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UK Coal PLC (HWG)

  Print      Mail a friend       Annual reports

Thursday 01 March, 2007

UK Coal PLC

Final Results. Part 2

UK Coal PLC
01 March 2007

Notes to the Accounts                                                                        
                                                                                             
1 Accounting policies                                                                        
                                                                                             
The principal accounting policies adopted in the preparation of these consolidated financial 
statements are set out below. These policies have been consistently applied to all the years 
presented, unless otherwise stated. The change in policy from the previous year (requiring a 
restatement of the comparative figures) has been a widening of the definition of an          
investment property (See Note 7). The directors have adopted this change as they believe it  
provides more relevant information on the position of the Group.                             
                                                                                             
Basis of preparation                                                                         
                                                                                             
These consolidated financial statements have been prepared in accordance with EU Endorsed    
International Financial Reporting Standards ('IFRSs') IFRIC interpretations and those parts  
of the Companies Act 1985 applicable to companies reporting under IFRS. The consolidated     
financial statements have been prepared under the historical cost convention, as modified by 
the revaluation of investment properties at fair value through income statement and where    
IFRSs require an alternative treatment (principally in the areas of retirement benefit       
obligations, share based payments and financial instruments).                                
                                                                                             
In preparing the 2006 financial statements, UK COAL has not applied the following            
pronouncements for which adoption is not mandatory until the year ending 31 December 2007 and
which have not yet been endorsed by the EU:                                                  
                                                                                             
IFRIC 7 'Applying the restatement approach under IAS 29 - Financial reporting in             
hyperinflationary economies'                                                                 
IFRIC 8 'Scope of IFRS2'                                                                     
IFRIC 9 'Reassessment of embedded derivatives'                                               
IFRIC11 'IFRS2 'Group and treasury transactions'                                             
IAS 1 amendment ' Presentation of financial statements Capital disclosures'                  
IFRS 7 'Financial Instruments: Disclosures'                                                  
IFRS 8 'Operating segments'                                                                  
                                                                                             
The directors do not anticipate any of the above will have a material impact on the Group's  
financial statements.                                                                        
                                                                                             

 
2 Segmental reporting                                                                 
                                                                                      
Revenue                                                                               
Revenue from continuing operations arises                2006                     2005
from:                                                                                 
                                                         £000                     £000
                                                                                      
Sale of goods                                         331,439                  334,355
Rendering of services                                   8,274                    6,859
                                                      339,713                  341,214
                                                                                      

 
The Group's operations are divided into the                                                 
following segments:                                                                         
                                                                                            
Deep mining                                                                                 
                                                                                            
The Group operated five ongoing deep mines in 2006 located in Central and Northern England. 
In February 2007, one deep mine at Maltby has been sold. Subsequent to this, the group has  
proven reserves of around 40 million tonnes, employing around 3,300 people. During 2006,    
mining operations were mothballed at Harworth and closed at Rossington. These are described 
as the closed deep mines in the segmental notes to the financial statements for 2006 and    
2005.                                                                                       
                                                                                            
Surface mining                                                                              
                                                                                            
The Group has four active surface mines and planning consent to mine a further site. Surface
mine reserves of 14 million tonnes have either already been granted for mining, applied for 
or are planned for application during 2007.                                                 
                                                                                            
Property                                                                                    
                                                                                            
The Group has a portfolio of around 47,500 acres of predominantly agricultural land and has 
identified some 2,650 acres of this land as offering prime prospects for a mix of business  
park, residential, distribution and community development.                                  
                                                                                            
Power Generation                                                                            
                                                                                            
The Group has established its own power generation business, which utilises waste gas from  
mines to generate electricity and is actively pursuing the development of alternative power 
generation opportunities, including wind farms.                                             
                                                                                            
Other                                                                                       
                                                                                            
This includes any activities not already included within one of the above segments and the  
results of joint ventures.                                                                  
                                                                                            

 
Primary reporting format - business segments                                                            
                                                                                                        
Year ended 31 December 2006                                                                             
                                Ongoing     Closed     Deep Surface               Power                 
                             Deep Mines Deep Mines   Mining  Mining Property Generation   Other    Total
                                   £000       £000     £000    £000     £000       £000    £000     £000
Continuing operations                                                                                   
Revenue - gross                 285,613     25,328  310,941  31,222    5,990      6,493   1,265  355,911
Revenue - intra Group                 -          -        - (9,561)        -    (6,200)   (437) (16,198)
Revenue                         285,613     25,328  310,941  21,661    5,990        293     828  339,713
Gross (loss) / profit          (19,300)        193 (19,107)   1,197    3,286      1,726   (413) (13,311)
before Exceptional Items                                                                                
within cost of sales                                                                                    
Exceptional Items within        (6,732)   (25,392) (32,124)   4,127        -          -         (27,997)
cost of sales                                                                                           
Gross (loss) / profit          (26,032)   (25,199) (51,231)   5,324    3,286      1,726   (413) (41,308)
Coal Investment Aid               7,892          -    7,892       -        -          -       -    7,892
Net appreciation in fair              -          -        -       -   68,622          -       -   68,622
value of properties                                                                                     
Profit on disposal of                 -          -        -       -    1,406          -       -    1,406
investment properties                                                                                   
Profit on disposal of              (73)          -     (73)     489        -          -       -      416
operating property, plant                                                                               
and equipment                                                                                           
Other operating income          (9,781)          -  (9,781) (1,185)     (14)      1,429     168  (9,383)
and expenses                                                                                            
Operating (loss)/ profit       (27,994)   (25,199) (53,193)   4,628   73,300      3,155   (245)   27,645
from continuing                                                                                         
operations                                                                                              
Finance costs                                                                                   (12,376)
Finance income                                                                                     2,261
Finance costs - net                                                                             (10,115)
Share of post-tax profit                                                                             105
from joint ventures                                                                                     
Profit before tax                                                                                 17,635
Tax                                                                                                (143)
Profit for the year from                                                                          17,492
continuing activities                                                                                   
                                                                                                        
                                                                                                        
Other segmental items                                                                                   
                                                                                                        
Capital expenditure              21,464          -   21,464   7,340    3,256      4,508       -   36,568
Depreciation                     38,119      1,544   39,663   3,885        -        782     186   44,516
Amortisation of surface                                   -   1,061                                1,061
mining development assets                                                                               
Stores equipment write            4,360      2,167    6,527       -        -          -       -    6,527
down                                                                                                    
Provision -non cash              10,314    (3,451)    6,863 (5,382)        -          -       8    1,489
movement                                                                                                

 
Year ended 31           Ongoing   Closed      Deep  Surface               Power                   
December 2005              Deep     Deep    Mining   Mining Property Generation    Other     Total                      
                          Mines    Mines                                                          
                           £000     £000      £000     £000     £000       £000     £000      £000
                                          Restated Restated Restated                      Restated
Continuing                                                                                        
operations                                                                                        
Revenue - gross         261,757   41,342   303,099   67,478    4,843      3,730   12,170   391,320
Revenue - intra        (13,163)        -  (13,163) (34,075)        -    (2,868)        -  (50,106)
Group                                                                                             
Revenue                 248,594   41,342   289,936   33,403    4,843        862   12,170   341,214
Gross (loss) /         (18,011) (19,326)  (37,337)    6,048    2,224        916    1,380  (26,769)
profit before                                                                                     
Exceptional Items                                                                                 
within cost of                                                                                    
sales                                                                                             
Exceptional Items      (20,343) (26,306)  (46,649)  (2,504)                               (49,153)
within cost of                                                                                    
sales                                                                                             
Gross (loss) /         (38,354) (45,632)  (83,986)    3,544    2,224        916    1,380  (75,922)
profit                                                                                            
Coal Investment          13,135    1,506    14,641                                          14,641
Aid                                                                                               
Net appreciation              -        -         -        -   40,668          -        -    40,668
in fair value of                                                                                  
properties                                                                                        
Profit on disposal            -        -         -        -    2,746          -        -     2,746
of investment                                                                                     
properties                                                                                        
Profit on disposal          305        -       305      158        -          -        -       463
of operating                                                                                      
property, plant                                                                                   
and equipment                                                                                     
Profit on disposal            -        -         -        -        -          -    3,100     3,100
of business                                                                                       
Other operating         (9,398)        -   (9,398)  (2,859)       53      2,446        2   (9,756)
income and                                                                                        
expenses                                                                                          
Operating (loss) /     (34,312) (44,126)  (78,438)      843   45,691      3,362    4,482  (24,060)
profit from                                                                                       
continuing                                                                                        
operations                                                                                        
Finance costs                                                                             (11,753)
Finance income                                                                               2,992
Finance costs -                                                                            (8,761)
net                                                                                               
                                                                                                  
Loss before tax                                                                           (32,821)
Tax (relating to                                                                              (72)
discontinued                                                                                      
operations)                                                                                       
Loss for the year                                                                         (32,893)
                                                                                                  
                                                                                                  
Other segmental                                                                                   
items                                                                                             
                                                                                                  
Capital                  16,603      930    17,533    1,874    8,082         26        -    27,515
expenditure                                                                                       
Impairment                    -    6,601     6,601      500        -          -        -     7,101
Depreciation             33,849    3,265    37,114    4,715        -        919      270    43,018
Amortisation of               -        -         -    1,911        -          -        -     1,911
surface mining                                                                                    
development assets                                                                                
Stores equipment          2,078    2,618     4,696        -        -          -        -     4,696
write down                                                                                        
Provision - non          19,299   13,669    32,968    (601)        -          -       12    32,379
cash movement                                                                                     
Amount provided           1,782      720     2,502        -        -          -        -     2,502
against Coal                                                                                      
Investment Aid                                                                                    
claim                                                                                             
                                                                                                  
                                                                                                  
Balance Sheet                                                                                     
at 31 December                                                                                    
2006                                                                                              
                        Ongoing   Closed      Deep  Surface               Power                   
                           Deep     Deep    Mining   Mining Property Generation    Other     Total
                          Mines    Mines                                                          
                           £000     £000      £000     £000     £000       £000     £000      £000
ASSETS                                                                                            
Non current assets                                                                                
Operating               189,322        -   189,322   25,708   14,585      8,324        3   237,942
property, plant                                                                                   
and equipment                                                                                     
Investment                    -        -         -        -  311,677          -        -   311,677
properties                                                                                        
Investment in                 -        -         -        -        -          -      205       205
joint venture                                                                                     
Deferred tax asset       35,752        -    35,752        -        -          -        -    35,752
Trade and other               -        -         -      475      489          -        -       964
receivables                                                                                       
                        225,074        -   225,074   26,183  326,751      8,324      208   586,540
Current assets                                                                                    
Inventories              31,477    1,700    33,177    3,463        -          -        -    36,640
Trade and other          36,788        -    36,788    2,874      277        764    6,901    47,604
receivables                                                                                       
Derivative                    -        -         -        -        -          -      675       675
financial                                                                                         
instruments                                                                                       
Cash and cash            42,337        -    42,337        -    1,042          -    2,549    45,928
equivalents 
                                                                                      
                        110,602    1,700   112,302    6,337    1,319        764   10,125   130,847

LIABILITIES                                                                                       
Current                                                                                           
liabilities                                                                                       
Financial                                                                                         
liabilities                                                                                       
- Borrowings            (3,564)        -   (3,564)  (3,027)    4,814      (950) (12,774)  (15,501)
Trade and other        (69,470)    (440)  (69,910) (10,144) (15,247)    (4,737)  (6,246) (106,284)
payables                                                                                          
Provisions             (13,628)  (5,629)  (19,257)  (8,310)        -          -    (364)  (27,931)

                       (86,662)  (6,069)  (92,731) (21,481) (10,433)    (5,687) (19,384) (149,716)

Net current assets       23,940  (4,369)    19,571 (15,144)  (9,114)    (4,923)  (9,259)  (18,869)
/(liabilities)                                                                                    
Non current                                                                                       
liabilities                                                                                       
Financial                                                                                         
liabilities                                                                                       
- Borrowings            (7,576)        -   (7,576)  (6,203) (68,163)      (344)       22  (82,264)
Trade and other               -        -         -    (130)    (182)          -        -     (312)
payables                                                                                          
Deferred tax                  -        -         -        -  (1,172)          -        -   (1,172)
liabilities                                                                                       
Provisions             (65,580)  (8,669)  (74,249) (45,060)        -          -        - (119,309)
Retirement benefit    (120,495)        - (120,495)        -        -          -        - (120,495)
obligations
                                                                                       
                      (193,651)  (8,669) (202,320) (51,393) (69,517)      (344)       22 (323,552)

Net assets/              55,363 (13,038)    42,325 (40,354)  248,120      3,057  (9,029)   244,119
(liabilities)                                                                                     
                                                                                                  
                                                                                                  
Balance Sheet                                                                                     
at 31 December                                                                                    
2005                                                                                              
                        Ongoing   Closed      Deep  Surface               Power                   
                           Deep     Deep    Mining   Mining Property Generation    Other     Total
                          Mines    Mines                                                          
                           £000     £000      £000     £000     £000       £000     £000      £000
                                                            Restated                      Restated
ASSETS                                                                                            
Non current assets                                                                                
Operating               206,345    5,042   211,387   24,162   14,238      4,596        4   254,387
property, plant                                                                                   
and equipment                                                                                     
Investment                    -        -         -        -  251,161          -        -   251,161
properties                                                                                        
Trade and other           2,394        -     2,394      476        -          -    1,858     4,728
receivables                                                                                       
                        208,739    5,042   213,781   24,638  265,399      4,596    1,862   510,276
Current assets                                                                                    
Inventories              34,395    4,994    39,389    2,779        -          -        -    42,168
Trade and other          54,089      211    54,300    1,774    1,140         68    6,030    63,312
receivables                                                                                       
Cash and cash            52,260        1    52,261        -      533          -      426    53,220
equivalents                                                                                       
                        140,744    5,206   145,950    4,553    1,673         68    6,456   158,700
LIABILITIES                                                                                       
Current                                                                                           
liabilities                                                                                       
Financial                                                                                         
liabilities                                                                                       
- Borrowings            (6,416)        -   (6,416)  (3,510)        -      (912) (52,148)  (62,986)
Trade and other        (86,411)    (968)  (87,379)  (4,201) (10,299)      (411)  (2,637) (104,927)
payables                                                                                          
Provisions             (20,731) (14,023)  (34,754) (17,528)        -          -     (38)  (52,320)

                      (113,558) (14,991) (128,549) (25,239) (10,299)    (1,323) (54,823) (220,233)

Net current assets       27,186  (9,785)    17,401 (20,686)  (8,626)    (1,255) (48,367)  (61,533)
/(liabilities)                                                                                    
Non current                                                                                       
liabilities                                                                                       
Financial                                                                                         
liabilities                                                                                       
- Borrowings           (11,051)        -  (11,051)  (1,490) (19,720)    (1,294)        -  (33,555)
- Derivative                  -        -         -        -        -          -     (55)      (55)
financial                                                                                         
instruments                                                                                       
Deferred tax                  -        -         -        -  (1,029)          -        -   (1,029)
liabilities                                                                                       
Provisions             (61,639)  (9,181)  (70,820) (50,635)        -          -    (323) (121,778)
Retirement benefit    (142,338)        - (142,338)        -        -          -        - (142,338)
obligations
                                                                                       
                      (215,028)  (9,181) (224,209) (52,125) (20,749)    (1,294)    (378) (298,755)

Net assets/              20,897 (13,924)     6,973 (48,173)  236,024      2,047 (46,883)   149,988
(liabilities)                                                                                     

 
Cash Flow            Ongoing   Closed     Deep  Surface               Power             2006     2005
Statement               Deep     Deep   Mining   Mining Property Generation   Other    Total    Total                   
                       Mines    Mines                                   
For the year            
ended 31 December                                                                     
2006                                                                                                 
                        £000     £000     £000     £000     £000       £000    £000     £000     £000
                                                        Restated                             Restated
Cash flows from                                                                                      
operating                                                                                            
activities                                                                                           
(Loss)/profit for   (28,975) (25,199) (54,174)    2,233   69,720      3,038 (3,325)   17,492 (32,893)
the year                                                                                             
Depreciation/         38,119    1,544   39,663    4,946        -        782     186   45,577   52,030
impairment of                                                                                        
property, plant and                                                                                  
equipment                                                                                            
Net fair value             -        -        -        - (68,622)          -         (68,622) (40,668)
appreciation in                                                                                      
investment                                                                                           
properties                                                                                           
Net interest             981        -      981    2,395    3,437        117   3,185   10,115    8,376
payable and                                                                                          
amortisation of                                                                                      
discount on                                                                                          
provisions                                                                                           
Net charge for             -        -        -        -        -          -     198      198      173
share based                                                                                          
remuneration                                                                                         
Net capitalised            -        -        -  (5,382)        -          -       -  (5,382)  (2,298)
surface mine                                                                                         
development and                                                                                      
restoration costs                                                                                    
Profit on                 73        -       73    (489)  (1,406)          -       -  (1,822)  (3,209)
disposal of                                                                                          
property, plant                                                                                      
and equipment                                                                                        
Profit on sale of          -        -        -        -        -          -       -        -  (3,100)
interests in                                                                                         
businesses                                                                                           
Decrease in         (16,647)  (8,247) (24,894) (11,352)        -          -       - (36,246) (21,378)
provisions                                                                                           
Tax                        -        -        -        -      143          -       -      143       72
Operating cash       (6,449) (31,902) (38,351)  (7,649)    3,272      3,937     244 (38,547) (42,895)
flows before                                                                                         
movements in                                                                                         
working capital                                                                                      
                                                                                                     
Decrease/Increase      2,919    3,294    6,213    (685)        -          -       -    5,528    2,004
in stocks                                                                                            
Decrease/             19,695      211   19,906  (1,099)      374      (696)     312   18,797  (1,551)
(Increase) in                                                                                        
receivables                                                                                          
Decrease/           (16,942)    (528) (17,470)    6,073    (810)      4,326   2,808  (5,073)  (2,376)
(Increase) in                                                                                        
payables                                                                                             
Cash (used in) /       (777) (28,925) (29,702)  (3,360)    2,836      7,567   3,364 (19,295) (44,818)
generated from                                                                                       
operations                                                                                           
Tax paid                   -        -                                                      -     (72)
Financing cost             -        -        -        -    (698)          -   (330)  (1,028)    (738)
Interest paid          (848)        -    (848)    (472)  (2,303)      (118) (3,198)  (6,939)  (5,744)
                                                                                                     
Cash (used in) /     (1,625) (28,925) (30,550)  (3,832)    (165)      7,449   (164) (27,262) (51,372)
generated from                                                                                       
operating                                                                                            
activities                                                                                           
                                                                                                     
Cash flows from                                                                                      
investing                                                                                            
activities                                                                                           
Interest received      2,056        -    2,056       18       31          1     155    2,261    2,992
Net receipt from       9,915        -    9,915        -        -          -       -    9,915    3,075
insurance and                                                                                        
subsidence security                                                                                  
funds                                                                                                
Disposal of                -        -        -        -        -          -       -        -    8,844
businesses                                                                                           
Proceeds on                -        -        -    5,594   18,597          -       -   24,191   15,861
disposal of                                                                                          
property, plant                                                                                      
and equipment                                                                                        
Investment in              -        -        -        -        -          -   (205)    (205)        -
joint venture                                                                                        
Development costs          -        -        -        -  (3,256)          -       -  (3,256)  (8,082)
of investment                                                                                        
properties                                                                                           
Purchase of         (21,607)        - (21,607)  (7,196)        -    (4,509)       - (33,312) (19,433)
operating                                                                                            
property, plant                                                                                      
and equipment                                                                                        
Cash (used in)/      (9,636)        -  (9,636)  (1,584)   15,372    (4,508)    (50)    (406)    3,257
generated from                                                                                       
investing                                                                                            
activities                                                                                           
Net Operating       (11,261) (28,925) (40,186)  (5,416)   15,207      2,941   (214) (27,668) (48,115)
Cash flow by                                                                                         
Segment                                                                                              

 

 
Secondary format -                                                                                 
geographic segments                                                                                
                                                                                                   
The Group manages its business segments on a global basis. The Group is entirely based in the      
United Kingdom. The United Kingdom is the home of the parent company. An analysis of revenue by    
destination, together with capital expenditure and segment assets is given in the following table: 
                                                                                                   
                                           Revenue               Segment                    Capital
                                                                  assets                expenditure
                                    2006      2005      2006        2005        2006           2005
                                    £000      £000      £000        £000        £000           £000
Continuing                                                      Restated                           
operations                                                                                         
United Kingdom                   339,713   333,272   717,387     668,976      36,568         27,515
Europe                                 -     7,942         -           -           -              -
                                 339,713   341,214   717,387     668,976      36,568         27,515

 
3 Expenses by nature                                                                          
                                                                                              
                                                                                              
                                                   Notes               2006               2005
                                                                       £000               £000
                                                                                      Restated
Revenue                                                             339,713            341,214
Depreciation of property, plant and                                (39,027)           (38,207)
equipment - owned assets                                                                      
Depreciation of property, plant and                                 (6,550)            (6,722)
equipment - under finance leases                                                              
Net credit for surface mine development and                           5,382              2,316
restoration assets                                                                            
Profit on disposal of investment                                      1,406              2,746
properties                                                                                    
Profit on disposal of operating property,                               416                463
plant and equipment                                                                           
Repairs and maintenance                                            (63,592)           (60,004)
Rent receivable                                                       5,222              4,841
Staff costs                                                       (175,131)          (175,631)
Inventories                                                                                   
- cost of inventories recognised as                                (39,280)           (41,361)
an expense                                                                                    
Operating expense for investment                                                              
property:                                                                                     
- for properties where rental                                       (1,256)              (797)
received                                                                                      
Operating lease payments                                              (268)              (386)
Net appreciation in fair value of                                    68,622             40,668
investment properties                                                                         
Profit on sale of business                                                -              3,100
Other expenses                                                     (47,907)           (64,888)
Exceptional items                                      4           (20,105)           (31,412)
Operating profit/(loss)                                              27,645           (24,060)
                                                                                              
                                                                                              
4 Exceptional Items                                                    2006               2005
                                                   Notes               £000               £000
                                                                                      Restated
Exceptional Items within cost of                                                              
sales                                                                                         
In relation to mine closures                                                                  
Harworth - mothballing costs                          4a           (10,264)                  -
Harworth - write off of assets                        4b            (3,589)                  -
Harworth - impairment of assets                       4c                  -              (967)
Rossington - mothballing costs                        4d            (4,809)                  -
Rossington - write off of assets                      4e              (203)                  -
Rossington - impairment of assets                     4f                  -            (5,634)
Stores equipment provision                            4g            (6,527)            (4,696)
Redundancy                                            4h            (1,995)           (24,249)
Post retirement benefits                              4i              4,355              5,180
Ellington post coaling                                4j                  -            (5,635)
Selby post coaling                                    4k                  -                249
                                                                                              
Other exceptional items                                                                       
Maltby - recovery costs                               4l            (6,973)                  -
Daw Mill - recovery costs                             4m            (2,392)                  -
Surface mining - reversal of                          4n              4,400              (500)
impairment charge                                                                             
Recovery costs at Kellingley and                      4o                  -           (12,551)
Rossington                                                                                    
Costs incurred following approach                     4p                  -              (350)
for company                                                                                   
Exceptional Items within cost of                                   (27,997)           (49,153)
sales                                                                                         
                                                                                              
Other exceptional items                                                                       
Coal Investment Aid                                   4q              7,892             17,143
Amount provided against Coal                          4r                  -            (2,502)
Investment Aid claim                                                                          
Profit on disposal of business                        4s                  -              3,100
Total Exceptional Items                                            (20,105)           (31,412)
                                                                                              
Operating profit before Exceptional                                  47,750              7,352
Items                                                                                         
Net charge for Exceptional Items                                   (20,105)           (31,412)
Operating profit/(loss)                                              27,645           (24,060)

 
Exceptional Items in relation to mine closures  
                                       
(a) The decision was taken to mothball the Harworth Colliery during 2006. In the year, 
attempts to develop a new face and to salvage the mining equipment proved unsuccessful.
As a result, abortive development costs of £2,940,000, net salvage costs of £2,467,000 
and post coaling costs of £4,857,000 were incurred. 
                                   
(b) In addition to the above, the remaining assets of the Harworth Colliery were       
written off £3,589,000.    
                                                            
(c) The decision was taken during 2005 to mothball the Harworth Colliery, the assets   
were reviewed giving rise to an impairment of £967,000.   
                             
(d) The decision was taken to mothball, and later to close, the Rossington Colliery    
during 2006. In the year, post coaling costs of £4,809,000 were incurred. 
             
(e) In addition to the above, the remaining assets of the Rossington Colliery were     
written off in 2006 of £203,000.    
                                                   
(f) The decision was taken during 2005 to mothball, and later to close, the Rossington 
Colliery, the assets were reviewed giving rise to an impairment of £5,634,000.
         
(g) In light of deep mine closures during the year, a strategic review was undertaken  
of the expected future utilisation of stores equipment. As a result, a provision was   
created against the carrying value of these items of £6,527,000 (2005: £4,696,000).  
  
(h) Costs in relation to redundancies announced prior to the year end have been        
recognised during the year of £1,995,000 (2005: £24,249,000).  
                        
(i) A one-off gain arose as a result of the reduction in the Group's liability to      
provide post retirement benefits in respect of employees leaving UK COAL's employment  
during the year of £4,355,000 (2005: £5,180,000).
                                      
(j) During 2005, post coaling costs were incurred at the Ellington Colliery following  
the cessation of mining operations in January 2005.  
                                  
(k) During 2005, a provision release was recognised in relation to a difference between
costs incurred on the cessation of coaling and the commencement of restoration work at 
Selby.                                                                                 
                                                                                       
Other Exceptional Item   
                                                              
(l) In July 2006 a major roof fall occurred at Maltby Colliery, resulting in the       
inability to mine for 3 months and the invocation of the force majeure clause of       
certain coal supply contracts. Net mining costs during this period have therefore been 
treated as exceptional costs of £6,973,000.  
                                          
(m) Costs incurred related to health and safety incidents at Daw Mill of £2,392,000.  
 
(n) An impairment provision release arose following the disposal of surface mining     
plant during the year of £4,400,000.  
                                                 
(o) During 2005, additional labour costs were incurred at Rossington and Kellingley    
consequent to the revised mining plans following invocation of the force majeure clause
within certain coal supply contracts. 
                                                 
(p) During 2005, costs were incurred following an approach from a consortium looking to
acquire the Company. It comprised fees from property advisers, lawyers and financial   
advisers.    
                                                                          
(q) Coal investment aid receivable under the Government Aid Scheme of £7,892,000 (2005:
£17,143,000). This scheme has now closed for new applications.    
                     
(r) In 2005, a provision was created against the Coal investment aid debtor in relation
to payments which were being challenged as a result of the closure or mothballing of   
collieries, or revised mining plans.    
                                               
(s) During 2005 a profit was earned on the disposal of the Monckton business.          

 
5 Finance income and                                                                         
costs                                                                                        
                                                                                             
                                                                  2006                   2005
                                                                  £000                   £000
Interest expense                                                                     Restated
- Bank borrowings                                              (6,377)                (3,959)
- Hire purchase agreements and finance                         (1,204)                (1,877)
leases                                                                                       
- Provisions unwinding of discount                             (4,550)                (5,123)
- Discounting of non-current receivables                           142                  (391)
- Amortisation of issue costs of bank loans                    (1,028)                  (344)
Fair value loss on financial instruments                                                     
- Interest rate swaps: fair value hedges                          (34)                    (4)
- Fair value of interest rate swaps                                675                   (55)
Finance costs                                                 (12,376)               (11,753)
Finance income                                                   2,261                  2,992
Net finance costs                                             (10,115)                (8,761)
                                                                                             
                                                                                             
                                                                                             
6 Operating property, plant                                                                  
and equipment                                                                                
                                                                                             
In order to provide more relevant information in relation to the Group's property portfolio, 
the directors have widened the categories of property recognised as investment properties.   
This change in accounting policy has led to a restatement of the Group's prior year          
consolidated income statement, consolidated balance sheet and statement of changes in        
shareholders' equity.                                                                        
                                                                                             
The effect of the                                                                            
adjustment is:                                                                               
                                                                 Group                       
                                                                  £000                       
                                                                                             
Uplift in revaluation                                           87,670                       
Provision for deferred                                         (1,029)                       
tax                                                                                          
Net increase in equity shareholders' funds                      86,641                       
at 1 January 2005                                                                            
Year ended 31 December                                                                       
2005:                                                                                        
- Income statement adjustments                                  29,273                       
- Revaluation gains taken to the revaluation                    48,805                       
reserve                                                                                      
Net increase in equity shareholders' funds                     164,719                       
at 31 December 2005                                                                          
                                                                                             
                                                                                             
                                                                                             
                                                                                             
                                                                                             
The impact on the consolidated income                                                        
statement is as follows:                                                                     
                                                      2006        2005                       
                                                      £000        £000                       
                                                                                             
Revaluation gains                                   59,051      36,138                       
Revaluation in profit on                          (11,059)     (6,865)                       
disposal                                                                                     
                                                    47,992      29,273                       
Tax                                                  (143)           -                       
                                                    47,849      29,273                       
                                                                                             
Group                                                                      Surface           
                                                                              mine           
                                                                       development           
                                                 Mines and                     and           
                                   Operating       surface   Plant and restoration           
                                  properties         works   machinery      assets      Total
                                        £000          £000        £000        £000       £000
                                    Restated                              Restated   Restated
Cost:                                                                                        
At 1 January 2006                     18,225       803,564     102,973      17,341    942,103
Additions                                143        21,464       5,006       6,699     33,312
Disposals                                  -      (13,400)    (14,785)           -   (28,185)
Transfer from investment                 391             -           -           -        391
properties                                                                                   
At 31 December 2006                   18,759       811,628      93,194      24,040    947,621
Depreciation:                                                                                
At 1 January 2006                      3,987       592,184      78,260      13,285    687,716
Charge for the year                      187        39,663       4,666       1,061     45,577
Disposals                                  -       (9,541)    (14,073)           -   (23,614)
At 31 December 2006                    4,174       622,306      68,853      14,346    709,679
                                                                                             
Net book amount :                                                                            
At 31 December 2006                   14,585       189,322      24,341       9,694    237,942
                                                                                             
                                                                                             
Cost:                                                                                        
At 1 January 2005 - as                82,934       812,549     121,560      62,628  1,079,671
previously stated                                                                            
Prior year adjustment -             (56,370)             -           -     (4,411)   (60,781)
transfer to Investment                                                                       
Properties (note 7)                                                                          
At 1 January 2005 as                  26,564       812,549     121,560      58,217  1,018,890
restated                                                                                     
Additions                                 19        17,599         269       1,546     19,433
Disposals                               (83)      (26,520)     (3,885)    (42,422)   (72,910)
Transfer to investment               (7,421)             -           -           -    (7,421)
properties                                                                                   
Transfer from investment                 280             -           -           -        280
properties                                                                                   
Monckton assets sold                 (1,134)          (64)    (14,971)           -   (16,169)
At 31 December 2005                   18,225       803,564     102,973      17,341    942,103
Depreciation:                                                                                
At 1 January 2005 - as                 7,016       575,276      85,234      53,913    721,439
previously stated                                                                            
Prior year adjustment -                 (26)             -           -       (665)      (691)
transfer to Investment                                                                       
Properties (note 7)                                                                          
At 1 January 2005 as                   6,990       575,276      85,234      53,248    720,748
restated                                                                                     
Charge for the year                      319        36,808       5,891       1,911     44,929
Impairment                                 -         6,601         500           -      7,101
Disposals                                  -      (26,437)     (3,592)    (41,874)   (71,903)
Transfer to investment               (2,547)             -           -           -    (2,547)
properties                                                                                   
Monckton assets sold                   (775)          (64)     (9,773)           -   (10,612)
At 31 December 2005                    3,987       592,184      78,260      13,285    687,716
                                                                                             
Net book amount :                                                                            
At 31 December 2005                   14,238       211,380      24,713       4,056    254,387
                                                                                             
Assets under finance leases, disclosed under plant and machinery and mines and surface works,
have the following net book amount:                                                          
                                                                  2006                   2005
                                                                  £000                   £000
                                                                                             
Cost                                                            46,213                 58,033
Aggregate depreciation                                        (20,864)               (27,713)
Net book amount                                                 25,349                 30,320
                                                                                             
Certain land and buildings are subject to a fixed charge to cover borrowings against those   
assets. Other property, plant and equipment is subject to a floating charge to cover either  
liabilities due to the Coal Authority or bank borrowings.                                    
                                                                                             
7 Investment properties                                                                      
                                                                                             
                                                                  2006                   2005
                                                                  £000                   £000
At valuation - Group                                                                 Restated
At 1 January as                                                251,161                  6,720
previously stated                                                                            
Transfer from operating                                              -                 60,090
property, plant and                                                                          
equipment                                                                                    
Revaluation gain on                                                  -                 87,670
Accounting Policy change                                                                     
At 1 January as restated                                       251,161                154,480
Additions                                                        3,256                  8,082
Disposals                                                     (14,023)               (10,033)
Fair value uplift                                               71,674                 40,668
Transfer from operating                                              -                  4,874
property, plant and                                                                          
equipment                                                                                    
Revaluation gain on transfer from                                    -                 53,370
operating property, plant and                                                                
equipment                                                                                    
Transfer to operating                                            (391)                  (280)
property, plant and                                                                          
equipment                                                                                    
At 31 December                                                 311,677                251,161
                                                                                             
The investment properties comprise all properties which are not designated as operating      
properties. The properties were valued during the year, in accordance with the Appraisal and 
Valuation Standards of the Royal Institution of Chartered Surveyors, by Atisreal, Smiths Gore
and Bell Ingram, independent firms with relevant experience of valuations of this nature. The
valuation excludes any deduction of rehabilitation and restoration costs which are stated    
within provisions in the balance sheet.                                                      
                                                                                             
Key assumptions within the basis of fair value are:                                          
                                                                                             
The sites will be cleared of redundant buildings, levelled and prepared ready for            
development;                                                                                 
The values are on a basis that no material environmental contamination exists on the subject 
or adjoining sites, or where this is present the sites will be remediated by UK COAL to a    
standard consistent with the intended use; and                                               
No deduction or adjustment has been made in relation to clawback provisions, or other taxes  
which may be payable.                                                                        
                                                                                             
Certain of the Group's borrowings are secured by a fixed charge over the investment          
properties.                                                                                  
                                                                                             
Had the above investment properties been carried at cost, rather than fair value , their     
value would be as follows:                                                                   
                                                                  2006                   2005
                                                                  £000                   £000
Cost                                                            76,318                 63,781
Additions                                                        3,256                  8,082
Transfer from operating                                              -                  4,874
property, plant and                                                                          
equipment                                                                                    
Disposals                                                      (2,964)                  (171)
Transfer to operating                                            (391)                  (248)
property ,plant and                                                                          
equipment                                                                                    
Revaluation and fair                                           235,458                174,843
value uplift                                                                                 
Total                                                          311,677                251,161
                                                                                             
                                                                                             
8 Financial liabilities -                                                                    
Borrowings                                                                                   
                                                                                             
Current                                                Group                  Company        
                                                      2006        2005        2006       2005
                                                      £000        £000        £000       £000
                                                                                             
Borrowings due within one                                                                    
year or on demand:                                                                           
Secured - bank loans and                            10,176      55,575      12,476     52,395
overdrafts                                                                                   
Unsecured - bank loans                                   -           -           -          -
and overdrafts                                                                               
                                                    10,176      55,575      12,476     52,395
Finance lease obligations                            5,325       7,411           -          -
                                                    15,501      62,986      12,476     52,395
                                                                                             
Non current                                            Group                  Company        
                                                      2006        2005        2006       2005
                                                      £000        £000        £000       £000
                                                                                             
Borrowings due after more                                                                    
than one year :                                                                              
Secured - bank loans and                            73,948      19,720           -          -
overdrafts                                                                                   
Unsecured - bank loans                                   -           -           -          -
and overdrafts                                                                               
                                                    73,948      19,720           -          -
Finance lease obligations                            8,316      13,835           -          -
                                                    82,264      33,555           -          -
                                                                                             
Bank loans and overdrafts due within one year or on demand are stated after deduction of     
unamortised borrowing costs of £1,259,000 (2005: £556,000). Non current bank loans and       
overdrafts are stated after deduction of unamortised borrowing costs of £2,072,000 (2005:    
£280,000). The Group's Revolving Credit Facility comprises one month rolling drawdowns, and  
are thus disclosed under amounts falling due within one year. The facility is, however,      
committed until 2008.                                                                        
                                                                                             
During 2006, new bank loans were taken out of £58,947,000 with associated borrowing costs of 
£3,275,000 and additional borrowing costs of £248,000 were incurred on existing bank loans.  
                                                                                             
The bank loans and overdrafts are secured by way of fixed and floating charges over certain  
assets of the Group.                                                                         
                                                                                             
The exposure of the Group to interest rate                                                   
changes when borrowings reprice is as                                                        
follows:                                                                                     
                                                                                             
                                                    Within               More than           
                                                    1 year   2-5 years     5 years      Total
                                                      £000        £000        £000       £000
                                                                                             
At 31 December 2006                                                                          
Secured and unsecured                               10,176      73,948           -     84,124
borrowings                                                                                   
Add back borrowing costs                             1,259       2,072           -      3,331
Total borrowings                                    11,435      76,020           -     87,455
Effect of interest rate                            (2,237)    (52,965)           -   (55,202)
swaps                                                                                        
                                                     9,198      23,055           -     32,253
                                                                                             
At 31 December 2005 -                                                                        
restated                                                                                     
Secured and unsecured                               55,575      19,720           -     75,295
borrowings                                                                                   
Add back borrowing costs                               556         280           -        836
Total borrowings                                    56,131      20,000           -     76,131
Effect of interest rate                                  -    (17,000)           -   (17,000)
swaps                                                                                        
                                                    56,131       3,000           -     59,131
                                                                                             
The above swaps have an average interest rate of 4.82% (2005: 4.65%). The debt under which   
these swaps are held are treated as fixed interest rate. The effective interest rates at the 
balance sheet date were as follows.                                                          
                                                                                             
                                                                                             
                                                                  2006                   2005
                                                                                             
Bank overdraft                                                    6.0%                   5.5%
Bank borrowings                                                   6.7%                   6.1%
Finance leases                                                    6.4%                   6.6%
                                                                                             
The carrying amount of the Group's borrowings are                                            
denominated in sterling.                                                                     
                                                                                             
The minimum lease payments under finance leases fall due                                     
as follows:                                                                                  
                                                                  2006                   2005
                                                                  £000                   £000
                                                                                             
Not later than one year                                          6,206                  8,733
Later than one year, but                                         9,114                 15,310
not more than five years                                                                     
More than five years                                                 -                    186
                                                                15,320                 24,229
Future finance charges on                                      (1,679)                (2,983)
finance leases                                                                               
Present value of finance                                        13,641                 21,246
lease liabilities                                                                            
                                                                                             
                                                                                             
                                                                                             

 
9 Provisions                                                                                     
                                 At                                                   At         
                          1 January  Provided Released Utilised  Unwinding   31 December         
                               2006   in year  in year  in year         of          2006         
                                                                  discount                       
                               £000      £000     £000     £000       £000          £000         
Group                                                                                            
Employer and public          17,998     5,562        -  (4,604)        900        19,856         
liabilities                                                                                      
Surface damage               21,988     3,763  (3,317)  (3,274)        660        19,820         
Claims                        1,538         8        -      (5)          -         1,541         
Restoration and closure      66,362     3,238  (8,620) (11,172)      1,941        51,749         
costs of surface mines                                                                           
Restoration and closure                                                                          
costs of deep mines:                                                                             
- shaft treatment and        18,494     1,044    (347)  (2,098)        542        17,635         
pit top                                                                                          
- spoil heaps                 5,029       148    (543)    (564)        151         4,221         
- pumping costs               8,985         -  (1,442)  (1,000)         71         6,614         
Ground/groundwater            9,483         -        -        -        285         9,768         
contamination                                                                                    
Redundancy                   24,221     4,949  (2,954) (10,180)          -        16,036         
                            174,098    18,712 (17,223) (32,897)      4,550       147,240         
                                                                                                 
Provisions have been analysed between current                                                    
and non current as follows:                                                                      
                                                                                 2006      2005  
                                                                                 £000      £000  
                                                                                                 
Current                                                                        27,931    52,320  
Non current                                                                   119,309   121,778  
                                                                              147,240   174,098  
                                                                                                 
                                                                                                 

 
                                                                                                        
Provisions are expected to be settled within the timescales set out in the following table. It should be
noted that these are based on the information available at the time the consolidated financial          
statements were prepared and are subject to a number of estimates and uncertainties, as noted below.    
                                                                                                        
                            Within 1        1-2 years        2-5 years  More than 5 years          Total
                                year                                                                    
                                £000             £000             £000               £000           £000
                                                                                                        
Employer and public            8,693            4,465            4,577              2,121         19,856
liabilities                                                                                             
Surface damage                 3,214            4,258            9,368              2,980         19,820
Claims                         1,041              500                -                  -          1,541
Restoration and                7,310           10,665           29,775              3,999         51,749
closure costs of                                                                                        
surface mines                                                                                           
Restoration and                                                                                         
closure costs of                                                                                        
deep mines:                                                                                             
shaft treatment and            3,149            2,756              931             10,799         17,635
pit top                                                                                                 
spoil heaps                      321              627              307              2,966          4,221
pumping costs                      -                -                -              6,614          6,614
Ground/groundwater                 -                -                -              9,768          9,768
contamination                                                                                           
Redundancy                     4,203           11,833                -                  -         16,036
                                                                                                        
                              27,931           35,104           44,958             39,247        147,240
                                                                                                        
                                                                                                        
The total of provisions created net of provisions released was £1.5 million (2005: £32.4 million).      
This included a charge of £2.0 million (2005: £29.6 million) in respect of Exceptional Items and a      
release of £0.5 million (2005: £2.8 million) in respect of non exceptional items.                       
                                                                                                        
A brief description of the nature of the Group's obligations and an indication of the uncertainties     
surrounding each of the above provisions is provided below:                                             
                                                                                                        
Employer and public liabilities - provisions are made for current and estimated obligations in          
respect of claims made by employees and the general public relating to accident or disease as a         
result of the business activities of the Group. This is covered by dedicated cash deposits.             
                                                                                                        
Surface damage - provision is made for the Group's liability to compensate for subsidence damage        
arising from past mining operations. Claims can be lodged by the public up to six years after the       
date of relevant damage. The estimate is based on historical claims experience, following a detailed    
assessment of the nature of damage foreseen. This is covered by dedicated cash deposits.                
                                                                                                        
Claims - where surface mine sites owned by the Group are mined by external contractors and mining       
conditions vary from those specified in the contract, the external contractors may be entitled to       
claim further costs incurred. Claims are settled with individual contractors, generally at the          
completion of a surface mining site. All claims provisions are based on known mining conditions         
encountered, historical experience and contracted rates.                                                
                                                                                                        
Restoration and closure costs of surface mines - provisions are made for the total costs of             
reinstatement of soil excavation and for surface restoration, such as topsoil replacement and           
landscaping. Costs become payable after coal mining has been completed. Further liabilities for         
aftercare can extend after restoration, for a period of up to six years.                                
                                                                                                        
Restoration and closure costs of deep mines:    
Shaft treatment and pit top - provisions are made to meet the Group's liability to fill and cap all     
mine shafts and return pit top areas to a condition consistent with the required planning               
permission. No liabilities will arise until decommissioning of each individual colliery. The current    
pit top provision reflects existing planning permissions that require pit areas to be restored to       
former use, usually agricultural. The Group will, where possible, seek planning permission for          
development use, which, if successful, may reduce the expected cost.                                    
                                                                                                        
Spoil heaps - provisions are made for the costs payable to bring spoil heaps to a condition             
consistent with required planning permission and to complete approved restoration schemes. An           
element of spoil heap restoration is ongoing, although the majority of costs will be incurred on        
decommissioning of a colliery.                                                                          
                                                                                                        
Pumping costs - there is a legal requirement to continue pumping activities at certain mine sites       
following closure and for a period into the future. The provision is based on current experience and    
the net present value of future cost projections. Pumping costs on continuing operations are            
expensed as incurred.                                                                                   
                                                                                                        
Ground/groundwater contamination - provisions are made for the Group's legal or constructive            
obligation to address ground and groundwater pollutants at its operating sites. The provision is        
based on estimates of volumes of contaminated soil and the historical contract costs of ground          
contamination treatment. These costs will usually be incurred on the decommissioning of a site.         
                                                                                                        
Redundancy - provision is made for current estimated future costs of redundancy and ex-gratia           
payments to be made where this has been communicated to those employees concerned.                      
                                                                                                        
                                                                                                        
10 Retirement                                                                                           
Benefit Obligations                                                                                     
                                                                                                        
Defined                                                                                                 
Contribution                                                                                            
Pension Schemes                                                                                         
The Group operates defined contribution pension schemes in respect of all employees who joined after    
the privatisation date in 1994. Contributions to defined contribution schemes in the year amounted      
to £1.4 million ( 2005: £1.7 million ).                                                                 
                                                                                                        
Defined Benefit                                                                                         
Obligations                                                                                             
                                                                                                        
The balance sheet amounts in respect of                                                                 
retirement benefit obligations are:                                                                     
                                                                               2006             2005    
                                                                               £000             £000    
                                                                                                        
Industry Wide                                                                94,469          116,730    
Schemes                                                                                                 
Blenkinsopp                                                                   1,299            1,299    
Concessionary Fuel                                                           24,727           24,309    
                                                                                                        
                                                                            120,495          142,338    
                                                                                                        
Contributions to defined benefit schemes during the year amounted to £20.3 million (2005: £19.3         
million).                                                                                               
                                                                                                        
A deferred tax asset of £35.8 million (2005: £nil) has been recognised in the year on the               
expectation that the Group generates sufficient taxable profits over the period during which the        
deficit is expected to reverse. In 2005, the deferred tax asset not recognised in the financial         
statements was £42.3 million.                                                                           
                                                                                                        
Industry wide                                                                                           
schemes                                                                                                 
                                                                                                        
The Group operates pension schemes providing benefits based on final pensionable pay. The majority      
of the employees within defined benefit schemes are members of industry wide schemes, being either      
the Industry Wide Coal Staff Superannuation Scheme ('IWCSSS') or the Industry Wide Mineworkers'         
Pension Scheme ('IWMPS'), both of which commenced on privatisation following the Coal Industry Act      
1994. Contributions are determined by a qualified actuary on the basis of triennial valuations,         
using the projected unit method. The most recent valuations were at 31 December 2003. The               
assumptions which usually have the most significant effect on the results of the valuation are the      
discount rate, which is based on bond yields, and the rates of increases in salaries and pensions.      
The main assumptions underlying the valuations of the UK COAL sections of each scheme were as           
follows:                                                                                                
                                                                                                        
                                                                           2006                 2005    
                                                                                                        
Discount rate                                                          5.10% pa             4.70% pa    
Rate of return on                                                      7.00% pa             7.00% pa    
investments                                                                                             
Rate of salary                                                         3.10% pa             2.70% pa    
increases                                                                                               
Rate of price                                                          3.10% pa             2.70% pa    
inflation                                                                                               
Rate of return on                                                      7.00% pa             7.00% pa    
equities                                                                                                
Rate of return on                                                      5.10% pa             4.70% pa    
debt                                                                                                    
Rate of cash                                                           22.5% pa             20.0% pa    
commutation                                                                                             
                                                                                                        
Pensions in payment are assumed to increase in line with price inflation.                               
Post retirement mortality has been estimated using applicable standard mortality tables. Normal         
health and ill health pensioners have been rated up by between one and three years and by five years    
respectively for the IWCSS, and by between two and eight years for the IWMPS.                           
                                                                                                        
The overall expected rate of return on assets is based on a historic view of the yields from            
equities and the rates prevailing on applicable bonds at the balance sheet date.                        
                                                                                                        
                                                                                                        
The amounts                                                                                             
recognised in the                                                                                       
consolidated balance                                                                                    
sheet are as follows:                                                                                   
                                         2006          2005         2004        2003*            2002*  
                                         £000          £000         £000         £000             £000  
                                                                                                        
Fair value of plan                    348,325       301,540      231,744      193,324          149,836  
assets                                                                                                  
Present value of                    (442,794)     (418,270)    (344,925)    (296,059)        (257,923)  
funding obligations                                                                                     
Net liability                        (94,469)     (116,730)    (113,181)    (102,735)        (108,087)  
recognised in the                                                                                       
balance sheet                                                                                           
                                                                                                        
None of the pension schemes owns any shares in the Company.                                             
                                                                                                        
                                                                                                        
                                                                                                        
The amounts recognised in the consolidated income statement are:                                        
                                                                    2006                         2005  
                                                                    £000                         £000  
                                                                                                        
Current service                                                 (14,185)                     (12,802)          
cost                                                                                                    
Interest cost                                                   (19,905)                     (18,053)          
Expected return on                                                20,577                       16,109            
plan assets                                                                                             
Effect of                                                          3,025                        2,191             
curtailment or                                                                                          
settlement                                                                                              
                                                                (10,488)                     (12,555)          
                                                                                                        
The above amounts are charged to cost of sales, except for the interest cost, which is included in      
administrative expenses. A further £12.5 million (2005: £10.3 million) has been charged to the          
consolidated statement of recognised income and expense in the year. This represents the net effect     
of experience and actuarial gains and losses on the schemes in the year.                                
                                                                                                        
Change in assets                                                                                        
                                                                      2006                        2005  
                                                                      £000                        £000  
                                                                                                        
Fair value of plan                                                 301,540                     231,744  
assets at 1 January                                                                                     
Expected return on                                                  20,577                      16,109  
plan assets                                                                                             
Actuarial gains on                                                   9,634                      36,975  
assets                                                                                                  
Employer                                                            20,271                      19,292  
contributions                                                                                           
Plan participants'                                                   3,837                       3,903  
contributions                                                                                           
Benefits paid                                                      (7,534)                     (6,483)  
Fair value of plan                                                 348,325                     301,540  
assets at 31                                                                                            
December                                                                                                
                                                                                                        
                                                                                                        
The major categories of the schemes' assets are as follows:                                             
                                                                      2006                        2005  
                                                                      £000                        £000  
                                                                                                        
Equity securities                                                  288,574                     256,060  
Debt securities                                                     59,751                      45,480  
                                                                   348,325                     301,540  
                                                                                                        
The actual return on plan assets was £30.2 million (2005: £53.1 million).                               
                                                                                                        
Change in defined benefit obligations                                 2006                        2005  
                                                                      £000                        £000  
                                                                                                        
Present value of                                                 (418,270)                   (344,925)  
defined benefit                                                                                         
obligation at 1                                                                                         
January                                                                                                 
Current service                                                   (14,185)                    (12,802)  
cost                                                                                                    
Interest cost                                                     (19,905)                    (18,053)  
Plan participants'                                                 (3,837)                     (3,903)  
contributions                                                                                           
Curtailment gain                                                     3,025                       2,191  
Actuarial gain /                                                     2,844                    (47,261)  
(loss)                                                                                                  
Benefits paid                                                        7,534                       6,483  
Present value of                                                 (442,794)                   (418,270)  
defined benefit                                                                                         
obligation at 31                                                                                        
December                                                                                                
                                                                                                        
                                                                                                        
Analysis of the movement of the balance                                                                 
sheet liability                                                                                         
                                                                      2006                        2005  
                                                                      £000                        £000  
                                                                                                        
1 January                                                        (116,730)                   (113,181)  
Total expense as                                                  (10,488)                    (12,555)  
above                                                                                                   
Contributions                                                       20,271                      19,292  
Net actuarial gain/                                                 12,478                    (10,286)  
(loss) from                                                                                             
participants' gains                                                                                     
recognised in the                                                                                       
year                                                                                                    
                                                                                                        
31 December                                                       (94,469)                   (116,730)  
                                                                                                        
                                                                                                        
Cumulative actuarial gains and losses                                                                   
recognised in equity                                                                                    
                                                                      2006                        2005  
                                                                      £000                        £000  
                                                                                                        
1 January                                                         (24,311)                    (14,025)  
Net actuarial gains                                                 12,478                    (10,286)  
/(losses) in the                                                                                        
year                                                                                                    
                                                                                                        
31 December                                                       (11,833)                    (24,311)  
                                                                                                        
                                                                                                        
                                                                                                        
Experience gains                                                                                        
and losses                                                                                              
                                                                                                        
                                                                      2006                        2005  
                                                                      £000                        £000  
                                                                                                        
Actual return less                                                   9,634                      36,975  
expected return on                                                                                      
schemes' assets                                                                                         
Experience losses                                                  (3,721)                     (5,242)  
arising on schemes'                                                                                     
liabilities                                                                                             
Changes in                                                           6,565                    (42,019)  
assumptions                                                                                             
underlying present                                                                                      
value of liabilities                                                                                    
                                                                                                        
Net actuarial gain/                                                 12,478                    (10,286)  
(loss)                                                                                                  
                                                                                                        
                                                                                                        
History of experience gains                                                                                        
and losses                                                                                              
                                         2006          2005         2004        2003*            2002*  
                                         £000          £000         £000         £000             £000  
                                                                                                        
Actual return less                      9,634        36,975       10,171       19,694         (53,260)  
expected return on                                                                                      
schemes' assets                                                                                         
Percentage of year                         3%           12%           4%          10%              36%  
end scheme assets                                                                                       
Experience (losses) /                 (3,721)       (5,242)      (7,074)        5,650            1,396  
gains arising on                                                                                        
schemes' liabilities                                                                                    
Percentage of the                          1%            1%           2%           2%               1%  
present value of                                                                                        
schemes'                                                                                                
liabilities                                                                                             
                                                                                                        
*The amounts for 2003 and 2002 are those disclosed under FRS17, as reported in prior years.                             
                                                                    
The contribution expected to be paid to the schemes during the year ending 31 December 2007 amounts to  
£19.1 million.                                                                                          
                                                                                                        
Blenkinsopp                                                                                             
                                                                                                        
Blenkinsopp is a section of the industry wide mineworkers scheme covering the pension arrangements      
of the various companies comprising parts of the former British Coal. Blenkinsopp Collieries Limited    
was sold by UK COAL in 1998, however it has since gone into liquidation and the retirement              
liabilities have reverted to UK COAL. The liability of £1.3 million (2005: £1.3 million, 2004: £1.3     
million) has been estimated on an ongoing basis since commencement in 2004.                             
                                                                                                        
                                                                                                        
Concessionary fuel                                                                                      
                                                                                                        
The Group operates a Concessionary Fuel arrangement in the UK. An actuarial valuation was carried       
out by an independent actuary at 31 December 2006.The major assumptions used by the actuary were:       
                                                                                                        
                                                                         2006                   2005    
                                                                                                        
Discount rate                                                           5.10%                  4.70%    
Inflation                                                               3.10%                  2.70%    
assumption                                                                                              
Coal price                                                              3.10%                  2.70%    
inflation                                                                                               
                                                                                                        
                                                                                                        
The amounts recognised in the                                                                                       
balance sheet are as follows:                                                                                           
    
                                              2006          2005         2004       2003*      2002*    
                                              £000          £000         £000        £000       £000    
                                                                                                        
Net liability                             (24,727)      (24,309)     (22,579)    (23,444)   (25,598)    
recognised in the                                                                                       
balance sheet                                                                                           
                                                                                                        
                                                                                                        
                                                                                                        
                                                                                                        
The amounts recognised in the consolidated income statement are:                                        
                                                                         2006                   2005    
                                                                         £000                   £000    
                                                                                                        
Current service                                                         (392)                  (489)    
cost                                                                                                    
Interest cost                                                         (1,138)                  (795)    
Effect of                                                               1,330                  2,989    
curtailment or                                                                                          
settlement                                                                                              
                                                                        (200)                  1,705         
                                                                                                        
The above amounts are charged to cost of sales, except for the interest cost, which is included in      
administrative expenses. A further loss of £0.9 million (2005: gain of £4.0 million) has been           
charged to the consolidated statement of recognised income and expense in the year. This represents     
the net effect of experience and actuarial gains and losses on the scheme in the year.                  
                                                                                                        
                                                                                                        
Analysis of the movement of the                                                                                         
balance sheet liability                                                                                               
                                                                         2006                   2005    
                                                                         £000                   £000    
                                                                                                        
Concessionary Fuel                                                   (24,309)               (22,579)    
reserve at 1                                                                                            
January                                                                                                 
Current service                                                         (392)                  (489)    
cost                                                                                                    
Benefits paid to                                                          637                    560    
former employees                                                                                        
during the year                                                                                         
Interest cost                                                         (1,138)                  (795)    
Actuarial loss                                                          (855)                (3,995)    
Gains on                                                                1,330                  2,989    
curtailments                                                                                            
Concessionary Fuel                                                   (24,727)               (24,309)    
reserve at 31                                                                                           
December                                                                                                
                                                                                                        
                                                                                                        
Cumulative actuarial gains and losses                                                                                   
recognised in equity                                                                                    
                                                                         2006                   2005    
                                                                         £000                   £000    
                                                                                                        
1 January                                                             (1,688)                  2,307    
Net actuarial                                                           (855)                (3,995)    
(loss)/gain in the                                                                                      
year                                                                                                    
                                                                                                        
31 December                                                           (2,543)                (1,688)    
                                                                                                        
                                                                                                        
Experience gains                                                                                        
and losses                                                                                              
                                                                         2006                   2005    
                                                                         £000                   £000    
                                                                                                        
Experience gains on                                                     1,258                      -    
Concessionary Fuel                                                                                      
reserve                                                                                                 
Changes in                                                            (2,113)                (3,995)    
assumptions                                                                                             
underlying present                                                                                      
value of liabilities                                                                                    
Total amount                                                            (855)                (3,995)    
recognised in                                                                                           
statement of income                                                                                     
and expense                                                                                             
                                                                                                        
                                                                                                        
History of experience gains                                                                                        
and losses                                                                                              
                                              2006          2005         2004       2003*      2002*    
                                              £000          £000         £000        £000       £000    
                                                                                                        
Experience gains on                          1,258             -        3,186       4,297        829    
Concessionary Fuel                                                                                      
reserve                                                                                                 
Percentage of                                   5%            0%          14%         17%         3%    
Concessionary Fuel                                                                                      
reserve                                                                                                 
                                                                                                        
*The amounts for 2003 and 2002 are those disclosed under FRS17, as reported in prior years.             
                                                                                                        
                                                                                                        
11 Post balance sheet events                                                                            
                                                                                                        
Sale of Maltby                                                                                          
Colliery                                                                                                
Following the year end,the Maltby Colliery was sold to Hargeaves Services PLC (Hargeaves) with a        
transfer of operational assets and liabilities, together with the workforce. Hargeaves is the second    
largest customer for Maltby. The consideration of £21.5 million resulted in a profit on disposal of     
£13 million.                                                                                            
                                                                                                        
Daw Mill Colliery                                                                                       
As a result of the fatal accident in January 2007 at the Daw Mill Colliery, caused by a fall of         
ground, the Health and Safety Executive ( 'HSE' ) issued an order for a systematic review of ground     
control requirements in an area of the mine associated with current production phase. As a result,      
production at Daw Mill was restricted for over a month. No other operations were affected.              
UK COAL adheres to the highest standards of safety and deeply regrets the fatal accident. The           
Company has offered its fullest sympathies to the family.                                               
                                                                                                        

END 



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