New World Resources : FY 2014 Unaudited Results

New World Resources Plc Operating and Financial Review
for the year ended 31 December 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% (18% on a constant currency basis), from EUR 850 million in 2013 to EUR 676 million in 2014. This is mainly attributable to lower sales volumes of thermal coal; and to lower realised prices of coking coal.

Cost of sales. Cost of sales decreased from EUR 844 million to EUR 616 million or by 27% (23% on a constant currency basis) in 2014 compared to 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 the finalisation of the Collective Bargaining Agreement in November 2013 which led to lower personnel benefit allowances and accordingly, in lower personnel expenses.

Cost of sales are further positively affected by a EUR 77 million year on year inventory impact following the build-up of inventories in 2014 compared to the reduction in inventories in 2013.

Selling expenses. Selling expenses decreased from EUR 86 million to EUR 64 million or by 26% (24% on a constant currency basis) in 2014, attributable mainly to lower sales volumes and the Group's ability to negotiate lower transport prices.

Administrative expenses. Administrative expenses decreased from EUR 79 million to EUR 71 million or by 10% (5% on a constant currency basis) mainly due to reduction in administrative headcount resulting in lower personnel expenses and due to savings on advisory services (advisory costs associated with the Capital Restructuring are described below).   

EBITDA. 2014 saw a positiveEBITDA from continuing operations of EUR 11 million, an increase of EUR 21 million compared to negative EBITDA of EUR 10 million recorded in 2013, attributable mainly to the decrease in operating expenses that outweighed the decrease in revenues.

Impairment loss on property, plant and equipment. The continuing challenging market environment, a further decrease in long term forecasted coking and thermal coal prices and an updated long term mine plan resulted in the Group undertaking an impairment review of its cash generating units and subsequently recognised an impairment charge of EUR 183 million to reflect non-current assets' recoverable value. The impairment review was carried out as at 31 December 2014. This compares to the impairment charge taken at 31 December 2013 of EUR 807 million.

Capital Restructuring. The Group completed the Capital Restructuring on 7 October 2014 by raising additional capital and reducing long-term debt (as described in note 3 and 7), resulting in a gain being recognised of EUR 342 million, net of the costs incurred of EUR 45 million (of which EUR 8 million are directly attributable to the equity component of the transaction and reflected directly in equity).

Underlying loss. The reported loss from continuing operations is EUR 21 million, compared to the loss of EUR 914 million in 2013. Excluding the impact of impairment charges and capital restructuring, the Group would recognise a loss of EUR 181 million in 2014 (loss of EUR 230 million in 2013).

3.     Basis of Presentation

The consolidated financial statements (the 'financial statements') presented in this document are prepared:

• for the year ended 31 December 2014, with the year ended 31 December 2013 as the comparative period; and
• 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 below).

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. Full annual financial statements as at and for the year ended 31 December 2014 which will be contained within the 2014 Annual Report and Accounts are planned to be issued on 19 March 2015.

The financial statements set out above do not constitute the Company's statutory accounts for the years ended 31 December 2014 and 2013. The financial statements for 2013 are derived from the statutory accounts for 2013, which have been delivered to the registrar of companies. The auditor has reported on the 2013 accounts; their report was (i) unqualified, (ii) did include a reference to an emphasis of matter in relation to the ability of the Group to continue as a going concern without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The statutory accounts for 2014 will be finalised on the basis of the financial statements presented by the Directors in this preliminary announcement, and will be delivered to the registrar of companies in due course. The potential effects on the auditors' report is described under 'Going concern basis of accounting' below.

Going concern basis of accounting

The Group manages its liquidity through cash (EUR 128 million (31 December 2013: EUR 184 million)) and receivable financing. The new senior secured notes and the new convertible notes have features which would result in interest being able to be paid in kind rather than in cash in certain circumstances.  

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 160 million at 31 December 2014.

The prolonged global pressure on both coking and thermal coal prices, the expiry of the Group's RCF credit line and a 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 this review, the Group commenced the Capital Restructuring announced on 6 June 2014 which included a rights issue and placing of shares in the Company as well as the financial, debt and corporate restructuring of the Group.

The Capital Restructuring was completed on 7 October 2014, raising EUR 185 million of new money by way of a EUR 150 million rights issue and placing and by certain noteholders providing a EUR 35 million new Super Senior Credit Facility. The Group repurchased all the existing notes for a mixture of cash and new debt, comprising (i) cash consideration of EUR 90 million (ii) new senior secured notes with a face amount of EUR 300 million (iii) new convertible notes with a face amount of EUR 150 million, and (iv) new contingent value rights with a face amount of EUR 35 million. 

Subsequently, the Export Credit Agency ('ECA') facility lenders have provided their consent to amend the EUR 49 million ECA Facility, including amending the repayment profile and waiving breaches of the terms of that agreement as at 30 September 2014, caused by, the Group having moved its Centre of Main Interest to England and having commenced negotiations with its creditors as part of the Capital Restructuring without consent having been obtained by the ECA Facility lenders that time.

Based on the current projections, the Directors consider that the Group has sufficient cash available to meet its funding requirements for at least the next 12 months following the date of this report.

There is a risk that the cash available to the Group is not sufficient for funding requirements over this period. In particular, in the event of unexpected production or other operating issues, or further deterioration in coal prices (although coal prices are fixed for most of the Group's anticipated 2015 sales, the Group is exposed to prices on approximately 25% of its coking coal sales in 2015 and to all sales in 2016), the Group could run out of cash in Q4 2015. The EUR 35 million Super Senior Credit Facility, which is fully drawn, requires the Group to maintain a minimum cash balance of EUR 40 million and this is first tested as at 31 October 2015.  Although the Group's projections indicate that it would have more than this minimum cash balance, the excess over this amount is limited and the Group would have very little flexibility to manage the position. If this were to occur, 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. In those circumstances, if it were able to, the Group would most likely repay any amount outstanding under the Super Senior Credit Facility prior to 31 October 2015 which would result in a minimal amount of cash being available.

In the event that it becomes likely that there will be a shortfall in available cash, the Group proposes to seek alternative sources of liquidity, which could include the sale of the assets of OKD and NWR Karbonia, or raising additional debt (to the extent permitted by the New Senior Notes Indenture, the Super Senior Credit Facility and the ECA Facility) or equity or, if no viable alternative solutions are then available, attempting to sell OKD and NWR Karbonia thus effectively liquidating the Group's assets. 

The Directors recognise that these circumstances represent a material uncertainty that may cast significant doubt as to the Group's and the Company's ability to continue as a going concern and that they may be unable to realise all of their assets and discharge all of their liabilities in the normal course of business.  Nevertheless, the Directors expect 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 do not include the adjustments that would result if the Group and the Company were unable to continue as a going concern.

We anticipate issuing our audited Annual Report in late March 2015. In the event that the status of these matters have changed by then we will update the above disclosures and the auditors' report will take account of these amendments. On the assumption that the position does not change substantially, the auditors' report is expected to include an Emphasis of Matter paragraph drawing attention to the material uncertainty regarding the Group's and Company's ability to continue as a going concern.

1. Significant Accounting Policies

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.  

The effect of Capital Restructuring on accounting policies is described in more detail in note 7 under Capital Restructuring. The Group has elected to account for the call option feature of the New Senior Secured Notes, the New Convertible Notes and the Contingent Value Rights at fair value with any changes in fair value being reflected in profit or loss as part of net finance costs.

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)
• Amendment to IAS 36 Impairment of Assets on recoverable amount disclosures (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 Interests in 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. Other standards, amendments and interpretations which are effective for the financial year beginning on 1 January 2014 have similarly no impact on the consolidated financial statements.

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, capital restructuring impact, depreciation and amortisation, impairment of property, plant and equipment ('PPE') and gains/losses from the sale of PPE;
• Underlying profit/(loss) as profit/(loss) before material one off impacts (for example impairment of PPE or capital restructuring).  

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)	2014	2013	y/y %
Average exchange rate	27.536	25.980	6%
End of year exchange rate	27.735	27.427	1%

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 excluding the estimated effect of currency translation differences, by using constant foreign exchange rates (constant currency basis), marked 'ex-FX'. 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 60% of total revenues in 2014, whilst the sale of thermal coal accounted for 28% of total revenues.

(EUR thousand)	2014	2013	y-y	y/y %	ex-FX
External coking coal sales (EXW)*	406,438	454,701	(48,263)	(11%)	(7%)
External thermal coal sales (EXW)*	192,589	283,720	(91,131)	(32%)	(30%)
Coal transport	47,326	71,791	(24,465)	(34%)	(32%)
Sale of coal by-products	17,949	19,592	(1,643)	(8%)	(3%)
Other revenues	12,079	20,652	(8,573)	(42%)	(38%)
Total revenues	676,381	850,456	(174,075)	(20%)	(18%)

*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 isolate 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 and lower realised prices of coking coal (see below). 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)	2014	2013	y-y	y/y %	ex-FX
Coking coal (EXW)	85	98	(13)	(13%)	(10%)
Thermal coal (EXW)	54	56	(2)	(4%)	0%

The majority of both coking coal and thermal coal sales are priced on a calendar year basis commencing from 2015, while in 2014 the Group's coking coal sales were priced on a quarterly basis.

Total production of coal in 2014 decreased by 2% compared to 2013. Coal volumes sold were lower by 14% mainly as a result of lower thermal coal sales, principally relating to the sell down of significant inventory level during 2013 that were held as at the end of 2012. Coal inventories increased by 288kt in 2014 compared to a decrease of 907kt in 2013.

Coal performance indicators (kt)	2014	2013	y-y	y/y %
Coal production	8,601	8,800	(199)	(2%)
External coal sales	8,315	9,709	(1,394)	(14%)
Coking coal	4,768	4,630	138	3%
Thermal coal	3,547	5,079	(1,532)	(30%)
Period end inventory*	668	380	288	76%

* 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)	2014	2013	y-y	y/y %	ex-FX
Consumption of material and energy	200,995	254,828	(53,833)	(21%)	(17%)
of which : mining material and spare parts	122,581	146,028	(23,447)	(16%)	(13%)
: energy consumption	66,557	96,897	(30,340)	(31%)	(27%)
Service expenses	142,105	149,225	(7,120)	(5%)	1%
of which : contractors	72,428	74,194	(1,766)	(2%)	3%
: maintenance	31,048	30,897	151	0%	5%
Personnel expenses	206,339	233,264	(26,925)	(12%)	(6%)
Depreciation and amortisation	79,753	141,741	(61,988)	(44%)	(40%)
Net gain from material sold	(3,214)	(4,433)	1,219	(27%)	(23%)
Change in inventories of finished goods and work in progress	(18,382)	58,570	(76,952)	-	-
Other operating expenses, net	8,861	10,662	(1,801)	(17%)	(12%)
Total cost of sales	616,457	843,857	(227,400)	(27%)	(23%)
Excluding the change in inventories impact	634,839	785,287	(150,448)	(19%)	(15%)

Excluding the EUR 77 million year on year impact in change in inventories driven by the Group producing on stock, cost of sales decreased by EUR 150 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
• reduction in headcount by 9% combined with the finalisation of the Collective Bargaining Agreement in November 2013 which led to lower personnel benefit allowances and accordingly, in lower personnel expenses.

Selling Expenses

(EUR thousand)	2014	2013	y-y	y/y %	ex-FX
Transport costs	45,030	70,857	(25,827)	(36%)	(35%)
Personnel expenses	2,802	3,379	(577)	(17%)	(13%)
Allowance for inventories on stock	5,517	711	4,806	676%	722%
Other expenses	10,237	11,550	(1,313)	(11%)	(6%)
Total selling expenses	63,586	86,497	(22,911)	(26%)	(24%)

Lower sales volumes together with the Group's ability to negotiate lower transport charges resulted in a reduction in transport costs by 36%, with a similar decrease in transport revenues, with no material impact on profitability. Higher volumes of low quality thermal coal on stock together with lower thermal coal prices resulted in recognition of higher allowance for inventories compared to 2013.

Administrative Expenses

(EUR thousand)	2014	2013	y-y	y/y %	ex-FX
Personnel expenses	42,033	45,143	(3,110)	(7%)	(2%)
Service expenses	15,048	19,036	(3,988)	(21%)	(17%)
Other expenses	13,919	14,362	(443)	(3%)	2%
Total administrative expenses	71,000	78,541	(7,541)	(10%)	(5%)

Administrative expenses decreased by 10% mainly due to reduction in administrative headcount resulting in lower personnel expenses and due to savings on advisory services.  

Total Personnel Expenses and Headcount

(EUR thousand)	2014	2013	y-y	y/y %	ex-FX
Personnel expenses	264,429	319,291	(54,862)	(17%)	(12%)
Employee benefit provision	(11,890)	(36,874)	24,984	(68%)	(66%)
Share-based payments	(263)	590	(853)	-	-
Total personnel expenses	252,276	283,007	(30,731)	(11%)	(6%)

Total personnel expenses have reduced principally through lower headcount (see below) and lower holiday and Christmas allowances based on the new Collective Bargaining Agreement signed in November 2013.

	2014	2013	y-y	y/y %
Employees headcount (average)	11,488	12,606	(1,118)	(9%)
Contractors headcount (average)	3,169	3,130	39	1%
Total headcount (average)	14,657	15,736	(1,079)	(7%)

EBITDA

(EUR thousand)	2014	2013	y-y	y/y %	ex-FX
EBITDA from continuing operations	10,651	(10,062)	20,713	-	-

The Group's EBITDA from continuing operations increased by EUR 21 million compared to 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 loss after tax.

(EUR thousand)	2014	2013
Loss after tax from continuing operations	(21,084)	(914,358)
Income tax	46,319	(146,438)
Net finance expense	59,511	88,246
Capital restructuring	(342,253)	-
Depreciation and amortisation	85,258	148,149
Impairment loss on property, plant and equipment	182,642	806,964
Loss from sale of PPE	258	7,375
EBITDA from continuing operations	10,651	(10,062)

Impairment Loss

Due to reduced price expectations for the Group's products, the Group undertook a re-assessment of the mine plan for future operations, which accordingly led to a re-assessment of the recoverable amount  of its cash generating units ('CGUs') as at 31 December 2014. As a result, an impairment loss of EUR 183 million (2013: EUR 807 million) has been recognised.

The recoverable amount of the CGUs was based on value in use. Value in use was determined by discounting the future cash flows expected to be generated from the continuing use of the CGUs. Value in use as at 31 December 2014 was based on the following key assumptions:

• cash flows were forecasted based on past experience, actual operating results, approved budget and long term business plan. Future cash flows were extrapolated using declining growth rates (reflecting decreasing production towards the end of the life of the mines);
• revenue was forecasted based on agreed prices for the year 2015. The anticipated annual revenue movement included in the cash flow projections ranged from 0% to 18% for the years 2016 to 2019 and are based on the average of a range of publically available data (market consensus);
• a post-tax discount rate of 12.60% (2013: 11.73%) was applied in determining the recoverable amount. The discount rate was estimated based on an industry average weighted-average cost of capital adjusted for the specific risks related to the Group; and
• cash mining unit costs anticipated of EUR 64 per tonne in 2015 and subsequent periods.

The impairment charges are particularly sensitive to the discount rate applied, the forecast sales prices of the Group's products and the operating expenses. Holding all other parameters constant a 1.50% increase in the discount rate would give rise to an additional impairment loss of EUR 21 million (2013: EUR 38 million); a 2.50% increase in the discount rate would give rise to an additional impairment loss of EUR 34 million (2013: EUR 61 million); a 5% reduction in sales prices would give rise to an additional impairment loss of EUR 95 million (2013: EUR 144 million) and a EUR 5 per tonne increase on operating expenses would give rise to an additional impairment loss of EUR 110 million (2013: EUR 164 million).

Finance Income and Expenses

(EUR thousand)	2014	2013	y-y	y/y %
Finance income	(7,987)	(25,420)	17,433	(69%)
Finance expenses	67,498	113,666	(46,168)	(41%)
Net finance expense	59,511	88,246	(28,735)	(33%)

A decrease in net finance expense of EUR 29 million in 2014 compared to 2013 is mainly attributable to the decrease of EUR 16 million in realised and unrealised FX losses recognised in comparative period (zero in 2014) and to EUR 8 million loss recognised in the comparative period due to the repayment of the Senior Notes due 2015, consisting of the write off of unamortised transaction costs (EUR 4 million) and the cost of early redemption (EUR 4 million).

Capital Restructuring

The Group completed the Capital Restructuring on 7 October 2014, raising EUR 185 million of new money by way of a EUR 150 million Rights Issue and Placing and by certain noteholders providing a EUR 35 million new Super Senior Credit Facility. The Group repurchased 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. The contractual terms of these financial instruments is explained further in note 14.

Equity component

The Company issued in total 6,394,436,852 new A shares through the Rights Issue and Placing by which it raised EUR 150 million, of which EUR 90 million was used to repurchase the Existing Notes (see below). The net proceeds by the Group are EUR 142 million (EUR 150 million gross proceeds less direct issue costs of EUR 8 million).

Debt component

The exchange of the Existing Notes for a mixture of cash and newly issued instruments has been accounted for as an extinguishment of the Existing Notes and the recognition of the new instruments issued as the terms of the newly issued instruments are substantially different from the Existing Notes. The gain of EUR 342 million (net of EUR 37 million of costs incurred and recognised directly into profit or loss) represent the difference between the carrying amount of the Existing Notes (including accumulated accrued interest) immediately prior to extinguishment and the fair value of the new instruments issued.

(EUR thousand)	Existing Senior Secured Notes	Existing Senior Unsecured Notes	Total
De-recognition of Existing Notes:
Nominal value	(500,000)	(275,000)	(775,000)
Unamortised transaction costs	8,512	3,622	12,134
Accrued interest	(17,063)	(15,761)	(32,824)
(795,690)
Fair value of exchange consideration:
Cash paid to Existing Note holders	60,000	30,000	90,000
New Senior Secured Notes*	248,299	-	248,299
New Convertible Notes	54,194	16,494	70,688
Contingent Value Rights	-	7,207	7,207
* including embedded derivative	416,194
Transaction costs	37,243
Total gain recognised	342,253

The total fair value of the New Senior Secured Notes (nominal EUR 300 million) and the New Convertible Notes (nominal EUR 150 million) has been estimated based on the market value of the new notes as at 7 October 2014, the effective date of the Capital Restructuring or early thereafter.

The fair value of the Contingent Value Rights (tranche one with a nominal value of EUR 20 million and tranche two with a nominal value of EUR 15 million) has been estimated based on the forward commodity curves for coking coal using Monte Carlo simulations and the pricing thresholds for the Group's reported average realised price in Euro per tonne for coking coal, which must be exceeded for two consecutive quarters in order for funds to be paid out in respect of the Contingent Value Rights.

Categories of newly issued financial instruments

The Group, on completion of the Capital Restructuring, designated the new financial instruments as follows:

New financial instruments	Category
New Senior Secured Notes	Financial liability held at amortised cost
Call option under New Senior Secured Notes (embedded derivative)	Financial asset held at fair value through profit or loss
New Convertible Notes	Financial liability held at fair value through profit or loss
Contingent Value Rights (derivative)	Financial liability held at fair value through profit or loss

On 30 July, the Group 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 and the defined terms used above have the meaning given in the prospectus.

Profit from Continuing Operations before Tax

The profit before tax in 2014 was EUR 25 million compared to a loss of EUR 1,061 million in 2013.

Income Tax

The Group recorded a net income tax expense of EUR 46 million in 2014, compared to a net income tax benefit of EUR 146 million in 2013.

During the year the Group updated its assessment of its ability to utilise tax losses based on medium term projections and concluded that it was not probable that these losses would be able to be recovered within the period for utilising such losses. As a result, the associated deferred tax asset recognised as at 31 December 2013 has been derecognised.

Loss from Continuing Operations

The Group recognised a loss from continuing operations of EUR 21 million in 2014 compared to the loss of EUR 914 million in 2013.

1. Earnings / (Loss) per Share

The calculation of earnings/(loss) per share was based on profit/(loss) attributable to the shareholders of the Company and a weighted average number of shares outstanding during the year ended 31 December:

(EUR thousand)	2014	2013
	Total	Continuing operations	Discontinued operations	Total
Loss for the year	(21,084)	(914,358)	(55,913)	(970,271)
Loss attributable to A shares	(24,463)	(911,363)	(47,294)	(958,657)
Profit / (loss) attributable to B shares	3,304	(9,546)	-	(9,546)
Eliminations between Mining and Real Estate divisions	75	6,551	(8,619)	(2,068)

	2014	2013 (adjusted)*
Weighted average number of A shares (basic)	2,246,642,534	805,045,854
Weighted average number of A shares (diluted)	2,249,155,832	805,909,085
Weighted average number of B shares (basic)	10,000	10,000
Weighted average number of B shares (diluted)	10,000	10,000

*On 7 October 2014, the Company completed a EUR 150 million capital increase via a 1:19 fully underwritten rights issue and a placing. The number of ordinary A shares issued under the Rights Issue was 5,030,100,717. The current and prior period basic and diluted earnings per share have been adjusted by the bonus element associated with the Rights Issue.

During the period ended 30 September 2014, the Company undertook a sub-division of its share capital, whereby, one A share with nominal value of EUR 0.40 was subdivided into one A share with nominal value of EUR 0.0004 and 999 D shares with nominal value of EUR 0.0004 per share. Altogether the Company issued 264,477,400,857 D shares. These have no rights to dividends and there is no impact on the EPS calculation as a result of the issuance of the D shares.

1. Cash Flow

(EUR thousand)	2014	2013
Net cash flows from operating activities	(56,293)	(35,894)
Net cash flows from investing activities	(51,276)	(18,057)
Net cash flows from financing activities	52,219	(20,135)
Net effect of currency translation	(280)	(9,260)
Total decrease in cash	(55,630)	(83,346)

Cash Flow from Operating Activities

Cash outflows arising from operating activities, after working capital changes and before interest and tax in 2014 were EUR 23 million, reflecting amongst others the fact the Group was producing on stock; and represents a EUR 48 million decrease compared to cash inflows of EUR 25 million in 2013. The comparative period was affected by material sell down of low quality thermal coal inventories.

Cash Flow from Investing Activities

Capital expenditures amounted to EUR 60 million in 2014, a decrease of EUR 49 million when compared to EUR 109 million spent in 2013 (of which EUR 9 million spent in coke segment in 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 the Coke segment in December 2013 (the Coke segment was sold for EUR 95 million with EUR 7 million paid into an 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 outcome of Capital Restructuring, through which the Group raised EUR 185 million of new money by way of a EUR 150 million Rights Issue and Placing and by certain noteholders providing a EUR 35 million new Super Senior Credit Facility; of which EUR 90 million was used to repurchase the Existing Notes. The Group incurred EUR 43 million on costs related to Capital Restructuring.

Cash flow from financing activities in the comparative period was influenced by the 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 included a scheduled repayment of an instalment of the ECA Facility of EUR 28 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 31 December 2014, the Group held cash and cash equivalents of EUR 128 million and had indebtedness of EUR 409 million (carrying value), none of which is contractually repayable in the next 12 months (see below). This results in a net debt position for the Group of EUR 281 million, 55% lower when compared to EUR 625 million as at 31 December 2013.

For more information about the review, liquidity and going concern basis of accounting please refer to note 3 Basis of Presentation.

As part of the Capital Restructuring, the ECA Facility Lenders have provided their consent to amend the EUR 49 million ECA Facility, including amending the repayment profile and waiving the breaches as at 30 September 2014, whereby, the Group had moved its Centre of Main Interest to England and having commenced negotiations with its creditors as part of the Capital Restructuring without consent having been obtained by the ECA Facility Lenders.

11.  Financial Instruments

Financial assets and liabilities by category

The following table shows the carrying amounts and fair value of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value (for example accounts receivable or accounts payable).

EUR thousand	31 December 2014				31 December 2013
	Carrying Value	Fair value			Carrying Value	Fair value
		Level 1	Level 2			Level 1	Level 2
Financial assets:
At fair value through profit or loss
Embedded option	2,629	-	2,629		-	-	-
Loans and receivables
Long-term receivables	3,062	-	-		5,769	-	-
Accounts receivable and prepayments	64,219	-	-		89,352	-	-
Cash and cash equivalents
Restricted deposits	22,037	-	-		30,742	-	-
Cash and cash equivalents	128,035	-	-		183,665	-	-
Total	219,982				309,528
Financial liabilities:
At fair value through profit or loss
Interest rates derivatives	3,402	-	3,402		8,037	-	8,037
Convertible Notes	70,845	70,845	-		-	-	-
Contingent value rights	5,305	-	5,305		-	-	-
Cash-settled share-based payments	227	227	-		1,279	1,279	-
Other
Long-term loans including accrued interest	84,067	-	-		48,153	-	-
Bonds issued including accrued interest	258,824	236,125	-		777,418	492,845	-
Other long-term liabilities	300	-	-		526	-	-
Accounts payable and accruals	130,989	-	-		141,496	-	-
Total	553,959				976,909

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 or uses third party professional valuators in which all significant inputs were based on observable market data.

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, which is now 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.