Major Drilling Group International Inc. (TSX: MDI) today reported
results for its first quarter of fiscal year 2021, ended July 31,
2020.
Highlights
In millions of Canadian dollars(except earnings per share) |
Q1 2021 |
|
Q1 2020 |
|
Revenue |
$89.4 |
|
$117.5 |
|
Gross margin |
|
16.9 |
% |
|
18.2 |
% |
Adjusted gross margin(1) |
|
27.8 |
% |
|
26.1 |
% |
EBITDA(2) As percentage of revenue |
|
13.915.5 |
% |
|
18.015.3 |
% |
Net earnings Per share |
|
2.10.03 |
|
|
6.00.08 |
|
(1) Adjusted gross margin excludes
depreciation expenses (see “Non-IFRS Financial Measures”).(2)
Earnings before interest, taxes, depreciation and amortization (see
“Non-IFRS Financial Measures”).
- Quarterly revenue was $89.4
million, down 24% from the same quarter last year due to the impact
of COVID-19.
- Net earnings at $2.1 million or
$0.03 per share.
- Added 13 rigs this quarter,
including 10 rigs to support U.S. underground operations.
“I am pleased with the fact that despite reduced
activity, the Company managed to be profitable this quarter.
Some of our operations were able to grow their revenue as compared
to last year while our larger operations, including Canada, U.S.,
Mexico and Chile, were affected more than others by COVID-19,” said
Denis Larocque, President and CEO of Major Drilling Group
International Inc. “The quarter started extremely slow as
many projects remained shut down, but the Company was still able to
generate $13.9 million in EBITDA. As the quarter progressed,
we saw more and more projects resume operations, some with a
reduced number of rigs due to restrictions on travel and mining
activities in some jurisdictions. I want to take this
opportunity to thank our employees and management for their effort
to ensure we continue to operate safely and efficiently during
these uncertain times.”
“The Company maintains a strong financial
position with net debt (net of cash, excluding lease liabilities
reported under IFRS 16) at $2.0 million. The decrease in cash
this quarter was due to a net working capital increase, mostly from
higher receivables as activity increased in the second half of the
quarter. As well, we spent $7.5 million on capital
expenditures this quarter, as we added 13 drill rigs and support
equipment,” said Mr. Larocque. “Twelve of these drills were
underground drills, including 10 rigs and ancillary equipment
bought from a smaller contractor in the U.S., with half of these
rigs added to existing contracts, as part of our diversification
strategy. During the quarter, we disposed of seven older and
inefficient rigs, bringing the fleet total to 613 rigs. Going
forward, with the anticipated increase in activity, we expect the
need for ancillary equipment to increase to support additional rigs
going to work."
“During the quarter, the Company repaid $20
million on its revolving bank loan facility. Last quarter, as
a cautionary measure given the uncertainty with respect to the
COVID-19 pandemic, the Company had drawn a total of $35 million
(the remaining portion of its $50 million facility) to ensure
access to cash if there was a prolonged slowdown.”
“As we look forward, the price of gold, which
accounted for 63% of the Company’s drilling activity this quarter,
has increased to new historic highs, above the US$2,000
level. In light of these existing conditions,
senior/intermediate gold miners are generating strong free cash
flows, at a time where they face declining reserves as a result of
low exploration spending over the last several years. As
well, we have seen a significant increase in mining financings
lately, particularly for junior mining companies, although there is
always a four to six month lag between the closing of financings
and the start of drilling programs.”
“Many industry experts expect that copper, which
typically accounts for 20-25% of the Company’s drilling activity,
will face a deficit position in the next few years, due to the
continued production and high grading of mines, combined with the
lack of exploration work conducted to replace reserves. New
infrastructure plans announced in China, India, Europe and soon to
be announced in the U.S., will require more copper and other
metals, which should accelerate the depletion of those
reserves.”
“With these signs pointing towards an increase
in exploration spending, we are preparing for an increase in
activity later in the fall and well into the 2021 calendar year and
beyond. However, in the short-term, operations will continue
to be somewhat affected by COVID-19 restrictions, which will slow
down the ramp up of drilling programs.”
First Quarter Ended July 31,
2020
Total revenue for the quarter was $89.4 million,
down 24% from revenue of $117.5 million recorded in the
same quarter last year. The foreign exchange translation impact on
revenue for the quarter, when comparing to the effective rates for
the same period last year, is negligible, with a minimal impact on
net earnings.
Revenue for the quarter from Canada - U.S.
drilling operations decreased by 24.6% to $46.0 million,
compared to the same period last year. The region saw
continued shutdowns in the first part of the quarter due to
government and customer imposed restrictions caused by COVID-19.
However, by quarter end, operations had resumed on a number of
projects under enhanced safety protocols.
South and Central American revenue decreased by
40.4% to $19.5 million for the quarter, compared to the same
quarter last year. Operational challenges in relation to
government or customer imposed restrictions regarding COVID-19
remained in place during the quarter in certain regions.
Asian and African operations reported revenue of
$23.8 million, which is flat compared to the same period last
year. Strong operational performances in Indonesia and
Mongolia offset the COVID-19 related shutdowns faced in Southern
Africa.
Gross margin percentage for the quarter
was 16.9%, compared to 18.2% for the same period last
year. Depreciation expense totaling $9.7 million is included
in direct costs for the current quarter, versus $9.3 million
in the same quarter last year. Adjusted gross margin, which
excludes depreciation expense, was 27.8% for the quarter, compared
to 26.1% for the same period last year. Margins were
positively impacted by improved pricing since January 2020, and by
approximately 1% due to government assistance programs available to
the Company in the hardest hit regions.
General and administrative costs were $11.2
million, a decrease of $1.0 million compared to the same quarter
last year. The decrease is mainly related to reduced travel
and various government assistance programs for administrative
employees. These temporary reductions will subside once activity
levels return in those impacted regions and government restrictions
are eased.
The income tax provision for the quarter was an
expense of $1.2 million compared to an expense of $2.0 million
for the prior year period. The income tax expense for the
quarter was impacted by non-deductible expenses and non-tax
effected losses in certain regions, while incurring taxes in
profitable branches.
Net earnings were $2.1 million or $0.03 per
share ($0.03 per share diluted) for the quarter, compared to net
earnings of $6.0 million or $0.08 per share ($0.08 per share
diluted) for the prior year quarter.
NON-IFRS FINANCIAL MEASURES
The Company’s financial data has been prepared
in accordance with IFRS, with the exception of certain financial
measures detailed below. The Company believes these non-IFRS
financial measures are key, for both management and investors, in
evaluating performance at a consolidated level and are commonly
reported and widely used by investors and lending institutions as
indicators of a company’s operating performance and ability to
incur and service debt, and as a valuation metric. These measures
do not have a standardized meaning prescribed by IFRS and therefore
may not be comparable to similarly titled measures presented by
other publicly traded companies, and should not be construed as an
alternative to other financial measures determined in accordance
with IFRS.
EBITDA - earnings before interest, taxes,
depreciation and amortization.
(in $000s CAD) |
|
Q1 2021 |
|
|
Q1 2020 |
|
|
|
|
|
|
|
|
Net earnings |
$ |
2,148 |
|
$ |
6,033 |
|
Finance costs |
|
288 |
|
|
219 |
|
Income tax provision |
|
1,231 |
|
|
1,994 |
|
Depreciation and amortization |
|
10,220 |
|
|
9,717 |
|
EBITDA |
$ |
13,887 |
|
$ |
17,963 |
|
Adjusted gross profit/margin - excludes
depreciation expense.
(in $000s CAD) |
|
Q1 2021 |
|
|
Q1 2020 |
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
89,420 |
|
|
$ |
117,459 |
|
Direct costs |
|
|
74,295 |
|
|
|
96,090 |
|
Less: depreciation |
|
|
(9,707 |
) |
|
|
(9,321 |
) |
Adjusted gross profit |
|
|
24,832 |
|
|
|
30,690 |
|
Adjusted gross margin |
|
|
27.8 |
% |
|
|
26.1 |
% |
Forward-Looking Statements
This news release contains statements that
constitute forward-looking statements about
the Company’s objectives, strategies, financial
condition, results of operations, cash flows and businesses. All
statements, other than historical facts, are “forward-looking”
because they are based on current expectations, estimates,
assumptions, risks and uncertainties. These forward-looking
statements are typically identified by future or conditional verbs
such as “outlook”, “believe”, “anticipate”, “estimate”, “project”,
“expect”, “intend”, “plan”, and terms and expressions of similar
import.
Forward-looking statements include, but are not
limited to: worldwide demand for gold and base metals and overall
commodity prices; the level of activity in the mining industry and
the demand for the Company’s services; the Canadian and
international economic environments; the Company’s ability to
attract and retain customers and to manage its assets and operating
costs; sources of funding for its clients (particularly for junior
mining companies); competitive pressures; currency movements (which
can affect the Company’s revenue in Canadian dollars); the
geographic distribution of the Company’s operations; the impact of
operational changes; changes in jurisdictions in which the Company
operates (including changes in regulation); failure by
counterparties to fulfill contractual obligations; and other
factors as may be set forth as well as objectives or goals
including words to the effect that the Company or management
expects a stated condition to exist or occur. Since
forward-looking statements address future events and conditions, by
their very nature, they involve inherent risks and
uncertainties. Actual results in each case could differ
materially from those currently anticipated in such statements by
reason of factors such as, but not limited to, the risks relating
to the COVID-19 outbreak and the factors set out in the discussion
on pages 15 to 19 of the 2020 Management’s Discussion &
Analysis entitled “General Risks and Uncertainties”, and such other
documents as available on SEDAR at www.sedar.com. All such
factors should be considered carefully when making decisions with
respect to the Company. The Company does not undertake to
update any forward-looking statements, including those statements
that are incorporated by reference herein, whether written or oral,
that may be made from time to time by or on its behalf, except in
accordance with applicable securities laws. All of the
forward-looking statements made in this news release are qualified
by these cautionary statements.
About Major Drilling
Major Drilling Group International Inc. is one
of the world’s largest drilling services companies primarily
serving the mining industry. Established in 1980, Major Drilling
has over 1,000 years of combined experience and expertise within
its management team alone. The Company maintains field
operations and offices in Canada, the United States, Mexico, South
America, Asia, Africa and Europe. Major Drilling provides a
complete suite of drilling services including surface and
underground coring, directional, reverse circulation, sonic,
geotechnical, environmental, water-well, coal-bed methane, shallow
gas, underground percussive/longhole drilling, surface drill and
blast, and a variety of mine services.
Webcast/Conference Call Information
Major Drilling Group International Inc. will
provide a simultaneous webcast and conference call to discuss its
quarterly results on Wednesday, September 9, 2020 at 9:00 AM
(EDT). To access the webcast, which includes a slide
presentation, please go to the investors/webcast section of Major
Drilling’s website at www.majordrilling.com and click on the
link. Please note that this is listen-only mode.
To participate in the conference call, please
dial 416-340-2217, participant passcode 7212240# and ask for Major
Drilling’s First Quarter Results Conference Call. To ensure
your participation, please call in approximately five minutes prior
to the scheduled start of the call.
For those unable to participate, a taped
rebroadcast will be available approximately one hour after the
completion of the call until midnight, Thursday, September 24,
2020. To access the rebroadcast, dial 905-694-9451 and enter
the passcode 7936172#. The webcast will also be archived for
one year and can be accessed on the Major Drilling website at
www.majordrilling.com.
For further information:Ian Ross, Chief
Financial OfficerTel: (506) 857-8636Fax: (506)
857-9211ir@majordrilling.com
Major Drilling Group International Inc. |
|
Interim Condensed Consolidated Statements of
Operations |
|
(in thousands of Canadian dollars, except per share
information) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
July 31 |
|
|
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
TOTAL
REVENUE |
|
$ |
89,420 |
|
|
$ |
117,459 |
|
|
|
|
|
|
|
|
|
|
DIRECT
COSTS |
|
|
74,295 |
|
|
|
96,090 |
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT |
|
|
15,125 |
|
|
|
21,369 |
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
General and administrative |
|
|
11,226 |
|
|
|
12,165 |
|
Other expenses |
|
|
895 |
|
|
|
1,158 |
|
(Gain) loss on disposal of property, plant and equipment |
|
|
(56 |
) |
|
|
(125 |
) |
Foreign exchange (gain) loss |
|
|
(607 |
) |
|
|
(75 |
) |
Finance costs |
|
|
288 |
|
|
|
219 |
|
|
|
|
11,746 |
|
|
|
13,342 |
|
|
|
|
|
|
|
|
|
|
EARNINGS BEFORE INCOME
TAX |
|
|
3,379 |
|
|
|
8,027 |
|
|
|
|
|
|
|
|
|
|
INCOME TAX PROVISION
(RECOVERY) (note 6) |
|
|
|
|
|
|
|
|
Current |
|
|
1,801 |
|
|
|
1,894 |
|
Deferred |
|
|
(570 |
) |
|
|
100 |
|
|
|
|
1,231 |
|
|
|
1,994 |
|
|
|
|
|
|
|
|
|
|
NET
EARNINGS |
|
$ |
2,148 |
|
|
$ |
6,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE
(note 7) |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.03 |
|
|
$ |
0.08 |
|
Diluted |
|
$ |
0.03 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
|
Major Drilling Group International Inc. |
Interim Condensed Consolidated Statements of Comprehensive
Earnings (Loss) |
(in thousands of Canadian dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
July 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
NET
EARNINGS |
|
$ |
2,148 |
|
|
$ |
6,033 |
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified
subsequently to profit or loss |
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on foreign currency translations (net of
tax) |
|
|
(8,090 |
) |
|
|
(5,756 |
) |
|
Unrealized gain (loss) on derivatives (net of tax) |
|
|
1,670 |
|
|
|
168 |
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE EARNINGS
(LOSS) |
|
$ |
(4,272 |
) |
|
$ |
445 |
|
|
Major Drilling Group International Inc. |
|
Interim Condensed Consolidated Statements of Changes in
Equity |
|
For the three months ended July 31, 2020 and
2019 |
|
(in thousands of Canadian dollars) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earnings |
|
|
Other |
|
|
Share-based |
|
|
Foreign currency |
|
|
|
|
|
|
|
Share capital |
|
|
(deficit) |
|
|
reserves |
|
|
payments reserve |
|
|
translation reserve |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY 1,
2019* |
|
$ |
241,264 |
|
|
$ |
29,020 |
|
|
$ |
(570 |
) |
|
$ |
14,503 |
|
|
$ |
78,783 |
|
|
$ |
363,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
90 |
|
|
|
- |
|
|
|
90 |
|
Stock options expired |
|
|
- |
|
|
|
2,067 |
|
|
|
- |
|
|
|
(2,067 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
241,264 |
|
|
|
31,087 |
|
|
|
(570 |
) |
|
|
12,526 |
|
|
|
78,783 |
|
|
|
363,090 |
|
Comprehensive
earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
- |
|
|
|
6,033 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
6,033 |
|
Unrealized gain (loss) on foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency translations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(5,756 |
) |
|
|
(5,756 |
) |
Unrealized gain (loss) on derivatives |
|
|
- |
|
|
|
- |
|
|
|
168 |
|
|
|
- |
|
|
|
- |
|
|
|
168 |
|
Total comprehensive earnings
(loss) |
|
|
- |
|
|
|
6,033 |
|
|
|
168 |
|
|
|
- |
|
|
|
(5,756 |
) |
|
|
445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT JULY 31,
2019 |
|
$ |
241,264 |
|
|
$ |
37,120 |
|
|
$ |
(402 |
) |
|
$ |
12,526 |
|
|
$ |
73,027 |
|
|
$ |
363,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY 1,
2020 |
|
$ |
243,189 |
|
|
$ |
(35,691 |
) |
|
$ |
(611 |
) |
|
$ |
8,519 |
|
|
$ |
81,640 |
|
|
$ |
297,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
76 |
|
|
|
- |
|
|
|
76 |
|
Stock options expired |
|
|
- |
|
|
|
3,371 |
|
|
|
- |
|
|
|
(3,371 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
243,189 |
|
|
|
(32,320 |
) |
|
|
(611 |
) |
|
|
5,224 |
|
|
|
81,640 |
|
|
|
297,122 |
|
Comprehensive
earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
- |
|
|
|
2,148 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
2,148 |
|
Unrealized gain (loss) on foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency translations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(8,090 |
) |
|
|
(8,090 |
) |
Unrealized gain (loss) on derivatives |
|
|
- |
|
|
|
- |
|
|
|
1,670 |
|
|
|
- |
|
|
|
- |
|
|
|
1,670 |
|
Total comprehensive earnings
(loss) |
|
|
- |
|
|
|
2,148 |
|
|
|
1,670 |
|
|
|
- |
|
|
|
(8,090 |
) |
|
|
(4,272 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT JULY 31,
2020 |
|
$ |
243,189 |
|
|
$ |
(30,172 |
) |
|
$ |
1,059 |
|
|
$ |
5,224 |
|
|
$ |
73,550 |
|
|
$ |
292,850 |
|
*Opening balances have been allocated to include
expired or forfeited stock options of $5,744, previously recorded
in share-based payments reserve, in retained earnings (deficit),
consistent with current year presentation.
Major Drilling Group International Inc. |
Interim Condensed Consolidated Statements of Cash
Flows |
(in thousands of Canadian dollars) |
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
|
|
July 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
Earnings before income
tax |
|
$ |
3,379 |
|
|
$ |
8,027 |
|
|
Operating items not involving
cash |
|
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
10,220 |
|
|
|
9,717 |
|
|
(Gain) loss on disposal of property, plant and equipment |
|
|
(56 |
) |
|
|
(125 |
) |
|
Share-based compensation |
|
|
76 |
|
|
|
90 |
|
|
Finance costs recognized in
earnings before income tax |
|
|
288 |
|
|
|
219 |
|
|
|
|
|
13,907 |
|
|
|
17,928 |
|
|
Changes in non-cash operating
working capital items |
|
|
(12,907 |
) |
|
|
(5,614 |
) |
|
Finance costs paid |
|
|
(288 |
) |
|
|
(219 |
) |
|
Income taxes paid |
|
|
(1,324 |
) |
|
|
(1,854 |
) |
|
Cash flow from (used in)
operating activities |
|
|
(612 |
) |
|
|
10,241 |
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
Repayment of lease
liabilities |
|
|
(310 |
) |
|
|
(300 |
) |
|
Repayment of long-term
debt |
|
|
(20,251 |
) |
|
|
(265 |
) |
|
Cash flow from (used in) used
in financing activities |
|
|
(20,561 |
) |
|
|
(565 |
) |
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
Acquisition of property, plant
and equipment |
|
|
(7,499 |
) |
|
|
(10,565 |
) |
|
(net of unpaid) (note 5) |
|
|
|
|
|
|
|
|
|
Proceeds from disposal of
property, plant and equipment |
|
|
301 |
|
|
|
266 |
|
|
Cash flow from (used in)
investing activities |
|
|
(7,198 |
) |
|
|
(10,299 |
) |
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes |
|
|
(991 |
) |
|
|
98 |
|
|
|
|
|
|
|
|
|
|
|
|
DECREASE IN
CASH |
|
|
(29,362 |
) |
|
|
(525 |
) |
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF THE PERIOD |
|
|
58,433 |
|
|
|
27,366 |
|
|
|
|
|
|
|
|
|
|
|
|
CASH AND CASH
EQUIVALENTS, END OF THE PERIOD |
|
$ |
29,071 |
|
|
$ |
26,841 |
|
|
Major Drilling Group International Inc. |
|
Interim Condensed Consolidated Balance Sheets |
|
As at July 31, 2020 and April 30, 2020 |
|
(in thousands of Canadian dollars) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
July 31, 2020 |
|
|
April 30, 2020 |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
29,071 |
|
|
$ |
58,433 |
|
Trade and other receivables |
|
|
84,469 |
|
|
|
71,641 |
|
Income tax receivable |
|
|
3,913 |
|
|
|
4,350 |
|
Inventories |
|
|
94,934 |
|
|
|
99,823 |
|
Prepaid expenses |
|
|
6,880 |
|
|
|
4,497 |
|
|
|
|
219,267 |
|
|
|
238,744 |
|
|
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND
EQUIPMENT (note 5) |
|
|
164,106 |
|
|
|
168,906 |
|
|
|
|
|
|
|
|
|
|
DEFERRED INCOME TAX
ASSETS |
|
|
9,782 |
|
|
|
9,613 |
|
|
|
|
|
|
|
|
|
|
GOODWILL |
|
|
7,708 |
|
|
|
7,708 |
|
|
|
|
|
|
|
|
|
|
INTANGIBLE
ASSETS |
|
|
852 |
|
|
|
946 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
401,715 |
|
|
$ |
425,917 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
|
|
Trade and other payables |
|
$ |
57,257 |
|
|
$ |
55,858 |
|
Income tax payable |
|
|
1,095 |
|
|
|
926 |
|
Current portion of lease liabilities |
|
|
1,115 |
|
|
|
1,121 |
|
Current portion of long-term debt |
|
|
1,028 |
|
|
|
1,024 |
|
|
|
|
60,495 |
|
|
|
58,929 |
|
|
|
|
|
|
|
|
|
|
LEASE
LIABILITIES |
|
|
2,388 |
|
|
|
2,701 |
|
|
|
|
|
|
|
|
|
|
CONTINGENT
CONSIDERATION |
|
|
1,807 |
|
|
|
1,807 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
DEBT |
|
|
30,079 |
|
|
|
50,333 |
|
|
|
|
|
|
|
|
|
|
DEFERRED INCOME TAX
LIABILITIES |
|
|
14,096 |
|
|
|
15,101 |
|
|
|
|
108,865 |
|
|
|
128,871 |
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY |
|
|
|
|
|
|
|
|
Share capital |
|
|
243,189 |
|
|
|
243,189 |
|
Retained earnings (deficit) |
|
|
(30,172 |
) |
|
|
(35,691 |
) |
Other reserves |
|
|
1,059 |
|
|
|
(611 |
) |
Share-based payments reserve |
|
|
5,224 |
|
|
|
8,519 |
|
Foreign currency translation reserve |
|
|
73,550 |
|
|
|
81,640 |
|
|
|
|
292,850 |
|
|
|
297,046 |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
401,715 |
|
|
$ |
425,917 |
|
1. NATURE OF ACTIVITIES
Major Drilling Group International Inc. (the
“Company”) is incorporated under the Canada Business Corporations
Act and has its head office at 111 St. George Street, Suite 100,
Moncton, NB, Canada. The Company’s common shares are listed on the
Toronto Stock Exchange (“TSX”). The principal source of
revenue consists of contract drilling for companies primarily
involved in mining and mineral exploration. The Company has
operations in Canada, the United States, Mexico, South America,
Asia, Africa and Europe.
2. BASIS OF PRESENTATION
Statement of compliance
These Interim Condensed Consolidated Financial
Statements have been prepared in accordance with IAS 34 Interim
Financial Reporting (“IAS 34”) as issued by the International
Accounting Standards Board (“IASB”) and using the accounting
policies as outlined in the Company’s annual Consolidated Financial
Statements for the year ended April 30, 2020.
On September 8, 2020, the Board of Directors
authorized the financial statements for issue.
Basis of consolidationThese
Interim Condensed Consolidated Financial Statements incorporate the
financial statements of the Company and entities controlled by the
Company. Control is achieved when the Company is exposed or has
rights to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee.
The results of subsidiaries acquired or disposed
of during the period are included in the Consolidated Statements of
Operations from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Intra-group transactions, balances, income and
expenses are eliminated on consolidation, where appropriate.
Basis of preparationThese
Interim Condensed Consolidated Financial Statements have been
prepared based on the historical cost basis except for certain
financial instruments that are measured at fair value, using the
same accounting policies and methods of computation as presented in
the Company’s annual Consolidated Financial Statements for the year
ended April 30, 2020.
3. KEY SOURCES OF ESTIMATION UNCERTAINTY AND
CRITICAL ACCOUNTING JUDGMENTS
The preparation of financial statements, in
conformity with International Financial Reporting Standards
(“IFRS”), requires management to make judgments, estimates and
assumptions that are not readily apparent from other sources, which
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Depending on the severity and duration of
disruptions caused by the COVID-19 pandemic, results could be
impacted in future periods. It is not possible at this time to
estimate the magnitude of such potential future impacts.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised, if the
revision affects only that period, or in the period of the revision
and future periods, if the revision affects both current and future
periods. Significant areas requiring the use of management
estimates relate to the useful lives of property, plant and
equipment for depreciation purposes, property, plant and equipment
and inventory valuation, determination of income and other taxes,
assumptions used in the compilation of share-based payments, fair
value of assets acquired and liabilities assumed in business
acquisitions, amounts recorded as accrued liabilities, contingent
consideration and allowance for doubtful accounts, and impairment
testing of goodwill and intangible assets.
The Company applied judgment in determining the
functional currency of the Company and its subsidiaries, the
determination of cash-generating units (“CGUs”), the degree of
componentization of property, plant and equipment, the recognition
of provisions and accrued liabilities, and the determination of the
probability that deferred income tax assets will be realized from
future taxable earnings.
4. SEASONALITY OF OPERATIONS
The third quarter (November to January) is
normally the Company’s weakest quarter due to the shutdown of
mining and exploration activities, often for extended periods over
the holiday season.
5. PROPERTY, PLANT AND EQUIPMENT
Capital expenditures for the three months ended
July 31, 2020 were $9,168 (2019 - $10,565). The unpaid portion of
capital expenditures for the three months ended July 31, 2020 was
$1,669 (2019 - nil).
Depreciation expense recorded in the Interim
Condensed Consolidated Statements of Operations in direct costs was
$9,707 (2019 - $9,321) and in general and administrative was $513
(2019 - $396).
6. INCOME TAXES
The income tax provision for the period can be reconciled to
accounting earnings before income tax as follows:
|
|
Q1 2021 |
|
|
Q1 2020 |
|
|
|
|
|
|
|
|
|
|
Earnings before income tax |
|
$ |
3,379 |
|
|
$ |
8,027 |
|
|
|
|
|
|
|
|
|
|
Statutory Canadian corporate
income tax rate |
|
|
27 |
% |
|
|
27 |
% |
|
|
|
|
|
|
|
|
|
Expected income tax provision
based on statutory rate |
|
|
912 |
|
|
|
2,167 |
|
Non-recognition of tax benefits
related to losses |
|
|
842 |
|
|
|
95 |
|
Utilization of previously
unrecognized losses |
|
|
(177 |
) |
|
|
(345 |
) |
Other foreign taxes paid |
|
|
121 |
|
|
|
168 |
|
Rate variances in foreign
jurisdictions |
|
|
(163 |
) |
|
|
(18 |
) |
Permanent differences and
other |
|
|
(304 |
) |
|
|
(73 |
) |
|
|
|
|
|
|
|
|
|
Income tax provision recognized
in net earnings |
|
$ |
1,231 |
|
|
$ |
1,994 |
|
The Company periodically assesses its
liabilities and contingencies for all tax years open to audit based
upon the latest information available. For those matters where it
is probable that an adjustment will be made, the Company records
its best estimate of these tax liabilities, including related
interest charges. Inherent uncertainties exist in estimates of tax
contingencies due to changes in tax laws. While management believes
they have adequately provided for the probable outcome of these
matters, future results may include favourable or unfavourable
adjustments to these estimated tax liabilities in the period the
assessments are made, or resolved, or when the statutes of
limitations lapse.
7. EARNINGS PER SHARE
All of the Company’s earnings are attributable
to common shares, therefore, net earnings is used in determining
earnings per share.
|
|
Q1 2021 |
|
|
Q1 2020 |
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
2,148 |
|
|
$ |
6,033 |
|
|
|
|
|
|
|
|
|
|
Weighted average number of
shares: |
|
|
|
|
|
|
|
|
Basic (000s) |
|
|
80,634 |
|
|
|
80,300 |
|
Diluted (000s) |
|
|
80,634 |
|
|
|
80,300 |
|
|
|
|
|
|
|
|
|
|
Earnings per share |
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.03 |
|
|
$ |
0.08 |
|
Diluted |
|
$ |
0.03 |
|
|
$ |
0.08 |
|
The calculation of diluted earnings per share
for the three months ended July 31, 2020 excludes the effect of
2,035,919 options (2019 - 3,230,195) as they were
anti‐dilutive.
The total number of shares outstanding on July 31, 2020 was
80,634,153 (2019 - 80,299,984).
8. SEGMENTED INFORMATION
The Company’s operations are divided into the
following three geographic segments, corresponding to its
management structure: Canada - U.S.; South and Central America; and
Asia and Africa. The services provided in each of the reportable
segments are essentially the same. The accounting policies of the
segments are the same as those described in the Company’s annual
Consolidated Financial Statements for the year ended April 30,
2020. Management evaluates performance based on earnings from
operations in these three geographic segments before finance costs,
general corporate expenses and income taxes. Data relating to
each of the Company’s reportable segments is presented as
follows:
|
|
Q1 2021 |
|
|
Q1 2020 |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
Canada - U.S.* |
|
$ |
46,045 |
|
|
$ |
60,957 |
|
South and Central America |
|
|
19,535 |
|
|
|
32,686 |
|
Asia and Africa |
|
|
23,840 |
|
|
|
23,816 |
|
|
|
$ |
89,420 |
|
|
$ |
117,459 |
|
*Canada - U.S. includes revenue of $18,078 and
$26,965 for Canadian operations for the three months ended July 31,
2020 and 2019, respectively.
|
|
Q1 2021 |
|
|
Q1 2020 |
|
|
|
|
|
|
|
|
|
|
Earnings (loss)
from operations |
|
|
|
|
|
|
|
|
Canada - U.S. |
|
$ |
2,801 |
|
|
$ |
5,338 |
|
South and Central America |
|
|
(1,043 |
) |
|
|
1,858 |
|
Asia and Africa |
|
|
3,001 |
|
|
|
3,812 |
|
|
|
|
4,759 |
|
|
|
11,008 |
|
|
|
|
|
|
|
|
|
|
Finance
costs |
|
|
288 |
|
|
|
219 |
|
General corporate
expenses** |
|
|
1,092 |
|
|
|
2,762 |
|
Income tax |
|
|
1,231 |
|
|
|
1,994 |
|
|
|
|
2,611 |
|
|
|
4,975 |
|
|
|
|
|
|
|
|
|
|
Net
Earnings |
|
$ |
2,148 |
|
|
$ |
6,033 |
|
**General corporate expenses include expenses
for corporate offices and stock options.
Capital expenditures |
|
|
|
|
|
|
|
|
Canada - U.S. |
|
$ |
8,021 |
|
|
$ |
8,464 |
|
South and Central America |
|
|
200 |
|
|
|
742 |
|
Asia and Africa |
|
|
947 |
|
|
|
1,206 |
|
Unallocated and corporate assets |
|
|
- |
|
|
|
153 |
|
Total capital
expenditures |
|
$ |
9,168 |
|
|
$ |
10,565 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Canada - U.S. |
|
$ |
5,024 |
|
|
$ |
4,318 |
|
South and Central America |
|
|
3,358 |
|
|
|
3,647 |
|
Asia and Africa |
|
|
1,792 |
|
|
|
1,473 |
|
Unallocated and corporate assets |
|
|
46 |
|
|
|
279 |
|
Total depreciation and
amortization |
|
$ |
10,220 |
|
|
$ |
9,717 |
|
|
|
July 31, 2020 |
|
|
April 30, 2020 |
|
Identifiable assets |
|
|
|
|
|
|
|
|
Canada - U.S.* |
|
$ |
187,325 |
|
|
$ |
180,925 |
|
South and Central America |
|
|
122,963 |
|
|
|
129,748 |
|
Asia and Africa |
|
|
122,367 |
|
|
|
121,954 |
|
Unallocated and corporate assets (liabilities) |
|
|
(30,940 |
) |
|
|
(6,710 |
) |
Total identifiable assets |
|
$ |
401,715 |
|
|
$ |
425,917 |
|
*Canada - U.S. includes property, plant and
equipment at July 31, 2020 of $44,293 (April 30, 2020 - $44,146)
for Canadian operations.
9. FINANCIAL INSTRUMENTS
Fair valueThe carrying values
of cash, trade and other receivables, demand credit facilities and
trade and other payables approximate their fair value due to the
relatively short period to maturity of the instruments. The
carrying value of long-term debt approximates its fair
value.
Financial assets and liabilities measured at
fair value are classified and disclosed in one of the following
categories:
- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
- Level 2 - inputs other than quoted prices included in level 1
that are observable for the assets or liabilities, either directly
(i.e., as prices) or indirectly (i.e., derived from prices);
and
- Level 3 - inputs for the assets or liabilities that are not
based on observable market data (unobservable inputs).
The Company’s derivatives are classified as
level 2 financial instruments. There were no transfers of amounts
between level 1, level 2 and level 3 financial instruments for the
quarter ended July 31, 2020.
The fair value hierarchy requires the use of
observable market inputs whenever such inputs exist. A
financial instrument is classified to the lowest level of the
hierarchy for which a significant input has been considered in
measuring fair value.
Credit riskAs at July 31, 2020,
90.6% (April 30, 2020 - 81.6%) of the Company’s trade receivables
were aged as current and 1.8% (April 30, 2020 - 2.0%) of the trade
receivables were impaired.
The movements in the allowance for impairment of
trade receivables during the three and twelve month periods were as
follows:
|
|
July 31, 2020 |
|
|
April 30, 2020 |
|
|
|
|
|
|
|
|
|
|
Opening
balance |
|
$ |
1,226 |
|
|
$ |
863 |
|
Increase in impairment
allowance |
|
|
99 |
|
|
|
442 |
|
Write-off charged against
allowance |
|
|
- |
|
|
|
(37 |
) |
Foreign exchange translation
differences |
|
|
1 |
|
|
|
(42 |
) |
Ending
balance |
|
$ |
1,326 |
|
|
$ |
1,226 |
|
Foreign currency risk As at
July 31, 2020, the most significant carrying amounts of net
monetary assets (which may include intercompany balances with other
subsidiaries) that: (i) are denominated in currencies other than
the functional currency of the respective Company subsidiary; and
(ii) cause foreign exchange rate exposure, including the impact on
earnings before income taxes (“EBIT”), if the corresponding rate
changes by 10%, are as follows:
|
|
Rate variance |
|
IDR/USD |
|
MNT/USD |
|
USD/AUD |
|
USD/CLP |
|
USD/CAD |
|
Other |
|
Net exposure on |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
monetary assets |
|
|
|
|
7,083 |
|
|
5,813 |
|
|
4,303 |
|
|
3,183 |
|
|
3,629 |
|
|
927 |
|
EBIT impact |
|
+/-10% |
|
|
787 |
|
|
646 |
|
|
478 |
|
|
354 |
|
|
403 |
|
|
103 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity risk
The following table details contractual
maturities for the Company’s financial liabilities:
|
|
1 year |
|
|
2-3 years |
|
|
4-5 years |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
$ |
57,257 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
57,257 |
|
Lease liabilities (interest
included) |
|
|
1,390 |
|
|
|
2,246 |
|
|
|
496 |
|
|
|
4,132 |
|
Contingent consideration
(undiscounted) |
|
|
- |
|
|
|
2,500 |
|
|
|
- |
|
|
|
2,500 |
|
Long-term debt (interest
included) |
|
|
1,685 |
|
|
|
32,293 |
|
|
|
- |
|
|
|
33,978 |
|
|
|
$ |
60,332 |
|
|
$ |
37,039 |
|
|
$ |
496 |
|
|
$ |
97,867 |
|
Major Drilling (TSX:MDI)
Historical Stock Chart
From Mar 2024 to Apr 2024
Major Drilling (TSX:MDI)
Historical Stock Chart
From Apr 2023 to Apr 2024