Harworth Group Plc · LSE:HWG
Harworth — UK Coal — H1 2009 Earnings Presentation
40 slides from Harworth's earnings presentation, Aug 27, 2009
Slide 1: 2009 Interim Results
2009 INTERIM RESULTS 27 August 2009
Slide 2: UK Coal: Strong platform for value creation
UK Coal : Strong platform for value creation Mining • Daw Mill demonstrating improved reliability • Kellingley and Thoresby on track for new seams • Development performance significantly improved • Long term pricing remains good despite short term volatility Harworth Estates • Continuing to progress
Slide 3: Results for First Half of 2009
Results for First Half of 2009 • Total sales 3.6mt (2008 H1: 3.7mt) • Total production 3.7mt (2008 H1: 3.7mt) • Deep mines 3.0mt (2008 H1: 2.8mt) • Surface mines 0.7mt (2008 H1: 0.9mt) • Average realised sales price £1.80 / gigajoule (2008 H1: £1.79/GJ) • Revenue £159.8m (2008 H1: £172.9m) • Harwort
Slide 4: Outlook
Outlook • Second half: difficult geology at Kellingley and Thoresby • New seams opening in Q1 2010 • Significantly improved mining productivity from 2010 • Costs reduced by closure of Welbeck • Deep mine output to be broadly unchanged • Pricing outlook progressively better 2010-2012 as new contractu
Slide 5: Group Financials
GROUP FINANCIALS
Slide 6: Segmental Income Statement
Segmental Income Statement £m H1 2009 H1 2008 FY 2008 Deep mines (35.9) (24.2) (12.8) Surface mines (3.2) 5.0 10.4 - surface mines restoration provision - (5.6) Other (0.2) 0.1 (0.5) Total mining, including power (39.3) (24.7) (2.9) Property Realised gains from investment properties 0.7 0.1 3.7 Othe
Slide 7: Tonnage Commitments as of end June 2009
Tonnage Commitments as of end June 2009 m tonnes Total 2009 2010 2011 2012 2013 2014 2015 Fully floating* 4.6 0.6 1.3 1.3 1.3 0.1 - - Floating within caps and floors** 8.9 0.8 1.2 2.5 3.1 0.4 0.6 0.3 Fixed subject to indexation*** 7.5 2.3 3.9 1.3 - - - - Fixed 11.2 0.6 1.1 2.1 1.9 1.9 1.8 1.8 Total
Slide 8: Contractual Commitments: Average Realised Sales Price £/GJ
Contractual Commitments: Average Realised Sales Price £/GJ API#2 Assumptions £/GJ 2009 2010 2011 2012 2013 2014 2015 £3.00 2.08 2.12 2.54 2.94 2.55 2.52 2.50 £2.75 2.04 2.08 2.48 2.84 2.54 2.52 2.50 £2.50 2.01 2.03 2.41 2.74 2.54 2.52 2.50 £2.25 1.97 1.97 2.30 2.57 2.49 2.47 2.46 £2.00 1.94 1.92 2.2
Slide 9: Revenue
Revenue £m H1 2009 H1 2008 FY 2008 Deep mines output (m tonnes) 3.0 2.8 6.2 Surface mines output (m tonnes) 0.7 0.9 1.7 Production (m tonnes) 3.7 3.7 7.9 Sales (m tonnes) 3.6 3.7 7.9 Average sales price (£/GJ) 1.80 1.79 1.62 Average calorific value (GJ/tonne) 24.0 24.8 24.4 £m £m £m Coal sales 153.9
Slide 10: Mines: Overview
Mines : Overview Production Cash cost before depreciation H1 2009 H1 2008 FY 2008 H1 2009 H1 2008 FY 2008 Deep mines m tonnes m tonnes m tonnes £m £m £m Daw Mill 1.7 1.6 3.2 55.1 45.7 96.9 Kellingley 0.4 0.5 1.2 38.1 35.7 72.4 Thoresby 0.4 0.3 0.9 31.7 32.9 63.1 Welbeck 0.5 0.4 0.9 28.9 26.8 57.7 To
Slide 11: Operating Costs
Operating Costs £m H1 2009 H1 2008 FY 2008 Deep mines costs excluding depreciation 145.0 136.7 287.1 Surface mines costs (including SM amortisation), excluding depreciation 33.3 31.6 63.1 Revaluation of SM restoration provisions - 5.6 - Total mining costs, excluding depreciation 178.3 173.9 350.2 Ot
Slide 12: Exceptionals, Finance and Tax
Exceptionals, Finance and Tax £m H1 2009 H1 2008 FY 2008 Non-trading exceptional items Profit on sale of joint venture 6.5 - - Closures and redundancies (0.7) (0.4) (0.6) Costs associated with Harworth colliery (2.2) (0.5) (3.4) 3.6 (0.9) (4.0) Net finance costs Bank interest and other (7.1) (5.5) (
Slide 13: Income Statement
Income Statement £m H1 2009 H1 2008 FY 2008 Revenue 159.8 172.9 392.5 Total costs (198.6) (197.0) (394.4) Profits on disposal of investment properties 0.7 0.1 3.7 Operating (loss)/profit before revaluation of investment properties (38.1) (24.0) 1.8 Revaluation of investment properties (37.4) 19.8 -
Slide 14: Cashflow
Cashflow £m H1 2009 H1 2008 FY 2008 Operating loss (71.8) (5.1) (2.2) Revaluation of property 37.4 (19.8) - Profits on sale of fixed assets and investment properties (0.7) (0.1) (3.7) Depreciation/diminution 17.9 20.3 37.9 Profit on sale of joint venture (6.5) - - Surface mines restoration provision
Slide 15: Borrowings – Bank Debt
Borrowings – Bank Debt £m Jun-09 Movement Dec-08 Gross bank debt (152.9) 26.5 (179.4) Unrestricted cash 9.4 (32.9) 42.3 Net bank debt less unrestricted cash (143.5) (6.4) (137.1) Generator loans and prepayments (47.3) (47.3) - Total debt less unrestricted cash (190.8) (53.7) (137.1) Restricted cash*
Slide 16: Balance Sheet
Balance Sheet £m H1 2009 H1 2008 FY 2008 Fixed assets Operating assets 194.4 191.0 181.8 Surface mines development assets 24.7 31.1 28.5 Investment properties 366.9 413.9 404.7 Deferred tax asset 36.1 36.0 36.1 Other 2.2 3.4 4.2 624.3 675.4 655.3 Inventories 58.5 46.2 46.7 Debtors 25.4 42.4 40.0 Cre
Slide 17: Retirement Benefit Liabilities
Retirement Benefit Liabilities £m Total Pensions Fuel Deficit January 2009 (104.0) (74.8) (29.2) Contributions paid less current service cost 3.1 2.9 0.2 Interest cost less expected return on assets (3.5) (2.5) (1.0) Difference between actual return and expected return on assets (13.6) (13.6) - Actu
Slide 18: Provisions
Provisions Dec 2008 Within 1 Within 1-2 Within 2-5 More than 5 June 2009 Restricted Total £m year years years years Total cash provisions Provisions offset by restricted funds Employee insurance liabilities etc 7.1 4.5 6.5 0.6 18.7 19.1 18.7 Surface damage (subsidence) 3.6 2.5 5.2 1.7 13.0 8.5 13.4
Slide 19: Mining and Power
MINING AND POWER
Slide 20: Mining: Overview
Mining : Overview Market environment • Short term demand for coal affected by economic recession • 2010 onwards - coal price indicators stronger • Very strong customer relationships helping to support investment in the future • New and amended contracts now in place Developing the business • Three h
Slide 21: Deep Mines
Deep Mines Daw Mill • Belt replacement programme in Q4 2008 has improved reliability of the mine • Fastest 2m tonnes in year ever mined from single coal face achieved 8 August 2009 • Successful development programme of 2,700m in H1 2009 compared to 2,000m in FY 2008 Kellingley • Poor geology has bli
Slide 22: Surface Mines
Surface Mines Surface mines output of 0.7m tonnes (2008 H1: 0.9m tonnes) • Production at Cutacre affected by former mine workings • Steadsburn output affected by need to get through thin seams to good coal • Muckshift to coal production ratio higher than expected • Resulting increase in cost per GJ
Slide 23: Mining: Future
Mining : Future Improved productivity. Improved pricing outlook. Substantial reserves. • Daw Mill Current block 20+mt to c.2016 Then potentially 400’s block - investment 2010+ - 30-40+m tonnes potential coal • Kellingley 20mt in Beeston project to c.2019 Additional potential thereafter • Thoresby 12
Slide 24: Harworth Estates
HARWORTH ESTATES
Slide 25: Harworth Estates
Harworth Estates • Prince of Wales/Baileycross, Pontefract –planning consent received for 917 homes and 260,000 sq ft of office, retail and community uses • In H1 2009 we received planning committee approvals for 169 homes and submitted planning applications for 585 homes and 370,000 sq ft of commer
Slide 26: RICS Valuation
RICS Valuation RICS VALUATION Jun-09 Dec-08 % Jun-08 Dec-08 like-for-like* Agricultural 115.6 110.2 5% 111.7 119.2 Undeveloped land 202.5 239.5 (15%) 253.0 231.1 Commercial land with rental income 48.8 54.6 (11%) 52.8 54.3 Investment Properties at valuation 366.9 404.3 (9%) 417.5 404.7 Operational 1
Slide 27: Summary
Summary Mining • Daw Mill demonstrating improved reliability • Kellingley and Thoresby on track for new seams • Development performance significantly improved • Long term pricing remains good despite short term volatility Harworth Estates • Continuing to progress planning – market appears to be stab
Slide 28: Thank you
Thank you
Slide 29: Appendices
APPENDICES Appendix I Harworth Estates Principal Events Appendix II Principal Sites Appendix III Project Worth December 2008 Appendix IV Coal Market Statistics Appendix V UK Coal Principal Locations
Slide 30: Appendix I: 2009 H1 Principal Events
2009 H1 : Principal Events Appendix I Baileycross, Pontefract (J32 M62 / A1M) • Outline Planning Consent for phase 1 • 917 homes and 261,000 sqft office / employment space Waverley J33 M1 Sheffield Parkway • Evolution Park, 94,000 sqft built (25% let), part of Advanced Manufacturing Park, • Highfiel
Slide 31: Appendix I: 2009 H1 Principal Events
2009 H1 : Principal Events Appendix I Cutacre (J4 M61 Bolton) – major strategic site adjoining Greater Manchester motorway network • Evidence submitted to support inclusion in Bolton’s Core Strategy as potential 271 acre premium mixed use Business Park following completion of restoration in 2013 Gas
Slide 32: Appendix II: RICS value of principal sites
2009 H1: RICS value of principal sites Appendix II £m Waverley, Sheffield - new community 20-50 Highfield Commercial - JV with Helical for Government Campus 7.5-10 AMP - successful JV’s with Yorkshire Forward & Strategic Sites 5 -7.5 Baileycross, Pontefract - 297 acres, 1,300 homes, 261k sq ft emplo
Slide 33: Appendix III: Project Worth estimates at December 2008
Project Worth estimates at December 2008 Appendix III 2012 2013 2014 1,600 1,400 • December 2006 £800 m 1,200 • December 2007 £935 m £1 bn 1,000 £ million • December 2008 mid case £668 m £783 m £886 m 800 600 400 Portfolio of: • 200 Projects 77 • 0 Gross acreage 13,290 acres 2008 2009 2010 2011 2012
Slide 34: UK electricity generation by fuel type
UK electricity generation by fuel type Appendix IVa • Steady decline in nuclear coupled with high coal price in summer both helped increase gas burn in 2008 • 2008 first year of Large Combustion Plant Directive influence (%) 2000 2001 2002 2003 2004 2005 2006 2007 2008 Coal 32.1 34.4 32.3 35.0 33.6
Slide 35: Steam Coal Supplies to UK Market 2008
Steam Coal Supplies to UK Market 2008 Appendix IVb 15% 18% UK COAL Russia 11% Colombia S Africa Other Imports Other Indigenous 8% 38% 10% Source: DECC Energy Statistics/McCloskey Coal 35
Slide 36: Electricity Generation: Capacity & Peak Demand Projections
Electricity Generation: Appendix IVc Capacity & Peak Demand Projections • Annual demand expected to grow by 120,000 ~1% per annum • 20GW by 2020 new build requirement 100,000 • 8GW Committed new build • 1.7GW New interconnector 80,000 • Increasing interest in new build as margins widen • Turbine/con
Slide 37: Forecast Worldwide Coal Burn
Forecast Worldwide Coal Burn Appendix IVd 12 10 China Billion Tonnes India 8 North America Europe Australia 6 Pacific Africa Russia Other Asia 4 South America Others 2 0 1990 2005 2010 2015 2020 2025 2030 Source: US Energy Information Agency 2008 37
Slide 38: Predicted coal burn for UK power generation
Predicted coal burn Appendix IVe for UK power generation 60 55 50 45 Mt per year 40 35 30 25 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Central Low High Source : DECC Energy markets Outlook, December 2008 38
Slide 39: UK Coal Principal Locations
UK COAL Principal Locations Principal locations Appendix V 39
Slide 40: Disclaimer
Disclaimer • These presentation slides contain certain forward-looking statements with respect to the operations, performance and financial condition UK COAL. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ mate