Harworth Group Plc · LSE:HWG
Harworth — UK Coal — FY2008 Earnings Presentation
50 slides from Harworth's earnings presentation, Apr 27, 2009
Slide 1: 2008 Results Roadshow
2008 RESULTS ROADSHOW 27 April 2009
Slide 2: Results for 2008
Results for 2008 • Total sales £392.5m (2007: £328.5m) (up 19.5%) • Average realised sales price £1.92/gigajoule (2007: £1.62/GJ) (up 18.5%) • Operating profit before non-trading exceptionals £1.8m (2007: £72.1m) • Property revaluation profit £23k (2007: £66.8m) • Loss before tax of £15.6m (2007: £6
Slide 3: UK Coal: Summary
UK Coal: Summary • New contractual arrangements • Demonstrate excellent customer relationships • New core customer added • Provide increased certainty of market • Pricing significantly above historic levels • Significantly increased cashflow in 2009 and 2010 • Increased revenues treated as prepaymen
Slide 4: Group Financials
GROUP FINANCIALS
Slide 5: Segmental income statement
Segmental income statement £m FY 2008 FY 2007 Deep mines (12.8) (10.3) Surface mines 10.4 8.5 Other (0.5) 0.7 Total mining, including power (2.9) (1.1) Property Realised gains from investment properties 3.7 3.7 Other income less expenses 1.0 2.7 Revaluation of investment properties - 66.8 Total prop
Slide 6: Revenue
Revenue FY 2008 FY 2007 Deep mines output (m tonnes) 6.2 6.4 Surface mines output (m tonnes) 1.7 1.5 7.9 7.9 Maltby output (m tonnes) - 0.2 Production (m tonnes) 7.9 8.1 Sales (m tonnes) 7.9 8.0 Average sales price (£/GJ) 1.92 1.62 £m £m Coal sales 368.5 314.3 Other mining and power 6.2 4.4 Other sa
Slide 7: Tonnage Commitments
Tonnage Commitments • As of April 2009, taking account of generator contracts entered into after the year end m tonnes Total 2009 2010 2011 2012 2013 2014 2015 Fully floating 5.3 0.9 1.3 1.4 1.4 0.1 0.1 0.1 Floating within caps and floors* 7.4 0.2 0.7 2.0 3.1 0.5 0.6 0.3 Fi d subject Fixed, bj t tto
Slide 8: Contractual Commitments: Average Realised Sales Price £/GJ
Contractual Commitments: Average Realised Sales Price £/GJ • Excluding options granted or unsold coal • RPI assumed to increase at 2% per annum • API 2 assumptions presumed to increase in line with 2% RPI assumption API 2 Assumptions £/GJ 2009 2010 2011 2012 2013 2014 2015 £3.00 1.98 2.12 2.59 2.95
Slide 9: Contractual Commitments: Estimated Impact on Cashflow
Contractual Commitments: Estimated Impact on Cashflow • Difference between revenue and cashflow • Takes account of prepayment/loans and repayments and other contractual changes £m 2009 2010 2011 2012 2013 2014 2015 Cashflow impact +85 +15 -32 -50 -18 -20 -11 9
Slide 10: NW Europe Spot Steam Coal Price in $/t
NW Europe Spot Steam Coal Price in $/t 200 150 $/t 100 50 Actual Latest Forward 01-Jan-08 31-Dec-08 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: API 2 - McCloskey Group / TFS Brokers Basis: <1%S, CIF NW Europe, 6000 Kcal / Kg NAR (25.121 GJ/Tonne) Forward Prices based o
Slide 11: NW Europe Spot Steam Coal Price in £/GJ
NW Europe Spot Steam Coal Price in £/GJ 5 4 3 £/GJ 2 1 Actual Latest Forward 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Source: API 2 - McCloskey Group / TFS Brokers Basis: <1%S, CIF NW Europe, 6000 Kcal / Kg NAR (25.121 GJ/Tonne) Actual historic exchange rates Assumed f
Slide 12: Operating costs
Operating costs £m FY 2008 FY 2007 Deep Mines costs, excluding depreciation Ongoing mines and power 287.1 237.5 Closed/Sold - 7.4 Surface Mines costs (including SM amortisation), excluding depreciation 63.1 41.2 Other costs 63 6.3 23 2.3 Costs including surface mine amortisation excluding depreciati
Slide 13: Exceptionals, finance and tax
Exceptionals, finance and tax £m FY 2008 FY 2007 Non-trading exceptional items Closures and redundancies (0.6) 3.8 Costs associated with Harworth colliery (3.4) (1.8) Maltby - 8.5 (4.0) 10.5 Net finance costs Interest and other (11.4) (8.3) Mark to market gains on fair value of swaps 0.8 (1.9) Unwin
Slide 14: Income statement
Income statement £m FY 2008 FY 2007 Revenue 392.5 328.5 Total costs (394.4) (326.9) Profits on disposal of investment properties 3.7 3.7 Operating (loss)/profit before revaluation of investment properties 1.8 5.3 Revaluation of investment properties - 66.8 Operating profit before non-trading excepti
Slide 15: Mining: H1/H2 split
Mining: H1/H2 split H1 H2 2008 Tonnage produced (m tonnes) 3.7 4.2 7.9 Tonnage sold (m tonnes) 3.7 4.2 7.9 Sales price (£/GJ) 1.79 2.04 1.92 £m £m £m Total revenue 166 7 166.7 218 9 218.9 385 6 385.6 Operating (loss)/profit before non-trading exceptionals Deep mines, including power (24.2) 11.4 (12.
Slide 16: Cashflow
Cashflow £m FY 2008 FY 2007 Operating (loss)/profit (2.2) 82.6 Revaluation of property - (66.8) Profits on sale of fixed assets and investment properties (3.7) (5.3) Profit on sale of Maltby - (8.5) Depreciation/diminution 37.9 38.5 Redundancy provisions release - (8.8) Working capital (13.1) 9.8 Ot
Slide 17: Bank Debt
Bank Debt £m Dec '08 Movement Dec '07 Gross bank debt (179.4) (54.1) (125.3) Unrestricted cash 42.3 21.3 21.0 Net bank debt less unrestricted cash (137.1) (32.8) (104.3) Restricted cash* 28.8 (20.3) 49.1 Net bank debt (108.3) 218.9 (55.2) Shareholders' funds 300.4 358.2 Gearing, exclulding restricte
Slide 18: Balance Sheet
Balance Sheet £m FY 2008 FY 2007 Fixed assets Operating assets 181.8 199.6 Surface mines development assets 28.5 20.1 Investment properties 404.7 384.3 Deferred tax asset 36.1 36.0 Other 4.2 1.9 655.3 641.9 Inventories 46.7 46 7 39.8 39 8 Debtors 40.0 30.4 Creditors (104.1) (100.3) Other (9.3) (3.0)
Slide 19: Retirement benefit liabilities
Retirement benefit liabilities £m Total Pensions Fuel Deficit January 2008 (73.2) (49.8) (23.4) Contributions paid less current service cost 8.1 7.7 0.4 Change in fund value compared to expected return (93.2) (91.9) (1.3) Actuarial gain/(loss) on liabilities 54.3 59.2 (4.9) Deficit December 2008 (10
Slide 20: Provisions
Provisions 2010- Restricted £m 2009 2010 2013 Beyond Total Cash Provisions offset by restricted funds Employee insurance liabilities etc 7.1 4.5 6.5 0.6 18.7 20.4 Surface damage (subsidence) 3.1 2.7 5.8 1.8 13.4 8.4 10.2 7.2 12.3 2.4 32.1 28.8 Provisions to be funded Surface mining site restoration
Slide 21: Surface Mines: Cashflow
Surface Mines : Cashflow £m FY 2008 FY 2007 Surface mine summary cash flows Operating profit 10.4 8.5 Amortisation of development/restoration assets 12.6 8.8 Pre-coaling - cash spent (6.2) (4.7) Deferred stripping (3.7) - Post-coaling/restoration - cash spent (8.9) (11.7) Cash flow for the year 4.2
Slide 22: Financial summary
Financial summary Improved international coal price showing through Continuing to work through legacy contracts • significant fall off in next 18 months • new contracts at significantly better pricing Cost increases reflecting • Energy/commodity market in 2008 • Investment in development metrage – t
Slide 23: Mining and Power
MINING AND POWER
Slide 24: Mining: Improved environment continues
Mining: Improved environment continues Market environment • Improved pricing environment / long term demand for coal - short term readjustment to suddenly lower electricity demand • Very strong customer relationships show through with new contracts and additional customer • Realised sales price and
Slide 25: Safety
Safety • Safety is at the heart of all aspects of our operations • From Board to Workforce, culture strives for zero incidents • Resolve further strengthened by fatality at Kellingley September 2008 • Statistics stubbornly flat but severity improving • Overall reportable injuries 24.0 per 100,000 ma
Slide 26: Mines: Overview
Mines: Overview Deep Mines Production Cost before depreciation FY 2008 FY 2007 FY 2008 FY 2007 m tonnes m tonnes £ million £ million Daw Mill 3.2 2.2 93.6 70.9 Kellingley 1.2 1.8 71.2 67.8 Thoresby 0.9 1.4 63.2 50.7 Welbeck 0.9 1.0 56.8 49.4 Total Ongoing 6.2 6.4 284.8 238.8 Power - - 2.3 (1.3) Clos
Slide 27: Deep Mines
Deep Mines • Daw Mill • record 3.2m tonnes mined • programme of belt replacement well underway • increased working hours to optimise production • priority to increase development bank – new mine layout helps • investment in longer faces helps productivity • Kellingley • last of Silkstone seam provin
Slide 28: Surface Mines and Power
Surface Mines and Power Surface mines output up 13% • Planning timescales extending, but 8 out of 8 major applications successful • Park Wall planning delay in 2008 made up in other output • Park Wall now approved • Diesel cost affected operating costs • Cost per GJ at high end of expectation • All
Slide 29: Mining and Power - Summary
Mining and Power - Summary Positive pricing outlook • Transitioning through contracts – realised price starting to show impact, 2009 key year • Increased 2009 & 2010 pricing treated as prepayments/loans • New contracts at significantly improved levels Long g term future • Daw Mill Current seam c 20m
Slide 30: Harworth Estates
HARWORTH ESTATES
Slide 31: Summary
Summary Maintaining the portfolio value despite market • Increase in RICS valuation to £422 million: gain of £23k Project Worth Estimates • £886m @ 2014 – central estimate • £668m @ 2012 (2007: £935m) Evolving the development plans • Prince of Wales – planning consent approved • Rossington in Doncas
Slide 32: Overview
Overview • Planning • Approvals secured - 1,200 homes and 140,000 sq mt (1.5m sq ft) of business space • Applications made for over 4,500 homes and 78,000 sq mt (841,000 sq ft) of business space • RICS valuation £422m (2007: £411m) • Operating profit £4.8m (2007: £73.2m) • Revaluation gain £23k (200
Slide 33: RICS Valuations at December 2008
RICS Valuations at December 2008 Dec-08 Dec-07 Dec-07 £’000 Like for like £’000 £’000 Agricultural Mixed 114,185 101,624 93,906 Low grade 5,045 3,247 3,247 Undeveloped land With planning 64,070 67,965 33,145 Application submitted 65 310 65,310 72 900 72,900 42 500 42,500 Without planning 101,723 100
Slide 34: Project Worth estimates
Project Worth estimates 2012 2013 2014 • December 2006 £800 m • December 2007 £935 m £1 bn • December 2008 £668 m £783 m £886 m Portfolio now consists of: • Projects 77 • Gross acreage 13,290 acres • Net developable 3,790 acres Ultimately supporting : 2014 • Housing c 30,000 plots on 1,649 net acres
Slide 35: 2008: Principal Progress
2008: Principal Progress Property valuation increased to £422m – maintained at Dec ’07 level after sales and investments • Planning successes, new lettings and agricultural land valuation increases Prince of Wales (J32 M62/A1M) • Planning committee approval for phase 1 • 917 homes and 261,000 sq ft
Slide 36: 2008: Principal Progress
2008: Principal Progress Cutacre (J4 M61 Bolton) – 1,000 acre site adjoining Greater Manchester motorway network with potential rail connection • Included in Bolton “Preferred Options Core Strategy” as potential 259 acre premium mixed use Business Park following completion of mining in 2012 Gascoign
Slide 37: UK Coal: Strong platform for value creation
UK Coal: Strong platform for value creation • Strengthened growth platform • Changed pricing environment and investment in mining – changes opportunity for value creation • Strong property business, well placed to respond to improved market conditions in due course • Positive long term outlook for a
Slide 38: Slide 38
Slide 39: Appendices
APPENDICES Appendix I Harworth Estates: RICS valuation of principal sites Appendix II Coal Market Statistics 2008 Appendix III Deep Mine Coal Assets Appendix IV Surface Mine Coal Assets Appendix V Surface Mine Balance Sheet Items Appendix VI UK Coal Principal Locations
Slide 40: 2008 RICS value of principal sites
2008 RICS value of principal sites Appendix I £m • Waverley, Sheffield/Rotherham - new community 50 - 60 - Highfield Commercial JV with Helical for Government Campus 10 - 20 - AMP successful JVs with Yorkshire Forward & Strategic Sites 5 - 7.5 • Prince of Wales, Pontefract - 297 acres, 1300 resident
Slide 41: UK electricity generation by fuel type
UK electricity generation by fuel type Appendix IIa • Steady decline in nuclear coupled with high coal price in summer both helped increase gas burn • 2008 first year of LCPD influence (%) 2000 2001 2002 2003 2004 2005 2006 2007 2008 Coal 32 1 32.1 34 4 34.4 32 3 32.3 35 0 35.0 33 6 33.6 34 1 34.1 3
Slide 42: Supplies of Steam Coal to the UK Market 2008
Supplies of Steam Coal to the UK Market 2008 Appendix IIb 15% 18% UK COAL Russia 11% Colombia S Africa Other Imports Other Indigenous 8% 38% 10% Source: DECC Energy Statistics/McCloskey Coal 42
Slide 43: Electricity Generation: Capacity & Peak Demand Projections
Electricity Generation: Capacity & Peak Demand Projections Appendix IIc 120,000 • Annual demand expected to grow by ~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 44: Forecast Worldwide Coal Burn
Forecast Worldwide Coal Burn Appendix IId 12 10 China onnes India 8 North America Europe Billion To 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 44
Slide 45: Predicted coal burn for UK power generation
Predicted coal burn for UK power generation Appendix IIe 60 55 50 Mt per year 45 40 M 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 45
Slide 46: Deep Mines Coal Assets
Deep Mines Coal Assets – m tonnes Appendix III Total Reserves Mineral Reserves Resources & Resources Potential Total Daw Mill 21 3 24 41 65 Kellingley 12 46 58 5 63 Thoresby 11 11 22 4 26 Welbeck 1 - 1 - 1 Total 45 60 105 50 155 * Classifications as per annual report 46
Slide 47: Surface Mine Coal Assets
Surface Mine Coal Assets Appendix IV M tonnes Sites with planning consent 6.8 Applications submitted 1.4 8.2 Sites to be submitted in 2009 3.3 Total reserves in planning process 11.5 Other reserves 11.3 22.8 Other coal resource requiring additional geological and planning work and, possible, third p
Slide 48: Balance sheet: Surface mines
Balance sheet: Surface mines Appendix V £m FY 2008 FY 2007 Development and restoration assets At January 20.1 9.7 Additions 6.2 4.7 Capitalised provisions 11.0 14.5 Deferred stripping 3.7 - Amortisation (12.6) (8.8) Development and restoration assets at December 28.4 20.1 Restoration provisions At J
Slide 49: Principal locations
UK COAL Principal Locations Principal locations Appendix VI 49
Slide 50: Disclaimer
Disclaimer • These presentation slides contain forward-looking statements with respect to the operations. Performance and financial condition of UK COAL. By their nature, these statements involve uncertainty since future events and circumstances can cause results and developments to differ materiall