Harworth Gp Regulatory News (HWG)

23 January 2012

UK COAL PLC

("UK Coal" or the "Group")

Trading Update

Trading update for the year ended 31 December 2011, in advance of the publication of its preliminary results in April.

Strategic Recovery Plan

In 2011, UK Coal was restored to profitability and the Board now anticipates operating profit for the full year to be in line with expectations, with full year tonnage of 7.5m tonnes.

We have continued to make progress on the Group's three year Strategic Recovery Plan, which was launched in May 2011. We realised £65m of property net receipts in the year and this, together with operating cash-flow, reduced our total net debt to £139m and net bank debt to £55m, excluding restricted cash. Looking forward, delivery of the recovery plan at Daw Mill remains the highest priority.

Production

Total production in the fourth quarter was 1.6m tonnes (Q4 2010: 2.3m tonnes), bringing full year production to 7.5m tonnes (2010: 7.2m tonnes), in line with expectations.

Deep mine production was 1.2m tonnes for the quarter (Q4 2010: 1.8m tonnes). Kellingley mined above expectations and Thoresby mined in line with expectations. These, however, were offset by lower production at Daw Mill where the programme to mitigate a face gap fell short of the mine's commitment, resulting in negligible production from Daw Mill through December. A new face is ramping up during January.

Surface mine production was 0.4m tonnes in the final quarter (Q4 2010: 0.5m tonnes), leaving output for the full year at 1.8m tonnes, ahead of expectations.

Working Practices and cost of employment

Our Strategic Recovery Plan highlighted that the restraint of labour costs and changes to working practices and pension arrangements were critical to the recovery of UK Coal. 

In December, we concluded negotiations and reached an agreement on pay and working practices with our workforce and their unions. When combined with the pension changes previously announced, this agreement is expected to hold per capita employment costs at 2010 levels through to the end of 2013.

Daw Mill

A key priority for 2012 is to safely recover production levels and significantly improve development at Daw Mill. The Board recently reviewed options for the future of Daw Mill. As a result, in January, a more intensive intervention in the day to day management of the mine has been introduced to bring pace to the programme of improvement.

Property (Harworth Estates)

Property disposals have generated around £6m of net receipts in the fourth quarter, bringing total net receipts in the year to £65m. We recorded a profit on property disposals of £3m for the full year. We have exchanged conditional contracts on further sales with a value of £18m, meaning net property sales of around £106m have been exchanged under our new approach since Q4, 2010.

Harworth Power

As part of our asset realisation programme to reduce borrowings, the Group is in the early stages of investigating the possible sale of Harworth Power, a business which generates electricity from mine methane.

Debt

Net bank debt reduced to £55m by the year end (December 2010: £141m), excluding restricted cash. Generator loans/prepayments were £84m (December 2010 £101m).

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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