Master Drilling Financial Results FY 2014: 32% increase in headline earnings per share

Key salient features

  • Headline earnings per share up 32.4% to 131.5 ZAR cents (2013: 99.3 ZAR cents)
  • 24% year-on-year improvement in revenue, increasing to ZAR1.431 billion (2013: ZAR1.154 billion)
  • Net cash generated from operating activities up by 52.9% to $23.8 million
  • Order book of $216 million, representing major commodities
  • Improved safety performance, with zero fatalities

Operating conditions across Master Drilling’s geographic footprint were challenging, with performance affected by volatile commodity cycle. Notwithstanding the tough environment, Master Drilling delivered impressive full year earnings, helped by a growth strategy focused on organic growth, a diverse footprint, and commodity mix. As a result, Master Drilling posted an increase of 18% in headline earnings to $17.98 million, as well as a 32% improvement in headline earnings per share to 131.5 ZAR cents. In the same period, revenue increased remarkably by 24% to ZAR1.4 billion.

Notably, the South Africa and Latin American businesses continue to deliver solid revenue for the Group, accounting for 34% and 50% of revenue respectively, namely in specialised drilling services to major, mid-tier and junior mining and exploration companies across different commodities. By year-end, the Group was actively operating 139 drilling rigs across Southern Africa, Latin America and West Africa.

Master Drilling’s commodity mix strategy of a 30% limit exposure to any commodity helped lift the Group’s revenue. Notably, in the year under review, exposure to the gold sector decreased from 36% the previous year to 32%, while activity in iron ore increased significantly from 1% in 2013 to 20% as at 31 December 2014.

In the year under review cash generated from operating activities was up by 52.9% to $23.8 million.

Commenting on the full year financial results, Master Drilling CEO Danie Pretorius said, “Operating performance was in line with expectations. Our geographic and commodity diversification strategy paid off; as a result, our performance was resilient across the Group against a backdrop of a volatile commodity cycle and tough global economic trading environment.

“We have a solid two-year order book, driven by geographical diversification. Our order book supports our diversification and organic growth strategies. With this in place, we expect to deliver a solid performance in the next financial year, offset against trading environment volatilities.”

Outlook
Looking ahead, the global operating environment is expected to remain challenging, against the backdrop of low commodity prices and volatile exchange rates. The Group expects to navigate this environment with a growth strategy focused on geographical diversification and the diversified commodity mix. Additionally, Master Drilling will pursue organic growth opportunities in Mexico, Peru and Colombia, in response to the global mining industry’s focus on greater level of mechanisation.

“We are a world-class supplier of technologically advanced mine drilling operations, as well as value-added services. We intend to solidify our global position by strengthening and consolidating our position in existing markets through focused organic growth and strategic acquisitions, expanding into new markets as well as enhancing operational efficiencies, while continuing with our dedicated focus on quality and safety,” concluded Pretorius.