Swick delivers earnings growth in 1H FY19

26-Feb-2019 Intellasia | | 2:08 PM Print This Post

1H FY19 summary:

* Revenue and other income of $75.3m, up 5.9% on 1H FY18

* Drilling Business EBITDA of $16.2 million, up 101% on 1H FY18

* Group EBITDA of $14.5m, up 103% on 1H FY18

* Group EBIT of $4.0m, up from a $0.9m EBIT loss in 1H FY18

* NPAT of $1.9m, up from a $1.3m NPAT loss in 1H FY18

* Earnings increased through targeting better performing contracts, reducing costs, and improved short‐term rates on two contracts

* Increase in cash from operations to $9.8m, up 98.3%, reflecting EBITDA growth

* Average fleet utilisation across 1H FY19 of 77%, up from 76% in 1H FY18

* Redeployment of rigs from some projects expected during 2H FY19

* Strong demand across Swick’s existing markets for underground rigs, with a number of tenders submitted

Western Australia – Swick Mining Services Limited (‘Swick’, ASX: SWK), a leading provider of high‐quality underground and surface mineral drilling and mineral analysis services, has reported strong earnings growth in the six‐month period ended 31 December 2018 (1H FY19).

Swick’s Drilling Business reported EBITDA of $16.2 million, more than double the prior corresponding period (1H FY18: $8.1 million), as Swick delivered on its strategy of targeting better performing contracts and reducing costs. It also benefited from improved short‐term rates on two contracts.

Swick Managing Director Kent Swick said the Company’s strategy to drive margin growth in the Drilling Business enabled the group to return a net profit after tax.

“Over the past 18 months we have had a clear plan to renew rates or move rigs onto better performing sites so that each contract is profitable on a standalone basis and also deliver a reduction in operating costs and enhanced performance across the business to drive value for our clients,” Mr Swick said.

“The benefits of this strategy are clear to see with earnings growth gaining momentum in the half, which has enabled the company to drive innovation to meet our clients’ needs.

“This has included establishing a dedicated deep exploration division, DeepEX, with clients looking for drillers to provide deep underground exploration capabilities.

“We have also been growing our mineral technology business, Orexplore, which increased the volume of commercial scans through the laboratory during the six‐month period.”

OUTLOOK

In addition to the two short‐term rates ceasing by end 3Q FY19, as noted above, Swick is likely to experience some transition for its underground rigs during 2H FY19. Swick is likely to reduce rigs or withdraw from underperforming projects and mobilise rigs onto existing projects or new sites. The resultant short‐term reduction in utilisation and cessation of the short‐term rates is expected to result in lower margins for the Drilling Business during 2H FY19 compared to 1H FY19.

Mr Swick said: “We expect there to be some movement of our underground rigs during the second half of FY19, in line with our strategy to ensure rates on contracts are delivering at our target margins.

“While this short‐term reduction in utilisation will contribute to a weaker result in the second half of FY19, compared to the first half, overall we are still expecting a significantly improved result compared to FY18 and look set to enter FY20 with strong momentum as new tenders are awarded.

“What’s pleasing is that we are experiencing strong demand across our existing markets for underground rigs that can deliver our target margins, with a number of tenders submitted at new projects both in Australia and the USA, particularly at producing gold mines. “We are also seeing growing opportunities to deploy more rigs at existing projects.

“Furthermore, we are in discussions with potential clients to deploy Swick’s recently launched mineral scanning technology, Orexplore, onto sites, so they can get near real time assay and geology results on drilled metres to eliminate the time and costs with transporting ore off‐site for destructing assay testing.”

To view the full ASX Announcement please click here.

 

(Source: FTI Consulting, Strategic Communications Perth)

 


Category: FinanceAsia

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