PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2004

Transcription

1 PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2004

2 Overview Chairman David Jones

3 Highlights Operating loss from continuing operations before exceptional items Loss before tax Cash (outflow) / inflow before dividend Final dividend Deep mine output Surface mine output Coal sales from UK operations Average selling price Total unit production costs Gross value of property before rehabilitation and restoration costs Property disposals - proceeds 2004 (28.7m) (51.6m) (7.5m) 1p per share 12.0mt 2.0mt 14.3mt 1.18 per Gj 1.30 per Gj 202m 4.3m 2003 (1.8m) (1.2m) 39.1m 5p per share 14.8mt 3.1mt 18.9mt 1.12 per Gj 1.16 per Gj 174m (2002) 9.7m 3

4 Operational Review and Strategy Chief Executive Gerry Spindler

5 Strategy Resolve issues in deep mines Regenerate surface mining business Develop property 5

6 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 performance shortfall (~ 25m) - Decrease of 1.9 million tonnes from 2003 to Low Development rates due to poor logistics and geologic difficulties, leading directly to face gaps - Spending continued at annual budget levels despite lower production Contract pricing (~ 25m) 8 Current contract portfolio average prices well below current market 6

7 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 probability of face gaps, which typically cost 1m per week Structured daily maintenance - Designed to dedicate significant time to maintenance EVERY DAY - Targeting component replacement and reduced downtime - Results in improved overall availability New cost control practices - Previous system treated all costs as fixed, all costs now are managed on a project basis - New system provides focused management for each project for on-time, on-cost performance New ground control techniques - First attempts with polyurethane injection to improve problematic face conditions quite successful, leading to fewer face production delays 7

8 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 risk Use of brownfield sites has benefit on local communities and have development potential after mining operation ceased 8

9 Surface Mines Key Tasks 4.7m tonnes for four sites to be submitted for planning approval in additional sites under appeal with 2.7m tonnes Working to change attitudes -Environmentally sensitive schemes -Brownfield site regeneration (complete with mining) -High standard of rehabilitation Revitalise surface mining by increasing awareness of benefits Increase the political lobby to modify the presumption against mineral planning, a number of initiatives in place Working with partners on pre-approved schemes 9

10 Contracted ESI Sales and Estimated Other Markets /GJ /GJ Firm ESI Financial Year /GJ Drax FM Other Markets /GJ /GJ ESI includes sales to Alcan / Sembcorp Million tonnes per annum Prices in 2005 money actual price within range dependent on outturn international prices 10

11 NW Europe Spot Steam Coal Price (Delivered Into Deep Water Ports) 80 Actual 70 Forward Mar03 $ / tonne Forward Sep03 Forward Mar04 Forward Sep '00 '01 '02 '03 '04 '05 '06 '07 Forward Dec04 Forward Feb05 Source: MCIS/TFS Brokers Basis: <1%S, CIF NW Europe, 6000 Kcal / Kg NAR ( GJ/Tonne) 11

12 Property - Key Issues Four key focus areas: Business parks Increase occupancy Grow rental income Add parks Brownfield re-generation Restore operating sites Rehabilitate un-used land Exploit opportunities - Residential - Light industrial - Business parks Agricultural land Land bank for surface mining Surplus land Develop rental incomes Good yields Utilize planning to leverage all areas to increase value of Land Market Value before deduction of Costs and excluding Asfordby and operating collieries 202 m (2002: 174m) Restoration and rehabilitation costs 77m 12

13 Financial Results Finance Director Chris Mawe

14 Segmental Profit/(Loss) Year ended 31 December m m Coal sales - Deep Mines (37.8) (8.6) Coal sales - Surface Mines Other businesses Australia coal sales (1.2) (4.0) Property activities - rentals & ongoing Loss before interest & exceptional items (30.3) (6.5) Exceptional items (20.9) 6.3 Profit on sale of businesses Property activities - profit on sales Operating (loss)/profit (46.5) 5.7 Net interest (5.1) (6.9) Loss before taxation (51.6) (1.3) 14

15 Movement in Operating Profit before Interest and Exceptional items "Deep Mine" Movement 2003 to millions (8.6) (2.8) mt (37.8) -50 (67.2) Price Vo... Volume Cost

16 Exceptional Items m m Redundancy (6.3) (2.7) Selby post coaling (6.2) - Other closure items 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 restoration costs (10.8) - Recovered against TXU debtor Provision against other amounts receivable- - (1.7) Coal Investment Aid (20.9)

17 Cash Flow year ended 31 December m m EBITDA Surface mine restoration (8.1) (18.3) Reduction in coal stocks Investment Aid received Other working capital and provisions (2.3) (0.4) Net redundancy payments inc. Government contribution (18.3) (7.1) Cash inflow from operating activities (0.1) 46.0 Net interest and finance charges 0.6 (0.2) Taxation Capital expenditure (51.4) (21.1) Capital sales (property/plant & machinery) Disposal of subsidiaries (including repayment of loan) Cash (outflow)/inflow before financing and dividends (7.5) 39.1 Opening net debt (29.7) (53.5) Closing net debt (48.1) (29.7) Gearing 28% 13% Bonded cash

18 Balance Sheet 31 Dec Dec 2003 m m Fixed assets Stocks Debtors Cash (less bonded cash) Total Assets Creditors Provision for liabilities (less bonded cash) Net Assets Equity shareholders funds

19 Pensions (defined benefit schemes) m m Charge to profit & loss (SSAP24) Charge to profit & loss (FRS17) Contributions paid FRS17 Opening deficit (Increase)/decrease 10.5 (5.4) Closing deficit Actuarial loss from Improved life expectancy main reason for increase in deficit Funding levels under SSAP24 at 31 Dec 03 IWMPS 101%, IWCSSS 88% 19

20 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

21 Investment Aid Total aid available 50.9m 24.6m to be claimed in 05/ Revenue Capital Total Cash received

22 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 2006 return to profit 22

23 PRELIMINARY RESULTS YEAR ENDED 31 DECEMBER 2004