Capital Limited · LSE:CAPD
Capital — Capital Drilling — FY2018 Earnings Presentation
36 slides from Capital's earnings presentation, Mar 14, 2019
Slide 1: 2018 Annual Results
2018 Annual Results 14 March 2019
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
Slide 3: Section 1 – Summary
Section 1 — Summary 1 al aie
Slide 4: Introducing Capital Drilling
Introducing Capital Drilling Capital Drilling provides OVERVIEW MAJOR CUSTOMERS • Mineral drilling company • Acacia Mining plc complete drilling • Commenced operations in Tanzania • AngloGold Ashanti Limited solutions to in 2005 • Centamin plc • Listed on LSE in 2010 customers within • Kinross Gold
Slide 5: Our Services
Our Services EXPLORATION DRILLING MINE SITE UNDERGROUND BLAST HOLE ANCILLARY SERVICES DRILLING SERVICES DRILLING SERVICES DRILLING SERVICES SERVICES Exploration Drilling Delineation Programs Underground Core Drilling Blast Hole Drilling Mineral Analytic Services Directional Software Grade Control Dr
Slide 6: Industry leading safety standards
Industry leading safety standards LTI FREQUENCY RATE TREND (2009 – 2018) COMMENTARY 0.45 0.41 • Achieved a record ZERO Loss Time Injury (LTI) in 2018 0.4 ˗ A record for Capital Drilling 0.35 0.3 0.29 ˗ An unparalleled performance in the industry 0.25 0.25 0.2 0.18 0.2 • Other 2018 safety records inc
Slide 7: Long term contracts, Tier 1 operations
Long term contracts, Tier 1 operations WEST AFRICA EAST & NORTH AFRICA Egypt • Commenced in 2005 Mauritania • Blast hole, grade control & delineation drilling • Commenced in 2010 • Contracted to Q3 2023 • Grade control, delineation & exploration drilling, Mali • Commenced in 2016 • Maintenance servi
Slide 8: Section 2 – Results
Section 2 – Results
Slide 9: 2018 Highlights
2018 Highlights STRATEGIC Multiple contract wins with existing and new customers Major contract extensions on long-term mine site contracts Doubled rig fleet in West Africa Established key West African infrastructure Record safety achievement of zero LTI’s during 2018 Continued investment in assets
Slide 10: FY 2018 Financial Overview
FY 2018 Financial Overview Revenue KPIs FY 2018 FY 2017 % change COMMENTARY Average Fleet Size 93 93 0% • Significant increase in both profitability and cash levels: Fleet Utilisation (%) 51% 53% -4% - Despite a 3% decrease in 2018 revenues to US$116.0 million, EBITDA ARPOR (US$) 194,000 194,000 0%
Slide 11: Improving Profitability
Improving Profitability GROSS PROFIT AND MARGINS EBITDA AND MARGINS GP (USDm) GP (%) 5yr Avg Margin 18.0 EBITDA (USDm) EBITDA (%) 5yr Avg Margin 30% 30.0 45% 16.0 25.7% 39.8% 23.3% 25% 38.1% 38.2% 22.9% 34.5% 34.5% 40% 14.0 22.2% 25.0 35% 20.3% 30.5% 12.0 18.7% 20% 17.5% GP Margin % 20.0 32.0% 26.4%
Slide 12: Strong Cash Flow
Strong Cash Flow 2018 2017 OPERATING CASH FLOW / FREE CASH FLOW Cash Flow (Proposed new) US$m US$m Cash Generated from Operations Free Cash Flow 25.0 EBITDA 28.3 24.3 20.0 Other non Cash flow adjustments (1.6) (0.5) Operating cash flows before working capital changes 26.7 23.8 15.0 Working Capital M
Slide 13: Capital Expenditure
Capital Expenditure US$m 30.0 25.0 20.0 15.0 30.0 26.7 10.0 13.6 12.8 10.8 11.9 5.0 7.9 4.3 0.0 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 Other New Rigs (2) $2.2m $2.6m • Total Capital Expenditure of US$11.9 million Rods - Sustaining CAPEX for 2018 US$5.0 million, approximately US$100,000 per
Slide 14: Improving Balance Sheet
Improving Balance Sheet FY 2018 FY 2017 Change COMMENTARY Balance Sheet US$m US$m % Strong EBITDA and improved working capital management drove: Cash and cash equivalents 19.9 16.9 17.6% Investments 5.7 3.3 75.0% • An increase in cash holdings (US$19.9 million, 2017: US$16.9 million) Investments in
Slide 15: 2018 Final Dividend
2018 Final Dividend • FINAL DIVIDEND DECLARED FOR 2018 of US1.5cps • 2017 final dividend of US1.2 cps paid in CY 2018 • Board Approved Policy Return excess to - “ … the Board will aim to approve an annual dividend of 25% to 75% of free cash flow Shareholders after investment activities (and before f
Slide 16: Section 3 - Strategy Update
Section 3 - Strategy Update
Slide 17: Our Strategy
Our Strategy • Geographic concentration to drive margins African Focused • Leverage extensive experience and knowledge across African markets • Focus on world class project execution Quality Providers • Deliver first world standards in the emerging markets • World class safety processes and procedur
Slide 18: Growth Drivers
Growth Drivers New Mine Site Utilise Idle Assets West Africa Expansion Additional Services Contracts • 2018 rig utilisation of 51% • West Africa region has the • Competitive advantage with • Adjacent services to broaden largest concentration of our unique full service the offering to our customers •
Slide 19: Increase Exploration Utilisation
Increase Exploration Utilisation 2018 EXPLORATION CNTRACT WINS Botswana Egypt Tanzania Côte d’Ivoire Tanzania • 3 diamond rigs • 1 reverse • 1 diamond rig • 1 diamond rig • 1 aircore rig • Commenced circulation rig • Commenced • Commenced Q4 • Commenced Q3 2018 • Commenced Q3 2018 2018 Q4 2018 Q3 20
Slide 20: Expansion into West Africa
Expansion into West Africa AFRICAN EXPLORATION BUDGETS BY COUNTRY, 2018 242 companies budgeting Increased Rig Count US$1.28 billion 31 rigs in West Africa as at end Dec 2018 1% 2% Egypt Established Infrastructure Mauritania Offices, warehouses, workshops and accommodation in Bamako Mali Niger (Mali)
Slide 21: Secure Long Term Mine Site Contracts
Secure Long Term Mine Site Contracts • Economies of scale from multiple rig operations • Shared infrastructure across assets and people BENEFITS • Continuous improvement initiatives as the business develops • Capacity to invest in training & provide career paths for employees • Enhanced revenue visi
Slide 22: Expanding our service offering
Expanding our service offering INVESTMENTS PROCUREMENT LABORATORY Drill for Equity Stealth Global MSALABS MAINTENANCE SERVICES REMOTE IT SERVICES DOWN HOLE SURVEY Maintenance Contracts Cap-Sat Technology Well Force REVIEWING OPPORTUNITIES BOTH ORGANIC AND INORGANIC 22
Slide 23: Conclusion and Outlook
Conclusion and Outlook MACRO ENVIRONMENT CAPITAL DRILLING STRENGTHS • Exploration spend has increased for the last two years, after a prolonged 4 • Cash generative business underpinned by long term contracts with tier one year downturn customers • Challenging capital markets in H2 2018, particularly
Slide 24: Appendices
Appendices
Slide 25: Revenue Metrics
Revenue Metrics UTILISATION ARPOR 65% US$'000 60% 56% 56% 205 200 198 55% 200 49% 49% 193 195 191 50% 46% 189 188 189 45% 190 45% 184 41% 40% 185 40% 180 177 35% 175 34% 35% 175 170 30% 165 25% 160 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 H1 14 H2 14 H1 15 H2 15 H1 16 H2 16 H1 17
Slide 26: Full range of drilling services
Full range of drilling services AIRCORE DIAMOND CORE REVERSE CIRCULATION (RC) UNDERGROUND BLAST HOLE (EXPLORATION & & GRADE CONTROL (GC) DELINEATION) Number of rigs Number of rigs Number of rigs Number of rigs Number of rigs 4 40 13 7 27 Average contract length Average contract length Average contra
Slide 27: Industry Leading in Equipment & Support Facilities
Industry Leading in Equipment & Support Facilities Highest Standards in Equipment Design, Repurpose and Rebuild Workshops In pit horizontal diamond drilling Converted AirCore / De-watering Rig 27 - Before Rig 27 - After Rig 63 - Before Rig 63 - After 27
Slide 28: Metal Prices softer, but supportive
Metal Prices softer, but supportive • Highly supportive gold price, which has continued to firm in Q1 1400 2019 1350 Gold Price 1300 • Gold remains the primary commodity for drilling activity Gold Price (US$/oz) - 50% of drilling exploration budget in 2018 (S&P Global 1250 Market Intelligence) 1200
Slide 29: Exploration Budgets & Funding
Exploration Budgets & Funding Gold financings Base financings Number of financings completed • Solid increase in financing activity by juniors and 10,000 500 Financings By Junior And Intermediate Companies intermediate companies over the past 2 years, however 9,000 450 challenging in H2 2018, partic
Slide 30: Major Discoveries – Gold and Copper
Major Discoveries – Gold and Copper Gold in reserves, resources and past production Projected new gold in discoveries Copper in discoveries Projected copper in discoveries Copper exploraton budgets (US$M) 180 10,000 Gold price (US$/oz) / gold exploration budget 120 5,000 Copper exploration budgets (
Slide 31: Client History
Client History Serbia Dundee Nevsun Resources Armenia Lydian Pakistan Egypt Antofagasta Gippsland Barrick Gold Thani Dubai (AngloGold Mauritania Ashanti) Aura Energy Eritrea Thani Stratex Resources Redblack Mali Ethiopia Andiamo Knight Piesold MRL Côte d'Ivoire APM Chalice Gold Ghana BHP Billiton Su
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 135,812,596 Other Founders Share price (as at 31 Dec 2018) US$0.50 Directors 26.81% 26.66% Market capitalisation (undiluted) ^ US$68.10 Cash (as at 31 Dec 2018) US$19.89 Other Top 10 Institutionals Debt (as at 31 Dec
Slide 34: Capital Drilling and Competitors
Capital Drilling and Competitors Perf. Mkt. Cap. Cash Debt Net Cash Ent. Val. EBITDA (US$m) EV / EBITDA (x) P / Book Div. Yield Company (12M) (US$m) (US$m) (US$m) (US$m) (US$m) 2017a 2018e 2019e 2017a 2018e 2019e (x) (%) (%) Ausdrill 905.5 140.0 525.6 (385.6) 1,291.1 112.0 180.0 271.0 11.5x 7.2x 4.8
Slide 35: Glossary
Glossary The following words 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]
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