Buoyant RJB plans pounds 100m buy-back
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Industrial Correspondent
RJB Mining, the company that bought almost the entire English coalfields from the Government, said yesterday it would seek permission for a pounds 100m share buy-back and added that it would repay the remainder of its acquisition debt by the end of April.
However, the company also warned that its new Asfordby colliery was still plagued by geological problems and that its future was in doubt.
RJB said operating conditions there were "extremely difficult" and that its viability would be assessed within the next six to nine months.
The uncertainty over the pit was the one black spot in a performance that impressed the City. Richard Budge, founder and chief executive, said RJB would ask shareholders for authority to buy back and cancel up to 10 per cent of the shares.
"Strong cash generation will enable the group to repay the remainder of the bank acquisition debt by the end of April 1996 and, therefore, we have been able to deliver greater value to shareholders than projected at the time of the English Coal acquisition," he said.
Mr Budge was speaking as RJB announced a jump in 1995 pre-tax profits to pounds 173m from pounds 16m the previous year, reflecting the full benefit of acquiring the former British Coal mines. Earnings per share soared by 157 per cent to 67.7p and the dividend in the year increased by 28 per cent to 16p.
Gordon McPhie, finance director, said on-going strong cash generation and a high level of dividend cover would allow substantial increases in dividend in the next three years.
"Our dividend cover is still high at 4.2 times compared to an average of around two times. Our intention is to progressively increase the dividend so that around two times' cover is achieved by 1998 or 1999. There is plenty to come."
RJB repaid pounds 313m of debt during the year, leaving pounds 55m outstanding and net gearing of 49 per cent. The company invested pounds 55m in plant and equipment over the 12 months in addition to pounds 300m on mining development. RJB also announced a payment of pounds 500 in shares to each of its employees through the company's Sharesave Trust.
One City analyst said: "The company has done extremely well, outstripping forecasts in the December 1994 prospectus, but the big question is still what happens in 1998 when its contracts with the generators mature." RJB's main customers are National Power and PowerGen. Their contracts with British Coal passed to the company along with the coalfields and are due to expire in 1998.
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