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MASTER DRILLING GROUP LIMITED - Abridged Annual Financial Results 2017

Release Date: 20/03/2018 07:05
Code(s): MDI     PDF:  
Wrap Text
Abridged Annual Financial Results 2017

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

ABRIDGED ANNUAL FINANCIAL RESULTS 2017

SALIENT FEATURES FOR THE PERIOD

-  USD Revenue was up by 2.8%
-  USD Earnings per share decreased by 19.6% to 11.5 cents
-  ZAR Earnings per share decreased by 27,1% to 153,1 cents
-  USD Headline earnings per share decreased by 18.9% to 11.6 cents
-  ZAR Headline earnings per share decreased by 26,5% to 154,4 cents
-  Stable order book of USD 124.7 million
-  Solid pipeline of USD 228.1 million
-  Focus on working capital management bearing fruit 
-  Added geographies - India and Australia
 
COMMENTARY

ABOUT MASTER DRILLING

Master Drilling was established in 1986 and listed on the Johannesburg Stock Exchange in 2012. The company delivers
innovative drilling technologies worldwide and has built trusted partner relationships with blue-chip major and mid-tier
companies in the mining, civil engineering and construction sectors across various commodities for over 30 years. The
Master Drilling business model of providing drilling solutions to clients through tailor-made designs, coupled with a
flexible support and logistics chain, makes it the preferred drilling partner throughout the lifecycle of projects from
exploration to production and capital stages.

Commenting on the 2017 results, Danie Pretorius, CEO of Master Drilling, said:

"Despite 2017 having been a challenging year with various political changes across the world and a tough
local macroeconomic environment, we delivered stable operational results in 2017 with the continued
focus on working capital bearing fruit in the form of satisfactory cash generation.

"The uptick in the global economy and commodity cycle is expected to have a positive impact on our
business going forward. Our pipeline is strong and we are excited about our entry into India and Australia,
further diversifying our geographical exposure. The recent acquisition of Bergteamet Raiseboring Europe
provides a launchpad for further expansion in Europe. There are many synergies between the two
companies and this business complements our focus on providing innovative tailored technology solutions
to our clients.

"New management strategies and actions implemented in some challenging regions have turned most of
our underperforming businesses around. As a result, we expect an improvement in most global regions
where we do business during the next reporting period.

"We are particularly proud of the launch of our Mobile Tunnel Borer in February 2018. This disruptive
technology allows continuous mining and requires no blasting, significantly enhancing mining efficiencies.
Because it is as advantageous at the capital stage of mining projects, with quicker deployment and access
to the ore body, as it is at the production stage through substantial productivity increase when opening
reserves or increasing a mine's underground primary and secondary infrastructure, we believe this will
open the doors to more opportunities in future"

"Master Drilling is pleased that satisfactory cash generation has enabled us to declare an annual dividend 
of ZAR26,0 cents per share

FINANCIAL OVERVIEW

Revenue increased 2.8% to USD121.4 million and operating profit decreased marginally to USD24.8 million. 
This was a positive result given that one of the Group's machine categories, the XX-large machines category, 
were utilized only 40%. Cost of sales increased in line with the increase in revenue bringing about a flat 
gross profit percentage in USD terms.

Further investment in human resources to support future growth, lower utilisation rates due to adverse demand,
increased finance charges on additional borrowings for further expansion and the exchange rate effect of emerging
currencies had a negative impact on the profit after tax.   

USD earnings per share (EPS) decreased 19.6% to 11.5 cents, and ZAR EPS decreased 27,1% to 153,1 cents. USD
headline earnings per share (HEPS) decreased 18.9% to 11.6 cents, and ZAR HEPS decreased 26,5% to 154,4 cents.

Net cash generation saw an increase to USD32.8 million, and although still not achieving management's target, is
moving in the right direction. Working capital remained fairly flat year-on-year, with minimal movement especially in
inventory and receivables. Cash resources continue to be managed stringently as market conditions improve to cater for
emerging opportunities that require specific design, planning and investment. This resulted in a healthy cash resource
balance that positions the company well for future growth.

Master Drilling's capital spend was 81.0% on expansion and 19.0% on sustaining the existing fleet.

Debt increased from USD 31.0 million to USD 44.0 million and the gearing ratio, including cash, improved from 6.4% to 2.4% 
in the current year. This is due to an additional draw down of USD20 million from ABSA during the year

OPERATIONAL OVERVIEW

Despite entering 2017 amid challenging commodities markets and softer economic growth domestically paired with
escalating cost pressures in the mining sector, continuous technological innovation positioned Master Drilling well to
expand our service and product offering strategically into other industries as well as additional geographies.

South America

We are seeing some green shoots at our South American operations. Although Peru experienced a slow start to the
year, results are reported at breakeven point. In the last quarter of 2017, we confirmed targeted utilisation of our fleet,
positively impacting the outlook of our operations for 2018.

Brazil reported good results for the first time in several years mainly because of the implementation of a successful
turnaround strategy, coupled with a renewed contract with Anglo Gold Ashanti.

The competitive landscape in Chile changed with more international contractors testing the market adding pressure
to margins forcing competitors to exit the market. This emphasises the importance of in-depth market knowledge
whilst having experienced, on-the-ground teams. Having serviced the market for more than 20 years, our competitive
advantage served us well. Despite the short-term negative impact, we expect a turnaround during the next financial year.

During 2017, Master Drilling was awarded a hydroelectric energy project to the value of USD1.9 million in
Colombia. The project was completed at the end of January 2018 in line with the agreed contract terms.

Central and North America

Our business in Mexico experienced one of its best years to date. This was as a result of our marketing efforts on the
back of improved silver prices. More equipment is being shipped for future projects.

Our project in USA, involving our new machine with dual capability of blind shaft boring and raise bore drilling
shipped to the USA during 2017, is ongoing with completion anticipated during the first half of 2018. A new Business
Development Manager has also been appointed and will focus on expanding our business in the region.

Africa

Statistics show a major decline in mining's contribution to South Africa's GDP growth in recent years. A large
contributor to this remains uncertainty regarding the proposed mining charter and challenging mining conditions
associated with deep South African mines. With the election of Cyril Ramaphosa as president and the appointment of
Gwede Mantashe as the new Minister of Mineral Resources, we remain cautiously optimistic regarding the local mining
sector. We are encouraged by the continuous support from our loyal client base.

The exploration business in South Africa yielded positive results in 2017 with our biggest contract being extended for
another year, resulting in a positive outlook for the next financial year.

The initial capital extension project in the DRC is slowly coming to an end. This is being replaced with a smaller contract
due to commence in the latter part of 2018. The contract will comprise raise boring at a copper mine utilising the same
equipment, albeit with a smaller scope.

Mali and Zambia are performing as expected with no major changes anticipated.

In South Africa, Master Drilling will continue to support its loyal clients although growth will remain subdued.

We remain committed to expansion into appropriate African countries.

Scandinavia

Given the current macroeconomic environment, Sweden was disappointing and reported results at breakeven. We
recently announced our decision to exercise our call option to acquire the remaining 60% of the shares in Bergteamet
Raiseboring Europe based in Scandinavia. This transaction provides a launchpad for the company to expand our
operations in the European markets and further diversify our geographic exposure.

India

In India, we began to support Vedanta Limited, a London Stock Exchange listed, globally diversified natural resources
major with interests in Zinc, Lead, Silver, Copper, Iron Ore, Aluminium, Energy and Oil & Gas. The company deployed
one large raise bore machine to one of Hindustan Zinc's mines in India at an initial contract value of approximately
US$6 million.

Australia  

In Australia, a large raise bore machine has been contracted out to Byrnecut, an internationally renowned specialist
underground mining contractor, on a polymetalic project. The rental contract, the first such agreement which sees
Master Drilling supply the machine without manpower, will run for an initial period of one year

Technology

The continuous improvement in our technology and services remains the cornerstone in providing our clients with
the one-stop solution that they require to stay ahead in their respective markets. Master Drilling is well positioned to
respond to the growing mechanisation trend within the mining industry thanks to our technological skills and proven
services offering. We believe we offer a one stop solution to clients and our agile approach to trends developing in the
mining industry allows us to provide cutting edge technological solutions to current and potential clients.

Master Drilling strengthened its internally developed technology service offering during the year and met several
development milestones on our world-first technologies that we bring to market. The company's new disruptive
Mobile Tunnel Boring ("MTB") solution was unveiled at the Investing in African Mining Indaba 2018 in Cape Town
during February 2018. The manufacturing order has been placed and the machine should be ready for commissioning
during the third quarter of 2018. Master Drilling's internally conceptualised design and internationally patented MTB
technology were developed in response to the growing demand from clients, and the mining industry at large, for a
cost effective mechanised tunnelling contract service offering that addresses safety and efficiency challenges on new
and existing operations. The new solution may also make it possible for marginal projects to pass feasibility hurdles due
to cost and time savings.

Plant and equipment

Two raise bore machines were added, contributing 3.5% growth in revenue in 2017. The fleet now consists of 107 raise
bore and 34 slim drilling rigs. The rate of new rigs coming on stream will settle with a focus on larger units which
typically generate higher income. No new slim rigs are in the pipeline at this point.

Skills development

Retaining expertise and skills development is a key priority for Master Drilling. We continue to invest in skills
development across our businesses to ensure a highly skilled and motivated work force to support our growth strategy.
Targeted interventions for management and technical training in general will remain a core focus for the business
during 2018.

As a solution driven company delivering a fully mechanised range of services to clients, we will also continue to invest in
Research and Development as new services, of which the MTB is one, are adopted and mature.

Dividend

Since listing in 2012, the Company has achieved compound annual growth in profit after taxation of 7.5% In USD terms and 
delivered on the key strategic objectives set out in its listing prospectus. This, coupled with significant ongoing cash generation, 
enables the company to strike a balance between continued investment in capital projects to support the company's further growth and 
enhancing returns to shareholders through the payment of appropriate dividends. Thus, the Board has declared a gross dividend
of ZAR26,0 cents per share on 19 March 2018 payable to all shareholders recorded in the company's share register on 18 May 2018.

The dividend is payable from distributable reserves and is subject to dividend withholding tax of 20% which results in a net dividend
of ZAR20,8 cents per share to shareholders subject to such dividend withholding tax. This dividend represents a six times earnings cover. 
Even though the level of cover for the dividend decreased, the dividend is still somewhat more conservative than the earnings cover at which 
our dividend policy is likely to settle over time.

The number of shares in issue at date of declaration amount to 150 592 777 and the company's tax reference number
is 9797/433/15/9.

In order to comply with the requirements of Strate, the following details are relevant:
Last date to trade cum dividend:                                                             Tuesday 15 May 2018
Trading ex dividend commences:                                                             Wednesday 16 May 2018 
Record date:                                                                                  Friday 18 May 2018
Payment date:                                                                                 Monday 21 May 2018 

Shares may not be dematerialised or re-materialised between Wednesday 16 May and Friday 18 May 2018, both
dates inclusive.

OUTLOOK AND PROSPECTS

Diversification across regions, commodities, currencies and industries remains a key part of our long-term strategy. We
are experiencing strong demand with increased enquiries across the various regions and commodities and expect this to
continue.

Engagement with the Industrial Development Corporation of South Africa Limited ("IDC") for the partial funding of the
blind shaft boring system development and roll-out in 2019 has been successfully concluded. Further opportunities to
develop home-grown technologies that support cheaper and simpler drilling systems are also being explored with the IDC.

Various opportunities in first world countries such as Australia, Canada and USA are coming to fruition. A Mexican
based client recently visited our USA project, indicating an interest in implementing a similar service of reverse
circulation in Mexico.

The upswing in the commodity cycle has had a positive impact on our order book with committed orders of
USD124.7 million and a healthy pipeline of USD228.1 million. Although not immediately reflected in our numbers, we
do expect a positive impact on our revenue during the next reporting period.

Our continued focus on working capital management has borne fruit. New geographies, clients and technologies
require large initial outlays and Master Drilling's robust support approach enables optimal operations and maintenance
support that is essential to building trust with clients.

Master Drilling's technology and experience put the company in a strong position to continue to support its clients'
drive to improve productivity and efficiencies whilst reducing operational risk.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                              2017                  2016   
                                                     Note(s)                   USD                   USD   
Assets                                                                                                     
Non-current assets                                                                                         
Property, plant and equipment                              3           119 075 667           105 316 594   
Goodwill                                                   4             3 083 427             3 043 042   
Financial assets                                           5             3 098 512            10 068 354   
Deferred tax asset                                                       2 010 263             1 733 825   
Investment in associate                                    6             6 022 115             6 023 825   
                                                                       133 289 984           126 185 640   
Current assets                                                                                             
Inventories                                                             23 894 609            24 437 264   
Related-party loans                                                        102 641                70 486   
Trade and other receivables                                7            38 191 737            39 014 664   
Cash and cash equivalents                                               40 211 629            21 690 039   
                                                                       102 400 616            85 212 453   
Non-current assets held for sale                           8             1 255 128             1 209 520   
                                                                       103 655 744            86 421 973   
Total assets                                                           236 945 728           212 607 613   
Equity and liabilities                                                                                     
Equity                                                                                                     
Share capital                                                          148 703 721           146 607 965   
Reserves                                                              (83 855 527)          (91 010 256)   
Retained income                                                         88 221 320            74 427 478   
                                                                       153 069 514           130 025 187   
Non-controlling interest                                                 8 255 315            16 291 360   
                                                                       161 324 829           146 316 547   
Liabilities                                                                                                
Non-current liabilities                                                                                    
Interest bearing borrowings                                             36 263 625            17 806 057   
Finance lease obligations                                                1 682 765             1 950 891   
Deferred tax liability                                                   9 189 125             9 266 022   
                                                                        47 135 515            29 022 970   
Current liabilities                                                                                        
Interest bearing borrowings                                              4 659 387             8 650 837   
Finance lease obligations                                                1 444 820             2 579 699
Related party loans                                                        195 483               160 622
Current tax payable                                                      2 098 947             1 561 045   
Trade and other payables                                   9            20 086 747            22 998 427   
Cash and cash equivalents                                                        -             1 317 466   
                                                                        28 485 384            37 268 096   
Total liabilities                                                       75 620 899            66 291 066   
Total equity and liabilities                                           236 945 728           212 607 613   

CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND
OTHER COMPREHENSIVE INCOME
                                                                                     2017           2016   
                                                                   Note(s)            USD            USD   
Revenue                                                                       121 424 109    118 102 983   
Cost of sales                                                                (76 794 271)   (75 159 529)   
Gross profit                                                                   44 629 838     42 943 454   
Other operating income                                                          3 674 987      4 645 115   
Other operating expenses                                                     (23 378 396)   (21 743 714)   
Operating profit                                                               24 926 429     25 844 855   
Investment revenue                                                                510 325        808 845   
Finance costs                                                                 (2 850 878)    (1 940 479)   
Share of profit from equity accounted investment                                 ( 1 710)        556 085   
Profit before taxation                                                         22 584 166     25 269 306   
Taxation                                                                10    (5 134 100)    (2 949 412)   
Profit for the year                                                            17 450 066     22 319 894   
Other comprehensive income that will subsequently be                                                       
classifiable to profit and loss:                                                                           
Exchange differences on translating foreign operations                          7 403 109      6 618 019   
Other comprehensive income/(loss) for the year net of taxation                  7 403 109      6 618 019   
Total comprehensive income                                                     24 853 175     28 937 913   
Profit attributable to:                                                        17 450 066     22 319 894   
Owners of the parent                                                           17 202 923     21 195 750   
Non-controlling interest                                                          247 143      1 124 144   
Total comprehensive income attributable to:                                    24 853 175     28 937 913   
Owners of the parent                                                           24 606 032     27 813 769   
Non-controlling interest                                                          247 143      1 124 144   
Earnings per share (USD)                                                11                                 
Basic earnings per share (cents)                                                     11.5           14.3   
Diluted earnings per share (USD)                                        11                                 
Diluted basic earnings per share (cents)                                             11.4           14.0   
Earnings per share (ZAR)                                                                                   
Basic earnings per share (cents)                                                    153,1          210,0   
Diluted earnings per share (ZAR)                                                                           
Diluted basic earnings per share (cents)                                            151,7          205,6   

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                    Equity due        Foreign  
                                                                     to change       currency   Share-based                                Attributable          Non-           Total
                                                       Share     in control of    translation      payments          Total      Retained   to owners of   controlling   Shareholders'
                                            USD       capital        interests        reserve       reserve       reserves        income     the parent      interest          equity   
Balance as at 31 December 2015                    146 607 965     (58 264 013)   (39 992 078)       372 467   (97 883 624)    53 231 728    101 956 069    16 309 067     118 265 136   
Share-based payments                                        -                -              -       255 349        255 349             -        255 349             -         255 349   
Dividends declared by subsidiaries                          -                -              -             -              -             -              -   (1 141 851)     (1 141 851)   
Total comprehensive income for the year                     -                -      6 618 019             -      6 618 019    21 195 750     27 813 769     1 124 144      28 937 913   
Total changes                                               -                -      6 618 019       255 349      6 873 368    21 195 750     28 069 118      (17 707)      28 051 411   
Balance as at 31 December 2016                    146 607 965     (58 264 013)   (33 374 059)       627 816   (91 010 256)    74 427 478    130 025 187    16 291 360     146 316 547   
Share-based payments                                        -                -              -       290 858        290 858             -        290 858             -         290 858   
Issue of ordinary shares                            2 095 756                -              -     (539 238)      (539 238)             -      1 556 518             -       1 556 518   
Dividends declared by subsidiaries                          -                -              -             -              -             -              -     (306 140)       (306 140)   
Dividends to shareholders                                   -                -              -             -              -   (3 409 081)    (3 409 081)                   (3 409 081)   
Derecognition of non-controlling interest                   -                -              -             -              -             -              -   (7 977 048)     (7 977 048)   
Total comprehensive income for the year                     -                -      7 403 109             -      7 403 109    17 202 923     24 606 032       247 143      24 853 175   
Total changes                                       2 095 756                -      7 403 109     (248 380)      7 154 729    13 793 842     23 044 327   (8 036 045)      15 008 281   
Balance as at 31 December 2017                    148 703 721     (58 264 013)   (25 970 950)       379 436   (83 855 527)    88 221 320    153 069 514     8 255 315     161 324 829   

CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                                     2017           2016   
                                                                   Note(s)            USD            USD   
Cash flows from operating activities                                                                       
Cash generated from operations                                        12.1     32 843 989     26 551 147   
Interest income                                                                   510 325        808 845   
Finance costs                                                                 (2 850 878)    (1 940 479)   
Tax paid                                                                      (5 497 412)    (5 840 274)   
Net cash from operating activities                                             25 006 024     19 579 239   
Cash flows from investing activities                                                                       
Purchase of property, plant and equipment                                    (15 833 126)   (16 364 467)   
Sale of property, plant and equipment                                             170 560      1 060 693   
Financial assets movement                                                         398 460        303 556   
Acquisition of subsidiary                                             12.2              -    (3 894 451)   
Net cash from investing activities                                           (15 264 106)   (18 894 669)   
Cash flows from financing activities                                                                       
Proceeds of financial liabilities                                              20 000 000      8 678 685   
Repayment of financial liabilities                                            (6 574 430)    (9 736 013)   
Proceeds from financial leases                                                    554 741      1 524 268   
Repayment of financial leases                                                 (2 382 326)    (2 891 833)   
Related party loan movement                                                         2 706         84 574   
Issue of share capital                                                          1 556 518              -   
Dividends paid to shareholders                                                (3 409 081)              -   
Dividends paid to BEE partners                                                  (306 140)    (1 141 851)   
Net cash from financing activities                                              9 441 988    (3 482 170)   
Total cash movement for the period                                             19 183 906    (2 797 600)   
Cash at the beginning of the period                                            20 372 573     22 496 770   
Effect of exchange rate movement on cash balances                                 655 150        673 403   
Total cash at end of the period                                                40 211 629     20 372 573   

ABRIDGED AUDITED FINANCIAL RESULTS

NATURE OF BUSINESS

Master Drilling Group Limited is an investment holding company, whose subsidiary companies provide specialised
drilling services to blue chip major and mid-tier companies in the mining, civil engineering, construction and
hydro-electric power sectors, across a number of commodities and geographies.

ACCOUNTING POLICIES

1.    BASIS OF PRESENTATION 

      The abridged audited financial results have been prepared in accordance with IAS 34: Interim Financial Reporting, 
      International Financial Reporting Standards, the SAICA reporting guides as issued by the Accounting Standards 
      Board and the requirements of the South African Companies Act, (Act No 71 of 2008), as amended and the Listings 
      Requirements of the JSE Limited. The audited consolidated annual financial statements have been prepared on the 
      historical cost basis, except certain financial instruments at fair value, and incorporate the principal 
      accounting policies set out below. They are presented in United States Dollar ("USD").

      The significant accounting policies are consistent in all material respects with those applied in the previous
      year, except for the adoption of new standards and amendments which became effective in the current year.

      The audited consolidated financial statements for Master Drilling Group Limited for the period ended 31 December 2017 
      have been audited by Grant Thornton, who expressed an unmodified audit opinion thereon. A copy of the auditor's report 
      on the audited consolidated financial statements are available on www.masterdrilling.com. These abridged audited consolidated 
      financial results were derived from the consolidated annual financial statements.

      The consolidated annual financial statements for Master Drilling Group Limited (Registration
      number 2011/008265/06), for the period ended 31 December 2017, have been audited by Grant
      Thornton, the Company's independent external auditors, whose unqualified audit report can be
      found on pages 6 to 9 of the consolidated annual financial statements 2017, which are available
      on: www.masterdrilling.com.

      The audited consolidated financial statements presented have been prepared by the corporate reporting staff of Master Drilling, 
      headed by Willem Ligthelm CA(SA), the Group's management accountant. This process was supervised by André Jean van Deventer CA(SA), 
      the Group's chief financial officer.

      The auditor's report does not necessarily report on all of the information contained in this abridged audited
      consolidated financial results. Shareholders are therefore advised that in order to obtain a full
      understanding of the nature of the auditor's engagement they should obtain a copy of the auditor's report
      together with the accompanying financial information from the issuer's registered office.

2.    SIGNIFICANT ACCOUNTING POLICIES

      Basis of consolidation

      The Group annual financial statements incorporate all entities which are controlled by the Group.

      At inception the Group annual financial statements had been accounted for under the pooling of interest
      method as acquisition of entities under common control is excluded from IFRS 3. The entities had been
      accounted for at historical carrying values for the period presented.

      Adjustments are made when necessary to the financial statements of subsidiaries to bring their accounting
      policies in line with those of the Group.

      All transactions and balances between Group companies are eliminated on consolidation, including unrealised
      gains and losses on transactions between Group companies. Where unrealised losses on intra-group
      asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group
      perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary
      to ensure consistency with the accounting policies adopted by the Group.

      Control is considered to exist if all of the factors below are satisfied.

      (a) The investor has power over the investee, i.e. the investor has existing rights that give it the ability to direct
          the relevant activities;
      (b) The investor has exposure, or rights to variable returns from its involvement with the investee; and
      (c) The investor has the ability to use its power over the investee to affect the amount of the investors returns.

      The Group assesses its control of an investee at the time of its initial investment and again if changes in facts
      and circumstances affect one or more of the control factors listed above. In assessing whether the Group has
      control over an investee, consideration is given to many factors including shareholding, voting rights and their
      impact on the Group's ability to direct the management, operations and returns of the investee; contractual
      obligations; minority shareholder rights and whether these are protective or substantive in nature; and the
      financial position of the investee.

      Property, plant and equipment

      Property, plant and equipment are initially measured at cost and subsequently at cost less any accumulated
      depreciation and accumulated impairment losses.

      Patents are acquired by the Group and have an infinite useful live. Patents are carried at cost less accumulated
      impairment losses. Amortisation methods, useful lives and residual values are reviewed at each reporting date
      and adjusted if appropriate.

      Costs include costs incurred initially to acquire or construct an item of property, plant and equipment. Cost
      associated with equipment upgrades that result in increased capabilities or performance enhancements of
      property and equipment are capitalised. If a replacement part is recognised in the carrying amount of an item
      of property, plant and equipment, the carrying amount of the replaced part is derecognised.
      
      An asset under construction will be reclassified to the relevant asset category as soon as it is available for use.
      
      The initial estimate of the costs of dismantling and removing the item and restoring the site on which it is
      located is also included in the cost of property, plant and equipment, where the Group is obligated to incur
      such expenditure, and where the obligation arises as a result of acquiring the asset or using it for purposes
      other than the production of inventories.
      
      Investment in associate
      
      The results, assets and liabilities are incorporated in these consolidated annual financial statements using the
      equity method of accounting. An investment in associate is initially recognised in the consolidated statement
      of financial position at cost and adjusted for thereafter to recognise the Group's share of the profit or loss in
      associate and other comprehensive income of the associate.
      
      When a Group entity transacts with an associate of the Group, profits and losses resulting from the
      transactions with the associate are recognised in the Group's consolidated annual financial statements only to
      the extent of interest in the associate that is not related to the Group.
      
      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 consolidated annual
      financial statements are presented in USD (the "presentation currency"). Management believes that USD
      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.
      
      Going concern
      
      Based on the information available to it, the Board of Directors believes that the Group remains
      a going concern.
      
      Issued capital
      
      There was no movement in authorised ordinary shares while 2 327 286 ordinary shares were issued during
      the financial year.
      
      Operating segments
      
      Changes were made to the operating segments from those disclosed at 31 December 2016. The changes
      will enable the chief decision maker, under the direct supervision of the resident boards, to improve the
      assessment of the performances and make better informed decisions on the allocation of resources to
      the different operating segments. The comparative reporting periods were adjusted accordingly as the
      information was available. See note 12 for more details. 
      
      Changes to the board
      
      There were no changes to the Board since 31 December 2016. 
      
      Annual general meeting
      
      The annual general meeting of Master Drilling Group Limited will be held at Grant Thornton, Wanderers
      Office Park, 52 Corlett Drive, Johannesburg, on Thursday, 7 June 2018 at 09:00. 
      
      Subsequent Events
      
      The Board approved a dividend on 19 March 2018 of ZAR26,0 cents per ordinary share payable to all
      shareholders recorded in the register on 18 May 2018. The dividend declared is not reflected in the financial
      statements for the year ended 31 December 2017.
      
      After 31 December 2017 financial year, the Group excercised its option to acquire the remainder of the 60%
      shares in Bergteamet Raiseboring Europe AB to increase its current shareholding to 100%. The purchase of
      the remainder of the shares amounted to SEK69 825 000.

3.    PROPERTY, PLANT AND EQUIPMENT
                                                                         Accumulated
                                                                        depreciation
                                                                                 and
      2017                                                                impairment            Carrying
      USD                                            Cost                     losses               value  
      Land and buildings                        4 267 124                  (124 152)           4 142 972   
      Plant and machinery                     140 270 031               (39 146 361)         101 123 670   
      Assets under construction                   392 338                    (2 567)             389 771   
      Furniture and fittings                    1 461 158                  (382 136)           1 079 022   
      Motor vehicles                            3 434 946                (1 699 685)           1 735 261   
      IT equipment                                743 646                  (444 396)             299 250   
      Finance lease: Plant and equipment       13 414 269                (4 560 949)           8 853 320   
      Computer software                         2 591 229                (1 378 429)           1 212 800   
      Patents                                     239 601                          -             239 601   
      Total                                   166 814 342               (47 738 575)         119 075 667   
                                                                         
                                                                         Accumulated
                                                                        depreciation
                                                                                 and
      2016                                                                impairment            Carrying
      USD                                            Cost                     losses               value
      Land and buildings                        4 003 516                   (80 517)           3 922 999   
      Plant and machinery                     108 189 065               (31 481 087)          76 707 978   
      Assets under construction                 2 398 153                    (2 566)           2 395 587   
      Furniture and fittings                    1 403 341                  (339 278)           1 064 063   
      Motor vehicles                            3 158 777                (1 354 858)           1 803 919   
      IT equipment                                887 221                  (376 563)             510 658   
      Finance lease: Plant and equipment       22 349 043                (4 909 530)          17 439 513   
      Computer software                         2 187 833                  (945 456)           1 242 377   
      Patents                                     229 500                          -             229 500   
      Total                                   144 806 449               (39 489 855)         105 316 594   
      
      Borrowing cost
      
      Included in the cost of land and buildings are capitalised borrowing cost related to the acquisition of land to
      the amount of 2017: USD 64 625 (2016: USD 138 978) calculated at a capitalisation rate of 5,9%.
      
      3.1   Reconciliation of property, plant and equipment
                                                                                 Exchange        Assets
                                                                            difference on      acquired   Reclassifications
                                                                            consolidation       through       and transfers
            2017                                     Opening                   of foreign      business             to/from                              Impairment of               
            USD                                      balance    Additions    subsidiaries   combination           inventory   Disposals   Depreciation    fixed assets         Total   
            Land and buildings                     3 922 999       71 550         186 510             -                   -           -       (38 087)               -     4 142 972   
            Plant and machinery                   76 707 978   13 364 454       4 194 304             -          11 384 687   (150 381)    (4 191 694)       (185 678)   101 123 670   
            Assets under construction              2 395 587    1 719 392           5 548             -         (3 730 756)           -              -               -       389 771   
            Furniture and fittings                 1 064 063       41 214           7 049             -               3 316     (2 089)       (34 531)               -     1 079 022   
            Motor vehicles                         1 803 919      358 472          25 915             -            (14 971)    (75 197)      (362 877)               -     1 735 261   
            IT equipment                             510 658      101 639          11 017             -           (175 477)     (9 895)      (138 692)               -       299 250   
            Finance lease: Plant and equipment    17 439 513      147 415         977 162             -         (8 692 643)           -    (1 018 127)               -     8 853 320   
            Computer software                      1 242 377       18 889          48 265             -             175 793       (180)      (272 344)               -     1 212 800   
            Patents                                  229 500       10 101               -             -                   -           -              -               -       239 601   
                                                 105 316 594   15 833 126       5 455 770             -         (1 050 051)   (237 742)    (6 056 352)       (185 678)   119 075 667 
             
                                                                                  Exchange
                                                                             difference on   Assets acquired
                                                                             consolidation           through
            2016                                     Opening                    of foreign          business   Reclassifications                              Impairment of        
            USD                                      balance    Additions     subsidiaries       combination       and transfers   Disposals   Depreciation    fixed assets         Total   
            Land and buildings                     3 572 664      297 042           90 182                 -                   -           -       (36 889)               -     3 922 999   
            Plant and machinery                   58 950 433   12 271 956        2 743 043         4 840 001           3 417 381   (711 201)    (4 535 247)       (268 388)    76 707 978   
            Assets under construction              5 505 621      695 298            9 148                 -         (3 814 480)           -              -               -     2 395 587   
            Furniture and fittings                   797 036      291 614          106 480             8 046                   -    (68 967)       (70 146)               -     1 064 063   
            Motor vehicles                         1 683 547      509 263         (24 152)            72 350             152 798    (47 477)      (542 410)               -     1 803 919   
            IT equipment                             249 540      187 740           10 805             2 694             172 983     (2 887)      (110 217)               -       510 658   
            Finance lease: Plant and equipment    17 481 071    1 524 268          856 607            42 925         (1 317 090)           -    (1 148 268)               -    17 439 513   
            Computer software                      1 063 054      587 286           76 512                 -                   -           -      (484 475)               -     1 242 377   
            Patents                                  229 500            -                -                 -                   -           -              -               -       229 500   
                                                  89 532 466   16 364 467        3 868 625         4 966 016         (1 388 408)   (830 532)    (6 927 652)       (268 388)   105 316 594 
           
            Security

            Moveable assets to the value of ZAR 1,2 billion (USD 96.9 million at closing spot rate) of the South
            African subsidiaries have been bonded to ABSA Capital as security for an interest bearing loan.

      3.2   Change in Estimate
 
            Drill rods were previously depreciated using an estimated useful life of 30 000 drilling meters, which
            was done based on management's best estimate of the expectancy of the drill rod's useful life.
            The Group conducted a drill rod evaluation review and it was established that some of the rods still
            had reasonable useful life left when the 30 000 drilling meters were reached. Therefore the current
            method doesn't reflect an reasonable useful life of the rods.
 
            It was concluded that the useful life of the rods should rather be estimated using the actual
            measurement of rods rather than the straight line method.
 
            Impairment
 
            During 2017, the Exploration department in our African segment recognised an impairment loss of
            USD185 678. The main elements were a write-down of the idle slim drilling rigs to their value in
            use. The calculation of value in use is most sensitive to mining commodity cycles. The future cash
            flows of the particular drill rigs were negatively affected by the current declining commodity prices
            of our customers, which mainly comprise of mining operations. As a result our customers reduced
            and deferred exploration slim drilling activities.

4.    INTANGIBLE ASSETS
      
                                                                                        2017        2016
                                                                                         USD         USD
      Goodwill recognised from value chain business combinations                   2 612 584   2 612 584   
      Goodwill recognised from raisebore business combinations                       470 843     430 458   
      Goodwill recognised from business combinations                               3 083 427   3 043 042   
       
                                                                                 Drilling
                                       Master Drilling         Raisebore        Technical
                                           Exploration  Rental (Pty) Ltd   Services (Pty)
5.    SUBSIDIARY                             (Pty) Ltd               (*)              Ltd          Total
      BEE Partner                                 Epha            Mosima           Mosima
                                        Drilling (Pty)    Drilling (Pty)   Drilling (Pty)
                                                   Ltd               Ltd              Ltd             
      2017
      USD                                                                                               
      Opening balance                        2 617 462         7 368 303           82 589     10 068 354
      Exchange rate differences
      on translation                           286 905           742 385            9 053      1 038 343
      Preference dividends
      receivable capitalised                   209 324                 -              401        209 725
      Buy-back of financial assets                   -       (7 977 048)                -    (7 977 048)
      Preference dividend received           (107 222)         (133 640)                -      (240 862)
      Closing balance                        3 006 469                 -           92 043      3 098 512

      (*) Previously known as Master Drilling South Africa (Pty) Ltd

      2016
      USD                                                                         
      Opening balance                        2 576 714         6 514 829           67 741      9 159 284
      Exchange rate differences
      on translation                           337 896           865 848            8 883      1 212 627
      Preference dividends
      receivable capitalised                   212 257           525 130            5 965        743 352
      Preference dividends received          (509 405)         (537 504)                -    (1 046 909)
      Closing balance                        2 617 462         7 368 303           82 589     10 068 354

      Variable rate cumulative redeemable preference shares. The variable rate is 72% of the prevailing South
      African prime overdraft rate as published by First National Bank.
 
      Preference shares are redeemable the earlier of 10 years from date of issue or at the election of the holder
      when the BEE company ceases to be wholly-owned by black persons.
 
      The carrying amounts of the investments are considered a reasonable approximation for the fair value.
 
      During 2017, the transaction between Raisebore Rental (Pty) Ltd (previously known as Master Drilling South
      Africa (Pty) Ltd) and Mosima Drilling (Pty) Ltd) was dissolved as the business requirements of Raisebore Rental
      (Pty) Ltd changed. This will result in Mosima (Pty) Ltd not receiving the economic benefits the transaction it
      was initially expected to achieve. The transaction was dissolved at fair value and all adjustments related to this
      transaction have been accounted for in the Group's financial statements.

6.    INVESTMENT IN ASSOCIATE

      On 1 December 2015, the Group purchased a 40% equity interest in Bergteamet Raiseboring Europe AB
      ("Bergteamet") for SEK 46 555 000 (USD 5 333 165). Bergteamet's operations located within Sweden,
      Norway, Finland and Ireland are very similar to that of the Group and will provide the Group with a strategic
      footprint into the European market.

      The Group does not have control of Bergteamet via the call option it has for the remainder of the shares
      in Bergteamet. The call option does not give rise to the substantive control of Bergteamet until such time
      as the Group exercises the call option which expires 31 March 2019 or the put option which expired
      on 31 May 2017. The put option gives the option to put the current 40% owned by the Group back to the
      sellers at the original purchase price thus effectively cancelling the transaction. Management considered the
      valuation of the call and put option. At year end the mark to market valuation did not present a material
      impact on the initial value of the call option.

      The financial year end of Bergteamet is 31 August. This was the reporting date established when that
      company was incorporated, and a change of reporting date is not permitted. For the purpose of applying
      the equity method of accounting, the financial information of Bergteamet have been used. Appropriate
      adjustments were made for fair value adjustments at acquisition, 1 December 2015, differences in accounting
      policies and effects of significant transactions up to 31 December 2017.

      The table below summarises and also reconciles the statement of comprehensive income's financial
      information as at 31 December.
      
                                                                                     2017           2016
                                                                                      USD            USD
      Revenue                                                                   9 873 828     16 011 794
      Profit from continuing operations                                           (4 275)      1 390 213
      Total comprehensive income                                                  (4 275)      1 390 213
      Group's share of total comprehensive income                                 (1 710)        556 085
      Dividends received from associate                                           104 207              -
      
      The table summarises and also reconciles the statement of financial position's financial information as
      at 31 December to the carrying amount of the Group's interest in Bergteamet.
      
                                                                                     2017           2016
                                                                                      USD            USD
      Non-current assets                                                        9 962 208      8 765 242
      Current assets                                                            6 456 978      7 986 687
      Non-current liabilities                                                   4 581 086    (5 134 029)
      Current liabilities                                                       3 614 112    (3 246 175)
      Net assets                                                                8 223 988      8 371 725
      Group's share of net assets                                               3 289 595      3 348 690
      Goodwill                                                                  2 734 230      2 119 050
      Share of profit from equity accounted investment                            (1 710)        556 085
      Investment in Bergteamet                                                  6 022 115      6 023 825
      
7.    TRADE AND OTHER RECEIVABLES
                                                                                       2017         2016
                                                                                        USD          USD
      Trade receivables - Normal                                                 27 333 869   26 789 516   
      Trade receivables - Retention                                               5 021 356    3 098 167   
      Loans to employees                                                             40 636       81 097   
      Pre-payments                                                                1 054 572    1 372 357   
      Deposits                                                                       82 219       46 890   
      Indirect taxes                                                              1 691 851    1 426 352   
      Sundry                                                                      2 967 234    6 200 285   
                                                                                 38 191 737   39 014 664   
      
      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                                          18 330 132   10 981 269   
      1 month past due                                                            6 029 069    6 702 871   
      2 months past due                                                           3 084 459    5 591 572   
      3 months and over past due                                                  5 413 060    6 748 090   
      Allowance for doubtful debts                                                (501 495)    (136 119)   
      Normal and retention trade receivables                                     32 355 225   29 887 683   
      
      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                                                             136 119      636 799   
      Exchange differences on translation of foreign operations                       6 698       58 431   
      Amounts written off                                                                 -            -   
      Allowance for doubtful debts (reversed)/provided for                          358 678    (559 111)   
                                                                                    501 495      136 119   
      
      The carrying amount in USD of trade and other receivables are denominated in the
      following currencies:
      
                                                                                       2017         2016   
                                                                                        USD          USD   
      United States Dollar (USD)                                                 18 223 187   17 591 574   
      South African Rands (ZAR)                                                   6 162 910    7 119 116   
      Brazilian Reals (BRL)                                                       2 943 824    4 455 101   
      Mexican Peso (MXN)                                                            594 427      373 151   
      Chilean Peso (CLP)                                                          7 558 388    7 360 884   
      Peruvian Nuevo Sol (PEN)                                                      630 645    1 289 943   
      CFA Franc BCEAO (XOF)                                                         712 913            -   
      Chinese Yuan Renminbi (CNY)                                                   339 833      440 543   
      Guatemalan Quetzal (GTQ)                                                        3 175            -   
      Zambian Kwacha (ZMW)                                                          351 527            -   
      Colombian Peso (COP)                                                          594 787      217 247   
      Indian Rupee (INR)                                                             43 673            -   
      Austalian Dollar (AUD)                                                         32 448            -   
      Euro (EUR)                                                                          -      167 105   
                                                                                 38 191 737   39 014 664   
      
8.    NON-CURRENT ASSETS HELD FOR SALE

      In September 2016, management committed to a plan to sell the land and building owned in Peru. Master
      Drilling Peru uses the land and building to house its administrative and workshop facilities. Management's
      plan is to develop another piece of land owned in Peru into offices and workshop facilities.

      In the previous financial year's annual financial statements, it was indicated that management expected to 
      finalise the sales transaction during May 2017. Since the release of the previous year's financial statements, 
      the interested buyer at the time decided against finalising the transaction as a better opportunity presented 
      itself that satisfied their requirements. Management still has the intention to sell and is actively marketing 
      the land and buildings. Negotiations to sell the land and buildings are at an advanced stage with a new interested buyer. 
      The sale is expected to be finalised towards the end of the second quarter in 2018.

      The movement in the amount disclosed as non-current asset held for sale relates to foreign exchange
      differences as the property's value is denominated in PEN.

      No impairment losses were recognised in profit and loss as the fair value less costs to sell exceeds the carrying
      amount.

      As at 31 December, the assets held for sale were comprised of the following:
      
                                                                                        2017        2016
                                                                                         USD         USD
      Land and buildings                                                           1 255 128   1 209 520   
      Assets held for sale                                                         1 255 128   1 209 520   
      

9.    TRADE AND OTHER PAYABLES
                                                                                      2017          2016
                                                                                       USD           USD
      Trade payables                                                             7 956 216     9 931 942
      Income received in advance                                                         -       391 683
      Indirect taxes                                                             6 654 506     5 914 578
      Leave pay accruals                                                         2 070 242     1 821 971
      Other accruals                                                             3 405 783     4 938 253
                                                                                20 086 747    22 998 427 
10.   TAXATION
                                                                                     2017           2016
                                                                                      USD            USD
      Current                                                                                           
      Normal taxation                                                           6 040 830      2 293 305
      Current taxation                                                          5 231 760      3 936 680
      Prior year tax over provided                                                809 070    (1 643 375)
      Deferred taxation: Temporary differences                                  (906 730)        656 107
                                                                                5 134 100      2 949 412
      Reconciliation of the tax expense                                                                   
      Accounting profit                                                        22 584 166     25 269 306
      Tax at the applicable tax rate                                            5 502 316      4 592 417
      Prior year tax over provided                                                809 070    (1 643 375)
      Exempt income                                                           (4 371 627)    (2 336 512)
      Non-deductible expenses                                                   2 724 372        571 321
      Deferred taxation: Change in tax rate                                        78 771        187 408
      Assessed loss not recognised                                                741 163      1 729 360
      Assessed loss from prior year                                             (349 965)      (151 207)
      Taxation per statement of comprehensive income                            5 134 100      2 949 412
      The total unrecognised assessed loss at 31 December 2017 is
      USD2 544 768 (2016: USD 4 029 099).                                                                
      Normal taxation charge/(refund) per entity within the Group                                       
      DCP Properties SAC                                                           15 129              -
      Master Drilling Exploration (Pty) Ltd                                       409 833        609 730
      Master Drilling Chile SA                                                    275 577        318 739
      Master Drilling Peru SAC                                                  1 394 792              -
      Master Drilling do Brasil Ltda                                              479 007              -
      Master Drilling Mexico SA                                                         -              -
      Master Drilling Malta Limited                                             1 554 235      1 894 395
      Master Drilling Guatemala SA                                                      -        195 253
      Jiangsu Master Mining Engineering Technology Company Limited                      -         30 126
      Master Drilling RDC SPRL                                                    389 921      (677 929)
      Master Drilling Colombia SAS                                                 80 900        503 304
      Master Drilling Zambia Limited                                            1 232 820      (256 579)
      Master Drilling International Ltd                                             2 988      (655 736)
      Master Drilling Changzhou Co Ltd                                                  -        213 921
      Master Drilling Ecuador SA                                                        -        103 670
      Master Drilling USA LLC                                                           -         14 411
      Drilling Technical Services SAC                                               2 567              -
      Martwick Ltd                                                                     18              -
      Master Drilling Mali SARL                                                   163 884              -
      MD Drilling Services Tanzania SARL                                           39 159              -
                                                                                6 040 830      2 293 305

      Conservative provisions for taxation in some jurisdictions in previous years as well as raising of deferred tax
      assets on historically loss making entities returning to profitability have led to a decrease in taxation expense
      in the previous year. The impact on taxation as a result potential future dividends is impractical to calculate as
      at 31 December.

      The change in tax rate relates to Chile where the tax rate changed from 24,00% to 25,50%.

11.   EARNINGS PER SHARE
                                                                                     2017           2016
                                                                                      USD            USD
      Reconciliation between earnings and headline earnings                                              
      Basic earnings for the year                                              17 450 066     22 319 894
      Deduct:                                                                                            
      Non-controlling interest                                                  (247 143)    (1 124 144)
      Attributable to owners of the parent                                     17 202 923     21 195 750
      (Gain)\Loss on disposal of fixed assets                                      67 183      (230 161)
      Impairment of plant and equipment                                           185 678        268 388
      Tax effect on loss on disposal of fixed assets and impairments             (70 801)       (48 284)
      Headline earnings for the year                                           17 384 983     21 185 693
      Earnings per share (cents)                                                     11.5           14.3
      Diluted earnings per share (cents)                                             11.4           14.0
      Headline earnings per share (cents)                                            11.6           14.3
      Diluted headline earnings per share (cents)                                    11.5           14.0
      Net asset value per share (cents)                                             107.6           98.7
      Tangible net asset value per share (cents)                                    105.6           96.6
      Dividends per share (cents)                                                    30.0              -
      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                                                      149 894 366    148 265 491
      Effect of dilutive potential ordinary shares - employee share options     1 603 877      3 003 793
      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                                     151 498 243    151 269 284
      
12    CASH GENERATED FROM OPERATIONS

      12.1  Cash generated from operations
                                                                                     2017           2016
                                                                                      USD            USD
            Profit before taxation                                             22 584 166     25 269 306
            Adjustments for:                                                                             
            Depreciation and amortisation                                       6 056 352      6 927 652
            Impairment                                                            845 891        268 388
            Share of profit from equity accounted investment                        1 710      (556 085)
            Translation effect of foreign operations                            2 203 374      1 134 652
            Share-based payment - equity settled                                  290 858        255 349
            Share-based payment - liability                                             -      (706 681)
            (Gain)/Loss on sale of assets                                          67 183      (230 161)
            Interest received                                                   (510 325)      (808 845)
            Finance costs                                                       2 850 878      1 940 479 
            Changes in working capital:                                                                  
            Inventories                                                           542 655    (3 529 733)
            Trade and other receivables                                           822 927    (7 479 267)
            Trade and other payables                                          (2 911 680)      4 066 093
                                                                               32 843 989     26 551 147
      12.2  Net cash flow on business combinations

            In January 2016, the Group acquired 100% of the equity instruments of Bergteamet Latin America
            SpA, a Chilean based business, thereby obtaining control. The acquisition was made to further
            expand the Group's presence within Chile.

            The acquisition of Bergteamet Latin America SpA was settled in cash amounting to USD4 000 000. 
            The purchase agreement included an amount of USD432 285 still payable. As part of the
            acquisition, the Group acquired the liability of employee termination costs. The employees were
            terminated as part of the previous shareholder requiring the re-assigning of these employees to
            other operations within its Group. Upon settling the termination costs, the remainder of the
            consideration payable will be settled.

            The assets and liabilities of Bergteamet Latin America were considered to be stated at fair
            value after a proper analysis was performed. This acquisition transaction resulted in goodwill of
            USD430 548 which is primarily related to the expected future profitability.
            
                                                                                      2017          2016
                                                                                       USD           USD
            The fair value of assets and liabilities assumed at date of
            acquisition was:                                                                            
            Assets                                                                                      
            Property, plant and equipment                                                -     4 966 016
            Net Working capital                                                          -     (964 189)
            Trade and other receivables                                                  -       962 575
            Cash and cash equivalents                                                    -       105 549
            Inventory                                                                    -     1 332 552
            Trade and other payables                                                     -   (3 364 865)
            Total assets and liabilities acquired                                        -     4 001 827
            Group's share of total assets and liabilities acquired                       -     4 001 827
            Goodwill at acquisition                                                      -       430 458
            Total consideration                                                          -     4 432 285
            Cash and cash equivalents on hand at acquisition                             -     (105 549)
            Consideration still payable                                                  -     (432 285)
            Net cash outflow on acquisition of subsidiaries                              -     3 894 451
            Profit after tax since acquistion date included in the
            consolidated results for the year                                            -     1 769 112
            Turnover since acquisition date included in the consolidated
            results for the year                                                         -     3 750 069
            Group profit after tax since acquistion date included in the
            results for the year                                                         -    22 319 894
            Group turnover since acquisition date included in the results
            for the year                                                                 -   118 102 983

13.   CAPITAL COMMITMENTS
                                                                                        2017        2016
                                                                                         USD         USD
      Capital expenditure authorised by the directors and contracted for
      within 12 months. Capital expenditure will be funded through cash
      generated from operations.                                                   4 579 527   4 276 175
      
14.   SEGMENT REPORTING

      14.1  Mining activity

            The following table shows the distribution of the Group's combined sales by mining activity,
            regardless of where the goods were produced:
            
                                                                                      2017          2016
                                                                                       USD           USD
            Sales revenue by stage of mining activity                                                      
            Exploration                                                            973 412       695 690   
            Capital                                                              4 339 904    22 792 887   
            Production                                                         116 110 793    94 614 406   
                                                                               121 424 109   118 102 983   
            Gross profit by stage of mining activity                                                       
            Exploration                                                            383 107       297 369   
            Capital                                                                830 043     9 350 969   
            Production                                                          43 416 688    33 295 116   
                                                                                44 629 838    42 943 454   
            
            The chief decision maker of the Group is the chief executive officer. The chief executive officer,
            under the direct supervision of the resident board, manages the activities of the Group concomitant
            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.

      14.2  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.

                                                                                      2017          2016
                                                                                       USD           USD
            Sales revenue by geographical market                                                           
            Africa                                                              54 737 735    49 006 600   
            Central and North America                                           14 619 849    11 064 465   
            Other countries                                                              -             -   
            South America                                                       52 066 525    58 031 918   
                                                                               121 424 109   118 102 983   
            Gross profit by geographical market                                                            
            Africa                                                              24 880 016    21 467 899   
            Central and North America                                            4 547 869     2 011 437   
            Other countries                                                              -     2 131 646   
            South America                                                       15 201 953    17 332 472   
                                                                                44 629 838    42 943 454   

            The gross profit percentages vary based on drilling ground conditions, competition in the markets
            and the mix of in-country and foreign cost.
            
            A customer in the African region, operating in the capital and production segments, accounts
            for 14% (2016: African region 9%) of the Group's revenue.
            
                                                                                       2017         2016
                                                                                        USD          USD
            Depreciation by geographical market                                                            
            Africa                                                                2 813 563    3 594 065   
            Central and North America                                               465 299      374 197   
            Other countries                                                          42 009       43 727   
            South America                                                         2 735 481    2 915 663   
                                                                                  6 056 352    6 927 652   
            
                                                                                       2017         2016
                                                                                        USD          USD
            Investment revenue by geographical market                                                      
            Africa                                                                  261 559      764 121   
            Central and North America                                                   749        1 207   
            Other countries                                                         168 101        3 169   
            South America                                                            79 916       40 348   
                                                                                    510 325      808 845   
            
                                                                                       2017         2016
                                                                                        USD          USD
            Finance cost by geographical market                                                         
            Africa                                                                1 834 711    1 103 886
            Central and North America                                               209 404      167 597
            Other countries                                                         204 635      233 814
            South America                                                           602 128      435 182
                                                                                  2 850 878    1 940 479
            
                                                                                       2017         2016
                                                                                        USD          USD
            Taxation by geographical market                                                             
            Africa                                                                1 334 731      762 444
            Central and North America                                               312 205    (146 543)
            Other countries                                                       2 203 622    1 709 223
            South America                                                         1 283 542      624 288
                                                                                  5 134 100    2 949 412
            
                                                                                       2017         2016
                                                                                        USD          USD
            Total assets by geographical market                                                         
            Africa                                                               95 020 536   88 457 389
            Central and North America                                            24 975 860   24 418 504
            Other countries *                                                    25 208 838   17 392 080
            South America **                                                     91 740 494   82 339 638
            Total assets as per statement of financial position                 236 945 728  212 607 611
            Total liabilities by geographical market                                                    
            Africa                                                               34 438 606   37 032 675
            Central and North America                                             8 457 641   18 306 283
            Other countries                                                       6 535 299    1 082 223
            South America                                                        26 189 353    9 869 885
            Total liabilities as per statement of financial position             75 620 899   66 291 066
            
            *  Assets in Other Countries includes the investment in associate.
            ** Assets in South America includes the non-current asset held for sale. See Note 8

15.   BUSINESS COMBINATION

      After 31 December 2017 financial year, the Group excercised its option to acquire the remainder of the 60%
      shares in Bergteamet Raiseboring Europe AB to increase its current shareholding to 100%. The purchase of
      the remainder of the shares amounted to SEK 69 825 000 (USD 8 532 621 - closing spot rate).

      Due to the recent nature of the acquisition the initial accounting for the acquisition has not been finalised
      as it is impractical in the limited time frame to do so. Management is still in the process of determining all
      identifiable assets and liabilities, therefore, initial accounting for the business combination is incomplete and
      will be finalised during the next financial period.

      Refer to note 6 for more information on the Group's Investment in Associate as at 31 December 2017.

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
Fred George Dixon                              Alternate director
(#) Resident in Peru                            

COMPANY SECRETARY

Andrew Colin 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)
Rosebank Towers, 15 Biermann Avenue,
Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)
South Africa

INVESTOR RELATIONS CONTACTS

Lizelle du Toit
Instinctif Partners
Telephone: +27 11 050 7506
Mobile: +27 82 465 1244
E-mail: MasterDrilling@instinctif.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

20 March 2018



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