PRELIMINARY RESULTSYEAR ENDED 31 DECEMBER 2005

Operational Review and StrategyChief Executive – Gerry Spindler

3

Agenda

• Overview

• Deep mines performance

• Market for Coal

• Surface mines

• Property

• Power

• Financial Performance

• Strategy & Outlook

• Questions

4

Performance Overview

• Deep mines performance improved throughout H2

• Management action taking effect-Fewer face gaps-Increasing prices-Improved productivity

• Surface mines reflect existing planning-New permits granted for 1.25 millions tonnes

• Property developed-Improved rentals-Increased values of investment properties

• Harworth Power-First planning obtained for wind farm

5

Overview

£(3.8m)£(48.1m)£(12.4m)Cash (outflow) / inflow before financing

£48.0m£95.5m£(11.1)m*Debt excluding captive cash

£202m£256m£260mGross value of property before rehabilitation and restoration costs

£4.3m£15.0m£6.8mProperty disposals - proceeds

£1.30 per GJ£1.47 per GJ£1.42 per GJTotal unit production costs

12.0mt9.0mt5.0mtDeep mine output

2.0mt1.0mt0.5mtSurface mine output

14.2mt10.0mt5.2mtCoal sales from UK operations

£1.18 per GJ£1.35 per GJ£1.37 per GJAverage selling price

£(19.7m)

£(7.2m)

H2 05

£(10.1m)£(31.4m)Exceptional items

£(27.0m)£(21.9m)Operating loss from continuing operations before exceptional items

20042005

* Movement in H2

6

Tonnes per man shift have increased in the second half of the year to a point higher than in any of the last five years, providing a good platform for 2006

7

2005 Cost / GJDeep Mines

1.27

1.891.78

1.351.54 1.59

1.69

1.26

0.00

0.50

1.00

1.50

2.00

Q1 Q2 Q3 Q4

£ / G

J OngoingTotal

Cost per GJ reducing in final quarter

Q4 benefited from improved performance

8

2005 Tonnes ProducedDeep Mines

2,090

1,3571,610

2,4802,173

1,807 1,961

3,028

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Q1 Q2 Q3 Q4

Tonn

es '0

00

OngoingTotal

Higher output starting to reflect potential for future

Q4 tonnage includes 2 face changes

9

Market Dynamics

• Strong upward price pressure:-China and US increasing domestic consumption-World coal demand rising-Domestic coal demand increased to 52 million tonnes (2004: 50 million tonnes)-Decline In UK production has put pressure on port capacity and rail infrastructure favouring domestic product

-Increased imports all supplied from Russia (11 million tonnes) (watch future cost of production)

-UK Gas market tight8 North Sea unable to meet demand8 New risk of pipeline disruption8 LNG will be a high cost solution

• Last DTI survey forecast declining coal burn at expense of gas-Gas prices remain persistently high-New FGD to be fitted on coal stations (additional 4 GW)-Increasing energy consumption takes increased renewable capacity-Coal burn likely to remain around 50 million tonnes

10

UK Gas Market

• North Sea unable to meet UK demand

• Growing realisation that UK is now in a world market

• UK now has to complete for gas supply

• Significant risk of pipeline disruption-Ukraine / Georgia

• LNG now a global commodity and will go to the highest bidder

• Gas prices to UK domestic consumers have risen by 66% over last 3 years.

11

UK Generation Forecast

0

50

100

150

200

250

300

350

400

TWh

2004 2005 2006 2007 2008

CoalOilGasNuclearRenewables

Source:Dti Energy Trends - actual UK COAL forecast of energy mix

51mtce

52mtce

50mtce

51mtce

50mtce

12

Contracted ESI Sales, by Customer with Estimated Other Markets

0 2 4 6 8 10 12 14

2010

2009

2008

2007

2006

2005

Million tonnes per annum

ESI Firm Price

ESI Floating Price -between cap andcollar

Other MarketsEstimate

ESI includes sales to AlcanPrices indicated in 2006 money –actual price dependent on out-turn international prices

£1.52/GJ

£1.39/GJ

£1.44/GJ

£1.47/GJ

£1.55/GJ

Price for contracted tonnage (£/GJ)

(2006 money)

Remaining production sold at spot

£1.35/GJ

13Source: Verein der Kohlenimporteure

Main Seaborne Coal Flows 2004 (Million Tonnes)

Maritime trade: 685 MtIncl. 505 Mt steam coal

180 Mt coking coal Global hard coal production: 4.6 Bn t

14

Coal Imports into the UK

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

Australia Colombia Indonesia Poland Russia S. Africa USA Other Coking

Thou

sand

Ton

nes

2004 Steam2005 Steam2004 Coking2005 Coking

Source: Business Trade Systems

15

Surface Mining

• Production of 1.0 mt (2004: 2.0 mt).

• Progress made, planning approval achieved for Stony Heap and Stobswood North

• Remain optimistic in respect of further new sites

• Planning applications for 12 sites totalling 10.3 million tonnes will be in progress in 2006

• Restoration work completed to value of £10.2m, increasing property valuation

-4 sites completed 2 in progress

16

Property Overview

• Sufficient land bank and project flow to eliminate the need to invest in acquisition

• Objective of developing durable income -Restoration-Planning gains-Retaining and growing increased value

17

Property

• Operating profit (before revaluations) of £2.3m (2004: £1.8m)

• Profit on sale of assets £9.6m (2004: £2.8m)

• Development activities progressing well-Compaction and restoration works at Orgreave-Infrastructure works at development sites-New build, 20,000 sq ft building at Bilsthorpe, pre let being negotiating at Asfordby

• Rent roll continues to grow (£4.8m)(2004: £3.9m)-Lease at Cannock-Business Parks virtually full – new capacity being added-Reviews of farm tenancies

• Property value (including investment properties) increased to £274.2m (2004: £208.6m)

-Received new planning permissions on 140 acres in 2005

18

Project Pipeline

£50m to £60m 6 £7.5m to £10m 3£20m to £50m 5 £5m to £7.5m 2£10m to £20m 4 £2.5m to £5m 1

Valuation Bands

Description of property Location Valuation Band

Waverley (Orgreave) Decontaminated 600 acre surface mine. Coal production ended in 2005. Currently partially compacted and restored with completiondue in 2007. 250 acre development footprint. Master planning underway. Planning submitted for initial 55 acre Highfield Commercial development area.

Catcliffe, off the Sheffield Parkway, Junction 33 M1, Rotherham

6

Prince of Wales 300 acre former colliery site. Surface demolition completed. Master planning in progress. Rail line and siding adjoining site.

Off Junction 32 M62, Pontefract, West Yorkshire

4

Gascoigne Wood 160 acre rail connected former coal dispatch site with 8 miles of sidings and 100 acres subject to a planning application for re-use of 250,00 sq ft buildings. Sidings currently let, and site preparation underway.

Sherburn, Selby, North Yorkshire

3

Asfordby 70 acre rail connected former colliery converted to business park comprising 230,000 sq ft. Annual income £0.7 million plus service

Melton Mowbray, Leicestershire

3

Waverley AMP 130 acre decontaminated and compacted former surface mine with B1,B2,B8 consent. Joint Venture with Yorkshire Forward to createAdvanced Manufacturing Park. 5 plots already sold (23 acres sold in 2005). AMP land adjoins Waverley (Orgreave) site. 70 acres remaining.

Catcliffe, off the Sheffield Parkway, Junction 33 M1, Rotherham

4

19

Harworth Power

• Better methane capture, increased generation

• Operating profit1 £1.4m (2004: £1.3m)

• Income of £2.4m from UK Emissions Trading Scheme (2004: £3.0m) continues for a further year – replacement scheme being discussed

• Wind power potential starting to be realised

• Planning permission for 4.5 MWe wind farm at Royal Oak construction to commence in 2006

• Further 8 wind farms for 80 MWe in progress

• Business well placed to exploit available network access & surplus sites to generate further green energy

1 operating profit excludes purchase of methane from deep mines and income from emissions trading scheme

Financial ResultsFinance Director – Chris Mawe

21

Summary Performance 2005

H1 Q3 Q4 H2 Year£'000 £'000 £'000 £'000 £'000

Deep Mines (29,808) (17,579) 957 (16,622) (46,430)Surface Mines 1,406 868 1,073 1,941 3,347Property (inc revaluation surplus/deficit) 10,363 397 5,658 6,055 16,418Harworth power (inc UKETS credits) 1,993 531 838 1,369 3,362Other businesses 1,316 (7) 73 66 1,382

Operating Profit/(loss) (14,730) (15,790) 8,599 (7,191) (21,921)

Investment aid 8,102 6,539 14,641

Operating loss after Investment aid (6,628) (652) (7,280)

Exceptional items within cost of sales (22,676) (26,477) (49,153)Profit on disposal of business 2,918 182 3,100

Loss before interest (26,386) (26,947) (53,333)

Interest (4,127) (4,634) (8,761)

Loss before tax (30,513) (31,581) (62,094)

22

Segmental Profit/(Loss)Year ended 31 December 2005Exceptional items reflect one off costs at four collieries

Deep Mines (46.4) (39.2)Surface Mines 3.3 4.1Property activities 16.4 4.6Power 3.4 4.2Other businesses 1.4 (0.7)Loss before interest & exceptional items (21.9) (27.0)

Exceptional items (49.1) (19.0)Investment aid 14.6 8.9Profit on sale of businesses 3.1 10.3Discontinued businesses - (1.6) Operating loss (53.3) (28.4)

Net interest (8.8) (5.1)

Loss before taxation (62.1) (33.5)

Final dividend per share nil 1p

2005 2004£m £m

23

Exceptional ItemsOne off costs incurred at four collieries

Stores Asset Closurestock impairment cost Redundancy Other Total£000 £000 £000 £000 £000 £000

Harworth (1,685) (967) (8,913) (11,565) Rossington (933) (5,634) (3,331) (4,843) (14,741) Kellingley (7,708) (7,708) Ellington (14) (5,635) (3,077) (8,726) Other (2,064) 249 (6,924) 4,830 (3,909)

Total Deep Mines (4,696) (6,601) (5,386) (22,245) (7,721) (46,649)

Surface mines (500) (2,004) (2,504)

Total (4,696) (7,101) (5,386) (24,249) (7,721) (49,153)

24

Cash Flowyear ended 31 December

2005 2004£000 £000

Operating cash flow before exceptional items 4,199 5,235

Exceptional items -42,186 -10,261

Operating cash flow -37,987 -5,026

Decrease in stocks 2,004 10,828Working capital -197 2,238

Net interest and financing -3,490 599Tax -71 0Net receipt from insurance and security funds 3,075 3,675Disposal of businesses 8,844 38,571

Proceeds from disposals of property, plant and equipment 15,861 6,382Capital expenditure -18,688 -51,370 Development expenditure -7,290 -2,173 Restoration expenditure -10,176 -7,491

Cash flow before financing -48,115 -3,767

2004 Borrowings -48,331 Movement from activities -48,115 Dividends -1,483 Other financing movements 1,3882005 Borrowings -96,541

25

Balance Sheet

Non current assets 344.5 369.1Stocks 42.2 47.6Debtors 63.0 62.4Cash (less bonded cash) 1.0 0.3

Total Assets 450.7 479.4Creditors 201.2 155.1Provision for liabilities (less bonded cash) 121.9 130.4Pension liabilities 142.3 137.1

Net Assets (14.7) 56.8

Equity shareholders’ funds (14.7) 56.8

31 Dec 2005 31 Dec 2004 £m £m

26

Independent Property Valuation

Total exc. investment properties

Land Category

Business Parks

Development PropertiesCommercial with PlanningOther Projects

Agricultural

Investment Properties

Total

Dec-04£'000

17,410

34,00491,406

59,086

201,906

6,720

208,626

Dec-05*£'000

19,210

30,060114,993

92,157

256,419

17,750

274,169

* Based on June valuation

27

Pensions (defined benefit schemes)Good asset returns – lower bond yields – increased liabilities

2005 2004

£m £m

Charge to profit & loss 12.6 13.3

Contributions paid 19.3 16.9

Opening deficit 113.2 102.7

Increase/(decrease) 3.5 10.5

Closing deficit 116.7 113.2

• Gains from better than forecast returns on scheme assets offset by increased liabilities due to lower bond yields

28

Pensions – assets & Liabilities

Main assumptions:

• Discount rate - 4.7%

• Rate of return on investments - 7.0%

• Rate of salary increases - 2.7%

• Rate of price inflation – 2.7%

• Rate of return on equities – 7.0%

UK Coal - IW Schemes - Assets and liabilities on IAS19 basis

0

50

100

150

200

250

300

350

400

450

Dec 03 Mar 04 Jun 04 Sep 04 Dec 04 Mar 05 Jun 05 Sep 05 Dec 05

£m

1.50%

1.70%

1.90%

2.10%

2.30%

2.50%

2.70%

Assets Liabilities Net liability Real discount rate

29

Strategy & Outlook

• Actions in 2005 have positioned business to recover

• Develop deep mines-Drive productivity-Advance market negotiations-Extend mine lives by securing appropriate support & contractual terms

• Secure surface mine planning & exploit reserve base-Manage costs-Perform value added restoration & clean up

• Make strongest possible case for coal in Energy Review

30

Strategy & Outlook – Pricing Opportunities

1.00

1.10

1.20

1.30

1.40

1.50

1.60

1.70

1.80

1.90

2.00

2.10

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

£/G

J

ARA

UKCOAL

31

Strategy & Outlook

• Develop Harworth Power’s opportunities-Methane as core, supported by emissions trading credits-Develop wind-Explore further opportunities

• Maximise property value – self funding from disposals and rental income

-Value added restoration & site clean up-Planning gains-Development & investment in key sites-Disposals where appropriate to support investment, after maximumvalue realised

-Manage for durable cash flow growth

PRELIMINARY RESULTSYEAR ENDED 31 DECEMBER 2005