Capital Drilling Ltd Q&A: Solid H1 financials & New contracts (LON:CAPD)

Capital Drilling

Capital Drilling Ltd (LON:CAPD) Chief Executive Officer Jamie Boyton caught up with DirectorsTalk for an exclusive interview to discuss their half-year results, new contracts in West Africa & the outlook going forward.

Q1: H1 results out, can you talk us through the financial highlights?

A1: We had a pretty solid half I’d have to say. The revenue came in at $54.8 million, it was a small increase on the first half of last year, $54.5 million, and EBITDA of $12.7 million, again a small increase, however, we did see quite large increases in a couple of key areas.

The first one, profitability, the net profit after tax rose from $2.8 million to $5.1 million and that is the impact of both lower depreciation and lower interest charges so a really good kick-up in our EPS. We also had a very strong increase in the cash from operations which rose from $7.2 million to $10.5 million so it just continues this theme of really solid results, solid margins and solid cash generation.

As a result of that, we declared an interim dividend  of 0.7 cent per share, that’s up 17% on the previous corresponding period, it gets paid in September so another good result for our shareholders.

Q2: In terms of operational highlights, I see that you’ve got new contracts in Africa. What can you tell us about these?

A2: We had a hugely successful first half in terms of securing new business, we won a total of 9 contracts, most of them are in West Africa so that certainly validates the group’s strategy to deploy assets and focus on the West African region. We increased our focus there in mid-2018.

We picked up 7 exploration contracts, 2 of which have already commenced drilling in the first half, the other 5 are all going to kick off drilling in Q3 and Q4, when the wet season is over.

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So, a really good result there so much as we started the year with 5 clients in West Africa and now, we’re to 12 so more than doubling a client base and therefore good for the pipeline.

On the long term contracts, we also had some wins which is, again, a key strategic focus for the group. These include underground drilling contract extension with Resolute, we secured a 3-year mine site laboratory services contract with Tasiast in Mauritania which is the biggest contract win we’ve had for our laboratory business since acquiring that and we also secured a long-term grade contract with Thor Explorations in Nigeria.

So, a really good mix, long-term and exploration, heavy focus on West Africa, really pleasing.

Q3: Looking forward, what’s the outlook like for Capital Drilling in H2 and 2020?

A3: The outlook is that we typically have a stronger second half than first half, we’ve given guidance to the market of $110-120 million revenue for the year and we did £55 million in the first half so naturally, that implies a stronger second half which is consistent with last year. So, the outlook there is positive.

These contracts wins that we just discussed I think is extremely positive because what it’s done is not only add to the long-term but also, it’s opened up a number of new customers for us so it’s really been a very pleasing result from a pipeline perspective.

The obvious thing that we’re all looking at, at the moment, is this spike in the gold price which didn’t really start to occur until June and it has obviously since moved above the $1,500 an ounce mark. So, with over 90% of our revenue coming out of the gold sector, that is a really positive sign, it should lead to the opening up of capital markets which obviously used to fund the juniors in exploration. It should also lead to increase in mine site budgets as the mining companies are obviously generating greater cash flows.

So, both of those drivers are pointing to a very good second half and beyond for Capital Drilling.

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Capital Drilling Ltd

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Find more news, interviews, share price & company profile here for:
Capital Drilling Ltd

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