For Immediate Release

18 August 2022

 

 

 

 

Capital Limited

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

 

H1 Results

 

Capital Limited (CAPD:LN), a leading mining services company, today announces half year results for the period 1 January to 30 June 2022 (the "Period"). 

 

HALF YEAR RESULTS FOR THE PERIOD ENDED 30 JUNE 2022*

 

	H1 2022	H1 2021	% change
Revenue ($ m)	138.1	98.7	39.9%
EBITDA1 ($ m)	41.4	28.4	45.8%
EBIT1 ($ m)	28.0	20.2	38.6%
Adjusted net profit2 ($ m)	19.9	12.7	56.7%
Investment (Losses) / Gains ($ m)	(10.3)	5.7	(280.7)%
Net Profit After Tax ($ m)	9.7	18.4	(47.3)%
Cash From Operations ($ m)	34.9	5.4	546.3%
Capex3 ($ m)	22.6	35.0	(35.4)%
Earnings per Share
Basic (adjusted)2 (cents)	10.5	6.7	56.7%
Basic (cents)	4.7	9.8	(52.0)%
Interim Dividend per Share (cents)	1.3	1.2	8.3%
Adjusted ROCE (%) 4	24.6	22.5	9.4%
Net cash / (debt) ($m)	(36.4)	(32.8)	11.0%
Net Debt/Equity (%)	16.3	20.1	(18.9)%
Investments ($m)	47.3	31.0	52.6%
Adjusted Net Cash (Including Investments) ($ m)	10.9	(1.8)	(12.2)%

 

 

*All amounts are in US dollars unless otherwise stated

⁽¹⁾ EBITDA, EBIT 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⁾ Adjusted net profit and adjusted earnings per share are pre investment losses and gains.

⁽³⁾ Capital expenditure (Capex) consists of purchase of PPE for cash, prepayments for PPE and financed capex.

⁽⁴⁾ Adjusted ROCE is calculated utilising annualised half year EBIT and excludes investments at fair value from assets.

 

 

 

Financial Overview

·      H1 2022 revenue of $138.1 million, up 39.9% on H1 2021 ($98.7 million);

·      Full year revenue guidance increased to $280 - $290 million (from $270 - 280 million);

·      Non-drilling revenue contributed 28% of total revenue for H1 2022, compared with H1 2021 (17%), driven by growth YoY in mining services and MSALABS;

·      H1 2022 EBITDA of $41.4 million, up 45.8% on H1 2021 ($28.4 million);

·      EBITDA margins increased to 30.0% from 28.8% in H1 2021;

·      Net losses from equity investments of $10.3 million in H1 2022 (unrealised), decreasing the value of Group strategic investments to $47.3 million, net of cash proceeds, as of 30 June 2022 (31 December 2021: $60.2 million);

·      Adjusted Net Profit After Tax (NPAT) $19.9 million (adjusted for changes in investments), an increase of 56.7% on H1 2021 ($12.7 million);

·      Capex of $22.6 million (H1 2021: $35.0 million) including prepayments and financed capex;

·      Cash generated from operations of $34.9 million (H1 2021: $5.4 million), a significant increase YoY and stronger cash conversion despite a further build in working capital with inventory of $51.5 million, up 35% on FY21 ($37.9 million) to accommodate larger revenues and supply chain constraints;

·      Net debt of $36.4 million (H1 2021: $32.8 million and year end 2021 $31.9 million);

·      Adjusted Net cash (including investments) of $10.9 million (H1 2021: adjusted net debt (including investments) of $1.8 million);

·      Adjusted ROCE of 24.6% (H1 2021: 22.5%); and

·      Declared an interim dividend of 1.3 cents per share, to be paid on 3 October 2022 to shareholders registered on 2 September 2022 (up 8.3% on 2021 interim dividend 1.2 cents per share). 

 

Operational & Strategic Review 

·      Rig fleet utilisation was 83% in H1 2022, an increase of 13.7% on H1 2021 (73%) and 17.8% on H2 2021 (77%);

·      Rig count increased from 110 to 116 through Q2 2022, net of depletion;

·      Safety performance remains world-class with the Group TRIFR at 1.8 in H1 2022. Capital's target is zero harm across the Group;

·      Previously announced contracts:

·      A three-year comprehensive drilling services contract with AngloGold Ashanti at the Geita gold mine: Our Tanzanian subsidiary company, CMS (Tanzania) Limited, has been awarded a contract to provide a full range of drilling services including development (diamond & reverse circulation), grade control, blast hole and underground drilling. Capital will utilise the existing fleet, which now has a total of 25 rigs on site. It is anticipated to generate ~$150 million over the three-year contract term, making it the second largest award of new business in the Company's history. 

·      First contract with B2Gold Corporation at the Fekola Gold mine in Mali, one of largest gold mines in Africa:  Capital has been awarded a reverse circulation drilling services contract. 

·      Capital Mining continues to perform strongly

·      Sukari Gold Mine (Egypt) waste mining contract continues to perform well;

·      Capital remains active in the tendering pipeline.

 

·      MSALABS: Growth outlook improved through expanded relationship with Chrysos  

·      Expanded relationship with Chrysos Corporation:

o  MSALABS recently announced an expansion of its global partnership with Chrysos, now guiding to deploying 21 Chrysos PhotonAssay units by 2025;

o  Rollout of initial six units by year end 2022 on track: In addition to four units already announced at Bulyanhulu Gold Mine (Tanzania), the Morila Gold Mine (Mali), the Kibali Gold Mine (DRC) and Val d'Or (Quebec, Canada):

o  A fifth unit will arrive imminently at Yamoussoukro, Côte d'Ivoire, with facility preparations well advanced;

o  A sixth unit is due to begin installation in Timmins, Canada, by the end of 2022;

·      MSALABS has been awarded a two-year extension to the existing three-year onsite laboratory services contract with Kinross at the Tasiast Gold Mine, Mauritania, subject to final terms and conditions. 

·      Capital Direct Investments (Capital DI): Impacted by general market conditions but strong business development performance

·      The portfolio recorded investment losses (unrealised) of US$10.3 million. The total value of investments (listed and unlisted) was US$47.3 million as of 30 June 2021, versus US$60.2 million at the end of 2021;

·      Over the period Capital continued to rationalize the breadth of holdings and realized cash proceeds from the portfolio, generating net sales after investments of US2.6million, with the proceeds directed toward group capital expenditures.

·      Contract revenues from investee companies again contributed strongly to Group revenues, totalling US$26.4mn over the H1 period.

 

Outlook 

·      Revenue guidance for 2022 increased to $280 - $290 million (from $270 - 280 million);

·      EBITDA margins are expected to remain in a range of 25-30% going forward;

·      Capital expenditure is now expected to be approximately $50-55 million in 2022. The increase in capex includes additional rig purchases, as well as higher sustaining capex driven by higher than anticipated utilisation of the expanded fleet; 

·      Drill rig fleet size forecast to increase to 120 rigs by the end of 2022, net of depletion;

·      The Sukari earth moving contract continues to perform well at full run rates;

·      MSALABS's growth trajectory is now underpinned over the next 2-3 years by the expanded partnership with Chrysos. Revenue guidance for 2022 remains $30 million, and is expected to grow to over $80 million per annum from 2025 following the rollout of 21 Chrysos units in conjunction with growth in the traditional laboratories business;

·      Tendering activity across all business units remains robust, with a number of opportunities progressing.

 

 

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

 

"We have been very pleased with the performance of the Group through the first half of 2022, not only because we've again delivered another strong half year, but we have also taken decisive steps to ensuring a stronger company in the years to come, particularly in our drilling business and in MSALABS.

 

In drilling we have taken advantage of the strength we have seen in underlying demand to focus on contract selection and rotate our portfolio. Through the period we have commenced operations at two more of Africa's largest gold mines, Kibali and Fekola, that are well positioned to operate consistently throughout the cycle. In addition, we have increased operations at Tier-1 gold and non-gold deposits with strong growth potential including Predictive Discovery's Bankan project, Goulamina (lithium) and Kabanga (nickel). This focus on growing long term contracts and partnerships with blue-chip customers remains core to the business model at Capital, irrespective of levels of activity across the market, delivering lower volatility in earnings and sustainability of the business through the cycles.

 

Similarly, MSALABS has now secured a multi-year growth trajectory driven primarily by the rollout of the revolutionary Chrysos PhotonAssay units. The expanded relationship with Chrysos means MSALABS will now deploy 21 units into the market into 2025. In addition to growth in its existing geochemistry business, this should drive annual revenues in excess of $80 million by 2025, an impressive outlook for a business that generated just $3 million at the time of the controlling interest acquisition in 2019.

 

The underlying demand in the market continues to be encouraging, as is evident from the high utilisation rates the Group delivered in the first half. While there will be some seasonal slowdown through the third quarter, the tender pipeline remains buoyant across drilling, mining and laboratories and as a result of this strong demand, we are raising our revenue guidance for 2022 to $280-290 million. We have also lifted our capex guidance to $50-55 million, which includes higher sustaining capex on the expanded fleet, and additional rigs to replace expedited rig replacements. In the strong demand environment we are currently experiencing, we have decided to further replenish our fleet to ensure both high reliability as well as a peer leading safety performance which remains core to our operations.

 

Our capital allocation strategy continually targets the best returns for our shareholders. We are excited by the outlook and the market backdrop and will continue to target new opportunities while maintaining a strong balance sheet and a balanced capital allocation policy. Therefore, in addition to funding further growth, given the strength of the underlying business, we announced a buyback at the beginning of the year and we have today also announced an interim dividend to shareholders of 1.3 cents per share.

 

 

 

 

Capital Limited will be hosting a live webcast presentation at 09:00 BST on Thursday 18 August 2022, where questions can be submitted through the platform.

 

The webcast presentation link:

https://www.lsegissuerservices.com/spark/CapitalDrillingLtd/events/db8bbc58-599b-4a60-aa07-abc49d7d187d

 

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 Limited'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

 

Tamesis Partners LLP                                                          +44 20 3882 2868

Charlie Bendon

Richard Greenfield

 

Stifel Nicolaus Europe Limited                                          +44 20 7710 7600

Ashton Clanfield

Callum Stewart

Rory Blundell

 

Berenberg                                                                             +44 20 3207 7800

Matthew Armitt

Jennifer Wyllie

Detlir Elezi            

 

Buchanan                                                                               +44 20 7466 5000

Bobby Morse                                                                        [email protected]

George Cleary

               

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; maintenance; and geochemical analysis. The Group's corporate headquarters are in Mauritius and it has established operations in Burkina Faso, Côte d'Ivoire, Canada, 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

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 2022 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.

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 2022 which comprises the condensed consolidated statement of comprehensive income, condensed consolidated statement of financial position, condensed consolidated statement of changes in equity, condensed consolidated statement of cash flows, and notes to the condensed consolidated interim financial statements. 

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" ("ISRE (UK) 2410"). 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.

As disclosed in note 1, the annual financial statements of the group are prepared in accordance with International Financial Reporting Standards. The condensed set of financial statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, "Interim Financial Reporting".

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the directors have inappropriately adopted the going concern basis of accounting or that the directors have identified material uncertainties relating to going concern that are not appropriately disclosed.

This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410, however future events or conditions may cause the group to cease to continue as a going concern.

Responsibilities of 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.

In preparing the half-yearly financial report, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities for the review of the financial information

In reviewing the half-yearly report, we are responsible for expressing to the Company a conclusion on the condensed set of financial statement in the half-yearly financial report. Our conclusion, including our Conclusions Relating to Going Concern, are based on procedures that are less extensive than audit procedures, as described in the Basis for Conclusion paragraph of this report.

 

Use of our report

Our report has been prepared in accordance with the terms of our engagement to assist the Company in meeting the requirements of 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

17 August 2022

 

 

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 2022
										Unaudited
										Six months ended
								Notes		30 June 2022		30 June 2021
										$		$
Revenue								4		138,128,602		98,683,980
Cost of sales										(77,010,453)		(56,028,630)
Gross profit										61,118,149		42,655,350
Administration expenses										(19,738,178)		(14,281,383)
Depreciation, amortisation, and impairments										(13,417,448)		(8,210,759)
Operating profit										27,962,523		20,163,208
Interest income										112,808		49,997
Finance charges										(2,670,575)		(1,606,618)
Fair value (loss)/gain on investments at fair value								14		(10,265,388)		5,706,322
Profit before taxation										15,139,368		24,312,909
Taxation								3		(5,456,706)		(5,903,119)
Profit and total comprehensive income for the period										9,682,662		18,409,790
Profit attributable to:
Owners of the parent										8,849,651		18,490,700
Non-controlling interest										833,011		(80,910)
										9,682,662		18,409,790
Earnings per share:
Basic (cents per share)								5		4.7		9.8
Diluted (cents per share)								5		4.5		9.6

 

CAPITAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2022
								Unaudited		Audited
						Notes		30 June 2022		31 December 2021
ASSETS								$		$
Non-current assets
Property, plant and equipment						7		153,190,469		143,598,399
Right of use assets								9,762,686		9,851,343
Goodwill								1,252,348		1,252,348
Intangible assets								1,673,374		1,282,269
Other receivables								6,460,000		6,460,000
Total non-current assets								172,338,877		162,444,359
Current assets
Inventory								51,510,590		37,935,112
Trade and other receivables								43,329,113		42,212,147
Prepaid expenses and other assets								20,222,327		17,681,623
Investments at fair value						14		47,278,117		60,151,667
Current tax receivable								121,916		499,361
Cash and cash equivalents								22,735,408		30,577,249
Total current assets								185,197,471		189,057,159
Total assets								357,536,348		351,501,518
EQUITY AND LIABILITIES
Equity
Share capital						8		19,287		19,006
Share premium						8		62,664,091		60,900,119
Treasury shares								(2,462,651)		-
Equity-settled employee benefits reserve								2,832,103		3,185,450
Other reserve								190,056		190,056
Retained income								159,121,253		154,879,201
								222,364,139		219,173,832
Non-controlling interest								4,600,600		3,767,589
Total equity								226,964,739		222,941,421
Non-current liabilities
Loans and borrowings						9		40,296,241		45,567,668
Lease liabilities								6,968,276		7,354,745
Deferred tax								34,196		34,196
Total non-current liabilities								47,298,713		52,956,609
Current liabilities
Trade and other payables								54,354,899		46,500,122
Current tax payable								8,238,790		9,979,250
Loans and borrowings						9		18,151,949		16,887,692
Lease liabilities								2,527,258		2,236,424
Total current liabilities								83,272,896		75,603,488
Total equity and liabilities								357,536,348		351,501,518