Harworth Group PLC · LSE:HWG
Harworth — UK Coal — H1 2005 Earnings Presentation
27 slides from Harworth's earnings presentation, 2005
Slide 1: Interim Results, Six Months to 30 June 2005
INTERIM RESULTS SIX MONTHS TO 30 JUNE 2005
Slide 2: Operational Review
Operational Review Chief Executive – Gerry Spindler
Slide 3: Operational Review
Operational Review • Production at ongoing collieries 3.9 million tonnes (2004: 3.6 million tonnes) • First half targeted: - Costs - Management process - Industrial relations - Working practices - 4 mines under review - 6 new face kit ups • Improvement in cost management gave performance as expected
Slide 4: H1 Production Comparison by Mine
H1 Production Comparison by Mine Colliery 2005 2004 Diff Daw Mill 718 1,325 -607 Harworth 278 541 -263 Ellington 91 281 -190 - 1,126 kt Rossington 165 231 -66 Maltby 432 440 -8 Welbeck 467 429 38 Thoresby 786 420 366 + 1,195 kt Kellingley 1,044 253 791 Sub-Total 3,981 3,920 61 Selby Mines 0 2,080 -2
Slide 5: Management Action having effect
Management Action having effect H1 2005 H1 2004 1,400,000 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 Kellingley Thoresby Welbeck Maltby Daw Mill 2005 Interim Results Presentation 5
Slide 6: Impact of Face Gaps of 2005 H1
Impact of Face Gaps of 2005 H1 • Six planned face transfers during H1 2005 - Week Number Face Gap 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Weeks Jan Feb March April May June Daw Mill 11 Kellingley 3 Maltby 10 Rossington 13 Harworth 4 Thoresby 2 Welbeck 0 Combined Total 43
Slide 7: Planned face transfers during 2005 H2
Planned face transfers during 2005 H2 • Two planned face transfers during H2 • Fewer face transfers will increase output and lower unit costs 2005 - Week Number Planned 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 Face gap weeks July August September October November
Slide 8: Issues and Progress
Issues and Progress • Positive workforce agreements - Now implemented at four collieries 8 Resulting in guaranteed time at the coal face 8 Reduction in disputes (4,400 shifts in H1 2004, nil in H1 2005) 8 Management focused in on planning complex mining activities 8 Workforce response has been posit
Slide 9: Focus for H2 2005
Focus for H2 2005 • Mine Manager accountability -Weekly accountabilities to key KPI’s focusing in on short term improvements • Cycle time improvement -Cycle time analysis, breaking the cycle down into its component parts ascertaining best practice and communicating this across all shifts • Shift han
Slide 10: Surface Mines
Surface Mines • Production 0.6 million tonnes (2004: 1.2 million tonnes) • Reserves with planning permission 2.7 million tonnes -Includes 1.5 million tonne site due to start production in 2006 • 620,000 tonnes submitted for planning in H1 – decisions expected in H2 • 2.7 million tonnes awaiting dete
Slide 11: NW Europe Spot Steam Coal Price
NW Europe Spot Steam Coal Price (Delivered Into Deep Water Ports) 80 70 Actual 60 $ / tonne Forward 50 Dec03 40 Forward 30 Aug05 20 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 Source: McCloskey Group / TFS Brokers Basis: <1%S, CIF NW Europe, 6000 Kcal / Kg NAR (25.122 GJ/Tonne) 20
Slide 12: Market & Contracts
Market & Contracts • High energy prices persist • Contracts renegotiated -More reflective of current international market -38 million tonnes in contract to 2010 -Price should be around £1.36/GJ next year • Drax force majeure resolved amicably -Shortfall (750,000 tonnes) delivered by March 2006 at pr
Slide 13: Contracted ESI Sales and Estimated Other Markets
Contracted ESI Sales and Estimated Other Markets 2005 £1.30- £1.31/GJ ESI Firm Price 2006 £1.30- £1.36/GJ Financial Year ESI Floating 2007 £1.31- £1.46/GJ Price - between cap and collar 2008 £1.32- £1.47/GJ Other Markets Estimate 2009 £1.31- £1.45/GJ 0 2 4 6 8 10 12 14 16 18 Million tonnes per annum
Slide 14: Property Strategy
Property Strategy • Management focused on specific value added projects • Three key areas: -Commercial lets -Development properties -Agricultural Land • Joint Ventures 14
Slide 15: Independent Property Valuation
Independent Property Valuation • On a like for like basis property shows gain of £74.9m (37%)* Summary of Properties Book Value Valuation Valuation 30-Jun-05 30-Jun-05 31-Dec-04 £000 £000 £000 Sites with Planning for development 260 32,260 41,420 Working Surface Mines 9,056 73,925 49,696 Surface Min
Slide 16: Property - Operational Review
Property - Operational Review • Rental income - £2.5m (2004: £2.1m) -Strong tenant demand and rental growth at business parks and major new agreement (50 year lease at Cannock) • Proceeds from disposals - £8.2m (2004: £1.9m) -Primarily Tetron Point and Waverley AMP land sold above valuation after be
Slide 17: Property Outlook
Property Outlook • Further sales expected in the second half • New lettings expected in H2 will add circa £400,000 to annual rent roll - This will maximise current value of those properties; and - Will further increase the value of the property portfolio • Several joint ventures for commercial devel
Slide 18: Other Businesses
Other Businesses • Harworth Power -Generated 48,000 MWh of electricity with a value of £1.9 million in H1 -Installed capacity 32MW -Progressing planning for up to 40 wind turbines with a capacity of 80MW 8 First planning decision expected in Q4 18
Slide 19: Financial Results
Financial Results Finance Director - Chris Mawe
Slide 20: Segmental Profit/(Loss)
Segmental Profit/(Loss) Six months ended 30 June 2005 2005 2004 £m £m Coal sales - Deep Mines (29.8) (23.9) Coal sales - Surface Mines 1.4 4.2 Other businesses 3.3 1.5 Property activities 10.4 2.4 Loss before interest & exceptional items (14.7) (15.8) Exceptional items (14.6) 7.7 Profit on sale of b
Slide 21: Exceptional Items
Exceptional Items Six months to June 2005 2004 £m £m Redundancy (2.4) 3.3 Ellington post coaling (5.1) - Other closure items (2.1) - Impairment re Rossington Colliery (5.6) - Recovery costs (7.5) - Net redundancy & closure costs (22.7) 3.3 Coal Investment Aid 8.1 4.4 Profit on sale of business 2.9 -
Slide 22: Cash Flow
Cash Flow Six months ended 30 June 2005 2004 £m £m Profit before tax (30.6) (1.4) Depreciation 26.4 22.4 Profit on sale of business/assets (7.8) (11.3) Other non cash movements (1.2) 1.0 (13.2) 10.8 Surface mine restoration (4.8) (4.6) Reduction in stocks 7.1 2.2 Other working capital (13.6) 1.5 Net
Slide 23: Balance Sheet
Balance Sheet 30 June 2005 30 June 2004 £m £m Non Current assets 358.6 375.1 Stocks 37.1 56.2 Debtors 53.6 92.2 Cash (less bonded cash) 0.4 0.8 Total Assets 449.7 524.3 Creditors 171.5 150.6 Provision for liabilities (less bonded cash) 109.7 138.7 Pension obligations 140.2 127.0 Net Assets 28.3 108.
Slide 24: Contingent Liability
Contingent Liability • Merits of the claim unchanged • Potential claim to provide certain pension related benefits on redundancy -Latest estimated cost range between zero and around £40 million (2004: between zero and £30 million) -Increase due to additional redundancies and higher pensionable salar
Slide 25: IFRS Conversion: Overview of Financial Impact
IFRS Conversion Overview of Financial Impact 2004 UK GAAP IFRS Difference • Improvement in loss before tax £000 £000 £000 - Profit on disposal of Gloucester Coal • Reduction in net assets Loss before tax (5,847) (1,352) 4,495 - Recognition of pension deficit on balance sheet Basic loss per share (4.
Slide 26: Outlook
Outlook • 2005 transitional year • Business positioned well - More consistent production in H2 – fewer face gaps - Benefits from ongoing reorganisation of workforce and working practices - High coal prices – UK COAL will benefit following contract renegotiations - Durable markets - Transport advanta
Slide 27: Interim Results, Six Months to June 2005
INTERIM RESULTS SIX MONTHS TO 30 JUNE 2005