Barnstorming results yesterday underlined that the slow train to nowhere that was UK Coal has been reborn as a fancy new express.
Since November last year a fire has been lit under the shares of this one-time wet weekend. Yesterday they closed down a bit, finishing at 549.5p, 14p lower than Tuesday's close.
But that was largely due to a bit of judicious profit-taking among investors who already knew most of the details of what would be in yesterday's interim results thanks to an exceptionally detailed trading statement in July.
That meant that yesterday's 143 per cent increase in pre-tax profits to £40.6m was not a surprise. To put it in perspective, the shares were worth only 150p in March 2006.
The outside observer might look at this and weep, thinking the company's astonishing resurgence has something to do with the way this most environmentally unfriendly of fossil fuels is suddenly very much in demand.
Dirty, coal-fired power stations are being fired up at an alarming rate in India, China and even the US.
But the blaze under UK Coal's shares does not have all that much to do with the black stuff.
That is because while UK Coal was once a miner which did a bit of property development, the reverse is now true. Yesterday's figures underlined that. The company's property business – some 71 projects spread over 3,326 acres – made £54m against £19.9m in the first half of 2006.
The responsibility for the change in emphasis lies with the chairman David Jones and outgoing chief executive Gerry Spindler.
The latter joined the company as a non-executive director in October 2001 having had a long career in the US coal industry. He was made chief executive three years later after the board, under the chairmanship of Mr Jones, a the former boss of National Grid, decided it was time to reassess strategy.
Mr Spindler's medicine for the coal side of the business will not be unfamiliar to observers of the industry. He opted to de-risk the business by closing or selling pits regarded as uneconomic, focusing the business on four core deep mines, at Daw Mill, Kellingley, Thoresby and Welbec, in addition to four surface mining operations.
At the same time, however, he wanted to make more of the company's substantial property assets and hired Jon Lloyd, a former property portfolio manager with Yorkshire Water and HBOS. The latter has now become Mr Spindler's replacement. Charles Kermot, the respected mining analyst at the stockbroker Seymour Pierce, explained: "Gerry Spindler worked very hard to turn the business around and while doing that, recognised the value of the property portfolio. He brought in Lloyd about a year ago to look at the potential for the property portfolio and develop a strategy to realise that potential. The company is now very much a property development group with a few coal mines attached, so it was right and proper that Lloyd should become the chief executive."
UK Coal's property arm redevelops its old sites, turning them into business parks and, crucially, residential areas. Its current land portfolio is valued at around £400m but the company believes that after achieving the necessary approvals for change of use from the planning authorities, it should be worth £900m by 2012.
And that is just the land itself, before any profits are realised from its redevelopment.
The market woke up to the gold mine hidden within these old coal mines when the company put out a stock exchange announcement last November accompanied by roadshows. These served to spark a sharp rise in its shares.
Mr Kermot said that in the past property development was always seen as secondary to the coal mining business, with the property operations usually under the ultimate control of coal mining people.
The appointment of Mr Lloyd changed that, and his elevation to chief executive looks set to make that change permanent. Some would even go so far as to say that the coal mining might as well be ditched.
The finance director Chris Mawe, who yesterday announced his plans to step down from the board on 17 September, denies this will happen. "We are a property company and a coal company and we don't single out one or the other as more important," he says."
To be fair, the coal side of the business is itself recovering. In the first half, deep mining losses ballooned to £15.3m from just £900,000. But in the last few months, the deep mining business has returned to profit, including the company's biggest mine, Daw Mill in Warwickshire.
It suffered a fatal accident in January and a three-month closure this year cost the company £20m – accounting for the losses. But the other deep mines have performed well and the supply contracts that the company got locked into at the bottom of the market are gradually unwinding, meaning that UK Coal will further benefit from the rise in global prices sparked in part by what is happening in China.
Total coal output in the UK fell to 18.5 million metric tonnes in 2006 from 53 million in 1995, while employment in deep mines fell to 4,000 from 12,000.
However, coal still provides a substantial amount of the UK's electricity, and most of it is imported.
The debate about coal is likely to rage for some time but to ensure a secure supply it has been recognised that a UK industry is a neccessity and so UK Coal is likely to find planning approval for future surface projects easier to achieve.
As Mr Kermot points out, it is either that, or the lights go out.
Rise and fall of an industry
1700s – The Industrial Rev-olution begins and starts the shift away from small-scale surface mining to large-scale deep shaft mining. Coal now becomes the main source of primary energy in industry and transportation.
1842 – First attempt at a trade union by the miners in the guise of the Miners' Association of Great Britain and Ireland.
1913 – A total of 436 men and boys killed in an explosion at the Senghenydd mine in South Wales – the worst disaster in British coal mining history.
1926 – UK General Strike takes place due to colliers' concerns over their working conditions and pay, along with calls for the nationalisation of the coal mines. But the strike doesn't last.
1947 – The coal industry passes into Government control as the industry is nationalised.
1972 – Miners strike over pay. Strikes using flying pickets follow throughout the 1970s over pay and working hours, bringing coal production to a standstill and causing power cuts. By the end of this period, miners have became the highest paid industrial workers in the country. Edward Heath's Tory Government falls as a result of the 1972 stoppage.
1982 – Arthur Scargill becomes head of the National Union of Mineworkers.
1984-85 – Miners strike led by Scargill leads to widespread disturbances. The violence fails to stop the Government's plans to shrink the industry, heralding the rapid decline of the UK's coal industry.
1990s – The rump of British Coal is privatised with the sell-off of a large number of pits to the private sector, including RJB Mining – now known as UKCoal – which bought the core mining activities of British Coal for £815m.
2006 – After several years of turmoil, UK Coal shows the benefit of a change in strategy – its concentration on property development – sparking a sharp rise in its shares.
Louise DransfieldReuse content