Master Drilling Group Limited (Master Drilling; JSE: MDI), providers of specialised drilling services worldwide, has announced a 22,9% increase in ZAR headline earnings per share from 61,0 cents to 75,0 cents. Profits were up by 11% to US$ 10.4 million, from US$9.3 million and the Group saw a 10,4% increase in US$ headline earnings per share to 6.3 cents from 5.7 cents.
Master Drilling reports that while its order book is stable, it is mindful of the current difficult economic landscape. The four strategic pillars of the Group hedged the group against the economic downturn in commodities.
Strategic progress in various areas delivered as follows during the first half of the year:
Commissioning of the RD8-1500, the largest raise bore rig in the world;
Expansion of the Group’s geographical footprint into Ecuador and Colombia;
Service offerings in the energy sector on hydro projects; the continuation of the drill rig fleet automation programme to enhance safety and efficiencies; and
The expansion of the fleet size to 145 rigs.
The utilisation of the Group’s raise bore rigs declined from 76% (H1 2014) to 68% (H1 2015) due to the economic environment. However, revenue generated per operating rig increased from US$ 111,303 to US$ 122,732. This is attributable to additional capital invested in adding machines with larger capabilities to the current fleet.With 50% of Master Drilling’s revenue generated in US Dollars, the risk of further devaluation of the Rand against other currencies, particularly the US$, is largely countered.
By keeping its growth strategy intact, Master Drilling maintained a good performance; strengthened by a diverse footprint and commodity mix in its customer base. The vertically integrated business model supports end-to-end solutions in terms of design and assembly of rigs, training and engineering support and ultimately diverse drilling applications. These core activities are production stage centered reducing exposure to more volatile aspects in business sectors and commodity markets.
Commenting on the interim results, Master Drilling CEO Danie Pretorius said, “We continue to lead as a world-class supplier of technologically advanced mine drilling operations, as well as delivering on value-added services. Our results reflect the merit of our diversification and organic growth strategies.”
Looking ahead, Master Drilling’s business strategy remains to achieve growth through further diversification of its business operations globally and within selected industries. The expansion of its service offering into non-commodity related services is gaining traction in the energy sector. Achieving organic growth targets is on track with operations having commenced in Ecuador and Colombia.
Despite the economic downturn in the commodity markets, the company managed to achieve results above expectations. Management continuously drives efficiency and cost control as they look to protect the cash of the business. During this time Master Drilling is improving their systems and investing in the training and development of their people.
Investment of expansion capital since listing is expected to be largely completed during the last quarter of this financial year. New machines built in this process are likely to be commissioned during the first half of next year. Efficiency and safe operation of rigs remain crucial and Master Drilling continues to automate the fleet to achieve higher operational standards.