Master Drilling’s full-year revenue hits a record high despite climate
Master Drilling says it is confident that its diversification model, cash generation abilities and investments in technology will help it weather the tough economic climate into the future, even as some commodity prices lag.
Gauteng-based Master Drilling reported record revenue for the year that ended in December, despite global market and economic uncertainty.
The global drilling company, which provides innovative drilling technologies and mining solutions and services, reported a 7.2% rise in revenue to $242.8m.
This is as it benefited from the addition of A&R Group, whose revenue was the biggest contribution in the period coupled with raise boring work in Africa and slim drilling, which also experienced a turnaround contrary to the flat nature of that segment in recent years.
Speaking to Business Day after the release of the results, CFO André van Deventer said though the group did not anticipate a record high again, it did expect the revenue growth trajectory to remain unabated in the short to medium term, citing its technological investments coupled with high demand among copper and gold miners.
“With the building blocks of the business where we are and the amount of capital we have spent in the last couple of years on expanding our fleet and also the new technologies that we are busy with, I would be very disappointed if we don’t grow year on year on these revenue levels,” Van Deventer said.
“I don’t think it’s a one-off, there is still a lot of growth to be had given the current conditions although it’s a bit bumpy as some of the commodities are really under pressure, but that’s why we are in all the different countries with different commodities and varying clients.”
The CFO said though the second half of last year saw platinum group metals falling off, there has been huge demand on the copper and gold sides.
“It’s at all-time highs as well especially given the weak emerging currencies so there’ sa lot of gold players out there that are doing well and want to use our services,” Van Deventer said.
However, operating profit decreased 2.8% to $33.8m.
The CFO said it was difficult to pass on price increases to its customers who were also under pressure from lower commodity prices. This resulted in the group carrying some of the additional increased costs in the period which hampered the group’s overall profit. Moreover, some one-off costs including a more than $2m impairment also reduced profitability but are not expected to repeat next year.
Headline earnings per share, which exclude one-off items, increased 2.1% to 14.5 US cents, which translated into a 15.1% increase in SA currency to 267.7c.
Master Drilling declared a dividend of 52.5c in rand terms, up from 47.5c a year ago.
Net cash generated from operations amounted to $35.5m. The group said it continued to manage cash resources carefully to cater for emerging opportunities that required specific design, planning and investment.
“If you look at the cash generation of the business, generating $35m of cash in the last year, so it’s just a matter of having that discipline on the split between the capital expansion that we are looking at, paying dividends to shareholders and paying back debt.”
The JSE-listed industrial metals and mining group said it was exploring opportunities to expand beyond traditional drilling, with potential applications for artificial intelligence being a key area of interest.
With the new technologies Master Drilling has invested in, the CFO said being at the forefront of mechanical drilling and cutting was a key area of growth to ensure sustainability into the future.
Since 2021 Master Drilling has been investing in the A&R Group a leading operator in the underground rail-bound and trackless equipment hardware environment in terms of management systems and focusing on safety solutions.
Van Deventer said this formed a part of its diversification strategy while bolstering safety for its clients.
He said these niche prospects, coupled with its committed order book and pipeline of work, placed the group in a formidable position.
Master Drilling, which has operations in North, South and Central America, and in Africa, among other regions, had a pipeline totalling $535.3m at the end of December, while the committed order book stood at $288.3m for 2024 and beyond.
CEO Danie Pretorius said the group had capitalised on its established client and partner relationships, along with its global presence, to achieve business growth.
“We recognise the value of fostering strong relationships, which has empowered us to deliver a wider range of turnkey solutions to our clients. This approach has transformed Master Drilling into a more comprehensive contractor,” he said.
He said the company would continue to focus on cost control, capital allocation and operational excellence.
Master Drilling shares closed 4.07% lower at R12.01 on Tuesday.
THE GROUP EXPECTS THE REVENUE GROWTH TRAJECTORY TO REMAIN UNABATED IN THE SHORT TO MEDIUM TERM