Capital Ltd (LON:CAPD) has announced its full year results for the year ended 31 December 2020.
| 2020 | 2019 | % change | |
| Average Fleet Size (No. of drill rigs) | 98 | 92 | 6.5 |
| Fleet Utilisation (%) | 59 | 54 | 9.3 |
| ARPOR ($) | 171,000 | 176,000 | (2.8) |
| Capex ($ m) | 48.7 | 19.8 | 145.7 |
| Revenue ($ m) | 135.0 | 114.8 | 17.5 |
| EBITDA1 ($ m) | 33.8 | 27.3 | 24.0 |
| EBIT1 ($ m) | 21.6 | 16.6 | 29.9 |
| Investment Gains (Losses) ($ m) | 13.6 | (1.1) | N/A |
| Net Profit After Tax ($ m) | 24.8 | 10.4 | 138.6 |
| Cash From Operations ($ m) | 36.0 | 28.7 | 34.6 |
| Earnings per Share | |||
| Basic (cents) | 17.8 | 7.7 | 130.6 |
| Diluted (cents) | 17.6 | 7.6 | 130.9 |
| Final Dividend per Share (cents) | 1.3 | 0.7 | 85.7 |
| Total dividend for FY (cents) | 2.2 | 1.4 | 57.1 |
| Net Asset Value per Share1 (cents) | 106.0 | 63.0 | 68.3 |
| Return on Capital Employed (ROCE) (%)2 | 12.4 | 18.4 | (32.8) |
| Adjusted ROCE (%) 3 | 22.2 | 18.4 | 20.3 |
| Net Cash1 ($ m) | 5.0 | 4.4 | 13.1 |
| Net Cash/Equity (%) | 3.4 | 5.2 | (34.5) |
*All amounts are in US dollars unless otherwise stated
(1) EBITDA, EBIT, Net Asset Value per share and Net Cash are non-IFRS financial measures and should not be used in isolation or as a substitute for Capital Limited financial results presented in accordance with IFRS.
(2) ROCE calculated utilising 12 months EBIT.
(3) Adjusted ROCE excludes Mining Assets and Prepayments, Net Equity Raise proceeds and Sukari prepayment from Capital Employed.
Financial Overview
· FY2020 revenue up 18% to $135.0 million (FY2019: $114.8 million);
· Year end net cash balance of $5.0 million (December 2019: $4.4 million) comprising cash of $35.7 million and drawn debt of $30.7 million;
· Strong growth in profitability, including:
– Net Profit After Tax up 139% to $24.8 million (2019: $10.4 million)
– Basic earnings per share up 131% to 17.8c (2019: 7.7c)
– EBITDA up 24% to $33.8 million (2019: $27.3 million)
– EBIT up 30% to $21.6 million (2019: $16.6 million)
· EPS growth driven by strong operating performance and substantial realised and unrealised investment gains. Year end investment portfolio valued at $27.2 million (2019: $12.5 million), recording investment gains totalling $13.6 million, comprising $13.2 million unrealised and $0.4 million realised;
· Solid growth in non-drilling revenue, increasing to 13% in 2020 (2019: 8%); and
· Final Dividend of US$1.3cps, up 86% (2019 second interim dividend: US$0.7cps) to be paid on 4 May 2021 which, together with the interim dividend of US$0.9cps brings total dividends declared for 2020 of US$2.2cps (2019: US$1.4cps) up 57% over prior year.
Operational and Strategic Highlights
· Outstanding safety results, significantly better than industry standards, including Total Recordable Injury Frequency Rate (TRIFR) of 0.77 per 1,000,000 hours worked and All Injury Frequency Rate (AIFR) of 0.43;
· Achieved world class safety records at multiple long-term operations, including:
– Mwanza Facility (Tanzania) achieved twelve years LTI free in January;
– Sukari Gold Mine (Egypt) achieved three years LTI free in January;
– North Mara Gold Mine (Tanzania) achieved four years LTI free in March;
– Geita Gold Mine (Tanzania) achieved three years LTI free in March;
– Syama Gold Mine (Mali) achieved four years LTI free in June;
– Tasiast Gold Mine (Mauritania) achieved three years LTI free in June; and
– Jabal Sayid Mine (Saudi Arabia) achieved one year LTI free in December.
· Increased annual rig utilisation to 59%, up 9% on FY 2019 (54%) on a larger average fleet of 98 rigs (FY 2019: 92 rigs);
· Closing fleet of 94 rigs (2019: 95 rigs) included decommissioning of six rigs during the year;
· ARPOR of $171,000 per rig (2019: $176,000);
· Awarded multiple new exploration contracts over 2020 with awards concentrated in the West African region, consistent with the Group’s expansion strategy executed over previous years, including;
– Predictive Discoveries in Guinea;
– Altus Strategies and Marvel Gold in Mali;
– Arrow Minerals in Burkina Faso;
– Oriole Resources in Cameroon;
– Awale Resources and Perseus Mining in Côte d’Ivoire.
· Awarded multiple mine-site based contracts during 2020 (new awards and extensions) consistent with the Group’s well-established strategy to focus on mine site services, including:
– AngloGold Ashanti in Tanzania;
– Barrick Gold Corporation (“Barrick”) in Tanzania (Bulyanhulu and North Mara);
– Firefinch, Hummingbird and Resolute in Mali;
– Centamin in Egypt; and
– Kinross in Mauritania (commencing Q1 2021).
· Accordingly, the Group’s portfolio of long-term mine-site based operations increased to ten sites, comprising 18 individual contracts with the addition of the new contracts with Barrick in Tanzania and Firefinch in Mali;
· MSALABS awarded its largest ever contract, a transformative five-year laboratory services contract with Barrick at the Bulyanhulu Gold Mine, Tanzania, together with additional new contracts with Endeavour Mining and Tudor Gold and a binding agreement with Thor Explorations;
· MSALABS continued its African expansion with the commissioning of a new laboratory in Nouakchott, Mauritania, together with the acquisition of the ELAM laboratory in Yamoussoukro;
· Strategic relocation of assets into West Africa continued throughout 2020 and is now largely complete, with rig count at year end of 41 rigs (out of 94 rigs in total);
· The COVID-19 pandemic had no material impact on operations, some restrictions were experienced on movement of personnel and supply chain while the Group’s protocols and management plan were highly effective in minimising incidents of infection;
· Post year-end contract awards include:
– Three-year contract for surface delineation and open pit grade control for AngloGold Ashanti, Tanzania (previously announced);
– Three-year contract for underground delineation and grade control drilling for AngloGold Ashanti, Tanzania (previously announced);
– Initial six-month delineation drilling contract for Allied Gold Corp, Mali;
– Exploration drilling contract for new client Cora Gold, Mali;
– Exploration drilling contract with Perseus Mining in Côte d’Ivoire;
– Initial six-month delineation drilling contract with Aya Gold and Silver Inc in Mauritania; and
– Six-month exploration drilling contract for Endeavour Mining Corporation, Burkina Faso.
Outlook
· Revenue guidance for 2021 of $185 to $195 million driven by improving drill rig utilisation, contract extensions and expansions from existing long-term contracts and the commencement of the load and haul waste stripping contract at Sukari, Egypt;
· Demand for drilling services has increased strongly from Q4 2020, building further in Q1 2021 and is particularly strong in West Africa where the Group now has 41 rigs ;
· Drill rig fleet size forecast to increase by 17 rigs with the majority allocated to previously announced contracts with Sukari, Bulyanhulu and Geita;
· Strong demand for laboratory services with MSLABS working at near full capacity across all major laboratories;
· Highly active tendering market across all business activities, with particularly strong demand in exploration drilling and satellite pit mining operations.
Transformative New Business Awards and Equity Placing
In December 2020, we announced the successful awards of a 120Mt waste stripping contract including load and haul and ancillary services, and an expansion and extension of the existing drilling contract at Centamin’s Sukari Gold Mine, Egypt. Together, they are expected to deliver US$235 – $260 million of incremental revenue over a four-year term, the Company’s largest award of new business since its inception, which is expected to be earnings accretive by the end of the year. The contract is a step-change in the scale of the business and its continued evolution into a full-service mining contractor.
Additionally, Capital completed a successful equity fundraising which was oversubscribed and introduced a new roster of quality institutional investors. Gross proceeds of approximately £30 million (approximately US$40 million, net approximately US$37.2 million) are being used to support the Sukari contracts together with key debt financing facilities, several of which were in place at the year end. The funds have facilitated further payments on all major capital equipment items required for the contracts, including 17 CAT 785 dump trucks, seven blast hole drill rigs, three excavators and all major ancillary support equipment including dozers, graders and water trucks. Subsequent to the year end, Capital has successfully agreed a further debt facility for up to US$17.0 million of which US$6.5 million is committed and available subject to finalisation of security.
The Sukari contracts have commenced and execution is progressing well, with earth moving operations commencing in February and multiple further assets scheduled for commissioning during the current quarter.
Results Conference Call
Capital Limited will host a Webcast on Thursday 18 March 2021 at 09:00am (London, UK time) to update investors and analysts on its results. Participants may join the webcast via the like below. Shareholders may also join the webcast by dialling one of the following numbers, approximately 10 minutes before the start of the call. Participants may also wish to download the 2020 Results Presentation, which is available by clicking http://www.capdrill.com/investors/presentations
Webcast Link
https://webcasting.buchanan.uk.com/broadcast/6040d1541e24d464e23e7d6b
Dial-In Details
United Kingdom Toll-Free: 08003589473
United Kingdom Toll: +44 3333000804
PIN: 19974583#
International dial-in numbers – Link
Commenting on the results, Jamie Boyton, Executive Chairman of Capital Limited, said:
‘Capital’s strategy proved resilient against the challenges of 2020 and our performance was outstanding. We delivered significant revenue and profitability growth, along with the achievement of several strategic highlights. Not only did we achieve a transformational milestone with the award of our mining business’s first major earthmoving contract with our long-term client Centamin, which is anticipated to deliver incremental revenues of $235 – $260 million over four years, but we also delivered outstanding results across all our business units. As a result of this strong performance, we will be delivering a final dividend to shareholders of US1.3cps, up 86% on the previous year.
Credit must be given to our team, who delivered these results while operating under extremely difficult conditions during the year and yet still maintained our industry leading safety performance, with a TRIFR result of 0.77. Their adherence to COVID-19 related safety protocols ensured we minimised rates of infection and were able to keep business operations continuing uninterrupted.
Our focus on restructuring and rebalancing our business over the past three years is proving successful. Our West African operations are now well established and we were rewarded with multiple new contract wins across the region, including expansion into Guinea and Cameroon. Growth of our ancillary services continued with our laboratory business, MSALABS, which was also awarded its largest contract since its establishment during November while further expanding its presence in Africa with new labs in Mauritania and Côte d’Ivoire. Additionally, our focus on growing the number of mine-site based contracts saw the award of six new long-term contracts during the year, increasing our portfolio to ten mine-site based operations. As we most recently announced, we have been awarded a further two long-term contracts at the Geita Gold Mine in Tanzania, due to commence in Q2 2021, while our two-year grade control drilling contract with Kinross at the Tasiast Gold Mine in Mauritania commenced in Q1.
Our key operational metrics remained strong, with rig utilisation up 9% to 59% and ARPOR of $171,000. We continued to upgrade our fleet to ensure we provide the most modern, reliable rig fleet in Africa and will be commissioning multiple new rigs throughout the remainder of the year, primarily to support our long-term contracts.
We are highly encouraged for the year ahead given favourable operating conditions are continuing. The gold price, our principal commodity exposure, remains at elevated levels and equity markets continue to be supportive for capital raising activity, with fundraisings for Juniors and Intermediates experiencing a significant month-on-month uptick in activity during February, with the greatest number of large financings in recent history, a strong indicator of future demand. Additionally, we have had a strong start to 2021 with numerous contract awards across the West African region, together with the new long-term contracts at the Geita Gold Mine awarded already to date.
We will continue to pursue our key strategic priorities during 2021, focusing on growing our full-service mining business, growing revenues from our ancillary services businesses, expanding capacity with our existing clients and increasing fleet utilisation. We also remain committed to maintaining our strong balance sheet to support further growth initiatives and returns to our shareholders.’
