Ausdrill Limited posted strong results for 1H17 and won significant new contracts
1H17 results summary:
Source: Ausdrill
Key points:
- Revenue for 1H17 rose by 3.9% to $373m per corresponding period (pcp), and EBITDA increased 9.9% to $65.6m pcp. Its strong performance was driven by a period of rationalisation, cost cutting and refocus on core mining services where Ausdrill holds a competitive advantage. As a result, interest coverage (EBITDA/net cash interest) also improved to 4.5x from 3.9x at 30 June 2016
- Most business segments reported improvements in EBIT and EBIT margins, with the exception of its Drilling Services Australia. While the segment recorded stable revenues and achieved key contract extensions, margins were negatively impacted by the termination of the Telfer contract and higher costs. Ausdrill continues to expect strong competition and highlighted the risk of margin compression for this segment
- Net operating cashflow improved significantly by 226% to $35.2m in 1H17. This includes a $22m gain from the sales of businesses, following implementation of further cost savings initiatives. Its improvement in cashflows was partly offset by an increase of 708% to $49.3m of capital expenditure resulting from an increase in growth projects in Africa
- Ausdrill maintained strong cashflow and as a result its balance sheet has strengthened, with cash holdings up by 20% at $218.6m at 31 December 2016 compared to $181.8m at 30 June 2016. Its undrawn facilities are in excess of $100m. Net debt also decreased by 12% to $191.3m at December 2016, due to the strong cashflow generation. Consequently, gearing (net debt/net debt plus equity) decreased to a five year low of 23.9% at December 2016, compared to 26.3% at June 2016. The company’s next major debt maturity is US$300m of unsecured notes (A$415.5m equivalent) in FY2020.
Outlook
Ausdrill mentioned numerous contract wins in Africa as underpinning the company’s growth, while it expects Australia will continue to be challenged by weak market conditions. The company also expects continuing downward pressure on margins notwithstanding the recent improvement in commodity prices.
Key highlights from Ausdrill’s guidance for the group:
- Ausdrill is on track to meet full year 2017 guidance of $800m revenue and an anticipated profit uplift of around 50%
- Revenue growth for FY18 is expected to be substantial following $1.2bn in new projects and contract renewals
- Capex for 2H17 is expected to be around $110m for growth projects in Africa
A link to the results is available here.