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Anglo Pacific Group PLC makes progress

Royalty income increased 149% to £8.7mln, driven by a strong increase in production at Narrabri and mining at the Kestrel operation. Both are Australian coal assets.
Anglo Pacific Group PLC makes progress
Anglo's coal investments are doing well.

Anglo Pacific Group PLC (LON:APF, TSX:APY), which makes its money from mining royalty and finance deals, posted a strong rise in top line growth as it swung to a profit last year.

Royalty income increased 149% to £8.7mln, driven by a strong increase in production at Narrabri and mining at the Kestrel operation. Both are Australian coal assets.

Adjusted earnings turned positive and grew by £6.2mln to £4mln, while Anglo posted a loss after tax of £22.6mln, which was largely due to the revaluation charge levied against Kestrel, which was more than £27mln.

The company, which was repaid a £2.9mln loan owed by Laramide Resources, was sitting with a £5.7mln cash balance at the year end and net debt of £1.8mln.

Anglo’s net assets at the period end were worth £162mln – well in excess of its market capitalisation, which currently stands at £118mln.

Investors will receive a final dividend of 3p a share, giving 7p in total – which means Anglo yields more than 10%.

Its policy going forward is to pay out 65% of adjusted earnings and in the medium-term the annual dividend should be at least 6p.

“The indiscriminate selling which has affected commodity stocks has also impacted our share price, to an extent that we trade well below our net asset value per share and at a very high dividend yield,” said chief executive Julian Treger.

“Ordinarily such a yield would suggest to the market a further dividend cut.

“However, following our announcement on January 28, in which we outlined a revision to our dividend policy, we have now made the cuts we believe are necessary to protect our balance sheet, subject to ongoing market conditions being relatively stable.”

Anglo Pacific may be at a turning point, broker Peel Hunt suggested.

The metallurgical coal price has firmed a little, the shares also trade at a material discount to the book value of its assets, offer a 9% yield while the Kestrel mine set to deliver significantly higher royalty income from the second half of the year.

“ Clearing 2015 with the balance sheet intact sees the company through the worst period (2014-2015) in its recent history.

“The dividend has been adjusted to a more sustainable level and the pipeline of new royalty acquisitions should offer opportunity for the management team to add value.”

The broker’s target price is 83p.

Shares rose 8% to 69p.


-- adds broker comment, share price --

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Anglo Pacific Group plc Timeline

February 21 2017

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