Maiden dividend for Master Drilling amid global growth

Raise-bore drilling specialist Master Drilling has declared its first dividend since listing in December 2012 after completing its planned investments in new machinery.

Originally a South African company, Master Drilling now earns 58% of its revenue from Latin America, compared with 23% from SA. Its Latin American pipeline was boosted by the acquisition of Bergteamet Latin America in January 2016.

Chief financial officer Andre van Deventer said the maiden dividend of 30c a share showed a conservative seven-times cover, but the longer-term target was to reduce cover to four to five times.

Headline earnings of 210c a share for the year to December were 19.4% higher than 2015, largely reflecting the weakening of the rand against the dollar. Headline earnings were up 3.6% in US currency.

The group’s order book was $196.6m and the total pipeline including contracts awaiting decisions, was R320.8m.

CEO Danie Pretorius said Master Drilling's strategy had changed from four years ago, when the focus was adding raise bore machines to the fleet.

The focus now was on horizontal raise boring and completing tests in the US of a new blind boring system, which entails drilling into virgin rock rather than between two open points. There is expected to be good demand for blind boring, particularly in areas such as nuclear storage and waste water disposal.

Pretorius said that, in future, Master Drilling expected to spend more on research and development than the $1.5m spent in 2016.

In 2016, 94% of Master Drilling’s work was in the mining sector, where it will continue to market itself mainly to copper, polymetallic and gold/zinc mines. Pretorius said the target was at least 30% exposure to the infrastructure and civils sector.

Van Deventer said revenue rose about 20% in dollar terms in the second half of the year compared with the first half, although costs also rose, mainly for labour. Raise-bore rig utilisation improved to 73% from 70%, but was still below the target of 75% overall, although the newer, bigger machines were 80% utilised.

Master Drilling’s shares, which are tightly held, were unchanged at R18 on the JSE on Wednesday.