REG - Capital Limited - 2021 Full Year Results
10/03/2022 07:00
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RNS Number : 3261E Capital Limited 10 March 2022
Capital Limited
("Capital", the "Group" or the "Company")
Full Year Results for the year ended 31 December 2021
FULL YEAR FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2021*
2021 2020 % change
Revenue ($ m) 226.8 135.0 68.0%
EBITDA(1) ($ m) 73.3 33.8 116.9%
EBIT(1) ($ m) 51.9 21.6 140.3%
Adjusted net profit ($ m) 36.6 11.2 226.6%
Investment Gains ($ m) 33.7 13.6 147.9%
Net Profit After Tax ($ m) 70.3 24.8 183.5%
Cash From Operations ($ m) 42.6 36.0 18.3%
Capex ($ m) 46.3 42.2 9.6%
Earnings per Share
Basic (adjusted) (cents) 19.2 7.9 141.7%
Basic (cents) 37.0 17.8 108.2%
Final / Interim Dividend per Share (cents) 2.4 1.3 84.6%
Total dividend per Share (cents) 3.6 2.2 63.6%
Adjusted ROCE (%) (3) 22.7 22.2 2.4%
Net cash / (debt) ($m) (31.9) 5.0
Investments ($m) 60.2 27.2 121.4%
Adjusted Net Cash (Including Investments) ($ m) 28.3 32.2 (12.2)%
Net Cash/Equity (%) 12.9 21.9 (41.2)%
*All amounts are in US dollars unless otherwise stated
((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 Limited financial results presented in accordance with
IFRS.
((2) )ROCE calculated utilising 12 months EBIT.
((3) )Adjusted ROCE excludes Mining Assets and Prepayments, Net
Equity Raise proceeds and Sukari prepayment from Capital Employed.
Financial Overview
· FY2021 revenue of $226.8 million, up 68% on FY 2020 ($135.0
million);
· 2021 EBITDA of $73.3 million, up 116.9% on FY 2020 ($33.8
million);
· EBITDA margins increased to 32.3% up from 25.0% in FY 2020;
· Net gains from equity investments of $33.7 million in 2021
(realised + unrealised), increasing the value of Group strategic investments
to $60.2 million, net of cash proceeds, as of 31 December 2021 (31 December
2020: $27.2 million);
· Net Profit After Tax (NPAT) $70.3 million (including investment
gains), an increase of 183.5% on FY 2020 ($24.8 million); and adjusted net
profit after tax of $36.6 million, up 226.6% on FY 2020 ($11.2 million);
· Cash capex of $46.3 million, up 9.6% on FY2020 ($42.2 million);
· Cash from operations of $42.6 million, an increase of 18.3% on FY
2020 ($36.0 million);
· Net cash including investments of $28.3 million, down from net
cash including investments of $32.2 million at year end 2020;
· Basic earnings per share (including investment gains) of 37.0
cents, up 108.2% on FY 2020 (17.8 cents); and adjusted earnings per share of
19.2 cents, up 141.7% on FY 2020 (7.9 cents)
· Declared a final dividend of US$2.4 cents per share, to be paid
on 10 May 2022 which, together with the interim dividend of US$1.2 cents per
share brings total dividends declared for 2021 of US$3.6 cents per share (up
64% on 2020 total dividend of US$2.2 cents per share).
Operational and Strategic Highlights
· Rig fleet utilisation increased to 79% in Q4 2021, up 4% on Q4
2020 (76%) and 34% on Q3 2021 (59%); FY 2021 average utilisation was 75%, an
increase of 27% on FY 2020 (59%);
· Non-drilling revenue contributed 22% of total revenue for 2021,
compared with 2020 (9% 1 (#_ftn1) ), primarily driven by the increased
contribution from mining services and MSALABS, which saw significant growth
through 2021;
· Average monthly revenue per operating rig ("ARPOR") for Q4 2021
at US$184,000, up 7% (Q4 2020: US$172,000) and up 6% on Q3 2021 (US$182,000);
FY 2021 ARPOR was $181,000 up 5.8% on FY 2020 $171,000 as core long-term
contracts continue to perform strongly;
· Safety performance remains world class with the Group remaining
LTI free across eleven sites through 2021, six of which have remained LTI free
in excess of three years;
· Recent contract wins (previously announced):
§ A three-year surface production drilling contract with AngloGold Ashanti at
the Geita Gold Mine, Tanzania. This contract will utilise five rigs from the
existing fleet together with one new rig during 2022, and is anticipated to
generate revenues of $33 million over the contract term;
§ An exploration contract with Firefinch at the Goulamina Lithium mine, Mali,
a JV project between Firefinch and the world's largest lithium producer
Ganfeng;
§ An exploration contract with Tembo Mining at the Kabanga Nickel mine,
Tanzania. This year has seen an investment from BHP intended to accelerate the
development at the project;
§ Expanded grade control services to include underground at North Mara,
Tanzania;
§ A one-year contract extension for underground grade control drilling with
Resolute at the Syama Gold Mine, Mali.
· New contract wins:
§ A three-year underground drilling contract with Barrick at the Jabal Sayid
copper mine, Saudi Arabia;
§ An extension with Cora Gold at the Sanankoro Gold Project for drilling
exploration;
§ An exploration contract with Aton Mining, Egypt.
· Sukari Gold Mine (Egypt) waste mining and expanded drilling
contracts performed ahead of contract targets in 2021:
§ Operations achieved mining quantities above contract in 2021, with all
production phases brought on-line ahead of schedule;
§ The commissioning phase of this contract involved over 400 new employees
with associated new equipment, and concluded its first year of operation
injury free.
· MSALABS has had a very successful 2021:
§ The rollout of the Chrysos'™ PhotonAssay units is progressing well:
· The unit at the Bulyanhulu (Tanzania) laboratory has been
commissioned and commenced operations in October;
· Two further units are due to be commissioned in Val d'Or (Canada)
and the Morila Gold Mine in Mali (80% owned by Firefinch ASX:FFX) in Q1 2022
and Q2 2022 respectively.
· Accordingly, the Group's portfolio of long-term mine-site based
operations increased to ten sites, comprising 18 individual contracts with the
addition of the new contracts with Barrick in Tanzania and Firefinch in Mali;
Outlook
· Revenue guidance for 2022 of $270 to $280 million driven by an
increased drill rig count, contract extensions and expansions from existing
long-term contracts, load and haul waste stripping contract at Sukari, Egypt
running for the whole year at full capacity and MSALABS continuing to grow
through 2022;
· Capital expenditure is expected to be approximately $45 million
in 2022. This will fund an increase to the drill rig count, the expansion of
MSALABS, including a major hub laboratory in Saudi Arabia, as well as
sustaining capex on the enlarged drill fleet and the Sukari mining contract;
· Drill rig fleet size forecast to increase by 11 rigs by the end
of 2022, net of depletion;
· The Sukari earth moving contract continues to perform well, with
the project now safely commissioned and we expect the operation to contribute
at full capacity through 2022;
· Laboratories is seeing strong demand for its services and the
rollout of the Chrysos units, with the business expected to deliver revenues
of approximately $30 million in 2022, almost double revenue in 2021 (FY 2020
$15.6 million);
· Business mix underpinned by long-term mine-site contracts with
blue-chip customers, growing exposure to metals beyond gold, and non-drilling
revenues expected to proportionally increase further in 2022;
· Tendering activity across all business units remains robust, with
a number of opportunities progressing.
Commenting on the results, Jamie Boyton, Executive Chairman of Capital
Limited, said:
'2021 has been another outstanding year for Capital and marks the business's
second consecutive year of material growth. While this has been supported by a
rapid increase in demand over the past 12 months, we have also taken a notable
shift forward in our service offering, increasing our non-drilling revenues to
22% of the Group from just 9% the prior year, while also growing our drilling
business.
In order to drive the growth in the business, we increased our headcount by
1,000 new people through the year, and despite this significant new onboarding
and increased activity across the group, we maintained our industry leading
safety performance, with a TRIFR result of 0.98 (2020: 0.77).
We entered 2021 flagging the disconnect between decade-high commodity prices,
with exploration spending at half the levels of a decade ago. We saw this
begin to correct through early 2021 with a rapid pickup in market activity
evident in our operational metrics. On top of an increased rig count, rig
utilisation increased to 75% in 2021 compared to 59% in 2020, while ARPOR also
increased by 5.8% to $181,000 from 2020. We are continuing to invest in our
drill rig fleet to meet the continued strength in demand we are seeing and
ensuring we have a favourable balance of rig type in the regions where we are
operating. Our focus will nevertheless remain on growing long term contracts
and partnerships with blue-chip customers to reduce the volatility and ensure
the sustainability of the business through the cycles.
Our mining business has taken a sizeable step forward in 2021 with the
exceptional ramp up of the Load & Haul contract at Sukari, which we
delivered ahead of contact expectations. Operations are now fully commissioned
and 2022 will be the first complete year with the earth moving contract at
full run rate. Following the rise in commodity prices, we are seeing an
increase in projects moving forward to development and therefore we expect the
pipeline of new mining contracts to expand in the coming years.
MSALABS also performed well through 2021, setting the foundations for further
growth in the coming years. 2022 will be an exciting year for MSALABS as it
continues the rollout of the revolutionary Chrysos PhotonAssay technology, as
well as developing a major hub laboratory in Saudi Arabia. PhotonAssay, which
provides gold assay results in minutes rather than weeks or months, has the
potential to disrupt the geochemical analysis sector. This technology is a key
driver of growth in MSALABS, with revenues expected to approximately double in
2022 YoY.
Another key contributor to our strong result for the year has been returns
from our equity investments, which have become a core pillar of our Group
strategy. Capital Investments not only contributes through equity returns,
which amounted to $33.7 million in 2021, but has also served as a highly
effective business development tool for several years, with $41 million or 18%
of group revenue coming from investee companies in 2021. This creates a strong
partnership approach to our contracting model and remains core to the
investment strategy.
In view of the significant progress made in 2021, Capital today is a stronger
and more robust business. We will continue to pursue our key strategic
priorities during 2022 and have confidence in maintaining a growth trajectory
in the business, with revenues expected to reach $270-280 million in 2022.'
Results Conference Call
Capital Limited will host a Webcast on Thursday 10 March 2022 at 09.00 am
(London, UK time) to update investors and analysts on its results.
Participants may join the webcast via the like below. Shareholders may also
join the webcast by dialling one of the following numbers, approximately 10
minutes before the start of the call. Participants may also wish to download
the 2021 Results Presentation, which is available by clicking
http://www.capdrill.com/investors/presentations
(http://www.capdrill.com/investors/presentations)
Webcast Link
https://webcasting.buchanan.uk.com/broadcast/6221ec7cd196af24e1e91a0c
(https://webcasting.buchanan.uk.com/broadcast/6221ec7cd196af24e1e91a0c)
Dial-In Details
United Kingdom Toll-Free: 08003589473
United Kingdom Toll: +44 3333000804
PIN: 35312080#
International dial-in numbers - Link
(https://urldefense.proofpoint.com/v2/url?u=https-3A__events-2Dftp.arkadin.com_ev_docs_NE-5FW2-5FTF-5FEvents-5FInternational-5FAccess-5FList.pdf&d=DwMGaQ&c=24Pv9SDmf15C3K1GQEblf0-dR4hG0m_5jejOBrkAV6M&r=QYkWmyFK8Y3e5jgEzqfg7BS4FTqS479bXiF2HYjlTIk&m=ieAtP9kTeBzfQmfbL2SLaqwFb5awB94m5UCaATVhTIJj0orOFv4i-8OBxpmh01Er&s=t71yT1mI7NRQzK3hfBkNUcZIYz52cleNDfaxzcuc5uc&e=)
- ENDS -
For further information, please visit Capital Limited's website
www.capdrill.com or contact:
Capital Limited
+230 464 3250
Jamie Boyton, Executive Chairman
investor@capdrill.com
Giles Everist, Chief Financial Officer
Rick Robson, Executive - Corporate Development
Berenberg
+44 20 3207 7800
Matthew Armitt
Jennifer Wyllie
Detlir Elezi
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
James Husband
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, focusing on the African
markets. The Company's services include: exploration, delineation and
production drilling; load and haul services; mining equipment hire and
maintenance; and geochemical analysis. The Group's corporate headquarters are
in Mauritius and it has established operations in Burkina Faso, Côte
d'Ivoire, Egypt, Guinea, Mali, Mauritania, Nigeria, Saudi Arabia and Tanzania.
Cautionary note regarding forward looking statements
Certain information contained in this report, including any information on
Capital Limited's plans or future financial or operating performance and other
statements that express management's expectations, or estimates of future
performance, constitute forward-looking statements. Such statements are based
on a number of estimates and assumptions that, while considered reasonable by
management at the time, are subject to significant business, economic and
competitive uncertainties. Capital Limited cautions that such statements
involve known and unknown risks, uncertainties and other factors that may
cause the actual financial results, performance or achievements of Capital
Limited to be materially different than the Company's estimated future
results, performance or achievements expressed or implied by those
forward-looking statements. These factors include the inherent risks involved
in exploration and development of mineral properties, changes in economic
conditions, changes in the worldwide price of commodities and project
execution delays, many of which are beyond the control of Capital Limited.
Nothing in the report should be construed as either an offer to sell or a
solicitation to buy or sell Capital Limited securities.
CHAIRMAN'S STATEMENT
2021 has been a transformational year with Capital delivering three record
quarters of revenue growth and the strongest year in our history. We have seen
growth in all our business areas, but most notably a sizeable shift forward in
our service offering with the addition of large scale load and haul services
at Sukari and the beginning of the rollout of the revolutionary Chrysos
PhotonAssay units in our laboratory business, MSALABS. The operational
execution of this growth has been outstanding, with an exceptional safety
performance, maximising the value delivered to shareholders.
We delivered 68% revenue growth, 117% EBITDA growth and 140% EBIT growth. This
is the second consecutive year we have delivered material growth, following
18% YoY growth in revenue in 2020. Amongst this growth however, our core focus
on long life, mine site contracts (88% of revenue in 2021) with blue-chip
customers has remained unchanged to ensure a business that is sustainable
through the cycles.
Our strategy to develop a broader range of services continued successfully
during 2021. The contribution from our non-drilling services increased
significantly during the year to 22% of Group revenues, compared to 9% in
2020, driven primarily by the ramp up of the load and haul operation at Sukari
and the continued expansion of MSALABS.
In 2020, we announced an equity raise to help fund equipment for a waste
mining contract with Centamin at the Sukari Gold mine, which represented the
largest award of business in the Group's history. The ramp up of this
operation in 2021 was ahead of contracted expectations and has reached full
run rate going into 2022, while remaining injury free. This contract is
anticipated to deliver incremental revenues of US$235 - $260 million over a
four-year period.
Our laboratory business, MSALABS, continued to perform well and is positioning
itself for material growth as it rolls out the revolutionary Chrysos
PhotonAssay units. The first of these units was successfully commissioned in
2021 and in 2022 MSALABS will continue to roll out further units, a key driver
of its growth. PhotonAssay technology has the potential to disrupt the
geochemical analysis sector and we are encouraged by the demand we are seeing.
In addition to the expansion in our service offering, our core drilling
business has also gone from strength to strength. As we entered 2021 there was
a clear disconnect between the rapid increase in commodity pricing seen in
2020, compared to capital raisings and exploration budgets, which remained at
close to half the level seen when commodity prices were last at these levels.
This changed early in the year and we saw a rapid and significant increase in
demand which was visible in our utilisation rates in the subsequent three
quarters of the year. Elevated commodity prices have continued into 2022, as
has the strong demand we are seeing for our services.
Our Direct Investments portfolio has also cemented itself as the fourth key
pillar of our strategy. We undertook a significant and well-timed investment
strategy in 2019 as we expanded our operations in West Africa. We have engaged
in direct investments into exploration and mining companies, and drill for
equity, aligning the activity with service contracts. The year-end portfolio
was valued at $60.2 million, up 121% compared to the year end 2020 position of
$27.2 million, with investment gains (predominantly unrealised) for the year
of $33.7 million. This translated into significant net profit growth in 2021
of 184%.
In addition to the investment gains, these positions have cemented key
relationships and partnerships with the investees, with contracts from these
companies generating $41 million of revenue over 2021 (18% of Group revenue).
At the beginning of 2022 we also launched a buyback programme of up to two
million shares. While our focus remains primarily on growth, the buyback
demonstrates both the huge success we achieved in 2021 and also the confidence
we have in the business going forward.
The Board of Directors has declared a final dividend for the 2021 period of
2.4cps ($4.5 million), payable on 10 May 2022 to shareholders on the register
as of 7 April 2022. This brings the total dividend declared in 2021 to 3.6c
per share. The dividend is a result of our solid financial and operating
position.
OPERATIONAL & SAFETY UPDATE
I am extraordinarily proud of our Company's achievements during 2021. Amongst
the significant levels of growth and increased activity, the Group has also
increased its headcount by 1,000 people, a 78% increase YoY. Nevertheless we
maintained the consistency in our operations throughout the year and our
industry leading safety record and I would like to take this opportunity to
thank all our employees for their dedication.
The Group's rig count increased from 94 at the end of 2020 to 109 at the end
of 2021, with a further three rigs undergoing commissioning. The new rigs
supported both existing long-term contracts and new contract wins. We remain
very active with our fleet management in order to maintain our position as the
provider of best-in-class equipment in the regions where we operate. In
addition to the increased fleet size, our rig fleet utilisation increased to
75% in 2021 vs 59% in 2020, while full year ARPOR also increased 5.8% in 2021
to $181,000 (2020: $171,000). This stellar performance is a result of both
improving commodity prices and macro conditions together with our successful
geographical expansion into West Africa. This expansion has delivered regional
revenue exposure beyond our traditional operations in Egypt and Tanzania, and
with it new long-term mine site contracts.
Our portfolio of ten long-term mine site contracts continued to perform well
through 2021 with a number seeing increased rig counts on site for further
support and new services. In addition, we signed multiple new contracts while
also expanding our commodity exposure.
By the nature of both the contracting market and also critically the
geographic regions where we operate, gold mining remains our main exposure.
However, at the beginning of 2022, Capital announced an exploration contract
with Firefinch at the Goulamina Lithium Mine, Mali, a JV project between
Firefinch and the world's largest lithium producer Ganfeng, as well as an
exploration contract with Tembo Mining at the Kabanga Nickel Mine, Tanzania.
Both projects have the potential to be very large, long-life assets and the
latter project has seen an investment from BHP intended to accelerate
development.
For the ramp up of the Sukari mining project we hired over 400 new employees
and purchased 4 excavators, 17 mining trucks and other associated vehicles.
Nevertheless we delivered ahead of our contract terms with the ramp up also
completed with its first year of operation injury free. This outstanding
performance in our first major earth moving contract both reinforces our
relationship with Centamin at Sukari, where we have provided drilling services
since 2005, and also positions us well for future tender awards.
MSALABS is quickly becoming a key growth area for the Group. 2021 saw the
start of the company's rollout of Chrysos PhotonAssay units, with the first
unit now commissioned at Barrick's Bulyanhulu Gold Mine in Tanzania. This
contract marked both the largest contract since MSALABS' establishment, and
the first PhotonAssay unit deployed outside Australia. Two more units were
deployed in Q1 2022, the first in Val d'Or in Quebec, Canada, and the second
at the Morila Gold Mine, Mali. MSALABS will also establish a third major hub
laboratory in Saudi Arabia later this year, which will assist in setting the
foundations for further growth in 2023 and beyond.
Once again, our focus and commitment to the safety of our employees delivered
results significantly better than industry standards, and I congratulate
everyone for their effort. We expect visible safety leadership at all levels
of the business, from the Executive Leadership Team to crews on site, and we
actively invest in training programs to ensure our workforce is skilled,
competent and can identify and mitigate hazards in the workplace. Our Total
Recordable Injury Frequency Rate (TRIFR) was 0.98 per 1,000,000 hours worked.
We also achieved a number of site records and safety milestones during 2021
including:
· 13 years LTIF at Mwanza, Tanzania
· 5 years LTIF at the Syama Gold Mine, Mali
· 5 years LTIF at the North Mara Gold Mine,
Tanzania
· 4 years LTIF at the Geita Gold Mine, Tanzania
· 3 years LTIF at Bamako, Mali
· 3 years LTIF at Hummingbird, Mali
· 2 years LTIF at the Jabal Sayid Copper Mine,
Saudi Arabia
· 1 year LTIF at the Bulyanhulu Gold Mine, Tanzania
· 1 year LTIF at the Bonikro Mine, Cote d'Ivoire
· 1 year LTIF at the Sukari Gold Mine, Egypt
· 1 year LTIF at the Bankan gold project, Guinea
OUTLOOK
As we look to the year ahead, trading conditions continue to point to very
strong demand. Commodity prices, including our main exposure gold, remain at
very high levels which provide strong profitability and cash flows for the
producers and is a positive indicator for continued momentum throughout 2022.
Equity markets also remain highly supportive for the mining industry, with
financings through 2021 at decade highs according to S&P Global Market
Intelligence. Together this suggests a further improvement in exploration
budgets and demand for our services across all of our business units.
Our focus on long-term mine site contracts continues to underpin our business
through 2022. At the end of 2020, we saw an extension and expansion of the
drilling contract at Sukari (in line with the mining contract award) and in
2021 we saw major contract renewals at Geita. These contract renewals provide
clear revenue visibility and a strong foundation for the year ahead.
At Sukari, operations are now fully commissioned, and 2022 will be the first
complete year with the earth moving contract at full run rate. MSALABS is also
at an exciting inflection point, with one Chrysos PhotonAssay unit
successfully commissioned in Q4 2021 and 2022 set to see material growth
driven by the rollout of further units, as well as the construction of the
Group's third major hub lab in Saudi Arabia.
As we enter 2022, our core drilling business has the highest rig count in the
group's history and we are confident in maintaining strong utilisation levels
given the increased activity we are seeing from our existing clients, as well
as the strength we continue to see in commodity pricing. We are also
continuing to invest in our fleet and this will drive a further increase to
our fleet size (net of decommissioning old rigs).
We will continue to execute our key strategic priorities in 2022, focussing on
growing our full-service mining business, growing revenues from our ancillary
services businesses, particularly MSALABS, expanding capacity with our
existing clients and maintaining high levels of utilisation through our fleet.
I would like to take this opportunity to thank all our employees, business
partners, shareholders, our Board of Directors and other stakeholders for
their continued support of our Company.
Jamie Boyton
Executive Chairman
9 March 2022
CHIEF FINANCIAL OFFICER'S REVIEW
OVERVIEW
Capital Limited has delivered a stellar performance in 2021 with all our
business areas achieving growth through the year. We have made
transformational steps through 2021, including expanding our service offering
in order to continue to grow the business even further in 2022 and beyond.
Revenue increased by 68% to $226.8 million (2020: $135.0 million). H2 revenue
($128.1 million) was 30% higher than H1 revenue ($98.7 million) primarily due
to the weighting of the ramp up of the Sukari waste mining contract, but also
new drilling contract wins through the year, an associated increase in rig
count and improved revenues at MSALABS.
Profitability also improved, with margin improvements across all key metrics
on the back of increased expenditure discipline. YoY EBITDA and EBIT increased
by 117% and 140% respectively.
Primarily as a result of our expanded service offering into waste mining and
the associated equipment purchases, our capex remained elevated relative to
2020 with cash capital expenditure of $46.3 million (2020: $42.2 million). In
addition to the Sukari load & haul contract, growth capex funded the
expansion of the rig fleet in 2021 and also deposits for rigs due to arrive
and commission in 2022.
Through 2021 we have increased our debt profile through additional financing
to fund equipment purchases in combination with operating cash flow. We
obtained this financing from Macquarie Bank ($27.7 million) and OEM financing
from Sandvik and Epiroc.
Cash generated from operations was $42.6 million (2020: $36.0 million).
Closing cash was $30.6 million (2020: $35.7 million), aided by an additional
$27.7 million in new financing in the year, with net debt of $31.9 million
(2020: $5.0 million net cash). Weighing on cash flows was the increased capex
outflow associated in particular with the Sukari mining ramp up. Nevertheless
our balance sheet remains in a very strong position with the group finishing
2021 with net cash including investments of $28.3 million.
Our portfolio of long-term mine-site based contracts continues to underpin our
cash flow and growth strategy. Mine-site based contracts represent 88% (2020:
93%) of our Company revenue and growth of this portfolio remains a focus.
Our investment portfolio generated a $33.7 million gain on investments
reflected in the Profit and Loss. This outstanding performance reflects a
significant value increase in a number of investments within the portfolio.
The result is a consequence of the successful 2019 investment strategy.
Investment activity decreased in 2020 and 2021 as the cycle improved and
capital markets became significantly more accommodating to equity issuance.
The Company's strategy has therefore matured and rationalised to a portfolio
of strategic core holdings, while continuing to evaluate new opportunities.
Our focus on long-term mine site contracts both reduces the volatility of
earnings and ensures the sustainability of the business through the cycles.
This stable business platform was demonstrated through 2020 and early 2021
through the COVID-19 pandemic where our portfolio of mine-site based contracts
continued uninterrupted. However, given the sometimes unpredictable nature of
the countries where we operate, we have evaluated a downside model taking the
aggregate effect of the reasonable downside short term risks and demonstrated
that the business is robust to scenarios far worse than experienced or
expected. Refer to Note 1.1 of the Annual Financial Statements for further
detail.
Statement of Comprehensive Income
Reported 2021 2020
$'m $'m
Revenue 226.8 135.0
EBITDA 73.3 33.8
EBITDA (%) 32.3 25.1
EBIT 51.9 21.6
PBT 82.0 34.1
NPAT 70.3 24.8
Basic EPS (cent) 37.0 17.8
Diluted EPS (cent) 36.4 17.6
Table 1: Statement of Comprehensive Income (Summary)
Average rig utilisation increased 16% to 75% (2020: 59%) on a larger average
fleet size of 104 (2020: 98). Average revenue per operating rig (ARPOR) per
month also saw an increase in 2021 to $181,000 (2020: $171,000) attributed to
the increased mobilisation of exploration rigs and some renegotiation of
existing contracts.
Non-drilling revenues saw a notable increase in contribution to Group revenues
in 2021, driven by the ramp up of the Sukari mining contract as well as the
continued ramp up of MSALABS. 2021 contribution to revenue from non-drilling
services was 22% in 2021 (2020: 9%) and is expected to increase further in
2022.
EBITDA increased 117% to $73.3 million delivering a 32.3% margin (2020: $33.8
million/25.0%).
EBIT increased 140% to $51.9 million delivering a 22.9% margin (2020: $21.6
million/16.0%).
Profit Before Tax (PBT) increased by 141% to $82.0 million (2020:
$34.1million) impacted by Net Interest of $3.6 million (2020: $1.1 million)
and benefitting from an investment gain of $33.7 million (2020: $13.6 million
gain). These investments were aligned to activity with service contracts and
provided greater revenue and earnings. Depreciation of $21.4 million (2020:
$12.2 million), flat as a percentage of revenue at 9%.
NPAT increased 184% to $70.3 million (2020: $24.8 million). The improved NPAT
benefitted from net gains on unrealised equity investments of $33.7 million
(2020: $13.6 million gain).
The Effective Tax Rate for 2021 was 14.3% (2020: 27.4%). The decrease YoY
reflects adjustments in 2020 that did not recur in 2021. In 2020 tax included
a $2.8m adjustment in respect of prior periods' assessments which were
finalised in 2020. The tax recognised in respect of prior periods in 2021 was
$0.2 million. As the Group operates in multiple jurisdictions, there is an
inherent uncertainty in the interpretation of income tax laws. As at 31
December 2021, the Group had uncertain income tax positions with an assessment
valued at $2.0 million (2020: $2.7 million). The Group has recognised a
provision of $0.2 million (2020: $0.9 million) as management's best estimate
of the likely exposure.
As at 31 December 2021, the Group had uncertain income tax positions with an
assessment valued at $2.0 million (2020: $2.7 million). The Group has
recognised a provision of $0.2 million (2020: $0.9 million) as management's
best estimate of the likely exposure.
The Basic Earnings Per Share (EPS) for the year increased 108% to 37.0 cents
(2020: 17.8 cents). The weighted average number of ordinary shares used in the
earnings per share calculation was 189,765,149 (2020: 138,367,746).
The substantial growth in Earnings per Share was driven by the strong
operating performance and investment gains.
Statement of Financial Position
Reported 2021 2020
$'m $'m
Non-current assets 162.4 91.1
Current assets 189.1 135.2
Total assets 351.5 226.3
Non-current liabilities 53.0 26.5
Current liabilities 75.6 51.8
Total liabilities 128.6 78.3
Shareholders' equity ((1)) 219.2 146.7
Table 2: Statement of Financial Position (Summary)
((1)) Excludes non-controlling interest of $3.8 million
As at 31 December 2021, shareholders' equity increased by 49.4% driven
primarily by strong net profit of $70.3 million. The Group distributed
dividends of $4.7 million (2020: $2.2 million) to shareholders.
The total rig fleet size at the end of 2021 was 109 drill rigs with 3 further
rigs undergoing commissioning (2019: 94).
Overall PPE increased from $89.0 million in 2020 to $143.6 million in 2021,
reflecting depreciation of $21.4 million (2020: $12.2 million), assets
disposed of $0.5 million (2020: $0.8 million) and additional operating capital
expenditure of $75.7 million (2020: $48.7 million).
Current assets increased to $189.1 million (2020: $135.2million). Inventory
increased by $13.2 million to $37.9 million (2020: $24.7 million) due to
increased inventory levels primarily in Egypt. Prepaid expenses decreased by
$10.7 million to $17.7 million (2020 $28.4 million). Cash and cash equivalents
decreased by $5.1 million to $30.6 million (2020:$35.7 million). Investments
held of $60.2 million (2020: $27.2 million) are the fair value of trade
investments.
Non-current liabilities of $53.0 million (2020: $26.5 million) includes
$45.6million (2020: $26.1 million) of long term loans. Total long term debt
includes $15 million of the renewed Revolving Credit Facility, a $37.7 million
asset backed facility with Macquarie and OEM financing direct through Epiroc
& Sandvik .
Current liabilities consisted of trade and other payables, $46.5 million
(2020: $39.7million), current portion of long-term liabilities $16.9 million
(2020: $4.6 million) and tax liabilities of $10.0 million (2020: $7.2
million). Trade and other payables includes increased trade payables of $22.1
million (2020: $19.9 million) due to increased activity levels and investment
in the Sukari contract.
Statement of changes in equity
Reported 2021 2020
$'m $'m
Opening equity 148.1 87.0
Net proceeds from Equity raise - 37.2
Share based payments 2.0 1.4
Total comprehensive income 70.3 24.7
Dividends paid (4.8) (2.2)
Gain on change in ownership 5.6 -
NCI ex Business Combination 1.7 -
Closing equity 222.9 148.1
Table 3: Statement of changes in equity (Summary)
Statement of Cash Flows
Reported 2021 2020
$'m $'m
Net cash from operating activities 30.4 28.3
Net cash used in investing activities (50.1) (60.7)
Net cash generated from/(used in) financing activities 15.5 50.1
Net (decrease)/increase in cash and cash equivalents (4.2) 17.7
Opening cash and cash equivalents 35.7 17.6
Translation of foreign currency cash (0.9) 0.4
Closing cash and cash equivalents 30.6 35.7
Table 4: Statement of Cash Flows (Summary)
Reconciliation of net cash (debt) position
Reported 2021 2020
$'m $'m
Net cash at the beginning of the year 5.0 4.4
Net (decrease)/increase in cash and cash equivalents (4.2) 17.7
(increase) in long term liabilities (31.8) (17.5)
Translation of foreign currency cash (0.9) 0.4
Net cash at the end of the year (31.9) 5.0
Table 5: Reconciliation of net cash (debt) position
Cash generated from operations was $42.6 million (2020: $36.0 million), an
increase of 18.3% year-on-year.
The investing cash flow have decreased year-on-year with some investments,
including prepayments, for the new Sukari contract occurring in 2020. We
continued to invest through 2021, however, both to complete the ramp up for
the Sukari mining contract as well as increase our drill rig count to meet
existing client requirements and maintain fleet operational readiness.
Financing activities included the dividend cash payment of $4.8 million (2019:
$2.2 million).
The dividend history for the past three years is as follows:
H1 2019 FY 2019 H1 2020 FY 2020 H1 2021 FY 2021
Declaration 22 Aug 2019 19 Mar 2020 20 Aug 2020 18 Mar 2021 19 Aug 2021 10 Mar 2022
Cents per share 0.7 0.7 0.9 1.3 1.2 2.4
Dividend amount ($'m) $0.95 $0.96 $1.23 $2.47 $2.28 $4.55
Principal Risks and Uncertainties
Given the breadth of operations and the geographies and markets in which the
Group operates, a wide range of risk factors and uncertainties have the
potential to impact Capital. While Capital attempts to mitigate and manage
risks where it is efficient and practicable to do so, there is no guarantee
these efforts will be successful. 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.
Outlined below is an overview of a number of material risks facing Capital.
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 are:
Area Risk Description Risk Mitigation
Reduction in levels of mining activity
The Group is highly dependent on the levels of mineral exploration, The Group is seeking to balance these risks by building a portfolio of long-
development and production activity within the markets in which it operates. term mine-site contracts, expanding its services offering into mine-site based
A reduction in exploration, development and production activities, activities such as load and haul mining, and also expanding both its customer
and geographic reach.
or in the budgeted expenditure of mining and mineral exploration companies,
will cause a decline in the demand for mining services, as was evident in the
2014 and 2015 financial years.
Risk of Termination
Contracts can be terminated for convenience by the client at short notice and Contract renewal negotiations are initiated well in advance of expiry of
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).
Group has no reason to believe any existing or potential contracts will be
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.
Supply chain disruption
Disruption to border crossings; equipment being held up in customs The Group ensures a continual monitoring of movement of goods at all 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 carries out enhanced tax due diligence on incorporation with
charges; unpredictable tax audit processes. 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.
Risk to Cash Repatriation
Restrictive currency controls which impact ability to repatriate cash from The Group has multiple bank accounts in multiple currencies and seeks to move
countries of operation. cash out of restrictive or high-risk jurisdictions as soon as possible.
The import documentation process is being improved and the process
increasingly automated.
Declines 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.
production volumes and not to the short-term price of the underlying
commodity. 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 achieving margins and earnings. In addition, the
Group's
diversification of service offering limits the exposure to one specific area
of the business.
Reliance on Key Customers
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
alliances, and derives a significant proportion of its revenue from a small periods between two to five years. Contract renewal negotiations are
number of key long- term customers and business relationships with a few
organisations. In the event that any of these customers fails to pay, reduces initiated well in advance of expiry of contracts to ensure contract renewals
production or scales back operations, terminates the relationship, defaults on are concluded without interruption to services.
a contract or fails to renew their contract with
the Group, this may have The Group has historically had a strong record of completing contracts to term
and securing contract extensions. The Group is selective in the
an adverse impact on the financial performance and/or financial position of
the Group. contracts that it enters into to allow for options to extend where possible to
maximise the contract period and 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 availability
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
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.
Risk of poor performance due to lack of equipment availability
The Group has a significant fleet of equipment, and has a substantial ongoing The Group continues to focus on supplier relationships including maintaining
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 Executive Chairman, Executive Leadership Team and managers provide
the case of employees, personal injury, malaria and loss of life and in the leadership to projects on the management of these risks and actively engage
Group's case, damage and destruction to property and equipment, release of with employees at all levels.
hazardous substances into the environment and interruption or suspension of
site operations due to unsafe operations. The occurrence of any of these The Group has implemented and continue to monitor and update a range of health
events could adversely impact the Group's business, financial condition, and safety policies and procedures including equipment standards and standard
results of operations and prospects, lead to legal proceedings and damage the work procedures. Employees are provided with training regarding risks
Group's reputation. In particular, clients are placing an increasing focus on associated with their employment, policies and standard work procedures.
occupational health and safety, and a deterioration in the Group's safety Health and Safety statistics and incident reports are monitored throughout our
record may result in the loss of key clients. projects and the various management structures of the Group, including the HSE
committee. Where necessary policies and procedures are updated to reflect
developments and improvement needs.
The Executive - 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.
Risk of Mispricing Contracts The Group is reliant on its ability to price contracts accurately. Contract The Group goes through a rigorous process to determine a price to submit as
prices are generally set at the-outset of a customer contract following a part of the tender submission based on a bottom-up costing analysis with a
competitive tender process. 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.
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.
Risk of non-compliance with climate related reporting regulations Non-physical risks arise from a variety of policy, regulatory, legal, The Group has recognised the need for the appointment of a Sustainability
financing and investor responses to the challenges posed by climate change. Manager. It has engaged with expert consultants in this field to establish
emissions reporting, guidance and publications. Additionally it has
established a separate Sustainability Committee to drive the ESG process
forward.
Communicable disease outbreaks, including COVID-19 A large-scale outbreak in one of our operating jurisdictions may lead to The Group undertakes extensive planning to facilitate the mobility of its
interruptions in operations, closures at mine sites, inability to source international and regional expatriate workforce as the Company manages
supplies or consumables, higher volatility in the global capital and commodity international flight cancellations and COVID-19 travel restrictions. The Group
markets, adverse impacts on investment sentiment and economies. Ongoing also monitors other communicable disease outbreaks relevant to the location of
restrictions on travel could significantly impair the Group's ability to the Group's operations in order to implement its planned respoibse strategy
manage its businesses effectively. when needed.
The Group's current key priorities on COVID-19 are:
protecting our people with a focus on their wellbeing
- to play our role in limiting the spread of the virus
- delivering value for our clients and stakeholders
- maintaining the strongest possible financial position.
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 pages 50
to 59.
The Directors have carried out a robust assessment of the emerging and
principal risks facing the Group over the coming three years, 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 54 to 56.
Taking account of the Group's position, emerging 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.
The review is a robust consideration of all risk factors and sensitivities.
Whilst all the risks identified could have an impact on the Group's
performance, the specific risks which could potentially impact the Group's
financial position / viability include:
· A deterioration in global demand and commodity prices;
· Non-renewal of key contracts within the time frame;
· Idled mining equipment at the end of the large scale load &
haul contract;
· A potential decrease in turnover due to a prolonged operational
disruption such as political unrest; and
· Increases in the Group's cost base.
Given the Group had minimal operational impacts from COVID-19 over the past
two years, the Directors no longer view it as a significant risk to the
Group's performance and financial position.
In view of the recent escalation of the Russia-Ukraine conflict and sanctions
imposed on Russia and Belarus, the Directors have considered the likely impact
on the Group as detailed in Note 1.1 and assessed the risk to the Group's
operations as minor. The Directors will continue to carefully assess the
impact of this situation on the Group's operations.
The evaluation of the potential downturn in commodity pricing considered the
long term nature of the majority of our contracts, the low operating costs of
the mines where we operate, the liquidity of the company, its robust balance
sheet and good relationship with financiers.
The evaluation of mining equipment remaining idle at the end of the mining
contract considered that the asset backed debt facilities drawn to purchase
the equipment over the life of the contract and therefore would not affect
group viability if left idled for a period.
The Directors have also evaluated short term major disruptions from due to
political events and while these risks are considered remote, in such a
scenario, the Group would be able to continue operating without reaching its
borrowing capacity nor breaching its covenants, given the diversification of
the company's geographic mix and through additional measures available to
mitigate the impact on the Group's liquidity and cash flows such as
reduction in inventories and capital expenditure and renegotiation of creditor
terms.
The Directors have also reviewed the forecasts and downward scenario against
the Group's current and projected future net cash/debt and liquidity position.
The Group closed the financial year with a net debt(1) position of $31.9
million (2020: $5.0 million net cash). The revolving credit facility has
financial covenants interest cover, debt-equity ratio, gross debt to EBITDA
and tangible net worth and is not due for renewal until June 2023.
A three-year period is considered appropriate for this assessment because:
· It is the period covered by the strategic plan;
· It is aligned with the terms of our principle financing
facilities;
· The majority of our major contracts are for a period of three to
five years; and
· It enables a high level of confidence, even in extreme adverse
events, due to a number of factors such as:
o 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;
o Low levels of gearing and strong debt capacity;
o Flexibility of cash outflows including capital expenditure and dividend
payments; and
o The Group's long-term contracts, 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
Giles Everist
Chief Financial Officer
9 March 2021
Financial Results
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
For the year ended 31 December 2021
CONSOLIDATED
2021 2020
$ $
Revenue 226,793,266 134,961,874
Cost of sales (120,491,246) (80,065,718)
Gross profit 106,302,020 54,896,156
Administration expenses (33,027,346) (21,074,206)
Depreciation (21,397,355) (12,197,072)
Profit from operations 51,877,319 21,624,878
Interest income 244,998 256,557
Finance charges (3,833,766) (1,364,222)
Fair value gain/(loss) on investments at fair value 33,716,756 13,574,332
Profit before tax 82,005,307 34,091,545
Taxation 4 (11,716,529) (9,328,357)
Profit for the year 70,288,778 24,763,188
Other comprehensive income:
Items that will not be reclassified to profit or loss:
Movement in other reserve
- -
Total other comprehensive income for the year - -
Total comprehensive income for the year 70,288,778 24,763,188
Earnings per share:
Basic operational earnings per share (cents per share) 5 19.21 7.95
Diluted operational earnings per share (cents per share) 5 18.91 7.86
Basic earnings per share (cents per share) 5 36.98 17.76
Diluted earnings per share (cents per share) 5 36.40 17.55
Profit (loss) attributable to:
Owners of the parent 70,174,784 24,571,452
Non-controlling interest 113,994 191,736
70,288,778 24,763,188
Other comprehensive income (loss) attributable to:
- 288,651
Owners of the parent - -
Non-controlling interest - -
- -
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 December 2021
Notes 2021 2020
$ $
ASSETS
Non-current assets
Property, plant and equipment 7 143,598,399 88,970,683
Right-of-use assets 9,851,343 629,657
Goodwill 1,252,348 1,252,348
Intangible assets 1,282,269 276,248
Prepaid expenses and other assets 6,460,000 -
Total non-current assets 162,444,359 91,128,936
Current assets
Inventory 10 37,935,112 24,689,102
Trade and other receivables 42,212,147 18,903,656
Prepaid expenses and other assets 17,681,623 28,394,850
Investments at fair value 60,151,667 27,167,095
Taxation 499,361 359,970
Cash and cash equivalents 30,577,249 35,701,894
Total current assets 189,057,159 135,216,567
Total assets 351,501,518 226,345,503
EQUITY AND LIABILITIES
Equity
Share capital 8 19,006 18,878
Share premium 8 60,900,119 60,169,426
Equity-settled employee benefits reserve 3,185,450 1,926,994
Other reserve 190,056 190,056
Retained earnings 154,879,201 84,384,101
219,173,832 146,689,455
Non-controlling interest 3,767,589 1,389,315
Total equity 222,941,421 148,078,770
Non-current liabilities
Loans and Borrowings 9 45,567,668 26,112,602
Lease liabilities 7,354,745 337,233
Deferred tax liabilities 34,196 13,755
Total non-current liabilities 52,956,609 26,463,590
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)
As at 31 December 2021
2021 2020
$ $
Current liabilities
Trade and other payables 46,500,122 39,711,217
Taxation 9,979,250 7,174,749
Loans and Borrowings 16,887,692 4,581,111
Lease liabilities 2,236,424 336,066
Total current liabilities 75,603,488 51,803,143
Total liabilities 128,560,097 78,266,733
Total equity and liabilities 351,501,518 226,345,503
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 31 December 2021
Share Share Equity Other reserve Retained earnings Non-controlling interest Total
capital
premium
settled
employee $
benefits
reserve
Note
$ $ $ $ $ $
CONSOLIDATED
Balance at January 1, 2020 13,625 22,495,287 974,118 261,301 62,004,344 1,199,681 86,948,356
Issue of shares 5,253 40,743,147 (458,740) - - - 40,289,660
Expenses paid on equity raise - (3,069,008) - - - - (3,069,008)
Recognition of share-based payments - - 1,411,616 - - - 1,411,616
Purchase of shares from minority - - - - - (2,102) (2,102)
Movement to intangible assets - - - (71,245) - - (71,245)
Total comprehensive (loss) income for the year - - - - 24,571,452 191,736 24,763,188
Profit for the year - - - - 24,571,452 191,736 24,763,188
Other comprehensive (loss) income for the year, net of tax - - - - - -
-
Dividends paid - - - - (2,191,695) - (2,191,695)
Balance at 31 December 2020 (Audited) 18,878 60,169,426 1,926,994 190,056 84,384,101 1,389,315 148,078,770
Issue of shares 128 730,693 (730,821) - - - -
Recognition of share-based payments - - 1,989,277 - - - 1,989,277
Adjustment arising from change in non-controlling interest 5,071,688 2,264,280 7,335,968
Total comprehensive income for the year - - - - 70,174,784 113,994 70,288,778
Profit for the year - - - - 70,174,784 113,994 70,288,778
Other comprehensive income for the year, net of tax - - - - - -
-
Dividends paid 6 - - - - (4,751,372) - (4,751,372)
Balance at 31 December 2021 19,006 60,900,119 3,185,450 190,056 154,879,201 3,767,589 222,941,421
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the year ended 31 December 2021
CONSOLIDATED
Notes 2021 2020
$ $
Operating activities:
Cash generated from operations 11 42,607,564 35,987,566
Interest received 244,998 256,557
Finance charges paid (3,423,815) (1,340,098)
Taxation paid (9,030,977) (6,577,555)
Net cash generated from operating activities 30,397,770 28,326,470
Investing activities:
Purchase of property, plant and equipment (46,303,585) (42,232,001)
Purchase of investments (9,150,084) (6,398,269)
Proceeds from sale of investments at fair value 9,774,463 6,562,856
Proceeds from disposal of property, plant and equipment
68,116 42,990
Purchase of intangible asset (1,006,021) (44,302)
Cash paid for asset acquisition - (716,752)
Cash paid in advance for property, plant and equipment (3,548,794) (17,933,019)
Proceeds from sale of other investments 107,805 -
Net cash from investing activities (50,058,100) (60,718,497)
Financing activities:
Proceeds from new loans 27,669,435 16,000,000
Repayment of loans (6,973,921) (1,062,766)
Repayments of leases - principal (946,920) (453,611)
Advance payment on ROU assets (418,782) -
Dividend paid 6 (4,751,372) (2,191,695)
Gross proceeds on equity raise - 40,289,660
Expenses paid on equity raise - (2,486,602)
Amount received from non-controlling interest on rights issue 875,968 -
Net cash from financing activities 15,454,408 50,094,986
Total cash movement for the year
(4,205,922) 17,702,959
Cash and cash equivalents at the beginning of the year 35,701,894 17,620,623
Effect of exchange rate movement on cash balances (918,723) 378,312
Total cash at end of the year 30,577,249 35,701,894
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
1. Basis of preparation
The 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 directors
are responsible for the preparation of the preliminary announcement.
The 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 2021 Annual Consolidated Financial Statements have been prepared in
accordance with IFRS. The 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 2021 and 2020 does
not constitute the annual financial statements. The annual consolidated
financial statements for the year ended 31 December 2020 and 2021 were
completed and received an unmodified audit report from the Company's Auditors.
2. Operations during the year
Capital Limited (the "Company") is incorporated in Bermuda. The Company and
its subsidiaries (the "Group") provide drilling services including but not
limited to exploration, development, grade control and blast hole drilling
services, mining services including but not limited to earthmoving, fleet
management and mine management, mineral analytical services including but not
limited to geochemical analysis and laboratory management, maintenance
services, including but not limited to fleet maintenance and distribution of
specialist mining supplies and rig site technology services including but not
limited to equipment rental, survey and geophysical logging and borehole
management software services for mining and mining exploration companies.
During the year ended 31 December 2021, the Group provided drilling services
in Burkina Faso, Cameroon, Côte d'Ivoire, Guinea, Egypt, Kenya, Mauritania,
Mali, Saudi Arabia and Tanzania. Mining services are provided in Egypt and
mineral analysis are provided in Canada, Guyana, Mauritania, Nigeria, Ivory
Coast, Mali and Tanzania. 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 2021
3. Segment analysis (continued)
· Africa: Derives revenue from the provision of drilling and mining services, equipment
rental, IT support services and mineral assaying.
· Rest of world: Derives revenue from the provision of drilling services, equipment rental, IT
support services and mineral assaying. The segment relates to jurisdictions
which contribute a relatively small amount of external revenue to the Group.
The following is an analysis of the Group's revenue and results by reportable
segment:
Africa Rest of world Consolidated
$ $ $
2021
External revenue 212,730,761 14,062,504 226,793,266
Segment profit (loss) 84,884,225 (31,732,012) 53,152,213
Central administration costs and depreciation (1,274,894)
Profit from operations 51,877,319
Interest income 244,998
Finance charges (3,833,766)
Fair value gain on investments at fair value 33,716,756
Profit before tax 82,005,307
2020 Audited
External revenue 118,892,158 16,069,716 134,961,874
Segment profit (loss) 42,983,120 (19,213,658) 23,769,462
Central administration costs and depreciation (2,144,584)
Profit from operations 21,624,878
Interest income 256,557
Finance charges (1,364,222)
Net loss on financial assets at fair value through profit and loss 13,574,332
Profit before tax 34,091,545
The following customers from the Africa segment contributed 10% or more to the
Group's revenue
2021 2020
% %
Customer A 16% 22%
Customer B 37% 30%
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
CONSOLIDATED
2021 2020
$ $
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 421,186,192 276,239,160
Rest of world 75,429,655 48,615,789
Total segment assets 496,615,847 324,854,949
Head office companies 278,034,723 209,060,235
774,650,570 533,915,184
Eliminations (423,149,052) (307,569,681)
Total Assets 351,501,518 226,345,503
Segment liabilities:
Africa 226,314,805 150,572,691
Rest of world 28,407,677 37,338,422
Total segment assets 254,722,482 187,911,113
Head office companies 269,589,374 189,124,661
524,311,856 377,035,774
Eliminations (395,751,759) (298,769,041)
Total Liabilities 128,560,097 78,266,733
Segmental reporting summary by region:
Revenue Non-current assets
e
2021 2020 2021 2020
Middle East/North Africa 89,307,774 44,620,151 75,919,256 41,357,995
South & East Africa 52,055,578 43,448,759 34,338,287 12,246,215
West Africa 78,186,571 39,699,664 39,508,301 24,682,269
Others 7,243,343 7,193,300 12,678,515 12,842,457
226,793,266 134,961,874 162,444,359 91,128,936
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.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
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 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, Zambia,
Mauritania and Ivory Coast.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
CONSOLIDATED
2021 2020
$ $
5. Earnings per share
Basic earnings per share
The earnings and weighted average number of ordinary shares used in the
calculation of basic earnings per share are as follows:
Earnings for the year, used in the calculation of basic earnings per share 24,571,452
70,174,784
Earnings for the year, used in the calculation of basic operational earnings 10,997,120
per share
36,458,028
Weighted average number of ordinary shares for the purposes of basic earnings 189,765,149 138,367,746
per share
Basic operational earnings per share (cents) 19.21 7.95
Basic earnings per share (cents) 36.98 17.76
Diluted earnings per share
The earnings used in the calculations of all diluted earnings per share
measures 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 189,765,149 138,367,746
earnings per share
Shares deemed to be issued for no consideration in respect of:
- Dilutive share options (#) - 149,023
- Effect of STIP and LTIP shares 3,021,654 1,478,469
Weighted average number of ordinary shares used in the calculation of diluted 192,786,803 139,995,238
earnings per share
Diluted operational earnings per share (cents) 18.91 7.86
Diluted earnings per share (cents) 36.40 17.55
(#) Share options granted in the previous year were anti-dilutive in nature
and were not considered in the calculation of diluted earnings per share of
the previous year.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
CONSOLIDATED
2021 2020
$ $
6. Dividends
Dividends paid:
Final dividend in respect of the year 4,751,372 2,191,695
Total dividends paid 4,751,372 2,191,695
During the 12 months ended 31 December 2021, a dividend of 1.3 cents (2020:
0.7 cent) per ordinary share, totalling to $2,470,714 (2020: $958,866) was
declared as the final dividend for 2020 and paid to the shareholders on 04 May
2021 (2020: 04 May 2020) followed by a further dividend of 1.2 cents (2020:
0.9 cents) per share which was declared as interim dividend for 2021 totalling
$2,280,658 (2020: $1,232,828) and paid on 24 September 2021 (2020: 25
September 2020). The total dividend paid is $4,751,372 (2020: $2,191,695).
In respect of the year ended December 31, 2021, the Directors propose that a
final dividend of 2.4 cents (2020: 1.3 cents) per share be paid to
shareholders on 10 May 2022 (2020: 04 May 2021). 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 7 April 2022 (2020: 9 April 2021). The total estimated final
dividend to be paid is $4.59 million (2020: $2.47 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 2021, the Group spent $75.7 million (2020:
$46.9 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 $0.5 million (2020:
$0.8 million) during the year. A loss of $0.5 million (2020: $0.8 million) was
incurred on the disposal of property, plant and equipment. Not reflected in
the Cash Flow is a $2.5 million asset finance facility obtained from Epiroc
Financial Solutions for the purchase of 3 Rigs, $8.5 million asset finance
facility obtained from Sandvik for the purchase of equipment and $0.7 million
of assets purchased on credit.
8. Share capital
Authorised
2,000,000,000 (2020: 2,000,000,000) ordinary shares of 0.0001 cents (2020: 200,000 200,000
0.0001 cents) each
Number of ordinary shares issued
190,054,838 (2020: 188,780,903) ordinary shares of 0.0001 cents (2020: 0.0001 19,006 18,878
cents) each
Share premium
Balance at the beginning of the year 60,169,426 22,495,287
Share issue 730,693 37,674,139
Balance at the end of the year 60,900,119 60,169,426
On 25th March 2021, the Company issued 1,273,935 new common shares (valued at
$730,821) pursuant to the Company's employee short term incentive plan. The
shares rank pari passu with the existing ordinary shares. Fully paid
ordinary shares which have a par value of 0.01 cents, carry one vote per share
and carry rights to dividends.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
9. Loans and Borrowings
Long term liabilities consist of
(a) $15 million revolving credit facility ("RCF") provided by Standard
Bank (Mauritius) Limited
The RCF was renewed on 30 July 2020 for a further term of three years. The
interest rate on the RCF is the prevailing three month US LIBOR plus a margin
of 6.5% (payable quarterly in arrears) and an annual commitment fee of 2.275%
of the undrawn balance. The RCF is secured by various pledges over the shares
and claims of the Group's entities in Cote d'Ivoire and Tanzania together with
the assignment of material contracts and their collection accounts in these
jurisdictions and a debenture over the rigs in Tanzania. The facility was
fully drawn as at 31 December 2021.
(b) $ 3.8 million credit facility provided by Epiroc Financial Solutions
AB
The facility was signed on 6 September 2019 and drawn down against the
purchase of five rigs. The term of the facility is four years repayable in 46
monthly instalments. Interest is charged at a with a fixed rate of 8.47% per
annum (payable monthly in arrears). As at 31 December 2021, an amount of $1.8
million (2020: $2.7 million) remained outstanding under this facility.
(c) $2.6 million credit facility by Epiroc Financial Solutions AB
The facility was signed on 26 November 2020 and drawn down against the
purchase of three rigs. The term of the facility is 4 years repayable in 46
monthly instalments. Interest is charged at a fixed rate of 8.25% per annum
(payable monthly in arrears). As at 31 December 2021, an amount of $1.9
million (2020: $ 2.6 million) remained outstanding under this facility.
(d) $2.5 million credit facility by Epiroc Financial Solutions AB
This new facility was signed on 01 May 2021 and drawn down against the
purchase of three rigs. The facility is repayable in 46 monthly instalments.
The interest rate is the prevailing three-month US LIBOR plus a margin of
4.8%. As at 31 December 2021, an amount of $2.4 million remained outstanding
under this facility.
(e) $37.7 million term loan provided by Macquarie Bank Limited (London
Branch)
On 25th September 2020, the Group entered into a 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 US LIBOR plus a margin of 7.75% per annum
(payable quarterly in arrears). The loan is secured over certain assets owned
by the Group and currently located in Egypt and Cote d'Ivoire together with
guarantees provided by Capital Limited, Capital Drilling Egypt LLC and Capital
Mining Services SARL. The Group drew an additional $27.7 million in 2021. The
facility was fully drawn as at 31 December 2021 (2020: fully drawn).
During the year under review, the Group has complied with all covenants that
attached to both the RCF and the term loan.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
9. Loans and Borrowings (Cont'd)
(f) $8.5 million term loan facility with Sandvik Financial Services AB
(PUBL)
On 19 November 2020, the Group entered into a new term loan facility agreement
with Sandvik Financial Services AB (PUBL). The facility is for up to $8.5
million for the purchase of equipment from Sandvik AB, available in not more
than four tranches until 31 December 2021. Each tranche is repayable over a
period of five years. Interest is payable quarterly in arrears at 5.45% per
annum on the drawn amount. As at 31 December 2021 $8.3 million of the facility
was used and $0.2 million of the facility remained undrawn (2020: $8.5 million
remained undrawn).
During the year under review, the Group has no covenants that attached to the
facility.
CONSOLIDATED
2021 2020
$ $
Balance at the beginning of the year 30,693,713 13,194,210
Amounts received during the year 27,669,435 16,000,000
Credit facility received for the purchase of rigs 10,834,144 2,649,798
Interest accrued during the year 3,217,253 1,196,504
Interest paid during the year (2,967,733) (1,098,963)
Commitment fees expensed/paid (17,531) (185,070)
Principal repayments during the year (6,973,921) (1,062,766)
62,455,360 30,693,713
Less: Current portion included under current liabilities (16,887,692) (4,581,111)
Due after more than one year 45,567,668 26,112,602
10. Inventory
The cost of inventories recognised as an expense in the current year amounts
to $13.4m (2020: $9.8m). During the year, the Group wrote off $1.3m (2020:
$0.4m) of inventory. A reversal of provision of $1.0m (2020: Provision of
$0.1m) was made during the year, resulting in a decrease in the carrying
amount of the provision.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
CONSOLIDATED
2021 2020
$ $
11. Cash generated from operations
Profit before tax 82,005,307 34,091,545
Adjusted for:
- Depreciation 20,516,484 11,778,170
- Loss on disposal of property, plant and equipment 453,869 778,847
- Depreciation of Right of use assets 883,923 418,902
- Share based payment expense 1,989,277 1,411,616
- Fair value gain/(loss) on investments at fair value (33,716,756) (13,574,332)
- Interest income (244,998) (256,557)
- Finance charges 3,833,766 1,364,222
- Unrealised foreign exchange loss/(gain) on foreign cash held 918,723 (378,312)
Operating cash flows before working capital changes 76,639,595 35,634,101
Adjustments for working capital changes:
- (Increase)/Decrease in inventory (13,246,010) (7,074,833)
- Increase in trade and other receivables (26,879,489) (5,170,082)
- Increase in trade and other payables 6,093,468 12,598,380
42,607,564 35,987,566
CONSOLIDATED
2021 2020
$ $
12. Commitments
The Group has the following commitments:
Committed capital expenditure 13,424,141 35,647,233
The Group had outstanding purchase orders amounting to $30.3 million (2020:
$40.2 million) at the end of the reporting period of which $13.4 million
(2020: $35.6 million) were for capital expenditure.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
13. Contingencies
Zambia tax:
Capital Drilling (Zambia) Limited ("CDZ"), a subsidiary of Capital Limited, is
a party to various tax claims made by the Zambian Revenue Authority (ZRA) for
the tax years 2007 to 2013.
On 30 April 2015, CDZ received a tax assessment from the ZRA totalling Zambian
Kwacha 150m ($8.2 million), inclusive of penalties and interest. The claims
relate to various taxes, including income tax, value added tax, payroll tax
(PAYE) and withholding tax. CDZ responded in detail to these claims, and no
amount has yet been paid. No subsequent communication has been received from
the ZRA regarding this matter since June 2016.
As Capital has ceased to operate in Zambia, CDZ is being liquidated. This
process is expected to be completed during 2022.
Tanzania tax:
2009-15 tax audit
Capital Drilling (T) Ltd ("CDT"), is party to a payroll tax claim made by the
Tanzanian Revenue Authority ("TRA") for the tax years 2009-2015. During the
financial year ended 31 December 2016, the company received an immediate
demand notice from the TRA for 18.6 billion Tanzanian Shillings ("TZS")
(US$ 8.0 million), inclusive of penalties and interest. The management of CDT
objected to the assessment raised by the TRA and requested the calculations of
the notice. In order to object, according to Tanzanian tax law, a taxpayer is
required to pay the tax amount not in dispute or one third of the assessed tax
whichever is greater. CDT's management reached an agreement with the TRA and
paid TZS 1.5 billion (US$0.7 million) in lieu of one third of the assessed
value.
In June 2017 the TRA provided its calculations to CDT, in which CDT identified
differences with the TRA on both the facts and methodology used to determine
the tax payable. In order to continue the discussions and negotiations with
the TRA, CDT has, at the request of the TRA, paid an additional amount of TZS
1.1 billion (US$0.4 million), increasing the total amount paid to TZS 2.6
billion (US$1.1 million) as at 31 December 2018.
CDT is of the view that the US$1.1 million already paid represents the maximum
potential tax liability. However, on 3 February 2020, the TRA issued an
updated assessment of TZS 22.5 billion (US$9.8 million) which comprises a
principal amount of TZS 7.3 billion (US$3.2 million) and interest of TZS 15.2
billion (US$6.6 million). CDT has lodged an appeal at the Tanzania Revenue
Appeals Board (TRAB), which was dismissed on a technicality on 25th September
2020. In August 2021, CDT finally received the documents required to be able
to appeal the dismissal and the appeal was lodged within the statutory
timeframe. CDT is now awaiting confirmation of the date for the verbal
arguments to be presented. CDT's advisers remain confident that the appeal
will be successful.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
13. Contingencies (Continued)
Tanzania tax: (Cont'd)
2016-18 tax audit
The TRA issued an initial assessment of $4.5m for 2016-18 in December 2019.
Through negotiation, this was reduced to $2.4 million in May 2020 and a total
of $0.7 million was paid by CDT in order to proceed with lodging formal
objections. These were lodged in June 2020 and responses finally received a
year later in June 2021. A number of CDT's positions were accepted and a
further round of correspondence entered into which is ongoing.
$0.7m remains in line with Management's estimate of the potential tax and
penalties due and, as this amount has already been paid, no further amounts
have been provided on the balance sheet.
Mauritania tax:
2019 tax audit
On 25 November 2020, CDM received notification that the MRA has commenced a
routine tax audit into the 2019 tax year and, on 21 December 2020, the MRA
issued a payment demand for a total of $1.9m including penalties.
Management considers that the maximum exposure is $0.7m, including
penalties. A payment of $0.3m was made before the end of 2020, leaving $0.4m
payable based on management's analysis. As at 31 December 2020, a further
$1.0m was provided on the balance sheet.
However, in February 2021 CDM was required to sign a payment plan for the full
outstanding claim of $1.7m, including an additional $0.1m penalties, in order
for the case to proceed to a full technical review by the MRA and to prevent
shutdown of the company's operations. The full technical review had not
progressed in any meaningful way before the payment agreement came to an end
with all but $0.1m paid in full. No further balance sheet provision is
therefore required, and no asset recognised for the potential reduction in the
final liability.
Negotiations with the MRA are ongoing and the technical review should still
take place, although both the timing and outcome are uncertain.
Ivory Coast tax:
2018-19 tax audit
A tax audit of CDCI for the two years ended 31 December 2019 is currently
underway which focuses on the tax outcomes resulting from the local SYSCOA
accounting reporting requirements. The main area where the Ivorian tax
authorities are seeking additional tax relates to securities tax (IRVM) that
they claim is payable on an intercompany balance. Through negotiations, the
total tax exposure has been reduced from $1.5m to $0.4m. No provision has
been recognised at 31 December 2021 on the basis that negotiations are ongoing
and the underlying facts would not trigger any additional securities tax
liability.
NOTES TO THE CONDENSED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2021
13. Contingencies (Continued)
Ivory Coast tax: (Cont'd)
Customs duty
An initial exchange of correspondence has taken place between the Ivorian
customs duty authority and Capital Mining Services (CMS) relating to the
availability of certain customs duty exemptions under CMS client's Mining
Convention. CMS responded with a forceful written denial of this position in
July 2021 and no further correspondence has been received. No balance sheet
provision has been made, no assessments have been issued and no amounts are
due and payable.
Mali tax:
2016-18 tax audit
In July 2019, the Mali Tax Authorities (DGE) commenced a routine tax audit of
Capital Drilling Mali for the periods 2016-18. No final assessments or
requests for payment have been issued in respect of any of the three years
under audit and the audit process has not yet formally concluded.
Across the three years, the maximum potential tax claim including penalties is
approximately $3.8m. Following a detailed review, our in-country advisers
have calculated the actual potential exposure at $0.2m, including penalties
and provided a comprehensive response to the tax authorities supporting this
position.
14. 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
LTM Last Twelve Months
NPAT Net Profit (Loss) After Tax
PBT Profit (Loss) Before Tax
YOY Year On Year
Return on capital employed LTM EBIT / (Equity)
Return on total assets LTM EBIT / Total Assets
1 (#_ftnref1) Restated as Well Force International (WFI) revenue is now
incorporated within drilling revenue
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