Wrap Text
Reviewed condensed consolidated results for the year ended 31 March 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")
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 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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