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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Capital Limited | LSE:CAPD | London | Ordinary Share | BMG022411000 | COMM SHS USD0.0001 (DI) |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 5.50 | 5.64% | 103.00 | 101.50 | 103.00 | 102.50 | 98.00 | 98.00 | 108,785 | 16:35:14 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Oil And Gas Field Expl Svcs | 318.42M | 36.74M | 0.1897 | 5.40 | 198.54M |
From Apr 2019 to Apr 2024
TIDMCAPD
RNS Number : 8335H
Capital Drilling Limited
16 March 2018
For Immediate Release 16 March 2018
Capital Drilling Limited
("Capital Drilling", the "Group" or the "Company")
Full Year Results
For the period ended 31 December 2017
Capital Drilling Limited (CAPD:LN), a leading drilling solutions company focused on the African markets, today announces its full year results for the period ended 31 December 2017.
FULL YEAR FINANCIAL RESULTS (UNAUDITED) FOR THE YEARED 31 DECEMBER 2017*
Hot Features
Premium
2017 2016
------------------------------------------------------------- ------------ --------
Average Fleet Size (No. of drill rigs) 93 94
Fleet Utilisation (%) 53 45
ARPOR ($) 194,000 177,000
Capex ($ m) 10.8 12.8
Revenue ($ m) 119.4 93.3
EBITDA(1) ($ m) 24.3 13.1
EBIT(1) ($ m) 11.7 (1.4)
Net Profit (Loss) After Tax ($ m) 5.2 (4.8)
Cash From Operations ($ m) 20.7 9.9
Earnings (loss) per Share
Basic (cents) 3.9 (3.6)
Diluted (cents) 3.8 (3.6)
Final Dividend per Share (cents) 1.2 1.0
Net Asset Value per Share(1) (cents) 51.8 49.5
Return on Capital Employed (%)** 14.3 (2.0)
Return on Total Assets (%)** 11.1 (1.5)
Net Cash(1) ($ m) 4.9 0.6
Net Cash/Equity (%) 7.0 0.9
*All amounts are in USD unless otherwise stated
** Twelve months rolling average
(1) EBITDA, EBIT, Net Asset Value per share and Net Cash are
non-IFRS financial measures, and should not be used in isolation
or as a substitute for Capital Drilling Limited financial results
presented in accordance with IFRS. For definitions and reconciliations
of these measurements to the most directly comparable financial
calculations presented in accordance with IFRS, please refer
'APPIX: GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES'
Financial Overview
-- Revenue up 28% to $119.4 million (2016: $93.3 million) -- EBITDA up 86% to $24.3 million (2016: $13.1 million) -- EBIT of $11.7 million (2016: loss of $1.4 million) -- Net Profit After Tax of $5.2 million (2016: loss of $4.8 million) -- Net Operating Cash Flows up 109% to $20.7 million (2016: $9.9 million) -- Final Dividend of 1.2cps [2016: 1.0cps] to be paid on 18 May 2018 -- Net Cash of $4.9 million (2016: $0.6 million)
Operational and Strategic Review
-- Performed strongly on long-term production contracts: - Acacia Mining's North Mara Gold Mine, Tanzania - AngloGold Ashanti's Geita Gold Mine, Tanzania - Centamin's Sukari Gold Mine, Egypt -- Awarded and commenced two new long terms contracts:
- Kinross Gold's Tasiast Mine, Mauritania: awarded a 3-year Grade Control contract, commenced Q2
- Resolute Mining's Syama Mine, Mali: awarded a 3-year underground drilling contract, commenced Q3
-- Received a two year contract extension at Acacia's North Mara Gold Mine, Tanzania (to December 2019)
-- Awarded numerous exploration contracts over 2017 - Acacia Mining (Tanzania) - Aton Resources (Egypt) - Aura Energy (Mauritania) - Algold (Mauritania) - MRL (Mauritania) - OreCorp Limited (Mauritania) - Resolute Limited (Syama) - Thani Stratex (Egypt) -- Achievement of a number of world class safety milestones, including: - Tanzania (Mwanza) achieved nine years LTI free in January 2017 - Mauritania (Tasiast Project) achieved six years LTI free in February 2017 - Mauritania (Algold Exploration) achieved one year LTI free in April 2017 - Serbia (Cukaru Peki Project) achieved one year LTI free in October 2017 -- Mobilised further rigs to the high growth West African market -- Strong increase in annual rig utilisation from 45% in 2016 to 53% in 2017 -- Strong increase in annual ARPOR, increasing by 10% to US$194,000 monthly revenue per rig
-- Purchased four new rigs, adding to the fleet's deep underground drilling capacity in addition to rig replacements for long term production contracts.
Commenting on the results, Jamie Boyton [Executive Chairman] said:
"Capital Drilling saw a return to profitability in 2017 as the Company continued to drive down costs, extend long-term contracts, as well as secure additional long term contracts in the West Africa market. Capital Drilling has also benefitted from the gradual improvement in market conditions in the mining sector, driving another year of strong revenue growth. Metals prices improved over 2017 and there was a strong increase in capital markets activity, which has translated into increased budgets from mining and exploration companies. The work done in 2016 in preparing and mobilising assets in preparation for the improving sector contributed to an outstanding increase in cash generation and profitability for the Group.
We have entered 2018 in a strong position, despite the ongoing challenges faced by our Tanzanian business. Our continued focus on our industry leading equipment, people and safety standards and our financial strength, provides us with a solid platform to capture opportunities in the year ahead. The addition of another two long-term contracts, with Resolute and Kinross, has further diversified our portfolio of long-term, mine site based contracts, further enhancing this platform. We are excited to be increasing our presence in the key West African market, with further rigs being deployed into our existing markets of Mauritania and Mali, in addition to our recently established presence in Côte d'Ivoire."
For further information, please visit Capital Drilling's website www.capdrill.com or contact:
Capital Drilling Limited +230 464 3250
Jamie Boyton, Executive Chairman investor@capdrill.com
André Koekemoer, Chief Financial Officer
finnCap Ltd +44 20 7220 0500
Christopher Raggett, Corporate Finance
Emily Morris/Simon Johnson, Corporate Broking
Tamesis Partners LLP +44 20 3882 2868
Charlie Bendon
Richard Greenfield
Buchanan +44 20 7466 5000
Bobby Morse capitaldrilling@buchanan.uk.com
Gemma Mostyn-Owen
About Capital Drilling
Capital Drilling provides specialised drilling services to mineral exploration and mining companies in emerging and developing markets, for exploration, development and production stage projects. The Company currently owns and operates a fleet of 93 drilling rigs with established operations in Botswana, Côte d'Ivoire, Egypt, Ethiopia, Kenya, Mali, Mauritania and Tanzania. The Group's corporate headquarters are in Mauritius.
CHAIRMAN'S STATEMENT
Commodities markets continued their positive momentum over 2017, with a broad rally across all metals markets including gold, industrial metals and battery metals. Capital markets activities have been highly supportive with a significant increase in capital raising activities, driving increased budgets for drilling from exploration and mining companies.
These positive operating conditions contributed to the second consecutive year of growth for the Company. Revenue increased 28% to $119.4 million, following a 19% increase in 2016 (US$93.3 million), reflecting improved demand for our services from new and existing customers, across exploration, delineation and mine site contracts.
Improved revenues contributed to a significant improvement in profitability, with the Group reporting a net profit after tax of US$5.2 million compared to 2016 loss of US$4.8 million. While increased revenues provided a strong contribution to the results, the management team's focus on cost management and a reduction in recommissioning and mobilisation expenditure as compared to 2016 were further strong drivers of our margin. This was particularly evident over the year with progressively improving quarterly operating margins, despite the decline in quarterly revenues, which were impacted by reduced activity levels in Tanzania and the conclusion of drilling activity in Serbia.
The materially stronger results, coupled with enhanced discipline around capital expenditure drove an improvement in the Group's balance sheet over the year, with net cash as at 31 December of US$4.9 million, up from US$0.6 million at December 31, 2016, after the payment of $2 million of dividends in 2017 and the $2.9 million strategic investment in A2 Global. The Group's gross debt was maintained at US$12 million.
In line with the Group's solid financial and operating position the Board of Directors have declared a final dividend for the 2017 period of 1.2cps (US$1.6 million), payable on 18 May 2018. This is consistent with 2016 dividends and reflects the stronger profit and balance sheet result, while retaining ample capacity to execute on the Company's strategy into 2018 and beyond.
OPERATIONAL UPDATE
The Group's key revenue metrics of utilization and ARPOR produced mixed results over the year. Fleet utilisation, based on the annual average fleet of 93 rigs (2016: 94 rigs), reduced from 56% in H1 2017 to 49% in H2 2017. This drop in utilization was due to reduced exploration and delineation drilling in Tanzania, driven by changes in the regulatory environment, and Serbia, where drilling concluded in August 2017. ARPOR however improved strongly over 2017, increasing 10% on 2016 to $194,000 per month. This increase was driven by improved contract performance as opposed to rate increases, reflecting a solid performance from our operational teams.
The Group's three long-term production contracts, Geita Gold Mine (AngloGold Ashanti) and North Mara Gold Mine (Acacia) in Tanzania, and Sukari Gold Mine (Centamin) in Egypt, all continued to perform well during 2017.
Pleasingly, Capital Drilling secured two further long-term mining contracts: a three year grade control contract at Tasiast Gold Mine (Kinross) in Mauritania; and a three-year underground contract at Syama Mine (Resolute) in Mali. Capital Drilling has strategically focussed on creating a broader base of long term contracts, targeting large scale, long-life, low cost of production mines which provide the Group with greater visibility on future revenue and earnings for Capital Drilling, together with expansion opportunities in the future.
The Group was also awarded a two year contract extension at the North Mara Gold Mine (Acacia) for existing Blast Hole and Grade Control drilling services.
Capital Drilling's production fleet of blast hole and grade control rigs continued to operate at near full capacity over the year. Throughout 2017, the Company acquired four rigs to support the new contract at the Syama Mine and for rig replacements at the Geita Gold Mine and the Sukari Gold Mine. The Group continues to focus on its disciplined program around rig maintenance and improvements, in addition to retiring older assets, to maintain its industry leading reputation for asset quality.
In 2016, Capital Drilling invested significantly in rig refurbishment and recommissioning in response to improving market conditions, preparing assets for the improving market conditions. As such capital expenditure was marginally lower in 2017 at US$10.8 million, versus US$12.8 million in 2016, despite the substantial year on year increase in revenue.
TANZANIA UPDATE
The Group's mine site production contracts at the Geita Gold Mine and the North Mara Gold Mine have at this stage been largely unaffected by the changes in the regulatory environment. However, legislative developments in Tanzania over 2017 have been well documented and have added uncertainty to the investment environment in the mining industry. This has unfortunately had an impact on investment decisions and is directly impacting activity levels in exploration and delineation drilling, which is likely to continue for the foreseeable future.
As outlined in our January trading statement, progress has been made in 2018 with the publication of new regulations promulgated pursuant to the Tanzanian Mining Act (the "Mining Regulations, 2018"), including, with direct applicability to Capital Drilling, the Mining (Local Content) Regulations 2018 (the "LC Regulations"), which were made available on 16 January 2018. The LC Regulations now provide further guidance and rules on the Mining Act's new local content supply chain provisions. However, as previously stated, there remain areas that are open to interpretation.
Capital Drilling remains engaged with local advisors to better understand the impact on our operations in Tanzania, and we look forward to the creation of the Mining Commission and its Local Content Committee in the near future, which will better position us to gain a clearer understanding of the regulations, with the aim to agree on their parameters and our compliance plans.
SAFETY
The Group has an uncompromising commitment to the safety of its employees and all other stakeholders. It expects visible safety leadership at all levels of the business, from the Executive Leadership Team to crews on site. The Company invests significantly in training programs to ensure its workforce is skilled, competent and can identify and mitigate hazards in the workplace.
This strong safety culture has contributed to the Company achieving several world class safety milestones during 2017 including:
-- Mwanza facilities, Tanzania achieved nine years LTI free in January 2017 -- Tasiast Gold Mine, Mauritania achieved six years LTI free in February 2017 -- Algold Exploration Projects, Mauritania achieved one year LTI free in April 2017 -- Cukaru Peki Project, Serbia achieved one year LTI free in October 2017
Capital Drilling's key benchmark for safety, specifically the AIFR, saw an increase from 0.80 at end of 2016 to 0.92 at end of 2017, due to an increase in medical treatment cases. Man hours worked for the year totalled 2,383,748. Despite the marginal increase, we remain industry leaders in our safety performance.
OUTLOOK
Commodities markets built on their positive momentum over 2017 and this momentum has continued into 2018, spurred by buoyant gold prices, the emergence and growing demand for battery metals and synchronised global industrial production growth driving industrial metal prices to multi year highs. With the current cycle still young, having turned in mid-2016, coupled with the lack of exploration and investment activity during the prolonged cyclical downturn from 2012, we enter the year optimistic from a demand-led environment. Capital markets activities in the opening months of 2018 have been highly encouraging, further supporting the demand environment for drilling services.
Despite the stronger market conditions, we are currently expecting a reduction in revenue in 2018, primarily due to the impact of Tanzanian regulatory developments, which has currently halted new investment in exploration and delineation drilling. These developments within a key market for Capital Drilling, in addition to the conclusion in 2017 of drilling activity in Serbia, necessitated a downgrade to market revenue guidance in January 2018.
To counter the softer demand in our historically key market of Tanzania, the Group has actively redeployed assets into the high growth West African market, and we are currently in the process of doubling our capacity in this region. Facilities have now been established in Côte d'Ivoire with the initial rigs arriving in country in February. Further rigs have also arrived in our current West African locations in Mauritania and Mali, adding to our service offerings. We are confident of securing additional contracts over the course of 2018, offsetting at least in part the anticipated impact of the weaker Tanzanian market.
The Company's long-term contracts, strong balance sheet and ongoing focus on cost discipline across the business places it in a strong position to leverage opportunities presented by favourable industry conditions and Capital Drilling's expansion within the active West African market. Capital Drilling will continue to focus on increasing its operations in West Africa, growing exploration and delineation drilling contracts across Africa and attaining further strategic long-term mining contracts.
I would like to take this opportunity to thank all of our employees, business partners, shareholders, our Board of Directors and other stakeholders for their continued support of our Company.
Jamie Boyton
Executive Chairman
16 March 2018
CHIEF FINANCIAL OFFICER'S REVIEW
Overview
During 2017 revenues increased 28% to US$119 million, the highest since 2012. This uplift in revenue was due to Capital Drilling improving the revenue streams from existing contracts, an extension of contracts that started during 2016 and new contracts, most notably a three year underground contract for Resolute Mining at Syama mine, Mali and a three year Grade Control contract for Kinross at Tasiast mine, Mauritania.
The increased revenues are as a result of Capital Drilling taking advantage of the continued trend of increased capital and equity raisings by junior mining companies, together with expanded brownfield exploration budgets evidenced in 2016.
The ability to benefit from the increased capital in the sector, combined with a continued focus on cost management, resulted in a strong return to profitability with an NPAT US$5.2 million (2016: loss of US$4.8 million).
Although reduced from 2016, capital expenditure continued to support the improving market conditions. 2017 US$10.8 million (2016: US$12.8 million). During the year four new rigs were purchased (two for production drilling, two for underground). 60% of Capex investment related to the acquisition or upgrade of the rig fleet.
Statement of Comprehensive Income
Reported 2017 2016
--------------------
$'m $'m
-------------------- ------ ------
Revenue 119.4 93.3
EBITDA 24.3 13.1
EBITDA (%) 20.4 14.0
EBIT 11.7 (1.4)
PBT 9.7 (1.0)
NPAT 5.2 (4.8)
Basic EPS (cent) 3.9 (3.6)
Diluted EPS (cent) 3.8 (3.6)
Table 1: Statement of Comprehensive Income (Summary)
Revenue increased by 28% to US$119 million (2016: US$93.3 million). Rig utilisation for the year was 53% (2016: 45%) on an average fleet size of 93 (2016: 94). Average revenue per operating rig (ARPOR) improved to $194,000 (2016: $177,000). While the Geita and Sukari production contracts both increased their contributions on the back of increased productivity, contracts in Mali, Mauritania, Kenya and Serbia all showed significant year on year increases, noting that the Serbia contract terminated in August after conclusion of drilling activities. As is evidenced by the increased ARPOR, revenue grew not only by increased utilisation, but also due to a strong focus on operational efficiencies.
The statement of comprehensive income includes an additional US$0.7 million provision raised for the ongoing tax dispute in Tanzania relating to payroll tax for the financial periods 2009 to 2015.
Earnings before interest, tax, depreciation and amortisation ("EBITDA"), amounted to US$24.3 million delivering a margin of 20.4% (2016: US$13.1 million or 14%), with the Group returning to profitability, with a profit after tax for the year of US$5.2 million (2016: loss of US$4.8 million). This represents a 46% increase year on year on EBITDA margins.
Most contract margin results improved due to greater operational focus and performance management, with a more hands-on approach by the Executive Leadership Team in involving and upskilling the project management teams to focus on profitability. The margin improvement was on an escalating trend into Q4 2017, highlighting the changed mindset. At a group level, the management team was streamlined and group overhead costs were reduced. This is a continuing process with further efficiencies expected in 2018.
The earnings per share for the year was 3.9 cents (2016: loss of 3.6 cents). The weighted average number of ordinary shares used in the earnings per share calculation was 135,162,396 (2016: 134,828,877).
Statement of Financial Position
Reported 2017 2016
$'m $'m
------------------------- ------ ------
Non-current assets 44.2 45.8
Current assets 61.4 54.8
Total assets 105.6 100.6
Non-current liabilities 12.0 10.0
Current liabilities 23.5 23.8
Total liabilities 35.5 33.8
Shareholders' equity 70.1 66.8
Table 2: Statement of Financial Position (Summary)
As at 31 December 2017, shareholders' equity increased by 5%. The Group distributed dividends of $2.0 million to the shareholders and recorded a net profit after tax of $5.2 million. Net cash is $4.9 million (2016: $0.6 million). The net profit for the year has further strengthened the Statement of Financial Position.
The total rig fleet size at the end of 2017 was 93 drill rigs (2016: 92). The strategic capital expenditure in 2016 resulted in a reduced requirement in 2017 of $10.8 million (2016: $12.8 million).
Overall property, plant and equipment reduced from $45.1 million in 2016 to $41.4 million in 2017, reflecting depreciation of $12.6 million (2016: $14.5 million), assets disposed of $1.9 million (2016: $2.3 million) and additional capital expenditure of $10.8 million (2016: 12.8 million).
Current assets increased to $61.4 million at 31 December 2017 (2016: $54.8 million). Inventory increased by $2.3 million to $21.7 million (2016: $19.4 million) to support the increased operational activity. Trade receivables increased by $1 million due to the increased revenues. Cash and cash equivalents increased by $4.2 million to $16.9 million (2016: $12.7 million).
Non-current liabilities consisted of a $12 million revolving credit facility ("RCF") provided by Standard Bank (Mauritius) Limited. This facility was renegotiated in 2017 for an additional three years. The Group was fully compliant with all debt covenants throughout the year.
Current liabilities consisted of trade and other payables, $19.7 million (2016: $18.4 million), current portion of long-term liabilities $0.04 million (2016: $2.1 million) and tax liabilities of $3.7 million (2016: $3.3 million). The year-on-year increase for trade and other payables is largely due to the increased business activities. Tax liabilities increased by $0.4 million primarily due to increased activity and Mali and Mauritania.
Reported 2017 2016
$'m $'m
----------------------------------- ------ ------
Opening equity 66.8 76.7
Share based payments 0.2 0.3
Total comprehensive income/(loss) 5.1 (4.8)
Dividends paid (2.0) (5.4)
Closing equity 70.1 66.8
Table 3: Statement of changes in equity (Summary)
Statement of Cash Flows
Reported 2017 2016
$'m $'m
------------------------------------------ ------- -------
Net cash from operating activities 20.7 9.9
Net cash used in investing activities (14.7) (11.6)
Net cash used in financing activities (2.0) 1.6
Net increase (decrease) in cash and cash
equivalents 3.9 (0.1)
Opening cash and cash equivalents 12.7 13.4
Translation of foreign currency cash 0.2 (0.6)
Closing cash and cash equivalents 16.9 12.7
Table 4: Statement of Cash Flows (Summary)
Reported 2017 2016
$'m $'m
---------------------------------------------- ----- ------
Net cash at the beginning of the year 0.6 8.3
Net increase (decrease) in cash and cash
equivalents 3.9 (0.1)
Decrease (Increase) in long term liabilities 0.0 (7.0)
Translation of foreign currency cash 0.2 (0.6)
Net cash at the end of the year 4.9 0.6
Table 5: Reconciliation of net cash (debt) position
Net cash generated from operating activities was $20.7 million (2016: $9.9 million) with the operating cash margin significantly higher than 2016. The EBITDA result was $24.3 million (2016: $13.1 million).
The increase in activity throughout the year significantly improved cash from operating activities, up $10.8 million. Investing activities increased for the year, with $2.9 million spent acquiring a 50% share in A2 Global Ventures, a Laboratory Sampling company that will enable Capital Drilling to increase its downstream value proposition in a growing market segment.
The capital expenditure decrease of $2.0 million in 2017 followed on the $4.9 million increase in 2016, driven by the Group's strategy of maintaining fleet operational readiness, which is expected to deliver long term growth benefits.
Financing activities were limited to the dividend declaration of $2.0 million, with no movement on the long-term liabilities.
The group reported a net cash position of $4.9 million at 31 December 2017. The increased net cash is attributed to the improved revenues for the year.
Critical Accounting Policies
The Financial Statements have been prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board. The principal accounting standards are set out in the Group's financial statements.
The Financial Statements have been prepared on the historical cost basis and are presented in US dollars, given the Group's transactions are primarily denominated in US dollars.
Property, Plant and Equipment
The Group depreciates all fixed assets over their estimated useful lives, less any pre-agreed salvage value. The carrying value of fixed assets are reviewed annually or more frequently if a triggering event occurs.
Principal Risks and Uncertainties
The Group operates in environments that pose various risks and uncertainties. Aside from the generic risks that face all businesses, the Group's business, financial condition or results of operations could be materially and adversely affected by any of the risks described below.
These risks should not be regarded as a complete and comprehensive statement of all potential risks and uncertainties nor are they listed in order of magnitude or probability. Additional risks and uncertainties that are not presently known to the Directors, or which they currently deem immaterial, may also have an adverse effect on the Group's operating results, financial condition and prospects.
The principal risks associated with the business are:
Area Description Mitigation
---------------------- ----------------------------------- ----------------------------------
Fluctuation The Group is highly dependent The Group is seeking
in levels of on the levels of mineral to balance these risks
mining activity exploration, development by building a portfolio
and production activity of long term drilling
within the markets in which contracts and expanding
it operates. A reduction into new geographic areas
in exploration, development and the implementation
and production activities, of its Lean Operating
or in the budgeted expenditure Model.
of mining and mineral exploration
companies, will cause a
decline in the demand for
drilling rigs and drilling
services, as was evident
in the 2014 and 2015 financial
years.
---------------------- ----------------------------------- ----------------------------------
Reliance on The Group's revenue is The Group has entered
key customers reliant on a small number into long term contracts
of key customers. A loss with its key customers
of a key customer, or a for periods between 2
significant reduction in to 5 years. Contract
the demand for drilling renewal negotiations
provided to a key customer are initiated well in
will have a significant advance of expiry of
adverse effect on the Group's contracts to ensure contract
revenues. renewals are concluded
without interruption
to drilling services.
The Group has and continues
to monitor projects closely
and invest a significant
amount of time into client
relationship and service
level monitoring at all
levels of the business.
A key part of this process
is the quarterly project
steering committee meetings
with key client stakeholders
that provide a forum
for monitoring and reporting
on project performance
and performance indicators,
contractual issues, pricing
and renewal.
---------------------- ----------------------------------- ----------------------------------
Key personnel The Group's ability to The Group has expanded
and staff retention implement a strategy of capabilities in the areas
pursuing expansion opportunities of business development,
is dependent on the efforts supply chain, finance,
and abilities of its executive training and health and
directors and senior managers. safety and continues
In addition, the Group's to do so through the
operations depend, in part, recruiting of senior
upon the continued services managers in the various
of certain key employees. fields, implementing
If the Group loses the comprehensive training
services of any of its programmes and providing
existing key personnel employees with international
without timely and suitable exposure in their fields.
replacements, or is unable
to attract and retain new The Group has implemented
personnel with suitable remuneration policies
experience as it grows, that seeks to recruit
the Group's business, financial suitable talent and to
condition, results of operations remunerate talent at
and prospects may be materially levels commensurate with
and adversely affected. market levels.
In addition, business may
be lost to competitors
which members of senior
management may join after
leaving their positions
with the Group.
---------------------- ----------------------------------- ----------------------------------
Operating risks Operations are subject The Executive Chairman
to various risks associated and Executive Leadership
with drilling including, Team and managers provide
in the case of employees, leadership to projects
personal injury, malaria on the management of
and loss of life and, in these risks and actively
the Group's case, damage engage with all levels
and destruction to property of employees. The Group
and equipment, release have implemented and
of hazardous substances continue to monitor and
in to the environment and update a range of health
interruption or suspension and safety policies and
of drill site operations procedures. including
due to unsafe drill operations. equipment standards and
The occurrence of any of standard work procedures.
these events could adversely Employees are provided
impact the Group's business, with training regarding
financial condition, results risks associated with
of operations and prospects, their employment, policies
lead to legal proceedings and standard work procedures.
and damage the Group's
reputation. In particular, Health and Safety statistics
clients are placing an and incident reports
increasing focus on occupational are monitored throughout
health and safety, and our projects and the
deterioration in the Group's various management structures
safety record may result of the Group, including
in the loss of key clients. the HSSE committee. Where
necessary policies and
procedures are update
to reflect developments
and improvement needs.
The Group maintains
adequate insurance policies
to provide insurance
cover against operating
risks.
---------------------- ----------------------------------- ----------------------------------
Currency fluctuations The Group receives the To minimise the Group's
majority of its revenues risk, the Group tries
in US dollars. However, to match the currency
some of the Group's costs of operating costs with
are in other currencies the currency of revenue.
in the jurisdictions in Funds are pooled centrally
which it operates. Foreign in the head office bank
currency fluctuations and accounts to the maximum
exchange rate risks between extent possible. The
the value of the US dollar group have implemented
and the value of other procedures to allow for
currencies may increase the repatriation of funds
the cost of the Group's to the Group's Head Office
operations and could adversely bank accounts from jurisdictions
affect the financial results. where exchange control
As a result, the Group regulations are in effect.
is exposed to currency
fluctuations and exchange
rate risks.
---------------------- ----------------------------------- ----------------------------------
Political, The Group operates in a The Group has invested
economic and number of jurisdictions in a number of countries
legislative where the political, economic thereby diversifying
risk and legal systems are less exposure to any single
predictable than in countries jurisdiction.
with more developed industrial
structures. Significant The Group monitors political
changes in the political, and regulatory developments
economic or legal landscape in the jurisdictions
in such countries may have it operates in through
a material effect on the a number of service providers
Group's operations in those and advisors.
countries. Potential impacts
include restrictions on Senior management regularly
the export of currency, reports to the Board
expropriation of assets, on any political or regulatory
imposition of royalties changes in the jurisdictions
or other taxes targeted we operate in.
at mining companies, and
requirements for local Where significant events
ownership. Political instability occur, we work closely
can also result in civil with our clients, advisors
unrest, industrial action and other stakeholders
and nullification of existing to address these events.
agreements, mining permits
or leases. Any of these The Group has also increased
may adversely affect the their international tax
Group's operations or results capabilities, by the
of those operations. appointment of an International
Tax Manager to ensure
and monitor compliance
with local legislation.
---------------------- ----------------------------------- ----------------------------------
Viability Statement
The activities of the Group, together with the factors likely to affect its future development, performance, the financial position of the Group, its cash flows, liquidity position and borrowing facilities are described in the pages 15 to 29. The Directors have carried out a robust assessment of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity. These risks and the ways they are being managed and mitigated by a wide range of actions are summarised on pages 10 to 13.
Taking account of the Group's position and principal risks, the Directors assessed the prospects of the Group by reviewing and discussing the annual forecast, the three-year strategic plan and the Group risk framework. Throughout the year the Directors review and discuss the potential impact of each principal risk as well as the risk impact of any major events or transactions. A three-year period is considered appropriate for this assessment because:
-- It is the period covered by the strategic plan; and
-- It enables a high level of confidence, even in extreme adverse events, due to a number of factors such as:
- The Group has considerable financial resources together with established business relationships with major, mid-tier and junior mining houses and suppliers in countries throughout the world
- High cash generation by the Group's operations - Low level of gearing and availability of unutilised facilities with the Group's bankers - Flexibility of cash outflows including capital expenditure and dividend payments - The Group's long term contracts, and equipment availability and diverse geographic operations
Based on the results of this analysis, the Directors believe that the Group is well placed to manage its business risks successfully as the market conditions continue to improve. The Directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment.
Cautionary Statement
This Business Review, which comprises the Chairman's Statement and Chief Financial Officer's Review, has been prepared solely to provide additional information to shareholders to assess the Group's strategies and the potential for those strategies to succeed.
The Business Review contains certain forward-looking statements. These statements are made by the directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.
By order of the Board
André Koekemoer
Chief Financial Officer
16 March 2018
Financial Results
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2017
CONSOLIDATED
Notes 2017 2016
$ $
Unaudited Audited
-------------------- -------------------------
Revenue 119,447,366 93,340,025
Cost of sales (80,180,448) (67,032,132)
-------------------- -------------------------
Gross profit 39,266,918 26,307,893
Administration expenses (14,939,639) (13,265,824)
Depreciation (12,586,369) (14,492,161)
-------------------- -------------------------
Profit (loss) from operations 11,740,910 (1,450,092)
Share of losses from associate (601,816) (57,290)
Interest income 199,630 94,169
Finance charges (1,192,002) (772,793)
Realised (loss) gain on available-for-sale
shares (99,435) 797,315
Fair value adjustment on financial
assets through profit and loss
- Share Options (358,657) 405,893
-------------------- -------------------------
Profit (loss) before tax 9,688,630 (982,798)
Taxation (4,475,578) (3,865,483)
-------------------- -------------------------
Profit (loss) for the year 5,213,052 (4,848,281)
-------------------- -------------------------
Other comprehensive income
(loss) :
Other comprehensive income (loss) to be reclassified to
profit or loss in subsequent periods
Exchange differences on translation
of foreign operations 38,454 35,665
Share of exchange differences
on translation of foreign operations
from associate (18,510) (38,454)
Net (loss) gain on revaluation
of available for sale investments
(net of taxation) (262,944) 877,785
Cumulative gain (loss) reclassified
to profit and loss (net of taxation) 99,435 (797,315)
-------------------- -------------------------
Total other comprehensive (loss)
income for the year (143,565) 77,681
==================== =========================
Total comprehensive income (loss)
for the year 5,069,487 (4,770,600)
-------------------- -------------------------
Earnings (Loss) per share:
Basic (cents per share) 5 3.9 (3.6)
-------------------- -------------------------
Diluted (cents per share) 5 3.8 (3.6)
==================== =========================
CONDENSED STATEMENT OF FINANCIAL POSITION
As at 31 December 2017
CONSOLIDATED
Notes 2017 2016
$ $
Unaudited Audited
ASSETS
Non-current assets
Property, plant and equipment 7 41,405,764 45,129,741
Investment in associates 2,750,295 467,933
Deferred tax assets 7,297 205,706
--------------------- -----------------------
Total non-current assets 44,163,356 45,803,380
--------------------- -----------------------
Current assets
Inventory 21,691,569 19,361,181
Trade and other receivables 16,554,256 15,591,138
Prepaid expenses and other
assets 2,863,167 5,240,278
Investments 3,260,331 1,316,243
Taxation 136,590 549,435
Cash and cash equivalents 16,911,383 12,728,555
--------------------- -----------------------
Total current assets 61,417,296 54,786,830
--------------------- -----------------------
Total assets 105,580,652 100,590,210
===================== =======================
EQUITY AND LIABILITIES
Equity
Share capital 8 13,524 13,490
Share premium 8 21,933,772 21,697,470
Equity-settled employee benefits
reserve 432,476 441,883
Investments revaluation reserve (126,589) 36,920
Foreign currency translation
reserve (18,510) (38,454)
Retained earnings 47,823,617 44,639,236
--------------------- -----------------------
Total equity 70,058,290 66,790,545
--------------------- -----------------------
Non-current liabilities
Long-term liabilities 9 12,000,000 10,000,000
--------------------- -----------------------
Total non-current liabilities 12,000,000 10,000,000
--------------------- -----------------------
Current liabilities
Trade and other payables 19,731,133 18,364,357
Taxation 3,749,644 3,340,183
Current portion of long-term
liabilities 41,585 2,095,125
--------------------- -----------------------
Total current liabilities 23,522,362 23,799,665
--------------------- -----------------------
Total equity and liabilities 105,580,652 100,590,210
===================== =======================
CONDENSED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2017
Equity
settled
employee Foreign
bene Investments currency
Share Share ts revaluation translation Retained
Notes capital premium reserve reserve reserve earnings Total
$ $ $ $ $ $ $
---------------------- ------ ---------------------- ---------------------- ---------------------- ---------------------- ------ ---------------------- ----------------------
CONSOLIDATED
Balance
at 31 December
2015 (Audited) 13,460 21,566,856 282,075 (43,550) (35,665) 54,883,674 76,666,850
Issue of
shares 30 130,614 (130,644) - - - -
Recognition
of share-based
payments - - 290,452 - - - 290,452
Total comprehensive
loss for
the year - - - 80,470 (2,789) (4,848,281) (4,770,600)
---------------------- ------ ---------------------- ---------------------- ---------------------- ---------------------- ------ ---------------------- ----------------------
Loss
for
the
year - - - - - (4,848,281) (4,848,281)
Other comprehensive
loss for the
year, net of
tax - - - 80,470 (2,789) - 77,681
---------------------- ------ ---------------------- ---------------------- ---------------------- ---------------------- ------ ---------------------- ----------------------
Dividends
paid - - - - - (5,396,157) (5,396,157)
---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Balance
at 31 December
2016 (Audited) 13,490 21,697,470 441,883 36,920 (38,454) 44,639,236 66,790,545
Issue of
shares 34 236,302 (236,336) - - - -
Recognition
of share-based
payments - - 226,929 - - - 226,929
Total comprehensive
income
for the
year - - - (163,509) 19,944 5,213,052 5,069,487
---------------------- ------ ---------------------- ---------------------- ---------------------- ---------------------- ------ ---------------------- ----------------------
Profit
for
the
year - - - - - 5,213,052 5,213,052
Other comprehensive
loss (income)
for the year,
net of tax - - - (163,509) 19,944 - (143,565)
---------------------- ------ ---------------------- ---------------------- ---------------------- ---------------------- ------ ---------------------- ----------------------
Dividends
paid 6 - - - - - (2,028,671) (2,028,671)
---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- ----------------------
Balance
at 31
December
2017
(Unaudited) 13,524 21,933,772 432,476 (126,589) (18,510) 47,823,617 70,058,290
---------------------- -------------------------- ---------------------- ---------------------- ---------------------- -------------------------- --------------------------
CONDENSED STATEMENT OF CASH FLOWS
For the year ended 31 December
2017
CONSOLIDATED
Notes 2017 2016
$ $
Unaudited Audited
---------------- -----------------------
Operating activities:
Cash generated from operations 10 25,184,253 12,442,477
Interest received 199,630 94,169
Finance charges paid (1,245,542) (773,669)
Taxation paid (3,454,863) (1,882,335)
---------------- -----------------------
Net cash generated from operating activities 20,683,478 9,880,642
---------------- -----------------------
Investing activities:
Purchase of property, plant and
equipment 7 (10,786,507) (12,772,084)
Purchase of investments (2,565,689) 189,467
Purchase of Investment in associate (2,902,688) -
Proceeds from disposal of property,
plant and equipment 1,539,665 1,011,583
---------------- -----------------------
Net cash (used in) investing activities (14,715,219) (11,571,034)
---------------- -----------------------
Financing activities:
Proceeds from long-term liabilities/loans 9 6,500,000 14,000,000
Long-term liabilities repaid 9 (6,500,000) (7,000,000)
Dividend paid 6 (2,028,671) (5,396,157)
---------------- -----------------------
Net cash (used in) from nancing
activities (2,028,671) 1,603,843
---------------- -----------------------
Net increase (decrease) in cash
and
cash equivalents 3,939,588 (86,549)
Cash and cash equivalents at the
beginning of the year 12,728,555 13,369,091
Translation of foreign currency
cash
and cash equivalent adjustment 243,240 (553,987)
---------------- -----------------------
Cash and cash equivalents at the
end of the year 16,911,383 12,728,555
---------------- -----------------------
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2017
1. Basis of preparation
The unaudited preliminary condensed consolidated financial
statements are prepared on the going concern basis under
the historical cost convention, except for certain financial
instruments which are measured at fair value.
The unaudited condensed consolidated financial statements
included in this preliminary announcement has been prepared
in accordance with the measurement and recognition criteria
of International Financial Reporting Standards ("IFRS")
as issued by the International Accounting Standards Board
("IASB"). Whilst the financial information included in this
preliminary announcement has been prepared in accordance
with IFRS, this announcement does not itself contain sufficient
information to comply with the disclosure requirements of
IFRS. The Group's 2017 Annual Consolidated Financial Statements
will be prepared in accordance with IFRS. The unaudited
preliminary announcement does not constitute a dissemination
of the annual financial reports. A separate dissemination
announcement in accordance with Disclosure and Transparency
Rules (DTR) 6.3 will be made when the Annual Report and
audited consolidated Financial Statements are available
on the Company's website.
The accounting policies are in terms of IFRS and consistent
with those of the prior year.
The financial information for the years ended 31 December
2017 and 2016 does not constitute the annual financial statements.
The annual consolidated financial statements for the year
ended 31 December 2016 were completed and received an unmodified
audit report from the Company's Auditors. The Annual Report
and Annual Consolidated Financial Statements for the year
ended 31 December 2017 will be finalised on the basis of
the financial information presented by the Directors in
this unaudited preliminary announcement. The audit report
on the full set of consolidated financial statements for
the year ended 31 December 2017 has not yet been issued.
2. Operations during the year
During the year ended 31 December 2017, the Group provided
drilling services in Botswana, Egypt, Mauritania, Mali,
Kenya, Tanzania and Serbia. The Group's administrative office
is located in Mauritius.
3. Segment analysis
Operating segments are identified on the basis of internal
management reports regarding components of the Group. These
are regularly reviewed by the Chairman in order to allocate
resources to the segments and to assess their performance.
Operating segments are identified based on the regions of
operations. For the purposes of the segmental report, the
information on the operating segments have been aggregated
into the principal regions of operations of the Group. The
Group's reportable segments under IFRS 8 are therefore:
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2017
3. Segment analysis (continued)
-- Africa: Derives revenue from the provision of drilling
services, equipment rental and IT support services.
-- Rest of Derives revenue from the provision of drilling
world: services, equipment rental and IT support services.
The following is an analysis of the Group's revenue and results
by reportable segment:
Rest of
Africa world Consolidated
$ $ $
--------------- ---------------- -------------------
2017 Unaudited
External revenue 109,438,811 10,008,555 119,447,366
=============== ================ ===================
Segment profit
(loss) 20,443,313 (4,230,092) 16,213,221
=============== ================
Central
administration
costs
and depreciation (4,472,311)
-------------------
Profit from
operations 11,740,910
Interest income 199,630
Share of losses from
associate (601,816)
Finance charges (1,192,002)
Net loss on
financial assets
at fair value
through profit
and loss (458,092)
-------------------
Profit before tax 9,688,630
===================
The total revenue of $109.4 million from the Africa segment
includes $84.3 million (2016: $73.3 million) from customers
that represent more than 10% of the Group's revenue.
2016 Audited
External revenue 90,341,048 2,998,977 93,340,025
=============== ================ ===================
Segment profit
(loss) 8,852,408 (9,107,110) (254,702)
Central
administration
costs
and depreciation (1,195,390)
-------------------
Loss from operations (1,450,092)
Interest income 94,169
Share of losses from
associate (57,290)
Finance charges (772,793)
Net gain on
financial assets
at fair value
through profit
and loss 1,203,208
-------------------
Loss before tax (982,798)
===================
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December
2017
CONSOLIDATED
2017 2016
$ $
Unaudited Audited
------------------- ---------------------
3. Segment analysis (continued)
Segment assets and liabilities:
The following is an analysis of the Group's assets and liabilities
by reportable segment:
Segment assets:
Africa 156,825,920 129,798,346
Rest of world 16,630,783 27,346,447
------------------- ---------------------
Total segment assets 173,456,703 157,144,793
Head office companies 41,030,351 34,726,134
------------------- ---------------------
214,487,054 191,870,927
Eliminations (108,906,402) (91,280,718)
------------------- ---------------------
Total Assets 105,580,652 100,590,209
=================== =====================
Segment liabilities:
Africa 38,977,584 28,342,176
Rest of world 11,588,762 20,235,544
------------------- ---------------------
Total segment assets 50,566,346 48,577,720
Head office companies 92,278,111 75,041,287
------------------- ---------------------
142,844,457 123,619,007
Eliminations (107,322,095) (89,819,342)
------------------- ---------------------
Total Liabilities 35,522,362 33,799,665
=================== =====================
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2017
4. Taxation
Capital Drilling Limited is incorporated in Bermuda. No
taxation is payable on the results of the Bermuda business.
Taxation for other jurisdictions is calculated in terms
of the legislation and rates prevailing in the respective
jurisdictions.
The Group operates in multiple jurisdictions with complex
legal and tax regulatory environments. In certain of these
jurisdictions, the Group has taken income tax positions
that management believes are supportable and are intended
to withstand challenge by tax authorities. Some of these
positions are inherently uncertain and relates to the interpretation
of income tax laws. The Group periodically reassesses its
tax positions. Changes to the financial statement recognition,
measurement, and disclosure of tax positions is based on
management's best judgment given any changes in the facts,
circumstances, information available and applicable tax
laws. Considering all available information and the history
of resolving income tax uncertainties, the Group believes
that the ultimate resolution of such matters will not likely
have a material effect on the Group's financial position,
statements of operations or cash flows.
Refer to Note 13 (Contingencies) for more detail on Tanzania
and Zambia and to Note 14 (Events post the reporting date)
regarding Tanzania.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31
December
2017
CONSOLIDATED
2017 2016
$ $
Unaudited Audited
--------------------- --------------
Earnings (Loss) per
5. share
Basic earnings (loss) per share
The earnings or (losses) and weighted
average number of ordinary shares used
in the calculation of basic earnings
(loss)
per share are as follows:
Earnings (Loss) for the year, used in
the calculation of basic earnings
(loss)
per share 5,213,052 (4,848,281)
==================== ==============
Weighted average number of ordinary
shares
for the purposes of basic earnings
per
share 135,162,396 134,828,877
==================== ==============
Basic earnings (loss) per share
(cents) 3.9 (3.6)
==================== ==============
Diluted earnings (loss) per share
The earnings or losses used in the
calculations
of all diluted earnings (loss) per
share
measures are the same as those used in
the equivalent basic earnings (loss)
per
share measures, as outlined above.
Weighted average number of ordinary
shares
used in the calculation of basic
earnings
(loss) per share 135,162,396 134,828,877
Shares deemed to be issued for no
consideration
in respect of:
- Dilutive share options (#) 402,485 296,834
-------------------- --------------
Weighted average number of ordinary
shares
used in the calculation of diluted
loss
per share 135,564,881 135,125,711
==================== ==============
Diluted earnings (loss) per share
(cents) 3.8 (3.6)
==================== ==============
(#) For the purposes of calculating diluted earnings per share,
the share options of 2.34 million were excluded as they are
anti-dilutive as the exercise price is higher than the current
share price.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December
2017
CONSOLIDATED
2017 2016
$ $
Unaudited Audited
-------------------- --- ----------------
6. Dividends
Dividends paid:
Final dividend in respect of the year 2,028,671 5,396,157
-------------------- ----------------
Total dividends paid 2,028,671 5,396,157
==================== ================
During the 12 months ended 31 December 2017, a dividend of 1
cent (2016: 2.5 cents) per ordinary share, totalling to $1,352,471
(2016: $3,372,605) was declared and paid to the shareholders
on 19 May 2017 (2016: 12 May 2016) followed by a further dividend
of 0.5 cents (2016: 1.5 cents) per share which was declared
totalling $676,200 (2016: $2,023,552) and paid on 6 October
2017 (2016: 14 October 2016). The total dividend paid is $2,028,671
(2016: $5,396,157).
In respect of the year ended 31 December 2017, the directors
propose that a final dividend of 1.2 cents (2016: 1 cent) per
share be paid to shareholders on 18 May 2018 (2016: 19 May 2017).
This final dividend is subject to approval by shareholders at
the Annual General Meeting and has not been included as a liability
in these Consolidated Financial Statements. The proposed final
dividend is payable to all shareholders on the Register of Members
on 26 April 2018 (2016: 28 April 2017). The total estimated
final dividend to be paid is $1.6 million (2016:$1.4 million).
The payment of this final dividend will not have any tax consequences
for the Group.
7. Property, plant and equipment
For the year ended 31 December 2017, the Group spent $10.8 million
(2016: $12.8 million) on drilling rigs and other assets to expand
its operations, safety upgrades and for the replacement of existing
assets. The Group disposed of property, plant and equipment
with a net book value of $1.9 million (2016: $2.3 million) during
the year. A loss of $0.4 million (2016: $1.3 million) was incurred
on the disposal of property, plant and equipment.
8. Share capital
Authorised
2,000,000,000 (2016: 2,000,000,000) ordinary
shares of 0.01 cents (2016: 0.01 cents)
each 200,000 200,000
==================== ================
Number of ordinary shares issued
135,247,159 (2016: 134,903,396) ordinary
shares of 0.01 cents (2016: 0.01 cents)
each 13,524 13,490
==================== ================
Share premium
Balance at the beginning of the year 21,697,470 21,566,856
Issue of shares 236,302 130,614
-------------------- ----------------
Balance at the end of the year 21,933,772 21,697,470
==================== ================
On 1 April 2017, the Company issued 343,763 (2016: 299,715) new
common shares pursuant to the Company's employee incentive scheme.
The shares rank pari passu with the existing ordinary shares.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December
2017
CONSOLIDATED
2017 2016
$ $
Unaudited Audited
-------------------- ---------------------
9. Long term debt
Long term liabilities consist of a $12 million revolving credit
facility ("RCF") provided by Standard Bank (Mauritius) Limited
following a renewal of the Facilities Agreement on 30 October
2017. The interest rate on the RCF is the prevailing three month
US LIBOR (payable in arrears) plus a margin of 5.75%, and an
annual commitment fee of 1.5% of the undrawn balance.
Security for the Standard Bank (Mauritius) Limited facility
comprises:
* Upward corporate guarantees from Capital Drilling (T)
Limited, Capital Drilling (Botswana) Proprietary
Limited and Capital Drilling Ltd.
* A negative pledge over the assets of Capital Drilling
(T) Limited and Capital Drilling Ltd.
As at the reporting date and during the year under review,
the Group has complied with all covenants that attaches to
the loan facilities.
Standard Bank (Mauritius) Limited
Balance at the beginning of the
year 12,095,125 5,096,001
Amounts received during the year 6,500,000 14,000,000
Interest accrued during the year 1,160,627 772,793
Interest paid during the year (1,214,167) (773,669)
Principal repayments during the
year (6,500,000) (7,000,000)
----------------------- --------------------
12,041,585 12,095,125
Less: Current portion included
under current liabilities (41,585) (2,095,125)
----------------------- --------------------
Due after more than one year 12,000,000 10,000,000
----------------------- --------------------
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December
2017
CONSOLIDATED
2017 2016
$ $
Unaudited Audited
-------------------------- ----------------
10. Cash generated from operations
Profit (Loss) before tax 9,688,630 (982,798)
Adjusted for:
- Depreciation 12,586,369 14,492,161
- Loss on disposal of property, plant
and equipment 384,450 1,306,335
- Share based payment expense 226,929 290,452
- Realised (gain) loss on Available
for Sale Shares 99,435 (797,315)
- Fair value adjustment on financial
assets through profit and loss 358,657 (405,893)
- Provision for inventory obsolescence (905,428) (172,643)
- Interest income (199,630) (94,169)
- Share of loss from associate 601,816 57,290
- Finance charges 1,192,002 772,793
- Unrealised foreign exchange (gain)
loss on foreign (204,786) 500,281
------ ----------------- ----------------
Operating cash flows before working capital
changes 23,828,444 14,966,494
Adjustments for working capital changes:
- Increase in inventory (1,424,960) (1,611,568)
- Increase in trade and other receivables (963,118) (6,546,611)
* Decrease (Increase) in prepaid expenses and other
assets 2,377,111 (553,373)
- Increase in trade and other payables 1,366,776 6,187,535
----------------
25,184,253 12,442,477
========================= ================
11. Financial instruments
Financial instruments that are measured in the consolidated
statement of financial position or disclosed at fair value
require disclosure of fair value measurements by level based
on the following fair value measurement hierarchy:
* level 1 - quoted prices (unadjusted) in active
markets for identical assets or liabilities;
* level 2 - inputs other than quoted prices included
within level 1 that are observable for the asset or
liability, either directly (that is, as prices) or
indirectly (that is, derived from prices); and
* level 3 - inputs for the asset or liability that are
not based on observable market data (that is,
unobservable inputs).
Financial assets that are listed equity securities are measured
at fair value at the end of each reporting period. They are
designated as level 1 in the fair value hierarchy. Their fair
value is determined using quote bid prices in an active market.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December
2017
CONSOLIDATED
2017 2016
$ $
Unaudited Audited
-------------- ----------
11. Financial instruments (continued)
The fair values of financial instruments that are not traded
in an active market are determined using standard valuation
techniques. These valuation techniques maximise the use
of observable market data where available and rely as little
as possible on Group specific estimates. The directors consider
that the carrying value amounts of financial assets and
financial liabilities recorded at amortised cost in the
consolidated financial statements are approximately equal
to their fair values. The fair values disclosed for the
financial assets and financial liabilities classified in
level 3 of the fair value hierarchy have been assessed to
approximate their carrying amounts based on a discounted
cash flow assessment.
12. Commitments
The Group has the following commitments:
Committed capital expenditure 1,711,481 1,493,276
============= ==========
The Group had outstanding purchase orders amounting to $2.8
million (2016: $4.7 million) at the end of the reporting
period of which $1.7 million [2016: $1.5 million] were for
capital expenditure.
13. Contingencies
Zambia tax:
As disclosed in the prior year Financial Statements, Capital
Drilling (Zambia) Limited is a party to various tax claims
made by the Zambian Revenue Authority for the tax years 2007
to 2013. On 30 April 2015, the Company received a tax assessment
from the Zambian Revenue Authority totalling ZMW 144.1 million
(USD equivalent: $13.1 million), inclusive of penalties and
interest. The claims relate to various taxes, including income
tax, value added tax, payroll tax and withholding tax. Since
the assessment date, Management has responded in detail to
these claims, providing the Zambian Revenue Authority with
detailed analysis and arguments justifying the Company's
tax position. No amount has yet been paid in this regard
and no additional communication or actions were received
from the Zambian Revenue Authority during the 2017 financial
year regarding this matter. Capital Drilling (Zambia) Limited
is currently dormant with no drilling revenue since November
2014. An amount of $1.6 million in 2015 has been raised relating
to certain areas of the claim, however the directors are
of the opinion that a significant portion of the tax claim
by the Zambia Revenue Authority is without merit.
NOTES TO THE CONDENSED ANNUAL FINANCIAL
STATEMENTS
For the year ended 31 December 2017
13. Contingencies (continued)
Tanzania tax:
Capital Drilling (T) Ltd is party to a payroll tax claim
made by the Tanzanian Revenue Authority (TRA) for the tax
years 2009-2015. During the financial year ended 31 December
2016, the company received an immediate demand notice from
the (TRA) for Tanzanian Shillings of 18,598,361,197 (US$
8,374,660), inclusive of penalties and interest. Management
objected to the assessment raised by the TRA and requested
the calculations of the notice. In order to object, according
to Tanzanian Tax Law Sections 51(1) and (5) of the TAA 2015,
a taxpayer is required to pay the tax amount not in dispute
or one third of the assessed tax whichever is greater. It
is prudent to note that the Finance Act in 2016 added a further
subsection (9) in Section 51 regarding tax objections and
assessments. The said amendment provides: "Where the taxpayer
fails to pay the amount stated under subsection (5) within
the time provided therein, the assessed tax decision shall
be confirmed as final tax assessment in terms of section
15(1)(a) of the Tax Revenue Appeals Act." In accordance with
the above-mentioned legislation, management reached an agreement
with the TRA to pay Tanzanian Shillings of 1,500,000,000
(US$0.7 million) in lieu of the one third of the assessed
value. This amount was fully provided for in the 2016 Annual
Financial Statements. In June 2017 the TRA provided their
workings to Capital Drilling (T) Ltd. Capital Drilling (T)
Ltd identified differences with the TRA on both the specific
merits and methodology used to determine the value. Capital
Drilling (T) Ltd has maintained an engaging relationship
with the TRA to find closure and resolution to this matter.
In order to continue the discussions and negotiations with
the TRA, Capital Drilling (T) Ltd has, at the request of
the TRA, provided an additional amount of Tanzanian Shillings
of 1,500,000,000 (US$0.7 million) as at 31 December 2017.
This is in line with the aforementioned Tanzanian Tax Law.
Refer to Note 14.
The TRA also raised a Withholding Tax liability of TZS 2,244,907,829
(US$1,024,268) inclusive of interest and penalties. This
pertains to the misinterpretation of the facts by the TRA
for assets that were purchased by Capital Drilling (T) Ltd
and not leased. The TRA interpreted these assets as a rental
agreement for these assets rather than permanent acquisition
of these assets, which results in no Withholding Tax liability.
Management lodged an objection on 14 November 2016 and paid
an upfront payment of TZS 170,000,000 (US$77,564) in order
to have the objection validated and acknowledged, as is required
per subsection (9) in Section 51 of the Income Tax Act of
Tanzania. Based on above, management assessed no further
liability with regards to this assessment. As at 31 December
2017, this objection is still pending with the TRA and no
resolution has been reached as yet.
Events post the reporting
14. date
Subsequent to year end, the management of Capital Drilling
(T) Ltd had a meeting with the Tanzanian Revenue Authority
(TRA) in February 2018 to find a resolution to the ongoing
payroll tax claims. The TRA communicated to the management
of Capital Drilling (T) Ltd that in order to continue negotiations,
an additional payment of Tanzanian Shillings 1,500,000,000
(US$0.7 million) to keep discussions open as is required
as per Tanzanian Tax Law under sections 51(5) and (5) of
the TAA 2015. This payment enables management to continue
have an open and positive relationship with the TRA in order
to bring closure to this matter in 2018.
NOTES TO THE CONDENSED ANNUAL FINANCIAL
STATEMENTS
For the year ended 31 December
2017
15. Glossary
A description of various acronyms is detailed below:
ARPOR Average Revenue Per Operating Rig
CAPEX Capital Expenditure
EBIT Earnings (Loss) Before Interest and Taxes
EBITDA Earnings (Loss) Before Interest, Taxes,
Depreciation and Amortisation
EPS Earnings (Loss) Per Share
ETR Effective Tax Rate
HSSE Health, Safety, Social and Environment
KPI Key Performance Indicator
LTI Lost Time Injury
NPAT Net Profit (Loss) After Tax
PBT Profit (Loss) Before Tax
YOY Year On Year
Return on capital EBIT / (Average Equity)
employed
Return on total EBIT / Average Total Assets
assets
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR FMGMFLKRGRZG
(END) Dow Jones Newswires
March 16, 2018 03:00 ET (07:00 GMT)
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