Capital Limited · LSE:CAPD
Capital — Capital Drilling — FY2019 Earnings Presentation
36 slides from Capital's earnings presentation, Mar 19, 2020
Slide 1: Capital Drilling Ltd 2019 Annual Results
Capital Drilling Ltd 2019 Annual Results 19 March 2020
Slide 2: Disclaimer
Disclaimer IMPORTANT NOTICE This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for, any securities of Capital Drilling Ltd. (the “Company”), nor shall any part of it nor the fact of its distribution fo
Slide 3: Section 1 – Summary
Section 1 – Summary
Slide 4: Introducing Capital Drilling
Introducing Capital Drilling Capital Drilling provides full KEY METRICS service mining and drilling REVENUE NET PROFIT NET CASH solutions to customers within the $114.8 million $10.4 million $4.4 million global minerals industry, focussing Within guidance of Up 34% on 2018 ($7.7 million) After $19.8
Slide 5: Our Strategy
Our Strategy STRATEGIC FOCUS AREAS DELIVERING AGAINST STRATEGY 2019 • Strong established presence in East Africa and Egypt • New entry into Burkina Faso and Namibia African Focused • Expansion into West African region • Continued infrastructure build in West Africa • Deliver first world project exec
Slide 6: Our Services
Our Services EXPLORATION DRILLING MINE SITE BLAST HOLE MINE SITE UNDERGROUND ANCILLARY SERVICES DRILLING SERVICES DRILLING SERVICES SERVICES DRILLING SERVICES SERVICES Exploration Drilling Delineation Programs Blast Hole Drilling Load and Haul Services Underground Core Drilling Mineral Analytic Serv
Slide 7: Expansion Into Mining Services
Expansion Into Mining Services • Building capability in load and haul services, enabling a fully integrated service offering • Mining service contracts typically provide significantly larger revenue opportunities ⁻ Exploration and delineation drilling contracts < $10 million p.a. ⁻ Production drilli
Slide 8: Industry Leading Safety Standards
Industry Leading Safety Standards LTI FREQUENCY RATE TREND (2009 – 2019) COMMENTARY 0.41 • Loss Time Injury Frequency Rate (LTIFR) of 0.05 in 2019 • All Injury Frequency Rate (AIFR) of 0.14, well below industry standards • Geita Mine Site obtained ISO 45001, 9001, 14001 and SA 8000 certification 0.2
Slide 9: Well Established Contracts, Tier 1 Operations
Well Established Contracts, Tier 1 Operations WEST AFRICA MIDDLE EAST AND NORTH AFRICA Egypt Saudi Arabia Mauritania Mali • Commenced in 2005 • Commenced in 2019 • Commenced in 2010 • Commenced in 2016 • Blast hole, grade control and • Underground exploration drilling • Grade control and delineation
Slide 10: Section 2 – Results
Section 2 – Results
Slide 11: 2019 Highlights
2019 Highlights STRATEGIC Multiple contract wins with existing and new customers Award four new long-term mine-site contracts 42% increase in rig fleet in West Africa to 44 rigs by end Q1 2020 Extension of services to include Load and Haul Rolling All Injury Frequency Rate (AIFR) of 0.14, well below
Slide 12: FY 2019 Financial Overview
FY 2019 Financial Overview Revenue KPIs FY 2019 FY 2018 % change COMMENTARY Average Fleet Size 92 93 -1% • Significant increase in profitability: Fleet Utilisation (%) 54% 51% 6% - Despite a marginal decrease in revenue, NPAT increased 36% to US$10.4 million ARPOR (US$) 176,000 194,000 -9% - Strong
Slide 13: Sustained Profitability
Sustained Profitability GROSS PROFIT AND MARGINS EBITDA AND MARGINS EBITDA (USDm) EBITDA (%) Avg Margin GP (USDm) GP (%) Avg Margin 18.0 30% 42.2% 27.2% 30.0 39.1% 45% 39.8% 16.0 38.1% 24.3% 40% 23.2% 25% 34.5% 22.9% 25.0 14.0 22.2% 38.2% 20.3% 35% 28.0% 12.0 18.7% 20% GP Margin % 20.0 26.4% 30% EBI
Slide 14: Strong Cash Flow
Strong Cash Flow 2019 2018 OPERATING CASH FLOW / FREE CASH FLOW Cash Flow Cash Generated from Operations Free Cash Flow US$m US$m 25.0 EBITDA 27.3 28.3 20.0 Other non Cash flow adjustments 1.3 0.8 15.0 Operating cash flows before working capital changes 28.6 29.1 10.0 Working Capital Movements 0.1 1
Slide 15: Capital Expenditure
Capital Expenditure US$m FY 2019 CAPEX 30.0 25.0 MSA $0.5 Mining Equipment 20.0 $3.4m 15.0 30.0 26.7 10.0 19.8 13.6 Vehicles & Trucks 12.8 10.8 11.9* $3.2m 5.0 7.9 4.3 New Rigs 0.0 $5.2m FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY18 FY19 * 2018 Reported operational capex $11.9 million, restated in
Slide 16: Strong Balance Sheet
Strong Balance Sheet FY 2019 FY 2018 Change COMMENTARY Balance Sheet US$m US$m % Cash and cash equivalents 17.6 19.9 -11.4% • Maintained positive Net Cash result $4.4 million (2018: $10.9 million) Investments 12.5 7.2 74.4% despite elevated operational capex and asset movements Receivables 25.2 20.5
Slide 17: 2019 Final Dividend
2019 Final Dividend • FINAL DIVIDEND DECLARED FOR 2019 of US0.7cps • 2018 final dividend of US1.5 cps paid in CY 2019 • Final dividend reduced as a precautionary measure given unprecedented uncertainty in the market due to the COVID-19 outbreak • We will continue our disciplined approach to capital
Slide 18: Section 3 – Strategy Update
Section 3 – Strategy Update
Slide 19: Growth Drivers
Growth Drivers Expanded Service Mine Site Contracts West Africa Expansion Utilise Idle Assets Offering • Competitive advantage with • Adjacent services to broaden • West Africa region has the • Q4 2019 rig utilisation of 59% our unique full service the offering to our customers largest concentration
Slide 20: Secure Long-term Mine-site Contracts
Secure Long-term Mine-site Contracts • Economies of scale from multiple revenue streams at the one location BENEFITS • Shared infrastructure across assets and people • Continuous improvement initiatives as the business develops • Capacity to invest in training and provide career paths for employees
Slide 21: Increase Exploration Utilisation
Increase Exploration Utilisation 2019 CONTRACT WINS IDLE EXPLORATION RIGS MALI BURKINA BURKINA MALI FASO FASO Commenced Commenced Commenced Commenced Q2 2019 Q2 2019 Q3 2019 Q4 2019 Aircore Diamond Core Reverse Circulation CÔTE CÔTE D’IVOIRE NAMIBIA MALI D’IVOIRE POTENTIAL REVENUE CAPTURE Commenced
Slide 22: Expansion into West Africa
Expansion into West Africa AFRICAN EXPLORATION BUDGETS BY COUNTRY, 2019 Increased Rig Count 256 companies budgeting Rig count in region tripled in two years from 13 rigs at December 2017 2% US$1.1 billion to 44 rigs (46% of total fleet) in West Africa by end Q1 2020 2% Egypt Established Infrastructu
Slide 23: Compelling Growth Opportunities in West Africa
Compelling Growth Opportunities in West Africa STRONG EQUITY MARKET SUPPORT 2nd TOP GOLD PRODUCING REGION $4.7 B raised for West African projects 10.4Moz production in 2018 (Estimated) Financing for Gold Companies ($B) National Gold Production (Estimate) (Moz) 2009 – 2019 2018 14 12.9 12 10.5 12 10.
Slide 24: Outlook
Outlook Significant strengthening in gold prices is a strong lead indicator for increased demand for services, with c90% of Capital Drilling revenue from gold producers Positive momentum with mine site exploration increasing, including Geita, Syama, Yanfolila and Sukari Strong industry fundamentals
Slide 25: Capital Drilling Investment Proposition
Capital Drilling Investment Proposition Tier 1 Mine-site based clients • Stable and predictable revenue streams Business Diversification • Diversity of services across the cycle, coupled with extension into complementary ancillary services, provides increased revenue security Targeted Growth • Focus
Slide 26: Appendices
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Slide 27: Revenue Metrics
Revenue Metrics UTILISATION vs ARPOR COMMENTS 60% 56% 56% 56% 220 • Improvement in H2 utilisation as exploration contracts come on line, particularly in 210 55% 198 200 the fourth quarter 52% 200 189 188 191 189 49% 49% 50% 175 183 190 • ARPOR decline in H2 as a result of extensive activity relating
Slide 28: Gold Price Highly Supportive
Gold Price Highly Supportive 1,700 Last price (US$/oz) 12M trailing average • Highly supportive gold price, which has increased strongly since Q2 2019 1,600 • Gold remains the primary commodity for drilling activity Gold Price 1,500 Gold price (US$/oz) - 50% of drilling exploration budget in 2019 (S
Slide 29: Exploration Budgets and Funding
Exploration Budgets and Funding Gold financings Base financings Number of financings completed • Financing activity by juniors and intermediate companies steady over the past 4 years however well below previous Financings By Junior And Intermediate Companies 10,000 500 9,000 450 peak levels seen in
Slide 30: Major Discoveries – Gold and Copper
Major Discoveries – Gold and Copper Gold in reserves, resources & past production Projected new gold in discoveries (Moz) (Moz) Copper in discoveries Projected copper in discoveries Copper exploration budget Gold price (US$/oz) Gold exploration budgets (US$M) Gold price (US$/oz) / gold exploration b
Slide 31: Client History
Client History Armenia Chile Antofagasta Anvil DRC APM Ethiopia Lydian Barrick Tiger BHP Billiton BHP Ethiopia Potash CMP Glencore MMG Polar Star Egypt Eritrea Ghana Kenya Mozambique Andiamo Kinross Acacia Boabab Mali Mauritania Riversdale Chalice Gold Sunridge Rio Tinto Aton Resourcs Gippsland Than
Slide 32: Board of Directors
Board of Directors EXECUTIVE Jamie Boyton • Over 20 years’ experience in finance industry Brian Rudd • Over 30 years’ experience in the mining industry in Africa and Executive Chairman • Co-founder of Capital Drilling Executive Director Australia • Previously Executive Director and Head of Asian Equ
Slide 33: Corporate Snapshot
Corporate Snapshot CAPITAL STRUCTURE SHAREHOLDING BLOCKS Fully paid ordinary shares 136,248,953 Share price (as at 31 December 2019) $0.87 Top 10 Market capitalisation (undiluted)^ $117.90 Institutionals Other Founders 48.3% 15.7% Cash (as at 31 December 2019) $17.62 Debt (as at 31 December 2019)* i
Slide 34: Capital Drilling and Competitors
Capital Drilling and Competitors Perf. Mkt. Cap. Cash Debt Net Cash Ent. Val. EBITDA (US$m) EV / EBITDA (x) P / Book Div. Yield Company (12M) (US$m) (US$m) (US$m) (US$m) (US$m) 2019a/e 2020e 2021e 2019a/e 2020e 2021e (x) (%) (%) Perenti 381.2 171.3 613.8 (374.3) 823.7 233.0 263.1 280.0 3.5x 3.1x 2.9
Slide 35: Glossary
Glossary The words below used in the presentation have the following meaning: ARPOR Average Revenue Per Operating Rig LTM Last Twelve Months CAPEX Cash used on acquisition of property plant and equipment less Profit or loss after tax adjusted for non-cash items +/- the net (Capital Expenditure) proc
Slide 36: Company Contact Details
Company Contact Details CAPITAL DRILLING LIMITED UK BROKERS UK PUBLIC RELATIONS Jamie Boyton Peel Hunt LLP Buchanan Executive Chairman Moor House, 120 London Wall, EC2Y 5ET 107 Cheapside, London EC2V 6DN jamie.boyton@capdrill.com Telephone: +44 20 7418 8900 Telephone: + 44 20 7466 5000 Ross Allister