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Capital Drilling

Q&A with Capital Drilling Ltd Chairman Jamie Boyton (LON:CAPD)

Capital Drilling Ltd (LON:CAPD) Chairman Jamie Boyton caught up with DirectorsTalk for an exclusive interview to discuss their half-year results and what to expect in the second half of the financial year.

 

Q1: Capital Drilling released a very encouraging set of results today, you must be pleased with them?

A1: Yes, we are very pleased actually, I’d call them a solid set of results. Revenue was down in the first half, we had some disruption in one of our main markets, Tanzania, last year in the second half and we concluded drilling activity in Serbia, both contributed to the reduction in revenue.

What was very pleasing about the results was that despite the reduction in revenue, our EBITDA and net profit were up as well as our margins. So, in light of weaker revenue, it’s a really pleasing result.

 

Q2: What cost management efforts have been deployed to improve the EBITDA margins?

A2: We’ve looked at everything really. We had a management change around March/April last year and since then we have looked at all the lines, including labour, other operational, fuel, just controls effectively – the discipline had been lacking in the previous 12 months or so, we brought that back into the business and it’s paid dividends.

 

Q3: What is driving the group’s West Africa move?

A3: West Africa is a hotbed for activity in Africa, there’s six mines between Tanzania and Egypt which are the traditional markets that Capital drill. In West Africa you’re probably looking at 30/40 plus mines. We have a lot of idle assets, we didn’t have a lot of growth out of our traditional markets, so we made the move early this year. We’ve sent rigs across there, we’ve doubled our capacity in the region and we’ve had rapid turnaround. We’ve had some pretty good contract wins very quickly which is fantastic.

 

Q4: With strong contract wins in the pipeline, does this give you increased confidence in the sector?

A4: We’re certainly confident for the company and activity on the ground is very positive. There’s a lot of enquiries and lots of tendering activity going on. Slightly concerned about the easing in market sentiment just recently, metal prices have pulled back, equity markets have pulled back and that’s obviously a lead indicator. Activity on the ground is really positive and I’m quite confident we’ll win further contracts in the second half.

 

Q5: With that in mind then, what is Capital Drilling’s outlook for the second half of the financial year?

A5: We recently upgraded our revenue guidance, we started the year at USD$100-110million, we upgraded the revenue guidance 105-115 and we’re tracking towards the top end of that band. Utilisation is certainly going to pick up in Q3, we announced a number of contracts recently and they’re all kicking off right now, so we’ve got a pretty good second half ahead of us.