RNS Number : 4295J
ATH Resources plc
03 December 2008
Press Release 3 December 2008
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 52 week period ended 28 September
2008.
Highlights
* Turnover up 9% to �76.9 million (2007: �70.5 million) on sales of 2.0
million tonnes of coal (2007: 2.2 million tonnes)
* Average selling price increased by 21% to �38 per tonne
* Profit before interest and tax up 8% to �11.9 million (2007: �11.1
million)
* Earnings per share up 4% to 15.3 pence per share (2007: 14.8 pence per
share)
* Dividend rebased to 6.0 pence per share for full year (2007: 11.6 pence
per share), with final dividend of 2.64 pence per share (2007: 8.24 pence
per share), enabling a greater proportion of investment in new, high
growth, opportunities to be funded from existing cash resources
* Planning consent recently received from Nottinghamshire County Council
for a 0.5 million tonne regeneration project at Langton - consent from
Derbyshire County Council expected in early 2009
* Proven coal reserves up 29% to 4.5 million tonnes (2007: 3.5 million
tonnes) with total reserves at 8.2 million tonnes (2007: 8.6 million
tonnes)
* Further 1.8 million tonnes increase in Proven coal reserves post year end
following recent planning successes
Commenting on the preliminary results, Tom Allchurch, Chief Executive of ATH Resources, said:
"I am extremely pleased to be reporting on another year of solid profits growth. The business is starting to benefit from higher coal
prices and is continuing to build upon an already healthy base of reserves and long term supply agreements. The exciting opportunities for
significant growth in our regeneration business are gathering momentum and, for this reason, we have decided to rebase our dividend to allow
a greater proportion of the investment required for these projects to be funded from our existing cash resources. I am confident that the
Group will continue to deliver significant value to shareholders in the years ahead."
- Ends -
For further information:
ATH Resources plc
Tom Allchurch, Chief Executive Tel: +44 (0) 1302 760 462
tom.allchurch@ath.co.uk www.ath.co.uk
Evolution Securities Limited
Joanne Lake/Peter Steel Tel: +44 (0)113 243 1619
joanne.lake@evosecurities.com www.evosecurities.com
Media enquiries:
Abchurch
Charlie Jack / George Parker Tel: +44 (0) 20 7398 7719
george.parker@abchurch-group.com www.abchurch-group.com
Chairman's Statement
Business progress
The Group continues to develop the two core businesses of surface mining and coal tip recovery and regeneration. Coal production in the
second six months of the year increased significantly compared to the first half with the opening up of the Muir Dean mine and the latest
extension to the Grievehill site. Overall coal sales for the year are in excess of 2 million tonnes.
The land regeneration and coal tip washing business, ATH Regeneration, continues the development of new sites and markets. The board was
delighted to hear that the Group was recently successful in receiving planning consent from Nottinghamshire County Council to recover 0.5
million tonnes of coal at the Langton site. Planning approval is required from Derbyshire County Council and this is expected to be received
in early 2009. The project, which is expected to commence in the first half of 2009, will be the first new project under the Group's
ownership and the board is confident that a number of other sites currently in development will also be forthcoming.
In addition to the opportunities in the UK, there is a growing momentum in the progression of a number of projects in Australia to
deploy the Group's unique coal tip washing technology. Negotiations are well advanced with two potential clients and operations in
Australia are expected to commence in 2009.
Development
The Group has had another very successful year in the development of its reserve base with new proven reserves of over 3 million tonnes.
In addition, planning consent has been received, following the year end, for a further 1.8 million tonnes.
Proven and Probable coal reserves at 28 September 2008 are 8.2 million tonnes (2007: 8.6 million tonnes).
Dividends
The board is recommending a final dividend of 2.64 pence per share (2007: 8.24 pence per share), payable on 16 January 2009, subject to
approval by the members at the Annual General Meeting to be held on 13 January 2009, to members on the share register at 19 December 2008.
This brings the total dividend for the year to 6.0 pence per share (2007: 11.6 pence per share).
The Group is progressing a number of attractive opportunities in Australia for ATH Regeneration which have relatively short pay back
periods and the potential to significantly boost earnings. The Group continues to be highly cash generative and, therefore, the board has
decided to retain a greater proportion of earnings within the business to fund the initial investment phase of these opportunities. This
will allow the Group to continue to pay an attractive dividend and is consistent with the high growth opportunities available to the Group.
Going forward, the board intends to grow dividends from the rebased level as earnings increase.
Chief Executive's Statement
Review of the period
The Group delivered another year of continued growth, reporting sales up 9% to �76.9 million (2007: �70.5 million) with profit before
tax and earnings per share growing by 4%. The business benefitted from increasing coal prices and achieved growth in profitability despite a
reduction in volumes arising from a planning delay to the Grievehill site and record oil prices leading to an increase in operating costs.
Operating cash flow remained a strong feature of the Group's results at �22.6 million (2007: �23.6 million).
Operational review
Surface mining
Profit before interest and tax grew by around a quarter during the year to �9.8 million (2007: �7.9 million). The new mine at Muir Dean
and the extension to the Grievehill site were opened successfully in the second half of the year and, with a full year contribution from
these sites, overall production volumes are expected to increase by more than 10% in 2009.
During the year, new planning consents were received for the Muir Dean (2.2 million tonnes) and Grievehill (1.0 million tonnes) sites.
Local planning consent was received for two extensions to the Glenmuckloch mine (0.7 million tonnes) and a new mine at Rigg (1.1 million
tonnes) in Dumfries and Galloway with full approval received after the period end. Following the year end, a planning application for 0.6
million tonnes was submitted for a further extension to the Skares Road mine and a 0.4 million tonnes extension to another mine was added to
Probable Reserves. During 2009, the Group expects to submit at least two further planning applications for an additional 3 million tonnes of
reserves.
Regeneration
Profit before interest and tax was �3.2m (2007: �4.5 million) reflecting the completion, as planned, of coal production at the
Grimethorpe site in July 2008 when the site entered into a short period of restoration.
Operations at Grimethorpe have been extremely successful and returns from this project alone have more than justified the original
purchase price of the business. The technology is unique to ATH Resources and patents to protect the Group's intellectual property rights
internationally are pending.
A number of new tip washing opportunities have been developed in the UK during the year where the estimated coal content is in excess of
2 million tonnes. The first of these, at Langton in Nottinghamshire, is expected to commence operations in the first half of 2009.
Interest in the deployment of the Group's technology in Australia has increased during the year. The Group is preferred bidder on a
project to wash 11 million tonnes of coal rejects at an operational mine in Queensland. Although this project has not moved forward as
quickly as initially expected, the potential client appears committed to an ATH Regeneration plant and is also reviewing strategic options
for wider deployment on a number of other mines. In addition, the Group has, under contract, sampled and analysed tips for another party in
Queensland and is currently in negotiation for a three to five year tip washing project, to commence in 2009.
Tip washing projects in Australia are a major opportunity for growth of the business given the number, sizes and coal content of rejects
tips, especially in Queensland, where the State Government has indicated in excess of 200 million tonnes of rejects on the surface which
could be suitable for processing.
Reserves
The Group has a dual strategy of growing coal reserves organically from its existing portfolio of sites and making suitable
complementary acquisitions. Estimated reserves of recoverable coal were 8.2 million tonnes (2007: 8.6 million tonnes) at the year end.
Current planning activity levels are expected to replace coal produced with new reserves securing production for the foreseeable future.
Coal Reserves
at 28 September 2008
Proven Probable
Total
Tonnes Tonnes
Tonnes
Site 000 000
000
Skares Road 100
600 700
Laigh Glenmuir -
800 800
Grievehill 600
- 600
Glenmuckloch 1,700
700 2,400
Muir Dean 2,100
- 2,100
Rigg -
1,100 1,100
Total Surface Mining 4,500
3,200 7,700
Langton -
500 500
Total Regeneration -
500 500
Group reserves 4,500
3,700 8,200
The information in this announcement 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 announcement of the
matters based on his
information in the form and context in which they appear. A glossary of terms is available on our website - www.ath.co.uk.
Market
Demand for coal in the UK was largely unchanged at around 60 million tonnes during 2008 with indigenous coal production meeting
approximately one third of total usage.
International coal prices during the year rose to an unprecedented level, peaking at over $220 per tonne, in line with the increase in
oil prices. Prices have fallen since the summer and returned to below the $100 per tonne level. Although this is less than half of the price
at its peak, the price remains higher than twelve months ago and, assisted by the strength of the US dollar, is approximately �15 per tonne
higher than the average selling price in 2008.
The Group holds agreements at September 2008 with a number of major UK electricity generators covering the supply of 3.6 million tonnes
of coal up to 2012. These agreements were negotiated at a time of lower coal prices and are at an average of around �32 per tonne.
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.
Operational sites have a nominated and qualified health and safety manager and employees are regularly trained in the Group's processes
which are aimed to exceed HSE best practice. In order to further strengthen the Group's capability, a dedicated HSE manager has been
recruited during the year to oversee the creation and adoption of best practice policies and procedures and to further strengthen the
Group's commitment to continuous improvement in health and safety performance.
Staff
The Group recognises the critical importance of its employees in the continued growth and success of the business. The Group employs
over 400 skilled, innovative and highly motivated people and continuous development is delivered through structured and targeted training
programmes.
The board would like to join me in thanking our people for all of the efforts they have made in the past year and the commitment that
they continue to demonstrate in delivering the success of the business.
Summary
The Group has delivered another set of strong results reflecting the underlying strength of the business with average prices and Proven
reserves showing significant steps forward. With a healthy market for coal, and exciting growth plans, the board is confident that the
business is well placed to deliver the next phase of value creating growth.
Financial review
The results are presented for the 52 week period to 28 September 2008 against a similar period to 30 September 2007.
Revenue
The Group's revenue for the year was �76.9 million (2007: �70.5 million) on sales of 2.0 million tonnes (2007: 2.2 million). The average
coal price was �38 per tonne (2007: �32 per tonne).
Revenues from surface mining were �65.7 million (2007: �57.3 million) and from ATH Regeneration were �11.2 million (2007: �13.2
million).
The increase in turnover from surface mining reflects higher coal prices secured on the renewal of existing supply contracts and new
contracts in certain industrial markets. Coal production commenced at the new Muir Dean mine adding to that from the existing mines in
Ayrshire and Dumfries and Galloway.
Revenues from ATH Regeneration reflected the completion of production at the Grimethorpe site.
Profit before interest and tax
Profit before interest and tax ("PBIT") was �11.9 million (2007: �11.1 million) and earnings before interest, tax and depreciation were
�25.7 million (2007: �25.2 million).
The return on PBIT of 35% (2007: 34%) reflects the increase in average selling price offset by increases in the Group's cost base,
particularly on gas oil.
Finance costs
Net finance costs of �2.9 million (2007: �2.4 million) were charged in the year. Continuing levels of significant fixed asset
acquisition means hire purchase interest charges remained at �1.1 million (2007: �1.1 million). �0.4 million (2007: �0.3 million) was
charged in respect of the unwinding of the discount on restoration provisions. The Group's acquisition of mine assets at Muir Dean and
additional investment in the asset base resulted in an increase in bank loan and overdraft interest charges to �1.4 million (2007:
�1.1million).
Taxation
The effective rate of tax was 32% (2007: 32%) compared with a standard rate of tax of 29% (2007: 30%). The difference between the actual
and standard rate is primarily due to expenses that are not allowable against tax.
Earnings per share
Earnings per share were 15.30 pence (2007: 14.76 pence), an increase of 4%. Fully diluted earnings per share, taking into account shares
expected to be issued under employee option schemes, were 14.90 pence (2007: 14.53 pence).
Net assets
Net assets were �34.2 million (2007: �32.1 million). The Group has continued to invest in fixed assets to expand the surface mining
operations. Total additions of plant, property and equipment were �27.9 million, with �15.8 million on plant and machinery and �12.1 million
on new surface mining sites and land acquisitions, including �8.6 million at Muir Dean to facilitate the start of coal production.
Cash flows
The Group continues to generate strong cash flows from its operations, with a net cash inflow from operations of �22.6 million (2007:
�23.6 million). Cash outflows on fixed assets, �13.6 million (2007: �9.0 million), and hire purchase payments, �7.9 million (2007: �8.2
million), reflect the Group's capital investment programme. Overall, net cash inflow is �9.3 million (2007: �5.3 million outflow).
Net debt at 28 September 2008 increased to �45.3 million (2007: �31.6 million) as a result of new debt and hire purchase borrowings to
fund the Group's capital investment. Debt repaid during the year was replaced by new hire purchase agreements and bank loans.
Financing
During the year, the Group entered into new financing arrangements to take advantage of investment opportunities within the business. A
new loan of �15 million replaced existing facilities of �3 million to reflect the long term nature of the business and an additional �7.7
million of debt was raised to finance the opening of the new Muir Dean surface mine in Fife. After the year end, the Group renewed and
extended its overdraft facilities with Royal Bank of Scotland following the annual review.
International Financial Reporting Standards (IFRS)
The Group has adopted IFRS for the first time during 2008 and comparative results for 2007 have been restated.
The adoption of IFRS has a significant impact on the results through the treatment of goodwill which is not amortised, but is subject to
an annual impairment review.
Acquisition
On 30 June 2008 the Group acquired Pacific West Coal Pty Limited ("PWC"), a company incorporated in Australia to facilitate the
expansion of the Regeneration business into this much larger coal producing market.
Steven Beaumont
Finance Director
Consolidated Income Statement
For the year ended 28 September 2008
2008 2007
�000 �000
Revenue 76,851 70,508
Cost of sales (55,429) (50,856)
Gross profit 21,422 19,652
Other operating income 353 129
Administrative expenses (9,872) (8,725)
Operating profit 11,903 11,056
Finance costs (2,895) (2,425)
Profit before taxation 9,008 8,631
Tax expense (2,878) (2,767)
Profit for the period 6,130 5,864
Basic earnings per share 15.30p 14.76p
Diluted earnings per share 14.90p 14.53p
There are no recognised gains or losses other than as stated in the income statement.
Consolidated Balance Sheet
As at 28 September 2008
ASSETS 2008 2007
�000 �000
Non-current assets
Intangible assets 7,657 7,169
Property, plant and equipment 83,458 64,356
Investments - 1
91,115 71,526
Current assets
Inventories 14,967 7,793
Trade and other receivables 11,133 11,229
Cash and cash equivalents 1,207 64
27,307 19,086
Total assets 118,422 90,612
LIABILITIES
Current liabilities
Trade and other payables (14,899) (10,181)
Tax liabilities (1,443) (712)
Financial liabilities - borrowings (14,649) (18,323)
Final void provision (1,811) -
(32,802) (29,216)
Non-current liabilities
Trade and other payables - (175)
Financial liabilities - borrowings (31,810) (13,292)
Final void provision (15,018) (12,223)
Deferred tax liabilities (4,208) (3,603)
Other provisions (338) -
(51,374) (29,293)
Total liabilities (84,176) (58,509)
Net assets 34,246 32,103
Equity
Share capital 200 199
Share premium 27,855 27,563
Share-based payment reserve 1,682 1,313
Retained earnings 4,509 3,028
Total equity 34,246 32,103
The financial statements were approved by the Board of Directors and authorised for issue on 2 December 2008 and are signed on its
behalf by:
S Beaumont
Group Finance Director and Company Secretary
Consolidated Cash Flow Statement
For the year ended 28 September 2008
2008 2007
�000 �000
Cash flows from operating activities
Cash generated from operations 22,588 23,580
Interest paid (2,558) (2,184)
Tax paid (1,542) (5,234)
Net cash from operating activities 18,488 16,162
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 197 352
Interest received 64 23
Government grant received 204 1,847
Purchases of property, plant and equipment (13,624) (8,967)
Acquisition of subsidiary (150) (1,000)
Net cash used in investing activities (13,309) (7,745)
Cash flows from financing activities
Dividends paid (4,649) (4,466)
Repayment of borrowings (6,323) (2,784)
Payment of finance lease liabilities (7,899) (8,248)
Proceeds from the issue of share capital 293 223
New bank loans raised 22,700 1,602
Net cash from/(used in) financing activities 4,122 (13,673)
Net increase/(decrease) in cash and cash 9,301 (5,256)
equivalents
Cash and cash equivalents at beginning of period (8,094) (2,838)
Cash and cash equivalents at end of period 1,207 (8,094)
Basis of accounting
The financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS"). The financial
statements have also been prepared in accordance with IFRS adopted by the European Union and therefore these financial statements comply
with Article 4 of the EU IAS Regulation. The financial statements have been prepared on the historical cost basis, except for the
revaluation of financial instruments which are carried at fair value.
Accounting period
The Company has drawn up its accounts for the 52 week period to 28 September 2008 (52 week period to 30 September 2007)
Notes to the Financial Statements
For the year ended 28 September 2008
1 Finance costs
2008 2007
�000 �000
Bank overdraft and loan interest 1,349 1,054
Finance leases and hire purchase contracts interest 1,145 1,107
Final void provision discount 401 264
2,895 2,425
2 Tax expense
Tax recognised in the Income Statement
2008 2007
�000 �000
United Kingdom corporation tax
On profits for the year 2,360 1,173
Adjustment in respect of prior periods (87) (337)
Total current tax recognised 2,273 836
Deferred taxation charge:
- accelerated capital allowances 518 1,942
- on share based payments 87 (11)
Total deferred tax recognised 605 1,931
Total tax expense recognised 2,878 2,767
The total tax charge assessed for the year differs from the standard rate of UK
tax as reconciled below:
2008 2007
�000 �000
Profit on ordinary activities before taxation 9,008 8,631
Profit before taxation multiplied by standard rate of 2,612 2,589
tax for the period of 29% (2007: 30%)
Expenses not deductible for tax purposes 306 348
Depreciation not allowable for tax purposes 214 167
Tax relief on exercise of share options (12) -
Impact of deferred tax on share options 87 -
Effect of change in tax rates (242) -
Adjustment in respect of prior periods (87) (337)
Total tax expense 2,878 2,767
Effective tax rate 32.0% 32.1%
3 Earnings per share
Basic earnings per share is calculated on profit after tax of �6,130,000 (2007: �5,864,000) and a weighted average number of shares of
40,062,310 (2007: 39,728,508). The diluted earnings per share takes account of share options outstanding to employees as set out below:
2008 2007
No. No.
Weighted average number of shares in issue 40,062,310 39,728,508
Weighted average number of dilutive share options 1,087,910 619,714
Total number of shares for calculating diluted 41,150,220 40,348,222
earnings per share
4 Cash flows
2008 2007
�000 �000
Operating profit from continuing operations 11,903 11,056
Adjustments for:
Depreciation of property, plant and equipment 13,466 13,648
(Profit)/loss on disposal of fixed assets (24) 58
Loss on disposal of investments 1 -
Share-based payment expense 369 460
Operating cash flows before movements in working 25,715 25,222
capital
Increase in inventories (7,174) (1,031)
Decrease/(increase) in receivables 96 (2,433)
Increase/(decrease) in payables and 3,951 1,822
provisions
Cash generated from operations 22,588 23,580
This information is provided by RNS
The company news service from the London Stock Exchange
END
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