REG - Capital Limited - H1 2023 Results
16/08/2023 07:00
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RNS Number : 4257J Capital Limited 16 August 2023
Capital Limited
("Capital", the "Group" or the "Company")
H1 2023 Results
Capital (LSE: CAPD), a leading mining services company, today provides its
trading update for the half year period 1 January to 30 June 2023 (the
"Period").
H1 2023 H1 2022 vs
H1 2022
Revenue ($ m) 154.3 138.1 11.7%
EBITDA (adjusted for IFRS 16 leases)(1,2) ($ m) 43.9 39.9 10.0%
Operating profit ($ m) 28.4 28.0 1.4%
Investment gain / (loss) ($ m) 0.8 (10.3) -107.8%
Net Profit After Tax (NPAT) ($ m) 17.6 9.7 81.4%
NPAT (Adjusted for investment gain/(loss) ($ m) 16.8 19.9 -15.6%
Earnings per share
Basic EPS (cents) 8.9 4.7 89.4%
Basic EPS (Adjusted for investment gain/(loss) (cents) 8.8 10.5 -16.2%
Interim Dividend per Share (cents) 1.3 1.3 0.0%
Cash from Operations (adjusted for IFRS 16 leases)(2) ($ m) 38.2 33.4 14.4%
Capex(3) ($ m) (36.2) (22.6) 60.2%
Net Debt(1) ($ m) 66.5 36.4 82.7%
Investments ($ m) 42.1 47.3 -11.0%
Margins and returns
EBITDA Margin (adjusted for IFRS 16 leases)(1,2) 28.5% 28.9%
Operating profit margin 18.4% 20.3%
NPAT Margin (Adjusted for investment gain/(loss) 10.9% 14.4%
*All amounts are in US dollars unless otherwise stated
((1) ) EBITDA, and Net Debt are non-IFRS financial measures and
should not be used in isolation or as a substitute for Capital Limited
financial results presented in accordance with IFRS. Alternative performance
measures as detailed on pages 33 - 34 of this results announcement
((2) ) Adjustment for the cash cost of the IFRS 16 lease which
amounts to $3.5 million in H1 2023 and $1.5 million in H1 2022 (see page 14).
((3) ) Capital expenditure (Capex) consists of purchase of PPE for
cash, prepayments for PPE and assets purchased during the year and financed by
OEM.
Financial Highlights
· H1 2023 revenue of $154.3 million, up 11.7% on H1 2022 ($138.1
million);
§ Full year revenue guidance remains $320 - $340 million.
· H1 2023 EBITDA (adjusted for IFRS16 leases) of $43.9 million, up
10.0% on H1 2022 ($39.9 million);
· EBITDA Margin (adjusted for IFRS16 leases) of 28.5% (H1 2022:
28.9%);
· Net gains from equity investments of $0.8 million (unrealised) in
H1 2023. Alongside cash investments carried out over the period, the value of
the group strategic investments increased to $42.1 million from $38.7 million
at 31 December 2022 (30 June 2022: $47.3 million); Our valuation for our stake
in Allied Gold Corp Limited ("Allied") remains broadly in line with our
valuation from 31 December 2022, and does not yet take into account the
company's public listing plans.
· Net Profit After Tax (NPAT) (adjusted for investment gain/ loss)
of $16.8 million, a decrease of 15.6% on H1 2022 ($19.9 million);
· Capex of $36.2 million (H1 2022: $22.6 million) including
prepayments and assets financed by OEM;
· Cash generated from operations (adjusted for IFRS 16 leases) of
$38.2 million (H1 2022: $33.4 million);
· Net debt of $66.5 million increased 82.7% on H1 2022 ($36.4
million) predominantly in order to fund our second material mining services
contract with Ivindo Iron SA without returning to equity markets for funding
(as required for our initial mining contract at Sukari). Investments remained
significant at $42.1 million at 30 June 2023. Adjusted Net debt (including
investments) of $24.4 million;
· Declared an interim dividend of 1.3 cents per share, to be paid
on 3 October 2023 to shareholders registered on 1 September 2023.
Operational & Strategic Review
· Safety performance remains world-class with H1 2023 Total
Recordable Injury Frequency Rate ("TRIFR") of 1.03 per 1,000,000 hours worked
(FY 2022: 1.2).
· Capital Drilling:
· H1 2023 average rig utilisation was 75%, a decrease of 9.6% on H1
2022 (83%). The decrease in part driven by the temporary shutdown of rigs at
Perseus' Meyas Gold Project in Sudan following the escalation of conflict in
the country;
· H1 2023 average monthly revenue per operating rig ("ARPOR")
remained strong at US$188,000, an 8.7% increase on H1 2022 ($173,000).
· Rig count increased from 123 to 125 through Q2 2023, net of
depletion;
· Recent Q2 2023 contracts wins (previously announced):
§ A reverse circulation exploration drilling contract with Centamin, at the
Nugrus Block in the Egyptian Eastern Desert.
· Capital Mining continues to perform strongly securing second
material contract win:
§ Capital secured a major earthmoving and crushing services contract with
Ivindo Iron SA with a term of up to 5 years. The site, located in Gabon's
northeast, is one of the world's largest undeveloped, high-grade hematite iron
ore deposits. Operations are now already underway and once fully operational,
the contract is expected to generate an annual revenue of approximately $30
million.
§ Sukari Gold Mine (Egypt) waste mining contract continues to perform well
and remained LTI free through the period; and
§ Capital remains active in the tendering pipeline.
· MSALABS: Growth outlook remains strong with expanded relationship
with Chrysos:
§ Through the successful rollout of Chrysos' PhotonAssay™ units, MSALABS
now has the largest international network of Chrysos PhotonAssay™
technology:
§ MSALABS now has Chrysos PhotonAssay™ units deployed or under construction
across Africa and Canada;
§ The expanded relationship with Chrysos will see MSALABS deploy 21 units by
2025.
§ While the rollout of Chrysos PhotonAssay™ technology will account for the
majority of the growth in revenues, we continue to expand our traditional
geochemical business in tandem;
§ This year MSALABS has commissioned a mine site laboratory at Shanta Gold's
Singida mine, Tanzania, a laboratory in Bougouni, Mali and currently has a
laboratory in Marsa Alam, Egypt under construction; and
§ MSALABS has completed a $10 million equity raise to fund the expansion of
the business. Following this Capital's shareholding in MSALABS has increased
from 77.8% to 81.8%.
· Capital Direct Investments (Capital DI):
§ The portfolio recorded investment gains (unrealised) of US$0.8 million. The
total value of investments (listed and unlisted) was US$42.1 million as of 30
June 2023, versus US$38.7 million at the end of 2022 ($47.3 million at 30 June
2022);
§ Our valuation for our stake in Allied Gold Corp Limited ("Allied") remains
broadly in line with our valuation from 31 December 2022, and does not yet
take into account the company's public listing plans.
Outlook
· Revenue guidance for 2023 remains $320 to $340 million;
· EBITDA margins are expected to remain in a range of 25-30% going
forward;
· Capital expenditure guidance for 2023 is approximately $65-$75
million. This increased ~$15 million from guidance at the FY22 results to
include additional equipment for the new mining and crushing services contract
at Ivindo Iron announced June 2023;
· Capital Drilling anticipates revenue growth in H2 2023, driven by
the ramp up of two high quality contracts at Reko Diq, Pakistan, and Ivindo,
Gabon together with a potential restart of operations at the Meyas Gold
Project, Sudan;
· Capital Mining will also see revenue growth through H2 2023
driven by the mining services and crushing contract at Ivindo, Gabon, which
has now commenced. Additionally, we expect the Sukari earth moving contract to
sustain steady performance throughout the rest of the year;
· MSALABS will continue its multi-year laboratory roll out,
particularly focused on Chrysos PhotonAssay™ units, with revenue guidance
for MSALABS remaining $40-50 million for 2023, another significant increase
YoY (FY 2022: $27.3 million); and
· Tendering activity remains robust across the Group with a number
of opportunities progressing.
Commenting on the interim results, Peter Stokes, Chief Executive, said:
"We are delighted with the performance delivered across all business divisions
of the Group. Through the half we were particularly pleased to announce our
second significant mining services contract, fortifying our position as a
full-service provider to the mining industry. This strategic move, combined
with our efforts in strengthening our drilling business and enhancing MSALABS,
sets us on a trajectory of continued growth and success in the years to come.
In drilling we began our strategic steps, in the back end of 2022, with
contract selection further towards long-term partnerships with blue-chip
clients, to maintain stability and sustainability for our business through the
cycles. It was therefore pleasing to add world-class gold and non-gold
drilling contracts in the first half of this year, namely Ivindo in Gabon and
Barrick's Reko Diq copper-gold project in Pakistan, both of which show
tremendous growth potential.
Similarly, our mining business has also achieved a significant milestone with
the addition of a major mining services and crushing contract with Ivindo in
Gabon. This showcases both our trusted reputation to offer a premium service
to a world class mining company and also our continued strategy to diversify
our revenue stream through an expanded service offering.
MSALABS continues to forge ahead on an impressive multi-year growth
trajectory, fuelled by the successful rollout of revolutionary Chrysos
PhotonAssay™ units, in conjunction with its traditional geochemistry
business. MSALABS proudly now operates the largest international network of
PhotonAssay™ technology, extending its reach across Africa and Canada and
our commitment to deploying 21 Chrysos PhotonAssay™ units by 2025 remains
steadfast, driving revenues for the business in excess of $80 million. This
remarkable trajectory is a testament to our team's relentless dedication and
strategic vision. Furthermore, the successful equity raise in H1 2023 has
provided a robust foundation as we continue to expand our global footprint.
Despite temporary operational disruption through the period, namely the Meyas
Sand Gold Project, Sudan, the underlying demand from our customers continues
to remain strong and we remain confident in our revenue guidance for 2023 of
$320-$340 million. We remain active in tendering across the business, with our
capital allocation strategy biased towards returns and not a singular business
division. Given the strength in the business, we have now also announced an
interim dividend of 1.3 cents per share, a testament to our commitment to
creating value for our shareholders and our confidence in the bright future
ahead for our company."
Capital Limited will be hosting a live webcast presentation at 09:00 BST on
Wednesday 16 August 2023, where questions can be submitted through the
platform.
The webcast presentation link:
https://www.lsegissuerservices.com/spark/CapitalDrillingLtd/events/434c93f8-9f1d-4bae-9cab-368c13379ca3
(https://eur04.safelinks.protection.outlook.com/?url=https%3A%2F%2Flinkprotect.cudasvc.com%2Furl%3Fa%3Dhttps%253a%252f%252fwww.lsegissuerservices.com%252fspark%252fCapitalDrillingLtd%252fevents%252f434c93f8-9f1d-4bae-9cab-368c13379ca3%26c%3DE%2C1%2CtJChro_YzNj2fO7n8Ve--poCiNRAtpBHtP_2WUd11CN2lLp7UhYiFVzcdjknNiANODeGPZJCwlu7Mpl4nNGWbwZAmml9A9pIrKNCC1nUMLBoE5n5GytgkLFNiu7Q%26typo%3D1&data=05%7C01%7Cconor.rowley%40capdrill.com%7C9beeaded752a423f0f7408db9da9d56e%7Cc0386db254e9426fbaa9cb50596e8a17%7C1%7C0%7C638277125032880048%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C3000%7C%7C%7C&sdata=hof0yhYEdtXamTCBZhAR4CmnFn%2BhqrXwm%2F4qNCZXcHs%3D&reserved=0)
Participants may join the webcast approximately five minutes before the
commencement time. A copy of the Company's presentation will be available on
www.capdrill.com (http://www.capdrill.com)
- ENDS -
For further information, please visit Capital Limited's website
www.capdrill.com or contact:
Capital Limited
Peter Stokes, Chief Executive
Officer
investor@capdrill.com
Rick Robson, Chief Financial Officer
Conor Rowley, Investor Relations & Corporate Development Manager
Tamesis Partners LLP
+44 20 3882 2868
Charlie Bendon
Richard Greenfield
Stifel Nicolaus Europe Limited
+44 20 7710 7600
Ashton Clanfield
Callum Stewart
Rory Blundell
Buchanan
+44 20 7466 5000
Bobby
Morse
capital@buchanan.uk.com
George Pope
About Capital Limited
Capital Limited is a leading mining services company providing a complete
range of drilling, mining, maintenance and geochemical laboratory solutions to
customers within the global minerals industry. The Company's services include:
exploration, delineation and production drilling; load and haul services;
maintenance; and laboratory services. The Group's corporate headquarters are
in the United Kingdom and it has established operations in Côte d'Ivoire,
Canada, Democratic Republic of Congo, Egypt, Gabon, Ghana, Guinea, Kenya,
Mali, Mauritania, Nigeria, Pakistan, Saudi Arabia, Sudan and Tanzania.
CAPITAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2023
Unaudited
Six months ended
Notes 30 June 2023 30 June 2022
US$ US$
Revenue 3 154,270,076 138,128,602
Cost of sales (83,315,580) (77,010,453)
Gross profit 70,954,496 61,118,149
Administration expenses (23,565,402) (19,738,178)
Depreciation, amortisation, and impairments (19,022,777) (13,417,448)
Operating profit 28,366,317 27,962,523
Interest income 17,441 112,808
Finance charges (5,814,411) (2,670,575)
Fair value (loss)/gain on investments at fair value 16 843,457 (10,265,388)
Profit before taxation 23,412,804 15,139,368
Taxation 4 (5,810,234) (5,456,706)
Profit and total comprehensive income for the period 17,602,570 9,682,662
Profit attributable to:
Owners of the parent 16,942,755 8,849,651
Non-controlling interest 10 659,815 833,011
17,602,570 9,682,662
Earnings per share:
Basic (cents per share) 5 8.9 4.7
Diluted (cents per share) 5 8.5 4.5
CAPITAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 30 June 2023
Unaudited Audited
Notes 30 June 2023 31 December 2022
ASSETS US$ US$
Non-current assets
Property, plant and equipment 7 195,445,478 172,658,108
Right of use assets 8 24,598,696 16,652,318
Goodwill 1,296,387 1,296,387
Intangible assets 2,342,107 1,916,190
Other receivables 6,460,000 6,460,000
Total non-current assets 230,142,668 198,983,003
Current assets
Inventories 63,452,720 58,694,979
Trade and other receivables 44,795,858 41,541,867
Other receivables 25,114,873 20,073,008
Investments at fair value 16 42,073,556 38,727,041
Current tax receivable 109,033 399,683
Cash and cash equivalents 32,059,797 28,379,607
Total current assets 207,605,837 187,816,185
Total assets 437,748,505 386,799,188
EQUITY AND LIABILITIES
Equity
Share capital 9 19,370 19,287
Share premium 9 62,390,217 62,390,217
Treasury - (2,474,964)
shares
Equity-settled employee benefits reserve 4,307,240 4,469,402
Other reserve 190,056 190,056
Retained income 178,324,115 168,725,546
Equity attributable to owners of the parent 245,230,998 233,319,544
Non-controlling interest 10 8,103,155 5,572,540
Total equity 253,334,153 238,892,084
Non-current liabilities
Loans and borrowings 11 77,568,244 56,864,811
Lease liabilities 17,890,623 12,127,384
Deferred tax 34,196 34,196
Total non-current liabilities 95,493,063 69,026,391
Current liabilities
Trade and other payables 54,948,972 44,937,680
Provisions 791,513 2,636,640
Current tax payable 7,728,400 9,130,118
Loans and borrowings 11 19,231,504 18,036,811
Lease liabilities 6,220,900 4,139,464
Total current liabilities 88,921,289 78,880,713
Total equity and liabilities 437,748,505 386,799,188
CAPITAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
As at 30 June 2023
Equity-settled employee benefits reserve
Total attributable to equity holders of the Group
Treasury share reserve Non-controlling interest
Share Share premium Total share capital Other reserve Total reserves Retained earnings Total
capital equity
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Balance at 31 December 2021 -Audited 19,006 60,900,119 - 60,919,125 3,185,450 190,056 3,375,506 154,879,201 219,173,832 3,767,589 222,941,421
Total profit and comprehensive income - - - - - - - 8,849,651 8,849,651 833,011 9,682,662
for the period
Contributions by and distributions to owners
Share options exercised 281 1,763,972 - 1,764,253 (1,764,253) - (1,764,253) - - - -
Share buy back - - (2,462,651) (2,462,651) - - - - (2,462,651) - (2,462,651)
Recognition of share-based payments - - - - 1,410,906 - 1,410,906 - 1,410,906 - 1,410,906
Dividends paid - - - - - - - (4,607,599) (4,607,599) - (4,607,599)
Total transactions with owners 281 1,763,972 (2,462,651) (698,398) (353,347) - (353,347) (4,607,599) (5,659,344) - (5,659,344)
Balance at 30 June 2022 (Unaudited) 19,287 62,664,091 (2,462,651) 60,220,727 2,832,103 190,056 3,022,159 159,121,253 222,364,139 4,600,600 226,964,739
Balance at 31 December 2022 - Audited 19,287 62,390,217 (2,474,964) 59,934,540 4,469,402 190,056 4,459,458 168,725,546 233,319,544 5,572,540 238,892,084
Total profit and comprehensive income for the period - - - - - - - 16,942,755 16,942,755 659,815 17,602,570
Contributions by and distributions to owners
Share options exercised 83 - 2,474,964 2,475,047 (2,195,717) - (2,195,717) (279,330) - - -
Recognition of share-based payments - - - - 2,033,555 - 2,033,555 - 2,033,555 - 2,033,555
Adjustment arising from change in non-controlling interest - - - - - - - (1,963,846) (1,963,846) 1,889,357 (74,489)
Dividends paid - - - - - - - (5,101,010) (5,101,010) (18,557) (5,119,567)
Total transactions with owners 83 - 2,474,964 2,475,047 (162,162) - (162,162) (7,344,186) (5,031,301) 1,870,800 (3,160,501)
Balance at 30 June 2023 (Unaudited) 19,370 62,390,217 - 62,409,587 4,307,240 190,056 4,497,296 178,324,115 245,230,998 8,103,155 253,334,153
CAPITAL LIMITED
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the six months ended 30 June 2023
Six months ended
Unaudited Unaudited
Notes 30 June 2023 30 June 2022
US$ US$
Cash flow from operating activities
Cash generated from operations 12 41,652,161 34,932,913
Interest income received 17,441 112,808
Interest paid - other (4,031,986) (2,432,005)
Interest paid - leases 8 (857,267) -
Tax paid (6,921,303) (6,819,720)
Net cash from operating activities 29,859,046 25,793,996
Cash flow from investing activities
Purchase of property, plant and equipment 7 (25,225,550) (10,168,688)
Proceeds from sale of property, plant and equipment 44,922 -
Purchase of intangible assets (425,917) (391,105)
Purchase of investments at fair value 16 (4,859,347) (5,891,493)
Proceeds on sale of investments at fair value 16 2,356,289 8,499,654
Cash paid in advance for property, plant and equipment (4,341,021) (6,389,092)
Net cash from investing activities (32,450,624) (14,340,724)
Cash flow from financing activities
Repayment of loans 11 (9,209,462) (9,295,897)
Proceeds from new loans 11 25,000,000 -
Arrangement fees paid - new financing (1,430,568) -
Dividend paid 6 (5,119,567) (4,607,599)
Repayment of principal portion of leases 8 (2,634,372) (1,483,881)
Advance payments on lease arrangements (605,802) (230,705)
Repurchase of own shares - (2,462,651)
Proceeds from MSA rights issue - non-controlling interest 1,193,302 -
Purchase of shares from minority shareholders (1,267,792) -
Net cash from financing activities 5,925,739 (18,080,733)
Net increase/ (decrease) in cash and cash equivalents 3,334,161 (6,627,461)
Cash and cash equivalents at the beginning of the period 28,379,607 30,577,249
Effect of exchange rate movement on cash balances 346,029 (1,214,380)
Cash and cash equivalents at the end of the period 32,059,797 22,735,408
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
For the six months ended 30 June 2023
1. Basis of presentation and accounting policies
Preparation of the condensed consolidated interim financial statements
The condensed consolidated interim financial statements of Capital Limited and
Subsidiaries ("Capital" or the "Group") as at and for the six months ended 30
June 2023 (the "Interim Financial Statements"), which are unaudited, have been
prepared in accordance with International Accounting Standard ("IAS") No. 34,
"Interim Financial Reporting". This condensed interim report does not include
all the notes of the type normally included in an Annual Report. They should
be read in conjunction with the annual consolidated financial statements and
the notes thereto in the Group's Annual Report for the year ended 31 December
2022 which have been prepared in accordance with International Financial
Reporting Standards ("IFRS") as issued by the International Accounting
Standards Board ("IASB"). The Interim Financial Statements have been reviewed
in terms of International Standard on Review Engagements (ISRE) 2410.
Accounting policies
The condensed consolidated interim financial statements have been prepared
under the going concern basis under the historical cost convention, except for
certain financial instruments which are measured at fair value.
All accounting policies, presentation and methods of computation which have
been followed in these condensed consolidated financial statements were
applied in the preparation of the Group's financial statements for the year
ended 31 December 2022.
The preparation of financial statements in conformity with IFRS recognition
and measurement principles requires the use of estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues and expenses.
Management reviews its estimates on an on-going basis using currently
available information. Changes in facts and circumstances may result in
revised estimates and actual results could differ from those estimates.
Going concern
As at 30 June 2023, the Group had a robust balance sheet with a low debt
gearing with equity of US$253.3 million and loans and borrowings of US$96.8
million. Cash as at 30 June 2023 was US$32.1 million, with net debt of US$66.5
million. Investments in listed entities at the end of June 2023 amounted to
US$42.1 million which provided additional flexibility as these investments
could be converted into cash.
This robustness is underpinned by stable revenues generated on long term
contracts. Revenues generated on mine sites and longer-term contracts make up
over 85% of Group revenues. Revenues continued to perform strongly in H1 2023
with increased revenue of 12% compared to H1 2022.
Commercially, the Group continues to secure and extend long term mining
contracts with high quality customers, including the latest significant win
for mining services and crushing contract in Gabon. Given the Group had
minimal operational impacts from COVID-19 over the past two years, the
Directors do not view it as a going concern risk.
In determining the going concern status of the business, management has
considered the principal risks of the business and considered those most
relevant to the going concern assessment and reverse stressed the model,
alongside the Group's capacity to mitigate, to identify the magnitude of
sensitivity required to cause a breach in covenants or risk the going concern
of the business. The most relevant of which was considered to be loss of
EBITDA through loss of contract wins, with no redeployment of equipment.
EBITDA would need to fall over 45% for a 12-month period to breach the
covenant test.
Given the strong market demand from existing clients and across a large
tendering pipeline, management consider the risk of a deep demand correction
to be low.
Given the Group's exposure to high quality mine site operations, we consider a
decrease of such magnitude to be remote. Overall, the analysis strongly
underpins the going concern status and as a result the Board considers the
business to be a going concern.
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
2. Operations in the interim period
Capital Limited (the "Company") is incorporated in Bermuda. The Company and
its subsidiaries (the "Group") provide drilling services, mining (load and
haul), mineral assaying and surveying services. The Group also has a portfolio
of investments in listed and unlisted exploration and mining companies.
During the period ended 30 June 2023, the Group provided drilling services in
Côte d'Ivoire, Guinea, Egypt, Mali, Saudi Arabia, Sudan, Gabon and Tanzania.
Mining services are provided in Egypt and mineral analysis services are
provided in Canada, Guyana, Mauritania, Nigeria, Côte d'Ivoire, Mali,
Tanzania, Kenya and Democratic Republic of the Congo. The Group's
administrative offices are located in the United Kingdom and Mauritius.
2.1 Use of estimates and judgements
The preparation of both annual and interim financial statements usually
requires the use of estimates and judgements. There has been no change in the
Group's estimates and judgements since the year end with the exception of
residual values for drilling rigs and associated equipment. The residual value
estimates have been revised down to 2.5% and 0% respectively.
Six months ended
3. Revenue 30 June 2023 30 June 2022
US$ US$
Revenue from the rendering of services comprises:
Drilling and associated revenue 108,046,633 100,230,452
Revenue from Mining 27,152,535 23,678,570
MSALABS revenue 17,104,748 11,814,696
Revenue from Surveying 1,966,160 2,404,884
154,270,076 138,128,602
4. Taxation
Capital 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 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 include those relating to transfer pricing matters and 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 judgement 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.
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
5. Earnings per share
Basic Earnings per share:
The profit and weighted average number of ordinary shares used in the
calculation of basic earnings per share are as follows:
Profit for the period used in the calculation of basic earnings per share 16,942,755 8,849,651
Weighted average number of ordinary shares for the purposes of basic earnings 191,185,152 189,451,637
per share
Basic earnings per share (cents) 8.9 4.7
Diluted earnings per share:
The profit used in the calculations of all diluted earnings per share measures 16,942,755 8,849,651
are the same as those used in the equivalent basic earnings per share
measures, as outlined above.
Weighted average number of ordinary shares used in the calculation of basic 191,185,152 189,451,637
earnings per share
- Dilutive share options (#) 8,780,924 6,847,322
Weighted average number of ordinary shares used in the calculation of diluted 199,966,075 196,298,959
earnings per share
Diluted earnings per share (cents) 8.5 4.5
(#) For the purposes of calculating diluted earnings per share, no share
options (2022: Nil) were excluded based on being anti-dilutive as the exercise
price is lower than the current share price.
( )
( )
6. Dividends
During the six months ended 30 June 2023, a dividend of 2.6 cents per ordinary
share was declared on 16 March 2023, totalling US$5,101,010 (six months ended
30 June 2022: 2.4 cents per ordinary share, totalling US$4,607,599) and paid
on 9 May 2023.
( )
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
7. Property, plant and equipment
Cost Associated Drilling & mining equipment
Camp and associated equipment
Heavy mining equipment Vehicles and trucks Computer software Leasehold improvements
Drilling rigs Total
At 1 January 2022 124,251,706 59,224,772 23,691,159 33,594,212 13,877,137 38,361 1,653,952 256,331,299
Additions 21,873,207 12,309,225 12,133,884 5,617,520 4,772,198 - - 56,706,034
Disposal (6,755,226) (89,983) (4,426,158) (1,425,910) (479,718) - - (13,176,995)
At 31 December 2022 139,369,687 71,444,014 31,398,885 37,785,822 18,169,617 38,361 1,653,952 299,860,338
Additions 13,806,782 7,802,362 554,006 3,929,134 13,316,261 13,601 - 39,422,146
Disposal (9,449,423) (131,442) (619,079) (1,003,873) (466,723) - - (11,670,540)
At 30 June 2023 143,727,046 79,114,934 31,333,812 40,711,083 31,019,155 51,962 1,653,952 327,611,944
Accumulated Depreciation
At 1 January 2022 75,824,884 7,980,219 7,953,664 13,761,124 7,106,489 9,221 97,299 112,732,900
Depreciation 10,373,050 8,876,658 3,134,579 3,180,506 1,389,635 4,178 - 26,958,606
Disposal (6,409,664) (81,176) (4,345,182) (1,245,572) (407,682) - - (12,489,276)
At 31 December 2022 79,788,270 16,775,701 6,743,061 15,696,058 8,088,442 13,399 97,299 127,202,230
Depreciation 5,317,342 5,606,564 1,482,341 2,389,168 1,096,939 3,222 - 15,895,576
Disposal (8,887,206) (151,888) (560,822) (908,875) (422,549) - - (10,931,340)
At 30 June 2023 76,218,406 22,230,377 (7,664,580) 17,176,351 8,762,832 16,621 97,299 132,166,466
Carrying amount at:
31 December 2022 59,581,417 54,668,313 24,655,824 22,089,764 10,081,175 24,962 1,556,653 172,658,108
30 June 2023 67,508,640 56,884,557 23,669,232 23,534,732 22,256,323 35,341 1,556,653 195,445,478
CAPITAL LIMITED
Notes to the Condensed Consolidated Interim Financial Statements (cont'd)
For the six months ended 30 June 2023
7. Property, plant and equipment (continued)
Bank borrowings are secured on the Group's drilling and mining
fleet - see Note 11.
The Group's property plant and equipment includes assets not yet commissioned
totalling US$45.5 million (HY 2022: US$22.4 million). The assets will be
depreciated once commissioned and available for use.
During the six months ended 30 June 2023, the Group acquired US$39.4 million
worth of property, plant and equipment (HY 2022: US$21.9 million). Out of the
US$39.4 million additions, US$6.6 million (HY 2022: US$6.0 million) was
acquired through supplier credit agreements - see Note 11.
The Group disposed of property, plant and equipment with a net carrying amount
of US$0.7 million (HY 2022: US$0.2 million) during the period. A loss of
US$0.7 million (2022: US$0.2 million) was incurred on the disposal of
property, plant and equipment.
At the end of each reporting period, the Group reviews the carrying amounts of
its tangible assets to determine whether there is any indication that those
assets may be impaired. As at 30 June 2023, there was no indication of
impairment.
8. Leases (Group as lessee)
Details pertaining to leasing arrangements, where the
Group is lessee are presented below:
Land & Buildings Machinery Total
Right of use assets US$ US$ US$
At 1 January 2022 1,858,960 7,992,383 9,851,343
Additions 88,258 1,200,106 1,288,364
Depreciation (306,712) (1,070,309) (1,377,021)
30 June 2022 1,640,506 8,122,180 9,762,686
At 31 December 2022 3,565,345 13,086,973 16,652,318
Additions 1,298,287 9,786,562 11,084,849
Depreciation (558,307) (2,580,164) (3,138,471)
At 30 June 2023 4,305,325 20,293,371 24,598,696
Lease liabilities
At 1 January 2022 1,543,182 8,047,987 9,591,169
Additions 26,725 1,030,934 1,057,659
Interest expense 49,637 280,948 330,585
Lease payments (293,235) (1,190,646) (1,483,881)
30 June 2022 1,326,309 8,169,223 9,495,532
At 31 December 2022 3,395,847 12,871,001 16,266,848
Additions 1,298,288 9,180,759 10,478,977
Interest expense 136,251 721,016 857,267
Lease payments (661,426) (2,830,213) (3,491,639)
At 30 June 2023 4,168,960 19,942,563 24,111,523
The weighted average incremental borrowing rate applied to lease liabilities
during the period was 10% (2022: 7%).
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
As at
30 June 2023 31 December 2022
US$ US$
9. Issued capital and share premium
Authorised capital
2,000,000,000 (31 December 2022: 2,000,000,000) ordinary shares of 0.01 cents 200,000 200,000
(2022: 0.01 cents) each
Issued and fully paid:
193,696,920 (31 December 2022: 192,864,738) ordinary shares of 0.01 cents (31
December 2022: 0.01 cents) each
19,370 19,287
Share premium:
Balance at the beginning of the period 62,390,217 60,900,119
Issue of shares - 1,490,098
Balance at the end of the period 62,390,217 62,390,217
Fully paid ordinary shares which have a par value of 0.01 cents, carry one
vote per share and carry rights to dividends.
10. Non-controlling interest
Below is a summary of the movement in non-controlling interest during the
period:
CMS (Tanzania) Ltd
MSALABS Ltd IACA Limited Total
US$ US$ US$ US$
Balance at 1 January 2023 2,688,022 2,891,202 (6,684) 5,572,540
Profit/ (loss) attributable to NCI (722,620) 1,398,317 (15,883) 659,814
Change in ownership:
- Equity raise 365,044 - - 365,044
- Rights issue 1,828,579 - - 1,828,579
- Purchase of shares from NCI (486,271) - - (486,271)
- Other 182,006 - - 182,006
Dividends paid (18,557) - - (18,557)
Balance at 30 June 2023 3,836,203 4,289,519 (22,567) 8,103,155
CMS (Tanzania) Ltd
MSALABS Ltd IACA Limited Total
US$ US$ US$ US$
Balance at 1 January 2022 2,673,353 1,094,236 - 3,767,589
Profit/ (loss) attributable to NCI 131,158 701,853 - 833,011
Balance at 30 June 2022 2,804,511 1,796,089 - 4,600,600
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
11. Loans and borrowings
Loans and borrowings consist of:
(a) US$50 million revolving credit facility ("RCF") provided by Standard Bank
(Mauritius) Limited and Nedbank Limited
The Company entered into a revolving credit facility agreement on 28 March
2023 as borrower together with Standard Bank (Mauritius) Limited and Nedbank
Limited (acting through its Nedbank Corporate and Investment banking division)
as lenders and arrangers, with Nedbank acting as agent and security agent to
borrow a revolving credit facility for an aggregate amount of US$50 million
with the Company being able to exercise an accordion option to request an
increase of the facility under the terms and conditions of the Facility
Agreement. The interest rate on the RCF is the prevailing three-month SOFR
(payable in arrears) plus a margin of 5.5%, and an annual commitment fee of
1.75% per annum is charged on any undrawn balances. The amount utilised on the
RCF is US$50 million as at 30 June 2023 (2022: US$25 million).
Under the terms of the RCF, the group is required to comply with certain
financial covenants relating to:
· Interest coverage
· Gross debt to EBITDA ratio
· Debt to equity ratio
· Tangible net worth
In addition, CAPD (Mauritius) Limited is also required to comply with the
Total Tangible Net Worth covenant.
Security for the revolving credit facility comprise various pledges over the
shares and claims of the Group's entities in Tanzania together with a
debenture over the rigs in Tanzania and the assignment of material contracts
and their collection accounts in each of Egypt, Tanzania and Mali.
As at the reporting date and during the period under review, the Group has
complied with all covenants attached to the loan facilities.
(b) US$32.5 million term loan provided by Macquarie Bank Limited (London
Branch)
On 15 September 2022, the Group refinanced the senior secured, asset backed
term loan facility with Macquarie Bank Limited. The term of the loan is three
years repayable in quarterly instalments with an interest rate on the facility
of the prevailing three-month SOFR plus a margin of 6.5% per annum (payable
quarterly in arrears). The loan is secured over certain assets owned by the
Group and currently located in Egypt together with guarantees provided by
Capital Limited and Capital Drilling Egypt LLC. As at 30 June 2023, the
outstanding amount was US$24.9m (2022:US$ 31.8m).
During the year under review, the Group has complied with all covenants
attached to the term loan.
(c) Epiroc Financial Solutions AB credit agreements
The Group has a number of credit agreements with Epiroc, drawn down against
the purchase of rigs. The term of the agreements is four years repayable in 46
monthly instalments. The rate of interest on some of the agreements is
three-month US LIBOR plus a margin of 4.8%, with a fixed rate of interest of
the remaining agreements of 8.25%. As at 30 June 2023, the total drawn under
these credit agreements was US$15.9 m (2022: US$11.7 million).
No covenants are attached to this facility.
(d) US$8.5 million term loan facility with Sandvik Financial Services AB
(PUBL)
The Group has term loan facility agreement with Sandvik Financial Services AB
(PUBL). The facility is for the purchase of equipment from Sandvik AB,
available in not more than four tranches. Interest is payable quarterly in
arrears at 5.45% per annum on the drawn amount. The facility is no longer
available to drawn on and as at 30 June 2023 the balance outstanding was
US$5.0 million (2022: US$5.9 million).
No covenants are attached to this facility.
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
As at
30 June 2023 31 December 2022
11. Loans and borrowings (cont'd) US$ US$
Bank loans 77,534,116 57,944,781
Supplier credit facilities 20,997,754 17,674,372
98,531,870 75,619,153
Less: Unamortised debt arrangement costs (1,732,122) (717,531)
Total loans and borrowings 96,799,748 74,901,622
Current 19,231,504 18,036,811
Non-current 77,568,244 56,864,811
Total loans and borrowings 96,799,748 74,901,622
At the reporting date, the Group's loans and borrowings total US$98.5 million
(2022: US$75.6 million), offset by unamortised debt costs of US$1.7 million
(2022: US$ 0.7m). US$0.9 million (2022:US$ 0.4m) of the debt costs have been
classified as current and US$0.8 million (2022:US$ 0.3m) as non-current.
Six months ended
12. Cash from operations 30 June 2023 30 June 2022
US$ US$
Profit before taxation 23,412,804 15,139,368
Adjusted for:
- Depreciation 15,895,577 12,040,427
- Loss on disposal of property, plant and equipment 694,279 229,091
- Fair value (gain)/ loss on investments at fair value (843,457) 10,265,388
- Share based payment expense 2,033,555 1,410,906
- Interest income (17,441) (112,808)
- Finance charges 5,814,411 2,670,575
- IFRS 16 depreciation on rights of use assets 3,138,471 1,377,021
- Unrealised foreign exchange (gain)/ loss on foreign currency held (346,029) 1,214,380
- Other non-cash items 638,365 492,000
- Increase in expected credit loss provision 1,453,657 -
- Bad debt write offs 218,350 -
- Release of provisions (721,491) -
Operating profit before working capital changes 51,371,051 44,726,348
Adjustments for working capital changes:
- Increase in inventory (4,899,280) (13,575,478)
- Increase in trade and other receivables (11,361,406) (2,278,530)
- Increase in trade and other payables 7,970,217 6,060,573
- Decrease in provisions (1,428,421) -
41,652,161 34,932,913
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
13. Segmental analysis
Operating segments are identified on the basis of internal management reports
regarding components of the Group. These are regularly reviewed by the board
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:
- Africa: Derives revenue from the provision of drilling services, mining services,
surveying, IT support services and mineral assaying.
- Rest of world: Derives revenue from the provision of drilling services, surveying, IT support
services and mineral assaying. The segment relates to jurisdictions which
contribute a relatively small amount of external revenue to the Group. These
include Saudi Arabia and Canada.
Information regarding the Group's operating segments is reported below. At 30
June 2023, management reviewed the composition of the Group's operating
segments and the allocations of operations to the reportable segments.
Segment revenue and results:
The following is an analysis of the Group's revenue and results by reportable
segment:
For the six months ended 30 June 2023 Africa Rest of World Consolidated
US$ US$ US$
External revenue 142,776,503 11,493,573 154,270,076
Segment profit (loss) 54,493,646 (9,724,702) 44,768,944
Central administration costs and depreciation, net of other income (16,365,127)
Profit from operations 28,403,817
Fair value gain on investments at fair value 843,457
Interest income 17,441
Finance charges (5,851,911)
23,412,804
The following customers from the Africa segment contributed 10% or more to the
Group's revenue:
30 June 2023 30 June 2022
% %
Customer A 35% 38%
Customer B 17% 14%
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
13. Segmental analysis (continued)
For the six months ended 30 June 2022 Africa Rest of World Consolidated
US$ US$ US$
External revenue 128,924,789 9,203,813 138,128,602
Segment profit (loss) 44,394,623 (15,675,189) 28,719,434
Central administration costs and depreciation, net of other income (756,911)
Profit from operations 27,962,523
Fair value gain on investments at fair value (10,265,388)
Interest income 112,808
Finance charges (2,670,575)
Profit before tax 15,139,368
The accounting policies of the reportable segments are the same as the Group's
accounting policies described in note 1. Segment profit/(loss) represents the
profit/(loss) earned by each segment without allocation of central
administration costs, depreciation, interest income, share of losses from
associate, finance charges and income tax. This is the measure reported to the
board for the purpose of resource allocation and assessment of segment
performance.
As at
30 June 2023 31 December 2022
US$ US$
Segment assets:
Africa 555,078,022 506,043,094
Rest of world 73,712,078 59,642,347
Total segment assets 628,790,100 565,685,441
Head office companies 337,534,248 280,828,362
966,324,348 846,513,803
Eliminations * (528,575,843) (459,714,615)
Total assets 437,748,505 386,799,188
Segment liabilities:
Africa 268,648,606 239,012,484
Rest of world 45,628,655 31,752,437
Total segment liabilities 314,277,261 270,764,921
Head office companies 364,979,087 315,694,862
679,256,348 586,459,783
Eliminations * (494,841,996) (438,552,679)
Total liabilities 184,414,352 147,907,104
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
13. Segmental analysis (continued)
For the purposes of monitoring segment performance and allocating resources
between segments the board monitors the tangible, intangible and financial
assets attributable to each segment. All assets are allocated to reportable
segments with the exception of property, plant and equipment used by the head
office companies, certain amounts included in other receivables, and cash and
cash equivalents held by the head office companies.
* Eliminations include intra-group accounts receivable, intra-group accounts
payable and intra-group investments.
Other segment information:
Six months ended
Non-Cash items included in profit or loss: 30 June 2023 30 June 2022
US$ US$
Depreciation
Africa 17,580,762 12,638,195
Rest of world 1,188,018 585,085
Total segment depreciation 18,768,780 13,223,280
Head office companies 253,997 194,168
19,022,777 13,417,448
Loss on disposal of property, plant and equipment
Africa 687,095 225,384
Rest of world - 3,707
Total segment loss on disposal 687,095 229,091
Head office companies 7,184 -
694,279 229,091
Six months ended
30 June 2023 30 June 2022
US$ US$
Impairment on Inventory
Africa
Stock Provision (688,935) 696,950
Stock Write Offs 316,372 11,198
(372,563) 708,148
Rest of world
Stock Provision 4,779 -
Stock Write Offs 375 -
5,154 -
Total segment impairment (367,409) 708,148
Head office companies 825,712 -
458,303 708,148
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
13. Segmental analysis (continued)
Segmental reporting summary by region:
Revenue Non-Current Assets
Six months ended As at
30 June 2023 30 June 2022 30 June 2023 31 December 2022
US$ US$ US$ US$
Middle East/North Africa 57,518,681 57,627,212 78,683,463 77,014,240
South and East Africa 51,618,763 32,979,498 53,314,478 36,970,552
West Africa 37,255,842 39,661,597 60,567,809 56,262,245
Others 7,876,790 7,860,295 37,576,918 28,735,966
154,270,076 138,128,602 230,142,668 198,983,003
The business has considered this segmental distribution to be appropriate as
it represents the discrete areas of operations that make up the Group's
revenue stream.
14. Commitments As at
30 June 2023 30 June 2022
The Group has the following capital commitments at 30 June: US$ US$
Committed capital expenditure 25,192,185 33,225,972
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
15. Contingencies
As a result of the multiple jurisdictions in which the Group operates, there
are a number of ongoing tax
audits. In the opinion of Management, with the exception of the matters
identified below, none of these
ongoing audits represent a reasonable possibility of a material settlement and
as such, no contingent
liability disclosure is required.
Cote D'Ivoire tax
2018-19 tax audit
A tax audit of Capital Drilling Cote D'Ivoire (CDCI) for the two years ended
31 December 2019 is currently
underway. Through negotiations, the total tax claimed has been reduced from
US$1.5 million to US$0.4
million.
The underlying facts would not trigger any additional tax liability and the
tax authorities verbally confirmed
they would undertake a full review. However, a demand for payment was issued
in February 2023 and
accordingly the exposure of US$0.4 million has been provided in full as at 30
June 2023.
MSA - Democratic Republic of the Congo (DRC)
MSA DRC was incorporated in May 2022 but was not formally registered for VAT
until 20 October 2022. In May 2023, the company was assessed for $0.9m of
penalties (300%) for charging VAT on invoices before being registered for VAT
in country.
Management has sought expert advice and the exchange of information with tax
authorities is ongoing. No provision has been recognised at 30 June 2023.
16. Financial instruments
(a) Fair value hierarchy
Financial instruments that are measured in the consolidated statement of
financial position or disclosed at fair value require disclosure of fair value
measurements by level based on the following fair value measurement hierarchy:
• Level 1: quoted prices (unadjusted) in active markets for identical assets or
liabilities;
• Level 2: inputs other than quoted prices included within level 1 that are observable
for the asset or liability, either directly (that is, as prices) or indirectly
(that is, derived from prices); and
• Level 3: inputs for the asset or liability that are not based on observable market data
(that is, unobservable inputs).
As at
30 June 2023 31 December 2022
US$ US$
Level 1 - Listed shares 31,386,250 30,434,599
Level 3 - Unlisted shares and derivative financial assets 10,687,306 8,292,442
42,073,556 38,727,041
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
16. Financial instruments (Continued)
The reconciliation of the investment valuations from 1 January 2023 to 30 June
2023 is as follows:
Level 1 Level 3 Total
At 1 January 2023 30,434,599 8,292,442 38,727,041
Additions 4,211,623 647,723 4,859,346
Disposal (2,356,288) - (2,356,288)
Fair value gain/(loss) 458,372 385,085 843,457
At 30 June 2023 32,748,306 9,325,250 42,073,556
Level 1 Level 3 Total
At 1 January 2022 51,958,649 8,193,018 60,151,667
Additions 8,713,205 297,316 9,010,521
Disposal (10,345,543) - (10,345,543)
Fair value (loss)/gain (19,891,712) (197,892) (20,089,604)
At 31 December 2022 30,434,599 8,292,442 38,727,041
(b) Fair value information
Level 1 shares
Market approach - Listed share price.
The Company's interests in various listed shares are valued at the 30 June
2023 closing prices. No secondary valuation methodologies have been considered
as all the Company's investments are listed on active markets.
Level 3 shares
Market Approach - Market Comparables applying Directors' estimate.
The Directors have reviewed the methodology at 30 June 2023 in the valuation
of Allied and considered the most appropriate valuation methodology is a
multiples-based approach based on comparing the enterprise values of a peer
group with their respective EBITDA (EV/EBITDA) across 2023 and 2024. The peer
average for 2023 used was 3.8x and the average used in 2024 was 3.4x.
For the purposes of the disclosures required by IFRS 13, if the EBITDA
increased by 25% across all the level 3 companies, with all other indicators
unchanged, in aggregate the level 3 investment value included in the balance
sheet would increase from USD10.7 million to USD13.0 million. The related fair
value increase of USD2.3 million would be recognised in profit and loss.
Alternatively, if the average multiples used decrease by 25%, with all other
indicators unchanged, in aggregate the level 3 investment value included in
the balance sheet would decrease from USD10.7 million to USD8.4 million. The
related fair value decreases of USD2.3 million would be recognised in profit
and loss. An adjustment to forecast gold prices would have an impact on the
Enterprise Values of the peer companies. The Directors do not have the
resources available to accurately determine the impact such a change would
have on the valuation of the level 3 companies.
The Directors also considered suitability of peers, specifically the impact
that different mine lives would have across the peers. A full comparison of
the same peer group of West African producing peers was performed and noted
that mine lives were comparable and took into account recent additions in
mining portfolio.
CAPITAL LIMITED
NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS (CONT'D)
For the six months ended 30 June 2023
16. Financial instruments (cont'd)
(c) Fair values of other financial instruments
Level 3 derivative financial assets
The Group's derivative financial assets consist of call options to acquire
additional shares in a non-listed entity. The financial assets have been
valued using the Black Scholes option pricing model by comparing the key
assumptions in the model to a peer group.
17. Events post the reporting date
The directors proposed that an interim dividend of 1.3 cents per share be paid
to shareholders on 3 October 2023. This dividend has not been included as a
liability in these condensed consolidated interim financial statements. The
proposed dividend is payable to all shareholders on the Register of Members on
1 September 2023. The total estimated interim dividend to be paid is US$2.5
million (2022: US$2.5 million). The payment of this dividend will have no tax
consequences for the Group.
CAPITAL LIMITED
STATEMENT OF DIRECTORS' RESPONSIBILITY
For the six months ended 30 June 2023
The directors are responsible for the maintenance of adequate accounting
records and the preparation and integrity of the condensed consolidated
interim financial statements and related information.
The directors are also responsible for the Group's systems of internal
financial control. These are designed to provide reasonable, but not absolute,
assurance as to the reliability of the financial statements, and to adequately
safeguard, verify and maintain accountability for the Group's assets, and to
prevent and detect misstatement and loss. Nothing has come to the attention of
the directors to indicate that any material breakdown in the functioning of
these controls, procedures and systems has occurred during the six months
under review.
We confirm that to the best of our knowledge:
a) the condensed set of consolidated interim financial statements, which has been
prepared in accordance with International Accounting Standard 34, Interim
Financial Reporting, as issued by the International Accounting Standards
Boards gives a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group as required by FCA's Disclosure and
Transparency Rules DTR4.2.4R;
b) the interim management report includes a fair review of the information
required by DTR 4.2.7R and DTR4.2.8R; and
c) there have been no significant individual related party transactions during
the first six months of the financial year and nor have there been any
significant changes in the Group's related party relationships from those
reported in the Group's annual financial statement for the year ended 31
December 2022.
The condensed consolidated interim financial statements have been prepared on
the going concern basis since the directors believe that the Group has
adequate resources in place to continue in operation for the foreseeable
future.
The condensed consolidated interim financial statements were approved by the
board of directors on 15 August 2023.
ON BEHALF OF THE DIRECTORS
Jamie Boyton
Chairman of the Board of Directors
Peter Stokes
Chief Executive Officer
CAPITAL LIMITED
Principal and Emerging 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 and emerging risks associated with the business have not changed
since the year end and are detailed below:
Area Description Mitigation
Reduction in The Group is highly dependent on the levels of mineral exploration, The Group is seeking to balance these risks by building a portfolio of
levels of mining development and production activity within the markets in which it long-term mine-site contracts, expanding its services offering into mine-site
activity operates. A reduction in exploration, development and production based
activities, or in the budgeted expenditure of mining and mineral exploration
activities such as load and haul mining, and also expanding both its customer
companies, will cause a decline in the demand for mining services, as was
and geographic reach.
evident in the 2014 and 2015 financial years.
Risk of Contracts can be terminated for convenience by the client at short notice and Contract renewal negotiations are initiated well in advance of expiry of
Termination without penalty. Guidance is partly based on current contracts in hand, and
contracts to ensure contract renewals are concluded without interruption
the Group derives a significant proportion of its revenue from providing
to services. There are also a wide range of termination clauses across the
services under large contracts. As a result, there can be no assurance that
Group's contracts depending on the size, nature and client involved (i.e., not
work in hand will be realised as revenue in any future period. There could be
all contracts can be terminated for convenience, and some contracts must be
future risks and costs arising from any termination of contract. While the terminated with notice and or require the client to pay us an early
Group has no reason to believe any existing or potential contracts will be termination payment or demobilisation fee).
terminated, there can be no assurance that this will not occur.
In addition, it's important that the Group maintains its project pipeline and
win rate. Any failure by the Group to continue to win new contracts will
impact its financial performance and position.
Risk of Default The Group has financing facilities with external financiers. A default under The Group has a robust system of analysing and forecasting cash and debt
any of these facilities could result in withdrawal of financial support or an positions. The Group is continuing to develop a stronger facilities management
increase in the cost of financing. system, in addition to strengthening and broadening its banking relationships.
CAPITAL LIMITED
Principal and Emerging Risks and Uncertainties (continued)
Area Description Mitigation
Supply chain Disruption to border crossings; equipment being held up in customs. The Group ensures a continual monitoring of movement of goods at all
disruption
relevant borders and assesses back-up options regularly. Inventory levels are
set to allow for a period of disruption. The Group also ensures a local
supplier early bulk purchasing strategy.
Adverse change in local tax laws, regulations and practice. Unforeseen changes to local tax regulations leading to new or higher tax The Group employs a senior international tax specialist in the head of tax
charges; unpredictable tax audit processes. role.
The Group carries out enhanced tax due diligence on incorporation with
identification of strong and well-connected local tax advisers. The Group
obtains written confirmation from local tax authorities in advance of
undertaking major transactions. The Group ensures supporting documentation for
all tax filings are complete and accurate.
Access to a detailed online tax technical database (IBFD) as well as close
links with local and multinational accounting firms. Experienced in-house tax
and compliance resource employed in West Africa with significant regional
experience and a Big-4 tax background.
Risk to Cash Restrictive currency controls which impact ability to repatriate cash from The Group has multiple bank accounts in multiple currencies and seeks to move
Repatriation countries of operation. cash out of restrictive or high-risk jurisdictions as soon as possible.
Decline in Minesite production levels The Group's activity levels and results are to a certain extent dependent on A significant proportion of the Group's revenue is derived from mines which
production levels at clients' mines while revenues are linked to the are already in production. The Group focuses on ensuring execution of work to
production volumes and not to the short-term price of the underlying a high standard and improving its operation to increase its value proposition
commodity. to clients. Application of the Group tender work procurement and approval
processes maximises the likelihood of achieving margins and earnings. In
addition, the Group's diversification of service offering limits the exposure
to one specific area of the business.
CAPITAL LIMITED
Principal and Emerging Risks and Uncertainties (continued)
Area Description Mitigation
Reliance on Key The Group's business relies on a number of individual contracts and business The Group has entered into long-term contracts with its key customers for
Customers alliances and derives a significant proportion of its revenue from a small periods between two to five years. Contract renewal negotiations are initiated
number of key long-term customers and business relationships with a few well in advance of expiry of contracts to ensure contract renewals are
organisations. In the event that any of these customers fails to pay, reduces concluded without interruption to services. The Group has historically had a
production or scales back operations, terminates the relationship, defaults on strong record of completing contracts to term and securing contract
a contract or fails to renew their contract with the Group, this may have an extensions. The Group is selective in the contracts that it enters into to
adverse impact on the financial performance and/or financial position of the allow for options to extend where possible to maximise the contract period and
Group. the return on capital. The Group focuses on ensuring execution of work to a
high standard and improving its operation to increase its value proposition to
clients. Application of the Group tender work procurement and approval
processes maximises the likelihood of securing quality work with commensurate
returns for the risks taken. The Group maintains a work portfolio diversified
by geography, market, activity and client to mitigate the impact of emerging
trends and market volatility. 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.
Labour costs and The Group is exposed to increased labour costs and retention constraints in The Group's labour costs are typically protected by rise and fall mechanisms
availability markets where the demand for labour is strong. Changes to labour laws and
within client contracts, which mitigate the impact of rising labour costs.
regulations
may limit productivity and increase costs of labour. If implemented and
enforced, these types of changes to labour laws and regulations could
adversely impact revenues and, if costs increase or productivity declines,
operating margins.
CAPITAL LIMITED
Principal and Emerging Risks and Uncertainties (continued)
Area Description Mitigation
Lack of equipment The Group has a significant fleet of equipment, and has a substantial ongoing The Group continues to focus on supplier relationships including maintaining
availability requirement for consumables, including tyres, parts and lubricants. If the payment terms and identifying alternative sources.
Group cannot secure a reliable supply of equipment and consumables, there is a
risk that its operational and financial performance may be adversely affected.
Deterioration in Health & Safety record Operations are subject to various risks associated with mining including, in The senior management team, led by the CEO, provide leadership to projects on
the case of employees, personal injury, malaria and loss of life and in the the management of these risks and actively engage with employees at all
Group's case, damage and destruction to property and equipment, levels. The Group has implemented and continue to monitor and update a range
release of hazardous substances into the environment and interruption or of health and safety policies and procedures including equipment standards and
suspension of site operations due to unsafe operations. The occurrence of any standard work procedures. Employees are provided with training regarding risks
of these events could adversely impact the Group's business, financial associated with their employment, policies and standard work procedures.
condition, results of operations and prospects, lead to legal proceedings and Health and Safety statistics and incident reports are monitored throughout our
damage the Group's reputation. In particular, clients are placing an projects and the various management structures of the Group, including the HSE
increasing focus on occupational health and safety, and a deterioration in the committee. Where necessary policies and procedures are updated to reflect
Group's safety record may result in the loss of key clients. developments and improvement needs. The Group HSEQ monitors high risk events
in areas of operation and distributes warnings and guidance as required. The
Group is also closely engaged with its clients to ensure workplace safety and
containment measures are adhered to.
CAPITAL LIMITED
Principal and Emerging Risks and Uncertainties (continued)
Area Description Mitigation
Tender and estimating risk Operations not able to deliver on tendered margins. The Group goes through a rigorous process to determine a price to submit as
part of the tender submission based on a bottom-up costing analysis with a
mark-up. The Group makes use of its extensive historical statistics and its
in-house knowledge base, combined with site visits to obtain contract specific
data. Where contracts are of significant scope, independent cost estimators
are
appointed, with their findings verified by in-house modelling. Some contracts
include pricing protections by way of mechanisms that allow for annual pricing
reviews and/or the application of annual CPI adjustments. Many contracts also
contain mechanisms to allow the Group to end the contract with minimal notice
if continued performance is financially burdensome.
Adverse movements in commodity prices Adverse movements in commodity prices may reduce both exploration budgets and The Group focuses on mine-site low-cost operations where activity is less
the pipeline of mine-site work in the mining sector, which in turn could
susceptible to adverse commodity price movements. In addition, the Group is
reduce the level of demand for the Group's drilling and mining services. This implementing a diversification strategy which is focused on developing new
could have a material impact on the Group's operating and financial service offerings, developing a finance/capital strategy that provides balance
performance. sheet strength and allows for organic and inorganic growth in the business,
and also diversifying through M&A opportunities.
Over exposure to Gold Gold is an important commodity contributing to the Group's order book and The Group is in the process of implementing a diversification strategy in
tender pipeline. If the gold industry were to suffer, it would have a material terms of developing new service offerings, developing a finance/capital
adverse effect on the Group's revenues and profitability. strategy that allows for organic and inorganic growth in the business, and
diversifying through M&A opportunities.
Adverse impact of Risks related to the physical impacts of climate change include increased The Group monitors weather patterns in countries/regions of operation. Fleet
climate change incidence and severity of extreme weather events that could disrupt site deployment is planned giving consideration to those weather patterns, as is
operations and impact the health and safety of our workforce. scheduling of shift work. The Group ensures force majeure clauses are included
within its contracts.
CAPITAL LIMITED
Principal and Emerging Risks and Uncertainties (continued)
Area Description Mitigation
Exposure to currency The Group's contract pricing is in US dollars. However, in certain markets the To minimise the Group's risk, the Group tries to match the currency of
fluctuations funds are received in local currency and some of the Group's costs are also in operating costs with the currency of revenue. Funds are pooled centrally in
local currency or other non-US dollar currencies. Foreign currency the head office bank accounts to the maximum extent possible. The Group has
fluctuations and exchange rate risks between the value of the US dollar and significantly improved processes for the repatriation of funds to the Group's
the value of other currencies may increase the cost of the Group's operations Head Office bank accounts from jurisdictions where exchange control
and could regulations are in effect, and this remains a key focus area.
adversely affect the financial results. As a result, the Group is exposed to
currency fluctuations and exchange rate risks. Arrangements entered into with online FX broking platforms allow greater
visibility of market rates for exotic currencies as well as the major hard
currency trades - allows more challenge of rates being offered by our banking
partners given the limited flexibility to trade with other parties that exists
under the current debt facility agreement with Standard Bank and NedBank.
Higher levels of Inflation Increases in cost of goods and in labour/salary costs related to higher levels The Group ensures accurately pursuing contractual rights under existing rise
of inflation.
and fall mechanisms. It ensures to price contracts with known inflationary
pressures and negotiates robust rise and fall mechanisms.
Reduction in values of Investments held The Group holds investments in a portfolio of both publicly traded and private The Group holds a portfolio of investments in various companies, mitigating
companies. The accounting value of these investments is marked to market at the risk of single company weakness. The Group's Investment Committee actively
each reporting date and the fair value adjustment is accordingly recorded in monitors existing investments for performance and strategic alignment.
the profit and loss account as an unrealised gain or loss. The value of the
investments will change and could materially alter both the Group's reported New investments are required to satisfy a number of criteria with
net assets and net profit position. non-Executive oversight. In the event of fair value investments becoming an
unrealised loss, while this would affect the company's net assets and
profitability, it would not affect going concern or cash flow.
ERP system failure ACCPAC, the current ERP system is not monitored by Sage but by internal Project underway to implement and transfer to new ERP system.
resources, therefore minimising downtime due to necessary maintenance is
reliant on having the appropriate skills internally.
CAPITAL LIMITED
APPENDIX: GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES (UNAUDITED)
The Group presents various Alternative Performance Measures (APMs) as
management believes that these are useful for users of the financial
statements in helping to provide a balanced view of, and relevant information
on, the Group's financial performance in the period.
The following terms and alternative performance measures are used in the half
year results release for the six months ended 30 June 2023.
ARPOR Average revenue per operating rig
EBIT Earnings before interest, taxes and fair value gain/loss
EBITDA Earnings before interest, taxes, depreciation, amortisation and fair value
gain/loss
EBITDA (adjusted for IFRS 16 leases) EBITDA pre fair value gain/ loss on investments, net of cash cost of the IFRS
16 leases
NPAT Net Profit After Tax
Adjusted NPAT Net profit after tax before fair value gain/loss on investments
ADJUSTED EPS Net profit after tax before fair value gain/loss over weighted average number
of ordinary shares
NET CASH (DEBT) Cash and cash equivalents less short term and long-term debt
Reconciliation of alternative performance measures to the financial
statements:
Six months ended
30 June 2023 30 June 2022
US$ US$
ARPOR can be reconciled from the financial statements as per the below:
Revenue per financial statements (US$) 154,270,076 138,128,602
Non-drilling revenue (US$) (50,061,076) (41,617,602)
Revenue used in the calculation of ARPOR (US$) 104,209,000 96,511,000
Monthly Average active operating Rigs 93 93
Monthly Average operating Rigs 124 112
ARPOR (rounded to nearest US$10,000) 188,000 173,000
EBIT and EBITDA can be reconciled from the financial statements as per the
below:
Profit for the period 17,602,570 9,682,662
Taxation 5,810,234 5,456,706
Interest income (17,441) (112,808)
Finance charges 5,851,911 2,670,575
Fair value adjustments (843,457) 10,265,388
EBIT 28,403,817 27,962,523
Gross profit 70,954,496 61,118,149
Administration expenses (23,527,902)
Depreciation (19,022,777) (13,417,448)
EBIT 28,403,818 27,962,523
CAPITAL LIMITED
APPENDIX: GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES (UNAUDITED)
Adjusted net profit and adjusted EPS can be reconciled from the financial
statements as per the below:
30 June 2023 30 Jun 2022
US$ US$
Profit for the period 17,602,570 9,682,662
Depreciation 19,022,777 13,417,448
Taxation 5,810,234 5,456,706
Interest income (17,441) (112,808)
Finance charges 5,851,911 2,670,575
Fair value adjustments (843,457) 10,265,388
EBITDA 47,426,594 41,379,971
30 June 2023 30 Jun 2022
US$ US$
Operating profit (EBIT) 28,403,817 27,962,523
Depreciation, amortisation and impairments 19,022,777 13,417,448
EBITDA 47,426,594 41,379,971
Gross profit 70,954,496 61,118,149
Administration expenses (23,527,902) (19,738,178)
EBITDA 47,426,595 41,379,971
Operating profit (EBIT) 28,403,817 27,962,523
Interest income 17,441 112,808
Finance charges (5,851,911) (2,670,575)
Taxation (5,810,234) (5,456,706)
Adjusted net profit 16,759,113 19,948,050
Profit for the period 17,602,570 9,682,662
Fair value adjustments (843,457) 10,265,388
Adjusted net profit 16,759,113 19,948,050
EBITDA (adjusted for IFRS 16 leases)
EBITDA 47,426,594 41,379,971
Lease payments (3,491,639) (1,483,881)
EBITDA (adjusted for IFRS 16 leases) 43,934,955 39,896,090
CAPITAL LIMITED
APPENDIX: GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES (UNAUDITED)
30 June 31 December 2022
2023
US$ US$
Net debt can be reconciled from the financial statements as per the below:
Cash and cash equivalents 32,059,797 28,379,607
Long-term liabilities (78,384,246) (57,153,863)
Current portion of long-term liabilities (20,147,624) (18,465,290)
Net debt (66,472,073) (47,239,546)
CAPITAL LIMITED
APPENDIX: GLOSSARY AND ALTERNATIVE PERFORMANCE MEASURES (UNREVIEWED)
(Continued)
EBITDA
EBITDA represents profit or loss for the year before interest, income taxes,
depreciation & amortisation and fair value adjustments on financial assets
at fair value through profit and loss and realised gain (loss) on fair value
through profit and loss investments.
EBITDA is a non-IFRS financial measure that is used as supplemental financial
measure by management and external users of financial statements, such as
investors, to assess our financial and operating performance. This non-IFRS
financial measure will assist our management and investors by increasing the
comparability of our performance from period to period.
We believe that including EBITDA assists our management and investors in: -
i. understanding and analysing the results of our operating and
business performance, and
ii. monitoring our ongoing financial and operational strength in
assessing whether to continue to hold our shares. This is achieved by
excluding the potentially disparate effects between periods of depreciation
and amortisation, income (loss) from associate, interest income, finance
charges, fair value adjustment on financial assets at fair value through
profit and loss and realised gain (loss) on fair value through profit and loss
investments, which may significantly affect comparability of results of
operations between periods.
EBITDA has limitations as analytical tools and should not be considered as
alternatives to, or as substitutes for, or superior to, profit or loss for the
period or any other measure of financial performance presented in accordance
with IFRS. Further other companies in our industry may calculate these
measures differently from how we do, limiting their usefulness as a
comparative measure.
EBITDA (adjusted for IFRS 16 leases)
EBITDA (adjusted for IFRS 16 leases) represents profit or loss for the year
before interest, income taxes, depreciation & amortisation, fair value
adjustments on financial assets at fair value through profit and loss and
realised gain (loss) on fair value through profit and loss investments and net
of cash cost of the IFRS 16 leases.
Net cash (debt)
Net cash (debt) is a non-IFRS measure that is defined as cash and cash
equivalents less short term and long-term debt.
Management believes that net cash (debt) is a useful indicator of the Group's
indebtedness, financial flexibility and capital structure because it indicates
the level of borrowings after taking account of cash and cash equivalents
within the Group's business that could be utilised to pay down the outstanding
borrowings. Management believes that net debt can assist securities analysts,
investors and other parties to evaluate the Group. Net cash (debt) and similar
measures are used by different companies for differing purposes and are often
calculated in ways that reflect the circumstances of those companies.
Accordingly, caution is required in comparing net debt as reported by the
Group to net cash (debt) of other companies.
Net Asset Value per share (cents)
Net Asset Value per share (cents) is a non-financial measure taking into
consideration the total equity over the weighted average number of shares used
in the calculation of basic earnings per share.
Management believe that the net asset value per share is a useful indicator of
the level of safety associated with each individual share because it indicates
the amount of money that a shareholder would get if the Group were to
liquidate. Management believes that net asset value per share can assist
securities analysts, investors and other parties to evaluate the Group.
Net asset value per share and similar measures are used by different companies
for different purposes and are often calculated in ways that reflect the
circumstances of those companies. Accordingly, caution is required when
comparing net asset value per share as reported by the Group to net asset
value per share of other companies.
Average revenue per operating rig
ARPOR is a non-financial measure defined as the monthly average drilling
specific revenue for the period divided by the monthly average active
operating rigs. Drilling specific revenue excludes revenue generated from shot
crew, a blast hole service that does not require a rig to perform but forms
part of drilling. Management uses this indicator to assess the operational
performance across the board on a period-by-period basis even if there is an
increase or decrease in rig utilisation.
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