Dryden Gold Corp. press release
Major Drilling Profits Increase by over 60%
TSXV - TSX Venture Exchange · Gold · Silver · Copper · Zinc · Lead · Canada
MONCTON, NB, Dec. 5 /CNW/ - Major Drilling Group International Inc. (TSX: MDI) today reported results for its second quarter of fiscal year 2007 ended October 31, 2006.
Historical data has been reclassified to reflect the disposition of the Company's manufacturing division, UDR Group, on June 7, 2006, and the discontinuation of its Chinese operations in the first quarter of fiscal 2007.
Highlights
$ millions 12 months 12 months (except to to earnings October October per Q2-07 Q2-06 YTD-07 YTD-06 31, 2006 31, 2005 share) ----- ----- ------ ------ -------- -------- Revenue 101.8 85.8 196.3 169.1 343.7 291.6 Gross 33.8 26.5 64.3 51.8 103.0 83.8 profit As percen- tage of sales 33.2% 30.8% 32.8% 30.6% 30.0% 28.7% Earnings from continuing ops 13.0 8.1 23.0 16.1 32.1 22.7 Earnings per share from continuing ops 0.56 0.36 1.00 0.71 1.39 1.02 Cash flow from continuing ops(x) 19.8 12.9 35.5 26.7 55.8 40.3 (x) before changes in working capital
The Company recorded the highest quarterly earnings from continuing operations in its history.
Major Drilling posted the highest quarterly revenues in its history at $101.8 million, up 18.6 percent from the $85.8 million recorded for the same quarter last year.
Gross margin percentage for the quarter was 33.2 percent, compared to 30.8 percent for the corresponding period last year, with good performance from all regions.
Earnings from continuing operations were $13.0 million or $0.56 per share for the quarter, up 60.5 percent from $8.1 million or $0.36 per share for the prior year quarter.
Net earnings for the quarter, after gain from discontinued operations, were $13.1 million or $0.57 per share, up from $9.3 million or $0.41 per share for the prior year quarter.
Cash flow from continuing operations before changes in working capital was $19.8 million for the quarter, up more than 50 percent from the $12.9 million for the same period last year.
With the cash level generated, the Company's cash balance is now in excess of its debt, meaning the Company is debt-free, net of cash.
"Combined strong performance by all of its regions propelled the Company to record quarterly revenue and profits," said Francis McGuire, President and CEO of Major Drilling. "With continued improvements in the price environment and productivity, margins have improved significantly to 33.2 percent, a level not seen in the last several years. These results were achieved while pressure on labour and material costs continues. Year-over-year revenue comparisons continue to be affected by the strengthening of the Canadian dollar against both U.S. and Australian currencies. The estimated unfavourable FX impact on revenue compared to the prior year quarter is $4.8 million, although the estimated impact on net earnings is less than $0.8 million. Excluding our third quarters, which always face seasonal slowdowns due to the holidays, this is the tenth consecutive quarter in which the Company has been able to grow its revenues." "All regions grew their revenues and margins. Latin American operations again showed the greatest improvement overall with continued strong demand in Mexico, Chile and Argentina. North American operations were the best performers on both revenue and margins due to tightening demand for drilling services in both Canada and the U.S. In Australasia and Africa, revenues in Tanzania more than doubled, muting a reduction of revenues in Australia in Canadian dollars, mostly due to the change in the Australian/Canadian exchange rate," said Mr. McGuire. "During the quarter, the Company had up to seven rigs working in the energy sector, mostly in the U.S., where results are improving significantly." "Cash flow from continuing operations before changes in working capital in the quarter continued to strengthen, increasing 53 percent to $19.8 million compared to the $12.9 million recorded in the prior year quarter," noted Mr. McGuire. "With this performance, the Company is now debt-free net of cash. With $36.7 million in cash on hand at the end of the quarter, the Company is well positioned to execute on its internal growth program and to take advantage of strategic acquisition opportunities." "The outlook for Major remains very positive. The prices of nickel, copper, gold, silver and zinc remain at historically high levels and well above economical thresholds for exploration, despite recent reductions in the price of some of these commodities," noted Mr. McGuire. "Because of delays in deliveries of rigs, transportation bottlenecks and availability of supplies, ten rigs, which we expected to be working in the second quarter, will not be in operation until the fourth quarter. The phenomenon is affecting the whole industry as manufacturers struggle to face the increased demand for rigs and supplies." "Recent surges in uranium prices have brought in new clients as demand for drilling services continues to increase and customers are more often prepared to pay a premium to secure rigs and crews. The Company will be opening an office in Saskatoon, Canada to service that area, particularly the uranium projects," noted Mr. McGuire. "It is important to note that we are now in our third quarter, traditionally the weakest quarter of our fiscal year, as mining and exploration companies shut down operations, often for extended periods, over the holiday season. Additionally, the Company schedules substantial overhaul and maintenance work on its equipment during this slower period as it prepares for the busy fourth quarter. These factors result in reduced revenues, increased costs, and reduced margins in the quarter," Mr. McGuire observed. "Typically, the Company posts a loss in the third quarter, before moving into its fourth quarter, which has historically been its strongest quarter of the fiscal year." "As announced on Friday, December 1, we have agreed to purchase the operations of the Longstaff group which carries on drilling operations in South Africa, Botswana and Namibia. This acquisition, to be made for approximately US$12.5 million, will add 55 additional conventional rigs to our worldwide fleet, as well as provide support equipment, management, employees and contracts, giving us a presence in, and the ability to expand further into, the important growth area of southern Africa," said Mr. McGuire. "Drilling in this operation has generally been conducted on a single shift basis, which will produce revenues for calendar 2006 of approximately US$14 million. It is Major's intention to significantly increase the utilization of these rigs over the next two years as we expand the labor force. As such we hope to double current revenues over that time frame. We would like to welcome all the employees of this operation into the Major group."
Second quarter ended October 31, 2006
Total revenue from continuing operations for the quarter was $101.8 million, up $16.0 million or 18.6 percent from the $85.8 million recorded in the same quarter last year. Revenue for the quarter from Canada-U.S. drilling operations increased by 14.5 percent to $39.4 million compared to $34.4 million for the same period last year. Improved pricing and increased capacity were responsible for the growth experienced in both countries, as well as the improvement in results from energy services in the U.S. South and Central America had the largest increase in revenue, year-over-year, with revenues at $29.3 million for the quarter, up 48.7 percent from the $19.7 million posted for the prior year quarter. Revenue growth was driven primarily by Mexico, Argentina and Chile, which accounted for 78 percent of the growth over the prior year quarter. The market for drilling services has improved in Venezuela this quarter and the Company is gradually increasing activity in that country. In Australasian/African drilling operations, encompassing Australia, Mongolia, Indonesia and Tanzania, revenues were $33.2 million, an increase of 4.4 percent over the $31.8 million in the same quarter last year. Tanzanian revenues grew 115 percent during the quarter. In Australia, revenues in Australian dollars decreased slightly year-over-year, but were down 7.7 percent in Canadian dollars compared to the prior year quarter due to the change in the Australian/Canadian exchange rate. Indonesian and Mongolian revenues were relatively stable year-over-year. The overall gross margin percentage for the quarter improved to 33.2 percent compared to 30.8 percent for the same period last year. Combined with the increase in sales volume, gross profit for the quarter increased $7.3 million or 27.5 percent to $33.8 million from $26.5 million for last year's second quarter. General and administrative costs were $7.6 million for the quarter, compared to $6.7 million in the same period last year. The increase is primarily due to additions to the management team and to salary increases across the operation. Other expenses for the quarter were $2.3 million compared to $2.4 million last year as an increase in incentive provisions as a result of improved profitability in this quarter were muted by decreases in one-time expenses. Foreign exchange loss in the quarter was $0.1 million compared to $0.4 million in the prior year quarter. Interest income for the quarter was $0.3 million compared to an expense of $0.1 million in the prior year quarter, reflecting the Company's favorable cash position. Interest expense on long-term debt was down $0.2 million at $0.7 million, reflecting lower debt levels. Amortization expense was $5.0 million for the quarter compared to $4.4 million for the same quarter last year, as a result of the significantly increased direct investment in equipment. The provision for income tax was $5.5 million in the quarter compared to $3.6 million for the prior year quarter, reflecting the increased profitability of the operations. Earnings from continuing operations for the quarter were $13.0 million or $0.56 per share ($0.55 per share diluted) compared to $8.1 million or $0.36 per share ($0.35 per share diluted) in the prior year period. Gain from discontinued operations was $0.1 million or $0.01 per share compared to a gain of $1.2 million or $0.05 per share for the same period last year. Discontinued operations include the sale of the manufacturing division and the termination of operations in China. Gain from discontinued operations in the second quarter of 2007 reflects adjustments to the purchase price from the sale of the manufacturing division, partially offset by ongoing costs as the Company closes down its Chinese operations. Gain from discontinued operations for the second quarter of 2006 represents operating results from the discontinued operations that have been reclassified from continuing operations. Resulting net earnings were $13.1 million or $0.57 per share ($0.56 per share on a diluted basis) compared to $9.3 million or $0.41 per share ($0.40 diluted) for the same period last year. On a rolling 12-month basis to October 31, 2006, revenues from continuing operations increased over 17.9 percent to $343.7 million compared to $291.6 million for the prior year period. Earnings from continuing operations, on the same rolling 12-month basis increased by 41.4 percent to $32.1 million from $22.7 million for the corresponding period last year.
Year to date ended October 31, 2006
Revenues for the six-month period ending October 31, 2006 increased 16.1 percent to $196.3 million from $169.1 million for the corresponding period last year. More than half of this increase in revenues is related to Latin America. Gross margins for the half-year period were 32.8 percent compared to 30.6 percent last year. With the increase in revenues and improving gross margins, gross profit for the six-month period increased over 24 percent compared to the prior year period. General and administrative expenses increased to $14.9 million compared to $13.6 million for the same period last year. The increase largely relates to salaries as the Company added additional management and administrative staff to face increased activity. Other expenses were $5.1 million for the six-month period compared to $4.4 million for the same period last year reflecting, in part, increased incentive provisions as a result of improved profitability in the current year, partially offset by decreases in bad debt expense and one-time expenses. Foreign exchange loss was $0.4 million for the six-month period compared to $0.6 million in the prior year. Interest on short-term debt was nil for the half-year period compared to an expense of $0.5 million in the prior year, reflecting the Company's favorable cash position. Interest expense on long-term debt was down $0.3 million at $1.2 million, reflecting lower debt levels. Amortization expense increased to $9.4 million for the half-year period, compared to $8.5 million for the same period last year, as a result of increased investment in equipment. The provision for income tax for the six-month period was $10.3 million compared to $6.7 million for the prior year period reflecting the increase in pre-tax earnings in the half-year and the fact that the Company has fully utilized previously non-tax effected losses from Canadian operations. Earnings from continuing operations for the six-month period were $23.0 million or $1.00 per share ($0.98 per share diluted) compared to $16.1 million or $0.71 per share ($0.70 per share diluted) for the same period last year. Gain from discontinued operations was $13.0 million or $0.56 per share compared to a gain of $1.5 million or $0.07 per share for the same period last year. Discontinued operations include the sale of the manufacturing division and the termination of operations in China. Resulting net earnings were $36.0 million or $1.56 per share ($1.53 per share on a diluted basis) compared to $17.6 million or $0.78 per share ($0.76 diluted) for the same period last year.
Some of the statements contained in this press release may be forward-looking statements, such as estimates and statements that describe or are with respect to the future price of minerals and metals, the Company's future plans, objectives or goals, including words to the effect that the Company or management expects a stated condition to exist or occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements by reason of factors such as, but not limited to, the factors set out in the discussion starting on pages 20 to 23 of the 2006 Annual Report entitled "General Risks and Uncertainties", as augmented by the section entitled "General Risks and Uncertainties" in the discussion starting on pages 6, 7 and 8 of the Company's second quarter MD&A, each as filed with the Canadian Securities Commission (available on SEDAR at www.sedar.com). All such factors should be considered carefully when making decisions with respect to the Company. The Company does not undertake to update any forward-looking statements, including those statements that are incorporated by reference herein, whether written or oral, that may be made from time to time by or on its behalf, except in accordance with applicable securities laws.
Based in Moncton, New Brunswick, Major Drilling Group International Inc. is one of the world's largest metals and minerals contract drilling service companies. To support its customers' mining operations and mineral exploration activities, Major Drilling maintains operations in Canada, the United States, Mexico, South and Central America, and in Australia, Indonesia, southern Africa and Mongolia.
Financial statements are attached.
Major Drilling will provide a simultaneous webcast of its quarterly conference call on Tuesday, December 5, 2006 at 9:00 AM (EDT). To access the webcast please go to the Major Drilling website at www.majordrilling.com and click the attached link, or go directly to the CNW Group website at www.newswire.ca for directions. Participants will require Windows MediaPlayer, which can be downloaded prior to accessing the call. Please note that this is listen only mode.
Major Drilling Group International Inc. Consolidated Statements of Operations (in thousands of Canadian dollars, except per share information) (unaudited)
Six months ended Three months ended October 31 October 31
2006 2005 2006 2005 (restated (restated note 3) - note 3)
TOTAL REVENUE $ 196,296 $ 169,073 $ 101,845 $ 85,763
DIRECT COSTS 131,968 117,318 68,021 59,313 GROSS PROFIT 64,328 51,755 33,824 26,450 32.8% 30.6% 33.2% 30.8%
OPERATING EXPENSES
General and administrative 14,860 13,565 7,629 6,718 Other expenses 5,120 4,367 2,287 2,378 Foreign exchange loss 413 565 89 367 Interest expense (revenue) (46) 471 (302) 56 Interest expense on long-term debt 1,247 1,499 653 859 Amortization 9,375 8,459 4,982 4,408 30,969 28,926 15,338 14,786
EARNINGS BEFORE INCOME TAX AND DISCONTINUED OPERATIONS 33,359 22,829 18,486 11,664
INCOME TAX - PROVISION Current 8,050 5,547 4,071 3,555 Future 2,300 1,142 1,456 55
10,350 6,689 5,527 3,610
EARNINGS FROM CONTINUING OPERATIONS 23,009 16,140 12,959 8,054
GAIN FROM DISCONTINUED OPERATIONS (note 3) 12,983 1,498 150 1,233
NET EARNINGS $ 35,992 $ 17,638 $ 13,109 $ 9,287
EARNINGS PER SHARE FROM CONTINUING OPERATIONS Basic (x) $ 1.00 $ 0.71 $ 0.56 $ 0.36 Diluted (xx) $ 0.98 $ 0.70 $ 0.55 $ 0.35
EARNINGS PER SHARE Basic (x) $ 1.56 $ 0.78 $ 0.57 $ 0.41 Diluted (xx) $ 1.53 $ 0.76 $ 0.56 $ 0.40
(x) Based on 23,083,444 and 22,637,892 daily weighted average shares outstanding for the fiscal year to date 2007 and 2006, respectively, and on 23,102,258 and 22,686,103 daily weighted average shares for the quarter ended October 31, 2006 and 2005, respectively. The total number of shares outstanding on October 31, 2006 was 23,103,191.
(xx) Based on 23,578,124 and 23,150,785 daily weighted average shares outstanding for the fiscal year to date 2007 and 2006, respectively, and on 23,569,533 and 23,255,084 daily weighted average shares for the quarter ended October 31, 2006 and 2005, respectively.
MAJOR DRILLING GROUP INTERNATIONAL INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) SIX MONTHS ENDED OCTOBER 31, 2006 AND 2005 (in thousands of Canadian dollars)
1. BASIS OF PRESENTATION
These interim financial statements were prepared using accounting policies and methods consistent with those used in the preparation of the Company's audited financial statements for the year ended April 30, 2006. These interim financial statements conform in all respects to the requirements of Canadian generally accepted accounting principles for annual financial statements, with the exception of certain note disclosures. As a result, these interim financial statements should be read in conjunction with the Company's audited financial statements and notes for the year ended April 30, 2006 contained in the Company's 2006 annual report.
2. SEASONALITY OF OPERATIONS
The geographic distribution of our growth is having an impact on our historical seasonal patterns. With the exception of the third quarter, the Company exhibits comparatively less seasonality in quarterly revenues than in the past since a relatively higher proportion of revenues is coming from regions with more temperate or tropical climates that are not impacted by winter weather conditions, and strong cyclical growth tends to mute normal seasonal patterns. Historically, the Company's operations tended to exhibit a seasonal pattern whereby its fourth quarter (February to April) was its strongest. The third quarter (November to January) is normally the Company's weakest quarter due to the shutdown of mining and exploration activities for extended periods over the holiday season, particularly in South and Central America.
3. DISCONTINUED OPERATIONS
On June 7, 2006, the Company sold its manufacturing subsidiary ("UDR") for A$46.8 million (C$39.2 million). The consideration for the sale was A$43.3 million (C$36.2 million) cash and a holdback due in 18 months in the amount of A$3.5 million (C$3.0 million). The net gain before income taxes is C$22.3 million being the proceeds of C$39.2 million less the book value of the assets of C$13.3 million and expenses relating to the sale of C$3.6 million. UDR previously constituted the Company's entire manufacturing segment. The Company made the strategic decision to focus its corporate resources on the mineral drilling business, where it competes as one of the world's largest contract drillers. The gain from discontinued operations of UDR is summarized as follows: