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Montauk Holdings Limited - Reviewed Condensed Consolidated Results For The Year Ended 31 March 2016

Release Date: 28/06/2016 15:15:00      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")


REVIEWED CONDENSED CONSOLIDATED RESULTS FOR THE YEAR ENDED 31 MARCH 2016


REVIEWED CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION        
                                                               Reviewed       Audited
                                                               31 March      31 March
                                                                   2016          2015
                                                                  $'000         $'000
ASSETS                              
Non-current assets                                              134 965        81 360 
Property, plant and equipment                                    98 027        45 332 
Other financial assets                                            2 235             - 
Intangibles                                                      32 789        32 427 
Long-term receivables                                             1 914         3 601 
                              
Current assets                                                   21 583        20 044 
Other                                                            11 573         4 153 
Bank balances and deposits                                       10 010        15 891 
Total assets                                                    156 548       101 404 

EQUITY AND LIABILITIES                              
Equity                                                           79 253        77 101 
Equity attributable to equity holders of the parent              79 253        77 101  
                              
Non-current liabilities                                          59 219        17 235 
Long-term borrowings                                             52 332        10 603 
Other                                                             6 887         6 632 
                              
Current liabilities                                              18 076         7 068 
Total equity and liabilities                                    156 548       101 404 

Net asset carrying value per share (cents)                           59            57


REVIEWED CONDENSED CONSOLIDATED INCOME STATEMENT                                   
                                                               Reviewed       Audited
                                                               31 March      31 March
                                                         %         2016          2015
                                                    change        $'000         $'000
Revenue                                              72.5%       50 751        29 428 
Expenses                                                        (41 424)      (26 966)
EBITDA                                              278.9%        9 327         2 462 
Other income                                                      9 573             - 
Depreciation and amortisation                                   (12 890)      (11 268)
Operating profit/(loss)                                           6 010        (8 806)
Investment income                                                    39            41 
Finance costs                                                      (449)         (301)
Gain on bargain purchase                                            265             - 
Asset impairments                                                (3 545)            - 
Profit/(loss) before taxation                       125.6%        2 320        (9 066)
Taxation                                                              -          (251)
Profit/(loss) for the year from continuing operations             2 320        (9 317)
Discontinued operations                                               -       (11 618)
Profit/(loss) for the year                                        2 320       (20 935)
                                        
Attributable to:                                        
Equity holders of the parent                                      2 320       (20 432)
Non-controlling interest                                              -          (503)
                                                                  2 320       (20 935)


REVIEWED CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME        
                                                               Reviewed       Audited
                                                               31 March      31 March
                                                                   2016          2015
                                                                  $'000         $'000
Profit/(loss) for the year                                        2 320       (20 935)
Other comprehensive income:                              
Items that may be reclassified subsequently to profit or loss    
Foreign currency translation differences                           (160)       (1 044)
Total comprehensive income                                        2 160       (21 979)
                              
Attributable to:                              
Equity holders of the parent                                      2 160       (21 382)
Non-controlling interest                                              -          (597)
                                                                  2 160       (21 979)


REVIEWED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                               Reviewed       Audited
                                                               31 March      31 March
                                                                   2016          2015
                                                                  $'000         $'000
Balance at beginning of year                                     77 101       145 522 
Current operations                              
Total comprehensive profit/(loss)                                 2 160       (21 979)
Equity-settled share-based payments                                   5             - 
Disposal of subsidiaries                                              -       (16 556)
Effects of changes in holding                                       (13)          (25)
Dividends                                                             -       (29 861)
Balance at end of year                                           79 253        77 101


RECONCILIATION OF HEADLINE EARNINGS
                                                         Reviewed year ended     Audited year ended
                                                            31 March 2016           31 March 2015*
                                                   %             $'000                  $'000
                                              change         Gross      Net        Gross      Net
                                                            
Earnings attributable to equity holders 
  of the parent                               111.4%                  2 320               (20 432)
Losses on disposal of plant and equipment                      189      189            -        - 
Impairment of plant and equipment                            3 545    3 545            -        - 
Third-party compensation received in respect 
  of impaired plant and equipment                           (1 140)  (1 140)           -        - 
Gain on bargain purchase                                      (265)    (265)           -        - 
Gains on disposal of intangible assets                      (9 573)  (9 573)           -        - 
Loss from disposal of subsidiary                                 -        -       11 717   11 717 
Headline loss                                  43.6%                 (4 924)               (8 715)
                                                            
Basic earnings per share (cents)                                                            
Earnings/(loss)                               111.4%                   1.72                (15.11)
Continuing operations                                                  1.72                 (6.52)
Discontinued operations                                                   -                 (8.59)

Headline loss                                  43.6%                  (3.64)                (6.45)
Continuing operations                                                 (3.64)                (6.52)
Discontinued operations                                                   -                  0.07 
                                                            
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 and shares issued in 
  respect of restricted stock plan) ('000)                          135 256               135 256 
                                                            
Diluted earnings per share (cents)                                                            
Earnings/(loss)                                111.4%                   1.72               (15.11)
Continuing operations                                                   1.72                (6.52)
Discontinued operations                                                    -                (8.59)

Headline loss                                   43.6%                  (3.64)               (6.45)
Continuing operations                                                  (3.64)               (6.52)
Discontinued operations                                                    -                 0.07 
Weighted average number of shares in issue ('000)                    135 256              135 256 
                                                            
* Restated


REVIEWED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                              
                                                               Reviewed       Audited
                                                               31 March      31 March
                                                                   2016          2015
                                                                  $'000         $'000
Cash flows from operating activities                             12 279           950 
Cash flows from investing activities                            (56 562)      (47 314)
Cash flows from financing activities                             38 588        14 918 
Decrease in cash and cash equivalents                            (5 695)      (31 446)
Cash and cash equivalents                               
At beginning of year                                             15 892        48 845 
Foreign exchange differences                                       (187)       (1 507)
At end of year                                                   10 010        15 892 
                              
Bank balances and deposits                                       10 010        15 892 
Cash and cash equivalents                                        10 010        15 892


SEGMENTAL ANALYSIS
                                                               Reviewed       Audited
                                                               31 March      31 March
                                                                   2016          2015
                                                                  $'000         $'000
Revenue          
   Renewable energy                                              50 751        29 428 
   Total                                                         50 751        29 428 
                    
EBITDA          
   Renewable energy                                               9 327         2 462 
   Total                                                          9 327         2 462 
                    
Profit/(loss) before tax          
   Renewable energy                                               2 320        (9 066)
   Total                                                          2 320        (9 066)
                    
Headline loss*          
   Media and broadcasting                                             -           683 
   Renewable energy                                              (4 924)       (8 964)
   Other                                                              -          (434)
   Total                                                         (4 924)       (8 715)
                    
* Restated


NOTES

BASIS OF PREPARATION AND ACCOUNTING POLICIES
The reviewed provisional results for the year ended 31 March 2016 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, the 
financial reporting pronouncements as issued by FRSC, 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 2015. As required by the JSE Limited Listings Requirements, the Company reports 
headline earnings in accordance with Circular 2/2015: 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).

RESTATEMENT OF PRIOR-YEAR EARNINGS
Shareholders are advised that it was noted by the JSE Limited's proactive monitoring 
process that depreciation and amortisation continued to be recognised during the year 
ended 31 March 2015 on certain assets subsequent to their classification as disposal 
group assets held for sale and that this was not in accordance with IFRS. The disposal 
group assets and liabilities held for sale comprised those of subsidiaries of the 
Company which were sold in anticipation of and prior to the unbundling and listing of 
the Company by its previous parent company. The sold subsidiaries' business operations 
are unrelated to the Company's renewable energy operations, had no impact on the results 
for the year under review and should have no impact on the future results of the Company. 
The Company agreed to restate its comparative results for the year ended 31 March 2015, 
the effects of which are as follows:

Statement of financial position: No impact
Income statement:
Earnings attributable to equity holders of the parent: No impact
Headline loss: Loss decreased by $0.87 million 
Basic loss per share from continuing operations: No impact
Basic loss per share from discontinued operations: No impact
Headline loss per share from continuing operations: No impact
Headline loss per share from discontinued operations: Loss of 0.57 cents improved to 
profit of 0.07 cents 
Opening equity attributable to equity holders of the parent in the current year was 
not affected.

BUSINESS COMBINATIONS
Acquisition of Leaf LFG US Investments, Inc. 
On 25 June 2015 the Company completed the acquisition of 100% of Leaf LFG US Investments, 
Inc. ("Leaf"), which comprises three additional renewable natural gas facilities located 
in Southwestern Pennsylvania, for $4.5 million in cash. The acquisition increases the 
Company's annual renewable natural gas production by approximately 700 000 MMBtus. 

The assets and liabilities acquired are as follows:
                                                                                $'000
Non-current assets                                                             12 468
Current assets                                                                    968
Non-current liabilities                                                        (7 862)
Current liabilities                                                              (827)
Net assets acquired                                                             4 747
Gain on bargain purchase                                                         (265)
Net cash outflow on acquisition                                                 4 482

As of 31 March 2016 the purchase price allocation for this acquisition is final. 

The results of operations of the acquired facilities are included in the Company's 
consolidated results from the date of acquisition. Revenues of $4.4 million and operating 
income of $0.1 million related to the acquisition are included in the consolidated income 
statement for the year ended 31 March 2016. Had the acquisition occurred on the first day 
of the financial reporting period, $6.1 million in revenues and $0.2 million in operating 
losses would have been included in the consolidated income statement.

RESULTS

CONSOLIDATED INCOME STATEMENT
Total Company revenue increased approximately 73% for the year ended 31 March 2016 over 
the prior fiscal year.

Revenue from the Company's renewable natural gas facilities increased approximately 128% 
for the year ended 31 March 2016. The increase is a result of $30.0 million in sales of 
cellulosic RINs generated from the Company's renewable natural gas facilities participating 
in the US EPA's RFS II programme, as compared to $3.9 million in sales for the prior year. 
At 31 March 2016 the Company had 5.9 million RINs generated and unsold.

Revenue from the Company's electric generation facilities decreased approximately 30% for 
the year ended 31 March 2016 from the prior year. While production remained consistent, 
the unfavourable variance is attributable to the decrease in the average price realised 
on the Company's electric production.

Expenses increased approximately 54% for the year ended 31 March 2016 as compared to the 
prior year, primarily as a result of additional royalties paid, largely driven by the 
increased sales of cellulosic RINs. Non-recurring items included in expenses for the 
year ended 31 March 2016 are $2.1 million in taxes on stock-based compensation, $1.5 million 
in severance-related costs and transaction costs related to the acquisition of Leaf.

Gains recognised from the Company's hedging programmes decreased by $1.9 million for 
the year ended 31 March 2016 as compared to the prior year, due to the timing of changes 
experienced in natural gas pricing in the US.

The Company recorded $9.6 million in other income for the year ended 31 March 2016, 
primarily due to the sale of emission reduction credits ("ERCs") generated as a result 
of the construction and operation of specialised pollution control equipment that created 
permanent emission reductions in excess of governing regulations to operate the facility.

The Company recorded asset impairments of $3.5 million for the year ended 31 March 2016, 
driven by electric generation facilities that monetise production in depressed merchant 
market conditions.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND CASH FLOW
Property, plant and equipment assets and intangible assets for the year ended 31 March 2016 
include $56.3 million and $9.0 million of construction and interconnection costs, respectively, 
related to the construction of the 20 MW electric generation facility in Southern California.

Other current assets for the year ended 31 March 2016 include $7.2 million of loan proceeds, 
reserved for costs related to the construction of the 20 MW electric generation facility 
in Southern California.

The Company's long-term borrowings at 31 March 2016 were $52.3 million. The increase from 
the prior year relates to the fully drawn $41.0 million facility for the construction of the 
20 MW electric generation facility in Southern California.

Cash flows used in investing activities for the year ended 31 March 2016 include $47.9 million 
in construction and interconnection costs of the 20 MW electric generation facility in 
Southern California, $4.5 million for the acquisition of Leaf and $9.6 million in cash receipts 
for the sale of ERCs. Cash flows from financing activities for the year ended 31 March 2016 
include the proceeds from the $41.0 million facility for the construction of the 20 MW 
electric generation facility in Southern California.

COMMENTARY

CELLULOSIC RINs
The EPA released the final volume obligations for 2014, 2015 and 2016 in November 2015. 
The EPA is expected to finalise the volume obligations for 2017 by November 2016 in 
accordance with the mandates of the RFS II programme. Although the market remains relatively 
illiquid, since the establishment of the current volume obligations the Company has been 
able to monetise blocks of cellulosic RINs at pricing levels commensurate with general market 
conditions. Current pricing for the cellulosic RINs is referenced as the price for an advanced 
RIN plus up to 100% of the published cellulosic waiver credit price for that vintage of RIN 
as the cellulosic RIN satisfies the compliance obligations for both advanced and cellulosic 
categories. The ultimate percentage of the cellulosic waiver credit price realised and the 
overall market liquidity will be dependent on the ongoing volume obligations set by EPA being 
both timely and sufficient to accommodate the actual production levels on an annual basis.

ENERGY COMMODITY PRICING
As discussed above, energy commodity prices continued to be pressured in fiscal 2016 by 
record storage levels of natural gas resulting from a warmer than normal winter withdrawal 
season, which generally lasts from mid-November through March, which significantly decreased 
heating demand from the residential sector during the winter months. The pricing declines 
continue to have an impact on the Company's results and any short-term price recovery that 
may occur would depend on the supply balance throughout the upcoming injection season, driven 
by higher demand for LNG exports and natural gas-fuelled electric generation. Longer-term price 
recovery would depend on increased demand from coal to gas switching for electric generation 
and the continued development of the LNG export market to off-set continued shale gas production. 
The Company continues to evaluate the impact of current and future natural gas pricing as well 
as available environmental attributes on our portfolio in determining a strategy for the 
overall Company and individual locations.

EVENTS SUBSEQUENT TO REPORTING DATE
In May 2016 the Company was both informed of and refunded approximately $4.8 million in respect
of amounts not utilised under its interconnection agreement with Southern California Edison, to 
construct the interconnection for the 20 MW electric generation facility in Southern California.

AUDITOR'S REVIEW
These condensed consolidated financial statements for the year ended 31 March 2016 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.

CHANGES IN DIRECTORATE
As communicated to shareholders on 27 May 2016, Mr DR Herrman resigned as executive director 
and chief executive officer with effect from 10 June 2016. Mr ML Ryan was appointed as 
executive director and chief executive officer on 27 May 2016.

DIVIDEND TO SHAREHOLDERS
The directors have resolved not to declare a final dividend.

For and on behalf of the board of directors

JA Copelyn         ML Ryan                      SF McClain
Chairman           Chief Executive Officer      Chief Financial Officer

Cape Town 
28 June 2016


Directors: JA Copelyn (Chairman)*, ML Ryan (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: 5th Floor, 4 Stirling Street, Zonnebloem, Cape Town, 7925 
Postal address: 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.montauk.co.za



Date: 28/06/2016 03:15:00 Supplied by www.sharenet.co.za                     
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