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Press Releases / 2014 / Unaudited H1 2014 Results 

Unaudited H1 2014 Results

21/8/2014

Amsterdam, 21 August 2014

 

Unaudited H1 2014 Results

New World Resources Plc (‘NWR’ or the ‘Company’) today announces its unaudited financial results for the first six months of 2014. Comparative information, unless stated, is for the six months ended 30 June 2013.

H1 2014 Financial summary

  • Revenues from continuing operations of EUR 346 million, down 20%.
  • Coking coal average realised price of EUR 87/t, down 15%; Thermal coal average realised price of EUR 58/t, up 4%.
  • Cash mining unit costs[1] of EUR 64/t, down 24% (19% on a constant currency basis) on 5% higher production.
  • Selling and administrative expenses from continuing operations down 27% to EUR 71 million.
  • EBITDA from continuing operations of EUR 19 million.
  • Basic loss from continuing operations per A share of EUR (0.22).
  • Net debt of EUR 688 million, including cash of EUR 122 million.
  • Capital restructuring process continues with completion expected in October 2014.
  • As at 30 June 2014, EUR 10 million of an anticipated EUR 30 million of associated costs have been incurred in relation to the process.

H1 2014 Operational summary

  • Safety is our number one priority and the drive for a fatality-free operation continues. Regrettably, four miners lost their lives this year. Safety metrics LTIFR[2] of 7.16 in H1 2014, vs. 7.41 in FY 2013.
  • Coal production of 4.5Mt, up 5% and coal sales of 4.0Mt, down 17%.
  • Coal sales mix of 63% coking coal and 37% thermal coal.
  • CAPEX of EUR 24 million, down 71%.
  • Coal Inventory of 858kt, up 14% year on year.
  • Total headcount from continuing operations including contractors down 10%.

FY 2014 Prices[3] and targets

  • Coking coal Q3 2014 average price agreed at EUR 85/t, up 1% on previous quarter.
  • An average price of EUR 54/t has been agreed for thermal coal production in 2014.
  • Production and sales volume targets of 9.0 – 9.5Mt.
  • Target of 55% – 60% coking coal in the sales mix.
  • CAPEX below EUR 100 million.
  • Further improvement in LTIFR towards the 2015 target of below 5.
  • Cash mining unit costs in the mid EUR 60’s including the Paskov Mine.

Review of the Group’s capital structure

  • The Board initiated a review of the Group’s capital structure on 22 January 2014.
  • The Group has engaged in discussions with all its stakeholders with a view to developing and implementing a capital structure that recognises and respects their interests.
  • On 2 June 2014, the Group announced that NWR NV had agreed the key terms of the restructuring of the capital structure with the Ad hoc Committee of noteholders and with the NWR Plc’s majority shareholder, CERCL Mining B.V. (formerly known as BXR Mining B.V.).
  • On 2 July 2014, the Group announced that NWR NV had agreed revised terms to the proposed capital restructuring announced on 2 June 2014. The revised terms entail an amended consensual restructuring transaction and (in case this transaction can not be implemented) an alternative restructuring transaction.
  • Under the consensual restructuring transaction, EUR 185 million of additional capital is to be raised pursuant to a EUR 118 million rights issue to existing shareholders of NWR Plc, a EUR 32 million placing to existing noteholders and a EUR 35 million super senior credit facility to be provided by existing noteholders. CERCL Mining B.V. has irrevocably committed to invest new equity capital into the consensual restructuring transaction. The funds necessary to facilitate the transaction are fully committed by a group of certain existing noteholders and the majority shareholder.
  • On 29 July 2014, following an order of the High Court of Justice of England and Wales, NWR NV has convened two creditor meetings on 29 August 2014. At their respective meetings each class of noteholders will consider and, if thought fit, approve the consensual restructuring transaction or in the case of the senior secured noteholders consider and, if thought fit, approve the alternative restructuring transaction, if the senior unsecured noteholders vote down the consensual restructuring transaction.
  • On 30 July 2014, NWR announced that it had published the prospectus relating to, among other things, the proposed rights issue and placing in connection with the consensual restructuring transaction.
  • On 20 August 2014, the Extraordinary General meeting of Shareholders of the NWR Plc have approved resolutions which are required to be passed in order to implement various aspects of the consensual restructuring transaction, including the rights issue.
  • The capital restructuring process is on track to complete In October 2014.

Chairman’s statement

Although we recorded a loss of almost EUR 57 million for the six months to the end of June 2014 (equivalent to a basic loss of EUR 0.22 per share), this is a big improvement on the result for the equivalent period in 2013 when we posted a basic loss from continuing operations of EUR 1.52 per share and an underlying loss of EUR 0.56 per share[4]. The first six months of 2014 witnessed a positive EBITDA from continuing operations of EUR 19 million, an increase of EUR 68 million compared to the equivalent period last year when an EBITDA loss from continuing operations of EUR 49 million was incurred.

This is a testimony to our efforts to continue to drive down costs and streamline the business. Cash mining unit costs were down 24% at EUR 64 a tonne (down 19% on a constant currency basis), six months ahead of schedule of our objective of attaining a mid EUR 60s run rate (including Paskov) by the end of the year. We also continued to focus on optimising our capital expenditure which at EUR 24 million for the six months was down EUR 61 million compared to the same period in 2013; this puts us in very good stead to reach our target of less than EUR 100 million in maintenance CAPEX for the 12 months.

Furthermore, we maintain our coal production and sales targets of between 9 and 9.5 million tonnes for the full year, with 55 to 60 per cent in favour of coking coal.

Alongside measures to optimise the operational side of the business, we have been looking to restructure the balance sheet through a UK court-sanctioned settlement (the ‘Scheme of Arrangement’) whereby, under the proposed consensual restructuring transaction, the existing senior secured notes and senior unsecured notes of NWR NV will be released in exchange for cash and/or new debt instruments. In this context up to EUR 185 million of additional capital is to be raised pursuant to the rights issue to existing shareholders, the placing to existing noteholders and super senior credit facility to be provided by existing noteholders. I am pleased that the funds necessary to facilitate the transaction have been fully committed by a group of certain existing noteholders and our majority shareholder  - this is a vote of confidence in the business and its management.

The restructuring process will strengthen our balance sheet as not only will there be a significant reduction in the levels of outstanding debt, and hence debt servicing costs, but will position NWR to benefit all stakeholders when there is an upturn in market conditions.

This consensual restructuring plan has so far progressed well with shareholder approval given on yesterday’s EGM and lock-up agreements received, by value, from 85% of the senior secured noteholders and 65% from the unsecured noteholders. The threshold required for approval in value of each class of creditors is 75% of those present and voting. I am confident that we will gain the requisite majorities at the creditor meetings that are scheduled for 29 August 2014.

However, as announced on 2 July 2014, the Group has – as part of its contingency planning – agreed a proposed alternative restructuring plan with certain holders of the senior secured notes, in case the consensual restructuring plan is not capable of being implemented. This contingency planning is required to ensure the continuation of our operations in the Czech Republic and in Poland. This alternative restructuring transaction is delivered through an insolvency of NWR NV. Its stakeholders are being paid in accordance with their respective rankings and this could leave certain categories of stakeholders with minimal or no recoveries. In light of this consequence, both the Boards of NWR NV and the NWR Plc repeat their recommendation to support the consensual restructuring plan as it takes into account the interests of all stakeholders of the Group.

The past few years have undeniably been tough, not just for NWR but for the whole coal mining sector and related industries. However, I am confident that with the radical steps that we have taken, and are continuing to do so, NWR will emerge as a much stronger regional player and better positioned to capitalise on the opportunities that will be afforded when conditions recover.

Gareth Penny

Executive Chairman of NWR


Selected financial and operational data (continuing operations) [5]

(EUR m, unless otherwise stated)

H1 2014

H1 2013

Chg

 

Revenues

346

434

(20%)

 

Cost of sales

299

467

(36%)

 

   Excluding Change in inventories

328

442

(26%)

 

Cash mining unit costs (EUR/t)[6]

64

84

(24%)

 

Gross profit

48

(33)

-

 

Selling and administrative expenses

71

98

(27%)

 

EBITDA

19

(49)

-

 

Impairment loss on PPE

0

307

 

 

Operating Loss

(23)

(439)

-

 

Loss for the period

(57)

(400)

-

 

Basic Loss per A share (EUR)

(0.22)

(1.52)

 

 

Total assets

850

1,6496

(48%)

 

Cash and cash equivalents

122

1767

(30%)

 

Net debt

688

6537

5%

 

Net working capital

(11)

467

-

 

 

 

 

 

 

Net cash flow from operations

(40)

(6)[7]

-

 

CAPEX

24

857

(71%)

 

 

 

 

 

 

Total headcount incl. contractors

14,619

16,206

(10%)

 

LTIFR

7.16

5.78

24%

 

Production & Sales (kt)

H1 2014

H1 2013

Chg

 

Coal production

4,497

4,281

5%

 

External sales

4,019

4,816

(17%)

 

   Coking coal[8]

2,544

2,306

10%

 

   Thermal coal[9]

1,475

2,510

(41%)

 

Period end inventory

858

755

14%

 

Average realised prices (EUR/t)

 

 

 

 

Coking coal

87

102

(15%)

 

Thermal coal

58

56

4%

 

 

H1 2014 earnings call and webcast:

NWR’s management will host an analyst and investor conference call on 21 August 2014 at 10:00 BST (11:00 CEST). The presentation will be made available via a live audio webcast on www.newworldresources.eu and then archived on the Company’s website.

For those who would like to join the live call, dial in details are as follows:

UK and the rest of Europe                    +44 (0)20 3427 1905

US and the rest of North America          +1 646 254 3365

The Netherlands                                   +31 (0)20 716 8257

Czech Republic                                    800 701 229

Poland                                                00 800 121 4329

Participant’s access code:                    7887608


Contact details:

Noteholders

Nick Cox-Johnson

+44 (0) 7957 596 729

ncjohnson@nwrgroup.eu

Media

Toby Moore, Andrew Hey

+44 (0) 207 638 9571

toby.moore@citigatedr.co.uk

andrew.hey@citigatedr.co.uk

 

 

Financial Adviser to NWR

The Blackstone Group

International Partners LLP

Martin Gudgeon / Paul O’Donnell /

 Shirish Joshi

+44 (0) 207 451 4000

gudgeon@blackstone.com

odonnellp@blackstone.com

joshis@blackstone.com

 

 

Legal Adviser to NWR

White & Case LLP

Christian Pilkington / Rebecca Campbell /

Boris Docekal

+44 (0) 207 532 1000

cpilkington@whitecase.com

rebecca.campbell@whitecase.com

bdocekal@whitecase.com

 

Financial Adviser to Committee

Moelis & Company UK LLP

Charles Noel-Johnson/ Rohan Choudhary

 

+44 (0) 207 634 3500

charles.noel-johnson@moelis.com

rohan.choudhary@moelis.com

 

Legal Adviser to Committee

Freshfields Bruckhaus Deringer LLP

Sean Lacey / Geoff O’Dea /

 Emma Gateaud

+44 (0) 207 936 4000

sean.lacey@freshfields.com

geoff.odea@freshfields.com

emma.gateaud@freshfields.com

 

Information Agent

Lucid Issuer Services Limited

Sunjeeve Patel

+44 (0) 207 704 0880

nwr@lucid-is.com

Shareholders

Radek Nemecek

+31 (0) 629 537 908

radek.nemecek@nwrgroup.eu

 

 

About NWR Plc

New World Resources Plc is a Central European hard coal producer, listed at the London, Prague and Warsaw stock exchanges. NWR produces quality coking and thermal coal for the steel and energy sectors in Central Europe through its (indirect) subsidiary OKD, the largest hard coal mining company in the Czech Republic.

 

About NWR N.V

New World Resources N.V. is a wholly owned subsidiary of NWR Plc. It is a company incorporated under the laws of the Netherlands and registered at Dutch Trade Register of the Chamber of Commerce under number 34239108 and registered as an overseas company at Companies House in the UK with UK establishment number BR016952 and its address at 115 Park Street, London, W1K 7AP, United Kingdom (Telephone +44 (0) 207 371 5990, Fax +44 (0) 207 371 5999).

 


Condensed consolidated interim financial information
for the six-month period
ended 30 June 2014

 

 

New World Resources Plc

Consolidated statement of comprehensive income

 

Six-month period

ended 30 June

 

Three-month period

ended 30 June

EUR thousand

2014

2013

(restated)

 

2014

2013

(restated)

 

 

 

 

 

 

Continuing operations

 

 

 

 

 

Revenues

346,344

433,750

 

173,809

222,835

Cost of sales

(298,537)

(467,225)

 

(151,545)

(232,448)

 

 

 

 

 

 

Gross profit / (loss)

47,807

(33,475)

 

22,264

(9,613)

Selling expenses

(34,119)

(54,086)

 

(18,474)

(32,832)

Administrative expenses

(37,204)

(43,912)

 

(18,983)

(22,607)

Impairment loss on property, plant and equipment

-

(307,137)

 

-

(307,137)

(Loss) / gain from sale of property, plant and equipment

(339)

1

 

(294)

1

Other operating income

1,525

1,235

 

563

593

Other operating expenses

(1,122)

(1,527)

 

(594)

(785)

 

 

 

 

 

 

Operating loss

(23,452)

(438,901)

 

(15,518)

(372,380)

Financial income

2,877

13,032

 

419

2,378

Financial expense

(35,733)

(57,238)

 

(17,724)

(18,702)

Capital restructuring

(9,970)

-

 

(7,626)

-

 

 

 

 

 

 

Loss before tax

(66,278)

(483,107)

 

(40,449)

(388,704)

Income tax benefit

9,423

83,397

 

10,258

69,586

 

 

 

 

 

 

Loss from continuing operations

(56,855)

(399,710)

 

(30,191)

(319,118)

 

 

 

 

 

 

Discontinued operations

 

 

 

 

 

Profit from discontinued operations, net of tax

-

3,979

 

-

3,715

 

 

 

 

 

 

Loss for the period

(56,855)

(395,731)

 

(30,191)

(315,403)

 

 

 

 

 

 

Other comprehensive income

 

 

 

 

 

Items that may be reclassified subsequently to profit or loss:

 

 

 

 

 

Foreign currency translation differences

(321)

(37,934)

 

20

(10,805)

Derivatives - change in fair value

-

(3,023)

 

-

(424)

Derivatives - transferred to profit and loss

-

(4,327)

 

-

(1,922)

Income tax relating to components of other comprehensive income

84

3,361

 

40

1,149

Items that will never be reclassified to profit or loss

-

-

 

-

-

 

 

 

 

 

 

Total other comprehensive income for the period, net of tax

(237)

(41,923)

 

60

(12,002)

 

 

 

 

 

 

Total comprehensive income for the period

(57,092)

(437,654)

 

(30,131)

(327,405)

 

 

 

 

 

 

Loss attributable to:

 

 

 

 

 

Shareholders of the Company

(56,855)

(395,731)

 

(30,191)

(315,403)

 

 

 

 

 

 

Total comprehensive income attributable to:

 

 

 

 

 

Shareholders of the Company

(57,092)

(437,654)

 

(30,131)

(327,405)

 

 

 

 

 

 

(LOSS) / EARNINGS PER SHARE (EUR)

 

 

 

 

 

A share

 

 

 

 

 

Basic loss

(0.22)

(1.50)

 

(0.12)

(1.20)

Diluted loss

(0.22)

(1.50)

 

(0.12)

(1.20)

Basic loss from continuing operations

(0.22)

(1.52)

 

(0.12)

(1.21)

Diluted loss from continuing operations

(0.22)

(1.51)

 

(0.12)

(1.21)

Basic earnings from discontinued operations

-

0.02

 

-

0.01

Diluted earnings from discontinued operations

-

0.01

 

-

0.01

B share

 

 

 

 

 

Basic earnings

152.30

220.60

 

76.10

103.20

Diluted earnings

152.30

220.60

 

76.10

103.20

The notes on pages 13 to 24 are an integral part of this condensed consolidated financial information.

New World Resources Plc

Consolidated statement of financial position

 

30 June

31 December

30 June

EUR thousand

2014

2013

2013

 

 

 

 

ASSETS

 

 

 

Property, plant and equipment

519,980

533,737

1,229,500

Accounts receivable

1,717

5,769

5,801

Deferred tax

54,411

44,747

9,855

Restricted deposits

25,973

23,742

10,621

Derivatives

-

-

2

TOTAL NON-CURRENT ASSETS

602,081

607,995

1,255,779

 

 

 

 

Inventories

57,653

29,681

113,525

Accounts receivable and prepayments

65,153

89,352

101,556

Income tax receivable

2,472

2,243

2,371

Cash and cash equivalents

122,390

183,665

175,732

Restricted cash

-

7,000

-

TOTAL CURRENT ASSETS

247,668

311,941

393,184

 

 

 

 

TOTAL ASSETS

849,749

919,936

1,648,963

 

 

 

 

EQUITY

 

 

 

Share capital

105,900

105,863

105,863

Share premium

2,368

2,368

2,368

Foreign exchange translation reserve

30,775

30,897

50,373

Restricted reserve

121,565

121,680

128,611

Equity-settled share based payments

15,471

15,421

14,747

Hedging reserve

-

-

1,344

Merger reserve

(1,631,161)

(1,631,161)

(1,631,161)

Other distributable reserve

1,684,463

1,684,463

1,684,463

Retained earnings

(666,191)

(609,629)

(35,089)

TOTAL EQUITY

(336,810)

(280,098)

321,519

 

 

 

 

LIABILITIES

 

 

 

Provisions

162,811

167,449

174,304

Long-term loans

-

34,598

55,406

Bonds issued

762,094

760,870

759,638

Employee benefits

47,935

49,308

87,841

Deferred revenue

781

2,369

3,287

Deferred tax

807

814

21,699

Other long-term liabilities

330

526

756

Cash-settled share-based payments

435

1,279

780

Derivatives

3,724

6,303

7,298

TOTAL NON-CURRENT LIABILITIES

978,917

1,023,516

1,111,009

 

 

 

 

Provisions

6,963

2,945

11,108

Accounts payable and accruals

133,709

141,496

168,629

Accrued interest payable on bonds

16,548

16,548

16,067

Derivatives

1,591

1,734

6,698

Income tax payable

175

240

82

Current portion of long-term loans

48,493

13,555

13,851

Cash-settled share-based payments

163

-

-

TOTAL CURRENT LIABILITIES

207,642

176,518

216,435

 

 

 

 

TOTAL LIABILITIES

1,186,559

1,200,034

1,327,444

 

 

 

 

TOTAL EQUITY AND LIABILITIES

849,749

919,936

1,648,963

The notes on pages 13 to 24 are an integral part of this condensed consolidated financial information.

New World Resources Plc

Consolidated statement of cash flows

 

Six-month period

ended 30 June

 

Three-month period

ended 30 June

EUR thousand

2014

2013

 

2014

2013

 

 

 

 

 

 

 

Cash flows from operating activities

 

 

 

 

 

 

Loss before tax from continuing operations

(66,278)

(483,107)

 

(40,449)

(388,704)

 

Profit before tax from discontinued operations

-

5,623

 

-

4,832

 

Loss before tax

(66,278)

(477,484)

 

(40,449)

(383,872)

 

Adjustments for:

 

 

 

 

 

 

Depreciation and amortisation

42,458

86,356

 

22,322

42,864

 

Impairment loss on property, plant and equipment

-

307,137

 

-

307,137

 

Changes in provisions

(2,776)

(4,669)

 

(1,829)

348

 

Loss / (gain) on disposal of property, plant and equipment

339

6

 

294

(8)

 

Interest expense, net

31,899

30,052

 

16,200

14,304

 

Change in fair value of derivatives

(2,723)

(7,663)

 

(2,259)

(4,359)

 

Loss on early bond redemption

-

8,116

 

-

-

 

Capital restructuring

9,970

-

 

7,626

-

 

Equity-settled share-based payment transactions

263

920

 

232

534

 

Operating cash flows before working capital changes

13,152

(57,229)

 

2,137

(23,052)

 

 

 

 

 

 

 

 

(Increase) / decrease in inventories

(27,972)

37,809

 

(6,466)

26,227

 

Decrease in receivables

28,607

28,170

 

8,151

30,788

 

(Decrease) / increase in payables and deferred revenue

(19,668)

(2,244)

 

90

1,469

 

(Increase) / decrease in restricted cash and restricted deposits

(2,255)

2,342

 

(3,989)

215

 

Currency translation and other non-cash movements

81

13,475

 

(44)

1,108

 

Cash generated from operating activities

(8,055)

22,323

 

(121)

36,755

 

 

 

 

 

 

 

 

Interest paid

(31,231)

(26,169)

 

(20,318)

(20,875)

 

Corporate income tax (paid) / refunded

(274)

(2,325)

 

(257)

47

 

Net cash flows from operating activities

(39,560)

(6,171)

 

(20,696)

15,927

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

Interest received

473

1,018

 

115

508

 

Purchase of land, property, plant and equipment

(24,225)

(84,909)

 

(12,468)

(25,380)

 

Proceeds from sale of property, plant and equipment

148

70

 

143

7

 

Proceeds from disposal of discontinued operations

7,000

-

 

-

-

 

Net cash flows from investing activities

(16,604)

(83,821)

 

(12,210)

(24,865)

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

Senior Notes due 2015 redemption

-

(257,565)

 

-

-

 

Fees paid on Senior Notes due 2015 redemption

-

(4,749)

 

-

-

 

Repayments of other long term loans

-

(7,123)

 

-

(7,123)

 

Proceeds from Senior Notes due 2021 issue

-

275,000

 

-

-

 

Transaction costs related to Senior Notes due 2021

-

(4,328)

 

-

(241)

 

Transaction costs related to capital restructuring

(5,086)

-

 

(3,513)

-

 

Net cash flows from financing activities

(5,086)

1,235

 

(3,513)

(7,364)

 

 

 

 

 

 

 

 

Net effect of currency translation

(25)

(2,522)

 

17

(871)

 

 

 

 

 

 

 

 

Net decrease in cash and cash equivalents

(61,275)

(91,279)

 

(36,402)

(17,173)

 

 

 

 

 

 

 

 

Cash and Cash Equivalents at the beginning of period

183,665

267,011

 

158,792

192,905

 

Cash and Cash Equivalents at the end of period

122,390

175,732

 

122,390

175,732

 

The notes on pages 13 to 24 are an integral part of this condensed consolidated financial information.


New World Resources Plc

Consolidated statement of changes in equity

EUR thousand

Share capital

Share premium

Foreign exchange translation reserve

Restricted reserve

Equity-settled share based payment

Hedging reserve

Merger reserve

Other distributable reserve

Retained earnings

Consolidated group total

 

 

 

 

 

 

 

 

 

 

 

Balance at 1 January 2014

105,863

2,368

30,897

121,680

15,421

-

(1,631,161)

1,684,463

(609,629)

(280,098)

Loss for the period

-

-

-

-

-

-

-

-

(56,855)

(56,855)

Total other comprehensive income, net of tax

-

-

(122)

(115)

-

-

-

-

-

(237)

Total comprehensive income for the period

-

-

(122)

(115)

-

-

-

-

(56,855)

(57,092)

Transaction with owners recorded directly in equity

 

 

 

 

 

 

 

 

Issue of A Shares under Deferred bonus plan

37

-

-

-

(213)

-

-

-

293

117

Share options for A Shares

-

-

-

-

263

-

-

-

-

263

Total transactions with owners

37

-

-

-

50

-

-

-

293

380

Balance at 30 June 2014

105,900

2,368

30,775

121,565

15,471

-

(1,631,161)

1,684,463

(666,191)

(336,810)

 

Balance at 1 January 2013

105,863

2,368

81,735

132,691

13,827

7,825

(1,631,161)

1,684,463

360,642

758,253

Loss for the period

-

-

-

-

-

-

-

-

(395,731)

(395,731)

Total other comprehensive income, net of tax

-

-

(31,362)

(4,080)

-

(6,481)

-

-

-

(41,923)

Total comprehensive income for the period

-

-

(31,362)

(4,080)

-

(6,481)

-

-

(395,731)

(437,654)

Transaction with owners recorded directly in equity

 

 

 

 

 

 

 

 

Share options for A Shares

-

-

-

-

920

-

-

-

-

920

Total transactions with owners

-

-

-

-

920

-

-

-

-

920

Balance at 30 June 2013

105,863

2,368

50,373

128,611

14,747

1,344

(1,631,161)

1,684,463

(35,089)

321,519

The notes on pages 13 to 24 are an integral part of this condensed consolidated financial information.


New World Resources Plc
Operating and Financial Review
for the six-month period ended 30 June 201
4 (‘6M 2014’)

 

1.     Corporate Information

New World Resources Plc (‘NWR’ or the ‘Company’) is a public limited liability company with its registered office at One Silk Street, London EC2Y 8HQ, United Kingdom.

These consolidated financial statements comprise the Company and its subsidiaries (together the ‘Group’). The Group is primarily involved in coal mining. The objective of the Company is to act as a holding company and to provide management services for the Group.

  1. Financial Results Overview

On 6 December 2013, the Group completed the sale of OKK Koksovny, a.s. (‘OKK’), representing its entire Coke segment, whose results are presented as a discontinued operation in the comparative period.

Continuing Operations

Revenues. The Group’s revenues decreased by 20% (17% on a constant currency basis), from EUR 434 million in 6M 2013 to EUR 346 million in 6M 2014. This is mainly attributable to lower sales volumes of thermal coal that were partly offset by higher realised prices, as well as to lower realised prices of coking coal that were partly offset by higher sales volumes.

Cost of sales. Cost of sales decreased from EUR 467 million to EUR 299 million or by 36% (32% on a constant currency basis) in 6M 2014 compared to 6M 2013. This is mainly attributable to:

  • lower depreciation following the impairment charge recognised in 2013;
  • less development work combined with lower input costs per equipped coal panel resulting in lower consumption of mining material and spare parts;
  • lower consumption of energy combined with lower energy prices resulting in lower energy costs; and
    • reduction in headcount combined with lower holiday allowances, resulting in lower personnel expenses.

Cost of sales are further positively affected by a EUR 54 million year on year inventory impact following the build-up of inventories in the first six months of 2014 compared to the reduction in inventories in the comparative period.

Selling expenses. Selling expenses decreased from EUR 54 million to EUR 34 million or by 37% (35% on a constant currency basis) in 6M 2014, attributable to lower sales volumes and lower transport prices; and reduced inventory allowances.

Administrative expenses. Administrative expenses decreased from EUR 44 million to EUR 37 million or by 15% (10% on a constant currency basis) mainly due to reduction in administrative headcount resulting in lower personnel expenses.   

EBITDA. 6M 2014 saw a positive EBITDA from continuing operations of EUR 19 million, an increase of EUR 68 million compared to negative EBITDA of EUR 49 million recorded in 6M 2013, attributable mainly to the decrease in operating expenses that outweighed the decrease in revenues.

Capital Restructuring. The Group incurred EUR 10 million in costs relating to the Capital Restructuring as described in note 3.

Loss for the period. The reported loss from continuing operations for the period is EUR 57 million, compared to the loss of EUR 400 million in 6M 2013. Excluding the impact of impairment charges, the loss for the comparative period would have been EUR 149 million.

3.     Basis of Presentation

The condensed consolidated interim financial statements (the ‘financial statements’) presented in this document are prepared:

  • for the six-month period ended 30 June 2014, with the six-month period ended 30 June 2013 as the comparative period;
  • based on the recognition and measurement criteria of International Financial Reporting Standards as adopted by European Union (‘adopted IFRS’) and on the going concern basis (see further on next page); and
  • in accordance with IAS 34 Interim Financial Reporting.

The financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the consolidated financial statements as at and for the year ended 31 December 2013, which are contained within the 2013 Annual Report and Accounts of the Company, available on the Group’s website at www.newworldresources.eu.

Going concern basis of accounting

The Group manages its liquidity through cash (EUR 122 million (31 December 2013: EUR 184 million)) and receivable financing.

At the present market prices for coal, the Group is currently cash flow negative and the current low coal price environment has placed significant pressure on the Group’s liquidity position and also on its solvency resulting in the Group having net liabilities of EUR 337 million at 30 June 2014.

The prolonged global pressure on both coking and thermal coal prices, the expiry on 7 February 2014 of the Group’s RCF and the likely downward revision of coal resource and reserve balances (as a direct result of the deterioration in the long term coal price outlook), triggered the Directors to initiate a review of the Group’s capital structure on 22 January 2014. Following such a review, the Group commenced the Capital Restructuring announced on 6 June 2014 which includes the Rights Issue and the Placing of shares in the Company as well as the financial, debt and corporate restructuring of the Group.

As part of the Capital Restructuring the Group anticipates raising net proceeds from the Rights Issue and Placing of EUR 144 million (EUR 150 million of gross proceeds, less expected issue costs of EUR 6 million).  In addition, the Group will repurchase the Existing Notes for a mixture of cash and new debt, comprising (i) cash consideration of EUR 90 million (ii) New Senior Secured Notes of EUR 300 million (iii) New Convertible Notes of EUR 150 million, and (iv) New Contingent Value Rights of EUR 35 million. In addition Existing Noteholders will provide a Super Senior Credit Facility of EUR 35 million for the working capital requirements of the Group.

In order for the Capital Restructuring to be implemented there are other conditions that need to be fulfilled, including obtaining (i) Shareholder approval at a General Meeting (ii) the approval of requisite majorities of holders of the Existing Notes; (iii) approval from the relevant courts; and (iv) consent from the ECA Facility Lenders to an amended ECA Facility.

As at 30 June 2014 the Group is in breach of one of its undertakings under the ECA Facility of EUR 48 million as it moved its Centre of Main Interest to England and is also potentially in default of the ECA Facility due to having commenced negotiations with its creditors as part of the Capital Restructuring. While the ECA Facility Lenders have not taken (and have not indicated that they intend to take) any steps in respect of the breach, they have reserved their right in respect of it and may withhold their consent to an amended ECA Facility.

There is a risk that one or more of these steps, including the consent from the ECA Facility Lenders, may not be completed or satisfied by 31 October 2014. Unless at least 50% of the Existing Noteholders who have responded to a request for extension within 5 Business Days and, to the extent necessary, the relevant court approve an extension of the period for completion of the Capital Restructure, the Capital Restructuring will not occur. If the Capital Restructuring does not occur, no funds will be available to be drawn by, or released to, the Group and the Group will not benefit from the injection of equity capital from the Rights Issue and the Placing.

If funds are not available to be drawn, and the Capital Restructuring does not proceed, the Directors are of the opinion that the Group would become insolvent.

If the Capital Restructuring does proceed, the Group will have sufficient working capital available, that is, for at least the next 12 months following the date of this report. However, under a reasonable Downside Scenario, arising from a deterioration in coal prices and/or other operating issues, the Directors expect the Group to breach the minimum available cash requirement for the Super Senior Facility, which is set at EUR 40 million and is first tested as at 31 October 2015. At that time the ECA Facility would also be capable of acceleration and, should that acceleration be reasonably probable, all of the remaining debt of the Group could become immediately repayable.

If the proceeds of the Rights Issue and the Placing are not received and the other steps of the Capital Restructuring are not implemented, the Group intends to proceed with the Alternative Restructuring Plan, whereby, the Group would transfer its interests in its subsidiaries into a special purpose vehicle, which would issue new debt instruments in exchange for the existing Senior Secured Notes. This procedure would result in the insolvency of the remaining Group.

 

The Directors recognise that the combination of these circumstances represents a material uncertainty that may cast significant doubt as to the Group’s ability to continue as a going concern and that it may be unable to realise all of its assets and discharge all of its liabilities in the normal course of business.  Nevertheless, the Directors expect that the Capital Restructuring will obtain all of the necessary approvals and consents, in October 2014, to ensure the continued operation of the Group and that the risks associated with a deterioration in coal prices and/or other operating issues have been appropriately taken into consideration and accordingly the financial statements have been prepared on a going concern basis and no break up adjustments have been made.

On 30 July 2014, NWR announced that it had published a prospectus and circular relating to, among other things, the proposed rights issue and placing in connection with the consensual restructuring transaction. The prospectus describes the Capital Restructuring in more details, contains further risks relating to the Capital Restructuring and includes a pro forma statement of net assets which illustrates the impact of the Capital restructuring on the Group’s financial position. The defined terms used above have the meaning given in the prospectus.

  1. Significant Accounting Policies

The financial statements have been prepared under the historical cost convention, except for certain financial instruments, which are stated at fair value. 

The financial statements have been prepared on the basis of accounting policies and methods of compilation consistent with those applied in the consolidated financial statements as at and for the year ended 31 December 2013, with the exception described below.  

New standards and interpretations

The Group adopted the following new/revised standards, which are effective for its accounting period starting 1 January 2014:

 

  • IAS 27 Separate Financial Statements (as revised in 2011, effective 1 January 2014)
  • IAS 28 Investments in Associates and Joint Ventures (as revised in 2011, effective 1 January 2014)
  • Amendment to IAS 32 Financial Instrument: Presentation – Offsetting Financial Assets and Financial Liabilities (effective 1 January 2014)
  • IFRS 10 Consolidated Financial Statements (effective 1 January 2014)
  • IFRS 11 Joint Arrangements (effective 1 January 2014)
  • IFRS 12 Disclosure of Involvement with Other Entities (effective 1 January 2014)

The adoption of the new/revised standards has no impact on the recognised assets, liabilities and comprehensive income of the Group.

Estimates

The preparation of financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these consolidated financial statements, the significant judgements made by the management in applying the Group’s accounting policies and the key sources of estimation uncertainty were the same as those applied to the consolidated financial statements of the Company as at and for the year ended 31 December 2013.

  1. Non-IFRS Measures

The Company defines EBITDA as net profit/(loss) before income tax, net financial costs, depreciation and amortisation, impairment of property, plant and equipment (‘PPE’) and gains/losses from the sale of PPE.

While the amounts included in EBITDA are derived from the Group's financial information, it is not a financial measure determined in accordance with adopted IFRS and should not be considered as an alternative to net income or operating income as a sole indication of the Group's performance or as an alternative to cash flows as a measure of the Group's liquidity. The Company currently uses EBITDA in its business operations to, among others, evaluate the performance of its operations, develop budgets and measure its performance against those budgets.

The Company defines net debt as total debt less cash and cash equivalents. Total debt includes issued bonds, long-term and short-term interest‑bearing loans and borrowings, less related expenses. Interest‑bearing loans, bond issues, and borrowings are measured at amortised cost.

  1. Exchange Rates

(EUR/CZK)

6M 2014

6M 2013

y/y %

Average exchange rate

27.444

25.699

7%

End of period exchange rate

27.453

25.949

6%

Throughout this document, the financial results and performance in both the current and comparative periods are expressed in Euros. The financial information could differ considerably if the financial information was presented in CZK. The Company may where deemed relevant, present variances using constant foreign exchange rates (constant currency basis), marked ‘ex-FX’, excluding the estimated effect of currency translation differences. These are non-IFRS financial measures.

  1. Financial Performance of Continuing Operations

Revenues

The Group's largest source of revenue is the sale of coking coal, which accounted for 64% of total revenues in 6M 2014, whilst the sale of thermal coal accounts for 25% of total revenues in this period.

(EUR thousand)

6M 2014

6M 2013 (restated)

y-y

y/y %

ex-FX

External coking coal sales (EXW)*

221,644

234,902

(13,258)

(6%)

(2%)

External thermal coal sales (EXW)*

85,005

140,977

(55,972)

(40%)

(38%)

Coal transport

24,296

36,884

(12,588)

(34%)

(31%)

Sale of coal by-products

9,228

10,276

(1,048)

(10%)

(5%)

Other revenues

6,171

10,711

(4,540)

(42%)

(38%)

Total revenues

346,344

433,750

(87,406)

(20%)

(17%)

*For the purpose of this analysis, where the Group sells products on an EXW or similar basis, the notional transport element is shown separately in order to separate the impact of changing transport revenues from changes in the underlying achieved price for the products sold.

Total revenues decreased by 20% mainly as a result of lower sales volumes of thermal coal that were partly offset by its higher realised prices (see table below). In addition, revenues decreased due to lower realised prices of coking coal that were partly offset by its higher sales volumes. Lower sales volumes and lower transport charges also resulted in a decrease of transport revenues, with a similar decrease in transport costs, with no material impact on profitability.

Average realised sales prices

(EUR per tonne)

6M 2014

6M 2013 (restated)

y-y

y/y %

ex-FX

Coking coal (EXW)

87

102

(15)

(15%)

(11%)

Thermal coal (EXW)

58

56

2

4%

7%

All of the Group’s coking coal sales are priced quarterly and the majority of thermal coal sales are priced on a calendar year basis.

Total production of coal in 6M 2014 increased by 5% compared to 6M 2013. Coal volumes sold were lower by 17% as a result of lower thermal coal sales, partially offset by increased sales of coking coal in 6M 2014.

Coal inventories increased by 478kt in 6M 2014 compared to a decrease by 532kt in 6M 2013.

Coal performance indicators (kt)

6M 2014

6M 2013 (restated)

y-y

y/y %

Coal production

4,497

4,281

216

5%

External coal sales

4,019

4,816

(797)

(17%)

Coking coal

2,544

2,306

238

10%

Thermal coal

1,475

2,510

(1,035)

(41%)

Period end inventory*

858

755

103

14%

* Inventory consists of coal available for immediate sale and coal that has to be converted from raw coal. Opening and closing inventory balances do not always reconcile due to various factors such as production losses.

 

Cost of Sales

(EUR thousand)

6M 2014

6M 2013 (restated)

y-y

y/y %

ex-FX

Consumption of material and energy

102,744

136,087

(33,343)

(25%)

(20%)

  of which : mining material and spare parts

61,138

82,064

(20,926)

(25%)

(22%)

              : energy consumption

35,642

51,050

(15,408)

(30%)

(25%)

Service expenses

69,960

81,635

(11,675)

(14%)

(9%)

  of which : contractors

34,759

40,062

(5,303)

(13%)

(7%)

              : maintenance

17,672

17,239

433

3%

7%

Personnel expenses

110,657

140,021

(29,364)

(21%)

(16%)

Depreciation and amortisation

39,809

79,704

(39,895)

(50%)

(47%)

Net gain from material sold

(1,642)

(2,501)

859

(34%)

(30%)

Change in inventories of finished goods and work in progress

(28,993)

25,310

(54,303)

-

-

Other operating expenses/(income)

6,002

6,969

(967)

(14%)

(8%)

  of which : compensation of, and provision for mining damages

2,764

3,621

(857)

(24%)

(19%)

Total cost of sales

298,537

467,225

(168,688)

(36%)

(32%)

Excluding the change in inventories impact

327,530

441,915

(114,385)

(26%)

(21%)

Excluding the EUR 54 million year on year impact in change in inventories driven by the Group producing on stock, cost of sales decreased by EUR 114 million, principally as a result of:

  • lower depreciation following the impairment charge recognised in 2013;
  • a decrease in development work combined with lower input costs per equipped coal panel lowering consumption of mining material and spare parts;
  • a decrease in consumption of energy combined with lower energy prices resulting in lower energy costs; and
  • a 10% decrease in the number of employees combined with lower holiday allowances, resulting in lower personnel expenses.

Selling Expenses

(EUR thousand)

6M 2014

6M 2013 (restated)

y-y

y/y %

ex-FX

Transport costs

24,434

36,960

(12,526)

(34%)

(32%)

Personnel expenses

1,312

1,558

(246)

(16%)

(11%)

Allowance for inventories on stock

2,769

9,228

(6,459)

(70%)

(68%)

Other expenses

5,604

6,340

(736)

(12%)

(6%)

Total selling expenses

34,119

54,086

(19,967)

(37%)

(35%)

Lower sales volumes together with lower transport charges resulted in a reduction in transport costs by 34%, with a similar decrease in transport revenues, with no material impact on profitability. The Group recognised lower allowance for inventories compared to 6M 2013.

Administrative Expenses

(EUR thousand)

6M 2014

6M 2013 (restated)

y-y

y/y %

ex-FX

Personnel expenses

21,086

26,903

(5,817)

(22%)

(17%)

Service expenses

8,267

9,504

(1,237)

(13%)

(7%)

Other expenses

7,851

7,505

346

5%

11%

Total administrative expenses

37,204

43,912

(6,708)

(15%)

(10%)

Administrative expenses decreased by 15% mainly due to reduction in administrative headcount resulting in lower personnel expenses.

 

 

 

Total Personnel Expenses and Headcount

(EUR thousand)

6M 2014

6M 2013 (restated)

y-y

y/y %

ex-FX

Personnel expenses

135,008

172,088

(37,080)

(22%)

(16%)

Employee benefit provision

(1,327)

(2,528)

1,201

(48%)

(44%)

Share-based payments

(301)

(756)

455

(60%)

(55%)

Total personnel expenses

133,380

168,804

(35,424)

(21%)

(16%)

Total personnel expenses have reduced principally through lower headcount (see below) and lower holiday allowances based on the new Collective Bargaining Agreement with employees, executed in December 2013.

 

6M 2014

6M 2013 (restated)

y-y

y/y %

 

Employees headcount (average)

11,560

12,907

(1,347)

(10%)

 

Contractors headcount (average)

3,059

3,299

(240)

(7%)

 

Total headcount (average)

14,619

16,206

(1,587)

(10%)

 

EBITDA

(EUR thousand)

6M 2014

6M 2013 (restated)

y-y

y/y %

ex-FX

EBITDA from continuing operations

19,345

(48,893)

68,238

-

-

The Group’s EBITDA from continuing operations increased by EUR 68 million compared to 6M 2013 mainly as a result of lower operating expenses that outweigh the decrease in revenues.

As EBITDA is a non-IFRS measure, the following table provides a reconciliation of EBITDA from continuing operations and net loss after tax.

(EUR thousand)

6M 2014

6M 2013 (restated)

Net loss after tax from continuing operations

(56,855)

(399,710)

Income tax

(9,423)

(83,397)

Net financial expenses

32,856

44,206

Capital restructuring

9,970

-

Depreciation and amortisation

42,458

82,872

Impairment loss on property, plant and equipment

-

307,137

Loss / (gain) from sale of PPE

339

(1)

EBITDA from continuing operations

19,345

(48,893)

Impairment

As at 30 June 2013, due to reduced price expectations for the Group’s products, the Group assessed the recoverable amount of its cash generating units (‘CGUs’). As a result, an impairment loss of EUR 307 million was recognised.  Further as at 31 December 2013, following continued price reductions a further impairment loss of EUR 500 million was recorded.

 

As at 30 June 2014, while prices have continued to decline for the Group’s products, the Group considers these reductions to be in line with the expectations and assumptions made as at 31 December 2013 and accordingly has assessed that the Group’s CGUs remain stated at their recoverable value.

Financial Income and Expense

(EUR thousand)

6M 2014

6M 2013 (restated)

y-y

y/y %

 

Financial income

(2,877)

(13,032)

10,155

(78%)

 

Financial expense

35,733

57,238

(21,505)

(38%)

 

Net financial expense

32,856

44,206

(11,350)

(26%)

 

The decrease in net financial expense of EUR 11 million in 6M 2014 compared to 6M 2013 is mainly attributable to the loss recorded in the comparative period due to the repayment of the Senior Notes due 2015 (EUR 8 million), consisting of the write off of unamortised transaction costs (EUR 4 million) and the cost of early redemption (EUR 4 million), and to a decrease in realised and unrealised FX losses (EUR 5 million).

Loss from Continuing Operations before Tax

The loss before tax in 6M 2014 was EUR 66 million, down EUR 417 million compared to a loss of EUR 483 million in 6M 2013.

Income Tax

The Group recorded a net income tax benefit of EUR 9 million in 6M 2014, compared to a net income tax benefit of EUR 83 million in 6M 2013.

Deferred tax assets are recognised to the extent that they are recoverable in the jurisdiction in which they were incurred.

Loss from Continuing Operations

The Group recognised a loss from continuing operations of EUR 57 million in 6M 2014, which represents a decrease of EUR 343 million compared to the loss of EUR 400 million in 6M 2013.

  1. (Loss) / Earnings per Share

(EUR)

6M 2014

6M 2013 (restated)

 

Total

Continuing

operations

Discontinued

operations

Total

A share – basic (loss) / earnings

(0.22)

(1.52)

0.02

(1.50)

A share – diluted (loss) / earnings

(0.22)

(1.51)

0.01

(1.50)

B share – basic earnings

152.30

220.60

-

220.60

B share – diluted earnings

152.30

220.60

-

220.60

The calculation of (loss)/earnings per share was based on (loss)/profit attributable to the shareholders of the Company and a weighted average number of shares outstanding during the six-month period ended 30 June:

(EUR thousand)

6M 2014

6M 2013 (restated)

 

Total

Continuing

operations

Discontinued

operations

Total

(Loss) / profit for the period

(56,855)

(399,710)

3,979

(395,731)

(Loss) / profit attributable to A shares

(58,415)

(401,495)

3,979

(397,516)

Profit attributable to B shares

1,523

2,206

-

2,206

Eliminations between Mining and Real Estate divisions

37

(421)

-

(421)

 

 

6M 2014

6M 2013

Weighted average number of A shares (basic)

264,710,416

264,648,002

Weighted average number of A shares (diluted)

265,544,372

265,388,788

Weighted average number of B shares (basic)

10,000

10,000

Weighted average number of B shares (diluted)

10,000

10,000

  1. Cash Flow

(EUR thousand)

6M 2014

6M 2013

Net cash flows from operating activities

(39,560)

(6,171)

Net cash flows from investing activities

(16,604)

(83,821)

Net cash flows from financing activities

(5,086)

1,235

Net effect of currency translation

(25)

(2,522)

Total decrease in cash

(61,275)

(91,279)

 

Cash Flow from Operating Activities

Cash outflows arising from operating activities, after working capital changes and before interest and tax payments in 6M 2014 were EUR 8 million, reflecting amongst others the fact the Group was producing on stock.

Cash Flow from Investing Activities

Capital expenditures amounted to EUR 24 million in 6M 2014, a decrease of EUR 61 million when compared to 6M 2013 (of which EUR 4 million spent in coke segment in 6M 2013).

Cash flow from investing activities was positively influenced by a release of EUR 7 million from an escrow account related to the sale of Coke segment in December 2013 (the Coke segment was sold for EUR 95 million with EUR 7 million paid on escrow account to be released three months after the date of sale, subject to the satisfaction of any claims by the purchaser under the OKK Share Purchase Agreement).

Cash Flow from Financing Activities

Cash flow from financing activities reflects the transaction costs related to capital restructuring of EUR 5 million. Cash flow from financing activities in the comparative period was influenced by issuance of new EUR 275 million Senior Notes due 2021 (the ‘2021 Notes’) that were used to repay in full the outstanding amount of EUR 258 million under the Senior Notes due 2015 (the ‘2015 Notes’). Additional transaction costs of EUR 9 million were incurred in connection with the refinancing. Cash flow from financing activities in the comparative period also consisted of an instalment of the ECA Facility of EUR 7 million.

10.  Borrowings, Liquidity and Capital Resources

The liquidity requirements of the Group arise primarily from the need to fund operating losses, working capital requirements and the need to fund capital expenditures. The principal uses of cash are anticipated to fund planned operating expenditures, capital expenditures, scheduled debt service on the Senior Notes and other borrowings, and other distributions.

Indebtedness and liquidity

As at 30 June 2014, the Group held cash and cash equivalents of EUR 122 million and had indebtedness of EUR 810 million (carrying value), of which EUR 48 million is contractually repayable in the next 12 months (see below). This results in a net debt position for the Group of EUR 688 million, 10% higher when compared to EUR 625 million as at 31 December 2013.

As a reaction to the continuation of difficult trading conditions and price pressures and the expiry of the Group’ EUR 100 million RCF credit line (expired on 7 February 2014), the Directors initiated a review of the Group’s capital structure. For more information about the review, liquidity and going concern basis of accounting please refer to note 3 Basis of Presentation.

The ECA Facility of EUR 48 million as at 30 June 2014, contains an undertaking of each obligor not to conduct its business in a manner that is reasonably likely to change its centre of main interest (the ‘‘COMI’’). NWR NV is in breach of this undertaking as it moved its COMI to England in the beginning of June 2014. NWR NV is also potentially in default of the ECA Facility due to having commenced negotiations with its creditors as part of the Capital Restructuring. The lenders under the ECA Facility have not taken, and have not indicated that they intend to take, any steps in respect of the breach, however, they reserved their rights in respect of it. As a consequence, the outstanding amount of the ECA Facility has been recognised as current liability in its whole as at 30 June 2014.

11.  Financial Instruments

Financial assets and liabilities by category

Financial assets and liabilities are categorised as shown below and stated at their carrying amounts. Where the carrying amount of a financial asset or liability does not approximate its fair value, this is disclosed.

(EUR thousand)

30 June 2014

31 December 2013

30 June 2013

Financial assets

Loans and receivables

Accounts receivable and prepayments

66,870

95,121

107,357

Cash and cash equivalents

Restricted deposits

25,973

30,742

10,621

Cash and cash equivalents

122,390

183,665

175,732

215,233

309,528

293,710

 

 

 

 

 

 

Financial liabilities

At fair value through profit and loss

Derivative financial liabilities

5,315

8,037

13,996

Financial liabilities at amortised cost

Borrowings

48,493

48,153

69,257

Bonds issued including accrued interest*

778,642

777,418

775,705

Accounts payable and accruals

134,820

144,391

172,672

Cash-settled share-based payments

598

1,279

780

967,868

979,278

1,032,410

*the fair value of the bonds was:

388,018

492,845

384,078

Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1

quoted prices (unadjusted) in active markets for identical assets or liabilities

Level 2

inputs other than quoted prices included within Level 1 that are observable for the asset or liabilities, either directly (i.e. as prices) or indirectly (i.e. derived from prices)

Level 3

inputs for the asset or liability that are not based on observable market data (unobservable inputs)

In order to determine the fair value of the financial instruments, the Company implements valuation techniques used by banks in which all significant inputs were based on observable market data.

(EUR thousand)

30 June 2014

31 December 2013

30 June 2013

 

Level 2

Level 2

Level 2

Financial liabilities at fair value through profit and loss

Interest rates derivatives(1)

5,315

8,037

9,228

Foreign exchange forwards(2)

-

-

4,768

 

5,315

8,037

13,996

(1)The fair value of interest rate derivatives is estimated by discounting the difference between the contractual interest rate and current interest rate for the residual maturity of the contract using a risk-free interest rate.

(2) The fair value of foreign exchange forwards is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate.

12.  Segments and Divisions

Until the end of 2013, NWR’s business was organised into two main segments - Coal and Coke segment. On 6 December 2013, the Group completed the sale of its entire Coke segment, following a strategic decision to focus on its mining business. Coke segment is presented separately as discontinued operations within comparative period (see Note 13). Financial and other performance measures of the remaining Coal segment are regularly evaluated by the Chief Operating Decision Maker (‘CODM’). The CODM is the Company’s Board of Directors.

The Group is further organised into two divisions: the Mining Division (‘MD’) and the Real Estate Division (‘RED’). The Company had A Shares and B Shares outstanding for the presented periods. The A Shares and B Shares are tracking stocks, which are designed to reflect the financial performance and economic value of the MD and RED, respectively. Due to the public listing of the Company’s A shares, the Group provides divisional reporting showing separately the performance of the MD and RED. The main rights, obligations and relations between the RED and MD are described in the Divisional Policy Statement, available at the Company’s website www.newworldresources.eu. The divisional reporting, as such, is essential for the evaluation of the equity attributable for the listed part of the Group. The whole Mining Division represents the Coal segment.


Business Segments

 

Six-month period ended 30 June 2014

 

Six-month period ended 30 June 2013 (restated)

 

EUR thousand

 

Mining division

 

Real Estate division

 

Eliminations & adjustments1

 

Group operations total

 

Mining division

 

Real Estate division

 

Eliminations & adjustments1

 

Group operations total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales to third parties

 

346,344

 

-

 

-

 

346,344

 

404,527

 

-

 

-

 

404,527

Sales to continuing segments

 

-

 

207

 

(207)

 

-

 

-

 

383

 

(383)

 

-

Sales to discontinued segments

 

-

 

-

 

-

 

-

 

29,223

 

-

 

-

 

29,223

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

346,344

 

207

 

(207)

 

346,344

 

433,750

 

383

 

(383)

 

433,750

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

(298,790)

 

-

 

253

 

(298,537)

 

(467,449)

 

(1)

 

225

 

(467,225)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross profit / (loss)

 

47,554

 

207

 

46

 

47,807

 

(33,699)

 

382

 

(158)

 

(33,475)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

(34,119)

 

-

 

-

 

(34,119)

 

(54,086)

 

-

 

-

 

(54,086)

Administrative expenses

 

(37,146)

 

(58)

 

-

 

(37,204)

 

(43,912)

 

-

 

-

 

(43,912)

Impairment loss on property, plant and equipment

 

-

 

-

 

-

 

-

 

(307,137)

 

-

 

-

 

(307,137)

(Loss) / gain from sale of property, plant and equipment

 

(339)

 

-

 

-

 

(339)

 

-

 

1

 

-

 

1

Other operating income

 

1,525

 

-

 

-

 

1,525

 

1,233

 

146

 

(144)

 

1,235

Other operating expenses

 

(1,122)

 

-

 

-

 

(1,122)

 

(1,527)

 

(73)

 

73

 

(1,527)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SEGMENT OPERATING (LOSS) / INCOME

 

(23,647)

 

149

 

46

 

(23,452)

 

(439,128)

 

456

 

(229)

 

(438,901)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA

 

19,404

 

148

 

(207)

 

19,345

 

(48,893)

 

470

 

(470)

 

(48,893)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial income

 

2,877

 

1,734

 

(1,734)

 

2,877

 

12,798

 

2,225

 

(1,991)

 

13,032

Financial expenses

 

(37,466)

 

(1)

 

1,734

 

(35,733)

 

(58,925)

 

(13)

 

1,700

 

(57,238)

Capital restructuring

 

(9,970)

 

-

 

-

 

(9,970)

 

-

 

-

 

-

 

-

(Loss) / profit before tax

 

(68,206)

 

1,882

 

46

 

(66,278)

 

(485,255)

 

2,668

 

(520)

 

(483,107)

Income tax expense

 

9,791

 

(359)

 

(9)

 

9,423

 

83,760

 

(462)

 

99

 

83,397

(LOSS) / PROFIT FROM CONTINUING OPERATIONS

 

(58,415)

 

1,523

 

37

 

(56,855)

 

(401,495)

 

2,206

 

(421)

 

(399,710)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SHAREHOLDERS OF THE COMPANY

 

(58,415)

 

1,523

 

37

 

(56,855)

 

(401,495)

 

2,206

 

(421)

 

(399,710)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets and liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segment assets

 

835,566

 

42,827

 

(28,644)

 

849,749

 

1,632,244

 

30,977

 

(14,258)

 

1,648,963

Total segment liabilities

 

1,205,259

 

8,019

 

(26,719)

 

1,186,559

 

1,327,475

 

14,227

 

(14,258)

 

1,327,444

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other segment information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital expenditures

 

24,225

 

-

 

-

 

24,225

 

80,842

 

-

 

-

 

80,842

Depreciation and amortisation

 

42,711

 

-

 

(253)

 

42,458

 

83,097

 

-

 

(225)

 

82,872

Interest income

 

411

 

1

 

-

 

412

 

895

 

1

 

-

 

896

Interest income - divisional CAP

 

-

 

1,721

 

(1,721)

 

-

 

-

 

1,690

 

(1,690)

 

-

Interest expense

 

32,313

 

-

 

-

 

32,313

 

30,949

 

-

 

-

 

30,949

Interest expense - divisional CAP

 

1,721

 

-

 

(1,721)

 

-

 

1,690

 

-

 

(1,690)

 

-

1 Eliminations of transactions between the divisions (e.g. lease charges, service fees, annual fees for providing real estates).


13.  Discontinued Operations

On 6 December 2013, the Group completed the sale of OKK, representing its entire Coke segment. As such, the Coke segment is presented as discontinued operations in the comparative consolidated statement of comprehensive income.

a)     Result of discontinued operations

EUR thousand

6M 2013

 

 

Revenues

88,455

Cost of sales

(69,933)

 

 

Gross profit

18,522

Selling expenses

(11,438)

Administrative expenses

(1,756)

Other operating income

331

Other operating expenses

(109)

 

 

Operating income

5,550

Financial income

121

Financial expense

(49)

 

 

Profit before tax

5,623

Income tax expense

(1,644)

 

 

Profit from discontinued operations for the period (operating activities)

3,979

b)     Cash flows from discontinued operations

EUR thousand

6M 2013

 

 

Net cash flows from operating activities

11,304

Net cash flows from investing activities

(3,998)

 

 

Net cash flow from discontinued operations

7,306

14.  Contingencies and Other Commitments

Contingent assets and liabilities

Contingent liabilities relate to several litigation proceedings. As inherent in such proceedings, outcomes cannot be predicted with certainty and there is a risk of unfavourable outcomes to the Group. The Group disputes all pending and threatened litigation claims of which it is aware and which it considers unjustified. No provision has been set up as at 30 June 2014 for any of the litigation proceedings.  At the date of these financial statements, based on advice of counsel, the management of the Group believes that the litigation proceedings have no significant impact on the Group’s financial position as at 30 June 2014. A summary of the main litigation proceedings is included in the 2013 Annual Report and Accounts of the Company. There have been no significant developments in any of these matters since.

Contractual obligations

The Group is subject to commitments resulting from its indebtedness. These result mainly from the loans drawn by the Group and Notes issued. The following table includes the contractual obligations resulting from the ECA Facility, the 7.875% Senior Notes due 2018 and the 7.875% Senior Notes due 2021 as at 30 June 2014 in nominal values.

(EUR thousand)

1/7/2014 - 30/6/2015

1/7/2015 - 30/6/2017

After 30/6/2017

7.875% Senior Notes due 2018

-

-

500,000

7.875% Senior Notes due 2021

-

-

275,000

ECA Facility

49,862

-

-

TOTAL

49,862

-

775,000

Interest is paid semi-annually on both Senior Notes. The interest rate on the ECA Facility is fixed for a total period of six months with a payment period of six months. The interest rate is based on EURIBOR plus a fixed margin.

The Group has contractual obligations to acquire property, plant and equipment in the total amount of EUR 31 million, all of which are spread within one year. The Group is also subject to contractual obligations under lease contracts in the total amount of EUR 2 million, of which EUR 1 million are short-term obligations.

15.  Subsequent Events and Other Information

Non-payment of coupon on Senior Unsecured Notes (Senior Notes due 2021)

As part of the Group ongoing balance sheet restructuring, the NWR NV entered into a lock-up agreement on 2 July 2014 (as amended) (the 'Lock-up Agreement') with approximately 85% by value of the holders of the senior secured notes and approximately 66% by value of the holders of the senior unsecured notes. The Lock-up Agreement envisages a consensual restructuring transaction and (in case this transaction cannot be implemented) an alternative restructuring transaction. Pursuant to the Lock-up Agreement, payment of the 15 July coupon payment on the senior unsecured notes is subject to the consent of the majority of locked-up holders. Should NWR NV make this coupon payment in the absence of such consent, noteholders can terminate the Lock-up Agreement - this would put both transactions at risk.

NWR NV has not received the requisite consent to make the coupon payment on the senior unsecured notes. As such, and having regard to the fact that payment of the coupon would be in breach of the Lock-Up Agreement and would jeopardise the strongly supported transactions during the final stages of the restructuring process, NWR NV’s board of directors believes that it is prudent, and in the best interests of NWR NV’s creditors as a whole, for NWR NV to comply with the terms of the Lock-Up Agreement to ensure a successful implementation of the restructuring and not to make the coupon payment on the senior unsecured notes.

All locked-up unsecured noteholders remain bound by the terms of the Lock-up Agreement. This includes an obligation to vote in favour of the consensual restructuring transaction, a restriction from taking any acceleration or enforcement action, and an undertaking to rescind any such action by any other group of senior unsecured noteholders. The percentage of locked-up unsecured noteholders provides NWR NV with the majority required for such a rescission.

Capital Restructuring

For more information about the Capital Restructuring of the Group, please refer to note 3 Basis of Presentation.

On 30 July 2014, NWR announced that it had published a prospectus and circular relating to, among other things, the proposed rights issue and placing in connection with the consensual restructuring transaction. Included within the prospectus is the pro forma statement of net assets, which has been prepared to illustrate the effect of the Capital Restructuring on the net assets of the Group.

16.  Certain Relationships and Related Party Transactions

Description of the relationship between the Group, CERCL Holdings Ltd. (the controlling Shareholder) and entities affiliated to the CERCL Holdings Ltd. is included on pages 87-89 of the 2013 Annual Report and Accounts of NWR. There have been no substantive changes to the nature, scale or terms of these arrangements during the six-month period ended 30 June 2014.

17.  Principal Risk and Uncertainties

It is not anticipated that the nature of the principal risks and uncertainties that affect the business, and which are set out on pages 26 to 36 of the 2013 Annual Report and Accounts of NWR, will change within the next six months of the financial year, subject to successful outcome of the Capital Restructuring. Further risks relating to the Capital Restructuring are described in the prospectus issued in connection with the consensual restructuring transaction.

 


 

Forward Looking Statements

 

Certain statements in this document are not historical facts and are or are deemed to be ‘forward-looking’. The Company’s prospects, plans, financial position and business strategy, and statements pertaining to the capital resources, future expenditure for development projects and results of operations, may constitute forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology including, but not limited to; ‘may’, ‘expect’, ‘intend’, ‘estimate’, ‘anticipate’, ‘plan’, ‘foresee’, ‘will’, ‘could’, ‘may’, ‘might’, ‘believe’ or ‘continue’ or the negatives of these terms or variations of them or similar terminology. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct. These forward-looking statements involve a number of risks, uncertainties and other facts that may cause actual results to be materially different from those expressed or implied in these forward-looking statements because they relate to events and depend on circumstances that may or may not occur in the future and may be beyond the Company’s ability to control or predict. Forward-looking statements are not guarantees of future performances.

Factors, risk and uncertainties that could cause actual outcomes and results to be materially different from those projected include, but are not limited to, the following: risks relating to changes in political, economic and social conditions in the Czech Republic, Poland and the CEE region; future prices and demand for the Company's products and demand for the Group's customers' products; coal mine reserves; remaining life of the Group's mines; coal production; trends in the coal industry and domestic and international coal market conditions; risks in coal mining operations; future expansion plans and capital expenditures; the Group's relationship with, and conditions affecting, the Group's customers; competition; railroad and other transport performance and costs; availability of specialist and qualified workers; and weather conditions or catastrophic damage; risks relating to Czech or Polish law, regulations and taxation, including laws, regulations, decrees and decisions governing the coal mining industry, the environment and currency and exchange controls relating to Czech and Polish entities and their official interpretation by governmental and other regulatory bodies and by the courts; and risks relating to global economic conditions and the global economic environment. Additional risk factors are described in the Company’s 2013 Annual Report and Accounts. A failure to achieve a satisfactory capital structure for liquidity and solvency purposes would pose a significant risk of the Group ceasing to operate as a going concern.

Forward-looking statements speak only as of the date of this document. The Company expressly disclaims any obligation or undertaking to release, publicly or otherwise, any updates or revisions to any forward-looking statement contained in this report to reflect any change in its expectations or any change in events, conditions, assumptions or circumstances on which any such statement is based unless so required by applicable law.

 

Amsterdam, 20 August 2014

 

Board of Directors

 


 

Directors’ Statement of Responsibility

We confirm that to the best of our knowledge:

  • the condensed set of financial statements has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union;
  • the six-month period management report includes a fair review of the information required by:

(a)

DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b)

DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the entity during that period; and any changes in the related party transactions described in the last annual report that could do so.

 

 

The Board

 

The Board of Directors that served during all or part of the six-month period to 30 June 2014 and their respective responsibilities can be found on pages 68 to 73 of the 2013 Annual Report and Accounts of NWR (except of Jan Fabian, who resigned with effect from 31 December 2013 as described on page 73 of the 2013 Annual Report and Accounts of NWR).

On 24 February 2014, Kostyantin Zhevago, Non-Independent Non-Executive Director resigned from the Board.

With effect from 30 June 2014, Pavel Telička, Non-Independent Non-Executive Director resigned from the Board.

Approved by the Board and signed on its behalf by

 

 

 

Marek Jelínek

Executive Director and Chief Financial Officer

20 August 2014


Independent Review Report to New World Resources Plc

 

Introduction

 

We have been engaged by the company to review the condensed set of financial statements in the half yearly financial report for the six months ended 30 June 2014 which comprises the condensed consolidated income statement, condensed consolidated statement of comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of changes in equity, condensed consolidated statement of cash flows and the related explanatory notes on pages 9 to 24. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

 

This report is made solely to the company in accordance with the terms of our engagement to assist the company in meeting the requirements of the Disclosure and Transparency Rules ("the DTR") of the UK Financial Conduct Authority ("the UK FCA"). Our review has been undertaken so that we might state to the Company those matters we are required to state to it in this report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company for our review work, for this report, or for the conclusions we have reached.

 

 

Directors' responsibilities

 

The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the DTR of the UK FCA.

 

As disclosed on page 13, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the EU. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU.

 

Our responsibility

 

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

 

Scope of review

 

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity issued by the Auditing Practices Board for use in the UK. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

 

Conclusion

 

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2014 is not prepared, in all material respects, in accordance with IAS 34 as adopted by the EU and the DTR of the UK FSA.

 

 

Emphasis of matter – going concern

 

In forming our conclusion on the condensed set of interim financial statements, which is not modified, we have considered the adequacy of the disclosures made in note 3 to the condensed set of interim financial statements concerning the Group’s ability to continue as a going concern; in particular, the Directors highlight the risks to its liquidity should the planned Capital Restructure not complete by 31 October 2014 and arising from a deterioration in coal prices and/or other operating issues even if the Capital Restructure does complete. These conditions, along with other matters explained in note 3 to the condensed set of interim financial statements, indicate the existence of a material uncertainty which may cast significant doubt as to the Group’s ability to continue as a going concern. The condensed set of interim financial statements does not include the adjustments that would result if the Group were unable to continue as a going concern.

 

 


Jimmy Daboo for and on behalf of KPMG LLP

Chartered Accountants

15 Canada Square

London E14 5GL

 

20 August 2014

 



[1] Cash mining costs per tonne reflect the operating costs incurred in production of both coking and thermal coal. They are principally calculated by deducting from the segmental Cost of sales the Change in inventories and D&A, and then divided by total coal production. Further non-cash adjustments to Cost of sales may apply in the calculation.

[2]   Lost Time Injury Frequency Rate (‘LTIFR’) represents the number of reportable injuries in NWR’s operations causing at least three days of absence per million hours worked, including contractors.

[3]    Final realised prices can be influenced by a range of factors including, but not limited to, exchange rate fluctuations, quality mix, timing of the deliveries and flexible provisions in the individual agreements. Thus, the actual realised price for the period may differ from the average agreed prices previously announced. All the forward-looking price guidance for 2014 is based on an exchange rate of EUR/CZK of 27.00. Prices are expressed as a blended average between the different qualities of coal and are ex-works.

  • § [4] The underlying figure excludes the impact of the asset impairment charge in H1 2013.

[5] More detail and analysis are in the Operating and Financial Review further in this document.

[6] Cash mining costs per tonne reflect the operating costs incurred in production of both coking and thermal coal. They are principally calculated by deducting from the segmental Cost of sales the Change in inventories and D&A, and then divided by total coal production. Further non-cash adjustments to Cost of sales may apply in the calculation.

[7] Including OKK, which was sold on 6 December 2013.

[8] In H1 2014 approx. 46% of coking coal sales were mid-volatility hard coking coal, 46% were semi-soft coking coal and 8% were PCI coking coal.

[9] In H1 2014 approx. 87% of thermal coal sales were thermal coal and 13% middlings.

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