Harworth Group PLC · LSE:HWG
Harworth — UK Coal — H1 2006 Earnings Presentation
27 slides from Harworth's earnings presentation, 2006
Slide 1: Interim Results: Six Months to 30 June 2006
INTERIM RESULTS SIX MONTHS TO 30 JUNE 2006
Slide 2: Group Highlights
Group Highlights • Return to Group profitability following restructuring • Operating profit £12.0m (2005: £26.4m loss) • Profit before tax £7.0m (2005: £30.5m loss) • Coal sales up 19% (5.7m tonnes) Sales prices up 7% (£1.39/GJ) • Deep mines made small loss (£0.9 m) (2005: £44.4m loss) • Surface min
Slide 3: Operational Review: Deep Mines
Operational Review Deep Mines • H1 loss £0.9m: Q2 incurred higher costs accessing new reserves • Output up or sustained across all mines (5.3m tonnes) (2005: 4.0m tonnes) -Output more than doubled at Daw Mill to 1.6m tonnes • Cost base increased reflecting higher power, steel and increased developme
Slide 4: H1 Production Comparison by Mine
H1 Production Comparison by Mine Output sustained or increased across all mines Production - 6 months to June (m t) H1 2006 H1 2005 Change Daw Mill 1.6 0.7 0.9 Kellingley 1.2 1.0 0.2 Thoresby 0.9 0.8 0.1 Welbeck 0.6 0.5 0.1 Maltby 0.4 0.4 0.0 Harworth 0.4 0.3 0.1 Rossington 0.2 0.2 0.0 Other Closed
Slide 5: Issues and Progress
Issues and Progress • Workforce agreements -Now consolidated across all ongoing mines -No disputes H1 2006 • Safety review after two Daw Mill fatalities in June and August -Independent facility team – safety procedures, compliance and accountability audits -Independent technical overview from Dr B J
Slide 6: Impact of Face Gaps of 2006 H1
Impact of Face Gaps of 2006 H1 • Three planned face transfers during H1,Thoresby deferred to H2 • Welbeck extended due to difficult conditions on face line 2006 - Week Number Face 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 Gap Weeks Jan Feb March April May June Daw Mill Kel
Slide 7: Face transfers during 2006 H2
Face transfers during 2006 H2 • Thoresby face transfer H2 (Was planned in H1) • No face transfers in last 4 months - increase output and lower unit costs • Welbeck extended due to difficult conditions 2006 - 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
Slide 8: Harworth
Harworth • Colliery to be mothballed following salvage of equipment from current face • Current face stopped short due to severe geological problems in gate roads • Next face development would be subject to same conditions and additional faulting • Colliery evaluating viability of reserves in altern
Slide 9: Surface Mines
Surface Mines • Good progress made rebuilding business • Applications granted for two sites (1.6m tonnes) -Now have four sites with planning operational Q4 2006-2007 (3.4mt) 8 Cutacre (1.5mt, Long Moor 0.7mt (subject to High Court appeal), Stony Heap 0.3mt, Stobswood North 0.9mt (all to mine 2006-9)
Slide 10: Coal Demand & Future Pricing
Coal Demand & Future Pricing Coal Demand • Coal burn forecast at 60 to 70mt per year for next 10 years (significantly increased compared to previous estimates) • Import capacity limited at around 45m tonnes (mainly rail factors) • Indigenous coal output required of around 20m tonnes • Strong forward
Slide 11: NW Europe Spot Steam Coal Price
NW Europe Spot Steam Coal Price (Delivered Into Deep Water Ports) 1.8 1.7 1.6 Actual 1.5 1.4 1.3 £/GJ 1.2 Forward 1.1 Aug06 1 0.9 0.8 Forward 0.7 Dec 05 0.6 0.5 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 Source: McCloskey Group / TFS Brokers Basis: <1%S, CIF NW Europe, 6000 K
Slide 12: Energy Review
Energy Review Energy Review • Initial conclusions for diverse energy portfolio. White Paper in early 2007 Creation of the Coal Forum and a place recognised for indigenous coal Coal Forum & Investments • The Coal Forum to be established to help investment in economic reserves with appropriate contrac
Slide 13: Existing Contracts
Existing Contracts • Average UK Coal sales price in the first 6 months increased to £1.39/GJ (June Cum 2005:£1.30/GJ) (Still significantly below market) • Significant price rises realised in Domestic Market with further planned • 24 million tonnes still remain under contract at July 2006 to be suppl
Slide 14: Contracted ESI Sales and Estimated Other Markets
Contracted ESI Sales and Estimated Other Markets 2006 £1.34- £1.40/GJ ESI Firm Price 2007 £1.35- £1.50/GJ Financial Year ESI Floating 2008 £1.33- £1.51/GJ Price - between cap and collar 2009 £1.32- £1.50/GJ Other Markets Estimate 2010 £1.35- £1.50/GJ 0 2 4 6 8 10 12 14 16 18 Million tonnes per annum
Slide 15: Harworth Estates: The UK COAL Property Company
Harworth Estates The UK COAL Property Company • Jon Lloyd appointed Chief Executive, Property (July 2006) • 28 years Experience in property investment Development and Management:- - Property Director, Yorkshire Water PLC - Regional Managing Director, DTZ Debenham Tie Leung - Head of Property, Halifa
Slide 16: Harworth Estates: Key Sites (1)
Harworth Estates The UK COAL Property Company KEY SITES (1) • AMP Waverley – J33, M1, Sheffield Parkway - JV with Regional Development Agency. 80 acres of fully consented business space to develop over a 3/5 year period • Waverley / Orgreave - J33, M1, Sheffield Parkway - 55 acres, 650,000 sq ft for
Slide 17: Harworth Estates: Key Sites (2)
Harworth Estates The UK COAL Property Company KEY SITES (2) • Lounge, A42, Ashby De La Zouch - 60 acre distribution site targeting planning consent for single occupier in Joint Venture with Gazeley • Chatterley Valley, A500, Stoke on Trent - 25 acre premium employment site, JV with Pro-Logis and adj
Slide 18: Power Generation
Power Generation • Business with significant potential which has continued to grow profitability £1.5m (2005: £1.2m like for like) • Power generated now 65k MWh (£3.4m) up from 48k MWh in 2005 (£1.9m) • Additional mines gas project secured with 10MW capacity coming on stream in 2006/2007 • First Win
Slide 19: Financial Results
Financial Results Finance Director - Chris Mawe
Slide 20: Segmental Profit/(Loss)
Segmental Profit/(Loss) Six months ended 30 June 2006 2006 2005 £m £m Deep Mines (2.3) (29.8) Surface Mines 1.3 1.4 Property 10.2 10.4 Power Generation and other businesses 1.6 3.3 Profit/(loss) before interest & exceptional 10.8 (14.7) items Exceptional items 1.2 (14.6) Profit on sale of businesses
Slide 21: Property Valuation
Property Valuation • Investment Properties have been revalued at June 06 Jun-06 Dec-05 Jun-05 Asfordby 12,250 8,250 8,250 Mid Cannock 6,750 6,500 6,500 Whitemoor 3,500 3,000 3,000 Total 22,500 17,750 17,750 • Non Investment Properties were valued Dec 05 at £256.4m being £181.5m higher than book valu
Slide 22: Exceptional Items
Exceptional Items Six months to June 2006 2005 £m £m Redundancy (0.4) (2.4) Post coaling- Rossington (2.0) - Post coaling- Ellington - (5.1) Other closure items - (2.1) Impairment of assets- Harworth (2.3) - Impairment of assets- Rossington - (5.6) Recovery costs - (7.5) Post retirement benefits 0.8
Slide 23: Balance Sheet
Balance Sheet 30 June 2006 30 June 2005 £m £m Non Current assets 333.8 358.6 Stocks 47.0 37.1 Debtors 59.4 53.6 Cash (less bonded cash) 8.9 0.4 Total Assets 449.1 449.7 Creditors 200.8 171.5 Provision for liabilities (less bonded cash) 116.9 109.7 Pension obligations 117.4 140.2 Total Liabilities 43
Slide 24: Cash Flow
Cash Flow Six months ended 30 June 2006 2005 £m £m EBITDA 19.1* (13.2) Surface mine restoration (5.6) (4.8) Reduction in stocks (4.8) 7.1 Other working capital (8.9) (13.6) Redundancy payments (4.5) (11.1) Capital expenditure (13.4) (10.8) Other provisions paid (5.4) (6.8) Capital sales (property/pl
Slide 25: Pensions Assets and Liabilities
Pensions Assets and Liabilities UK Coal - IW Schemes - Assets and liabilities on IAS19 basis 450 2.70% 400 2.50% 350 300 2.30% 250 £m 2.10% 200 150 1.90% 100 1.70% 50 0 1.50% Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05 Mar 06 Jun 06 Assets Liabilities Net liability Real discount r
Slide 26: Outlook
Outlook • In short term Deep Mines will have lower output in Q3 and recover in Q4 • Steadily improving visibility on pricing framework for coal from 2008 • Planning consents for surface mining growing • Property business more actively managed and planning profile maturing rapidly • Power business be
Slide 27: End of Presentation
End of Presentation