Wrap Text
Unaudited condensed consolidated interim results
for the six months ended 30 September 2017
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 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
30 September 30 September 31 March
2017 2016 2017
$'000 $'000 $'000
ASSETS
Non-current assets 156 927 122 833 156 960
Property, plant and equipment 112 323 92 767 101 330
Other non-current financial assets 7 3 357 4 185
Intangibles 21 932 25 663 23 398
Deferred taxation 21 763 - 26 825
Long-term receivables 902 1 046 1 222
Current assets 40 947 22 285 33 042
Inventories 1 588 1 187 1 053
Other current financial assets 45 3 808 3 582
Trade and other receivables 8 881 7 571 8 785
Taxation 10 - -
Bank balances and deposits 30 423 9 719 19 622
Disposal group assets held for sale 769 2 621 770
Total assets 198 643 147 739 190 772
EQUITY AND LIABILITIES
Equity 128 527 85 738 122 729
Equity attributable to equity holders
of the parent 128 527 85 738 122 729
Non-current liabilities 47 715 52 382 42 052
Borrowings 41 349 45 706 35 837
Long-term provisions 6 350 6 676 6 215
Other non-current financial liabilities 16 - -
Current liabilities 22 080 9 619 25 592
Trade and other payables 13 867 5 773 11 869
Other current financial liabilities 229 148 8
Current portion of borrowings 6 602 2 937 11 433
Taxation 399 175 450
Provisions 983 586 1 832
Non-current liabilities held for sale 321 - 399
Total equity and liabilities 198 643 147 739 190 772
Net asset carrying value per share (cents) 95 63 90
CONSOLIDATED INCOME STATEMENT
Unaudited Unaudited
30 September 30 September
% 2017 2016
change $'000 $'000
Revenue 26.3% 53 111 42 054
Expenses (26 280) (25 051)
EBITDA 57.8% 26 831 17 003
Other income (losses) 107 (91)
Depreciation and amortisation (7 757) (8 232)
Operating profit 19 181 8 680
Investment income 31 19
Finance costs (1 952) (2 471)
Loss on extinguishment of borrowings (1 611) -
Profit before taxation 151.3% 15 649 6 228
Taxation (6 072) (174)
Profit for the period 9 577 6 054
Attributable to:
Equity holders of the parent 9 577 6 054
CONSOLIDATED STATEMENT OF OTHER COMPREHENSIVE INCOME
Unaudited Unaudited
30 September 30 September
2017 2016
$'000 $'000
Profit for the period 9 577 6 054
Other comprehensive income:
Items that may be reclassified subsequently to profit or loss
Foreign currency translation differences 83 33
Total comprehensive income 9 660 6 087
Attributable to:
Equity holders of the parent 9 660 6 087
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited
30 September 30 September
2017 2016
$'000 $'000
Balance at the beginning of the period 122 729 79 253
Current operations
Total comprehensive profit 9 660 6 087
Equity-settled share-based payments 347 398
Dividends (4 209) -
Balance at the end of the period 128 527 85 738
RECONCILIATION OF HEADLINE EARNINGS
Unaudited Unaudited
six months ended six months ended
30 September 2017 30 September 2016
% $'000 $'000
change Gross Net Gross Net
Earnings attributable to equity holders
of the parent 58.2% 9 577 6 054
Losses on disposal of plant and equipment 6 6 97 97
Gain on disposal of intangible assets (113) (113) - -
Headline profit 54.0% 9 470 6 151
Basic earnings per share (cents)
Earnings 57.4% 7.04 4.48
Headline earnings 53.2% 6.97 4.55
Weighted average number of shares in issue ('000) 135 940 135 256
Actual number of share in issue at end of period
(net of treasury shares and shares issued in
respect of restricted stock plan) ('000) 135 940 135 256
Diluted earnings per share (cents)
Earnings 55.9% 6.96 4.46
Headline earnings 51.7% 6.88 4.53
Weighted average number of shares in issue ('000) 137 640 135 635
CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited
30 September 30 September
2017 2016
$'000 $'000
Cash flows from operating activities 19 956 5 521
Cash generated by operations 27 384 19 415
Net finance costs (1 431) (2 452)
Changes in working capital (4 925) (11 442)
Taxation paid (1 072) -
Cash flows from investing activities (4 004) 1 718
Investments disposed of 7 759 471
Decrease in long-term receivables 311 -
Proceeds from insurance recovery 350 -
Intangible assets
- Additions (951) -
- Disposals and refunds 638 4 843
Property, plant and equipment
- Additions (12 186) (3 596)
- Disposals 75 -
Cash flows from financing activities (5 236) (7 564)
Debt issuance costs (798) (28)
Debt extinguishment costs (1 127) -
Dividends paid (4 209) -
Net funding raised/(repaid) 898 (7 536)
Increase/(decrease) in cash and cash equivalents 10 716 (325)
Cash and cash equivalents
At the beginning of the period 19 622 10 010
Foreign exchange differences 85 34
At the end of the period 30 423 9 719
Bank balances and deposits 30 423 9 719
NOTES
The results for the six months ended 30 September 2017 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 2017. 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).
DISPOSAL GROUPS HELD FOR SALE
The Company has identified specific operating assets in its renewable electric generation
operating portfolio to be held for sale. Those assets and corresponding liabilities
are included in disposal groups held for sale in the statement of financial position.
RESULTS
Consolidated income statement
Revenue from the Company's renewable natural gas facilities increased by $8.3 million
or 23.7% for the six months ended 30 September 2017 from the prior comparative six months.
The Company produced 2.0 million MMBtus in renewable natural gas volumes, an increase
of 3.0% over the prior comparative six months. During the six months ended 30 September 2017
the Company monetised 8.2 million RINs, a 7.5 million decrease in the number of RINs sold
during the six months ended 30 September 2016. The decrease in RINs sold was attributable
to an increase in gas volumes monetised under fixed-price contracts. At 30 September 2017
the Company had 1.4 million RINs generated and unsold. Average commodity pricing for
natural gas during the six months ended 30 September 2017 was 29.7% higher than the prior
comparative six months. Average pricing realised on RIN sales during the six months ended
30 September 2017 was 46.8% higher than average pricing realised in the prior comparative
six months, partially attributed to the increase in the cellulosic waiver credit from
calendar year 2016 to calendar year 2017. For the six months ended 30 September 2017
the Company monetised 52.0% of renewable natural gas production under fixed-price contracts.
Revenue from the Company's electric generation facilities increased by $2.8 million or
38.9% for the six months ended 30 September 2017 from the prior comparative six months.
The Company produced 0.2 million MWh in renewable electric volumes, approximately equal
to the prior comparative six months. Average commodity pricing for electricity during
the six months ended 30 September 2017 was 15.8% higher than the prior comparative
six months. For the six months ended 30 September 2017 the Company monetised 67.1% of
renewable electric production under fixed-price contracts.
Operating expenses for the six months ended 30 September 2017 increased by $1.2 million
or 4.9%. The gains recognised from the Company's hedging programmes for the six months
ended 30 September 2017, as compared to the prior comparative six months, increased
by $0.2 million.
In August 2017 the Company realised gains of $0.1 million on the sale of nitrogen oxide
("NOx") emission allowances for its Texas-based renewable electric generation facilities.
In August 2017 the Company recognised $1.6 million in expenses related to the early
extinguishment of debt. Total cash paid associated with this expense was $1.1 million.
For the six months ended 30 September 2017 the Company has recognised $6.1 million in
tax expense, of which $5.1 million was off-set against the Company's deferred tax asset.
Consolidated statement of financial position and cash flow
Fixed and intangible assets at 30 September 2017 include $28.2 million and $0.9 million
in costs related to the construction of two renewable natural gas facilities, respectively.
Deferred tax assets of $21.8 million at 30 September 2017 relate to the Company's net
operating losses that may be utilised for set-off against future taxable income.
In July 2017 the Company paid in full the outstanding $8.8 million balance on its existing
term loan. In August 2017 the Company paid in full the outstanding balance of $0.5 million
on its existing revolving credit facility.
In August 2017 the Company entered into a credit agreement with a commercial bank,
which provided for a three-year term loan facility in the amount of $20.0 million and
a three-year $20.0 million revolving credit facility.
In August 2017 Bowerman Power LFG, LLC ("Bowerman"), a subsidiary of the Company that
owns and operates a 20 MW electric generation facility in Southern California, entered
into a credit agreement with a commercial bank, which provided for a five-year term loan
facility in the amount of $27.5 million and a five-year revolving credit facility in the
amount of $10.0 million. Bowerman used the proceeds from the term loan of $27.5 million,
$1.8 million from the revolving credit facility and $10.0 million of restricted deposits
to repay all indebtedness outstanding and related prepayment costs under the existing
construction to term loan agreement.
The Company's consolidated borrowings at 30 September 2017 were $48.0 million, net of
debt issuance costs. $19.7 million was outstanding on the Company's commercial bank
facilities and $29.0 million was outstanding on the Bowerman commercial bank facilities.
Of the total Company borrowings outstanding at 30 September 2017, $6.9 million is
currently due within the next 12 months.
Cash flow from operating activities of $20.0 million for the six months ended
30 September 2017 was $14.4 million higher than the prior comparative six months,
primarily driven by increases in EBITDA and changes in working capital related to the
development of two renewable natural gas facilities. Included in cash flow from investing
activities was asset additions of $13.1 million and $7.8 million of net changes in
restricted deposits in conjunction with the debt refinancing. As of 30 September 2017,
the Company had cash on hand of $30.4 million. Undrawn capacities of $12.8 million and
$6.3 million remain under the Company's corporate and Bowerman revolving credit facilities,
respectively.
CHIEF EXECUTIVE OFFICER'S REPORT
Cellulosic RINs
In July 2017 the EPA released the proposed volume obligations for 2018 of 238 million
gallons cellulosic D3 RINs, representing a 23% decrease over the 2017 volume obligations
for cellulosic D3 RINs of 311 million gallons. The 2018 proposal was below our expectations
as the EPA used a new "rate of growth" methodology in this proposal instead of a previously
used "facility-by-facility" analysis. This "rate of growth" methodology fails to take
into account renewable natural gas ("RNG") projects under construction or undergoing
retrofit to add fuel volume and has the potential to be inaccurate. In the interim, the EPA
accepted comments through 31 August 2017 from industry participants (including Montauk)
on the volumes which it intends to use in finalising the volume obligations to accurately
reflect actual production while promoting the growth of cellulosic biofuels. Montauk has
taken an active role in the process by providing comments both individually and collectively
through various renewable energy organisations to assist the EPA in setting volume obligations
that meet the projected production for the industry. The proposed volume obligations are
expected to be finalised by the EPA by 30 November 2017.
Development activities
In October 2016 the Company entered into an agreement with one of its existing landfill
counterparties that provides the option to build, own and operate a RNG facility for a
term of 20 years from commercial operation. Upon commercial operation this new facility
will process up to 7 500 standard cubic feet per minute ("scfm") of methane, a portion of
which is currently being allocated to the Company's on-site electric facility that
monetises power at market-rate commodity pricing. Commercial operation of the RNG project
is targeted to commence early in the 2019 financial year and will replace the existing
on-site electric facility.
In June 2017 the Company entered into an agreement with a new landfill counterparty to
build, own and operate the gas collection system and a RNG facility at a landfill located
in Ohio for a term of 20 years from commercial operation. Upon commercial operation
this new facility will process up to 3 500 scfm of methane. Commercial operation of
this RNG project is targeted to commence in the first half of the 2019 financial year.
These additions will further strengthen Montauk's position as a leader in the production
of renewable natural gas from landfill methane.
EVENTS SUBSEQUENT TO REPORTING DATE
There have been no events subsequent to the reporting date which may have a material
impact on the results for the six months ended 30 September 2017 or the statement of
financial position as at that date.
DIVIDEND TO SHAREHOLDERS
The directors have resolved not to declare an interim dividend.
JA Copelyn ML Ryan SF McClain
Chairman Chief Executive Officer Chief Financial Officer
Cape Town
31 October 2017
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
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196. PO Box 61051, Marshalltown, 2107
Sponsor: Investec Bank Limited
www.montauk.co.za
Date: 31/10/2017 04:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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