Harworth Gp Regulatory News (HWG)

UK COAL PLC ("UK Coal" or the "Group")

Trading update for period from 26 June to 17 November 2011

UK COAL today issues its Interim Management Statement for the period from 26 June to 17 November 2011 incorporating a trading statement for the third quarter ended 24 September 2011.

Strategic Recovery Plan

We continue to make progress with the Group's Strategic Recovery Plan. This is a three year programme.

Safety

The fatal accident at Kellingley on 27 September 2011 was a stark reminder of the importance of our safety improvement plan and the internal investigation into the accident is nearing completion. Following the fatality, we instigated a Critical Safety Impact Review, with teams led by members independent from each mine, examining all critical conditions and working behaviours. This has been done with the full support of our Trade Unions and we have already started to implement the findings.

 Production

Total production in the third quarter was 1.8m tonnes (Q3 2010: 2.2m tonnes), making year to date production 5.9m tonnes, in line with management expectations.

Deep mine production was 1.4m tonnes (Q3 2010: 1.7m tonnes). Kellingley and Thoresby continued to mine ahead of plan. However, at Daw Mill, the challenges of working through a fault and seeking agreement to changes in working practices, have restrained development and production. Nonetheless, the decision to continue to mine the existing panel at Daw Mill through the previously reported fault has avoided the risk of a costly face gap and the installation of equipment to prepare the next face for mining has been successfully completed. This new panel is now available to start when the existing panel finishes in early 2012.

Surface mine production was 0.4m tonnes in the third quarter (Q3 2010: 0.5m tonnes), ahead of management expectations.

Debt

Net bank debt has continued to reduce and, at 24 September 2011, was £68m (December 2010: £141m), excluding restricted cash. Property disposals have generated around £26m of receipts in the third quarter, including £23m in respect of sales exchanged in the first half, with year to date receipts of £59m. Generator loans/prepayments were £92m (December 2010 £101m).

 Working Practices and Pension Schemes

Changes to working practices and the restraint of labour costs are critical to the recovery of UK Coal. We have previously announced that all but one of the unions representing our workforce had indicated their intention to recommend proposals to change terms and conditions of employment. We are pleased that managerial and supervisor unions have all agreed to support our recovery plan. However, the proposals recommended by both the UDM and by the NUM National Executives were rejected by their members, by the narrowest of margins in the case of NUM members. We have now agreed with the NUM to enter a conciliation process to bring this matter to a close in the over-riding interest of the viability of UK Coal. We have asked the UDM to agree to the same process.

In September we agreed significant changes to the final salary pension schemes with the Trade Unions and Trustees. Current service cost of the two schemes will be reduced by 50% and the Trustees have agreed that future accrual will be reviewed each year in line with affordability. This has enabled UK Coal to agree markedly increased levels of deficit contribution. 

Property Sales

Harworth Estates has continued to make good progress with its accelerated sales programme with disposals that realised £3m in Q3, bringing the total value of disposals to around £80m since November 2010. We have recorded a profit on property disposals of around £2m year to date.

Beyond these sales, our Recovery Plan sets out a new strategy for delivering value from our major brownfield sites, the biggest of which is Waverley, South Yorkshire, at 710 acres. On the residential side of this site, we have exchanged conditional contracts with Taylor Wimpey, Barratt Homes and Harron Homes on the first phase of the construction for 254 homes. Additionally, on the Waverley Advanced Manufacturing Park, we have exchanged a contract with Rolls-Royce plc on 17.4 acres to build a 165,000 sq ft high-tech manufacturing unit. These are significant milestones to realising the site's value.

Management Appointments

We have made a number of important management changes over the last three months with the appointment of Andrew Fulton, from Anglo American, as Director of Deep Mines; Simon Taylor, from Aggregate Industries, as Director of Surface Mines; Simon Byway, from Shell's downstream business, as Commercial Director and Andrew Mackintosh from Anglian Water as Director of Communications. On the property front, Phil Wilson has joined as Commercial Director from Peel Holdings and Campbell Carruth has joined from Clugston Estates as the new Business Parks Director. Each brings extensive and relevant experience with them.

Other than the information contained in this Interim Management Statement, there have been no material events or transactions in the period which have affected UK Coal and its financial position.

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Enquiries:

Analysts and investors

Jonson Cox Chairman Tel: 01302 755 002

David Brocksom Group Finance Director Tel: 01302 755 002

Media

Rob Ballantyne Cardew Group Tel: 020 7930 0777

Emma Crawshaw Cardew Group Tel: 020 7930 0777

Andrew Mackintosh Director of Communications Tel: 01302 755 218