Harworth Group PLC · LSE:HWG
Harworth — UK Coal — FY2004 Earnings Presentation
23 slides from Harworth's earnings presentation, 2005
Slide 1: Preliminary Results Year Ended 31 December 2004
PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2004
Slide 2: Overview
Overview Chairman David Jones
Slide 3: Highlights
Highlights 2004 2003 Operating loss from continuing £(28.7m) £(1.8m) operations before exceptional items Loss before tax £(51.6m) £(1.2m) Cash (outflow) / inflow before dividend £(7.5m) £39.1m Final dividend 1p per share 5p per share Deep mine output 12.0mt 14.8mt Surface mine output 2.0mt 3.1mt Coa
Slide 4: Operational Review and Strategy
Operational Review and Strategy Chief Executive – Gerry Spindler
Slide 5: Strategy
Strategy • Resolve issues in deep mines • Regenerate surface mining business • Develop property 5
Slide 6: Deep Mines - Key Issues
Deep Mines - Key Issues • Workforce disputes (2004 impact ~£10m) - Mostly related to bonus structure - Led to serious performance shortfalls • Poor equipment availability (~£10m) 8 Over-emphasis on Machine Available Time 8 Inadequate time available for prudent preventive maintenance • Mine performan
Slide 7: Deep Mines - Progress to Date
Deep Mines - Progress to Date • Positive Workforce agreements at 2 collieries - Increased face time - Daily Bonuses replaced with different pay structure - Should reduce disputes, reduce management time devoted to complex bonus schemes, and improve ability to plan complex mining activities - Reduces
Slide 8: Surface Mines – Key Issues
Surface Mines – Key Issues • Replaces imports • 100 million tonnes of reserves -20:1 ratio overburden to coal • Economic at today’s prices • Planning permissions represent barrier • Surface mine schemes have low cost start up which would produce higher operating margins combined with low operational
Slide 9: Surface Mines – Key Tasks
Surface Mines – Key Tasks • 4.7m tonnes for four sites to be submitted for planning approval in 2005 • 3 additional sites under appeal with 2.7m tonnes • Working to change attitudes -Environmentally sensitive schemes -Brownfield site regeneration (complete with mining) -High standard of rehabilitati
Slide 10: Contracted ESI Sales and Estimated Other Markets
Contracted ESI Sales and Estimated Other Markets 2005 £1.301-£1.309/GJ 2006 £1.300-£1.361/GJ Firm ESI Financial Year Drax FM 2007 £1.312-£1.460/GJ Other Markets 2008 £1.336-£1.487/GJ 2009 £1.321-£1.468/GJ 0 2 4 6 8 10 12 14 16 18 Million tonnes per annum ESI includes sales to Alcan / Sembcorp Prices
Slide 11: NW Europe Spot Steam Coal Price
NW Europe Spot Steam Coal Price (Delivered Into Deep Water Ports) 80 Actual 70 Forward Mar03 60 Forward Sep03 $ / tonne Forward 50 Mar04 Forward 40 Sep04 Forward 30 Dec04 Forward Feb05 20 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 Source: MCIS/TFS Brokers Basis: <1%S, CIF NW Europe,
Slide 12: Property - Key Issues
Property - Key Issues • Four key focus areas: Business parks Agricultural land • Increase occupancy • Land bank for surface mining • Grow rental income • Surplus land • Add parks • Develop rental incomes • Good yields Brownfield re-generation • Restore operating sites Utilize planning to leverage al
Slide 13: Financial Results
Financial Results Finance Director Chris Mawe
Slide 14: Segmental Profit/(Loss)
Segmental Profit/(Loss) Year ended 31 December 2004 2004 2003 £m £m Coal sales - Deep Mines (37.8) (8.6) Coal sales - Surface Mines 4.1 0.7 Other businesses 3.1 4.3 Australia coal sales (1.2) (4.0) Property activities - rentals & ongoing 1.5 1.1 Loss before interest & exceptional items (30.3) (6.5)
Slide 15: Movement in Operating Profit before Interest and Exceptional Items
Movement in Operating Profit before Interest and Exceptional items "Deep Mine" Movement 2003 to 2004 50 21.0 17.0 30 10 £ millions -10 (8.6) (2.8) mT (37.8) -30 -50 (67.2) -70 e ..m e t 03 04 os ic .u 20 20 Pr C ool VV 15
Slide 16: Exceptional Items
Exceptional Items 2004 2003 £m £m Redundancy (6.3) (2.7) Selby post coaling (6.2) - Other closure items - 0.7 Impairment re Ellington Colliery (3.1) - Net redundancy & closure costs (15.6) (2.0) Surface mine equipment written down (4.3) - Pension deficit of company disposed of (1.3) - Stobswood rest
Slide 17: Cash Flow
Cash Flow year ended 31 December 2004 2003 £m £m EBITDA 2.2 52.5 Surface mine restoration (8.1) (18.3) Reduction in coal stocks 11.2 19.3 Investment Aid received 15.2 - Other working capital and provisions (2.3) (0.4) Net redundancy payments inc. Government contribution (18.3) (7.1) Cash inflow from
Slide 18: Balance Sheet
Balance Sheet 31 Dec 2004 31 Dec 2003 £m £m Fixed assets 364.6 399.9 Stocks 47.6 59.5 Debtors 69.9 82.4 Cash (less bonded cash) 0.3 1.4 Total Assets 482.4 543.2 Creditors 156.6 152.7 Provision for liabilities (less bonded cash) 155.2 168.0 Net Assets 170.6 222.5 Equity shareholders’ funds 170.6 222.
Slide 19: Pensions (defined benefit schemes)
Pensions (defined benefit schemes) 2004 2003 £m £m Charge to profit & loss (SSAP24) 14.5 13.4 Charge to profit & loss (FRS17) 13.3 21.1 Contributions paid 16.6 14.6 FRS17 Opening deficit 102.7 108.1 (Increase)/decrease 10.5 (5.4) Closing deficit 113.2 102.7 • Actuarial loss from Improved life expect
Slide 20: Contingent Liability
Contingent Liability • Potential claim lodged following recent European ruling • Estimated cost range between zero and around £30 million. • UK COAL is vigorously defending this claim. • No provision in the 2004 year end accounts 20
Slide 21: Investment Aid
Investment Aid • Total aid available £50.9m • £24.6m to be claimed in 05/06 2003 2004 Revenue 3.4 8.6 Capital 2.0 12.3 Total 5.4 20.9 Cash received 15.2 21
Slide 22: Outlook
Outlook • Business positioned well - High coal prices - Durable markets - Strategic location of operation • Growth opportunities - Deep mines improved potential operational efficiency - Surface mines planning - Property growth • Rationalisation required – job still to do • 2005 transitional year • 2
Slide 23: Preliminary Results Year Ended December 2004
PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2004