UK Coal confirms bleak outlook

IT IS almost 20 years since the end of the miners' strike and the industry's fortunes continue to dwindle. Troubled mining group UK Coal today reported huge full-year losses and a drop in output after a dire performance from its remaining deep mines.

New chief executive Gerry Spindler, who was previously a non-executive but took over after the ousting of predecessor Gordon McPhie in October, admitted that the work needed to turn the situation around would be a 'long journey'.

'In 2004 our deep mines lost £37.8m before exceptional items, a deterioration of £29.3m compared to the prior year and a significant shortfall against the potential of these operations. It does not need further explanation to conclude the year has been unsatisfactory,' he said, adding: 'We expect 2005 to be a transitional year.'

UK Coal reported a pre-tax loss of £51.6m, compared with a £1.2m deficit a year ago. Deep mine output dropped to 12m tonnes from 14.8m tonnes and coal sales from UK operations fell to 14.3m tonnes, compared with 18.9m tonnes this time last year.

Spindler said he had identified several 'fundamental' operating flaws in the business, including inadequate equipment availability, common dispute with the workforce, low priced contracts, an inability to complete underground development projects on time and geological problems.

Adverse geology was blamed for many problems encountered during the year. Three of UK Coal's collieries are suffering from problems that require investment in the early part of this year. Meanwhile, the workforce at two of the company's collieries have agreed a new wage structure and a new programme of structured daily maintenance has been agreed but Spindler admitted that successes to date can only be described as works in progress.

The company is fighting a High Court action to avoid having to pay early retirement pension benefits to redundant workers. The transfer of staff to UK Coal on privatisation meant the company had to give certain assurances about pension-related redundancy arrangements but is now contesting the extent of these. The potential bill could be substantial and the company has yet to make any provision for the claim if it loses the claim.

Nearly 3,000 jobs have gone from UK Coal's Selby colliery in the past three years. The company announced the closure earlier this year of Ellington Colliery and will take a 3.8m charge reflecting the cost of redundancies.

Meanwhile, UK Coal is looking beyond mining to achieve financial stability. The company plans to exploit its property portfolio through the development of business parks and brownfield development opportunities.