Sky Solar Holdings, Ltd. today announced its financial results for the first quarter of 2016 ended March 31, 2016.
- Q1 2016 total revenue of $11.7 million, up 14% over Q1 2015
- Q1 2016 electricity revenue of $9.9 million, up 94% over Q1 2015
- Q1 2016 Adjusted EBITDA1 of $5.4 million, compared to $7.0 million in Q1 2015
- 133.1MW of IPP assets in operation as of March 31, 2016, compared to 128.6MW as of December 31, 2015
- As of March 31, 2016, 24.1MW under construction, 236.1MW of shovel-ready projects, and 1.0 GW of solar parks in pipeline
Mr. Weili Su, Founder, Chairman and Chief executive officer of Sky Solar, commented, "While our overall installation during the quarter was modest as expected, this performance was generally due to our our ongoing strategic initiatives to unlock shareholder value. In addition, in early May, we announced the execution of a definitive agreement to acquire operating assets in the US, marking our first US transaction, a strategic market for Sky Solar in which we look forward to building a larger presence."
Mr. Sanjay Shrestha, Chief Investment Officer of Sky Solar, and President of Sky Capital America commented, "Our strategic evaluation of Japan is underway. Furthermore, our recently signed definitive agreement to acquire operating assets in the US include 22MW of solar parks with an average remaining PPA of 15 years, which can generate a highly attractive cash on-cash-return."
"We are also pursing additional opportunities in the US and continue to remain disciplined on our investment return metrics. We also see great potential for sustainable growth in Uruguay with attractive returns beyond our operating portfolio of 9MW and existing pipeline of 82MW. We look forward to providing additional operational and financial updates to investors as we progress through the year."
First Quarter 2016 Financial Results
Revenue was $11.7 million, up 14.5% from $10.3 million in the same period of 2015.
Electricity sales were $9.9 million in the first quarter of 2016, up 94.0% from $5.1 million in the same period of 2015. The year-over-year growth in electricity sales was primarily due to the increase in the Company's operational IPP assets globally. Electricity sales in the first quarter of 2016 was up 25.9% from $7.9 million in the fourth quarter of 2015, due to the same reason.
Systems and other sales were $1.8 million in the first quarter of 2016, down 65.0% from $5.1 million in the same period of 2015. The year-over-year decline in systems and other sales was primarily due to permit sales in Japan in the first quarter of 2015, while the Company did not record similar sales in the first quarter of 2016. Systems and other sales in the first quarter of 2016 were down 58.3% from $4.3 million in the fourth quarter of 2015, primarily due to the Company's continuing shift toward IPP electricity sales.
The following table shows the Company's sequential and year-over-year change in revenue for each category, geographic region and period indicated.
Cost of sales and services were $6.4 million, compared to $3.1 million in the same period in 2015. The increase was mainly a result of the increased capacity of IPP solar parks during the first quarter of 2016.
Gross profit was $5.3 million, down 25.7% from $7.2 million in the same period in 2015. Gross margin decreased to 45.5% from 70.0% in the same period in 2015 because of the permits sales in Japan in first quarter 2015, which commanded a higher margin.
Selling, general and administrative ("SG&A") expenses were $4.8 million, up 10.6% from $4.4 million in the same period in 2015 due to the increased project financing activities in South America.
Other operating income was $1.9 million, compared to $42 thousand in the same period of 2015. The increase in other operating income was due to income from the disposal of 1.8MW solar parks in Japan during the first quarter of 2016.
As a result of the above, operating profits decreased to $2.4 million in the first quarter of 2016, from $2.8 million in the same period in 2015.
Finance costs were $1.3 million, compared to $0.9 million in the same period of 2015. The increase in finance costs was primarily due to the increased average balance of bank loans in the first quarter in 2016.
Other non-operating expenses of $1.6 million mainly represented fair value changes of financial liabilities – FVTPL of US$0.8 million and loss from hedge ineffectiveness on cashflow hedge of US$1.0 million – compared to other non-operating income of $485 thousand in the same period of 2015. These other non-operating expenses were primarily due to an increase of charges in fair value change as compared with the same period in 2015.
As a result of the above, the net loss for the first quarter of 2016 was $823 thousand, compared to a net profit of $2.6 million in the same period in 2015.
Basic and diluted loss per share was $0.002 compared to earning per share of $0.01 in the same period in 2015. Basic and diluted loss per ADS were $0.017 compared to earning per share of $0.05 in the same period in 2015.
Adjusted EBITDA was $5.4 million, compared to $7.0 million in the same period in 2015.
As of March 31, 2016, the Company owned and operated 133.1MW of IPP assets, compared to 128.6MW as of December 31, 2015. This reflects all the incremental net project additions in Japan.
The Company had 24.1MW of projects under construction as of March 31, 2016, compared to 28.2MW under construction as of December 31, 2015. All of the 24.1MW of projects under construction are located in Japan.
In total, the Company had 1.2 GW of projects in various stages of development as of March 31, 2016, which included the projects under construction described above as well as 236.1MW of shovel-ready projects and more than 1.0 GW of projects in pipeline. This does not include any incremental opportunities associated with project opportunities in the US or Latin American markets.
Balance Sheet and Liquidity
As of March 31, 2016, the Company had bank balances and cash of $38.4 million, trade receivables of $24.3 million and IPP solar park assets of $288.8 million. Total borrowing was $123.2 million, including $18.4 million of borrowing due within one year.
Use of Non-IFRS Measures
To provide investors with additional information regarding the Company's financial results, the Company has disclosed Adjusted EBITDA, a non-IFRS financial measure, below. The Company presents this non-IFRS financial measure because it is used by the Company's management to evaluate its operating performance. The Company also believes that this non-IFRS financial measure provides useful information to investors and others in understanding and evaluating the Company's consolidated results of operations in the same manner as the Company's management and in comparing financial results across accounting periods and to those of its peers.
Adjusted EBITDA, as the Company presents it, represents profit or loss for the period before taxes, depreciation and amortization, adjusted to eliminate the impact of share-based compensation expenses, interest expenses, impairment losses and fair value changes of financial liabilities.
The use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation or as a substitute for analysis of the Company's financial results as reported under IFRS. Some of these limitations are: (a) although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; (b) Adjusted EBITDA does not reflect changes in, or cash requirements for, the Company's working capital needs; (c) Adjusted EBITDA does not reflect the potentially dilutive impact of equity-based compensation; (d) Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to the Company; and (e) other companies, including companies in the Company's industry, may calculate Adjusted EBITDA or similarly titled measures differently, which reduces their usefulness as a comparative measure. Because of these and other limitations, you should consider Adjusted EBITDA alongside the Company's IFRS-based financial performance measures, such as profit (loss) for the period and the Company's other IFRS financial results.
The following table presents a reconciliation of Adjusted EBITDA to profit (loss) for the period, the most directly comparable IFRS measure, for each of the periods indicated:
The Company does not consider historical Adjusted EBITDA to be representative of future Adjusted EBITDA, as the Company's revenue model changed from primarily generating revenue from selling solar energy systems to primarily generating revenue from selling electricity in the fourth quarter of 2013 and the Company continues to shift its business towards IPP business. The Company believes that Adjusted EBITDA is an important measure for evaluating the results of its IPP business.
These measures are not intended to represent or substitute numbers as measured under IFRS. The submission of non-IFRS numbers is voluntary and should be reviewed together with IFRS results.
Unless specifically indicated or the context otherwise requires, megawatt capacity values in this earnings release refer to the attributable capacity of a solar park. We calculate the attributable capacity of a solar park by multiplying the percentage of our equity ownership in the solar park by the total capacity of the solar park.