Harworth Group Plc · LSE:HWG
Harworth — UK Coal — FY2006 Earnings Presentation
35 slides from Harworth's earnings presentation, Mar 1, 2007
Slide 1: 2006 Preliminary Results
2006 PRELIMINARY RESULTS 1 March, 2007
Slide 2: David Jones, Chairman
David Jones Ch i Chairman
Slide 3: A year of substantial progress
A year of substantial progress • Much improved operating and financial performance • Strengthened balance sheet • Clear strategic framework • Mining to access reserves only where clear prospect of creating value • Considerable store of value confirmed in property business • Property strategy well re
Slide 4: Gerry Spindler, Group CEO
Gerry Spindler G Group CEO
Slide 5: Headlines
Headlines 2005 2006 restated £m £m Operating Profit (pre-Exceptionals) up £40m 47.8 7.4 Including property fair value uplift of 68 6 68.6 40 7 40.7 Exceptional Items (20.1) (31.4) Operating Profit/(Loss) up £52m 27.7 (24.0) Including exceptional mine closure costs of (25.4) (26.3) Profit for the y y
Slide 6: Jon Lloyd, CEO Harworth Estates
Jon Lloyd CEO HHarworth th E Estates t t - The Th UK COAL P Property t CCompany
Slide 7: Harworth Estates: Key financials
Harworth Estates : Key financials 2006 2005 Revaluation gains £68.6m £40.7m Net rental income £ 3.3m £ 2.3m Profit on disposals £ 1.4m £ 2.7m Profit before interest & taxation £73.3m £45.7m • Pre-disposals like for like valuation increase of 33 33.8% 8% Like for Like £000 Dec-06 Dec-05 Dec-05 to Dec
Slide 8: Harworth Estates: Progress towards £800 million
Harworth Estates : Progress towards £800 million Strategy presentation November Operating Board established • CEO. Development Director. Estates Director. Finance Director Business Park occupancy levels remain near 100% • Further expansion / build out opportunities during 2007 A Asset t di disposals
Slide 9: Harworth Estates: Key sites
Harworth Estates : Key sites Waverley Orgreave, J33 M1 Sheffield Parkway • 650,000 sq ft mixed use Business Park approved December 2006 • New sustainable community of up to 4,000 homes plus associated employment development community uses etc. progressing through local plan process • Land estimate o
Slide 10: Harworth Estates: Key sites
Harworth Estates : Key sites Lounge, A42 Ashby de la Zouch • 100 acre distribution site. Joint Venture with Gazeley. Planning Application within 3 months. • Land estimate of worth c2010 £25m Chatterley Valley, A500 Stoke on Trent • 25 acre employment site. JV with Prologis and adjoining owner over l
Slide 11: Coal Market Overview
COAL MARKET OVERVIEW G Gerry Spindler S i dl
Slide 12: Current market position: Power generation
Current market position : Power generation 2006 UK coal burn remains high • High coal stock levels and mild winter has reduced short term prices slightly • Burn for 2006 is still expected to be in excess of 50mt • UK coal fired stations continue to run at consistently high load factors in spite of l
Slide 13: NW Europe spot steam coal price
NW Europe spot steam coal price (Delivered into deep water ports) 80 70 Actual 60 nne 50 $/ton 40 Forward Jan07 30 20 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 Source: McCloskey Group / TFS Brokers Current 2008 Forward pprice some 5p/GJ p less than November 2006 - Basis: <1%
Slide 14: UK COAL: Market positioning
UK COAL : Market positioning • Well placed to benefit • Physical limitations of supply in the UK • UK COAL seek to increase prices against this background • UK COAL will position itself as supplier of the last tonne • Future sales mix will be a blend of • The residue of long-term contracts • Market
Slide 15: Contracted ESI sales from January 2007
Contracted ESI sales from January 2007 C rrent Contracts Current 2007 2008 2009 2010 Total In 2007 money Customer 1 2,638 2,300 2,300 2,139 9,377 £1.48/GJ Customer 2 2,444 750 500 3,694 £1 38 – 1.54/GJ £1.38 1 54/GJ Customer 3 2,338 550 550 550 3,988 £1.36 – 1.45/GJ Customer 4 375 495 870 £1.45 – 1.
Slide 16: Deep mines
Deep mines 2006 2005 Loss b L before f exceptional ti l it items £29 0 £29.0m £46 4 £46.4m Cost per GJ before exceptional items £1.54 £1.59 Tonnes 000’s 2006 2005 Daw Mill 2,725 2,000 Kellingley 2,105 2,000 Thoresby 1,450 1,400 W lb k Welbeck 1 187 1,187 1 000 1,000 Total Ongoing Mines 7,467 6,400 M
Slide 17: Cost per GJ by quarter
Cost per GJ by quarter All Mines: Q1 Q2 Q3 Q4 Total Tonnes 2006 (million) 2.9 2.4 1.5 2.1 8.9 Op. Costs per GJ 2006 (£) £1.40 £1.40 £2.47 £1.26 £1.54 C hC Cash Costs t per GJ 2006 (£) £1 19 £1.19 £1 21 £1.21 £1 92 £1.92 £1 14 £1.14 £1 31 £1.31 Cash Costs are pre exceptional and exclude central costs
Slide 18: Moving forward: How the deep mines are improving
Moving forward : How the deep mines are improving • Projects to improve performance by • Quicker more consistent cycle times • Quicker start up at the beginning of shifts • Detailed delay analysis • Continued focused on key accountabilities • Production disciplines extended to • Development p teams
Slide 19: Face production: Some areas of improvement
Face production : Some areas of improvement Improving Cycle Time at Kellingley 52 • Use of Cowls and upgraded rams 50 • Improved tail gate support systems 48 8 46 Cycle Time 44 (minutes) 42 40 38 307 408 404 19
Slide 20: Face moves: Some areas of improvement
Face moves : Some areas of improvement Improvement in Welbeck face moves 12 10 8 • Detailed planning of resource 6 Face Moves • Greater availability of vehicles (weeks) 4 • Availability of multiple working points 2 0 DS219 DS244 DS209 20
Slide 21: Development: Some areas of improvement
Development : Some areas of improvement • ABM standard operatingg procedures for 45 LG, 55LG and SG, g giving g consistent rates in excess of 120 metres per week. • Improved material transport systems • Provision P i i off more efficient ffi i t man riding idi facilities f iliti • Extended cut per c
Slide 22: Deep mines: Maltby disposal
Deep mines : Maltby disposal • Sold February 2007 for £21.5m to Hargreaves. Cash consideration • Mine produced 0.75mt in 2006, generating a loss of £18.2m on a turnover of £32.7m • Net assets disposed of £6.2m • Profit on disposal £13m • Maltby produces a coking coal used by Hargreaves coking facili
Slide 23: Deep mines: Daw Mill
Deep mines : Daw Mill • Production halted following fall of ground • Lost output amounting to 280kt • Mine now p producing g and ramping p gp production back up p • Ongoing potential of mine not reduced • Remedial work on current face may y marginally g y limit p production up p to August 2007 • New
Slide 24: Deep mines: Reserve assessment
Deep mines : Reserve assessment - m tonnes Jan 1, 2007 Operating Mineral Reserves Resource Total Mines Potential Daw Mill 21 3 40 64 Kellingley 12 44 5 61 Thoresby 3 20 2 25 Welbeck 4 3 16 23 Total 40 70 63 173 24
Slide 25: Surface mining: Headlines
Surface mining : Headlines 2006 2005 Output tonnes 0.6mt 1.0mt Profit before interest & tax £ 4.6m £ 0.8m With Planning Awaiting Consent To be submitted in 2007 Reserves (mt) 4.1 5.4 4.6 25
Slide 26: Surface mining: Operational review
Surface mining : Operational review Increase in activity during 2006 • Two sites commenced operations in H2 — North Stobswood (Northumberland) – mineable reserves of 970kt — Stony Heap (Durham) – mineable reserves of 257kt • Cutacre (Lancashire) commenced infrastructure works — Production will start
Slide 27: Surface mining: Outlook
Surface mining : Outlook • Total surface mine reserves 97mt • Planning environment remains challenging but 100% success in 2006 with 2 new planning consents and 1 further site consented but subject to a High Court challenge • Additional planning consents expected in 2007 to secure production volumes
Slide 28: Harworth Power: Operational review
Harworth Power : Operational review • Operating profit £3.2 million (2005: £3.4 million) • Installed capacity 32MW • 15% increase electricity generation 119,717 Mwh - 2005:104,526 Mwh mainly from operating mine sites • Purchase of Stillingfleet PEDL in order to site 12Mw of new generation capacity •
Slide 29: Financial Review, Chris Mawe
Chris Mawe Group Finance Director Financial Review
Slide 30: Group Income Statement
Group Income Statement 2006 2005 £000 £000 Continuing C ti i operations ti Revenue 339,713 341,214 Cost of Sales (381,021) (417,136) Gross Loss (41,308) (75,922) Coal Investment Aid 7,892 14,641 Investment Property Uplift 68,622 40,668 Other Items (7,561) (3,447) Operating Profit/ (Loss) 27,645 (24,
Slide 31: Segmental Operating Profit
Segmental Operating Profit 2006 2005 £000 £000 Ongoing Deep Mines (29 2) (29.2) (27 1) (27.1) Closed Deep Mines 0.2 (19.3) Surface Mining 0.5 3.3 Property p y 73.3 45.7 Power 3.2 3.4 Other (0.2) 1.4 47.8 7.4 E Exceptional ti l It Items (20 1) (20.1) (31 4) (31.4) Operating Profit 27.7 (24.0) 31
Slide 32: Segmental operating profit 2006 v 2005 Ongoing deep mines
Segmental operating profit 2006 v 2005 Ongoing deep mines (including Maltby) 2006 Ongoing • Unit costs reduced on all measures Deep mines Profit/(loss) pre- • Improvement held back by Q3 exceptionals (29.2) • Sales price up 4% to £1.41/GJ Exceptional Items 1.2 Operating Profit/(Loss) (28.0) • Cash c
Slide 33: Group Cash Flow
Group Cash Flow Total ota • Share placing in November realised £29 million £ 000s • Strengthened Balance Sheet EBITDA and working g capital 9,149 • Covered Co ered Q3 losses Joint venture investment (205) • Allowed rationalisation of deep mines Capital and development expenditure (36,550) Restoratio
Slide 34: Group Balance Sheet
Group Balance Sheet Total Segmental Balance D.Mining S.Mining Property Power Other Total restated Sh t Dec Sheet: D 2006 £ £m 2006 2006 2006 C t l Central 2006 2005 Fixed Assets 189.3 26.2 326.8 8.3 0.2 550.8 510.3 Provisions (93.4) (53.4) (0.4) (147.2) (174.1) Pension scheme provisions (95.7) (95.7
Slide 35: Thank you
Thank you