TIDMCAPD
RNS Number : 5957D
Capital Drilling Limited
01 February 2018
For Immediate Release 1 February 2018
Capital Drilling Limited
("Capital Drilling", the "Group" or the "Company")
Q4 2017 Trading Update
Capital Drilling Limited (CAPD:LN), a leading drilling solutions
company focused on the African markets, today provides its Q4 2017
trading update for the period ended 31 December 2017 (the
"Period"), ahead of announcing its full year results on 16 March
2018.
FOURTH QUARTER (Q4) AND FULL YEAR 2017* KEY METRICS
Q4 2017 Q3 2017 % change 2017* 2016 % change
from Q3 from FY
2017 2016
=================== ========== ========== ========== =========== ========== =========
Revenue
($m) 27.1 30.0 -10% 119.4 93.3 28%
=================== ========== ========== ========== =========== ========== =========
ARPOR(#)
($) 198,000 198,000 0% 194,000 177,000 10%
Average
utilised
rigs 43 48 -10% 49 42 17%
=================== ========== ========== ========== =========== ========== =========
Fleet Utilisation
(%) 47% 52% -10% 53% 45% 18%
Average
Fleet 92 93 -1% 93 94 -1%
=================== ========== ========== ========== =========== ========== =========
Closing
fleet size 93 92 1% 93 92 1%
=================== ========== ========== ========== =========== ========== =========
All amounts are in USD unless otherwise stated
(#) Average revenue per operating rig
* Unaudited numbers
Financial Highlights
-- Q4 2017 revenue of $27.1 million reflecting traditional
seasonal slowing from Q3. Revenue down marginally from Q4 2016 of
$27.8 million
-- Full year 2017 revenue of $119.4 million, representing a 28% increase over 2016
-- The company returned to profitability as the sector emerged
from a four year cyclical downturn
-- Maintained and improved the Group's strong balance sheet,
driven by enhanced discipline around capital expenditure and
improved cost management
-- Finished the period with $4.9 million in net cash, up from
$0.6 million as at 31 December 2016, after investing $2.85 million
in MS Analytical and paying $2 million in dividends during 2017
-- Successfully refinanced the Group's debt facility with
leading African lending institution Standard Bank, signing a new
$12 million revolving credit facility with a three year term to
December 2020
-- Completed the phased strategic investment to earn a 50%
interest in the minerals testing business, MS Analytical, with
Capital Drilling now holding two Board seats in the Company
-- Guidance maintained for FY 2017 due to an improving margin
profile over 2017, with full year results scheduled for release on
16 March 2018
-- The Company anticipates full year 2018 revenues of between
$100 and $110 million underpinned by long term contracts in
Tanzania, Egypt, Mauritania and Mali. Guidance does not incorporate
new business opportunities in exploration, particularly in the West
African market
Operational Highlights
-- Strong and improving ARPOR driven by improved performance
across the Group's key long-term contracts.
-- Q4 2017 ARPOR of $198,000 consistent with Q3 2017, with H2
2017 ARPOR improving by 4% on H1 2017 ARPOR of $191,000
-- Substantial improvement in full year ARPOR to $194,000, up 10% on 2016 ($177,000)
-- Utilisation decreased to 47% for Q4 2017 (from 52% in Q3
2017) reflecting the completion of drilling activities in Serbia,
an easing in delineation drilling activities in Kenya and ongoing
subdued delineation activity levels in Tanzania
-- Acquired four rigs over 2017 for long-term contracts at the
Geita Gold Mine (Tanzania), the Sukari Gold Mine (Egypt) and the
Syama Mine (Mali), while retiring two production rigs and selling
two exploration rigs over the same period
-- Expanded activities on long term mine site based contracts, specifically;
- Increased Grade Control drilling activity at the Tasiast Mine
(Kinross) in Mauritania (two rigs), consistent with the sustained
increase in mining volumes
- Commencement of underground drilling at the Syama Mine (Resolute) in Mali (two rigs)
-- Received a two year contract extension at the North Mara Gold
Mine in Tanzania (Acacia), covering our existing blast hole and
grade control drilling services
-- Commenced redeployment of idle assets from Serbia and Chile
to the high growth West African region, including establishing a
presence in Côte d'Ivoire
-- Continued progress made with corporate integration of MS
Analytical, consistent with Capital Drilling's strategy of
expanding our service offering to the exploration and mining
sector
Trading Update
Capital Drilling generated revenue of $27.1 million during Q4
2017, representing a 10% decrease on the previous quarter. The
continued strength in ARPOR, reflecting improved contract
performance, was offset by weaker utilisation, driven by the
conclusion of drilling activities in Serbia and softer activity
levels in Tanzania and Kenya. Revenue for 2017 of $119.4 million
did however record a material 28% increase over 2016, with the
company returning to profitability as the cyclical recovery builds
momentum.
Despite weaker Q4 2017 revenue, we were encouraged by a
progressive expansion in operating margins over the year, a
reflection of improved contract performance, ceasing activities in
Serbia and a general improvement in cost management across the
business. The improved operating performance, coupled with enhanced
discipline around capital expenditure, drove an improvement in the
Group's balance sheet over the year, with closing net cash of $4.9
million, up from $0.6 million as at 31 December 2016. The Group's
gross debt was further reduced by $1.5 million in Q4 2017, to $12
million, and the Group refinanced its revolving credit facility
with Standard Bank for a further three year term.
Significant progress was made over the year in securing further
long-term contracts. We received a two year extension, to December
2019, for the continued provision of grade control and blast hole
drilling services at the North Mara Gold Mine in Tanzania (Acacia).
In Mauritania we were awarded a three year grade control drilling
contract at the Tasiast Mine (Kinross) and in Mali we were awarded
a three year underground drilling contract at the Syama Mine
(Resolute). These awards have added depth to the Company's
portfolio of long term mine site based contracts and provide a
solid platform for growth into the future.
Tanzania Update
We are pleased to note the publication of the Mining (Local
Content) Regulations (the "LC Regulations"), 2018, which were made
available on 16 January 2018. The release of the Regulations
follows the passing of legislation by the National Assembly in July
2017.
In our July 2017 market release we noted that the draft Bill's
original text had referred to "goods and services" and as such
there were welcomed changes in the final published amendments to
section 102(2) of the Mining Act, which did not include "services".
This suggested that where services required by a licenced miner in
Tanzania were not otherwise available in Tanzania (such as
specialised drilling), the miner could contract with companies
regardless of their ownership.
The LC Regulations now provide further guidance and rules on
Mining Act's new local content supply chain provisions. However,
there remain areas that are open to wide interpretation and we will
be actively engaging regulators and stakeholders, including the new
Mining Commission and its proposed Local Content Committee, to gain
a clearer understanding of the regulations and their consistency
with the Act, with the aim to agree on their parameters and our
compliance plans.
Our long-term production contracts with Acacia Mining (North
Mara) and AngloGold Ashanti (Geita) continue to operate in line
with expectations, however delineation and exploration activity has
been put on hold while the impact of the regulations is
established.
Outlook
Commodities markets continued their positive momentum over 2017
and into 2018, with a broad rally across all metal markets
including gold, base metals and battery minerals. Capital markets
activities have been highly supportive with a significant increase
in capital raising activities. These developments continue to
indicate increased drilling activity levels.
Despite the stronger market conditions, Capital Drilling has
been impacted by the uncertain regulatory developments in our key
Tanzanian market, where there has been a halt to exploration and
delineation based drilling activities, while the core production
contracts have broadly continued their activity levels. As a result
of developments in Tanzania and due to the conclusion of drilling
activity in Serbia, we have actively redeployed further assets into
West Africa, and are currently in the process of doubling our
capacity in this high growth region. Rigs are being deployed to
Mauritania, Mali and our newly established facility in Côte
d'Ivoire. As a result of these developments the Company provides
revenue guidance of between $100 and $110 million for 2018. This
guidance is primarily underpinned by the Company's core long term
contracts in Tanzania, Egypt, Mauritania and Mali. The Company
anticipates retaining the margin improvements made over the last
six months.
Commenting on the trading update, Jamie Boyton, Executive
Chairman, said:
"The fourth quarter demonstrated the strength of the business
model which is focused on generating cash from our drilling assets.
We have seen strong revenue and margin growth in 2017 despite the
ongoing pressures and uncertainties of the Tanzanian mining sector,
as well as some shorter-term contracts being completed during the
period. We look forward to the year ahead with confidence due to a
stronger underlying metals market as well as our geographic
expansion particularly in West Africa, one of the most dynamic
markets for drilling at the moment. The Group will maintain its
focus on cash generation and delivering a quality service to our
strong customer base."
The Group's full year results, together with any dividend
declarations, will be announced 16 March 2018.
For further information, please visit Capital Drilling's website
www.capdrill.com or contact:
Capital Drilling Limited +230 464 3250
Jamie Boyton, Executive Chairman investor@capdrill.com
André Koekemoer, Chief Financial Officer
finnCap Ltd +44 20 7220 0500
Christopher Raggett, Corporate Finance
Emily Morris/Simon Johnson, Corporate Broking
Tamesis Partners LLP +44 20 3882 2868
Charlie Bendon
Richard Greenfield
Buchanan +44 20 7466 5000
Bobby Morse capitaldrilling@buchanan.uk.com
Gemma Mostyn-Owen
About Capital Drilling
Capital Drilling provides specialised drilling services to
mineral exploration and mining companies in emerging and developing
markets, for exploration, development and production stage
projects. The Company currently owns and operates a fleet of 93
drilling rigs with established operations in Botswana, Côte
d'Ivoire, Egypt, Ethiopia, Kenya, Mali, Mauritania and Tanzania.
The Group's corporate headquarters is in Mauritius.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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