Johannesburg, South Africa. 31 March 2016. Master Drilling Group Limited (Master Drilling, JSE: MDI) released its final results for the year ended 31 December 2015 to shareholders today.
Key financial features:
- Basic earnings per share in ZAR up by 39% from ZAR123,7 to ZAR172,0 cents
- Basic earnings per share in USD up by 14% from USD12.1 cents to USD13.8 cents
- A 7% growth in gross profit margin to 40% with a value of USD47.9 million
- Revenue down by 9% from USD132.0 million to USD119.9 million
- Net cash generated from operations up by 19% to USD28.2 million
- Profit for the year in ZAR up by 35% from R200.1 million to ZAR269.6 million
- Profit for the year in USD up by 14% from USD18.5 million to USD21.1 million
Master Drilling reported strong results for the period under review, particularly given the challenges in the South African economy and the volatility of commodity performance.
A 9% decline in revenue for the year from USD132 million is largely attributable to the lower revenue in South Africa, which declined to USD30.7 million, and accounted for 26% of revenue for the year (2014: 34%). The decline in revenue from South Africa is largely owed to the translation of results to USD against the weaker ZAR and tough economic conditions experienced by customers.
While the revenue contribution from Latin America was marginally higher at 52% (2014: 50%), the contribution from Africa grew to 23% (2014: 15%). Revenue contribution from the African segment was driven by the business in Zambia, Mali and the Democratic Republic of Congo. Master Drilling remains highly cash generative with net cash generated from operating activities reached US$28.3 million, up 19% from 2014.
Optimisation to grow profitability
Profit attributable to equity shareholders increased by 18% to USD20.0 million (2014: USD16.9 million), while the gross profit margin rose from 33% in 2014 to 40% in 2015. The gross profit margin varied, given drilling ground conditions, competition in the markets and the mix of country and foreign cost structures. Costs remained well managed, with operating profit margin increasing from 20% in 2014 to 25% in 2015.
Technology optimisation and development
Capital investment absorbed USD18.4 million (2014: USD19.7 million) during the year. This included investment in the South African segment where the RD8 raisebore machine, the ROSS and ROSI shotcrete system were developed. This machine and support system has been successfully deployed at the Palabora Mining Company in Phalaborwa.
In Latin America, investment in equipment was made to service the growing market in this region.
USD2 million of this investment has been allocated to equipment in Ecuador. Further, a capital investment of USD3 million in Malta includes purchasing of intellectual property, a fully patented and registered blind shaft boring system.
Gearing ratio remained at a relatively low level of 26% in 2015 (2014: 20%), less than the group’s target of 30%. An interest-bearing facility of USD30.0 million from ABSA Capital was made available during the year to support the business’ growth strategy. The facility is not fully utilised as the business is currently sufficiently cash-generative. The gearing ratio net of cash for 2015 was determined to be less than 2%.
Interest-bearing debt stands at USD24.2 million, an increase from USD5.7 million in 2014.
In 2016, we expect to see added benefits from our geographical expansion. The USA operations are expected to contribute towards group’s geographical footprint. Latin America is expected to continue on a steady course. Operations in South Africa will be monitored closely as the country’s mining industry is currently under tough economic pressure