Interim results for the six months ended June 30, 2016

Anglo Pacific Group PLC (“Anglo Pacific”, the “Company”, the “Group”) (LSE: APF) (TSX: APY) is pleased to announce interim results for the six months ended June 30, 2016 which are available on both the Group’s website at www.anglopacificgroup.com and on SEDAR at www.SEDAR.com.

 

Headlines:

Results for the half year

  • Total royalty income of £4.1m in H1 2016, a 6% increase from £3.8m in H1 2015
  • Increased proportion of sales from Kestrel (37%) within the Group’s land in H1 2016 (H1 2015: 22%).
  • Weakening of the pound following the outcome of the EU referendum significantly benefitted the balance sheet at June 30, 2016 and should impact positively on the income statement in H2 2016
  • Interim dividend maintained at the 2015 final dividend level of 3.00p (2015 interim dividend: 4.00p) as per the previously announced dividend policy
  • Free cash flow of £3.6m in H1 2016, more than double the £1.7m generated in H1 2015
  • Loss after tax of £5.4m resulting in a basic loss per share of 3.18p (June 30, 2015: £8.8m and 5.81p respectively) mainly arising from the £10.2m non-cash Kestrel revaluation deficit
  • The unrealised foreign exchange gain of translating the Kestrel asset to pounds at the balance sheet date reverses this loss, but this is recognised in other comprehensive income and not the income statement
  • Adjusted profit after tax of £2.4m, up 50% on H1 2015, resulting in adjusted earnings per share of 1.43p (June 30, 2015: £1.6m and 1.04p respectively)
  • Net debt of £5.0m at June 30, 2016 (December 31, 2015: £1.8m) and currently £7.5m following the dividend payment in August
  • Significant increase in the value of the Group’s equity stake in Berkeley Energia in the period, to £11.3m at June 30, 2016 (December 31, 2015: £7.2m), currently valued at £13.5m
  • Increase in net assets at June 30, 2016 to £164.8m from £162.0m at December 31, 2015 resulting in net assets per share of 97p (December 31, 2015: 95p)

 

Outlook

  • The majority of the Group’s revenue from Kestrel for the year is expected in H2 2016, similar to 2015, and this is now likely to be the last time there is such a discrepancy between reporting periods as mining will now be mainly within the Group’s private royalty land
  • Improved outlook for both coking and thermal coal prices with the Q3 2016 coking coal contract price settling at US$92/t, a 14% increase on Q1 2016 and spot price currently at around US$110/t
  • Absent any downward movement in exchange rates and commodity prices, FY 2016 royalty income is expected to be considerably higher than 2015, mainly driven by production levels at Kestrel
  • Borrowing levels expected to reduce from the current levels and free cash flow is expected to increase, at least in line with royalty income growth

Julian Treger, Chief Executive Officer, commented:

 

“Anglo Pacific performed strongly in the first six months of 2016, reporting higher royalty income, a doubling in free cash flow and a 50% increase in adjusted earnings. We expect this to continue for the remainder of 2016 as, similar to 2015, the majority of our income should be generated in the second half of the year, due to increased mining in our private royalty lands at Kestrel.

 

The immediate impact of Brexit was the weakening of the pound and this should be positive for the Group as our assets and income are in dollar denominated currencies. The price of both coking coal and thermal coal ended the second quarter strongly, mainly on the back of supply cuts in China. Both of these tailwinds combined should facilitate a stronger second half of the year for the Group.

There have been a number of positive developments in our royalty portfolio during the period: increased permitting at Narrabri; record production levels at Maracás Menchen; first royalty revenue from Four Mile; and significant progress by Berkeley Energia Limited at Salamanca. We were also pleased to see Berkeley announce a further royalty during the year which would imply that our existing royalty over the project is now worth three times the balance sheet value.

Our encouraging start to the year, coupled with the near-term improved outlook for commodity prices and a weaker pound, should now accelerate dividend cover. We continue to work hard to acquire accretive acquisitions but remain disciplined to only invest in those opportunities which will, over time, enable us to grow the dividend and create shareholder value.”

Analyst conference call:

There will be an analyst presentation via webcast at 09:30 (BST) on August 25, 2016 at www.anglopacificgroup.com. The presentation will be hosted by Julian Treger (CEO), Kevin Flynn (CFO) and Juan Alvarez (Head of Investments). Dial in details for the call are shown below and a replay of the webcast will also be available at www.anglopacificgroup.com.

Dial in number: 020 3059 8125 (United Kingdom local)
+ 44 20 3059 8125 (all other locations)

Participant Password: “Anglo Pacific” – this must be quoted to the Operator in order for participants to gain access to the conference

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