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MASTER DRILLING GROUP LIMITED - Unaudited Interim Report for the six months ended 30 June 2016

Release Date: 05/09/2016 16:30
Code(s): MDI     PDF:  
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Unaudited Interim Report for the six months ended 30 June 2016

Master Drilling Group Limited 
(Incorporated in the Republic of South Africa)
Registration number 2011/008265/06
JSE share code: MDI ISIN: ZAE000171948
("Master Drilling" or "the Company")

REPORT TO SHAREHOLDERS
UNAUDITED INTERIM REPORT
FOR THE SIX MONTHS ENDED 30 JUNE 2016

HIGHLIGHTS FOR THE PERIOD

-  ZAR Revenue up by 15.4% assisted by a weaker ZAR
-  US$ Gross profit margin increased by 1.6% from 38.9% to 40.5%
-  US$ Profit after tax margin increased by 0.8% from 17.2% to 18.0%
-  US$ Headline earnings per share remained constant at 6.3 cents 
-  ZAR Headline earnings per share increased by 30.1% from 75,0 cents to 97,6 cents
-  Acquisition of Bergteamet Latin America SpA's assets and operations in Chile
-  Steady increase in order book to US$ 209 million

COMMENTARY

FINANCIAL OVERVIEW
The 2016 year had a slow start for Master Drilling. Delayed access to sites, postponement of the start-up
of projects, poor ground conditions and economic fluctuations were the factors that contributed to the
initial underperformance, especially in the first quarter. Fortunately, better performance during the second
quarter indicated an uplift due to the improvement in the mining industry. Our diversification across
regions, commodities, currencies and industries remains the key success factors of the business.

The results in US$ compared to the corresponding period in 2015 are as follow:
-   Revenue down by 10.8%
-   Gross profit margin of 40.5%, up by 1.6%
-   Operating profit margin of 24.9%, down by 1.0%
-   Profit after tax margin at 18.0%, improvement of 0.8%

ABOUT MASTER DRILLING GROUP LIMITED
Master Drilling was established in 1986 and listed on the Johannesburg Stock Exchange during the
latter part of 2012. Master Drilling provides specialized drilling services to blue-chip, major and mid-tier
companies in the mining, civil engineering and building construction sectors. Drilling services are provided
across a range of drilling activities that include exploration, production and capital stage drilling in various commodities.

Master Drilling is a global business with operations in Africa, Asia, Europe, Latin America and North America.

The first half of 2016 saw the acquisition of Bergteamet Latin America SpA's assets and operations in
Chile. The Master Drilling business in Brazil secured the 5-year extension of a key contract at Anglo Gold
Ashanti. The successful award of Sierra Leone and Tanzania contracts supports our diversification strategy
for Africa. In the USA we were awarded a first contract for blind shaft boring.

Revenue is down in both Mexico and Africa as a result of projects start-up delays and lower utilization of
equipment. The exploration business is still impacted by lower iron ore prices.

We added 4 raise bore machines, contributing 4.4% growth in revenue, the fleet now consists of 102
raise boring and 49 slim drilling rigs.

Strong margins were maintained during these difficult times. This, together with the ramp-up during the
second quarter, indicates higher utilization of equipment and improved financial performance during the
second half of the year.

COMMITTED ORDERS
As at 30 June 2016 our committed order book totalled US$208 916 631. This includes, in respect of the second 
half of the year from 1 July 2016 to 31 December 2016, committed orders, and, in respect of the period beyond 
that, assumptions based on past experience of continuation of current customer projects.

UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS 
of the Master Drilling Group for the six months ended 30 June 2016

ACCOUNTING POLICIES – BASIS OF PREPARATION

The condensed consolidated unaudited interim financial statements of Master Drilling Group Limited
have been prepared on the historical cost basis, except for certain financial instruments that are stated
at fair value. The group financial statements for the six months ended 30 June 2016 have been prepared
in compliance with IAS 34: Interim Financial Reporting, International Financial Reporting Standards (IFRS)
as issued by the International Accounting Standards Board and the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee and presented in accordance with the minimum
content, including disclosures, prepared in accordance with the JSE Limited Listings Requirements and the
requirements of the South African Companies Act, 2008 (as amended).

The group's accounting policies used in the preparation of these financial statements are consistent with
those used in the annual financial statements for the year ended 31 December 2015.

The unaudited financial statements for the six months ended 30 June 2016 have been prepared by
the corporate reporting staff of Master Drilling Group Limited, headed by Elzaan Swanepoel (CA(SA)),
the group's Management Accountant. This process was supervised by André Jean van Deventer (CA(SA)),
the group's Financial Director.

GOING CONCERN
Based on the information available to it, the Board of Directors believes that the group remains a
going concern.

ISSUED CAPITAL
There has been no change to the issued capital since 31 December 2015.

OPERATING SEGMENTS
There are no changes to the operating segments from those disclosed at 31 December 2015.
See note 7.

FUNCTIONAL AND PRESENTATION CURRENCY
Items included in the financial statements of each of the group's entities are measured using the currency
of the primary environment in which the entity operates, i.e. 'functional currency'. The condensed
consolidated unaudited interim financial statements are presented in US$ (the 'presentation currency').
Management believes that presentation in US$ is more useful to the users of the consolidated financial
statements, as this currency most reliably reflects the global business performance of the group as a
whole.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION    
                                                                                           Unaudited six   Audited year
                                                                                            months ended          ended
                                                                                              Jun 2016       Dec 2015
                                                                            Note(s)                USD            USD
Assets                                                                                                               
Non-current assets                                                                                                   
Property, plant and equipment                                                     1          98 586 114     89 532 466
Intangible assets                                                                             3 043 042      2 612 584
Deferred tax asset                                                                            1 028 715      1 124 233
Financial assets                                                                              9 991 715      9 159 284
Investment in associate                                                                       5 643 973      5 467 740
                                                                                           118 293 559    107 896 307
Current assets                                                                                                       
Inventories                                                                                  26 986 975     19 574 979
Related-party loans                                                                             180 166         35 755
Trade and other receivables                                                       2          35 839 019     30 572 822
Cash and cash equivalents                                                                    19 972 385     22 496 770
                                                                                            82 978 545     72 680 326
Total assets                                                                                201 272 104    180 576 633   
Equity and liabilities                                                                                                
Equity                                                                                                                
Share capital                                                                               146 607 965    146 607 965
Reserves                                                                                   (93 190 617)   (97 883 624)
Retained income                                                                              62 601 426     53 231 728
                                                                                           116 018 774    101 956 069
Non-controlling interest                                                                     16 626 536     16 309 067
                                                                                           132 645 310    118 265 136
Liabilities                                                                                                          
Non-current liabilities                                                                                              
Interest-bearing borrowings                                                                  22 504 992     19 096 633
Finance lease obligations                                                                     2 324 043      2 957 153
Share-based payment liability                                                                   196 745        706 681
Deferred tax liability                                                                        8 632 943      7 387 853
                                                                                            33 658 723     30 148 320
Current liabilities                                                                                                  
Interest-bearing borrowings                                                                   9 185 708      8 417 589
Finance lease obligations                                                                     2 589 184      2 941 002
Related party loans                                                                              41 907         41 317
Current tax payable                                                                           5 349 004      5 195 800
Trade and other payables                                                          3          17 802 268     15 567 469
                                                                                            34 968 071     32 163 177
Total liabilities                                                                            68 626 794     62 311 497
Total equity and liabilities                                                                201 272 104    180 576 633

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                    Unaudited six        Unaudited six    Audited year
                                                                     months ended         months ended           ended
                                                                       Jun 2016             Jun 2015        Dec 2015
                                                     Note(s)                 USD                  USD             USD
Revenue                                                               53 808 765           60 300 461     119 867 646
Cost of sales                                                       (31 997 953)         (36 816 661)    (71 989 042)
Gross profit                                                          21 810 812           23 483 800      47 878 604
Other operating income                                                   516 516              829 956       1 037 888
Other operating expenses                                             (8 914 143)          (8 675 566)    (19 336 260)
Operating profit                                                      13 413 185           15 638 190      29 580 232
Investment revenue                                                       398 053              474 483         806 556
Finance costs                                                        (1 276 002)           ( 744 204)     (1 710 539)
Share of profit from equity accounted investment                         176 233                    –         134 575
Profit before taxation                                                12 711 469           15 368 469      28 810 824
Taxation                                                             (3 024 302)          (4 991 656)     (7 695 925)
Profit for the year                                                    9 687 167           10 376 813      21 114 899
Other comprehensive income/(loss) that will   
subsequently be classifiable to profit and loss:   
Exchange differences on translating foreign   
operations                                                             4 599 036          (5 300 056)    (18 378 247)     
Other comprehensive income/(loss) for the                                                                               
year net of taxation                                                   4 599 036          (5 300 056)    (18 378 247)     
Total comprehensive income                                            14 286 203            5 076 757       2 736 652    
Profit attributable to:                                                9 687 167           10 376 813      21 114 899
Owners of the parent                                                   9 369 698            9 310 508      19 966 151
Non-controlling interest                                                 317 469            1 066 305       1 148 748     
Total comprehensive income   
attributable to:                                                      14 286 203            5 076 757       2 736 652
Owners of the parent                                                  13 968 734            4 010 452       1 587 904
Non-controlling interest                                                 317 469            1 066 305       1 148 748     
Earnings per share (USD)                                   4                                                        
Basic earnings per share (cents)                                             6.3                  6.3            13.5
Headline earnings per share (cents)                                          6.3                  6.3            13.8     
Diluted earnings per share (USD)                           4                                                        
Diluted basic earnings per share (cents)                                     6.2                  6.2            13.3
Diluted headline earnings per share (cents)                                  6.2                  6.2            13.6    
Earnings per share (ZAR)                                                                                           
Basic earnings per share (cents)                                            97,4                 74,8           172,0
Headline earnings per share (cents)                                         97,6                 75,0           175,9     
Diluted earnings per share (ZAR)                                                                                   
Diluted basic earnings per share (cents)                                    95,7                 73,7           169,3
Diluted headline earnings per share (cents)                                 95,9                 73,8           173,2

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                                             Equity due        Foreign
                                                                                              to change       currency
                                                                                   Share  in control of    translation
USD                                                                              capital      interests        reserve
Balance as at 30 June 2015                                                   146 607 965   (58 264 013)   (26 913 887)     
Share-based payments                                                                   –              –              –
Dividends declared by subsidiaries                                                     –              –              –
Total comprehensive income for the year                                                –              –   (13 078 191)
Total changes                                                                          –              –   (13 078 191)     
Balance as at 31 December 2015                                               146 607 965   (58 264 013)   (39 992 078)     
Share-based payments                                                                   –              –              –
Total comprehensive income for the year                                                –              –      4 599 036
Total changes                                                                          –              –      4 599 036     
Balance as at 30 June 2016                                                   146 607 965   (58 264 013)   (35 393 042)
                                   
                                   Share-based                              Attributable           Non-          Total
                                      payments          Total     Retained  to owners of    controlling  Shareholders'
                                       reserve       reserves       income    the parent       interest         equity
                                       309 973   (84 867 927)   42 576 085   104 316 123     16 540 847    120 856 970     
                                        62 494         62 494            –        62 494              –         62 494
                                             –              –            –             –      (314 223)      (314 223)
                                             –   (13 078 191)   10 655 643   (2 422 548)         82 443    (2 340 105)
                                        62 494   (13 015 697)   10 655 643   (2 360 054)      (231 780)    (2 591 834)     
                                       372 467   (97 883 624)   53 231 728   101 956 069     16 309 067    118 265 136     
                                        93 971         93 971            –        93 971              –         93 971
                                             –      4 599 036    9 369 698    13 968 734        317 469     14 286 203
                                        93 971     4 693 007     9 369 698    14 062 705        317 469     14 380 174
                                                                                                                 
                                       466 438   (93 190 617)   62 601 426   116 018 774     16 626 536    132 645 310

CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                                     Unaudited six       Unaudited six
                                                                                      months ended        months ended
                                                                                       Jun 2016            Jun 2015
                                                                     Note(s)                 USD                 USD
Cash flows from operating activities                                                                               
Cash generated from operations                                            5.1           4 391 721          23 958 288
Interest income                                                                          398 053             474 483
Finance costs                                                                        (1 276 002)           (744 204)
Tax paid                                                                             (1 362 779)         (3 405 221)
Net cash from operating activities                                                     2 150 993          20 283 346
Cash flows from investing activities                                                                                     
Purchase of property, plant and equipment                                            (7 330 531)        (16 220 124)
Sale of property, plant and equipment                                                    800 868              56 438
Acquisition of subsidiary                                                 5.2         (1 543 451)                   –
Net cash from investing activities                                                   (8 073 114)        (16 163 686)
Cash flows from financing activities                                                                                     
Proceeds/(Repayment) of financial liabilities                                          4 176 478           1 509 328
Repayment of financial leases                                                          (984 928)         (2 625 382)
Related party loan movement                                                            (143 821)         (1 079 546)
Net cash from financing activities                                                     3 047 729         (2 195 600)
Total cash movement for the period                                                   (2 874 392)           1 924 060      
Cash at the beginning of the period                                                   22 496 770          12 477 082
Effect of exchange rate movement on cash balances                                        350 007           (781 753)
Total cash at end of the period                                                       19 972 385          13 619 389
              
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED              
INTERIM FINANCIAL STATEMENTS  

1.   PROPERTY, PLANT AND EQUIPMENT                                    
                                                                                             Accumulated
                                                                                            depreciation
                                                                                                     and
     Jun 2016                                                                                 impairment       Carrying
    USD                                                                             Cost         losses          value
    Land and buildings                                                         3 762 948       (46 309)      3 716 639
    Plant and machinery                                                       94 853 164   (28 248 430)     66 604 734
    Assets under construction                                                  5 625 607              –      5 625 607
    Furniture and fittings                                                     1 323 968      (387 466)        936 502
    Motor vehicles                                                             2 514 222    (1 066 281)      1 447 941
    Office equipment                                                             284 721       (53 284)        231 437
    IT equipment                                                                 655 404      (373 721)        281 683
    Finance lease: Plant and equipment                                        23 075 565    (4 715 610)     18 359 955
    Computer software                                                          2 211 746    (1 059 630)      1 152 116
    Patents                                                                      229 500              –        229 500
    Total                                                                    134 536 845   (35 950 731)     98 586 114
                                    
                                                                                             Accumulated
                                                                                            depreciation
                                                                                                     and
     Dec 2015                                                                                 impairment       Carrying
    USD                                                                             Cost         losses          value
    Land and buildings                                                         3 611 305       (38 641)      3 572 664
    Plant and machinery                                                       84 071 033   (25 120 600)     58 950 433
    Assets under construction                                                  5 505 621              –      5 505 621
    Furniture and fittings                                                     1 148 103      (360 892)        787 211
    Motor vehicles                                                             2 669 126      (985 579)      1 683 547
    Office equipment                                                              53 264       (43 439)          9 825
    IT equipment                                                                 564 286      (314 746)        249 540
    Finance lease: Plant and equipment                                        21 737 224    (4 256 153)     17 481 071
    Computer software                                                          1 877 368      (814 314)      1 063 054
    Patents                                                                      229 500              –        229 500
    Total                                                                    121 466 830   (31 934 364)     89 532 466
              
1.1   Reconciliation of property, plant and equipment              
                                                                                                               Exchange
                                                                                                          difference on
                                                                                                          consolidation
      Jun 2016                                                                    Opening                    of foreign
     USD                                                                         balance    Additions     subsidiaries
     Land and buildings                                                        3 572 664            –          149 052
     Plant and machinery                                                      58 950 433    6 936 749        2 391 354
     Assets under construction                                                 5 505 621    1 004 226           12 774
     Furniture and fittings                                                      787 211      171 320           15 780
     Motor vehicles                                                            1 683 547      189 618           16 174
     Office equipment                                                              9 825      216 518            5 622
     IT equipment                                                                249 540       70 086            8 152
     Finance lease: Plant and equipment                                       17 481 071      940 738          688 195
     Computer software                                                         1 063 054      244 039           51 064
     Patents                                                                     229 500            –                –
                                                                             89 532 466    9 773 294        3 338 167
                                     Reclassifications
                                       and transfer to
                                             inventory       Disposals          Depreciation                      Total      
                                                     –               –               (5 077)                  3 716 639      
                                               700 110       (216 286)           (2 157 626)                 66 604 734      
                                             (897 014)               –                     –                 5 625 607      
                                                     –        (17 535)              (20 274)                    936 502      
                                                     –       (329 549)             (111 849)                  1 447 941      
                                                     –               –                 (528)                    231 437      
                                                     –         (2 236)              (43 859)                    281 683      
                                                26 837       (210 492)             (566 394)                 18 359 955      
                                                     –         (1 661)             (204 380)                  1 152 116      
                                                     –               –                     –                    229 500      
                                             (170 067)       (777 759)           (3 109 987)                 98 586 114
 
                                                                                                               Exchange
                                                                                                          difference on
                                                                                                          consolidation
      Dec 2015                                                                    Opening                    of foreign
     USD                                                                         balance    Additions     subsidiaries
     Land and buildings                                                        3 894 241      261 581        (536 993)
     Plant and machinery                                                      55 996 007   15 893 937      (7 364 009)
     Assets under construction                                                 7 943 681      609 798         (27 296)
     Furniture and fittings                                                      815 069       72 054         (48 375)
     Motor vehicles                                                            1 993 290      471 266        (270 120)
     Office equipment                                                             27 757        1 794         (13 022)
     IT equipment                                                                277 218      102 035         (32 662)
     Finance lease: Plant and equipment                                       21 996 857      429 247      (3 567 469)
     Computer software                                                         1 437 735      325 481        (211 809)
     Patents                                                                           –      229 500                –
                                                                             94 381 855   18 396 693     (12 071 755)    
                                     Reclassifications
                                       and transfer to
                                             inventory        Disposals         Depreciation                      Total      
                                                     –         (26 545)             (19 620)                  3 572 664      
                                               435 994        (529 625)          (5 481 871)                 58 950 433      
                                           (3 020 562)                –                    –                  5 505 621      
                                                     –          (8 999)             (42 538)                    787 211      
                                               116 537        (323 726)            (303 700)                  1 683 547      
                                                     –                –              (6 704)                      9 825      
                                                 (138)          (5 024)             (91 889)                    249 540 
                                             (116 537)         (12 049)          (1 248 978)                 17 481 071      
                                                     –                –            (488 353)                  1 063 054      
                                                     –                –                    –                    229 500      
                                           (2 584 706)        (905 968)          (7 683 653)                 89 532 466
                                                                                      
2.   TRADE AND OTHER RECEIVABLES
                                                                                            Unaudited six  Audited year
                                                                                             months ended         ended
                                                                                              Jun 2016      Dec 2015
                                                                                                   USD           USD
    Trade receivables                                                                        29 029 001    24 157 869
    Loans to employees                                                                          185 286        89 298
    Pre-payments                                                                              2 539 447     2 534 712
    Deposits                                                                                     99 302       106 733
    Indirect taxes                                                                            1 320 031       521 086
    Sundry                                                                                    2 665 952     3 163 124
                                                                                             35 839 019    30 572 822
    Trade and other receivables past due but not impaired                                                           
    The ageing of amounts past due but not impaired is as follows:                                                  
    Outstanding on normal cycle terms                                                        16 561 553    16 947 349
      1 month past due                                                                        4 673 229     3 109 214
      2 months past due                                                                       2 878 302     1 719 700
      3 months past due                                                                       5 539 589     3 018 405
    Allowance for doubtful debts                                                              (623 672)     (636 799)
                                                                                            29 029 001    24 157 869     
     Trade receivables of South African subsidiaries have been ceded to             
    ABSA Capital as security for interest-bearing loan                                                               
     The movement in allowance for doubtful debts is                                                                       
    presented below                                                                                                  
    Balance 1 January                                                                           636 799     1 590 191
    Exchange differences on translation of foreign operations                                    38 812     (440 887)
    Amounts written off                                                                               –     (578 880)
    Allowance for doubtful debts                                                               (51 939)        66 375
                                                                                               623 672       636 799     
     The carrying amount in USD of trade and other receivables             
    are denominated in the following currencies:                                                                    
    United States Dollar (USD)                                                               16 766 894    16 520 399
    South African Rands (ZAR)                                                                 4 856 254     3 563 917
    Brazilian Reals (BRL)                                                                     2 601 479     3 794 977
    Mexican Peso (MXN)                                                                          213 889        37 902
    Chilean Peso (CLP)                                                                        6 641 840     3 643 250
    Peruvian Nuevo Sol (PEN)                                                                    343 746     1 271 413
    Chinese Yuan Renminbi (CNY)                                                                 144 369       148 753
    Guatemalan Quetzal (GTQ)                                                                    249 952       476 351
    Zambian Kwacha (ZMW)                                                                      2 025 633             –
    Colombian Peso (CLP)                                                                      1 825 131       946 076
    Euro (EUR)                                                                                  169 832       169 784
                                                                                            35 839 019    30 572 822
3.   TRADE AND OTHER PAYABLES                                                                                                
                                                                                            Unaudited six  Audited year
                                                                                             months ended         ended
                                                                                               Jun 2016      Dec 2015
                                                                                                    USD           USD      
    Trade payables                                                                             9 925 659     7 839 195
    Income received in advance                                                                         –       517 570
    Indirect taxes                                                                               768 545     2 850 274
    Leave pay accruals                                                                         2 015 141     1 306 196
    Other accruals                                                                             5 092 923     3 054 234
                                                                                             17 802 268    15 567 469
4.   EARNINGS PER SHARE                                                                                                 
                                                                        Unaudited six       Unaudited six   Audited year
                                                                         months ended        months ended          ended
                                                                          Jun 2016            Jun 2015       Dec 2015
                                                                               USD                 USD            USD
     Reconciliation between earnings and 
    headline earnings                                                                                               
    Basic earnings for the year                                           9 687 167          10 376 813     21 114 899
    Deduct:                                                                                                         
    Non-controlling interest                                              (317 469)         (1 066 305)    (1 148 748)
    Attributable to owners of the parent                                  9 369 698           9 310 508     19 966 151
     Loss on disposal of fixed assets                                          23 109             24 059       677 898       
    Tax effect on loss on disposal of fixed assets                          (6 470)             (5 198)      (217 524)
    Headline earnings for the year                                        9 386 337           9 329 369     20 426 525    
    Earnings per share (cents)                                                  6.3                 6.3           13.5
    Diluted earnings per share (cents)                                          6.2                 6.2           13.3
    Headline earnings per share (cents)                                         6.3                 6.3           13.8
    Diluted headline earnings per share (cents)                                 6.2                 6.2           13.6
    Net asset value per share (cents)                                          89.5                81.5           79.8
    Tangible net asset value per share (cents)                                 87.4                79.8           78.0
    Dividends per share (cents)                                                   –                   –              –
     Weighted average number of ordinary                                                                                 
     shares at the end of the year for the purpose 
     of basic earnings per share and headline 
    earnings per share                                                  148 265 491         148 265 491    148 265 491
     Effect of dilutive potential ordinary shares 
    – employee share options                                              2 676 268           2 327 286      2 379 656
     Weighted average number of ordinary shares 
     at the end of the year for the purpose of 
     diluted basic earnings per share and diluted 
    headline earnings per share                                         150 941 759         150 592 777    150 645 147
 
5.    NOTES TO THE STATEMENT OF CASH FLOWS                                                                                 
                                                                                       Unaudited six       Unaudited six
                                                                                        months ended        months ended
                                                                                         Jun 2016            Jun 2015
                                                                                               USD                 USD    
5.1   Cash generated from operations                                                                   
     Profit before taxation                                                             12 711 469          15 368 469
     Adjustments for:                                                                                                 
     Depreciation and amortisation                                                       3 109 987           3 413 288
     Share of profit from equity accounted investments                                   (176 233)                   –
     Translation effect of foreign operations                                            (452 183)            (80 845)
     Share-based payment – equity settled                                                   93 971             102 109
     Share-based payment – liability                                                     (509 936)             262 036
     Loss on sale of assets                                                                 23 109              24 059
     Interest received                                                                   (398 053)           (434 483)
     Finance costs                                                                       1 276 002             744 204
     Changes in working capital:                                                                                      
     Inventories                                                                       (7 045 149)           3 264 640
     Trade and other receivables                                                       (5 153 376)           (241 201)
     Trade and other payables                                                              912 113           1 576 012
                                                                                        4 391 721          23 958 288
5.2   Acquisition of subsidiary                                                                                        
      The fair value of assets and liabilities assumed at date of
     acquisition was:                                                                                                 
     Assets                                                                                                           
       Property, plant and equipment                                                     2 442 763                   –
       Current tax receivable                                                              125 292                   –
       Cash on hand                                                                        105 549                   –
     Net Working capital                                                               (1 013 085)                   –
     Total assets and liabilities acquired                                               1 660 519                   –
     Less: Non-controlling interests' portion of assets and liabilities acquired                 –                   –
     Group's share of total assets and liabilities acquired                              1 660 519                   –
     Goodwill at acquisition                                                               430 458                   –
     Total consideration                                                                 2 090 977                   –
     Consideration payable                                                               (441 977)                   –
     Cash and cash equivalents on hand at acquisition                                    (105 549)                   –
     Net cash (inflow)/outflow on acquisition of subsidiaries                            1 543 451                   –

6.    CAPITAL COMMITMENTS                                                                                                      
                                                                                       Unaudited six        Audited year
                                                                                        months ended               ended
                                                                                          Jun 2016            Dec 2015
                                                                                               USD                 USD      
      Capital expenditure authorised by the directors and contracted for
      within 12 months. Capital expenditure will be funded through cash
     generated from operations.                                                          4 709 195           6 974 023

7.    SEGMENT REPORTING                                                                                            
                                                               Unaudited six              Unaudited six     Audited year
                                                                months ended               months ended            ended
                                                                  Jun 2016                   Jun 2015         Dec 2015
                                                                       USD                        USD              USD         
    7.1 Mining activity                                                                                               
       The following table shows the distribution of the
       group's combined sales by mining activity, regardless
      of where the goods were produced:                                                    
      Sales revenue by stage of mining activity                                                                
      Exploration                                                   316 288                          –        1 664 074
      Capital                                                     8 995 132                 13 901 317       11 804 595
      Production                                                 44 497 345                 46 399 144      106 398 977
                                                                 53 808 765                 60 300 461      119 867 646      
      Gross profit by stage of mining activity                                                                       
      Exploration                                                   131 801                          –          779 248
      Capital                                                     2 758 394                  5 465 803        4 984 392
      Production                                                 18 920 617                 18 017 997       42 114 964
                                                                 21 810 812                 23 483 800       47 878 604

       The chief decision maker of the group is the chief executive officer. The chief executive officer, under
       the direct supervision of the resident boards, manages the activities of the group with due consideration
       to the inherent risks facing these activities. It is for this reason that the activities are separated between
       exploration, capital and production stage drilling. The equipment and related liabilities of the group can
       be used at multiple stages and therefore cannot be presented per activity.
                                                                                                                              

                                                                        Unaudited six      Unaudited six    Audited year
                                                                         months ended       months ended           ended
                                                                      30 June 2016       30 June 2015        Dec 2015
                                                                                 USD                USD             USD
7.2   Geographical segments                                                                                     
      Although the group's major operating divisions are
      managed on a worldwide basis, they operate in four
     principal geographical areas of the world                                                                    
     Sales revenue by geographical market                                                                           
     Africa                                                              10 485 839         13 683 945      27 087 779
     Latin America                                                       31 964 638         29 002 433      61 844 572
     Other Countries                                                              –            221 935         207 734
     South Africa                                                        11 358 288         17 392 148      30 727 561
                                                                        53 808 765         60 300 461     119 867 646      
     Gross profit by geographical market                                                                            
     Africa                                                               6 392 095          6 792 731      14 232 105
     Latin America                                                       11 223 866          9 419 710      16 594 674
     Other Countries                                                        (6 835)            290 448       1 010 347
     South Africa                                                         4 201 686          6 980 911      16 041 478
                                                                        21 810 812         23 493 800      47 878 604
                                                                                                             
      The gross profit percentages vary based on drilling ground conditions, competition in the markets
     and the mix of in-country and foreign cost.

SUBSEQUENT TO THE REPORTING PERIOD 
There have been no significant events subsequent to 30 June 2016 which require adjustment or additional
disclosure to these interim results.

DIVIDENDS
The anticipated investment in capital projects require the reservation of resources to fund our strategic
expansion. Based on this, and taking into account continuing uncertain economic conditions globally,
particularly for the mining industry, the Board resolved not to declare a dividend in respect of this
reporting period. 

OUTLOOK AND PROSPECTS
We are experiencing a change in the market with increased enquiries and project evaluations taking place.
Diversification across countries, commodities, industries and currencies remains the foundation of our
business. We have achieved strategic expansion of our footprint in Africa and the project in the USA, the
first step for the blind shaft boring development, becomes operational during the second half of this year.

We have invested in and extended our team to support the growth of our business and have allocated
resources to the Bergteamet Europe AB office with the anticipated exercising of our option to buy out the
remaining 60% shareholding. 

Cash resources continue to be stringently managed to cater for emerging opportunities that require
specific design, planning and investment. Continuous improvement in our technology and methods
remains the cornerstone in providing our clients with the one-stop solution that they require to stay
ahead in their market. Mechanisation, the key issue our mining clients are facing, supports our focus
as our business is already well positioned for this with the technologically advanced methods we use.

Comprehensive training plans were established to increase the skill level of key employees in the group.

The condensed consolidated unaudited financial statements of Master Drilling Group Limited were
approved by the Board of Directors on 5 September 2016 and signed off on its behalf by DC Pretorius.
On behalf of the board

DC Pretorius
Chief Executive Officer
Fochville
5 September 2016

CORPORATE INFORMATION
MASTER DRILLING GROUP LIMITED
Registration number: 2011/008265/06 
Incorporated in the Republic of South Africa
JSE share code: MDI
ISIN: ZAE000171948

REGISTERED AND CORPORATE OFFICE
4 Bosman Street
PO Box 902
Fochville, 2515
South Africa

DIRECTORS
Executive
Daniël (Danie) Coenraad Pretorius              Chief executive officer and founder
André Jean van Deventer                        Financial director and chief financial officer
Barend Jacobus (Koos) Jordaan                  Technical director
Gareth (Gary) Robert Sheppard(#)               Chief operating officer

Non-executive
Hendrik Roux Van Der Merwe                     Chairman and independent non-executive
Akhter Alli Deshmukh                           Independent non-executive
Jacques Pierre de Wet                          Independent non-executive
Johan Louis Botha                              Independent non-executive
Shane Trevor Ferguson                          Non-executive
Christopher Gerald O'Neill                     Alternate director
Fred George Dixon                              Alternate director
(#)Resident in Peru                            

COMPANY SECRETARY
Andrew Beaven
6 Dwars Street,
Krugersdorp,
1739
South Africa
PO Box 158, Krugersdorp,
1740
South Africa

JSE SPONSOR
Investec Bank Limited
(Registration number: 1969/004763/06)
100 Grayston Drive, Sandown, Sandton
2196
South Africa

INDEPENDENT AUDITORS
Grant Thornton Johannesburg Partnership
South African member of Grant Thornton International Limited
52 Corlett Drive
Illovo
2196
South Africa

SHARE TRANSFER SECRETARIES
Computershare Investor Services (Proprietary) Limited
(Registration number: 2004/003647/07)
Ground Floor, 70 Marshall Street
Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107
South Africa

INVESTOR RELATIONS CONTACTS
Su-Marie Lemmer
Master Drilling Group Limited
Telephone: +27 18 771 8100
Mobile: +27 82 570 3451
E-mail: marketcomm@masterdrilling.com

GENERAL E-MAIL QUERIES
info@masterdrilling.com

Master Drilling website
www.masterdrilling.com

Company Secretarial E-mail
Companysecretary@masterdrilling.com
Master Drilling posts information that is important to investors on the main page of its website at
www.masterdrilling.com and under the 'investors' tab on the main page. The information is updated
regularly and investors should visit the website to obtain important information about Master Drilling.

www.masterdrilling.com



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