Wrap Text
Reviewed condensed consolidated results for the year ended 31 March 2015
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 2015
REVIEWED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed Audited
31 March 31 March
2015 2014
$'000 $'000
ASSETS
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 CONSOLIDATED INCOME STATEMENT
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 CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
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 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
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
RECONCILIATION OF HEADLINE EARNINGS
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 CONSOLIDATED STATEMENT OF CASH FLOWS
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
SEGMENTAL ANALYSIS
Reviewed Audited
31 March 31 March
2015 2014
$'000 $'000
Revenue
Natural gas 29 428 31 956
Total 29 428 31 956
EBITDA
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)
NOTES
BASIS OF PREPARATION AND ACCOUNTING POLICIES
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).
DISCONTINUED OPERATIONS AND DISPOSAL GROUPS HELD FOR SALE
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:
$'000
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
RESULTS
CONSOLIDATED INCOME STATEMENT
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.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AND CASH FLOW
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.
SUBSEQUENT EVENT
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.
COMMENTARY
GENERAL
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.
ENERGY COMMODITY PRICING
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.
ENVIRONMENTAL ATTRIBUTES - RENEWABLE FUELS STANDARD (RFS II)
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.
DEVELOPMENT ACTIVITIES
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.
CHANGES IN DIRECTORATE
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
AUDITOR'S REVIEW
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.
DIVIDEND TO SHAREHOLDERS
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
www.montauk.co.za
Date: 04/06/2015 04:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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