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Montauk Holdings Limited - Unaudited Condensed Consolidated Interim Results For The Six Months Ended 30 September 2016

Release Date: 28/10/2016 12:00:00      Code(s): MNK     
for the six months ended 30 September 2016

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 CONSOLIDATED INTERIM RESULTS 
FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016


Revenue +142.9%
EBITDA +603.2%
Headline earnings per share +273.3%


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION               
                                                Unaudited     Unaudited       Audited
                                             30 September  30 September      31 March
                                                     2016          2015*         2016
                                                    $'000         $'000         $'000
ASSETS                         
Non-current assets                                122 833       121 637       134 965 
Property, plant and equipment                      92 767        86 119        98 438 
Other non-current financial assets                  3 357             -         2 235 
Intangibles                                        25 663        32 760        32 378 
Long-term receivables                               1 046         2 758         1 914 
                         
Current assets                                     22 285        13 854        21 583 
Inventories                                         1 187         1 581         1 109 
Other current financial assets                      3 808           450         7 159 
Trade and other receivables                         7 571         5 399         3 305 
Bank balances and deposits                          9 719         6 424        10 010 
Disposal group assets held for sale                 2 621            -            - 
Total assets                                      147 739       135 491       156 548 

EQUITY AND LIABILITIES                         
Equity                                             85 738        83 019        79 253 
Equity attributable to equity 
  holders of the parent                            85 738        83 019        79 253 
                         
Non-current liabilities                            52 382        43 867        59 219 
Borrowings                                         45 706        36 815        52 332 
Long-term provisions                                6 676         7 005         6 871 
Other non-current financial liabilities                 -            47            16 
                         
Current liabilities                                 9 619         8 605        18 076 
Trade and other payables                            5 773         4 954        12 869 
Other current financial liabilities                   148           123            38 
Current portion of borrowings                       2 937         2 393         3 691 
Taxation                                              175             1             1 
Provisions                                            586         1 134         1 477 
                         
Total equity and liabilities                      147 739       135 491       156 548 
Net asset carrying value per share (cents)             63            61            59 

* Restated                         


CONDENSED CONSOLIDATED INCOME STATEMENT                    
                                                              Unaudited     Unaudited
                                                           30 September  30 September
                                                        %          2016          2015*
                                                   change         $'000         $'000
Revenue                                            142.9%        42 054        17 310 
Expenses                                                        (25 051)      (14 892) 
EBITDA                                             603.2%        17 003         2 418 
Other (losses)/income                                               (91)        9 763 
Depreciation and amortisation                                    (8 232)       (6 214) 
Operating profit                                                 (8 680)        5 967 
Investment income                                                    19            24 
Finance costs                                                    (2 471)         (232)
Gain on bargain purchase                                              -           265 
Profit before taxation                               3.4%         6 228         6 024 
Taxation                                                           (174)            - 
Profit for the period                                             6 054         6 024 
                    
Attributable to:                    
Equity holders of the parent                                      6 054         6 024 
                        
* Restated                    


CONDENSED CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME               
                                                              Unaudited     Unaudited
                                                           30 September  30 September
                                                                   2016          2015*
                                                                  $'000         $'000
Profit for the period                                             6 054         6 024 
Other comprehensive income:               
Items that may be reclassified subsequently to profit or loss                
Foreign currency translation differences                             33          (106)
Total comprehensive income                                        6 087         5 918 
               
Attributable to:               
Equity holders of the parent                                      6 087         5 918 
                                                    
* Restated


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY               
                                                              Unaudited     Unaudited
                                                           30 September  30 September
                                                                   2016          2015*
                                                                  $'000         $'000 
Balance at the beginning of the period                           79 253        77 101  
Current operations               
Total comprehensive profit/(loss)                                 6 087         5 918 
Equity-settled share-based payments                                 398             -  
Balance at the end of the period                                 85 738        83 019 

* Restated               


RECONCILIATION OF HEADLINE EARNINGS
                                                              Unaudited             Unaudited
                                                           six months ended      six months ended
                                                           30 September 2016     30 September 2015*
                                                       %         $'000                 $'000     
                                                  change     Gross      Net        Gross      Net
                              
Earnings attributable to equity holders                               
  of the parent                                     0.5%              6 054                 6 024 
Losses on disposal of plant and equipment                       97       97          296      296 
Gains on disposal of intangible assets                           -        -       (9 869)  (9 869) 
Headline profit/(loss)                            273.3%              6 151                (3 549) 
                              
Basic earnings per share (cents)                              
Earnings                                            0.5%               4.48                  4.45 
Headline earnings                                 273.3%               4.55                 (2.62)
                              
Weighted average number of shares in issue ('000)                   135 256               135 256 
Actual number of share in issue at the end of 
  the period (net of treasury shares and shares 
  issued in respect of restricted stock plan) ('000)                135 256               135 256 
                              
Diluted earnings per share (cents)                              
Earnings                                            0.2%               4.46                  4.45 
Headline earnings                                 272.8%               4.53                 (2.62)
                              
Weighted average number of shares in issue ('000)                   135 635               135 256 
                              
* Restated                              


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS               
                                                              Unaudited     Unaudited
                                                           30 September  30 September
                                                                   2016          2015
                                                                  $'000         $'000
Cash flows from operating activities                              5 521         1 466 
Cash flows from investing activities                              1 718       (31 965) 
Cash flows from financing activities                             (7 564)       21 145 
Decrease in cash and cash equivalents                              (325)       (9 354) 
Cash and cash equivalents                
At the beginning of the period                                   10 010        15 891 
Foreign exchange differences                                         34          (113)
At the end of the period                                          9 719         6 424 
               
Bank balances and deposits                                        9 719         6 424  
Cash and cash equivalents                                         9 719         6 424


NOTES

BASIS OF PREPARATION AND ACCOUNTING POLICIES
The results for the six months ended 30 September 2016 have been prepared in accordance 
with International Financial Reporting Standards ("IFRS"), the disclosure requirements 
of IAS 34, the South African Institute of Chartered Accountants ("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 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 2016. 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 SAICA.

These financial statements were prepared under the supervision of the chief financial 
officer, Mr SF McClain (CPA).

RESTATEMENT OF PRIOR-PERIOD RESULTS
On 25 June 2015 the Company completed the acquisition of 100% of Leaf LFG US 
Investments, Inc. ("Leaf"). The acquisition qualified as a business combination in 
terms of IFRS 3: Business Combinations. The results as at 30 September 2015 were 
determined based on all information available at the acquisition date ("provisional 
accounting"). The provisional accounting was adjusted in the prior year, but 
subsequent to 30 September 2015, for new information obtained. This was within a 
time frame of 12 months after the acquisition date, as permitted by IFRS 3. These 
adjustments to the fair values determined in the provisional purchase price allocation 
are treated as adjustments to the comparative results as at 30 September 2015.

The Company restated its comparative results for the six months ended 30 September 2015 
as follows: 

                                                                        Change ($'000)
Statement of financial position     
Property, plant and equipment                                                    (177)
Intangibles                                                                      (576)
Borrowings                                                                        266
Long-term provisions                                                           (1 165)
Trade and other payables                                                         (190)
Current portion of borrowings                                                    (266)
Equity attributable to equity holders of the parent                               602
Income statement     
Expenses                                                                           (2)
Other income                                                                      190
Depreciation and amortisation                                                     149
Gain on bargain purchase                                                          265
Earnings attributable to equity holders of the parent                             602
     
                                                                        Change (cents)
Earnings per share     
Basic earnings per share from continuing operations:                             0.44
Headline earnings per share from continuing operations:                          0.44

DISPOSAL GROUPS HELD FOR SALE
Disposal group assets held for sale consist of $2.6 million in electric generation equipment.

RESULTS

GROUP INCOME STATEMENT
Revenue from the Company's renewable natural gas facilities increased by approximately 
$21.5 million or 161% for the six months ended 30 September 2016 from the prior period. 
The Company produced approximately 1.9 million MMBtus in renewable natural gas volumes, 
an increase of 12% over the prior period. The majority of this favourable variance is 
due to full period operations of three facilities associated with the 2015 acquisition 
of Leaf. During the six months ended 30 September 2016, the Company monetised 
approximately 15.7 million RINs, a 5.5 million increase in the number of RINs sold 
during the six months ended 30 September 2015. At 30 September 2016 the Company had 
approximately 2.9 million RINs generated and unsold in inventory. Average commodity 
pricing for natural gas during the six months ended 30 September 2016 was $2.38 vs 
$2.70 during the prior period. Average pricing realised on RIN sales during the 
six months ended 30 September 2016, was approximately 91% higher than average pricing 
realised in the prior period. For the six months ended 30 September 2016, the Company 
monetised approximately 34% of renewable natural gas production under fixed-price contracts. 

Revenue from the Company's electric generation facilities increased by approximately 
$3.2 million or 83% for the six months ended 30 September 2016 from the prior period. 
The Company produced approximately 155 000 MWh in renewable electric volumes, an 
increase of 37% over the prior period. The first quarter commencement of commercial 
operations of Bowerman Power LFG, LLC ("Bowerman"), a 20 MW electric generation 
facility in Southern California, is the leading contributor to this favourable 
variance. Average commodity pricing for electricity during the six months ended 
30 September 2016 was approximately 7% lower than the prior period. For the six months 
ended 30 September 2016, the Company monetised approximately 57% of renewable electric 
production under fixed-price contracts. 

Operating expenses for the six months ended 30 September 2016 increased by 
approximately $10.2 million or 68%. The unfavourable variance was due to royalties 
on increased commodity and attribute revenue, full-period operations of three 
facilities associated with the 2015 acquisition of Leaf and the first-quarter 
commencement of commercial operations of Bowerman. The change in gains recognised 
from the Company's hedging programmes for the six months ended 30 September 2016, 
as compared to the prior period, was immaterial.

In May 2015 the Company realised once-off proceeds of approximately $9.9 million on 
the sale of retired emission reduction credits ("ERCs") for its Texas-based renewable 
natural gas facility, as a result of the installation of pollution control equipment 
that permanently reduced the emissions profile of the facility.

GROUP STATEMENT OF FINANCIAL POSITION AND CASH FLOW
Fixed and intangible assets at 30 September 2016 include approximately $54.3 million 
and $3.3 million in costs related to the construction of the Bowerman facility, 
respectively. The Company's borrowings at 30 September 2016 were approximately 
$49.3 million. Of this amount, approximately $10.3 million was outstanding on the 
Company's commercial bank facilities, and approximately $39.0 million was outstanding 
on the facility to construct Bowerman. At 30 September 2015 approximately $6 million 
remained outstanding on borrowings acquired in conjunction with the Leaf acquisition 
completed in June 2015. As of 30 September 2016 those borrowings acquired with the 
Leaf acquisition have been fully satisfied. Of the approximately $49.3 million in 
borrowings outstanding at 30 September 2016, approximately $2.9 million is currently 
due within the next 12 months.

Cash flow from operating activities of $5.5 million for the six months ended 
30 September 2016 was approximately $4.1 million higher from the prior period, driven 
by a corresponding increase in EBITDA. Included in cash flow from investing activities 
was a $4.8 million refund received for amounts not utilised under an agreement to 
construct an interconnection for the Bowerman facility. Included in cash flow from 
financing activities was the satisfaction of approximately $5.5 million outstanding 
borrowings acquired in conjunction with the Leaf acquisition. As of 30 September 2016, 
the Company had cash on hand of approximately $9.7 million. Approximately $2.3 million 
capacity remains under the Company's revolving credit facility. 

SUBSEQUENT EVENT
In October 2016, the Company entered into a 20-year agreement with one of its existing 
landfill counterparties that provides the option to build, own and operate a renewable 
natural gas facility. Upon commercial operation this new facility will process up to 
7 000 scfm of methane currently being allocated to the Company's on-site electric 
facility that monetises power at market-rate commodity pricing. The project is in the 
design and engineering phase, with commercial operations targeted early in the 
2019 financial year. 

CHANGES IN DIRECTORATE
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 an interim 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 October 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: 28/10/2016 12:00:00 Supplied by www.sharenet.co.za                     
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