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MONTAUK HOLDINGS LIMITED - Reviewed condensed consolidated results for the year ended 31 March 2015

Release Date: 04/06/2015 16:45:00      Code(s): MNK     
Incorporated in the Republic of South Africa
Registration number: 2010/017811/06
Share code: MNK
ISIN: ZAE000197455
("Montauk" or "the Company" or "the Group")


                                                               Reviewed       Audited
                                                               31 March      31 March
                                                                   2015          2014
                                                                  $'000         $'000
Non-current assets                                               81 360        75 403 
Property, plant and equipment                                    45 332        44 654  
Intangibles                                                      32 427        29 063  
Long-term receivables                                             3 601         1 686 
Current assets                                                   20 044        13 728 
Other                                                             4 153         4 987 
Bank balances and deposits                                       15 891         8 741 
Non-current assets held for sale                                      -       123 080 
Total assets                                                    101 404       212 211 

EQUITY AND LIABILITIES                  
Equity                                                           77 101       145 522 
Equity attributable to equity holders of the parent              77 101       120 070 
Non-controlling interest                                              -        25 452 
Non-current liabilities                                          17 235         6 150 
Long-term borrowings                                             10 603             - 
Other                                                             6 632         6 150 
Current liabilities                                               7 068        39 154 
Non-current liabilities held for sale                                 -        21 385 
Total equity and liabilities                                    101 404       212 211 
Net asset carrying value per share (cents)                           57            89

                                                               Reviewed       Audited
                                                               31 March      31 March
                                                        %          2015          2014
                                                   change         $'000         $'000
Revenue                                             -7.9%        29 428        31 956 
Expenses                                                        (26 966)      (25 515)
EBITDA                                             -61.8%         2 462         6 441 
Depreciation and amortisation                                   (11 268)      (10 882)
Operating loss                                                   (8 806)       (4 441)
Investment income                                                    41             4 
Finance costs                                                      (301)         (916)
Loss before taxation                               -69.4%        (9 066)       (5 353)
Taxation                                                           (251)            - 
Loss for the year from continuing operations                     (9 317)       (5 353)
Discontinued operations                                         (11 618)      (10 829)
Loss for the year                                               (20 935)      (16 182)
Attributable to:
Equity holders of the parent                                    (20 432)      (12 933)
Non-controlling interest                                           (503)       (3 249)
                                                                (20 935)      (16 182)

                                                               Reviewed       Audited
                                                               31 March      31 March
                                                                   2015          2014
                                                                  $'000         $'000
Loss for the year                                               (20 935)      (16 182)
Other comprehensive loss:                  
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences                         (1 044)       (2 050)
Total comprehensive loss                                        (21 979)      (18 232)
Attributable to:                  
Equity holders of the parent                                    (21 382)      (18 572)
Non-controlling interest                                           (597)          340 
                                                                (21 979)      (18 232)

                                                               Reviewed       Audited
                                                               31 March      31 March
                                                                   2015          2014
                                                                  $'000         $'000
Balance at beginning of year                                    145 522       166 312 
Current operations                  
Total comprehensive loss                                        (21 979)      (18 232)
Acquisition of subsidiary                                             -           864 
Disposal of subsidiaries                                        (16 556)            - 
Effects of changes in holding                                       (25)       (3 242)
Dividends                                                       (29 861)         (180)
Balance at end of year                                           77 101       145 522

                                                      Reviewed                Audited 
                                                    31 March 2015          31 March 2014 
                                          %             $'000                   $'000      
                                     change         Gross      Net         Gross      Net
Loss attributable to equity holders                                     
   of the parent                     -58.0%                (20 432)               (12 933)

IAS 16 losses on disposal of 
   plant and equipment                                  -        -             3        3 
IAS 36 impairment of assets                             -        -         2 520    2 016 
IAS 27 loss from disposal/part 
   disposal of subsidiary                          10 847   10 847             -        - 
Remeasurements included in equity-
   accounted earnings of associates 
   and joint ventures                                   -        -         4 911    3 325 
Headline loss                        -26.3%                 (9 585)                (7 589)
Basic earnings per share (cents)                                    
Loss                                 -58.0%                 (15.11)                 (9.56)
Continuing operations                                        (6.52)                 (3.96)
Discontinued operations                                      (8.59)                 (5.60)
Headline loss                        -26.1%                  (7.09)                 (5.62)
Continuing operations                                        (6.52)                 (3.96)
Discontinued operations                                      (0.57)                 (1.66)
Weighted average number of shares 
   in issue ('000)                                         135 256                135 256 
Actual number of share in issue 
   at end of year (net of treasury 
   shares) ('000)                                          135 256                135 256

                                                               Reviewed       Audited
                                                               31 March      31 March
                                                                   2015          2014
                                                                  $'000         $'000
Cash flows from operating activities                                950        10 717 
Cash flows from investing activities                            (47 314)          334 
Cash flows from financing activities                             14 918         7 290 
(Decrease)/increase in cash and cash equivalents                (31 446)       18 341 
Cash and cash equivalents                   
At beginning of year                                             48 845        32 996 
Foreign exchange differences                                     (1 507)       (2 492)
At end of year                                                   15 892        48 845 
Cash in disposal groups held for sale                                 -        40 104 
Bank balances and deposits                                       15 892         8 741 
Bank overdrafts                                                       -             - 
Cash and cash equivalents                                        15 892        48 845

                                                               Reviewed       Audited
                                                               31 March      31 March
                                                                   2015          2014
                                                                  $'000         $'000
   Natural gas                                                   29 428        31 956 
   Total                                                         29 428        31 956 
   Natural gas                                                    2 462         6 441 
   Total                                                          2 462         6 441 
Loss before tax      
   Natural gas                                                   (9 066)       (5 353)
   Total                                                         (9 066)       (5 353)
Headline loss      
   Media and broadcasting                                          (187)         (653)
   Natural gas                                                   (8 964)       (5 350)
   Other                                                           (434)       (1 586)
   Total                                                         (9 585)       (7 589)


The results for the year ended 31 March 2015 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 Company in the 
preparation of these condensed consolidated financial statements are consistent with 
those applied by the Company in its consolidated financial statements as at and for the 
year ended 31 March 2014. As required by the JSE Limited Listings Requirements, the 
Company 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 chief financial 
officer, Mr SF McClain (CPA).
During the year under review the Company disposed of its 80% interest in Longkloof 
Limited, which consisted of various offshore media investments, to Sabido Investments 
Proprietary Limited. The Company also disposed of its 100% interest in Deepkloof Limited 
to its parent company, Hosken Consolidated Investments Limited ("HCI"), prior to being 
unbundled to shareholders by that company. Deepkloof contained the Company's diversified 
investments in Australia and its 19.9% interest in Impact Oil and Gas. The results of 
these operations have been included in discontinued operations in the income statement 
and its assets and liabilities included in disposal groups held for sale in the statement 
of financial position in the prior year.

The details of assets and liabilities disposed of are as follows:
Non-current assets                                                            104 454
Current assets                                                                 51 958
Non-current liabilities                                                        (3 746)
Current liabilities                                                           (14 134)
Net assets disposed of                                                        138 532
Non-controlling interest                                                      (24 855)
Loss on disposal                                                              (10 847)
Proceeds                                                                      102 830
Cash balances disposed of                                                     (29 069)
Net cash received                                                              73 761


Revenue from the Company's renewable natural gas facilities decreased approximately 8% 
for the year ended 31 March 2015 from the prior year despite an 8% increase in volume 
produced. The decrease is a result of a 3% decrease in the average natural gas price 
as well as the deferral of the sale of the majority of cellulosic RINs generated in 
fiscal 2015 from the Company's renewable natural gas facilities participating in the 
US EPA's RFS II programme. The Company has deferred the sale of the RINs awaiting the 
EPA's finalisation of the volume obligations for both 2014 and 2015. At 31 March 2015 
the Company had approximately 10.0 million RINs generated and unsold. 

Revenue from the Company's electric generation facilities decreased 2% for the year 
ended 31 March 2015 from the prior year despite a 4% increase in electric production. 
The decrease is a result of a 14.8% decrease in the average price realised on the 
Company's electric production, primarily due to the expiration of an above market fixed 
price contract for one of the Company's electric generation facilities in the first quarter 
of fiscal 2015 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 5.6% for the year ended 31 March 2015 as compared to the prior year 
primarily as a result of the timing of scheduled major maintenance events for electric 
facilities. Included in expenses for the year ended 31 March 2015 are $0.3 million in 
transaction costs related to the potential acquisition of three renewable natural gas 
facilities. Gains recognised from the Company's hedging programmes increased by $0.6 million 
for the year ended 31 March 2015 as compared to the prior year due to the timing of changes 
experienced in natural gas pricing in the US.

Intangible assets for the year ended 31 March 2015 include $6.6 million of interconnection 
costs related to the construction of the 20 MW electric generation facility in 
southern California.

Included in long-term receivables for the year ended 31 March 2015 are $1.6 million in 
security collateralisation required for the construction and operation of the 20 MW electric 
generation facility in southern California.

The Company's long-term borrowings at 31 March 2015 were approximately $11.8 million from a 
commercial bank facility entered into on 31 October 2014. As of 31 March 2015 the Company 
has not drawn on the $41 million facility available for the construction of the 20 MW electric 
generation facility in southern California.

Cash flow from operating activities contains changes in working capital of $2 million in 
Longkloof. 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 
was invested in Impact Oil and Gas. $9.2 million was invested in property, plant and equipment. 
Net borrowings of $16.5 million were raised.

In May 2015 the Company sold and received $9.9 million (net of commission) for the sale of 
Emission Reduction Credits ("ERCs"). The ERCs were generated as a result of the Company 
constructing and operating specialised pollution control equipment that created permanent 
emission reductions that exceed the amount of reductions required by governing regulations 
to operate the facility.


The losses incurred and the unbundling of the Company from HCI in fiscal 2015 has not changed 
the Company's philosophy to position itself to be able to capitalise on the opportunities that 
develop in the ever-changing renewable energy markets. The evolving regulatory environment 
mandating the use of renewable fuels can lead to opportunities that can allow existing projects 
to capture available premiums over the base energy commodity prices, which in the current 
environment of depressed base energy commodity pricing is a key factor in the long-term value 
of the Company. The absence of attractive base energy pricing in the current markets requires 
the Company to remain flexible in its offtake contract strategy, which may negatively impact 
short-term results, to potentially capture longer-term value.

In this environment the Company continues to optimise its current facilities' operations and 
looks to selectively develop and/or acquire renewable energy projects that fit the overall 
strategy. Given the relatively higher production cost of renewable energy facilities over 
conventional energy producers on a per unit basis the Company's goal is to drive volumes 
through an aggressive preventative maintenance programme that maximises each facility's 
availability and allows for greater predictability in maintenance costs and to be actively 
involved in assisting the Company's landfill partners in operating and managing the landfill's 
collection systems to maximise, to the extent possible, the quality and quantity of available 
landfill gas to be used as either feedstock for renewable natural gas production or fuel for 
electricity production. 

Through economies of scale and the depth of experience within the organisation the Company 
manages its portfolio of projects to run as efficiently as possible and maintain its 
relationships with the landfill owners that allow the Company to make it through lean times 
and keep the flexibility to capture value as it arises.

Since the onset of the shale gas boom in the US the last several years has seen natural 
gas pricing remain relatively depressed while maintaining a high degree of volatility based 
on short-term market factors. Given the ever-increasing use of natural gas as fuel for 
electricity generation as a result of the increased volumes of shale gas, futures pricing 
for electricity in liquid markets in which the Company's facilities are located trade as an 
index based on the current natural gas pricing. In this environment, unless the location of 
the facility and/or available premium given for a bundled (energy plus renewable attribute) 
product dictates otherwise, the Company, in executing its strategy, generally has elected 
to not lock in longer-term pricing, but instead utilises short-term hedging to capture any 
perceived value in the current futures pricing with varying degrees of success. 

The Company participates in available state and federal renewable energy programmes for its 
electric and renewable natural gas facilities. Each programme's value per unit of renewable 
energy varies based on location and nature of the programme. In fiscal 2015, as a result of an 
EPA ruling that allowed renewable natural gas that was used as a vehicle fuel to qualify as 
a cellulosic RIN under the EPA's RFS II, the Company began participating in the programme. 
However, delays in the EPA's release of the volume obligations for calendar years 2014 and 
2015 under the programme has impacted the timing of the sale of the RINs generated. During 
fiscal 2015, given the absence of EPA-mandated volumes required to be purchased by obligated 
parties, the market value for cellulosic RINs has not approached the Company's expectations 
of the value of the RINs generated. As a result the Company has made a decision to hold these 
RINs in inventory until the volume obligations are released so as to see what the market will 
price the RINs with volume obligations published. As of the end of fiscal 2015 the Company had 
approximately 10 million cellulosic RINs unsold.

In accordance with a consent decree reached in a settlement with various petroleum groups in 
April 2015, on 29 May 2015 the EPA released its proposed cellulosic RINs volume obligations 
for calendar year 2014 (33 million gallons), 2015 (106 million gallons) and 2016 (206 million 
gallons). The EPA announced that the volume obligations would be finalised for all three years 
by 30 November 2015, which would put it back in compliance with the RFS II standard for timing 
of setting the required volumes. The Company is currently evaluating the proposed volume 
obligations and its potential impact on the market for RINs generated.

The Company secured financing and has begun construction of the 20 MW electric generation 
facility in southern California. The project is on schedule to be completed and begin 
commercial operations in the fourth quarter of fiscal 2016. The Company has contracted with a 
large municipality in southern California for the electricity and associated environmental 
attributes produced under a 20-year fixed price power purchase agreement. 

In November 2014 the Company executed a purchase agreement to acquire three additional 
renewable natural gas facilities. The purchase is contingent upon the seller satisfying 
certain conditions precedent to closing. As of the current date the seller has not met and 
is not expected to meet the conditions precedent. The Company and the seller are in 
discussions regarding a possible resolution and the ultimate outcome of those discussions 
is yet to be determined. 

During the year 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

These condensed consolidated financial statements for the year ended 31 March 2015 have been 
reviewed by Grant Thornton Johannesburg, who expressed an unmodified review conclusion. A copy 
of the auditor's review report is available for inspection at the Company's registered office 
together with the financial statements identified in the auditor's report.

The auditor's report does not necessarily report on all of the information contained in this 
announcement/financial results. Shareholders are therefore advised that in order to obtain a 
full understanding of the nature of the auditor's engagement they should obtain a copy of the 
auditor's report together with the accompanying financial information from the issuer's 
registered office.

The directors have resolved not to declare a final 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 
4 June 2015

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

Date: 04/06/2015 04:45:00 Supplied by www.sharenet.co.za                     
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