# Capital Drilling Limited Deliver another strong performance for H1

- Link: https://www.directorstalkinterviews.com/capital-drilling-limited-deliver-another-strong-performance-for-h1/412790989
- Published: 2019-08-22T07:14:51+01:00
- Author: Giles Arbor

**Capital Drilling Limited** ([LON: CAPD](https://www.directorstalkinterviews.com/company/capital-drilling-ltd/capd.l)),
a leading drilling solutions company focused on the African markets, today announced
half year results for the period ended 30th June 2019.

|   | H1 2019 | H1 2018 | 
| Average Fleet Size (No. of drill rigs) | 91 | 94 | 
| Fleet Utilisation (%) | 52 | 46 | 
| ARPOR ($) | 183,000 | 200,000 | 
|   |   |   | 
| Capex ($ m) | 6.4 | 5.4 | 
|   |   |   | 
| Revenue ($ m) | 54.8 | 54.5 | 
| EBITDA^(1) ($ m) | 12.7 | 12.5 | 
| EBIT^(1) ($ m) | 7.9 | 5.8 | 
| Net Profit After Tax ($ m) | 5.1 | 2.8 | 
| Cash From Operations ($ m) | 10.5 | 7.2 | 
|   |   |   | 
| Earnings per Share |   |   | 
| Basic (cents) | 3.7 | 2.0 | 
| Diluted (cents) | 3.7 | 2.0 | 
|   |   |   | 
| Interim Dividend per Share (cents) | 0.7 | 0.6 | 
|   |   |   | 
| Net Asset Value per Share^(1) (cents) | 58.3 | 52.2 | 
|   |   |   | 
| Return on Capital Employed (%) | 21.4 | 17.7 | 
| Return on Total Assets (%) | 15.6 | 11.8 | 
| Net Cash^(1) ($ m) | 8.5 | 3.4 | 
| Net Cash/Equity (%) | 10.7 | 4.7 |

*All amounts are in USD unless otherwise stated

(1) ) EBITDA, EBIT, Net Asset Value per share and Net Cash are non-IFRS financial
measures and should not be used in isolation or as a substitute for Capital Drilling
Limited financial results presented in accordance with IFRS.

**Financial Overview**

· First half revenue of $54.8 million, 0.6% higher than H1 2018 (H1 2018: $54.5 
million)

· ARPOR of $183,000 (H1 2018: $200,000), an 8.5% decrease with lower revenues during
start-up phase of new contracts. Continued solid contract performance across key
contracts

· EBITDA of $12.7 million, up 1.6% on H1 2018 despite the increased investment in
growth. Margins stable at 23%, reflecting the [sustainability](https://www.directorstalkinterviews.com/sustainability-green-stocks-news)
of cost management initiatives

· NPAT $5.1 million, an 82.1% increase (H1 2018: $2.8 million) reflecting reduced
depreciation and lower interest charges

· Capex up 18.4% to $6.4 million (H1 2018: $5.4 million) on expanding the support
asset base in West Africa

· Net cash up 150% to $8.5 million (H1 2018: $3.4 million) with an additional $2
million of long-term debt repaid

· Cash from operations up 45.8% to $10.5 million (H1 2018: $7.2 million) due to 
improved working capital management

· Investments of $7.7 million as of 30 June 2019 (31 December 2018: $5.7 million)
following strategic investments aligned to successful West African business development
strategy, supporting a number of contract wins

· Earnings per share improved by 87.3% to 3.7 cents (H1 2018: 2.0 cents)

· Final dividend for 2018 financial year of 1.5 cents per share, paid in May 2019(
FY 2017: 1.2 cents)

· Interim dividend of 0.7 cent per share, up 17%, to be paid on 27 September 2019(
2018: Interim dividend of 0.6 cents per share) to shareholders registered on 06 
September 2019

**Operational and Strategic Review**

· New exploration contracts wins to commence in H2 2019 include:

 * Arrow Minerals, Burkina Faso
 * Desert Gold Ventures, Mali
 * Awale Resources, Cote d’Ivoire

· Previously announced Exploration contracts awarded in H1 2019 include:

 * Compass Gold Corp, Mali
 * Golden Rim Resources, Burkina Faso
 * Allied Gold Corp, Cote d’Ivoire
 * Thor Explorations Ltd, Nigeria

· Previously announced Mine Site contracts awarded in H1 2019 include:

 * Kinross Gold Corp, Mauritania
 * Resolute Mining Ltd, Mali
 * Thor Explorations Ltd, Nigeria

· Expanded the Group’s operations into new West African markets of Burkina Faso 
and Nigeria (Q4)

· Contract wins with new clients and in new countries reflect progress in leveraging
the increased operational presence in West Africa

· Further deployed rigs into the high-growth West African region, increasing the
rig count to 33 rigs

· Multi-year contract wins (Allied, Thor and Kinross laboratory contract) expanded
the Group’s portfolio of long-term mine-site based contracts to eight

· Strengthened operational and business development capabilities, appointing Jodie
North as Chief Operating Officer and Chris Hall as Business Development Manager –
West Africa

· Purchased an additional blast hole rig to support long-term Sukari Gold Mine (
Egypt) contract

· Fleet utilisation up 13% (52%) on H1 2018 (46%) on an average fleet of 91 rigs

**Health & Safety**

· Previously announced world class safety achievements:

 * Sukari Gold Mine (Egypt) achieved two years LTI free in January
 * North Mara Gold Mine (Tanzania) achieved three years LTI free in March
 * Geita Gold Mine (Tanzania) achieved two years LTI free in March
 * Tasiast Gold Mine (Mauritania) achieved two years LTI free in June
 * Syama Gold Mine (Mali) achieved three years LTI free in June

**Outlook**

· Recent strength in the gold price an encouraging indicator – approximately 90%
of the Company’s revenues are linked to gold

· Equity markets showing renewed interest in the exploration sector as a result 
of the stronger gold price

· Strategic expansion into West Africa continuing to generate multiple new opportunities

· West Africa remains a high growth region, particularly in the gold sector with
relatively under-developed gold deposits

· Business development activity securing new business, including with new clients
in existing operational areas, together with expansion into new operational countries

· Strong cash generation from mining companies driving increased exploration budgets

· Solid pipeline of new contracts commencing in H2 provide confidence in growth 
plans

The Group maintains its revenue guidance range of $110 – $120 million for 2019, 
with revenue expected to increase in H2 2019, consistent with 2018.

**Commenting on the results, Jamie Boyton, Executive Chairman of Capital Drilling,
said:**

> “We are pleased to report the Group has delivered another strong performance for
> the first half, delivering solid financial results while continuing to pursue 
> strategic growth plans. Particularly pleasing is the strong cash result, despite
> outflows associated with establishing operations in Burkina Faso and mobilisation
> for a new contract in Mali. Our balance sheet remains robust due to ongoing prudent
> cost management. As a result of this performance, we have today announced an interim
> dividend to shareholders of 0.7 cents per share, representing a 17% increase on
> the previous corresponding period.
> Our strategic expansion into West Africa continues to yield results which will
> diversify our revenue base. Our increased presence in the region, together with
> business development activity undertaken during the half has developed a solid
> pipeline of new contracts, including a number of new clients and further expansion
> of operations into Burkina Faso and Nigeria. This positions the company well for
> the remainder of the year, with the majority of these contracts expected to contribute
> to revenue from late Q3.
> We continue to target mine-site based contracts and it is extremely pleasing to
> have announced the award of a further three long-term contracts during the period.
> Encouragingly, MSALAB’s three-year laboratory management contract with Kinross(
> Mauritania) sees the investment into developing infrastructure to grow the business
> coming to fruition. Capital Drilling now has a solid portfolio of eight long-term
> mine-site based contracts, providing revenue stability across the cycle.
> Additionally, our existing long-term contracts continue to perform strongly, maintaining
> a robust ARPOR result. Our underground grade control drilling contract with Resolute
> Mining (Mali) was extended for a further one year, a reflection of our excellent
> service delivery.
> Safety remains at the core of our operations and we have achieved exceptional 
> results during the half, with safety milestones achieved across all our existing
> long-term contract sites – Geita and North Mara (Tanzania), Sukari (Egypt), Syama(
> Mali) and Tasiast (Mauritania).
> We made a strategic decision in the half year to increase the size of our drill
> for equity programme in line with increased business development activity in West
> Africa. This proved successful in supporting a number of our contract wins.
> The recent strength in the gold price is a further positive indicator for Capital
> Drilling given the sector represents 90% of our overall business, by revenue. 
> Additionally, mining companies are generating stronger cash flows that are driving
> increased exploration budgets.
> The recent announcement of six new contract awards, together with ongoing strong
> performance at existing long-term operations, places the Group in a strong position
> for the second half of 2019. We continue to grow and consolidate our presence 
> in the high growth region of West Africa and remain confident this will provide
> further growth opportunities for the remainder of the year.”

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