Nine Mile Metals Ltd. press release
Major Drilling Reports New Records - Revenues up 45% and Earnings from Continuing Operations up 90%
CSE - Canadian National Stock Exchange · Copper · Zinc · Lead · Silver · Gold · Indium · Canada
MONCTON, NB, June 12 /CNW/ - Major Drilling Group International Inc. (TSX: MDI) today reported results for its fourth quarter of fiscal year 2007, ended April 30, 2007.
Financial Highlights $ millions Fiscal Fiscal (except earnings per share) Q4-07 Q4-06 2007 2006
Revenue $ 129.0 $ 89.0 $ 415.4 $ 316.5 Gross profit 43.5 25.9 133.1 90.4 As percentage of sales 33.7% 29.2% 32.0% 28.6% Earnings from continuing operations 17.8 9.3 46.5 25.2 Earnings per share from continuing operations 0.77 0.40 2.01 1.11 Cash flow from continuing operations(x) 25.1 14.6 75.6 46.8 (x) before changes in non-cash working capital items
Major Drilling posted the highest quarterly revenue in its history at $129.0 million, up 45 percent from the same period last year. This also represented an increase of 27 percent from the previous high of $101.8 million recorded in the second quarter of this fiscal year. Annual revenue moved to a new record for the fifth consecutive year at $415.4 million, an increase of 31 percent over the previous record of $316.5 million set last year.
The Company posted the highest quarterly earnings in its history with earnings from continuing operations increasing by over 90 percent to $17.8 million or $0.77 per share, compared to $9.3 million or $0.40 per share for the prior year quarter. Earnings from continuing operations for fiscal 2007 increased over 84 percent, or $21.3 million to $46.5 million ($2.01 per share), an annual record, from earnings of $25.2 million ($1.11 per share) in fiscal 2006.
Gross margin percentage for the quarter was 33.7 percent, compared to 29.2 percent for the corresponding period last year. Annual gross margins were 32.0 percent for fiscal 2007 compared to 28.6 percent for fiscal 2006.
Net earnings for the quarter were $17.8 million or $0.77 per share compared to net earnings of $11.7 million or $0.51 per share for the prior year quarter.
Cash from continuing operations, before changes in non-cash working capital items, was up 72 percent to $25.1 million for the quarter, compared to $14.6 million for the same quarter last year. Annual cash flow from operations, before changes in non-cash working capital items, was $75.6 million in fiscal 2007, up 62 percent from the $46.8 million recorded in fiscal 2006.
Net capital expenditures for fiscal 2008 are projected at some $65 million, as heavy investments in staff training and safety will facilitate continuing growth.
"All of the Company's regions contributed to the 45 percent increase in revenues this quarter as the Company continued to benefit from a favorable pricing environment and invested in additional equipment, while still being somewhat constrained by labour availability," said Francis McGuire, President and CEO of Major Drilling. "This was also the first full quarter for our recent acquisitions in South Africa, Botswana and Namibia, which accounted for almost 15 percent of the growth over the same period last year. Despite continuing pressures on labour and material costs, and increased investments in training, margins improved to 33.7 percent." "All three geographic segments grew their revenues by 40 percent or more. Latin America led all regions in growth with strong contributions from Mexico, Chile and Venezuela. In North America, operations improved significantly in the quarter, although we were less active in the coal-bed methane/shallow gas area in the period," said Mr. McGuire. "The flexibility of our fleet, which is able to shift between energy drilling and mineral drilling, allowed us to take advantage of growing opportunities in the mineral sector. Australasia/Africa also had a good quarter. About half of the revenue growth in the region came from the new African acquisition, while the Company also had good revenue performance from Australia, Indonesia and Tanzania. Mongolian revenue was down 22.5 percent as the mining industry in that country continues to struggle with uncertainty relating to government mining policies." "Fiscal 2007 was a very rewarding year as the Company benefited from its ongoing training and recruiting efforts of the last few years, facilitating additional investments in internal growth. Also, the Company's strong operational leverage continued in fiscal 2007 as an annual revenue growth of 31 percent translated into an 84 percent increase in earnings from continuing operations," noted Mr. McGuire. "The outlook for metal prices remains encouraging. The fundamental demand drivers in the global markets show no signs of major changes and most industry watchers are calling for the supply of metals to remain relatively tight for the foreseeable future as mineral companies continue to search for significant discoveries. We continued to see an overall increase in demand for the Company's services during the quarter," observed Mr. McGuire. "Looking at fiscal 2008, the Company expects its growth to come from three main drivers: from additional investments in people and equipment, strong market conditions and from Africa. The Company also continues to seek acquisitions that will either enhance its strategy of dominating specialized drilling or that will expand its geographical footprint," said Mr. McGuire. "Given the strong demand and the Company's favorable financial position, net capital expenditures are expected to grow from a record $49.5 million in fiscal 2007 to some $65 million in the upcoming year. With the additional rigs, we will be maximizing our ability to train and recruit drilling crews, and significant investments in training will have some effect, moderating the rate of growth in margins. We continue to see an overall increase in demand for the Company's services, creating a favorable pricing environment for the upcoming year. In Africa, where pricing still lags somewhat behind other regions, utilization is growing faster than expected as we are having success in recruiting drillers and in double shifting our rigs. This year, we expect to reach our objective of doubling revenue from our African acquisitions compared to pre-acquisition levels, one year earlier than we initially expected," noted Mr. McGuire.
Fourth quarter ended April 30, 2007
Total revenue for the fourth quarter was $129.0 million, up 45 percent from the $89.0 million recorded for the prior year period. Year-over-year revenue and profit comparisons were not materially affected by the variations of the Canadian dollar against either the U.S. or Australian dollar. Revenue from Canada-U.S. drilling operations was up $13.4 million or 40 percent to $47.0 million for the quarter compared to $33.6 million for the same period last year. In Canada, improved winter conditions, as compared to last year, allowed early startups in most of our contracts. Last year, warm weather conditions had slowed the development of the winter roads required to gain access to many project sites, which caused delays or cancellation of a certain number of projects. In the U.S., the Company had only three of the five capable rigs working in the energy sector during the quarter as customers in that sector trimmed their exploration and development programs in light of lower natural gas prices. While the Company still believes that the potential of the energy sector remains positive, it was able to take advantage of growing opportunities in the mineral sector with the remaining energy capable rigs. In South and Central America, revenue for the quarter was $41.1 million, up 57.5 percent from $26.1 million recorded in the prior year quarter. This strong year-over-year quarterly growth was driven primarily by very strong demand in Mexico and Chile. Also, operations in Venezuela made a significant contribution to the region's growth. Australasian and African drilling operations reported revenue of $40.9 million, up some 40 percent from $29.2 million reported in the same period last year. Nearly half of this growth is attributable to the African acquisition. Australia, Indonesia and Tanzania showed good revenue growth in the quarter compared to the same period last year. Mongolian revenue was down more than 20 percent as the mining industry in that country continues to struggle with uncertainty relating to government mining policies. The overall gross margin percentage for the quarter was 33.7 percent, up from 29.2 percent for the same period last year. Gross margin percentages improved year-over-year in all three regions due to generally improved pricing and better weather conditions overall compared to the same period last year. General and administrative costs were $10.2 million for the quarter, compared to $7.7 million for the prior year period. The increase was primarily due to the African acquisition, additions to the management team to accommodate growth and the increased compliance costs relating to Ontario Bill 198. Other expenses were $2.2 million for the quarter compared to $0.3 million for the same period last year, due to higher incentive compensation expenses given the Company's improved profitability in the current year and losses on disposal of assets. Last year, gains on sale of assets more than offset increased bonus provisions. Foreign exchange loss was $0.5 million for the quarter compared to $0.2 million for the prior year period. Short-term interest revenue was $0.4 million for the quarter compared to an expense of $0.3 million last year, while interest on long-term debt was $0.7 million compared to $0.5 million for the prior year quarter. Amortization expense increased to $5.9 million for the quarter compared to $4.3 million for the same quarter last year, as a result of increased investment in equipment. The Company's tax expense was $6.6 million for the quarter, reflecting the Company's profitability, compared to $3.3 million for the same period last year. Earnings from continuing operations for the quarter were $17.8 million or $0.77 per share ($0.75 per share diluted) compared to $9.3 million or $0.40 per share ($0.39 per share diluted) in the prior year period. Gain from discontinued operations was nil compared to $2.4 million or $0.11 per share for the same period last year. Discontinued operations include the sale of the manufacturing division and the termination of operations in China. The loss from discontinued operations in the fourth quarter of 2007 reflects ongoing costs as the Company was closing down its Chinese operations. Gain from discontinued operations for the fourth quarter of 2006 represents operating results from the discontinued operations that have been reclassified from continuing operations. Net earnings were $17.8 million or $0.77 per share ($0.75 per share diluted) compared to $11.7 million or $0.51 per share ($0.50 per share diluted) for the same period last year.
Year ended April 30, 2007
Revenue for the fiscal year ending April 30, 2007 increased 31.2 percent to $415.4 million from $316.5 million for the corresponding period last year. Almost half of this increase in revenue was related to South and Central America. Canada-U.S. revenue increased by 27.0 percent to $151.2 million compared to $119.1 million last year with both countries contributing, as the industry continues to experience difficulty in meeting the growing demand for drilling services. Revenue in South and Central America increased by 56.3 percent or $45.9 million to $127.4 million, compared to $81.5 million in fiscal 2006. Mexico accounted for almost half of this growth while Chile, Argentina and Venezuela also made strong contributions. Revenue in Australasia and Africa increased 18.1 percent to $136.8 million from $115.8 million in fiscal 2006. With Tanzanian revenue up 88 percent, combined with the recent African acquisition, African operations accounted for over 80 percent of the growth in this segment. Australian and Indonesian revenue was up slightly while Mongolian revenue showed no growth due to uncertainty relating to government mining policies. Gross margins for the year were 32.0 percent compared to 28.6 percent last year, due mainly to an improving pricing environment and improvements in drillers' productivity. With the increase in revenue and improving gross margins, gross profit for the year increased by 47.2 percent to $133.1 million compared to $90.4 million for the prior year. General and administrative expenses increased to $33.8 million compared to $28.6 million for the same period last year. This increase is primarily due to additions to the management team to accommodate growth, administrative salary increases and the African acquisition. Other expenses were $9.3 million for the year compared to $5.6 million for the same period last year due in part to an increase in incentive provisions as a result of improved profitability and increased provision for bad debt and legal matters. Foreign exchange loss was $0.8 million compared to $1.0 million in the prior year period. Short-term interest revenue was $0.7 million for the year compared to an expense of $0.9 million last year, while interest on long-term debt was $2.6 million in fiscal 2007 compared to $2.7 million last year. Amortization expense increased to $20.5 million compared to $17.2 million last year, as a result of increased investment in equipment. The provision for income tax for the year was $20.2 million compared to $9.1 million for the prior year reflecting the increase in pre-tax earnings. The effective tax rate for the year increased compared to the prior year as the Company was still utilizing non-tax effected losses during fiscal 2006, which have now been fully utilized. Earnings from continuing operations were $46.5 million or $2.01 per share ($1.98 per share diluted) compared to $25.2 million or $1.11 per share ($1.09 per share diluted) last year. Gain from discontinued operations was $12.3 million or $0.53 per share compared to a gain of $3.4 million or $0.15 per share last year. Gain from discontinued operations of fiscal 2007 largely reflects the gain from the sale of the manufacturing division, partially offset by a loss in the Chinese operations after close down costs. Gain from discontinued operations for fiscal 2006 represents operating results from the discontinued operations that have been reclassified from continuing operations. Net earnings were $58.8 million or $2.54 per share ($2.50 per share diluted) compared to $28.6 million or $1.26 per share ($1.23 per share diluted) for 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 of the Company's second and third 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, Australia, Indonesia, Africa and Mongolia.
Financial statements are attached.
Major Drilling will provide a simultaneous webcast of its quarterly conference call on Tuesday, June 12, 2007 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)
For the years ended Three months ended April 30 April 30
2007 2006 2007 2006 (reclassi- (reclassi- fied- fied- note 4) note 4)
TOTAL REVENUE $ 415,437 $ 316,477 $ 129,049 $ 88,956
DIRECT COSTS 282,367 226,061 85,529 63,018 GROSS PROFIT 133,070 90,416 43,520 25,938 32.0% 28.6% 33.7% 29.2% OPERATING EXPENSES
General and administrative 33,821 28,634 10,205 7,747 Other expenses 9,252 5,604 2,176 296 Foreign exchange loss 828 1,001 461 199 Interest (revenue) expense on short term debt (729) 916 (388) 349 Interest expense on long-term debt 2,615 2,671 684 524 Amortization 20,526 17,207 5,942 4,268 66,313 56,033 19,080 13,383 EARNINGS BEFORE INCOME TAX AND DISCONTINUED OPERATIONS 66,757 34,383 24,440 12,555 INCOME TAX - PROVISION Current 13,932 5,165 6,460 1,391 Future 6,279 3,979 180 1,871 20,211 9,144 6,640 3,262 EARNINGS FROM CONTINUING OPERATIONS 46,546 25,239 17,800 9,293
GAIN FROM DISCONTINUED OPERATIONS 12,257 3,403 9 2,396 NET EARNINGS $ 58,803 $ 28,642 $ 17,809 $ 11,689 EARNINGS PER SHARE FROM CONTINUING OPERATIONS Basic(x) $ 2.01 $ 1.11 $ 0.77 $ 0.40 Diluted(xx) $ 1.98 $ 1.09 $ 0.75 $ 0.39 EARNINGS PER SHARE Basic(x) $ 2.54 $ 1.26 $ 0.77 $ 0.51 Diluted(xx) $ 2.50 $ 1.23 $ 0.75 $ 0.50
(x) Based on 23,135,889 and 22,782,485 daily weighted average shares outstanding for the fiscal year to date 2007 and 2006, respectively, and on 23,253,058 and 23,032,283 daily weighted average shares for the quarter ended April 30, 2007 and 2006, respectively. The total number of shares outstanding on April 30, 2007 was 23,386,278 (xx) Based on 23,490,195 and 23,228,108 daily weighted average shares outstanding for the fiscal year to date 2007 and 2006, respectively, and on 23,686,734 and 23,610,691 daily weighted average shares outstanding for the fourth quarter ended 2007 and 2006, respectively.
Major Drilling Group International Inc. Consolidated Statements of Retained Earnings (in thousands of Canadian dollars) (unaudited)
For the years ended April 30
2007 2006 (reclassi- fied- note 4)
RETAINED EARNINGS, BEGINNING OF THE YEAR $ 49,635 $ 20,993
Net earnings 58,803 28,642 RETAINED EARNINGS, END OF THE YEAR $ 108,438 $ 49,635
Major Drilling Group International Inc. Consolidated Statements of Cash Flows (in thousands of Canadian dollars) (unaudited)
For the years ended Three months ended April 30 April 30
2007 2006 2007 2006 (reclassi- (reclassi- fied- fied- note 4) note 4)
OPERATING ACTIVITIES Earnings from continuing operations $ 46,546 $ 25,239 $ 17,800 $ 9,293 Operating items not involving cash Amortization 20,526 17,207 5,942 4,268 Loss (Gain) on disposal of capital assets 977 (725) 622 (981) Future income tax 6,279 3,979 180 1,871 Stock-based compensation 1,265 1,141 602 174 75,593 46,841 25,146 14,625 Changes in non-cash operating working capital items (14,509) (8,711) (12,257) (14,254) 61,084 38,130 12,889 371 (Loss) earnings from discontinued operations, adjusted for non-cash items (1,271) 3,403 (55) 2,396 Changes in non-cash operating working capital items from discontinued operations 3,154 (4,156) (79) 471 Cash flow from operating activities 62,967 37,377 12,755 3,238 FINANCING ACTIVITIES Repayment of long-term debt (16,863) (14,733) (5,355) (3,216) Additional long-term debt 459 2,052 - - (Repayment of) increase in demand loans (16,721) (1,230) - 10,821 Issuance of common shares 2,653 2,627 1,740 380 Cash flow (used in) from financing activities (30,472) (11,284) (3,615) 7,985 INVESTING ACTIVITIES Net proceeds from sale of discontinued operations 28,717 - (43) - Business acquisitions (note 3) (13,058) - - - Acquisition of capital assets, net of direct financing (36,803) (27,379) (12,474) (7,815) Proceeds from disposal of capital assets 3,040 5,504 452 2,962 Discontinued operations 687 (89) - (750) Cash flow used in investing activities (17,417) (21,964) (12,065) (5,603) OTHER ACTIVITIES Foreign exchange translation adjustment (2,043) 1,335 (658) 234