Master Drilling posts record revenue and profit

JSE-listed Master Drilling achieved 31.7% growth in revenue in the full-year to December 2022, taking it to a record high of $226.4 million in US dollar terms, while its operating profit rose 26% to $35.1 million.

The provider of drilling solutions to the mining and construction industries announced its full-year results on Tuesday, attributing its achievement to “higher utilisation, investment in new business ventures and capital discipline”.

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Headline earnings per share (Heps) increased by 19% in rand terms to 232.5 cents (USD Heps increased 10.1% to 14.2 cents).

It declared a dividend of 47.5 cents (in rand terms) for the period, up from the 32.5 cents reported in the prior period.

The period saw significant investment in expansion for the group, with 63% of the total capital spend of $24.4 million dedicated to expansion projects, while the rest went to sustaining Master Drilling’s existing fleet.

“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,” says CEO Danie Pretorius.

“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,” he adds.

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Analyst Keith McLachlan of Integral Asset Management tells Moneyweb that while the company delivered a strong performance, its reporting on cash generation, which came in at $25 million, was slightly displeasing.

“Cash generation was the only weak point and there was just a bit more money tied up in working capital than expected, [also] some slower-paying debtors than expected, but many of those have mainly come through subsequent to the period.

“In terms of revenue [and] the bottom line, they did really well. The order book implies that they will, at least for the near future, continue doing well.”

Concentrating focus

The group, which has a broad presence around the world – operating in the Americas, Africa, Scandinavia and India – told shareholders that it is looking to continue its focus on using innovative mechanised equipment in its future operations.

“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,” Master Drilling noted.

“Opportunities to diversify outside of the traditional drilling business into areas such as artificial intelligence will also continue to be pursued,” it added.

Market moves

The market seemed pleased with the company’s performance, with the share price closing 4.21% stronger on Tuesday at R14.59.

For McLachlan, Master Drilling’s on-day market moves undersell the company’s overall performance. He believes the stock is currently undervalued.

“What’s far more indicative of how they are doing is their income statement, cash flow and their performance over a longer period of time,” he says.

“You can see that they are coming out of the other side of the cycle and doing really well.”

Listen to Master Drilling’s CEO speaking to Fifi Peter about the group’s latest financial performance: