
Closing shareholders' funds 222,242 227,763 441,048 456,761
-------------------------- -------- -------- ---------- ----------
11.Provisions for liabilities and charges
At 1 Created Released Utilised Unwinding At 31
January in year in year in year of December
2003 discount 2003
£'000 £'000 £'000 £'000 £'000 £'000
------------------ -------- -------- -------- -------- --------- --------
Employer &
public
liabilities 29,529 5,580 - (11,779) 1,099 24,429
Surface damage 23,839 6,798 - (9,497) 715 21,855
Concessionary
fuel 25,074 - (325) (559) 890 25,080
Claims 975 - (975) - - -
Restoration & closure
costs
- surface mines
84,417 9,997 (4,572) (18,302) 2,533 74,073
Restoration & closure
costs
- deep mines shaft
treatment
and pit top
25,913 5 (3,406) (277) 776 23,011
Spoil heaps 5,573 - (432) (25) 167 5,283
Pumping costs 10,169 - (986) - 65 9,248
Ground/ground-
water
contamination 10,867 - (423) - 325 10,769
Gas plant
decommissioning 153 158 - (311) - -
Redundancy 42,190 3,097 (170) (11,878) - 33,239
------------------ -------- -------- -------- -------- --------- --------
258,699 25,635 (11,289) (52,628) 6,570 226,987
------------------ -------- -------- -------- -------- --------- --------
Changes to provisions that arise as a result of redundancy programmes are
treated as exceptional items in the profit and loss account, consistent with the
nature of the underlying event, which is usually the closure of a mine. Other
provision changes relate to revisions in estimates arising in the ordinary
course of business and are charged/credited within the appropriate caption in
the profit and loss account.
The net provision created/released of £14.3 million (2002: £34.8 million)
includes £2.7 million (2002: £55.9 million) in respect of exceptional items and
£11.6 million (2002: release of £21.1 million) in respect of non-exceptional
items. The latter includes £4.1 million (see Note 14) created (2002: £nil) on
acquisition of the assets of a surface mining contractor that is off-set by
equivalent amounts as a result of the same acquisition resulting in no profit
and loss account impact.
12..Creditors
2003 2002
£'000 £'000
Creditors - amounts falling due after more than one year
-------------------------------------- ------------ --------
Hire purchase and finance lease liabilities 15,106 18,256
Retentions 196 4,534
-------------------------------------- ------------ --------
15,302 22,790
-------------------------------------- ------------ --------
Creditors - amounts falling due within one year
-------------------------------------- ------------ --------
Trade creditors 50,791 55,209
Other taxation and social security 18,374 13,697
Hire purchase and finance lease liabilities 8,801 7,217
Bank borrowings 7,224 28,386
Dividends payable 7,471 7,401
Accruals and deferred income 44,696 33,191
Corporation tax - 1,126
--------------------------------------- ------------ --------
137,357 146,227
-------------------------------------- ------------ --------
13.Cash at bank and in hand
2003 2003 2002 2002
Change Change
in year in year
£'000 £'000 £'000 £'000
------------------------ ---------- ---------- --------- --------
Monies deposited to cover insurance
requirements 32,890 (4,471) 37,361 2,075
Subsidence security fund 24,023 792 23,231 2,664
Other security funds 2,053 2,053 - -
Other cash balances 1,384 1,083* 301 (21,027)*
------------------------ ---------- ---------- --------- --------
60,350 (543) 60,893 (16,288)
------------------------ ---------- ---------- --------- --------
* Includes, £ 63,000 (2002: £9,000) of exchange differences.
Included within the cash balance of £60.4 million (2002: £60.9 million) are
amounts totalling £32.9 million (2002: £37.4 million) held by the Group's
insurance subsidiary and £24.0 million (2002: £23.2 million) deposited by way of
security to cover subsidence liabilities.
14.Acquisition of trade and assets
On 18 December 2003, the Group acquired the trade and certain of the assets of a
surface mining contractor employed on three of the Group's surface mining sites
with the objective of undertaking, up to completion of restoration, the surface
mining operations on those sites. Being so close to the year end, these surface
mining operations did not have any material effect on the Group's trading
results.
Provisional
fair value
£'000
Plant and equipment 1,500
Additional restoration and redundancy provision (4,055)
-------------------------------- -----------------------
Net liabilities assumed (2,555)
The net liabilities assumed were satisfied by cash consideration of £2.0 million
and the release of creditors and retentions amounting to £4.6 million.
This information is provided by RNS
The company news service from the London Stock Exchange
IVIIS