UK Coal continues to show tentative signs of recovery, with production in the first half of 4.1m tonnes marking a significant increase on the 2.7m tonnes achieved in the same period last year. Indeed, production was higher in all three deep mines, which collectively produced 3.1m tonnes.
But maintaining strong output over the second half depends on overcoming potential difficulties at Daw Mill, the largest producer, where UK Coal must change the mining face, mine through a geological fault and agree terms and conditions with its workforce. The debt pile remains a concern, too. Losses of some £270m over the last three years have left net debt at a heavy £207m. Without the disposal of properties - which realised a net £53.8m, of which £34.9m was received in the period - net debt would have increased further due to working capital movements.
In the second half, management will start negotiations for coal sales beyond the current low-priced contractual commitments that have dragged on earnings. These will reflect much more favourable current prices, although management recognises that it has in the past over-contracted its production.
Evolution Securities expects full-year pre-tax profit of £29.4m and EPS of 9.8p.
| UK COAL (UKC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 39p | MARKET VALUE: | £117m | |
| TOUCH: | 38-39p | 12-MONTH HIGH: | 57p | LOW: 32p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 24p | NET DEBT*: | 284% | |
| Half-yearto 25 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 141 | -93.2 | -30.7 | nil |
| 2011 | 256 | 22.1 | 7.40 | nil |
| % change | +81 | - | - | - |
*Excludes restricted cash of £23.9m | ||||
