Odyssey Marine Exploration, Inc. press release
Foraco International Reports Q4 2019
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TORONTO and MARSEILLE, France, March 2, 2020
TORONTOand MARSEILLE, France, March 2, 2020/CNW/ - Foraco International SA (TSX: FAR) (the "Company" or "Foraco"), a leading global provider of mineral drilling services, today released its unaudited financial results for the fourth quarter 2019. All figures are expressed in US Dollars (US$) unless otherwise indicated.
"We posted our third consecutive profitable quarter in Q4 2019 and ended the year 2019 with a net profit after tax for the first time since 2013. This year again, we continued to outperform the market growth with a 14% increase in revenue at USD 205.4 millionin 2019 versus USD 180.0 millionin 2018. The US$ 48.4 millionrevenue generated in Q4 2019 reflects the sustained performance of all regions and confirmed our strategy to focus on and to develop our positioning in key markets. Canada, Australia, Braziland Russiaare the main contributors to this performance this quarter" commented Daniel Simoncini, Chairman and Co-CEO of Foraco. "The bidding activity was exciting and we are pleased to report that our backlog at year-end is significantly higher than last year at USD 158.1 millionto be executed in 2020, a 19% increase compared to US$133.0 millionat the end of 2018. We certainly have a strong base to build upon now and we would like to take this opportunity to thank our dedicated management team for his enthusiasm and commitment which made this recovery possible"
"In Q4 2019, we recorded an EBITDA of US$ 8.2 million, a 88% increase compared to Q4 2018. On a full year basis, we posted US$ 29.3 millionEBITDA in 2019, a 62% increase compared to FY 2018. Free cash flow continued to be positive for the fifth consecutive quarter and our net result after tax was a profit of US$ 2.3 millionin Q4 2019 and US$ 2.6 millionfor the full year 2019." added Jean-Pierre Charmensat, Co-CEO and Chief Financial Officer. "Despite this positive news, we are aware of the challenges we will face in the future as a result of simultaneously competing factors ranging from economic data, outbreaks and geopolitical shifts. Our response is to restore our financial flexibility and thus to concentrate our efforts to accelerate our balance sheet deleveraging while protecting our current stakeholders."
Highlights – Q4 2019
Revenue
Q4 2019 revenue amounted to US$ 48.4 millioncompared to US$ 48.0 millionin Q4 2018, an increase of 1%.
The rigs utilization rate was 45% in Q4 2019 compared to 51% in Q4 2018 mainly due to the mixed effect of lower activity in South Americacompensated by increased activity in Australiawhere revenue per rig is higher.
Profitability
The Q4 2019 gross margin including depreciation within cost of sales was US$ 8.9 million(or 18.4% of revenue) compared to US$ 5.4 million(or 11.3% of revenue) in Q4 2018. This increase is due to improved performance on contracts and continued effective cost control over our operating expenses.
During the quarter, EBITDA amounted to US$ 8.2 million(or 17.0% of revenue), a 88% increase compared to US$ 4.4 million(or 9.1% of revenue) for the same quarter last year.
Highlights – FY 2019
Revenue
FY 2019 revenue amounted to US$ 205.4 millioncompared to US$ 180.0 millionin FY 2018, an increase of 14%.
The rigs utilization rate was 48% in FY 2019 compared to 45% in FY 2018 mainly due to Australia, Braziland Russiaincrease in activity.
Profitability
FY 2019 gross margin including depreciation within cost of sales was US$ 32.1 million(or 15.6% of revenue) compared to US$ 21.9 million(or 12.2% of revenue) in FY 2018. This increase is due to improved performance on contracts, better absorption of fixed operational costs and continued effective cost control over our operating expenses.
During the period, EBITDA amounted to US$ 29.3 million(or 14.2% of revenue), compared to US$ 18.1 million(or 10.0% of revenue) for the same period last year.
Net debt
The net debt excluding the impact of the implementation of IFRS 16 was US$ 128.9 millionas at December 31, 2019compared to US$ 130.4 millionas at December 31, 2018. This decrease is mainly linked to the free cash flow generated during the period (US$ 8.0 million) offset by the capitalized interest (US$ 5.5 million). The net debt including the impact of IFRS 16 is US$ 133.0 millionas at December 31, 2019.
Backlog
As at December 31, 2019, the Company's order backlog for continuing operations was US$ 269.1 millionof which US$ 158.1 millionis expected to be executed during the FY 2020. Last year at the same period, the order backlog for continuing operations was US$ 266.0 millionof which US$ 133.9 millionwas expected to be executed during FY 2019.
Selected financial data
| (In thousands of US$) (unaudited) | | Three-month period ended
December 31, | | Year ended
December 31, | | | | | | | | | | | 2019 | | 2018 | | 2019 | | 2018 | | | | | | | | | | | | | | | | | | Revenue | | | 48,379 | | 47,992 | | | 205,444 | | 180,046 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Gross profit (1) | | | 8,920 | | 5,447 | | | 32,100 | | 21,885 | | | As a percentage of sales | | | 18.4% | | 11.3% | | | 15.6% | | 12.2% | | | | | | | | | | | | | | | | EBITDA | | | 8,230 | | 4,370 | | | 29,251 | | 18,081 | | | As a percentage of sales | | | 17.0% | | 9.1% | | | 14.2% | | 10.0% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Operating profit / (loss) | | | 3,584 | | 182 | | | 10,952 | | 1,114 | | | As a percentage of sales | | | 7.4% | | 0.4% | | | 5.3% | | 0.6% | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Profit / (loss) for the period | | | 2,269 | | (3,633) | | | 2,632 | | (10,630) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Attributable to: | | | | | | | | | | | | | Equity holders of the Company | | | 2,756 | | (3,931) | | | 1,085 | | (10,616) | | | Non-controlling interests | | | (487) | | 298 | | | 1,547 | | (546) | | | | | | | | | | | | | | | | EPS (in US cents) | | | | | | | | | | | | | Basic | | | 3.07 | | (4.37) | | | 1.21 | | (11.83) | | | Diluted | | | 2.99 | | (4.37) | | | 1.18 | | (11.83) | |
| | | | (1) | This line item includes amortization and depreciation expenses related to operations |
Financial results
Revenue
| (In thousands of US$) - (unaudited) | Q4 2019 | % change | Q4 2018 | FY 2019 | % change | FY 2018 | | Reporting segment | | | | | | | | Mining | 46,499 | 0% | 46,566 | 199,327 | 14% | 174,940 | | Water | 1,880 | 32% | 1,426 | 6,117 | 20% | 5,106 | | Total revenue | 48,379 | 1% | 47,992 | 205,444 | 14% | 180,046 | | | | | | | | | | Geographic region | | | | | | | | Europe, Middle East and Africa | 12,931 | 17% | 11,087 | 52,386 | 17% | 44,603 | | South America | 10,145 | -20% | 12,605 | 46,404 | 27% | 36,479 | | North America | 16,245 | -5% | 17,096 | 70,499 | 4% | 68,012 | | Asia Pacific | 9,058 | 26% | 7,204 | 36,155 | 17% | 30,952 | | Total revenue | 48,379 | 1% | 47,992 | 205,444 | 14% | 180,046 |
Q4 2019
Revenue of the quarter slightly increased from US$ 48.0 millionin Q4 2018 to US$ 48.4 millionin Q4 2019 (+1%).
In EMEA revenue for the quarter was US$ 12.9 millioncompared to US$ 11.1 millionin Q4 2018, an increase of 17%. Each area showed improved activity. In Africa, the Company mobilized new deep-water wells contracts which will continue through 2020. In Russia, most of the contracts will continue during 2020.
Revenue in South Americadecreased by 20% at US$ 10.1 millionin Q4 2019 (US$ 12.6 millionin Q4 2018). The activity in Brazildecreased by 20% linked to the end of certain contracts with Junior companies. In Chile, the activity slowed down as political troubles affected the rotation of crews.
Activity in North Americaremained sustained with revenue at US$ 16.2 millionin Q4 2019 compared to US$ 17.1 millionin Q4 2018. Extreme weather conditions affected our operations at the end of the quarter.
In Asia Pacific, Q4 2019 revenue amounted to US$ 9.1 million, an increase of 26% mainly due to the increased volume with existing clients and start-up of new contracts.
FY 2019
FY 2019 revenue amounted to US$ 205.4 millioncompared to US$ 180.0 millionin FY 2018, an increase of 14%.
In EMEA, revenue increased by 17%, to US$ 52.4 millionin FY 2019 from US$ 44.6 millionin FY 2018, as a result of increased activity in Russiaand a stable activity in Franceand Africa.
Revenue in South Americaincreased by 27% at US$ 46.4 millionin FY 2019 (US$ 36.5 millionin FY 2018). Brazilshowed improved activity with major clients and junior companies.
Revenue in North Americaincreased by 4% to US$ 70.5 millionin FY 2019 from US$ 68.0 millionin FY 2018. In FY 2019, the Company benefited from sustained activity with major clients and secured new long-term contracts in the underground sector.
In Asia Pacific, FY 2019 revenue amounted to US$ 36.2 million, an increase of 17% mainly due to the increased volume with our existing clients and start of new contracts in Australia.
Gross profit
| (In thousands of US$) - (unaudited) | Q4 2019 | % change | Q4 2018 | FY 2019 | % change | FY 2018 | | Reporting segment | | | | | | | | Mining | 8,669 | 50% | 5,793 | 31,285 | 42% | 22,101 | | Water | 251 | n/a | (347) | 815 | n/a | (216) | | Total gross profit / (loss) | 8,920 | 64% | 5,446 | 32,100 | 47% | 21,885 |
Q4 2019
The Q4 2019 gross margin including depreciation within cost of sales was US$ 8.9 million(or 18.4% of revenue) compared to US$ 5.4 million(or 11.3% of revenue) in Q4 2018. This increase is due to improved performance on contracts and continued effective cost control over our operating expenses.
FY 2019
The FY 2019 gross margin including depreciation within cost of sales was US$ 32.1 million(or 15.6% of revenue) compared to US$ 21.9 million(or 12.2% of revenue) in FY 2018. This increase is due to improved performance on contracts, better absorption of fixed operational costs and continued effective cost control over our operating expenses.
Selling, General and Administrative Expenses
| (In thousands of US$) - (unaudited) | Q4 2019 | % change | Q4 2018 | FY 2019 | % change | FY 2018 | | | | | Selling, general and administrative expenses | 5,336 | 1% | 5,265 | 21,149 | 2% | 20,771 | | | |
Q4 2019
SG&A was stable compared to the same quarter last year.
FY 2019
SG&A increased by 2% compared to the same period last year. As a percentage of revenue, SG&A decreased from 11.5% in FY 2018 to 10.3% in FY 2019.
Operating result
| (In thousands of US$) - (unaudited) | Q4 2019 | % change | Q4 2018 | FY 2019 | % change | FY 2018 | | | Reporting segment | | | | | | | | | Mining | 3,540 | n/a | 685 | 10,784 | n/a | 2,234 | | | Water | 44 | n/a | (503) | 168 | n/a | (1,120) | | | Total operating profit / (loss) | 3,584 | n/a | 182 | 10,952 | n/a | 1,114 | | | | | | | | | | |
Q4 2019
The operating profit was US$ 3.6 million, a US$ 3.4 millionimprovement as a result of increased activity, improved gross margin and controlled SG&A expenses.
FY 2019
The operating profit was US$ 11.0 million, a US$ 8.9 millionimprovement as a result of increased activity, improved operating performance and effective cost control over SG&A expenses.
Financial position
The following table provides a summary of the Company's cash flows for FY 2019 and FY 2018:
| (In thousands of US$) | FY 2019 | FY 2018 | | | | | | Cash generated by operations before working capital requirements | 29,251 | 18,194 | | | | | | Working capital requirements | (637) | (6,847) | | Income tax paid (received) | (4,696) | (2,404) | | Purchase of equipment in cash | (12,533) | (12,743) | | | | | | Free Cash Flow before debt servicing | 11,385 | (3,800) | | | | | | Debt variance | (1,161) | 5,301 | | Interests paid | (3,364) | (3,374) | | Acquisition of treasury shares | (19) | (487) | | Dividends paid to non-controlling interests | (1,046) | (77) | | | | | | Net cash generated / (used in) financing activities | (5,590) | 1,363 | | | | | | Net cash variation | 5,795 | (2,436) | | | | | | Foreign exchange differences | (830) | (1,051) | | | | | | Variation in cash and cash equivalents | 4,965 | (3,487) |
In FY 2019, the cash generated from operations before working capital requirements amounted to US 29.3 million compared to US$ 18.2 millionin FY 2018.
In FY 2019, the working capital requirement was US$0.6 millioncompared to US$ 6.8 millionin the same period last year impacted by the significant upturn in activity which started end of 2017.
During the period, the Capex was US$ 12.5 millionin cash, a stable amount compared to FY 2018. The Capex mainly relates to major rigs overhauls, ancillary equipment and rods. The Company acquired 9 rigs in FY 2019 and 9 rigs were removed from service.
Free cash flow before debt servicing was US$ 11.4 millionin FY 2019 compared to US$ (3.8) millionin FY 2018.
As at December 31, 2019, cash and cash equivalents totaled US$ 16.1 millioncompared to US$ 11.1 millionas at December 31, 2018. Cash and cash equivalents are mainly held at or invested within top tier financial institutions.
As at December 31, 2019, net debt excluding IFRS 16 implementation amounted to US$ 128.9 million(US$ 130.4 millionas at December 31, 2018).
Bank guarantees as at December 31, 2019totaled US$ 6.5 millioncompared to US$ 1.7 millionas at December 31, 2018linked to new contracts in the water segment. The Company benefits from a confirmed contract guarantee line of € 12.7 million (US$ 14.2 million).
Going concern and impairment testing
Going concern is assessed based on internal forecasts and projections that take into account the trend in the business in which the Company operates and its capacity to address the market and deliver its services. On the basis of the above, the Company believes that it will have adequate financial resources to continue in operation for a period of at least twelve months. Accordingly, the Company continues to adopt the going concern basis in preparing its financial statements.
As part of the May 2017debt reorganization, certain key financial covenants were set including minimum cash, leverage ratio and limitation to capital expenditure. In December 2018, a new set of covenants applicable to the year 2019 was agreed with the lenders. As at September 30, 2019, the Company met its covenants. Nothing indicates that the Company will not respect its covenants going forward within the next 12 month period.
Currency exchange rates
The exchange rates for the periods under review are provided in the Management's Discussion and Analysis of Q4 2019.
Non-IFRS measures
EBITDA represents Net income before interest expense, income taxes, depreciation, amortization and non-cash share based compensation expenses. EBITDA is a non-IFRS quantitative measure used to assist in the assessment of the Company's ability to generate cash from its operations. The Company believes that the presentation of EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in the drilling industry. EBITDA is not defined in IFRS and should not be considered to be an alternative to Profit for the period or Operating profit or any other financial metric required by such accounting principles.
Net debt corresponds to the current and non-current portions of borrowings and the consideration payable related to acquisitions, net of cash and cash equivalents.
Reconciliation of the EBITDA is as follows:
| (In thousands of US$)
(unaudited) | Q4 2019 | Q4 2018 | FY 2019 | FY 2018 | | | | | | | | Operating profit / (loss | 3,584 | 182 | 10,951 | 1,114 | | Depreciation expense | 4,601 | 4,143 | 18,119 | 16,787 | | Non-cash employee share-based compensation | 45 | 45 | 180 | 180 | | EBITDA | 8,230 | 4,370 | 29,251 | 18,081 |
IFRS 16 implementation had a positive impact of US$ 0.3 millionin Q4 2019 and US$ 1.1 millionin FY 2019.
Outlook
The Company's strategy is to become a leading actor in the mineral drilling services sector, assisting its customers to explore or manage their deposits throughout the whole cycle, with a special focus on life of mines extension activity. The Company intends to develop and grow its services offered across the world with a focus on stable jurisdictions, high tech drilling services, optimal commodities mix - with a significant involvement in water related drilling services and choose carefully its customers. The Company expects it will execute its strategy primarily through organic growth in the near future.
As at December 31, 2019, the Company's order backlog for continuing operations was US$ 269.1 millionof which US$ 158.1 millionis expected to be executed during the FY 2020. Last year at the same period, the order backlog for continuing operations was US$ 266.0 millionof which US$ 133.9 millionwas expected to be executed during FY 2019. The Company's order backlog consists of sales orders. Sales orders are subject to modification by mutual consent and in certain instances orders may be revised by customers. As a result, the order backlog of any particular date may not be indicative of actual operating results for any subsequent period.
Conference call and webcast
On March 2, 2020, Company Management will conduct a conference call at 5:30 pm ETto review the financial results. The call will be hosted by Daniel Simoncini, Chairman and co-CEO, and Jean-Pierre Charmensat, co-CEO and CFO.
You can join the call by dialing 1-888-231-8191 or 1-647-427-7450. You will be put on hold until the conference call begins. A live audio webcast of the Conference Call will also be available through:
https://event.on24.com/wcc/r/2207388/BA6098C47F0B5929553D09ACACDB50C8
An archived replay of the webcast will be available for 90 days.
About Foraco International SA
Foraco International SA (TSX: FAR) is a leading global mineral drilling services company that provides a comprehensive and reliable service offering in mining and water projects. Supported by its founding values of integrity, innovation and involvement, Foraco has grown into the third largest global drilling enterprise with a presence in 22 countries across five continents. For more information about Foraco, visit www.foraco.com.
"Neither TSX Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Exchange) accepts responsibility for the adequacy or accuracy of this release."
Caution concerning forward-looking statements
This document may contain "forward-looking statements" and "forward-looking information" within the meaning of applicable securities laws. These statements and information include estimates, forecasts, information and statements as to Management's expectations with respect to, among other things, the future financial or operating performance of the Company and capital and operating expenditures. Often, but not always, forward-looking statements and information can be identified by the use of words such as "may", "will", "should", "plans", "expects", "intends", "anticipates", "believes", "budget", and "scheduled" or the negative thereof or variations thereon or similar terminology. Forward-looking statements and information are necessarily based upon a number of estimates and assumptions that, while considered reasonable by Management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Readers are cautioned that any such forward-looking statements and information are not guarantees and there can be no assurance that such statements and information will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from the Company's expectations are disclosed under the heading "Risk Factors" in the Company's Annual Information Form dated May 29, 2019, which is filed with Canadian regulators on SEDAR (www.sedar.com). The Company expressly disclaims any intention or obligation to update or revise any forward-looking statements and information whether as a result of new information, future events or otherwise. All written and oral forward-looking statements and information attributable to Foraco or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements.