ADES International Holding Ltd Results for the Year Ended 31 December 2017

ADES International Holding (“ADES” or “the Company”), the London-listed company providing offshore and onshore oil and gas drilling and production services in the Middle East and Africa through its subsidiaries, announces today its full-year results for the year ended 31 December 2017.

FY2017 Headline Figures

Revenue

Adjusted EBITDA1

Normalised Net Profit2

USD 158 million

▲ 18% y-o-y

USD 80 million

▲ 11% y-o-y

USD 50 million

▲31% y-o-y

Number of

Rigs

Av. Fleet Utilisation

in FY20173

Backlog as at 31

December 2017

14 rigs

as at 31 December 2017

78%

>90% since 2012

USD 427 million

Summary Income Statement

(USD ‘000)

2017

2016

% change

Revenues

157,590

134,116

17.5%

        
        
        
      
      
        
          Gross Profit
        
        
        
        
          79,267
        
        
        
        
          70,843
        
        
        
        
          11.9%
        
        
        
      
      
        
          Gross Profit Margin
        
        
        
        
          50.3%
        
        
        
        
          52.8%
        
        
        
        
          -2.5 pts
        
        
        
      
      
        
          

Adjusted EBITDA

[1]
        
        
        
        
          

80,318

72,227

11.2%

        
        
        
      
      
        
          Adj. EBITDA Margin
        
        
        
        
          51.0%
        
        
        
        
          53.9%
        
        
        
        
          -2.9 pts
        
        
        
      
      
        
          

Net Profit

44,574

38,013

17.3%

        
        
        
      
      
        
          Net Profit Margin
        
        
        
        
          28.3%
        
        
        
        
          28.3%
        
        
        
        
          0.0 pts
        
        
        
      
      
        
          

Normalised Net Profit

2

49,637

38,013

30.6%

        
        
        
      
      
        
          Normalised Net Profit Margin
        
        
        
        
          31.5%
        
        
        
        
          28.3%
        
        
        
        
          3.2 pts
        
        
        
      
      
        
          

Earnings per Share (USD)

1.16

1.19

-3.0%

        
        
        
      
      
        
          No. of Shares
        
        
        
        
          

38,553,6204

        
        
        
        
          31,900,000
        
        
        
        
           
        
        
        
      
    
    

Financial Highlights

• Revenue grew 17.5% year-on-year, from USD 134.1 million in 2016 to USD 157.6 million in 2017.
• Gross profit grew 11.9% year-on-year, from USD 70.8 million in 2016 to USD 79.2 million in 2017.
• Adjusted EBITDA recorded USD 80.3 million in FY2017, up 11.2% year-on-year and delivering an adjusted EBITDA margin of 51.0%.
• Net profit rose 17.3% year-on-year to USD 44.6 million in FY2017.
• Normalised net profit excluding the one-time IPO expense in FY2017 stood at 49.7 million.
• Cash balances including cash equivalents stood at USD 137.0 million at 31 December 2017, supported by funds raised at IPO.
• Net debt stood at USD 75.5 million as at 31 December 2017.

Operational Highlights

• Maintained an exemplary safety performance, recording over 4.34 million man hours with a Recordable Injury Frequency Rate (“RIFR”) (per 200,000 working hours) at 0.41, below the IADC worldwide standard rate of 0.56 as at 31 December 2017.
• FY2017 utilisation rate recorded 78%, which takes into account planned recertification and upgrading projects on two offshore rigs in Egypt and two offshore rigs in the KSA during the year. ADES maintained a six-year average utilisation rate of 90%, above the current average Middle East Jack-up utilisation rate of 75%5.
• Total backlog as at 31 December 2017 stood at USD 427 million, compared to USD 501 million as at 31 December 2016.
• New contract awards for Admarine III with General Petroleum Company (GPC), Admarine 88 with Belayim Petroleum Co. (Petrobel), while Admarine VIII was awarded a farm-in agreement with Suez Oil Company (SUCO). Revenues from Admarine 88 and Admarine VIII contracts are expected to commence in the first half of 2018.
• Contract renewals and extensions, including a three-month extension for the Admarine II jack-up barge with the Gulf of Suez Petroleum Company (GUPCO) as well as an extension of GUPCO’s existing contract for ADES’ jack-up rig, Admarine IV, for a further six months. Admarine V was also renewed for a six-month period on a call-out basis with an option to extend the contract for a further six months, while GPC renewed its existing contract for ADES’ Admarine VI jack-up rig for a two-year period.
• Acquisition of three operational jack-up rigs located in the KSA for a total purchase price of USD 83 million – payable in a combination of cash and ADES shares – from a subsidiary of Nabors Industries Ltd (Nabors), subject to the satisfaction of conditions precedent including the novation and renewal of the rigs’ existing drilling contracts with a current major client. Upon completion, the transaction will double ADES’ Arabian Gulf fleet and number of contracted rigs.
• Long-term agreement to establish a joint venture (JV) with a subsidiary of Vantage Drilling International (Vantage), which will see ADES operate Vantage’s deepwater drilling units in Egyptian waters on a bareboat charter agreement basis in line with ADES’ asset-light model and is a natural development of its strategy.
• Finalised exclusive marketing agreements with leading shipyards enabling ADES to market new-build offshore jack-up rigs, including high-specification rigs, that will allow it to deploy these assets on a revenue-sharing basis once contracted, broadening ADES’ service offering and allowing it to penetrate new markets as well as capture a larger market share.

Current Trading and Outlook

• We expect 2018 to deliver continued organic growth from existing operations with realisation of several of the Company’s strategic efforts during 2017, including the commencement of new contracts and securing new tenders across the region. The Nabors acquisitions, once completed, will add to the Company’s revenue and earnings, and as a result of the expected timing of completion, we expect overall Company revenues to be weighted materially towards the second half of the year.
• The Company is committed to putting in place the necessary debt arrangements to secure and support its current operation and future expansion. Further information on debt transactions will be made available to the market once concluded.
• Management is actively evaluating acquisition opportunities that meet ADES’ criteria of being located in the MENA region, within our core line of business and will provide accretive value to shareholders.

Commenting on the full-year performance, Dr. Mohamed Farouk, Chief Executive Officer of ADES International said:

“In our first full-year results following our IPO on the London Stock Exchange in May 2017, ADES has successfully sustained its growth trajectory and delivered a strong operational and financial performance.

Our top-line recorded growth of 18% to USD 158 million was on the back of continued high rig utilisation rates, well above the current average Middle East jack-up utilisation rate of 75%6. This growth was supported by our increasingly diversified revenue mix across geographies.

In addition, ADES’ low-cost business model saw us maintain EBITDA margins in excess of 50% and deliver a net profit growth rate of approximately 17% year-on-year. Most importantly, we continued to set the benchmark for service quality and safety performance, with an RIFR rate of 0.41, well below the IADC worldwide standard rate of 0.56 as at 31 December 2017.

ADES’ continued success is driven by our three-pillar growth strategy of replenishing our backlog; actively participating in tendering activities to expand our footprint and increase market share; and targeting smart and value accretive acquisition opportunities. 2017 saw the Company make significant progress on all three fronts, having been awarded new contracts while securing renewals and extensions for existing contracts; participated in tenders across existing and new markets; and continued to grow our fleet, with the recent signing of a PSA to acquire three operating offshore jack-up rigs in the Arabian Gulf.

In line with our post-IPO growth strategy of scaling-up operations in existing and target markets, ADES will continue to leverage its demonstrated purchasing power and streamlined decision-making process to swiftly act on acquisition opportunities that meet our criteria for delivering long-term sustainable growth. To expand the range of opportunities we are able to consider, the Company is committed to putting in place the necessary debt arrangements to bolster our already strong cash position following the IPO.

We expect 2018 to deliver organic growth from existing operations, with the realisation of several of our strategic efforts during 2017, including the commencement of new contracts and securing new tenders across the region, as well as from the Nabors acquisitions, which once completed, will add to our revenue and earnings.

Given the timing of completion of the Nabors transaction and the resulting contribution of the three rigs to revenues, we expect overall company revenues to be weighted materially towards the second half of the year.”

Conference Call

ADES’ management team will present the FY2017 Results and will be available for a Q&A session with analysts and investors today at 14:00 BST. For conference call details, please email [e-mail]

The full announcement can be viewed here.

1 Adjusted EBITDA - Operating profit for the year before depreciation and amortisation, employee benefit provision and other provisions and impairment of assets under construction2 Normalised Net Profit – Net Profit for the year before the one-time IPO expense of USD 5.1 million during FY20173 Utilisation rate – Extent to which ADES’ assets under contract and available in the operational area are generating revenue throughout the contract, calculated by dividing utilisation days by potential utilisation days4 Based on weighted average number of shares5 Source: Clarksons Research – Offshore Drilling Rig Monthly (February, 2018)6 Source: Clarksons Research – Offshore Drilling Rig Monthly (February, 2018)

View source version on businesswire.com: https://www.businesswire.com/news/home/20180319005587/en/

EnquiriesADES International HoldingHussein BadawyInvestor Relations [e-mail][phone]orInstinctifDavid SimonsonLaura SyrettGeorge [e-mail][phone]