Harworth Group PLC · LSE:HWG
Harworth — UK Coal — FY2003 Earnings Presentation
30 slides from Harworth's earnings presentation, 2004
Slide 1: UK Coal PLC Preliminary Results Year Ended 31 December 2003
UK COAL PLC PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2003
Slide 2: 2003 Highlights
2003 Highlights • Turnover for year £563.9m (2002: £596.6m) • Loss before tax and operating exceptionals of £7.6m (2002: £8.4m profit) • Profit after tax of £3.9m (2002: £81.8m loss) • Cash inflow before use of liquid resources, financing and dividends of £39.1m (2002: £25.2m outflow) • Dividend for
Slide 3: Segmental Profit/(Loss)
Segmental Profit/(Loss) 2003 2002 £m £m Coal sales - Deep Mines (8.6) (5.9) Coal sales - Surface Mines 0.7 16.5 Other associated activities 0.7 (2.3) Manufactured fuel 0.4 (0.6) Emissions trading 3.2 4.2 Australia - coal sales (4.0) 1.8 - hedging loss 0.0 (2.5) Property activities - rentals & ongoin
Slide 4: Movement in Profit before Interest and Exceptional items
Movement in Profit before Interest and Exceptional items 15 10 5 0 £ millions -5 -10 -15 -20 -25 -30 M Em Ot Au 20 Co M Pr 20 ini an 02 03 he op str al is s ng . r er p a li i Fu on ric ty co a el s e st tra ... 3
Slide 5: Exceptional Items
Exceptional Items 2003 2002 £m £m Redundancy (2.7) (60.3) Other closure items 0.7 (9.8) DTI contribution to Selby closure - 10.0 Concessionary fuel - 4.5 Net redundancy & closure costs (2.0) (55.6) Selby asset impairment - (20.2) Recovered/(Provided) against TXU debtor 6.5 (6.4) Provision against ot
Slide 6: Balance Sheet
Balance Sheet 31 Dec 2003 31 Dec 2002 £m £m Fixed assets 399.9 433.7 Stocks 59.5 79.2 Debtors 82.4 82.0 Cash and short term deposits 60.4 60.9 Total Assets 602.2 655.8 Shareholders’ funds 222.5 228.1 Provision for liabilities and charges 227.0 258.7 Creditors 152.7 169.0 Total funds employed 602.2 6
Slide 7: Cash Flow
Cash Flow 2003 2002 £m £m Operating loss (0.2) (79.5) Depreciation 52.6 59.3 Impairment - 20.2 Stocks movement 19.7 (7.3) Movement in debtors/creditors and provisions (30.9) 16.2 Gov’t contribution to Selby redundancy 4.8 - Cash inflow from continuing operations 46.0 8.9 Net interest and finance cha
Slide 8: FRS 17 – Retirement benefits
FRS 17 – Retirement benefits • Current year disclosure only - full implementation will be in 2005 • Two defined benefit schemes (ex TUPE employees) which were effectively closed to new members in 1995 • Actuarial review (based on long term view of assets and liabilities at Dec 2000 — IWMPS 101% fund
Slide 9: UK Steam Coal Supply and Consumption
UK Steam Coal Supply and Consumption excluding coking - 2003 2003 2002 60 60 50 50 40 40 Million Tonnes Million Tonnes 30 30 20 20 10 10 0 0 Consumption Supply Consumption Supply Electricity Dom./MFP Industry Source: Dti Energy Trends 8 UK COAL UK Others Imports
Slide 10: Contracted ESI Sales and Projected ESI Market
Contracted ESI Sales and Projected ESI Market 2004 2005 2006 Projected burn 2007 Firm sales 0 5 10 15 20 25 30 35 40 45 50 Million tonnes 9
Slide 11: NW Europe Spot Steam Coal Price
NW Europe Spot Steam Coal Price (Delivered Into Deep Water Ports) 80 70 60 $ / tonne 50 Actual 40 TFS Forward 30 20 91 92 93 94 95 96 97 98 99 '00 '01 '02 '03 '04 '05 '06 Source: McCloskey Coal / TFS Basis: <1%S, CIF NW Europe, 6000 Kcal / Kg NAR (25.122 GJ/Tonne) 10
Slide 12: UK Electricity Market
UK Electricity Market • Rising electricity prices – reflecting station withdrawals and security of supply concerns • Lower gas generation - high gas prices • Electricity consumption 1% higher than 2002 • Coal burn increased by 12% year on year • Forward electricity prices continuing to firm reflecti
Slide 13: Medium Term
Medium Term • Unlikely to see new station build in short term, (Ilex Consultants suggest no new entry before 2009) • Short term market determined by traditional economics within NETA • Price of carbon will determine potential for coal • New FGD plants will increase available market for UK Coal — Wes
Slide 14: Large Combustion Plant Directive
Large Combustion Plant Directive • European legislation. Applies from 2008 • Government to choose between “Emission Limit Values (ELV)” and “National Plan” approach. Government have provisionally lodged a National Plan with the Commission, but are still considering the options available • UK COAL pr
Slide 15: Deep Mines
Deep Mines Production - 2003 2003 2002 Deep Mines: Mil tonnes Mil tonnes Clipstone 0.2 0.3 Ceased production in April 2003 Daw Mill 2.2 0.8 Ellington 0.6 0.7 Harworth 1.2 1.2 Kellingley 1.6 1.6 Maltby 1.4 1.4 Prince of Wales - 0.7 Ceased production in August 2002 Riccall Combine (Selby) 0.9 1.3 Ross
Slide 16: Deep Mines Operational Review
Deep Mines Operational Review • Ongoing mines returned 2003 Q4 costs of £1.09Gj • Flat line management structure implemented July 2003 • Maltby flexible working has increased planned face MAT by 34% — Kellingley offers increased MAT from 5th April 2004 • Daw Mill better performance in 2003 having pa
Slide 17: Deep Mines Project improvement initiatives
Deep Mines Project 105 improvement initiatives • Five integrated themes for focus in 2004 comprising 22 projects 1. Performance Improvement 2. Skills and Process Development 3. Performance Management (inc Risk and Data management) 4. Communication 5. Cost Reduction — Themes divided into 22 “targeted
Slide 18: Investment Aid
Investment Aid • UK Coal have accepted seven offers totalling £35.4m — Daw Mill - £9.7m — Kellingley - £7.2m — Welbeck - £5.2m — Harworth - £4.7m — Rossington - £3.3m — Thoresby £2.9m — Maltby £2.4m 17
Slide 19: Surface Mining Operational Review
Surface Mining Operational Review • Production of 3.1m tonnes (2002: 4.3m tonnes) • Planning permission for 350,000 tonnes received during year • 2.7m tonnes awaiting approval from Mineral Planning Authority • Two new site extensions commenced production • 3.5m tonnes to be submitted for approval in
Slide 20: Surface Mining Operational Review
Surface Mining Operational Review • Profitability hit by lower coal prices and reduced production from high volume sites • Continuation of difficult planning environment will further impact on production volumes going forward 19
Slide 21: Property Sales 2003
Property Sales 2003 • Proceeds from disposals £9.7m (2002: £2.2m) comprising: Rockingham £1.7m Wimblebury £3.0m Tetron Point £4.1m Other £0.9m • Profit on disposals £5.8m (2002: £2.0m) 20
Slide 22: Property Planning Approvals 2003
Property Planning Approvals 2003 • 50 acres of land received detailed planning consent — Tetron Point — Waverley AMP — Donisthorpe — Arkwright • Waverley / Orgreave - 80 acre planning application for Advanced Manufacturing Business Park - Orgreave Public Consultation for further 350 acres - resident
Slide 23: Property Planning - Current Progress
Property Planning - Current Progress • Denby Hall (60 acres, B1,B2,B8) • Wardley (150 acres, B2 B8) • Tetron Point (60 acres, B1,B2,B8, • South Leicester (30 acres, B2,B8) leisure) • Prince of Wales (60+ acres, B1,B2,B8 • Rockingham (15 acres, B1,B2,B8) + residential) • Waverley/Orgreave (350 acres,
Slide 24: Property Operational Rental Review
Property Operational Rental Review • Income - £3.8m (2002: £3.4m) • Business parks rental demand:- — Asfordby (South Leicestershire) - units 90% let — Whitemoor (North Yorkshire) - units 58% let — North Selby (Yorkshire) - units 34% let • Agricultural tenancies 23
Slide 25: Property Outlook
Property Outlook • Securing value from development sites • Agriculture - increase rentals through diversification • Business Parks - build for pre-let — Improving site quality / services — Increasing percentage occupation — Rent reviews — Selby sites • New sites - working on new planning allocation
Slide 26: Outlook
Outlook • Sharp rise in world coal prices offset partly by weakening dollar • Limited upside from strong coal price due to forward contracted sales for 90% of 2004 and 50% of 2005 production • Geological problems at Rossington and Welbeck will add around 3% to unit costs • Slow start to 2004 product
Slide 27: Appendices
Appendices 26
Slide 28: UK Generation Forecast
UK Generation Forecast 400 350 42 41 40 39 53 47 mtce mtce mtce mtce 300 mtce mtce 250 Coal Oil TWh 200 Gas 150 Nuclear 100 Renewables 50 0 2003 2004 2005 2006 2007 2008 Source:Dti Energy Trends – actual; UK COAL forecast of energy mix 27
Slide 29: Coal Consumption 2003
Coal Consumption 2003 excluding coking 3% 2% ESI Domestic & MFP Industrial 95% 56.4m tonnes (2002: 52.1m tonnes) Source: Dti Energy Trends 28
Slide 30: EU Emissions Trading Scheme
EU Emissions Trading Scheme • Government reaffirmed 20% CO2 reduction by 2010, significantly higher than Kyoto 12.5% reduction of GHGs. • Electricity generators to be responsible for achieving additional reductions of 5.5 MtCO2 by 2010, over and above projected business as usual. — “power generation