Trading Update H110
19 July 2010
UK COAL PLC
("UK COAL" or the "Group")
Pre-close trading update for the six months ended 26 June 2010
UK COAL today issues its pre-close trading update, together with an outlook statement for the full year, prior to the publication of its Interim Results for the six months ended 26 June 2010 on 25 August 2010.
The Group continues to prioritise its safety culture and has seen some significant steps on a long journey in a number of areas in the first half of 2010. In particular, there has been a 50% reduction in the number of major injuries in the first half of 2010 compared to 2009.
Mining
Average realised sales price: Reflecting the rise in the world coal price over the period together with the move from our legacy contracts towards new supply contracts, our average realised sales price for the first half of 2010 was £1.97/GJ (H1 2009: £1.80/GJ, FY 2009: £1.87/GJ).
The outstanding tonnage to be delivered under legacy contracts continues to fall and the mix of supply is moving more towards the previously announced new or amended long-term contracts, which significantly increases our long-term contracted coal prices and our short-term cash flows. The legacy contracts will have been largely fulfilled by the end of this year, leaving only a further 2.6m tonnes to be delivered, predominantly in 2011.
Production: Total first half production was 2.7m tonnes (H1 2009: 3.7m tonnes, FY 2009: 7.0m tonnes), of which deep mine production was 2.2m tonnes and surface mine production was 0.5m tonnes (H1 2009: 3.0m tonnes and 0.7m tonnes respectively, FY 2009: 5.7m tonnes and 1.3m tonnes respectively).
Deep mines: As previously announced, the first quarter deep mine production of 0.8m tonnes (Q1 2009: 1.4m tonnes) was substantially affected by the delayed start to the new face at Daw Mill and by lower performance from Kellingley and Thoresby, as they mined through poor geology in the last of the coal in the old seams.
Second quarter deep mine production rose sharply to 1.4m tonnes (Q2 2009: 1.6m tonnes). This reflected Kellingley and Thoresby being fully ramped up on their new seams during the whole quarter, and Daw Mill fully ramped up by the end of May. Over the last six weeks prior to this announcement, weekly production from the deep mines averaged 137,000 tonnes, in line with expectations.
During the first half of 2010, Thoresby and Kellingley respectively increased production by 50 and 100 per cent. compared to their production in the first half of 2009, with development work continuing well on track. Daw Mill is now producing in line with its expected run-rate and the focus on its development work has increased. Welbeck, as expected, ceased mining in May, and its first half production was 0.2m tonnes (H1 2009: 0.5m tonnes).
Surface mines: Surface mines operated with three operating mines for the majority of the first half, compared to five operating mines for the majority of the first half of 2009, following the completion of coaling at Long Moor in January 2010. Second half 2010 surface mine production is expected to benefit from the opening of Park Wall North and Potland Burn in the summer and Huntington Lane in the final quarter of 2010.
We are in advanced negotiations regarding the sale of our Blair House, Fife surface mine site, with the sale expected to be completed in July 2010.
Production figures for the individual mine operations are as follows:
|
|
Q1 2010 |
Q2 2010 |
H1 2010 |
H1 2009 |
FY2009 |
|
|
m tonnes |
m tonnes |
m tonnes |
m tonnes |
m tonnes |
|
Daw Mill |
0.2 |
0.4 |
0.6 |
1.7 |
2.9 |
|
Kellingley |
0.3 |
0.5 |
0.8 |
0.4 |
1.0 |
|
Thoresby |
0.2 |
0.4 |
0.6 |
0.4 |
0.8 |
|
Welbeck |
0.1 |
0.1 |
0.2 |
0.5 |
1.0 |
|
Total deep mines |
0.8 |
1.4 |
2.2 |
3.0 |
5.7 |
|
Surface mines |
0.2 |
0.3 |
0.5 |
0.7 |
1.3 |
|
Total production |
1.0 |
1.7 |
2.7 |
3.7 |
7.0 |
Property
Progress on planning has continued across our brownfield portfolio during the first half, and agricultural land values have remained strong.
We have made significant progress on a number of residential schemes, both in submitting representations and in preparation for submitting planning applications. Applications for over 1,500 new homes and for 894,000 sq ft of employment space have been submitted during the first half. This brings the total planning applications awaiting determination to around 5,900 new homes and 4.4 million sq ft of employment space.
On 22 June 2010, The Secretary of State for the Department of Communities and Local Government confirmed that, following a review of the Waverley planning applications, he would not be intervening. This empowers Rotherham Metropolitan Borough Council to issue decision notices comprising a new residential community of 3,900 homes and 165,000 sq ft of mixed employment and community uses and, secondly, a 645,000 sq ft Government Office Campus being developed in association with Helical Governetz.
Overall, the commercial and residential property markets continue to show signs of recovery, but there remain regional disparities in the speed and solidity of the recovery in values.
For the first half of the year, planning gains and the strength of agricultural land values have done much to offset the weaker employment land market. We therefore expect the value of our portfolio as of the end of June 2010 to be around £384m, compared to £394m as at the end of December 2009.
The programmes we have announced, to dispose of surplus agricultural land and to explore a greater degree of joint venturing on development of our brownfield sites are now well underway, and we are seeing substantial interest.
Overall
The Group's overall first half operating loss, including the Group's share of the results of its joint ventures, is expect to be around £52m before revaluation movements and non-trading exceptional items (H1 2009: £37.7m loss). Non-cash property valuation losses are expected to be around £10m (H1 2009: £37.4m loss).
As previously announced, the Group refinanced and increased its bank facilities in April this year. In accordance with accounting standards, we are required to write-off both previous arrangement fees and related fair values which have previously been hedge accounted, as well as the new arrangement fees. The carrying value of the previous arrangement fees and hedging costs of a combined £5m have accordingly been expensed as an exceptional item, together with an estimated £5m in respect of the new arrangement fees, the ultimate cost of which is dependent on the value of land sales achieved.
Exceptional legal and professional fees of approximately £7.5m were incurred in the first half, principally relating to the refinancing exercise. These, together with around £1m of Harworth maintenance costs, will be treated as exceptional items in the period.
As a result of the above, first half exceptional finance costs are expected to be around £10m (H1 2009: nil), and non-trading exceptional costs are expected to be around £8.5m (H1 2009: £3.7m).
Interest and other financing costs are expected to be around £13.5m (H1 2009: £10.2m), excluding the arrangement fees and the write off of previously hedged fair value movements referred to above.
The total first half pre tax loss is therefore expected to be around £94m (H1 2009: £81.5m).
Net debt excluding restricted cash and generator loans/prepayments at 26 June 2010 is expected to be around £170m (December 2009: £114.3m). Including generator loans/prepayments, but excluding restricted cash, net debt is expected to be around £255m (December 2009: £181m).
Outlook
We continue to expect full year production to be around 7.6m tonnes, with deep mines production of around 6.0m tonnes (FY 2009: 5.7 m tonnes) and production from our surface mines of around 1.6m tonnes (FY 2009: 1.3m tonnes).
In Harworth Estates, we expect to complete a significant part of the disposal of our surplus agricultural land before this year end and we expect to identify JV partners for major residential development schemes in autumn this year, as well as continued progress in obtaining planning consents.
For further information please contact:
Media:
|
Anthony Carlisle, Citigate Dewe Rogerson |
Tel: +44 (0) 20 7638 9571 Mobile: +44 (0)7973 611 888 |
Analysts and investors:
|
Jon Lloyd (Chief Executive, UK COAL) |
Tel: +44 (0) 1302 755 002 |
|
David Brocksom (Finance Director, UK COAL) |
Tel: +44 (0) 1302 755 013 |
|
|
|
|
Nick Cox-Johnson, Citigate Dewe Rogerson |
Tel: +44 (0) 20 7638 9571 |
This information is provided by RNS
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