The UK's biggest coal producer said yesterday that it had almost trebled interim pre-tax profits as its move into property development helped to offset continued declines in deep mining.
UK Coal reported a loss of £15.3 million in its deep mining division in the first half of the year, hit by a halt in production at its Daw Mill mine in the West Midlands.
However, the company said the mining business had now picked up and new chief executive Jon Lloyd was bullish about its long-term prospects.
"We see deep mining staying in profit for the second half and way beyond that," he said yesterday.
Losses widened after a production shutdown at the Daw Mill pit but returned to a profit in June. Output from Daw Mill was suspended from January until May following a fatal accident.
Offsetting the deep mining losses was the profitable property business, which specialises in developing land around former mines for both commercial and residential use.
The group banked a pre-tax profits haul of £54 million in its property arm, which helped see group-wide profits rocket by 143 per cent to £40.6 million from £16.7 million last year.
The value of its property portfolio grew 16 per cent to £398 million, helped by significant progress in planning consent. The company added 11 sites to its portfolio in the first half, bringing the total to 71, and said it expected to develop a small number of additional sites in the second half.
Surface mining, or opencasting, achieved a profit of £4.5 million, compared with £1.2 million last time, on an output of 700,000 tonnes.
Mr Lloyd said production from the surface mines was expected to reach 1.5 million tonnes this year, up from 570,000 tonnes in 2006, and would continue to grow to about two million tonnes a year.
The group, which said it was looking forward to the future with confidence, is also involved in power generation, some of it through wind farms.
The side of the business, which has 29 MW of installed generation capacity, made a £2 million profit and the group said it now wanted to add a further 25 MW of wind turbine generated power.
UK Coal said its deep mines had been generating operating profit since June, helped by "new contracts at today's much higher world market prices".
The company has long-standing contracts to deliver coal at prices that are around 20 per cent below the current market.
UK Coal, which is using cash to invest in the core business rather than pay dividends, said in July it was raising its estimate of the value of its land and property portfolio in 2012 by 12.5 per cent to £900 million.
"We continue to identify new opportunities and to make very good progress in securing the appropriate planning consents," the group said yesterday, adding net assets per share were 32 per cent higher year-on-year at 206 pence at the end of June.
Since the end of June the company has renegotiated its funding package but it said it had felt no impact from the credit crunch and that its banking relationships had not been affected.
Finance director Chris Mawe said he had achieved what he had set out to do at UK Coal when joining in March 2004. He said he expected to take up a new job shortly.
Seymour Pierce analyst Charles Kernot said that with UK Coal "working hard on the property side of the equation", he was reiterating his "buy" rating on the company's stock.