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Montauk Holdings Limited - Unaudited Condensed Interim Results For The Six Months Ended 30 September 2014

Release Date: 19/12/2014 15:00:00      Code(s): MNK     
MONTAUK HOLDINGS LIMITED
Incorporated in the Republic of South Africa
Registration number: 2010/017811/06
Share code: MNK
ISIN: ZAE000197455
("Montauk" or "the Company" or "the Group")

UNAUDITED CONDENSED INTERIM RESULTS
for the six months ended 30 September 2014

UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                Unaudited     Unaudited       Audited
                                             30 September  30 September      31 March
                                                     2014          2013          2014
                                                    $'000         $'000         $'000
ASSETS                    
Non-current assets                                 75 940       155 997        75 403 
Property  plant and equipment                      46 129        48 031        44 654 
Goodwill                                                -         9 819             - 
Interest in associates and joint ventures               -        39 179             - 
Other financial assets                                  -         5 378             - 
Intangibles                                        27 144        51 649        29 063 
Deferred taxation                                       -           110             - 
Long-term receivables                               2 667         1 831         1 686 
                    
Current assets                                     16 762        54 217        13 728 
Other                                               6 701        13 722         4 987 
Bank balances and deposits                         10 061        40 495         8 741 
Non-current assets held for sale                  125 677             -       123 080 
Total assets                                      218 379       210 214       212 211 

EQUITY AND LIABILITIES                    
Equity                                            151 243       150 115       145 522 
Equity attributable to equity holders 
  of the parent                                   124 347       124 273       120 070 
Non-controlling interest                           26 896        25 842        25 452 
                    
Non-current liabilities                             6 374        27 260         6 150 
Long-term borrowings                                    -        21 250             - 
Other                                               6 374         6 010         6 150 
                    
Current liabilities                                55 197        32 839        39 154 
Non-current liabilities held for sale               5 565             -        21 385 
Total equity and liabilities                      218 379       210 214       212 211 
Net asset carrying value per share (cents)             92            92            89


UNAUDITED CONSOLIDATED INCOME STATEMENT                        
                                          %     Unaudited     Unaudited       Audited
                                     change  30 September  30 September      31 March
                                                     2014          2013          2014
                                                    $'000         $'000         $'000
Revenue                               -5.2%        15 478        16 325        31 956 
Expenses                                          (13 643)      (12 108)      (25 515)
EBITDA                               -56.5%         1 835         4 217         6 441 
Depreciation and amortisation                      (5 602)       (5 349)      (10 882)
Operating profit                                   (3 767)       (1 132)       (4 441)
Investment income                                       -             1             4 
Finance costs                                         (22)         (658)         (916)
Profit before taxation               111.8%        (3 789)       (1 789)       (5 353)
Taxation                                                -             -             - 
Profit for the year from 
  continuing operations                            (3 789)       (1 789)       (5 353)
Discontinued operations                             6 662        (8 148)      (10 829)
Profit for the year                                 2 873        (9 937)      (16 182)
                        
Attributable to:                        
Equity holders of the parent                        3 376        (7 347)      (12 933)
Non-controlling interest                             (503)       (2 590)       (3 249)
                                                    2 873        (9 937)      (16 182)


UNAUDITED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
                                                Unaudited     Unaudited       Audited
                                             30 September  30 September      31 March
                                                     2014          2013          2014
                                                    $'000         $'000         $'000
Profit for the year                                 2 873        (9 937)      (16 182)
Other comprehensive income:                    
Items that may be reclassified subsequently 
  to profit or loss
Foreign currency translation differences           (1 685)       (7 124)       (2 050)
Total comprehensive income                          1 188       (17 061)      (18 232)
                    
Attributable to:                    
Equity holders of the company                       1 786       (14 527)      (18 572)
Non-controlling interest                             (597)       (2 534)          340 
                                                    1 188       (17 061)      (18 232)


UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                Unaudited     Unaudited       Audited
                                             30 September  30 September      31 March
                                                     2014          2013          2014
                                                    $'000         $'000         $'000
Balance at beginning of year                      145 522       166 312       166 312 
Current operations      
Total comprehensive income                          1 188       (17 061)      (18 232)
Acquisition of subsidiary                               -           864           864 
Disposal of subsidiaries                            4 533             -             - 
Effects of changes in holding                           -             -        (3 242)
Dividends                                               -             -          (180)
Balance at end of year                            151 243       150 115       145 522


RECONCILIATION OF HEADLINE EARNINGS
                                                       Unaudited              Unaudited               Audited
                                                   six months ended       six months ended           year ended    
                                                    30 September 14        30 September 13          31 March 2014    
                                          %               $'000                 $'000                  $'000    
                                     change         Gross      Net         Gross      Net         Gross      Net
                                    
Earnings attributable to 
  equity holders of the parent      -145.9%                  3 376                 (7 347)               (12 933)
                                    
IAS 16 losses (gains) on disposal 
  of plant and equipment                                -        -             -        -             3        3 
IAS 36 impairment of assets                             -        -             -        -         2 520    2 016 
IAS 27 profit from disposal/ 
  part disposal of subsidiary                      (7 434)  (7 434)            -        -             -        -
Remeasurements included in 
  equity-accounted earnings of 
  associates and joint ventures                         -        -             -        -         4 911    3 325 
Headline profit                       -44.8%                (4 058)                (7 347)                (7 589)
                                    
Basic earnings per share (cents)
Earnings                             -145.9%                  2.50                  (5.43)                 (9.56)
Continuing operations                                        (2.43)                  0.59                  (3.96)
Discontinued operations                                       4.93                  (6.02)                 (5.60)
                                    
Headline earnings                     -44.8%                 (3.00)                 (5.43)                 (5.62)
Continuing operations                                        (2.43)                  0.59                  (3.97)
Discontinued operations                                      (0.57)                 (6.02)                 (1.66)
                                    
Weighted average number of shares 
  in issue ('000)                                          135 256                135 256                135 256 
Actual number of shares in issue 
  at end of year                                    
(net of treasury shares) ('000)                            135 256                135 256                135 256 
                                    
Diluted earnings per share (cents)                                    
Earnings                            -145.9%                   2.50                  (5.43)                 (9.56)
Continuing operations                                        (2.43)                  0.59                  (3.96)
Discontinued operations                                       4.93                  (6.02)                 (5.60)
                                    
Headline earnings                    -44.8%                  (3.00)                 (5.43)                 (5.62)
Continuing operations                                        (2.43)                  0.59                  (3.97)
Discontinued operations                                      (0.57)                 (6.02)                 (1.66)
                                    
Diluted weighted average number 
  of shares in issue ('000)                                135 256                135 256                135 256 
* Restated                                    


UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS                    
                                                Unaudited     Unaudited       Audited
                                             30 September  30 September      31 March
                                                     2014          2013          2014
                                                    $'000         $'000         $'000
Cash flows from operating activities               (2 524)        7 598        10 717 
Cash flows from investing activities              (11 288)          328           334 
Cash flows from financing activities               18 647         1 829         7 290 
(Decrease)/increase in cash and cash equivalents    4 835         9 755        18 341 
Cash and cash equivalents                     
At beginning of year                               48 845        32 996        32 996 
Foreign exchange differences                       (1 443)       (2 256)       (2 492)
At end of year                                     52 237        40 495        48 845 
                    
Cash in disposal groups held for sale              42 175             -        40 104 
Bank balances and deposits                         10 062        40 495         8 741 
Cash and cash equivalents                          52 237        40 495        48 845


SEGMENTAL ANALYSIS            
                                                Unaudited     Unaudited       Audited
                                             30 September  30 September      31 March
                                                     2014          2013          2014
                                                    $'000         $'000         $'000
Revenue        
   Natural gas                                     15 478        16 325        31 956 

EBITDA        
   Natural gas                                      1 835         4 217         6 441 

Profit before tax        
   Natural gas                                     (3 789)       (1 789)       (5 353)

Headline earnings        
   Media and broadcasting                              30           151          (653)
   Natural gas                                     (3 789)       (1 789)       (5 350)
   Other                                             (299)       (5 709)       (1 586)
   Total                                           (4 058)       (7 347)       (7 589)


NOTES

BASIS OF PREPARATION AND ACCOUNTING POLICIES
The results for the six months ended 30 September 2014 have been prepared in accordance 
with International Financial Reporting Standards ("IFRS"), the disclosure requirements 
of IAS 34, the SAICA Financial Reporting Guides as issued by the Accounting Practices 
Committee, the requirements of the South African Companies Act, 2008, and the Listings 
Requirements of the JSE Limited. The accounting policies applied by the group in the 
preparation of these condensed consolidated interim financial statements are consistent 
with those applied by the group in its consolidated financial statements as at and for 
the year ended 31 March 2014. As required by the JSE Limited Listings Requirements, 
the group reports headline earnings in accordance with Circular 2/2013: Headline Earnings 
as issued by the South African Institute of Chartered Accountants.

These financial statements were prepared under the supervision of the financial director, 
Mr SF McClain (CPA).
        
DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE
During the period under review, the Group disposed of its 80% interest in Longkloof 
Limited, which consisted of various offshore media investments, to Sabido Investments 
Proprietary Limited. The results of these operations have been included in discontinued 
operations in the current and prior periods.

Following the announcement by the Company's parent company, Hosken Consolidated 
Investments Limited ("HCI"), during March 2014 that it will unbundle and list its 
natural gas interests, the Company entered into an agreement with a wholly owned 
subsidiary of HCI for the sale of its diversified investments in Australia and its 19.9% 
in Impact Oil and Gas. The results of these operations have consequently been reclassified 
to discontinued operations in the income statement and its assets and liabilities 
reclassified to disposal groups held for sale in the statement of financial position. 

The disposal groups held for sale, as disclosed in the statement of financial position, 
relate to the assets and liabilities of the Group's remaining media and other operations, 
which were disposed of during October 2014 in terms of the above agreement.


RESULTS

GROUP INCOME STATEMENT
Revenues for the six months ended 30 September 2014 contain $10.0 million related to 
high-btu gas and associated environmental attribute sales and $5.2 million related to 
sales of electricity and associated environmental attributes. 

Expenses contain net gains of $1.3 million related to short-term gains resulting from 
the Company's natural gas and electric commodity hedging programme. 

Profit from discontinued operations includes $7.4 million investment surplus on the 
sale of the Group's interest in Longkloof Limited.

GROUP STATEMENT OF FINANCIAL POSITION AND CASH FLOW
The assets and liabilities disclosed in statement of financial position, excluding 
disposal group assets and liabilities, consist mainly of items associated with the 
Group's natural gas operations.

Current liabilities contain $50 million of short-term borrowings owing to HCI group 
companies that were settled prior to the Company's unbundling by HCI.

Cash flow from operating activities contain changes in working capital of $3.9 million. 
Included in cash flow from investing activities is $36.7 million received on the sale of 
Longkloof, cash of $34.1 million invested in associate entities of which $33.3 million 
in Impact Oil and Gas and $6 million invested in property, plant and equipment. Net 
borrowings of $18.6 million were raised inter alia for the purchase of the Group's 
interest in Impact Oil and Gas.

COMMENTARY

The Company's results from its natural gas operations are heavily influenced by the 
current market price for natural gas and electricity in the markets served, the price 
associated with the accompanying environmental attribute and the volumes produced. 

Overall revenue from the Company's high-btu facilities increased 3.9% for the six months 
ended 30 September 2014 over the same period in the prior year. The average market 
price for natural gas in the US increased approximately 13% for the six months ended 
30 September 2014 over the comparable six-month period in 2013. In addition, overall 
volumes produced increased 5.4% for the six months ended 30 September 2014 compared to 
2013. The lower than expected overall growth in revenue from the Company's high-btu 
facilities for the six months ended 30 September 2014 as compared to the prior year 
is a result of the Company's not realising revenue for the cellulosic RINs generated 
from the two high-btu facilities that have entered into contracts beginning in the 
quarter ended 30 September 2014 to produce RINs resulting from the high-btu gas being 
used as a vehicle fuel under the US EPA's RFS II program. The delay in realising the 
environmental attribute revenue from these facilities is a result of the US EPA's delay 
in issuing the 2014 volume obligations under the RFS II programme. The volume obligations 
were required to be published in November of 2013, but given the developing market for 
producing cellulosic RINs the EPA has delayed issuance of the obligations until the 
available supply can be quantified. The EPA has indicated that the expectation is to 
publish the 2014 volume requirements in early 2015, along with the corresponding 2015 
volume requirements. The establishment of the volume obligations is expected to compel 
obligated parties to begin actively purchasing cellulosic RINs that should result in 
the establishment of a market price for the cellulosic RINs and will allow the 
realisation of the RINs that have been and will continue to be produced. Market price 
indications of cellulosic RIN value remain strong, however, until the volume obligations 
are released and the parties required to purchase the RINs begin transacting the 
realisable value of the RINs in inventory and to be produced cannot be determined.

Revenue from the Company's electric generation facilities decreased 20% for the six months 
ended 30 September 2014 over the comparable period for the prior year despite a 1.7% 
increase in electric production over the same period in the prior year. The decrease is 
a result of a 13% decrease in the average price realised on the Company's electric 
production primarily due to the expiration of an above market fixed price contract one of 
the Company's electric generation facilities on 31 May 2014 as well as a $0.5 million 
reduction in revenues incurred as a result of the inability to meet required minimum 
production levels under the expired contract. 

Expenses increased 12.7% for the six months ended 30 September 2014 as compared to the 
same period in the prior year primarily as a result of the timing of scheduled major 
maintenance events. Gains recognised from the Company's hedging programmes also decreased 
by $0.5 million for the six months ended 30 September 2014 as compared to the same period 
in 2013 due to the timing of changes experienced in natural gas pricing in the US.

In November 2014, the Company executed a purchase agreement to acquire three additional 
high-btu facilities. The purchase is contingent upon the seller satisfying certain 
conditions precedent to closing which is expected to occur in February of 2015. The 
purchase price for the facilities is expected to be $4.6 million in cash, including 
closing costs and working capital and the assumption of existing debt of approximately 
$6.5 million. The acquisition is expected to contribute positively to the after tax 
profit of the Company. 


CHANGES IN DIRECTORATE
During the period under review the following changes in directorate occurred:

DR Herrman                                                   Appointed 31 August 2014
SF McClain                                                   Appointed 31 August 2014
MH Ahmed                                Resigned 1 May 2014; Appointed 31 August 2014
MA Jacobson                                                  Appointed 31 August 2014
NB Jappie                                                    Appointed 31 August 2014
BS Raynor                                                    Appointed 31 August 2014
A van der Veen                                               Appointed 31 August 2014
TG Govender                             Appointed 1 May 2014; Resigned 31 August 2014
MJA Golding                                                       Resigned 1 May 2014
JG Ncgobo                                                         Resigned 1 May 2014
VE Mphande                                                        Resigned 1 May 2014
Y Shaik                                                           Resigned 1 May 2014

DIVIDEND TO SHAREHOLDERS
The directors have resolved not to declare an interim dividend. 

For and on behalf of the board of directors 

JA Copelyn                   DR Herrman                        SF McClain
Chairman                     Chief Executive Officer           Chief Financial Officer

Cape Town 
19 December 2014


Directors: JA Copelyn (Chairman)*; DR Herrman (Chief Executive Officer)#; SF McClain 
           (Chief Financial Officer)#; MH Ahmed*; MA Jacobson*##; NB Jappie*; BS Raynor*#; 
           A van der Veen*   *Non-Executive   #United States of America   ##Australia
Company secretary: HCI Managerial Services Proprietary Limited
Registered office: Suite 801, 76 Regent Road, Sea Point, Cape Town, 8005. PO Box 5251, Cape Town, 8000
Transfer secretaries: Computershare Investor Services Proprietary Limited
                      70 Marshall Street, Johannesburg, 2001. PO Box 61051, Marshalltown, 2107
Sponsor: Investec Bank Limited
www.hci.co.za

Date: 19/12/2014 03:00:00 Supplied by www.sharenet.co.za                     
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