RNS Number:1874J
ATH Resources plc
05 December 2007
Press Release 5 December 2007
ATH Resources plc
("ATH Resources" or "the Group")
Preliminary Results
ATH Resources plc, one of the UK's largest coal producers, reports its
Preliminary Results for the year ended 30 September 2007.
Highlights
* Turnover up 30% to #70.5 million (2006 restated: #54.1 million) on sales of 2.2 million tonnes of coal
(2006: 1.8 million tonnes)
* EBITDA up 31% to #25.1 million (2006 restated: #19.2 million)
* Profit before interest and tax up 27% to #10.3 million (2006 restated: #8.1 million)
* Earnings per share up 11% to 13.1 pence per share (2006 restated: 11.8 pence per share)
* Final proposed dividend of 8.24 pence per share (2006: 7.89 pence per share)
* Proven and probable coal reserves up 9% to 8.6 million tonnes (2006: 7.9 million tonnes)
Highlights post year end
* Successful appeal for development of ATH's Muir Dean project in Fife which will enable ATH to mine 2
million tonnes of coal
* Application for a 1 million tonne extension at Grievehill was approved by the Local Planning Authority
in November 2007
Commenting on the Preliminary Results, Tom Allchurch, Chief Executive of ATH
Resources, said:
"We are delighted to report a year of record profitability. With production at
its highest level and further opportunities identified for growth in both the UK
and Australia, the Board is confident in the Group's long term prospects"
- Ends -
For further information:
ATH Resources plc
Tom Allchurch, Chief Executive Tel: +44 (0) 1302 760 462
tom@ath.co.uk www.ath.co.uk
Seymour Pierce Limited
Nicola Marrin, Corporate Finance Tel: +44 (0) 20 7107 8000
nicolamarrin@seymourpierce.com www.seymourpierce.com
Media enquiries:
Abchurch
Charlie Jack / Georgina Bonham Tel: +44 (0) 20 7398 7700
georgina.bonham@abchurch-group.com www.abchurch-group.com
Chairman's statement
Business Progress
The Group continues to build on the strategy of growing the business organically
and by acquisition. It is pleasing to report a year of record production
resulting in the Group selling its ten millionth tonne of coal since commencing
operations in 1998. The Surface Mining business opened two new mines in the
year and commissioned the full length of its 16km conveyor network linking the
new mines to the railhead.
The land regeneration and coal tip washing business, re-branded as ATH
Regeneration, is fully integrated within the Group and continues to perform
ahead of expectations. A number of exciting new opportunities, to exploit the
business' intellectual property and market potential in both the UK and
Australia, are being actively pursued.
Development
Following the year end, the Board was delighted to hear that the Group was
successful in its appeal on the Muir Dean site in Fife. The planning process has
been an extended one, given the appeal, and the Group is now looking forward to
working with the local community in opening the site later in 2008.
Planning consents for new reserves remain a key issue for the Group. The
business is awaiting final approval for an extension to the Grievehill mine from
the Scottish Executive Planning Department ("SEPD"). The Board is confident that
confirmation of SEPD's decision will be received within the necessary timeframe
for the Group to meet its production plans in 2007/08.
Board of Directors
During the year, Steven Beaumont replaced Richard Croston as Group Finance
Director. In addition, the Director nominated by The Alchemy Plan, Ivana Ridler,
left Alchemy and became an Independent Non-Executive Director.
Following the year end, Group Marketing Director John Hodgson, one of the three
founding directors, retired from the Board. John will continue as a Director of
the Surface Mining business. His commitment and dedication to the business has
been fundamental to the success of ATH and the Board is grateful for his
contribution over the last nine years.
Strategy
There is a growing recognition of the value and importance of UK produced coal
in creating a balanced and secure portfolio of energy supply within the UK.
With this background the Group will continue to develop the business organically
and through acquisition, exploiting new opportunities especially in the
Regeneration business, to build on the reserve base.
Chief Executive's statement
Review of the period
The Group delivered a year of continued growth, reporting record sales up 30% to
#70.5 million (2006 restated: #54.1 million), with profit before interest, tax,
depreciation and goodwill amortisation growing by over 30% to a record high of
#25.1 million (2006 restated: #19.2 million). Operating cashflow of #23.6
million was generated to fund the continued expansion of the business.
Operational review
Surface Mining
The Surface Mining business continues to grow steadily in line with the Group's
strategy. During the year, the Group brought two new mines at Glenmuckloch and
Laigh Glenmuir into production and both mines operated ahead of expectations.
In addition, 16km of overland conveyors linking the sites to the rail loading
facility at Crowbandsgate were constructed with the assistance of a #2.2 million
Freight Facilities Grant provided by the Scottish Executive. The conveyors,
which can handle up to 500 tonnes of coal per hour, remove over 50,000 lorry
loads of coal from local roads and significantly reduce the environmental impact
of these sites.
The Grievehill mine finished production on existing reserves in November 2007.
An application for a further one million tonne extension was approved by the
Local Planning Authority in November 2007 and ratification of this decision by
the SEPD is awaited, with mining expected to re-commence in February 2008.
In addition to Grievehill, a Surface Mining planning application was submitted
for Rigg in Dumfries and Galloway for 1.3 million tonnes and an extension of 0.7
million tonnes to the Glenmuckloch mine was identified. During 2008, the Group
expects to submit at least two further new planning applications for 2.1 million
tonnes of surface mine reserves.
The Surface Mining business has an estimated 7.9 million tonnes of proven and
probable reserves. Subject to the approval of the Grievehill extension these
are sufficient to satisfy production at current capacity levels for over three
and a half years. This is approximately double the reserve life that the company
had when it came to the Stock Market.
Regeneration
ATH Regeneration continues to operate ahead of expectations at its coal washing
plant at Grimethorpe utilising its unique natural medium coal recovery
techniques. Coal is being extracted from the coal tip at rates and qualities
higher than anticipated at the time of acquisition in 2006. Coal recovery at
Grimethorpe is expected to cease during 2008 with the site entering a period of
restoration.
In March 2007, the Group acquired 12.3 acres of development land at Pinxton in
Derbyshire to facilitate the access and washing of the Langton coal tip which
was part of the 2006 acquisition. A planning application has been submitted and
the operations are expected to commence in 2008.
Several new tip washing opportunities have been identified and negotiations with
prospective partners where the necessary planning permission is in place are
ongoing on two further projects. On agreement of terms with these partners, 1.3
million tonnes would be added to either the reported proven reserves or future
order book. Progress is also being made on two further tip washing operations
expected to commence in the UK in the next two years.
In addition, a number of projects are being actively pursued in Australia. The
Directors have identified a clear opportunity to build a presence in this much
larger coal production market, where the Group's successful coal recovery
techniques are not presently employed.
France
The Group continues to pursue its development opportunities in France. The
Administrative Court in Toulouse has found in the Group's favour on litigation
brought against the French State after their refusal of applications to transfer
concessions at Bertholene in 1997. The Directors hope that this ruling will
have significance in progressing the French State's determination of the Group's
long outstanding application for a concession at Commentry.
Reserves
The Group has a dual strategy of growing coal reserves organically from its
existing portfolio whilst continuing to identify suitable complimentary
acquisitions. Estimated reserves of recoverable coal (proven and probable) grew
by 9% during the year to 8.6 million tonnes (2006: 7.9 million tonnes) despite a
year of record production. Current planning activity levels will continue to
replace mined coal with new reserves, securing production for the foreseeable
future.
Coal Reserves
at 30 September 2007
Proven Probable Total
Tonnes Tonnes Tonnes
Sites 000 000 000
Site
Skares Road 340 - 340
Laigh Glenmuir 360 - 360
Grievehill 60 1,060 1,120
Glenmuckloch 2,510 700 3,210
Muir Dean - 2,275 2,275
Rigg - 600 600
Total Surface Mining 3,270 4,635 7,905
Grimethorpe 220 - 220
Langton - 475 475
Total Regeneration 220 475 695
Group reserves 3,490 5,110 8,600
* The information in this report relating to exploration results, mineral
resources or mineral reserves is based on information compiled by Mr Peter
Morgan, a full time employee of the Group, who is a fellow of the Institute of
Materials, Minerals and Mining. Mr Morgan has sufficient experience which is
relevant to the style of mineralisation and type of deposit under consideration.
He has reviewed and consents to the inclusion in the report of the matters based
on his information in the form and context in which it appears. A glossary of
terms is available on our website - www.ath.co.uk
Market
Demand for coal in the UK was exceptional during 2006 and, as expected, returned
to near previous normal levels in 2007. UK coal production meets approximately
one third of demand, with the balance being imported predominantly from Russia,
South Africa and Colombia.
International coal prices are at an all time high, largely due to soaring demand
from China, India and smaller developing countries in the Far East, leading to
severe logistical difficulties, particularly at Australian ports that are
struggling to cope with the required throughputs. Although there is currently
resistance among UK electricity generators to pay these higher international
coal prices to indigenous producers, the Directors expect an outcome that will
satisfy both producer and generator.
Consequently, the Directors anticipate a prolonged period of higher UK coal
prices in the medium-term. These higher prices for coal are already starting to
benefit the Group as long term supply contracts are renewed.
The Group holds supply agreements with a number of major UK electricity
generators. These cover the supply of 3.1 million tonnes of coal up to 2011.
New contract agreements have recently been secured for a further 1.3 million
tonnes at a price in 2009/10 15% above the legacy contract.
Health and safety
The Board understands the potentially hazardous nature of the work undertaken in
the Group's operations and takes very seriously its responsibilities for Health
and Safety.
Each operational site has a nominated and qualified Health and Safety Manager
and employees are regularly trained in the Group's processes which aim to exceed
HSE best practice.
Staff
The Board recognises the critical importance of its employees in the Group's
continued growth and success. The business has a skilled, innovative and highly
motivated workforce approaching a total of 400 and the Group continues to
deliver structured and targeted training programmes to ensure staff are
competent to carry out their duties.
The Board joins me in thanking all of our employees for the efforts they have
made during the past year of trading.
Summary
These strong results reflect a busy period for the Group in growing the reserve
base and identifying important future opportunities, particularly for ATH
Regeneration in the UK and Australia. The Board looks forward to delivering
value from these opportunities and further strengthening the Group's market
position.
Financial review
The results are presented for the 52 week period to 30 September 2007 against a
similar period to 1 October 2006 and incorporate a full year's trading of ATH
Regeneration, acquired during 2006.
Turnover
The Group's turnover for the year was #70.5 million (2006 restated: #54.1
million) on sales of 2.2 million tonnes (2006: 1.8 million). The average coal
price was #32 per tonne (2006: #30 per tonne).
Turnover on Surface Mining was #57.3 million (2006 restated: #48.2 million) and
on Regeneration was #13.2 million (2006 restated: #5.9 million).
The increase in turnover from Surface Mining reflects the greater resources
available following the opening of the Glenmuckloch and Laigh Glenmuir mines to
complement existing production and the cessation of coaling at the Garleffan
site in 2006. Regeneration provided a full year of production.
The increase in average coal prices reflects a full year contribution from
Regeneration and new contracts with power generators.
Profit before interest and tax
Profit before interest and tax (PBIT) was #10.3 million (2006 restated: #8.1
million) and earnings before interest, tax, depreciation and amortisation
(EBITDA) was #25.1 million (2006 restated: #19.2 million).
Return on capital employed of 16% (2006 restated: 15%) reflects good cost
control and careful management of capital within the business.
Interest
Net interest of #2.4 million (2006 restated: #1.0 million) was charged in the
year. Following current and prior year plant acquisitions, hire purchase
interest charges increased to #1.1 million (2006 restated: #0.6 million) and
#0.3 million (2006 restated: #Nil) was charged in respect of the unwinding of
the discount on restoration provisions. Additional investment in the asset base
and the Regeneration acquisition in 2006 resulted in an increase in bank loan
and overdraft interest charges of #1.0 million (2006 restated: #0.4 million).
Corporation Tax
The effective rate of tax was 35% (2006 restated: 35%) compared with a standard
rate of tax of 30%. The difference between the actual and standard rate is
primarily due to the amortisation of acquired goodwill which is not allowable
against tax.
Dividends
The Board is recommending a final dividend of 8.24 pence per share (2006: 7.89
pence), subject to approval by the members at the Annual General Meeting to be
held on 15 January 2008, to members on the share register at 21 December 2007.
On approval, the total dividend will be 11.6 pence per share, an increase of 3%
on the 2006 figure of 11.25 pence. Under UK Accounting rules the proposed final
dividend has not been accrued as a liability in these financial statements.
Earnings per share
Earnings per share was 13.08 pence (2006 restated: 11.77 pence), an 11% increase
overall. Fully diluted earnings per share, taking into account shares expected
to be issued under employee option schemes, was 12.88p (2006 restated: 11.61p).
Net Assets
Net assets were #31.4 million (2006 restated: #30.0 million). Investment in
fixed assets was #12.0 million, with #5.0 million on plant and machinery,
including the conveyor, #2.3 million to acquire development land at Pinxton and
#4.7 million on the development of new Surface Mining assets.
Cash flows
The Group continues to generate strong cash flows from its operations with a net
cash inflow on operations of #23.6 million (2006 restated: #17.6 million). Cash
outflows on fixed assets, #7.1 million (2006 restated: #7.8 million) and hire
purchase payments, #8.2 million (2006 restated: #5.5 million) reflect the
Group's capital investment programme. A one-off corporation tax payment of #3.9
million relating to a pre-acquisition liability of Regeneration was made during
the year. Overall, net cash outflow was #5.3 million (2006 restated: #1.2
million).
Net debt at 30 September 2007 was #31.6 million (2006 restated: #31.4 million).
Debt repaid during the year was replaced by new hire purchase agreements and
bank loans. Gearing, defined as net debt divided by capital employed, was 50%
(2006 restated: 51%).
Financing
Following the year end, the Group renegotiated its banking facilities with the
Royal Bank of Scotland in order to take advantage of new investment
opportunities in both the Surface Mining and Regeneration businesses.
The new arrangements include three year loan facilities totalling #15 million
replacing existing term loans of #3 million. Further loans have been agreed in
principle to finance the capital investment required to bring future projects
and mines into production.
FRS 20 Share based payment
The Group adopted "FRS 20 Share based payment" in the year which is treated as a
change in accounting policy under UK accounting rules, requiring both current
and prior year figures to be restated.
On implementation of this new standard, the Group's Profit Before Interest and
Tax was reduced by #0.5 million in both 2007 and 2006.
International Financial Reporting Standards (IFRS)
The Group will fully implement IFRS during 2008. Both the Interim Accounts to
March 2008 and full year Financial Statements to September 2008 will be prepared
on this basis with full comparative information.
The Group has not quantified the full potential impact on its earnings of IFRS
but the key areas identified are noted below.
IFRS 3 - Business combinations
This standard will require the goodwill arising on consolidation of the Group's
results to cease being charged to profit. Instead, the goodwill balance will be
subject to an annual impairment test.
IFRS 12 - Income taxes
This standard will require a deferred tax provision to be created for all
differences between fair values of assets and liabilities and their tax bases
which would not normally be required under current practice.
Steven Beaumont
Finance Director
CONSOLIDATED PROFIT AND LOSS ACCOUNT
For the year ended 30 September 2007
Restated
2007 2006
#000 #000
Turnover 70,508 54,126
Cost of sales (50,856) (40,470)
Gross profit 19,652 13,656
Administrative expenses (9,460) (5,575)
Other operating income 129 18
Operating profit 10,321 8,099
(Loss)/profit on disposal of fixed assets (58) 28
Profit on ordinary activities before interest 10,263 8,127
Interest receivable 23 65
Interest payable and similar charges (2,448) (1,049)
7,838 7,143
Profit on ordinary activities before taxation
Tax on profit on ordinary activities (2,640) (2,470)
5,198 4,673
Profit on ordinary activities after taxation
Basic earnings per share 13.08p 11.77p
Diluted earnings per share 12.88p 11.61p
The profit on ordinary activities before taxation arises from the Group's
continuing activities.
There are no recognised gains or losses other than as stated in the profit and
loss account.
CONSOLIDATED BALANCE SHEET
As at 30 September 2007
Restated
2007 2006
#000 #000 #000 #000
Fixed assets
Goodwill 6,376 7,169
Tangible fixed assets 64,356 65,143
Investments 1 1
70,733 72,313
Current assets
Stocks 7,793 6,762
Debtors 11,229 8,796
Cash at bank 64 -
19,086 15,558
Creditors: amounts falling due within one year (29,216) (28,555)
Net current liabilities (10,130) (12,997)
Total assets less current liabilities 60,603 59,316
Creditors: amounts falling due after more than (13,467) (16,602)
one year
Provisions for liabilities and charges (15,699) (12,692)
Net assets 31,437 30,022
Capital and reserves
Called up share capital 199 198
Share premium account 27,563 27,341
Share based payment reserve 1,313 853
Profit and loss account 2,362 1,630
Equity shareholders' funds 31,437 30,022
The financial statements were approved by the Board of Directors and authorised
for issue on 4 December 2007 and are signed on its behalf by:
S Beaumont
Finance Director
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 30 September 2007
Restated
2007 2006
#000 #000 #000 #000
Net cash flow from operating activities 23,580 17,601
Returns on investment and servicing of finance
Interest received 23 65
Interest paid (1,077) (423)
Interest element of finance leases (1,107) (626)
(2,161) (984)
Taxation paid (5,234) (640)
Capital expenditure
Payments to acquire tangible fixed assets (7,120) (7,838)
Receipts from sales of tangible fixed assets 352 376
Acquisition
Cash acquired with subsidiary - 22,321
Purchase of business (1,000) (25,944)
(7,768) (11,085)
Equity dividends paid (4,466) (4,335)
Cash flow before financing 3,951 557
Financing
Issue of ordinary shares 223 -
New secured loan 1,602 5,500
Repayment of secured loan (2,784) (1,793)
Capital element of finance lease payments (8,248) (5,460)
(9,207) (1,753)
Decrease in cash (5,256) (1,196)
Basis of accounting
The financial statements have been prepared under the historical cost accounting
convention and in accordance with applicable accounting standards.
Accounting period
The Company has drawn up its accounts for the 52 week period to 30 September
2007 (52 week period to 1 October 2006).
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 September 2007
1. Interest payable and similar charges
Restated
2007 2006
#000 #000
Bank overdraft and loan interest 1,077 423
Finance leases and hire purchase contracts interest 1,107 626
Final void provision discount 264 -
2,448 1,049
2. Taxation
Restated
2007 2006
Group #000 #000
Corporation tax:
Current year 1,173 1,491
Adjustment to prior year (337) 72
Deferred taxation 1,804 907
2,640 2,470
The tax assessed for the year is lower than the standard rate of corporation tax
as explained below:
Restated
2007 2006
Group #000 #000
Profit on ordinary activities before taxation 7,838 7,143
Profit on ordinary activities multiplied by standard rate of tax for the 2,351 2,143
period of 30%
Effect of expenses not allowable for tax purposes 448 357
Effect of depreciation in excess of capital allowances (1,764)
(1,135)
Effect of short term timing differences 138 126
Total current tax 1,173 1,491
3. Earnings per share
Basic earnings per share is calculated on profit after tax of #5,198,000 (2006
restated: #4,673,000) and a weighted average number of shares of 39,728,508
(2006: 39,693,568). The diluted earnings per share takes account of share
options outstanding to employees as set out below:
Restated
2007 2006
Group No No
Weighted average number of shares in issue 39,728,508 39,693,568
Weighted average number of dilutive share options 619,714 550,714
Total number of shares for calculating diluted earnings per share 40,348,222 40,244,282
4. Cash flows
Reconciliation of operating profit to net cash inflow from operating activities
Restated
2007 2006
#000 #000
Operating profit 10,263 8,127
Depreciation and amortisation 14,441 10,620
Loss/(profit) on disposal of fixed assets 58 (28)
Increase in stocks (1,031) (746)
(Increase)/decrease in debtors (2,433) 2,118
Increase/(decrease) in creditors and provisions 2,282 (2,490)
Net cash flow from operating activities 23,580 17,601
5. FRS 20 Share based payment
During the year the Group adopted FRS 20 'Share based payment'. The adoption of
this standard constitutes a change in accounting policy and therefore the impact
has been reflected as a prior year adjustment in accordance with FRS3 'Reporting
Financial Performance'.
The standard requires that where shares or rights to shares are granted to third
parties, including employees, a charge should be recognised in the profit and
loss account based on the fair values of the shares at the date the grant of
shares or right to shares is made. The Group operates share option schemes for
senior executives which are required under the standard to be valued and charged
against profit before tax.
The effect of the adoption of FRS 20 on prior year comparatives is to reduce
Operating Profit by #480,000 in the year 1 October 2006. Operating Profit in the
year to 30 September 2007 is reduced by #460,000.
A corresponding reserve is created in the balance sheet - FRS 20 Reserve - which
is a distributable reserve. In addition, a deferred tax credit is recognised in
the profit and loss account to reflect tax relief available when the options are
exercised. The impact on net assets is an increase of #255,855 for the period
ended 1 October 2006 and an increase of #393,855 for the period ended 30
September 2007.
Ends
This information is provided by RNS
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