UK Coal back in profit

UK Coal chairman Jonson Cox warned the company still faces major challenges this morning after delivering its first pre-tax profit for four years.

The company turned around a pre-tax loss of £124.6m in 2010 to a £58m profit last year as revenues jumped from £351.2m to £488.2m. UK Coal’s biggest investor is Manchester-based Peel Group.

However, UK Coal also faces a pension deficit of £430m and has struggled with production problems at the Daw Mill mine, the largest deep mine in the country, which it is considering closing.

Mr Cox said: “This improved performance is in line with our recovery plan, with an increase in revenue from improved production, stock reductions and realised sales price, and from our initial steps in addressing our cost base. Our programme to reduce bank debt, through development and sale of the property portfolio succeeded in more than halving bank debt over the year.
 
“However, recent operational performance at Daw Mill, the near-doubling of our pension deficit and the level of debt in the mining business have continued to highlight how much remains to be done to put the UK Coal mining business on a stable footing.

“The company has announced its intention to seek the agreement of key economic stakeholders in the company to a restructuring of the group, and a reduction in its debt, to create a long term stable financial footing for the business and to isolate the operating risk of each deep mine from the Group as a whole.”

Mr Cox said the restructuring plan, first put forward last month, was still being discussed with its banks, customers and other interested parties.

The results showed that production over the course of the year rose by 300,000 tonnes while total net debt fell from £242m to £139m.