Wrap Text
Audited Condensed Annual Financial Statements for the year ended 31 December 2022 and Dividend Declaration
MASTER DRILLING GROUP LIMITED
Registration number: 2011/008265/06
Incorporated in the Republic of South Africa
JSE share code: MDI
ISIN: ZAE000171948 ||| LEI: 37890095B2AFC611E529
AUDITED CONDENSED ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2022 AND DIVIDEND DECLARATION
HIGHLIGHTS FOR THE PERIOD
- USD Revenue increased by 31.7% to USD226.4 million
- USD Earnings per share increased by 7.6% to 14.2 cents
- ZAR Earnings per share increased by 19,0% to 232,5 cents
- USD Headline earnings per share increased by 10.1% to 14.2 cents
- ZAR Headline earnings per share increased by 21,9% to 232,5 cents
- Stable order book of USD265.4 million
- Healthy pipeline of USD567.9 million
- Dividend of ZAR47,5 cents per share declared increased from the ZAR32,5 cents per share from 2021
- Cash generated from operating activities amounted to USD25.0 million
REGULATORY REQUIREMENTS
The contents of the short form announcement are the responsibility of the Board of directors of
Master Drilling. The information in the short-form announcement is a summary of the full
announcement available on Master Drilling's website. 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.
The full announcement can also be accessed online at
https://senspdf.jse.co.za/documents/2023/JSE/ISSE/MDI/FY2022.pdf
The consolidated annual financial statements for Master Drilling Group Limited (Registration
number 2011/008265/06), for the period ended 31 December 2022, have been audited by BDO South
Africa Incorporated, the Company’s independent external auditors, whose unmodified audit report,
including the key audit matters, can be found on pages 6 to 10 of the consolidated annual financial
statements 2022, which are available on: www.masterdrilling.com
The information in this announcement has been extracted from the condensed audited consolidated
annual financial statements as prepared by the corporate reporting staff of Master Drilling, headed
by Willem Ligthelm CA(SA), the Group's financial manager. This process was supervised by Andre
Jean van Deventer CA(SA), the Group's chief financial officer.
DIVIDEND
Since listing in 2012, the Company has delivered on its key strategic objectives, as set out in its listing
prospectus. This, coupled with significant ongoing cash generation, now 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,
in respect of the financial year ended 31 December 2022, the Board on 27 March 2023 declared a
gross dividend of ZAR47,5 cents per share payable to shareholders recorded in the company's share
register on 19 May 2023. This dividend represents a 5 times earnings cover which is in line with the
desired level indicated in its listing prospectus, of a 4 to 5 times earnings cover.
The dividend is payable from distributable reserves and where subject to dividend withholding tax of
20%, a net dividend of ZAR38,00000 cents per share to shareholders will be payable after such
dividend withholding tax.
The number of shares in issue at date of declaration amounts to 151 362 777 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 provided:
Last date to trade cum dividend: Tuesday, 16 May 2023
Trading ex dividend commences: Wednesday, 17 May 2023
Record date: Friday, 19 May 2023
Payment date: Monday, 22 May 2023
Shares may not be dematerialised or re-materialised between Wednesday, 17 May 2023 and Friday
19 May 2023, both dates inclusive.
A dividend of 32,5 cents per share in ZAR terms relating to FY2021 was declared and paid during
June 2022. Any dividend unclaimed after a period of three years from the date on which the same
has been declared to be payable shall be forfeited and revert to the Company.
There are no arrangements under which future dividends are waived or agreed to be waived.
The Company complies with the requirements of the Companies Act in terms of satisfying the
solvency and liquidity test when declaring this dividend.
COMMENTARY
About Master Drilling
Master Drilling was established in 1986 and listed on the Johannesburg Stock Exchange Limited (JSE)
in 2012. The Group delivers innovative drilling technologies and mining solutions. Master Drilling has
built trusted partner relationships with blue-chip and mid-tier clients in the mining, hydro-electric
energy, civil, engineering, as well as construction sectors worldwide. The Company is exposed to
various key commodities that ensure its sustainability. The Master Drilling business model of
providing drilling solutions and mining services to clients through tailor-made designs, coupled with
a flexible support and logistics chain, makes it the preferred partner throughout the lifecycle of
projects.
Commenting on the results for the year ended 31 December 2022, Danie Pretorius, Chief Executive
Officer of Master Drilling, said:
"Master Drilling is grateful to announce that we had a stellar year in 2022. Revenue is up by 32% to a
record high of USD226.4 million and cash generated from the business was USD25.0 million This is
on the back of higher utilisation and investment in new business ventures. We must thank our
clients and business partners for their continued support.
Our continued focus capital discipline has resulted in increased returns.
There was a renewed focus on technology development, and we have seen some of our new
technologies maturing and making an impact on the way mining is conducted. We believe in our
vision of "making a difference" and we are going to stay the course, to make the industry safer,
more productive, and cost-effective.
Apart from our cutting and drilling technologies, we have also invested in asset-light business
ventures in the digital space. Master Drilling has further invested in businesses that provide
proximity detection solutions and integrated data and resource management systems for mining.
These business ventures have contributed to the bottom line and have also opened up new
opportunities for the Group. These actions will ensure that the Group remains relevant and
maintains its standing as a leading innovator.
Master Drilling has been able to leverage its relationships with clients and partners, as well as its
international footprint, to grow the business. The importance of building sound relationships has
provided us with the foundation to offer more turnkey solutions to our clients and has seen the
business metamorphose into a more holistic contractor.
Looking forward, the Company is optimistic about the future. Analysts are referring to a "super-
cycle" in the mining industry that is being driven by the energy transition. We will, however, ensure
that we remain responsible and focus on our cost control, capital allocation and operational
excellence."
Financial Overview
Revenue increased 32% to USD226.4 million and operating profit grew 26% to USD35.1 million.
These figures represent record results, achieved despite uncertain market and operating conditions
experienced globally.
USD earnings per share (EPS) increased 7.6% to 14.2 cents, and ZAR EPS increased 19,0% to
232,5 cents. USD headline earnings per share (HEPS) increased 10.1% to 14.2 cents, and
ZAR HEPS increased 21,9% to 232,5 cents.
Net cash generated from operations amounted to USD25.0 million. Cash resources continue to be
managed carefully to cater for emerging opportunities that require specific design, planning and
investment.
Master Drilling's total capital spend of USD24.4 million was applied as follows: 63% on expansion
and 37% on sustaining the existing fleet.
Debt increased from USD32.1 million to USD46.1 million and the gearing ratio, including cash,
increased from 5.8% to 8.2% in the 2022 fiscal year.
Operational Overview
Globally, Master Drilling's operations experienced a profitable year, demonstrating the benefits of
significant capex investment over the past 10 years.
Safety and response to risk
The Group has an extensive risk management program, and this is made visible through a
collaborative platform. Progress on the implementation of mitigation measures is tracked and
significant business risk is escalated to the executive team and Board. A group of internal auditors
provides assurance that actions are followed through and have the desired effect.
Our Lost Time Injury Frequency Rate for 2022 has been 0,83 indicating a significant improvement
from 1,65 on our path to zero harm. This was achieved in a period where we employed many new
employees which can potentially increase risk. Through a focus on behaviour-based training and
growing a high-performance culture, we have been able to drive compliance with policies and
procedures. Our priority remains to remove people out of harm's way through innovative
engineering solutions.
South America
South America delivered a strong performance despite several political headwinds for miners in the
region.
Brazil's performance for the year was satisfactory. We commenced a flagship shaft project that will
keep one XXL machine busy for most of 2023. We will continue to service our current client base in
the region and focus on efficiencies and further automating our operations. We have also deployed
one remote-operated raise bore machine at one of our client's operations. We are actively looking
for new mining projects and exploring other drilling opportunities.
Chile had its best performing year of the past several years. Contracts with Codelco performed well
and we have seen high levels of utilisation during the year.
The Master Drilling Besalco Consortium is performing well with a record year of production. We
expect to expand the Consortium and obtain more contracts from Codelco and other miners in the
region. We are developing a new-generation blind hole machine to be deployed in Chile during the
next year. These machines are technologically superior to those available through other companies
and we believe they will have a major impact on the market.
In Peru, we were awarded several new contracts in 2022. This is a result of very good operational
performance over the past few years. We have seen strong growth from Peru together with better
profitability. Bigger raise boring equipment has been mobilised to the region to service the need of
our clients for bigger ventilation shafts. We are actively pursuing other opportunities in neighbouring
countries such as Ecuador and Colombia.
Central and North America
The market for raise boring and exploration drilling activities in North America was buoyant in 2022.
Our management team there is already working on tenders for the current year as well as long-term
drilling contracts.
The Canadian contracts are advancing well. During the previous year, we were awarded a new
contract and started mobilising equipment towards the end of last year. The remote locations
present logistical challenges; however, we are well positioned to meet these. We have established a
solid base in Canada and are well positioned to capitalise on increasing opportunities.
We continue with our efforts to secure contractors' licences across each relevant state in the USA.
Doing this will assist in driving our new business pipelines, focusing primarily on mining-rich Nevada
and also Arizona.
Mexico had a fair performance in 2022. For the first time ever, we were able to enter into one of the
biggest mining groups in Mexico. We saw several new contracts being awarded in the latter part of
the year, which is setting the business up for a good start in 2023. Additional machines have been
deployed to projects in satellite countries such as Nicaragua. We continue to work on our
operational efficiencies to reduce overall costs.
The Master Drilling Mexico business in partnership with A&R Engineering and Mining Services and
related companies, a subsidiary of the Group, has delivered its first project in this region.
Africa
Africa remains the key area for the Group, and we are aggressively pursuing further opportunities in
this market.
In Ghana, we are strategically placed to service existing and potential contracts in the Western
African region.
In the DRC, we continued our satisfactory performance with our long-term project. We have a strong
working relationship with the client, with additional opportunities for work on the copper, nickel and
cobalt mines. Further growth opportunities are in the pipeline in this region.
Stable revenue is expected in Mali and the current client is regarded as a strategic partner of Master
Drilling.
We mobilised two additional machines to Sierra Leone towards the end of 2022, to start a new
project at the beginning of 2023, and believe this area will be a long-term contributor.
We mobilised two machines to Tanzania in 2022, and our outlook is positive for this country's
operations.
Zimbabwe's projects concluded at the end of 2022, and we are currently pursuing new opportunities
in this platinum-rich country.
We remain optimistic about opportunities in Zambia and are staying close to the developments in
the country.
In Botswana, we are progressing well with a long-term contract at one of the copper mines.
The South African operations have maintained steady growth. With two XXXL machines busy on
long-term contracts with a key client, the medium-term outlook is very positive.
Master Drilling will continue to support its loyal domestic clients although growth will likely remain
subdued.
We remain committed to further expansion into other African countries that meet our investment
criteria.
Scandinavia
Master Drilling Europe has stabilised well during 2022 and showed decent returns. The flagship TELT
project in Europe has finally started and we are performing on schedule. This project is key to
providing ventilation through four 500m shafts to the high-speed train between France and Italy. We
are expanding our business in Iberia with additional equipment mobilised to the region. Our shaft
construction projects in Stockholm are performing well and we will continue investing in similar
projects. We see great opportunities in the region in the years to come.
India
The Indian operations are performing well, in line with expectations. We will continue to seek
additional projects within India and the surrounding areas.
Other regions
Master Drilling is growing its presence in Australia and Central Asia, with a focus on consolidation in
the marketplace and organic growth.
Growth in Australia was promising for the year. We were fortunate to work for some of the largest
mining houses in the country. We continue to actively market our offering for additional projects in
this region.
We are staying close to emerging mining countries and are confident of further geographical growth
in 2023.
Technology
Technological innovation is a key priority for Master Drilling to support clients to move down the
cost curve, optimise their operations and increase safety.
Given our mining clients' challenges, we have identified three technology focus areas in order to
develop a growth strategy and diversify the business: shaft sinking, tunnelling and non-explosive
mining.
In order to spread our risk and lighten funding requirements, partnered (Master Sinkers) with the
Industrial Development Corporation (IDC) with a view to pursuing a promising business case.
During 2022, Master Sinkers continued to design, manufacture, and assemble the shaft boring system.
Master Sinkers are currently engaging with the market to seek the best possible project to implement
the technology in a phased approach. It is envisaged that the shaft boring machine will be commissioned
H2 2023 during the test sink of a 50m deep shaft in South African hard rock. We are positioning
ourselves as a specialised mining contractor, as opposed to a mainstream one.
During 2022 the application of the Mobile Tunnel Borer for the construction of the Sandsloot
Exploration Decline at Mogalakwena Mine for Anglo American progressed well during which key
performance indicators were met. It is planned to complete the turnkey scope during 2023. The
technology looks very promising while a steep learning curve is being experienced with associated
mining specific interactions. A 2nd generation Mobile Tunnel Borer design is progressing well and
will be completed and considered for further development during 2023. From our experience gained
it has become evident that alternative non-explosive tunnelling technologies would be required for
specific tunnelling application needs not addressed by the Mobile Tunnel Borer, and that will be
considered in future for further development.
Non-explosives mining is still an uncharted area, and we are looking to provide solutions for clients
that are not bound by the requirement of explosives approvals, while at the same time shielding
personnel against hazards by offering the flexibility to operate remotely. We have engaged with four
different clients where we are able to develop these technologies and provide bespoke solutions
that cater to their specific needs. By doing so, we hope to build relationships with these clients in a
phased approach thereby ensuring gradual progress and minimising large exposure or risk. All these
projects are progressing well.
These technologies all relate to providing a safer, higher productivity, cost-competitive and efficient
solution.
Operational equipment
The fleet consists of 140 raise bore, 38 slim drilling and 1 mobile tunnel boring rigs. The total raise
boring fleet utilisation rate was around 77% while the slim drilling fleet utilisation was around 67%.
The rate of new rigs coming on board will settle with a focus on larger units, which typically generate
higher income.
Our people
We believe that a motivated and engaged workforce creates a sustainable, competitive advantage
for our business and benefits society. We are committed to attracting, developing and retaining the
best people, providing a safe working environment for them and creating a winning culture that
embraces their diversity and celebrates their contribution.
As at 31 December 2022, Master Drilling Group, together with its joint ventures, employs a total
of 2 892 employees. This headcount includes the incorporation of Hall Core Holdings (Pty) Ltd
(237) and A&R Engineering and Mining Services (Pty) Ltd and related companies (436) personnel
due to the acquisition of the businesses. There was a total increase in headcount movement
of 709 from the corresponding previous period in 2021.
We continuously drive and strive to embed our RAISE values to ultimately create and foster a culture
where all employees can thrive and grow. It is imperative to improve our working environment to
one where employees feel:
- Respected
- Accountable
- Innovative
- Safe
- Efficient
Human capital strategy
We have recently developed a human capital strategy, which is currently in the implementation
phase. The focus areas are:
- to attract the best people; and
- to create a high-performance culture in which our employees are engaged, motivated and
equipped to support the achievement of our group strategy.
The core elements and objectives of our human capital strategy are:
- a positive and safe working environment that encourages a sense of well-being in our
employees;
- leadership development and creating strong teams;
- growth opportunities that enable our employees to be leaders, and our leaders to grow and
excel;
- rewards for and recognition of outstanding performance and stewardship; and
- succession planning by building junior and middle management talent pipelines.
Creating an ethical culture
The Master Drilling Group's code of ethics is made available and explained to all employees as part
of their induction. Our code of ethics provides employees with information about the core principles
of the Group, including legal compliance, ethical dealings, labour practices, human rights, and
gender and race diversity. We recognise the right of employees to freedom of association,
organisation and collective bargaining. As part of the process of monitoring our ethics, we have an
independent, anonymous whistle-blower hotline. This allows anyone to report illegal or unethical
behaviour, including mismanagement, discrimination, harassment, vandalism, corruption, violence
and theft. The whistle-blower hotline is available to both national and international callers. Hotline
activities are reported to the Social, Ethics and Sustainability Committee, Audit Committee, Risk
Committee and the Board.
The above continues to be a strong focus area as part of our ESG strategic pillar.
The B-BBEE skills development initiatives for the South African entities were once again successfully
co-ordinated and financed via Master Drilling Training Services. The B-BBEE certification for Master
Drilling Exploration was finalised with a Level 1 rating being achieved. Master Drilling South Africa
was also finalised, and an improved Level 3 rating was achieved.
PIPELINE AND COMMITTED ORDERS
As at 31 December 2022 our pipeline totalled USD567.9 million while the committed order book
totalled USD265.4 million for 2023 and beyond.
OUTLOOK AND PROSPECTS
Despite global uncertainty, we are confident that Master Drilling will perform well because of its
long-term contracts, diversified footprint, proactive capital management and service orientation.
The fleet utilisation is now moving towards the required benchmark of 75%. Capital Management
remains a top priority. The Group's diversification across regions, commodities, currencies, and
industries proved to be a key factor in this and will remain a key part of Master Drilling's strategy.
The Group remains committed to ensuring the safety of its people and will continue using innovative
mechanised equipment in its operation. This is also the future of the industry, with an increased
focus on mechanisation and remote operations, which is the space in which Master Drilling likes to
operate and is well placed to compete. Opportunities to diversify outside of the traditional drilling
business into areas such as artificial intelligence will also continue to be pursued.
The pipeline as at 31 December 2022 totalled USD501.1 million, while the committed order book
totalled USD199.6 million for 2023 and beyond. In the short to medium term, the sales pipeline is
expected to stabilise and increase with further tactical acquisitions and joint ventures supporting
performance.
We will continue to invest in our people, and we have started to employ best practice in a number of
areas within human capital that will ensure that we are an employer of choice and attract the best of
the best in the industry.
There is an evolving commitment and enhanced contribution to all matters relating to ESG. This is
not just the right thing to do, it will also support the industry objective and ensure that Master
Drilling remains sustainable into the future.
Master Drilling's technology and experience put the Group in a strong position to continue to
support its clients' drive to improve productivity and efficiencies while reducing operational risk.
Ultimately, our strategic focus remains the same. We want to make a difference in the lives of our
employees and our clients. We challenge the status quo and want to ensure we address the
challenges of safety, cost and productivity in the way we work. Our 2023 focus will be on building a
sustainable, diversified and scalable business through organic and acquisitive growth as well as
formal partnerships and alliances.
NATURE OF BUSINESS
Master Drilling Group Limited through its operating subsidiary companies provides specialised
drilling services to blue-chip major and mid-tier companies in the mining, civil engineering,
infrastructure and hydro-electric energy sectors, across a number of commodities and geographies.
Master Drilling is the global leader in the raise bore drilling services industry.
Any investment decision by investors and/or shareholders should be based on consideration of the
full announcement as available on www.masterdrilling.com. The full announcement is also available
at the Company's registered office (for inspection, at no charge, during office hours on any business day).
For and on behalf of the Board
DC Pretorius AJ van Deventer
Chief Executive Officer Chief Financial Officer
Sponsor
Investec Bank Limited
REGISTERED AND CORPORATE OFFICE
4 Bosman Street
PO Box 902
Fochville, 2515
South Africa
Sandton
28 March 2023
Date: 28-03-2023 07:05:00
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