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April 19, 2011 6:08 pm
In a blunt assessment Jonson Cox, the former Anglian Water chief who is the coalminer’s executive chairman, said “woeful and sustained underperformance” had been tolerated for too long.
He suggested that the company might sell its 38,000 acres of UK land after it resolves operational and financial problems. “There is no logic for having a property business and a mining business together.”
UK Coal’s pre-tax losses of £125m in the year to December 25 were on par with the prior year’s £129m loss.
The company, which has been lossmaking since 2008, has avoided bankruptcy by borrowing against the land portfolio centred in the old mining counties of Yorkshire and Nottinghamshire.
Mr Cox outlined a plan to boost mine productivity, make more money from coal contracts and reduce operating costs in part by rolling back benefits for its unionised workforce. Negotiations with the union are continuing.
“If we want to have an indigenous coal industry, especially in terms of taking coal from deep mines, then we need to implement a recovery programme that will get the industry back to health.” He added: “We have shown everyone how bad it is.”
The company’s three working mines are the rump of a UK industry that flourished during the industrial revolution but was largely put out of business by globalisation and the industrial overhaul of the Thatcherite 1980s.
Mr Cox said the business was unlikely to be profitable in 2011. “We can’t promise a viable return this year but are hoping that shareholders see that we are starting to generate cash.”
In the past year, the share price has been hurt by repeated downgrades to production amid rising costs and widening losses.
For the 12 months to December 25 revenues rose from £316m to £351m and losses per share narrowed from 72.9p to 41.8p.
Net debt ballooned from £195.5m to £243m and there is no dividend. The shares fell 4¼p, or 11 per cent, to 34½p on Tuesday.
The company downgraded the value of its land portfolio from £394m to £339m. This was the latest knock to an asset that under the previous management had been forecast to reach more than £800m in value.
A review to be completed in June will determine the overhaul that UK Coal needs, Mr Cox said. He added, however, that its debt levels may constrain its ability to pay for a radical overhaul that includes “expensive redundancies”.
UK Coal has already reversed a companywide wage increase awarded in January. It is attempting to close its pension scheme, which is in deficit.
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