Master Drilling improves profit margin in stabilised environment

Media Release

22 March 2017

Master Drilling improves profit margin in stabilised environment

Maiden dividend of 30c declared on back of strong results

Master Drilling Group Limited (Master Drilling, JSE: MDI) today released its results for the 2016 financial year. The second half of the year saw a marked increase in activities, higher utilisation rates and the initiation of new projects that supported Group financial performance. The current environment has stabilised with a healthy level of enquiries and improved operational base throughout.

Commenting on the 2016 results, Danie Pretorius, CEO of Master Drilling, said:

“We delivered a satisfactory performance in 2016 following a difficult first half marked by severe operational and economic issues. As indicated at half year, the improvement in our operating environment including in the commodities sector, supported an uplift in overall performance for the year.

Revenue decreased 1.5% to USD118.1 million due to the impact of unfavourable foreign exchange movements, market conditions, pricing pressures and clients opting for shorter term projects that also impact cost efficiencies.

Costs related to the launch of new projects in a number of countries including the DRC, Sierra Leone and Tanzania coupled with the decision to invest in people and capabilities to drive future growth impacted on profitability although the company delivered a healthy rise in earnings.

USD Earnings per share (EPS) increased 5.9% to 14.3 cents, and ZAR EPS increased 22,1% to 210,0 cents. USD Headline earnings per share (HEPS) increased 3.6% to 14.3 cents, and ZAR HEPS increased 19,4% to 210,0 cents.

“The corrective measures implemented in key markets to support market position and performance are bearing fruit and we will continue to balance investments in technology and people that support growth with the need to drive efficiencies and productivity ratios across the group. This approach coupled with our diversification strategy across regions, commodities, currencies and industries will see our revenue and margins stabilise further,” added Pretorius

Master Drilling strengthened its internally developed technology service offering during the year and met several development milestones on its world-first technologies that we expect to bring to market within the medium term, e.g. our horizontal raised boring (HRB) technology completed a pilot milestone at Petra Diamonds Cullinan mine and is driving strong levels of enquiries.

Seven raise bore machines were added, contributing 4.5% growth in revenue in 2016. The fleet now consists of 105 raise bore and 33 slim drilling rigs. The rate of new rigs coming on stream will settle with a focus on larger units which typically generate higher income. No new slim rigs are in the pipeline at this point.

Since listing in 2012, the Company has achieved compound annual growth of 16.1% in Profit after Tax in US$ terms and delivered on the key strategic objectives set out in its listing prospectus. This, coupled with significant ongoing cash generation, now enables the Company to strike a balance between continued investment in capital projects to support the company’s further growth and enhancing returns to shareholders through the payment of appropriate dividends. Thus, the Board has declared a maiden dividend of ZAR 30 cents per share payable to all shareholders recorded in the register on 16 May 2017.

“A more stable environment is setting in and we are encouraged by the intensified market activity. This is highlighted by a committed order book of USD196.6 million and our strong pipeline of USD320.8 million,” concluded Pretorius

ContactsMaster DrillingSu-Marie Lemmer marketcomm@masterdrilling.com

Instinctif Partners (media and investor relations)

Pietman Roos Pietman.Roos@Instinctif.com Keagile Makgoba Keagile.Makgoba@instinctif.com

NOTES TO EDITORS

About Master Drilling

+27 18 771 8100

+27 72 360 5575 / +27 11 050 7506 +27 11 447 3030

“We challenge the status quo to provide our clients with specialised, adaptive one-stop-shop drilling solutions”

Master Drilling was established in 1986 and listed on the Johannesburg Stock Exchange in 2012. The company delivers innovative drilling technologies and has built trusted partner relationships with blue-chip major and mid-tier companies in the mining, civil engineering and building construction sectors across various commodities worldwide. The Master Drilling business model of providing drilling solutions to clients through tailor-made designs coupled with a flexible support and logistics chain makes it the preferred drilling partner throughout the lifecycle of projects from exploration to production and capital stages.