UK Coal Share Discussion Threads

[jacks13] 06/7/2011 12:23

If UKC turn out to be on track for £8m tonnes at c£2.50 that will do fine, there is every prospect that H2 will be better than H1 for a variety of reasons touched on in your post and earlier posts.

They are chipping away, albeit modestly, at the debt pile. The recent sale of land to the Church Commissioners (1760 acres) helps.
According to Dow Jones Newswire UKC had a net debt of £220.70m at the end of March 2011. Debt being something to have a close look at come the interim statement.

I don't see the pensions liability being resolved by the forthcoming (ongoing?) negotiations. Retirement benefits already accrued will inevitably (and rightly) be protected. It will be liabilities/benefits going forward that will I would think be up for discussion.

What UKC doesn't need at this time is a deterioration in capital market; equities, bonds and property etc as a result of the euro debacle. This could cause the asset base of the fund to once more shrink and result in earnings being diverted as a top-up, spare cash being much more effectively employed if diverted towards reducing the debt pile.

[nellie1973] 04/7/2011 14:34

Broker note-Buy target 49p

[jacks13] 03/7/2011 14:34

Interim 2011 Trading statement, due Monday 18 July

source: DJ UK Calendar of Events

[ivancampo] 02/7/2011 08:10

I reckon price rise yesterday was down to new non-exec buying , I expect this may run into the next day or so and support the price further. Close period must be soon.

[jacks13] 20/6/2011 19:57

Have you looked in the coalhouse?

[hvs] 20/6/2011 14:00

Where is the COAL ???

[warbaby43] 20/6/2011 13:36

No quibble on 7.8 mt, Jacks, and although the new face at Kell is reportedly its best ever, there is a difficult face change ahead at D Mill and an altogether more challenging new face there to shift to, with all this being against a delicate industial relations negotiations background and a cessation of coaling at Cutacre and Steadsburn surface mines.

With regard to price, £2.21 gj emerged from a lengthy Yorkshire Post article back on 18th January which quoted extensively from Evolution's mining analyst, Charles Kernot, with the relevant sentence being:

"He (Kernot) sees the miner earning an average price of £2.01gj for 2010 rising to £2.21 gj in 2011"

However, while £2.01 was slightly over optimistic for 2010 (£1.97 gj,) I commented at the time that it was hard to see any rationale for £2.21 for 2011, given that working back from the indicative contract prices, £2.21 would require an ARA price of $90 allied to a $/£ rate of $1.80 with neither the ARA futures market nor most $/£ forecasts at that time being remotely near those figures. Indeed, ARA has been nowhere near $100 let alone $90 with $/£ not exceeding $1.67. In retrospect, therefore, I would suggest that while £2.51 would have been almost bang on, £2.21 was flat wrong, though whether that was Kernot or the journo getting it wrong, there is no way of knowing. Also worth pointing out in this regard that Kernot's 14/06/11 estimate for 2011 outurn is pre-tax £16.50 (5.50p EPS) and £71.30 for 2012 (23.80 EPS)

With regard to the centrality of the debt and cash flow issue, I could not agree more especially with generator repayments being due of £32m this year and £48m next year. Similarly, as you also say, there is the very relevant issue of the pension deficit, though it should also be noted that they have embarked on negotiations to make radical changes to the major deficit scheme and while the background of the changes the government is embarking on to the public sector schemes cannot be unhelpful to UKC, I would suggest there is considerably less likelihood of a u-turn by Jonson Cox than there is by Cameron.

As ever with UKC, watch this space - never less than interesting and certainly not for those of an overly nervous disposition.

[jacks13] 19/6/2011 16:05

My own hunch is for around 7.8m tonnes in 2011.

The investment in underground equipment, ongoing upgrades to surface plant, the focus on face development and the avoidance of face gaps all should result in an uplift on the 2010 figure of 7.2m tonnes. Bearing in mind last year's problems this may not be too demanding given that we get no serious production issues.

Using 7.8m tonnes and the house broker's forecast of £2.21/gJ would give revenue of c£414m, adding approximately £6m of income from other sources would give a gross income of about £420m. Assuming there is no further write-down of property values and production costs and finance costs remain unchanged this would result in earnings per share of around zero.

Using, for example, the figure of £2.53/gJ would produce eps between 15p and 20p.

There are a lot of assumptions here though. Costs, particularly finance costs for example, may be higher this year than last. Debt rose to £243 million at year end 2010 from £182 million a year earlier. There could also be further property value write-downs.

The pensions liabilities burden has eased. The funding obligations were £566m at year end and the pensions fund assets had risen from £390m in 2009 to £432m by year end 2010, so the gap had reduced. This is progress but whilst the obligations are stable or even growing slightly the supporting assets are subject to a lot more (market) volatility.

It is vital that there are substantial retained profits over the next several years to pay down the debt and to cover any persistent funding gap in the pensions liabilities. There is little scope for any further borrowing.

[warbaby43] 19/6/2011 12:38

I'll hope for the best, expect the worst and stay on the pessimistic side of realistic, Jacks. So many daft forecasts with deeply disappointing outcomes from the previous management have left me very wary of making any sort of prediction.

Worth mentioning, though, that if they manage 1.9mt in this quarter, that will give them 4m in the half year and 8.5 mt over the last twelve months - best since 2006 when they had five deep mines.

I'll hope, but no more than that, for 8m in 2011 with anything more than that a bonus and if they manage 8.2m with .5 mt at fully floating as above, I'll be delirious given that will get them, at current and projected prices, to c £500m turnover. But dream on, I already hear the chorus.

Be interested to get your view jacks and that of any other of the brethren

[jacks13] 18/6/2011 16:51

good stuff warbaby.
What is your thinking on final tonnage for the year?

[keithk2t] 15/6/2011 10:59

They are planning to build waste incinerators in the areas that already have the most incinerators. There has been a long and bitter battle to build an incinerator at UKCOALs rufford site which was turned down after a planning inquary.

These jount ventures will take up lots of management time and leagal costs. Due to the existing incinerators being short of waste they are very likely to get turned down at the planning stage.

[loafofbread] 14/6/2011 14:23

Warbs,

Looks like you get another chance at this EGM?

Have to say this property guy at UKC is fast becoming our new best mate.

Lets hope the coal side catches up.

[ivancampo] 14/6/2011 09:21

Not quite sure what the announcement today means but price looking ready to move imo.

[warbaby43] 11/6/2011 13:54

Oh dear, regarding the AGM, egg on my rather red face, I'm ashamed to say.

My whinge about having received no response to my e mail about the AGM was picked up by UKC who contacted me to say that failure to respond was not acceptable and asked me to forward a copy. Unfortunately, when I came to forward it, I noticed that the original had been incorrectly addressed, so small wonder that I had received no reply.

My public apology, therefore, to UKC who also advised me that the AGM date, which I must have missed, had been indicated in the Prelims. Encouraging too, that my misplaced whinge was picked up by them and responded to promptly.

Did anyone else go to the AGM?

[hvs] 09/6/2011 18:15

Any OLD COAL,

[loafofbread] 09/6/2011 18:05

Warb,

Not good news. I was looking forward to your report!

[warbaby43] 09/6/2011 18:00

Was anybody else caught unawares by today's AGM? I cannot recall seeing any notice of the event and as a regular attender at AGMs over the years I am pretty miffed at having missed it. What is especially annoying is that I had emailed them last week asking to be sent the accompanying AGM papers which I don't receive as a matter of course as my shares are held via Barclays Nominees.

When there was no response to that e mail I assumed that the AGM date had still to be fixed. Have any other of the bretheren been similarly caught unawares?

[jacks13] 09/6/2011 17:03

They really do need to get their deep mines act together and the statement assures us they are attempting to do that. Selling off property is helping to keep the wolf from the door but it is self harming and cannot go on indefinitely.

[ivancampo] 09/6/2011 16:05

Agree, just added a few more....