RNS Number:1407G
ATH Resources plc
08 December 2004
Press Release 8 December 2004
ATH Resources plc
("ATH Resources" or "the Company")
Preliminary Results - Wednesday 8 December 2004
ATH Resources plc, one of the UK's largest coal producers, reports its maiden
set of Preliminary Results for the 10 months ended 26 September 2004.
Highlights
- acquisition of Garleffan opencast mine
- successful debut on AIM
- turnover of #31.4 million (*Pro forma 12 months: #34.6 million)
- EBITDA of #6.4 million (*Pro forma 12 months: #7.3 million)
- profit before interest and tax of #1.4 million (*Pro forma 12 months:
#1.7 million)
- final dividend of 3.36 pence per share
- earnings per share of 0.44 pence (*Pro forma 12 months 1.27 pence)
Commenting on the Preliminary Results, Tom Allchurch, Chief Executive of ATH
Resources, said: "These results confirm that the progress of the business is in
line with the Directors' expectations and underpin the Board's strategy of
making ATH a major player in the UK coal mining industry. The Board is
confident of the Group's ability to deliver all of its targets with both new
sites and extensions to existing operations planned in Scotland and France. The
continued rise in worldwide demand for coal and increasing prices should present
more opportunities for the Group."
*Pro forma information shows the results for the Group as if it had been trading
in its current form for the full 12 month period.
For further information:
ATH Resources
Tom Allchurch, Chief Executive Tel: +44 (0) 1302 760462
tom@ath.co.uk www.ath.co.uk
Seymour Pierce Limited
Sarah Wharry, Corporate Finance Tel: +44 (0) 207 107 8000
sarahwharry@seymourpierce.com www.seymourpierce.com
Media enquiries:
Abchurch
Henry Harrison-Topham Tel: +44 (0) 20 7398 7702
henry.ht@abchurch-group.com www.abchurch-group.com
Chairman's Statement
This year has seen a massive step change in both the size of the Group and its
public profile. Commencing operations in 1998 as a one site, venture capital
backed opencast coal mine with ambitions then limited to the successful
development of the Skares Road site, it is particularly pleasing to report on a
year that has seen the continuing profitable operation of the Group's original
mine, the doubling of the Group's operations through the acquisition from LAW
Mining of a second site at Garleffan and the successful listing on AIM.
Taken individually, any one of these events could be judged as constituting a
successful year. To have achieved all three demonstrates not only ATH's
ambition to become a major player in the UK coal mining industry, but also the
ability of a young and committed management team to deliver complex and
strategically demanding targets.
Business progress
Profitability after allowing for all of the exceptional costs associated with
the acquisition and the float is in line with the Board's expectations and plans
are in place to further improve performance in the coming year. Extensions are
planned at both of the Group's existing sites and new planning applications will
shortly be made to extend ATH's operations to other parts of Scotland. In
France, progress continues to be made towards developing new opencast sites
which will provide coal for French coal consumers.
Board changes
During the year the Board has been further strengthened by the addition of two
Non-executive Directors. Vaughan Williams recently retired from BHP Billiton is
widely experienced in the coal industry and brings industry knowledge and
considerable management experience to the Board. Ivana Slade, an executive with
Alchemy Partners, is widely experienced in all aspects of M&A and fund raising.
These two appointments ensure that the Board has all the skills necessary to
take it forward.
In France the Group is particularly pleased to have secured the services of
Michel Guy as a Director of its French subsidiary. Michel has a coal
importation business in France and is well placed to ensure that the output from
the two French mines will have a smooth path to market.
Strategy
There is no doubt that the coal industry, which currently is responsible for
producing some 35 per cent of the UK's electricity, faces some significant
political and fiscal challenges. Whilst the country has failed to evolve a
credible and balanced long-term energy policy, the demand for electricity
continues to increase and the older nuclear power stations are reaching the end
of their useful lives. Current policy places too much reliance upon renewables,
imported gas from Russia and LNG from the Middle East and South America. This
means that coal will continue to have to play a significant part in this
country's electricity generation.
ATH's strategy will be to maintain a relatively small but stable share of that
market. Its low cost of operation and its access to low sulphur Scottish coal
should ensure the success of that strategy. There also remains a significant
market for domestic fuel in which ATH is already established as a major supplier
and in which it will continue to operate.
Worldwide demand for coal continues to rise with the economic growth of China
and this together with high freight costs means that the selling price for coal
will remain high for the foreseeable future. The vast majority of ATH's sales
contracts are at selling prices significantly below current market levels
therefore revenues should increase as these contracts are renewed. Against
this, the high cost of oil has significantly increased the Group's operating
costs as it is a major consumer of gas oil.
The listing of ATH on AIM has strategically placed the Group to take advantage
of the many opportunities that will become available in the near future, and the
Board looks forward to reporting on further developments in the coming year.
David Port
Chairman
8 December 2004
Chief Executive's Report
This financial period has been the most eventful in the Group's development. It
has seen two major structural changes to the Group. First, the acquisition of
the Garleffan opencast coal site from LAW Mining Limited on 28 November 2003,
assisted by new funding from Alchemy Partners and Bank of Scotland, effectively
doubling the size of the Group. Second, the flotation of the Group on AIM on 11
June 2004 has positioned the Group exceptionally well for future development.
Operational Review
The Skares Road mine has performed exceptionally well through the period. Coal
production has been scaled back, during the second half, as the mine switched
operational areas into higher stripping ratios. The mine produced and sold
800,000 tonnes of coal and its products continued to perform strongly in the
household and industrial coal markets.
Following its acquisition, the Garleffan mine was subject to a turnaround
through the year. The mine required deepening, in order that the reserve was
maximised and the excavation cuts needed to be realigned for efficient
operation. This process has been completed along with the reorganisation and
relocation of many of the coal preparation and support services areas. In
addition, this mine has benefited from significant investment in new overburden
excavation and transportation equipment and is now set to operate to its maximum
efficiency for the remainder of its life. Despite these major changes to the
operations the mine produced 640,000 tonnes of coal over the ten month period of
ATH control.
In addition, in August, the Group successfully concluded the disposal of a
parcel of its development land at Hannahston in Ayrshire, for which planning
permission for 36 houses had been granted on a restored opencast site.
Development projects
The development of new business opportunities has received constant attention
since the listing. In Fife, the Muir Dean Project, is moving towards a planning
application with terms agreed on the final major land parcel. Two other
Ayrshire sites are also being prepared for planning application early in 2005.
These developments will see planning permission being sought for more than three
million tonnes this winter. Additionally, prospecting is ongoing at other new
projects in Scotland in advance of further applications for planning permission.
The SRMMC projects are also developing steadily, with an application for mining
permit for the Commentry project progressing through the planning system and the
transfer of the Bertholene Concession completed. During this coming winter,
both sites will have exploration works ongoing; Commentry for quality analysis
and Bertholene for scheme design. Both projects will also be the subject of
environmental assessments as part of the application process and it is planned
to have both mines available for commencement in 2006, although only one at a
time will be brought into production.
Market
The market for coal in the UK remains buoyant. International coal prices remain
very high on the back of worldwide growth in demand driven by China and the Far
East. Infrastructure limitations will slow any pricing falls as production
tries to catch up with demand. Consequently as we renew coal sales contracts
from 2006 we expect to see some uplift in pricing to the benefit of the
business.
Finally, in summary, this has been an extraordinary year for our business, which
has only been made possible by the commitment and dedication of the employees
over several years and in particular the last twelve months. I would like to
thank each of them for their support and effort that has collectively developed
this business to the strong position it now holds.
Tom Allchurch
Chief Executive Officer
8 December 2004
Financial Review
Summary
The reported results represent the trading of the Group for the 10 month period
since the incorporation of the Group and acquisition of Garleffan. These show
that trading for the period was in line with the Directors' expectations at the
time of the listing on AIM, which raised some #11.5 million, after costs, and
has enabled the balance sheet to be de-geared leaving the Group cash positive in
order that it may pursue its development program.
Turnover
Turnover for the 10 month period was #31.4 million on sales of 1.3 million
tonnes, with an average price of #24 per tonne. Sales by product comprised:
T'm #'m
Electricity Supply Industry (ESI) 1.1 25.2
Domestic 0.1 3.4
Industrial 0.1 2.8
Total 1.3 31.4
ESI customers supplied in the period were E.On, Drax Power, EDF Energy and
British Energy.
With the increase in world coal prices, which have risen by over 40 per cent
during the last year, the Group will be able to capitalise on improved domestic
and industrial prices this winter and as the Group's portfolio of ESI contracts
come up for renewal over the coming years.
Profit before interest and tax
Profit before interest and tax was #1.4 million. EBITDA was #6.4 million
reflecting the high upfront cost of acquiring mining assets and the capital
intensive nature of operating the business.
Overall, this is considered a satisfactory result as the Skares Road site has
performed in line with expectations and the Group's Garleffan site has been
substantially improved. Following the purchase of Garleffan the plant fleet has
been renewed and the site re-engineered. This turnaround is now complete and
the site is now operating efficiently.
The cost of gas oil, which accounts for some 10 per cent of direct costs, has
risen recently in response to the well publicised rise in crude oil prices. As
the majority of sales are at formulated prices there is limited opportunity to
pass through this increase to our customers. The Group is investigating
mechanisms, both financially and operationally, to manage this short term cost
increase as we currently believe that over the coming financial year oil prices
will return to around $35/barrel.
Interest
Interest charges of #1.1 million were incurred in the period. Of these charges
#0.5 million were in respect of the repayment of loan stock interest and will
not be incurred again. Following the listing, the Group has been cash positive
and so the main ongoing interest charge will be in respect of finance leases and
hire purchase agreements and the unwinding of the discount on the restoration
provision, which is not a cash flow item.
The Group manages its exposure to interest rates by acquiring plant on fixed
rate hire purchase agreements.
Tax
The effective rate of tax was 66 per cent compared with a standard rate of tax
of 30 per cent. The primary cause for this variation in effective rate was the
effect of depreciation charges being in excess of capital allowances.
Dividends and Earning Per Share
The Board is recommending a final dividend of #1 million, equivalent to 3.36
pence per share, subject to approval by the members at the AGM. As there was
not an obligation to pay the proposed dividend at 26 September 2004 it has not
been accrued for in the financial statement.
Earnings per share for the period was 0.44 pence
Cash Flow
Net cash inflow from operating activities was #8.7 million and the Group was
cash positive to the tune of #2.5 million as at 26 September 2004, whilst net
debt was #3.2 million. #5.3 million of this difference is in respect of finance
leases and hire purchase contracts outstanding on the plant fleet and the
balancing #0.4 million is in respect of commercial mortgages on properties
acquired at the Muir Dean site.
Capital expenditure
During the period the Group acquired capital equipment with a value of #2.8
million comprising an RH120 excavator and four TR100 dumptrucks. At 26
September 2004 the Group had placed orders worth #2.5 million for a further five
TR100 dumptrucks and two Caterpillar D9 bulldozers as part of its ongoing policy
of renewing plant to ensure that the Group operates a modern cost effective
plant fleet.
Pro Forma Results
In order to provide a better understanding of the full year trading we have
produced below pro forma information which shows the results for the Group as if
it had been trading in its current form for the full 12 month period. The basis
of the preparation for this pro forma information is given in the notes to the
interim statement below. The pro forma financial information shows that if the
Group had been in its current form for the full twelve months to 26 September
2004 results would have shown an increase in turnover over the same period in
2003 of #15.2m and an increase in underlying operating profit of #0.5m.
PRO FORMA CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the year ended 26 September 2004
Pro forma year Year ended
ended 26 28 September
September 2004 2003
(Unaudited) (Audited)
# #
TURNOVER 34,613,803 19,425,813
Cost of sales (29,864,636) (16,427,212)
Gross profit 4,749,167 2,998,601
Administrative expenses (3,295,747) (1,843,878)
Exceptional legal and professional costs (358,464) (159,946)
Other operating income 578,625 206,907
(3,075,586) (1,796,917)
OPERATING PROFIT 1,673,581 1,201,684
Interest receivable 13,535 6,483
Interest payable and similar charges (1,183,480) (590,529)
(1,169,945) (584,046)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 503,636 617,638
Tax on profit on ordinary activities (246,432) (409,391)
Dividends paid (271,000) (259,335)
RETAINED LOSS FOR THE YEAR (13,796) (51,088)
The pro forma results for the year ended 26 September 2004 comprise the actual
results of the ATH Resources plc group for the period plus the trading of the
subsidiary undertaking, Aardvark TMC Limited, for the two months of October and
November 2003 prior to the formation of the Group.
International Financial Reporting Standards (IFRS)
The London Stock Exchange has now confirmed that companies listed on AIM will
not have to apply IFRS until accounting periods commencing on or after 1 January
2007. Consequently the first set of fully compliant IFRS financial statements
will not be required until the year ending September 2008. In the meantime the
Group will be appraising the impact of adopting IFRS and briefing accordingly.
Richard Croston
Finance Director
8 December 2004
CONSOLIDATED PROFIT AND LOSS ACCOUNT
for the period ended 26 September 2004
Notes # #
TURNOVER 2 31,390,930
Cost of sales (27,267,466)
Gross profit 4,123,464
Administrative expenses (2,976,607)
Exceptional legal and professional costs (358,464)
Other operating income 578,625
(2,756,446)
OPERATING PROFIT 3 1,367,018
Interest receivable 13,535
Interest payable and similar charges 4 (1,115,920)
(1,102,385)
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 264,633
Tax on profit on ordinary activities 5 (174,432)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 90,201
RETAINED PROFIT FOR THE PERIOD 90,201
pence
Basic and diluted earnings per share 6 0.44
The profit on ordinary activities before taxation arises from the Group's
operations, all of which were acquired on 28 November 2003 and which are
continuing.
There are no recognised gains or losses other than as stated in the profit and
loss account.
CONSOLIDATED BALANCE SHEET
26 September 2004
# #
FIXED ASSETS
Goodwill 6,148,116
Site development costs 606,741
Tangible fixed assets 10,590,022
Investments 2
17,344,881
CURRENT ASSETS
Stocks 5,007,841
Debtors 8,115,563
Cash at bank 2,525,196
15,648,600
CREDITORS: Amounts falling due within one year (11,080,880)
NET CURRENT ASSETS 4,567,720
TOTAL ASSETS LESS CURRENT LIABILITIES 21,912,601
CREDITORS: Amounts falling due after more than one year (4,010,044)
PROVISIONS FOR LIABILITIES AND CHARGES (6,262,090)
NET ASSETS 11,640,467
CAPITAL AND RESERVES
Called up share capital 148,851
Share premium account 11,401,415
Profit and loss account 90,201
EQUITY SHAREHOLDERS' FUNDS 11,640,467
CONSOLIDATED CASH FLOW STATEMENT
for the period ended 26 September 2004
# #
NET CASH FLOW FROM OPERATING ACTIVITIES 8,677,466
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received 13,535
Interest paid (655,513)
Interest element of finance leases (274,182)
(916,160)
TAXATION PAID (668,796)
CAPITAL EXPENDITURE
Payments to acquire tangible fixed assets (514,712)
Receipts from sales of tangible fixed assets 575,813
ACQUISITIONS
Net overdrafts acquired with subsidiary (1,626,037)
Purchase of business (5,835,000)
(7,399,936)
CASH FLOW BEFORE FINANCING (307,426)
FINANCING
Issue of ordinary shares 11,494,016
New secured loan 3,000,000
Repayment of secured loan (3,050,000)
Issue of loan notes 1,480,530
Repayment of loan notes (7,331,280)
Capital element of finance lease payments (2,760,644)
2,832,622
INCREASE IN CASH 2,525,196
NOTES TO THE FINANCIAL STATEMENTS
for the period ended 26 September 2004
1 Accounting policies
The financial statements have been prepared under the historical cost
convention and in accordance with applicable accounting standards. The
Group has drawn up its accounts for the period from incorporation to 26
September 2004.
2 Turnover and segmental reporting
The Group's turnover was derived from its principal activity undertaken
wholly within the UK.
3 Reconciliation between non statutory and statutory financial #
information
EBITDA 6,443,709
Depreciation of tangible assets
owned assets (1,126,253)
leased assets (1,584,631)
Amortisation of site development costs (493,001)
Amortisation of goodwill (1,872,806)
Operating profit 1,367,018
4 Interest payable and similar charges #
Loan stock interest 488,526
Bank overdraft and loan interest 166,987
Finance lease interest 274,182
Restoration provision discount 186,225
1,115,920
5 Taxation #
Corporation tax:
Current year 407,894
Deferred taxation (233,462)
174,432
The tax assessed for the period is higher than the standard rate of
corporation tax as explained below:
Profit on ordinary activities before taxation 264,633
Profit on ordinary activities multiplied by standard rate of
tax for the period of 30%
79,390
Effect of expenses not allowable for tax purposes 76,883
Effect of depreciation in excess of capital allowances 218,195
Effect of short term timing differences 33,426
Total current tax 407,894
6 Earnings per share
Basic and diluted earnings per share is calculated on profit after tax of
#90,201 and a weighted average number of shares of 20,302,635. The diluted
earnings per share takes account of share options outstanding. However, as
the performance criteria for the share options had not been met, there is
no adjustment to the weighted average number of shares.
7 Analysis of net debt Acquisition
(Excluding net 26 September
Cash flow overdrafts) Other movements 2004
# # # #
Cash at bank 2,525,196 - - 2,525,196
Debt due within one year 5,850,750 ( 50,000) ( 5,850,750) ( 50,000)
Debt due beyond one year 50,000 ( 394,500) - (344,500)
Finance leases and hire purchase
contracts 2,760,644 (3,792,848) ( 4,272,300) (5,304,504)
8,661,394
11,186,590 (4,237,348) (10,123,050) (3,173,808)
During the year the group entered into finance leases and hire purchase
contracts in respect of assets with a total capital value at the inception of
the agreements of #4,272,300.
Part of the consideration for the purchase of subsidiary undertakings that
occurred during the period comprised shares and loan notes. Further details of
the acquisitions are set below.
8 Acquisitions of subsidiaries
On 28 November 2003 the Company acquired the whole of the issued share
capital of Aardvark TMC Limited for a total consideration of #5,907,000.
The consideration was satisfied by means of a loan note being granted to
the members of Aardvark TMC Limited, which attracted interest at the rate
of 12% per annum, and the issue of 56,250 'A' ordinary shares.
#
Net assets acquired (fair value)
Site development costs 1,099,742
Tangible fixed assets 7,239,931
Investments 2
Stocks 4,216,434
Debtors 3,839,817
Bank overdrafts (1,626,037)
Bank loans (444,500)
Creditors (3,633,206)
Finance leases (3,792,848)
Provisions (2,964,463)
3,934,872
Goodwill 1,972,128
5,907,000
Satisfied by:
Shares allotted 56,250
Loan notes 5,850,750
5,907,000
On the same day the Company acquired the whole of the issued share capital
of ATH Garleffan Limited at par. On 28 November 2003 ATH Garleffan
Limited acquired the Garleffan open cast coal mine from LAW Mining Limited.
9 Annual Report and Financial Statements
Copies of the Annual Report and Financial Statements will be circulated to
shareholders shortly and may be obtained after the posting date from
Richard Croston, Company Secretary, ATH Resources plc, Richmonds House,
White Rose Way, Doncaster DN4 5JH. Copies of this announcement are
available from the Company's nominated adviser Seymour Pierce Limited,
Bucklersbury House, 3 Queen Victoria Street, London EC4N 8EL.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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