For Immediate Release

19 August 2021

 

 

 

 

 

Capital Limited

("Capital", the "Group" or the "Company")

 

H1 Results

 

Capital Limited (CAPD:LN), a leading mining services company focused on the African markets, today announces half year results for the period 1 January to 30 June 2021 (the "Period"). 

 

 

HALF YEAR RESULTS FOR THE PERIOD ENDED 30 JUNE 2021*

 

	H1 2021	H1 2020	% Change from H1 2020
Average Fleet Size (No. of drill rigs)	99	99	0.0%
Closing fleet size (No. of drill rigs)	106	99	7.0%
Rig Fleet Utilisation (%)	73	57	28.1%
ARPOR ($)	180,000	170,000	5.9%
Capex1 ($ m)	27.7	7.0	295.7%
Revenue ($ m)	98.7	65.1	51.6%
EBITDA2 ($ m)	28.4	15.4	84.4%
EBIT2 ($ m)	20.2	9.6	110.4%
Adjusted Net Profit3 ($ m)	12.7	3.8	238.6%
Investment Gains ($ m)	5.7	9.9	-42.3%
Net Profit After Tax ($ m)	18.4	13.6	35.3%
Earnings per Share
Basic (adjusted) 3 (cents)	6.7	2.8	140.1%
Basic (cents)	9.8	10.0	-2.5%
Interim Dividend per Share (cents)	1.2	0.9	33.3%
Net Asset Value per Share (cents)	86.3	72.4	19.2%
Adjusted Return on Capital Employed (ROCE) (%)4	17.9	23.1
Net Debt ($ m)	32.8	0.1
Net Debt/Equity (%)	20.1	0.1

 

*All amounts are in US dollars unless otherwise stated

⁽¹⁾ Capex is net of prepayments.

⁽²⁾ 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.

⁽³⁾ Adjusted net profit and adjusted earnings per share are pre investment gains.

⁽⁴⁾ Adjusted ROCE is calculated utilising 12 months EBIT and excludes investments at fair value from assets.

 

 

 

 

 

 

Financial Overview

 

·    H1 2021 revenue of $98.7 million, up 51.6% on H1 2020 ($65.1 million);

·    H1 2021 EBITDA of $28.4 million, up 84.4% on H1 2020 ($15.4 million);

·    EBITDA margins increased to 28.8% from 23.7% in H1 2020;

·    Net gains from equity investments of $5.7 million in H1 2021 (realised + unrealised), increasing the value of Group strategic investments to $31.0 million, net of cash proceeds, as of 30 June 2021 (31 December 2020: $27.2 million);

·    Net Profit After Tax (NPAT) $18.4 million (including investment gains), an increase of 35.3% on H1 2020 ($13.6 million);

·    Cash capex of $27.7 million (H1 2020: $7.0 million) included the majority of the remaining capex relating to the Sukari earth moving contract;

·    Cash from operations of $5.4 million (H1 2020: $7.0 million), impacted by a significant build in working capital;

·    Net debt of $32.8 million (H1 2020: net debt of $0.1 million and year end 2020 net cash of $5 million) reflecting increased capex for Sukari;

·    Earnings per share (including investment gains) was 9.8 cents in H1 2021 (H1 2020: 10.0 cents); and

·    Declared an interim dividend of 1.2 cents per share, to be paid on 1 October 2021 to shareholders registered on 3 September 2021 (up 33.3% on 2020 interim dividend 0.9 cents per share).  

 

 

Operational & Strategic Review 

·      Rig fleet utilisation increased to 79% in Q2 2021, an increase of 36.2% on Q2 2020 (58%) and 17.9% on Q1 2021 (67%);

·      Non-drilling revenue contributed 17% of total revenue for H1 2021, compared with H1 2020 (9%[1]), driven by mining services, maintenance services and MSALABS;

·      West African region's contribution to Group revenue was 38% in H1 2021, compared to a 31% contribution in H1 2020 and 32% in H2 2020;

·      H1 2021 average rig utilisation was 73%, an increase of 28.1% on H1 2020 (57%) and 21.7% on H2 2020 (60%);

·      Average monthly revenue per operating rig ("ARPOR") of $180,000, up 5.9% on H1 2020 ($170,000) and 5% on H2 2020 ($172,000) as core long-term contracts continue to perform strongly;

·      Safety performance remains outstanding with Capital achieving eight LTI free milestones, six of which are in excess of three years;

·      Previously announced contracts:

-        New contract awards include an exploration contract with new client Shanta Gold at its West Kenya project, Kenya (commencing Q3), together with exploration contracts with Arrow Minerals (Burkina Faso) and Allied Gold (Egypt); and

-        Contract extensions include a two-year contract extension for surface exploration and resource development drilling with Resolute at the Syama Gold Mine, Mali.

·      Increased rig capacity at multiple operations, including:

-        Sukari Gold Mine, Egypt (Centamin);

-        Geita Gold Mine, Tanzania (AngloGold);

-        North Mara Gold Mine, Tanzania (Barrick);

-        Morila Gold Mine, Mali (Firefinch); and

-        Sanankoro Project, Mali (Cora Gold).

·      New contract wins include:

-        Exploration contract with Altus Strategies (Mali);

-        A two-year grade control and delineation drilling contract with Kinross (Mauritania);

-        An additional exploration and delineation rig with Centamin (Egypt); and

-        MSALABS provisionally awarded a five-year contract with Societe Des Mines De Morila SA at the Morila Gold Mine in Mali (80% owned by Firefinch ASX:FFX), subject to final terms and conditions. The contract would include the new Chrysos PhotonAssay technology with a unit expected to be on site before the end of the year. This would be the first Chrysos unit to be deployed in Western Africa.

·      Sukari Gold Mine (Egypt) waste mining and expanded drilling contracts continue to perform well:

-        Blast hole fleet is fully utilised, with all seven new blast hole rigs now operational;

-        Large excavator fleet (1 x CAT 6020 and 2 x CAT 6040) commissioned and operational; and

-        Workforce recruitment is approximately 98% complete, with remaining employees undergoing onboarding.

·      MSALABS continues to expand, and is advancing the installation of Chrysos's PhotonAssay units:

-        The initial Chrysos unit has arrived in Tanzania and is in transit to the Bulyanhulu laboratory, commissioning is anticipated imminently, with the Chrysos team now on site;

-        Additional Chrysos unit secured for Canada and scheduled for arrival in Val d'Or, Quebec, in Q4, representing an expansion of our presence in the country and entry into the prolific Abitibi Belt. Offtake discussions are well advanced for the unit's capacity; and

-        Expanded services with Thor Explorations, commencing management of the mine site laboratory following the first gold pour at the Segilola mine during July.

·      Rig count increased from 98 (31 March 2021) to 106 with the acquisition of new rigs to support existing long term contracts, including four blast hole rigs for Sukari (Egypt), three underground rigs for Geita (Tanzania) and one RC rig for Yanfolila (Mali); and

·      The Group's portfolio of ten long-term mine-site based contracts performed well.

 

Outlook 

·      Demand for drilling services has continued to increase this year and the outlook remains robust for maintaining a high utilisation rate through H2 2021;

·      Increases to capex and exploration budgets across the mining sector, supported by the performance of gold, continues to provide a strong tailwind for Capital with c.90% of revenue exposed to the African gold mining sector;

·      Strong demand for laboratory services with MSALABS installing two Chrysos units in H2 2021, and a third unit scheduled for Morila;

·      Drill rig fleet size forecast to increase by a further eight rigs by the end of 2021;

·      Sukari earth moving works continue to ramp up ahead of schedule. Guidance for full operating run rate remains Q4 2021;

·      Highly active tendering market across all business activities, with particularly strong demand in drilling especially in West Africa; and

·      Capital remains committed to its strategy of maintaining a strong balance sheet and providing returns to its shareholders.

 

The Group maintains its revenue guidance range of $200-210 million for 2021, as guided in the Q2 2021 trading update.

 

 

 Commenting on the results, Jamie Boyton, Executive Chairman of Capital Limited, said:

 

"We are pleased to report the Group has delivered its strongest half year performance since its inception. Strength across all areas of the business has led to significant revenue growth, up 52% on the prior period, a reflection of an outstanding performance at our underlying operations and improved market activity. Given the strength of the underlying business, we have today announced an interim dividend to shareholders of 1.2 cents per share, representing a 33% increase on the previous corresponding period.

 

This year marks a transformational step for Capital as the Group's mining business began its first major earthmoving contract at Sukari. The team delivered on a demanding ramp up schedule, with mine production commencing in February, just two months after winning the contract. The blast hole fleet is now fully utilised and the three excavators are commissioned and operational. We expect to reach steady state in Q4 this year and deliver incremental revenues of $235 - $260 million over the next four years.

 

The core drilling business has continued to go from strength to strength. Not only did our fleet size rise from 94 to 106 rigs through the half but our utilisation rate increased from 60% in H2 2020 to 73% in H1 2021, ending Q2 at 79%, levels not seen since 2012. This uplift has been driven by new contract wins and expansion at existing sites including West Africa, a pleasing result following our focus on restructuring and rebalancing our business over the past three years.  

 

Safety remains at the core of our operations and we have achieved exceptional results during the half, with safety milestones achieved across many of our existing long-term contract sites, including sites with multi-year LTI free records.

 

MSALABS, our laboratory business, continued to perform well and is positioning itself for growth as it rolls out the revolutionary Chrysos PhotonAssay units. The first of these is now in Tanzania in transit to the Bulyanhulu mine site, marking the largest contract since MSALABS' establishment. Chrysos has the potential to disrupt the geochemical analysis sector and we are encouraged by the demand we see as we prepare to roll out the second unit in Val d'Or in Quebec, Canada, in Q4 this year and the third at Morila in Mali soon thereafter.

 

Another key contributor to our strong result for the half has been returns from our equity investments. Capital Investments not only contributes through equity returns, which amounted to $5.7m in H1 2021, but has also served as a highly effective business development tool for several years. This creates a strong partnership approach to our contracting and remains core to the investment strategy.

 

As the business continues to develop and expand, the long term prospects for Capital look highly encouraging.  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 uptick in H1 2021 to decade highs. Despite the increased activity, our strategy remains focused on mine sites to ensure a business that is sustainable through the cycles.

 

Capital's position of offering not only drilling but also mining and laboratory services to mine sites, all of which are crucial to the sustainability and growth of any large scale mine, has provided a broader, stronger platform to sustain its growth trajectory over the next few years. 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 further increasing fleet utilisation. We also remain committed to maximising free cash flow generation and maintaining our strong balance sheet to support further growth initiatives and returns to our shareholders."

 

Capital Limited will be hosting a live webcast presentation at 09:00 BST on Thursday 19 August 2021, where questions can be submitted through the platform.

 

The webcast presentation link:

https://webcasting.buchanan.uk.com/broadcast/6114e801c97de6636c2d8e89 

 

Dial-in details

 

United Kingdom Toll-Free: 08003589473 PIN: 74683173#

United Kingdom Toll: +44 3333000804 PIN: 74683173#

 

Link for international access numbers

 

 

Participants may join the webcast approximately five minutes before the commencement time. A copy of the Company's presentation will be available on www.capdrill.com 

 

- ENDS -

 

For further information, please visit Capital's website www.capdrill.com or contact:

 

Capital Limited                                                                 +230 464 3250

Jamie Boyton, Executive Chairman                                [email protected]

Giles Everist, Chief Financial Officer

Conor Rowley, Investor Relations & Corporate Development Manager

 

Berenberg                                                                          +44 20 3207 7800

Matthew Armitt

Jennifer Wyllie

Detlir Elezi         

 

Tamesis Partners LLP                                                       +44 20 3882 2868

Charlie Bendon

Richard Greenfield

 

Buchanan                                                                            +44 20 7466 5000

Bobby Morse                                                                     [email protected]

Kelsey Traynor

James Husband

            

 

About Capital Limited

 

Capital Limited is a leading mining services company providing a complete range of drilling, mining, maintenance and geochemical laboratory solutions to customers within the global minerals industry, focusing on the African markets. The Company's services include: exploration, delineation and production drilling; load and haul services; mining equipment hire and maintenance; and geochemical analysis. The Group's corporate headquarters are in Mauritius and it has established operations in Burkina Faso, Cameroon, Côte d'Ivoire, Egypt, Guinea, Kenya, Mali, Mauritania, Nigeria, Saudi Arabia and Tanzania.

 

 

Cautionary note regarding forward looking statements

 

Certain information contained in this report, including any information on Capital Limited's plans or future financial or operating performance and other statements that express management's expectations, or estimates of future performance, constitute forward-looking statements. Such statements are based on a number of estimates and assumptions that, while considered reasonable by management at the time, are subject to significant business, economic and competitive uncertainties. Capital Limited cautions that such statements involve known and unknown risks, uncertainties and other factors that may cause the actual financial results, performance or achievements of Capital Limited to be materially different than the Company's estimated future results, performance or achievements expressed or implied by those forward-looking statements. These factors include the inherent risks involved in exploration and development of mineral properties, changes in economic conditions, changes in the worldwide price of commodities and project execution delays, many of which are beyond the control of Capital Limited. Nothing in the report should be construed as either an offer to sell or a solicitation to buy or sell Capital Limited securities.

 

 

INDEPENDENT REVIEW REPORT TO CAPITAL LIMITED

Introduction

We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 which comprises the condensed consolidated statement of comprehensive income, the condensed consolidated statement of financial position, the condensed consolidated statement of changes in equity, the condensed consolidated statement of cash flows and the related notes 1 to 15.

We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of and has been approved by the directors.  The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

As disclosed in note 1, the annual financial statements of the group will be prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The condensed set of financial statements included in this interim financial report has been prepared in accordance with International Accounting Standard 34, ''Interim Financial Reporting''.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, ''Review of Interim Financial Information Performed by the Independent Auditor of the Entity'', issued by the Financial Reporting Council for use in the United Kingdom.  A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.  A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit.  Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended 30 June 2021 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority.

 

 

 

 

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting its responsibilities in respect of half-yearly financial reporting in accordance with the Disclosure Guidance and Transparency Rules of the United Kingdom's Financial Conduct Authority and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.

 

 

BDO LLP

Chartered Accountants

London, United Kingdom

18 August 2021

 

 

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

 

 

CAPITAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2021
										Unaudited
										Six months ended
								Notes		30 June 2021		30 June 2020
										$		$
Revenue								4		98,683,980		65,089,372
Cost of sales										(56,028,630)		(39,431,925)
Gross profit										42,655,350		25,657,447
Administration expenses										(14,281,383)		(10,276,703)
Depreciation, amortisation and impairments										(8,210,759)		(5,732,201)
Operating profit										20,163,208		9,648,543
Interest income										49,997		179,637
Finance charges										(1,606,618)		(566,691)
Fair value gain on investments at fair value										5,706,322		9,863,850
Profit before taxation										24,312,909		19,125,339
Taxation								3		(5,903,119)		(5,509,895)
Profit and total comprehensive income for the period										18,409,790		13,615,444
Profit attributable to:
Owners of the parent										18,490,700		13,673,957
Non-controlling interest										(80,910)		(58,513)
										18,409,790		13,615,444
Earnings per share:
Basic (cents per share)								5		9.8		10.0
Diluted (cents per share)								5		9.6		9.9

 

 

CAPITAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2021
								Unaudited		Audited
						Notes		30 June 2021		31 December 2020
ASSETS								$		$
Non-current assets
Property, plant and equipment						7		132,036,724		88,970,683
Right of use assets								856,445		629,657
Goodwill								1,252,348		1,252,348
Intangible assets								299,363		276,248
Total non-current assets								134,444,880		91,128,936
Current assets
Inventory								31,568,936		24,689,102
Trade and other receivables								36,239,073		18,903,656
Prepaid expenses and other assets								18,856,261		28,394,850
Investments at fair value								31,049,470		27,167,095
Current tax receivable								265,199		359,970
Cash and cash equivalents								19,950,711		35,701,894
Total current assets								137,929,650		135,216,567
Total assets								272,374,530		226,345,503
EQUITY AND LIABILITIES
Equity
Share capital						8		19,006		18,878
Share premium						8		60,900,119		60,169,426
Equity-settled employee benefits reserve								1,998,608		1,926,994
Other reserve								190,056		190,056
Retained income								100,404,088		84,384,101
								163,511,877		146,689,455
Non-controlling interest								1,308,405		1,389,315
Total equity								164,820,282		148,078,770
Non-current liabilities
Loans and borrowings						9		44,781,585		26,112,602
Lease liabilities								538,604		337,233
Deferred tax								30,620		13,755
Total non-current liabilities								45,350,809		26,463,590
Current liabilities
Trade and other payables								46,770,991		39,711,217
Current tax payable								7,068,259		7,174,749
Loans and borrowings						9		8,016,928		4,581,111
Lease liabilities								347,261		336,066
Total current liabilities								62,203,439		51,803,143
Total equity and liabilities								272,374,530		226,345,503