REG - Capital Limited - PRELIMINARY FULL YEAR FINANCIAL RESULTS
16/03/2023 07:00
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RNS Number : 1388T Capital Limited 16 March 2023
Capital Limited
("Capital", the "Group" or the "Company")
PRELIMINARY FULL YEAR FINANCIAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2022*
(unaudited)
2022 2021 % change
Revenue ($ m) 290.3 226.8 28.0%
Investment (Loss)/ Gain ($ m) (19.8) 33.7 N/A
Net Profit After Tax ($ m) 22.7 70.3 (67.7)%
Basic EPS (cents) 11.1 37.0 (70.1)%
Cash From Operations ($ m) 73.5 42.6 72.5%
IFRS 16 lease payments ($ m) 3.7 0.9 311.1%
Adjusted for investment (loss)/ gain
EBITDA(1,2) ($ m) 90.1 73.3 22.9%
EBIT(1,2) ($ m) 59.7 51.9 15.0%
Adjusted Net Profit After Tax(2) ($ m) 42.5 36.6 16.2%
Basic EPS (adjusted)(2) (cents) 21.5 19.2 11.9%
Adjusted for investment (loss)/ gain and IFRS 16 lease payments
EBITDA (adjusted for IFRS 16 leases)(3) ($ m) 86.4 72.4 19.4%
Cash from operations (adjusted for IFRS 16 leases)(3) ($ m) 69.8 41.7 67.5%
Final Dividend per Share (cents) 2.6 2.4 8.3%
Total dividend per Share (cents) 3.9 3.6 8.3%
ROCE (%)(4) 25.9 22.7 14.1%
Capex (including assets financed by OEM)(5) ($ m) 57.5 60.7 (5.3)%
Net Debt(1,6) ($m) 47.2 31.9 48.0%
Investments ($m) 38.7 60.2 (35.6)%
*All amounts are in US dollars unless otherwise stated
((1) ) EBITDA, EBIT 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.
((2) ) EBITDA, EBIT, Adjusted Net Profit After Tax and Basic Earnings
Per Share (adjusted) are pre fair value gain/loss on investments.
((3) ) EBITDA (adjusted for IFRS 16 leases) and Cash from operations
(adjusted for IFRS 16 leases) are pre fair value gain/ loss on investments and
include the cash cost of the IFRS 16 leases.
((4) ) ROCE calculated utilising 12 months EBIT and average yearly
capital employed.
((5) ) Capital expenditure (Capex) consists of purchase of PPE for
cash, prepayments for PPE and assets purchased during the year and financed by
OEM.
((6) ) Net Debt excludes lease liabilities.
FY 2022 Financial Overview
· FY 2022 revenue of $290.3 million, up 28.0% on FY 2021 ($226.8
million), at the upper end of revised guidance of $280-290 million (up from
$270-280 million guided at our FY21 results);
· This is the third consecutive year Capital has delivered material
growth in revenue, with full year revenues increasing 28%, following 68% YoY
growth in 2021 and 18% YoY growth in 2020.
· FY 2022 EBITDA of $90.1 million, up 22.9% on FY 2021 ($73.3
million);
· FY 2022 EBITDA (adjusted for IFRS16 leases) of $86.4 million, up
19.4% on FY 2021 ($72.4 million);
· Introducing EBITDA (adjusted for IFRS16 leases): Our reported
EBITDA does not take into account IFRS 16 lease payments, most notably the
minimum lease cost payment to Chrysos. While not a material difference in
2022, this will grow as we roll out more Chrysos PhotonAssay™ units over the
coming years. We will therefore report EBITDA (adjusted for IFRS 16 leases)
which adjusts EBITDA to take into account the cash cost of these lease
payments and is therefore more representative of the underlying profitability
and more aligned with cash flows.
· FY 2022 EBITDA (adjusted for IFRS16 leases) margins remained
robust at 29.8% (FY 2021: 31.9%);
· Net losses from equity investments of $19.8 million in 2022,
predominantly unrealised, which in combination with proceeds from sales,
decreased the value of Group strategic investment portfolio to $38.7 million,
as of 31 December 2022 (31 December 2021: $60.2 million);
· Net profit after tax (NPAT) of $22.7 million, down 67.7% on FY
2021 ($70.3 million). Excluding the impact of investment losses/ gains,
adjusted NPAT is $42.5 million for FY2022, up 16.2% on FY 2021 ($36.6
million);
· Basic earnings per share (EPS) of 11.1 cents, down 70.1% on FY
2021 (37.0 cents). Excluding the impact of investment losses/ gains, basic EPS
(adjusted) is 21.5 cents, up 11.9% on FY 2021 (19.2 cents);
· Cash from operations (adjusted for IFRS 16 leases) of $69.8
million, an increase of 67.5% on FY 2021 ($41.7 million);
· Total capex of $57.5 million, down 5.3% on FY 2021 ($60.7
million). Total capex consisted of cash capex of $43.0 million (2021: $46.3
million), prepayments of $5.5 million (2021: $3.5 million) and financed capex
of $9.0 million (2021: $10.9 million);
· Net debt of $47.2 million an increase of 48.0% on FY21 ($31.9
million);
· Net debt including investments of $8.5 million (FY 2021: net cash
including investments of $28.3 million);
· Declared a final dividend of US$2.6 cents per share, to be paid
on 9 May 2023 which, together with the interim dividend of US$1.3 cents per
share brings the total dividends declared for 2022 to US$3.9 cents per share
(up 8% on 2021 total dividend of US$3.6 cents per share).
Operational and Strategic Highlights
· Delivered a sector-leading safety performance with 2022 Total
Recordable Injury Frequency Rate ("TRIFR") of 1.2 per 1,000,000 hours worked
(2021: 0.98).
· Capital Drilling: Further material contract wins
- Average monthly revenue per operating rig ("ARPOR") in FY 2022
at US$180,000, down 0.6% on FY 2021 (US$181,000); Q4 2022 ARPOR of US$191,000,
up 3.8% on Q4 2021 (US$184,000);
- FY 2022 average utilisation was 79% an increase on FY 2021
(75%); Fleet utilisation decreased to 73% in Q4 2022, compared to 79% in Q4
2021 and 77% in Q3 2022. This is the result of our active strategy to
reposition the contract portfolio, reducing exposure to small scale contracts,
and focusing on large scale mine sites and Tier-1 projects with significant
growth potential.
- New contract wins:
§ A two-year diamond drilling services contract with Barrick at the Reko Diq
copper-gold project, Pakistan;
§ A three-year reverse circulation and diamond drilling services contract
with Fortescue Metals Group at the Belinga iron ore project, Gabon;
§ A diamond drilling services contract with Kodal Minerals at the Bougouni
lithium project, Mali.
- Recent Q4 2022 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;
§ A two-year contract extension for underground grade control drilling with
Barrick at the Bulyanhulu gold mine, Tanzania;
§ A three-year contract extension (with two-year further extension option)
for grade control and reverse circulation drilling with B2Gold at the Fekola
gold mine, Mali;
§ An underground contract with Barrick for an additional rig at North Mara
gold mine, Tanzania;
§ An extension of the exploration contract to June 2024, including additional
rigs, with Tembo Mining at the Kabanga nickel project, Tanzania.
- Rig count increased to 129 from 127 through Q4 2022, net of
depletion.
· Capital Mining: Consistent strong performance
- Sukari Gold Mine (Egypt) waste mining contract had another
strong performance through Q4 2022 with the team exceeding their previous
daily production record since the project commenced.
· MSALABS: Strong start to 2023
- Chrysos' PhotonAssay™ unit rollout is progressing well. The
expanded relationship with Chrysos will see MSALABS deploy 21 units by 2025:
• MSALABS now has six units commissioned across Africa and Canada,
with a mine site laboratory at Barrick's Kibali gold mine, and the commercial
laboratory in Prince George, Canada successfully commissioning in recent
weeks;
• Routine copper analysis commenced at the unit at Barrick's
Bulyanahulu gold mine, Tanzania;
- MSALABS has also extended into the Yukon region in Canada, where
mining activity is rapidly growing, with a sample preparation laboratory at
Victoria Gold's Eagle mine.
- MSALABS has also now commissioned a mine site laboratory at
Shanta Gold's Singida mine, Tanzania, and a laboratory in Bougouni, Mali,
which will support gold and lithium operations in southern Mali.
Outlook
· Tendering activity across all business units remains robust, with
a number of opportunities progressing.
· Revenue guidance for 2023 of $320 to $340 million driven an
improved contract portfolio, contract extensions and expansions from existing
long-term contracts, the Sukari load & haul contract continuing at steady
state and MSALABS continuing to grow through 2023;
· Laboratories is seeing strong demand for its services and the
rollout of the Chrysos units, with the business expected to deliver revenues
of $40-50 million in 2023, another significant YoY increase from 2022 (FY 2022
$27.3 million) and is expected to grow to over $80 million per annum from
2025;
· The Sukari earth moving contract continues to perform well and we
expect the operation to continue at steady state through 2023;
· Capital expenditure is expected to be $50-60 million in 2023.
This will fund a more than typical replacement of the drilling fleet to ensure
ongoing youth and productivity, the expansion of MSALABS, including a number
of commercial labs, as well as sustaining capex on the enlarged drill fleet
and the Sukari mining contract;
· Drill rig fleet size forecast to remain broadly flat compared to
the end of 2023, net of depletion.
Commenting on the results, Jamie Boyton, Executive Chairman of Capital
Limited, said:
'2022 has been another outstanding year for Capital marking the business's
third consecutive year of material growth, but most pleasingly Capital enters
2023 with an even stronger underlying business. The Group has made significant
steps in strengthening the contract portfolio, the management and operational
teams, the equipment quality and the balance sheet flexibility. The focus on
our premium service and quality of our equipment remains paramount in
underpinning our growth strategy across our business divisions with our
ongoing sector leading safety performance an example of such focus.
Our drilling business had another strong performance in 2022 with average
utilisation for the year increasing further to 79% near historic record
levels. Notably however we made the strategic decision during the year to
reduce exposure to small scale exploration contracts and focus on our key
long-term mine site contracts and world-class development projects. It has
been pleasing to see this strategy reap the benefits so quickly with major
extensions at the Geita and Bulyanhulu gold mines, Tanzania, a new material
mine site contract at the Fekola gold mine, Mali, expanded contracts at world
class non-gold projects Goulamina (lithium) and Kabanga (Nickel) and recent
new contracts at world class projects Belinga (iron ore) and Reko Diq
(copper).
Our mining business, having ramped up at Sukari in 2021, has now proven,
operating throughout the year at steady state and even achieving its daily
production in the final quarter of the year. The Sukari waste mining contract
is the first load & haul of significant scale for Capital and this
exceptional operational performance has elevated Capital's reputation both in
mining as we tender on further opportunities and also as a reliable end-to-end
service provider.
The growth trajectory MSALABS is achieving is remarkable especially
considering in 2022 the business laid the foundations for material further
growth in the years to come. The expanded relationship with Chrysos means
MSALABS will now deploy 21 units into the market by 2025 and having achieved a
strong start in 2023 we're expecting the business to generate $40-50 million
this year and in excess of $80 million per annum from 2025.
Our Direct Investments portfolio remained focused around key holdings through
the year. While 2022 market volatility saw a reduction in the portfolio to
$38.7 million, it has nevertheless grown significantly from the net investment
to date of ~$12.5 million, but also remains a strong business development tool
with contracts from investee companies generating revenue of $51 million in
2022 (17.5% of Group revenue) and remains a core pillar of our business model.
The underlying demand in the market continues to be encouraging and our tender
pipeline remains equally buoyant. In addition none of our material contracts
are due for renewal in 2023, providing a firm footing from which to continue
to grow. We will continue to pursue our key strategic priorities during 2023,
with revenues expected to reach $320-340 million in 2023.'
Peter Stokes, Chief Executive, said:
"Since joining Capital in October 2022, I've seen first hand how strong a
business Capital is and through 2023 we will strive to leverage our existing
platform to continue to grow our service offering, while maintaining our core
values.
We are extending our geographic footprint outside Africa both through MSALABS,
in Canada in particular, and now with our drilling business as we commence
operations at Barrick's Reko Diq project in Pakistan. We are continuing to
look at opportunities globally but will maintain the core value of
prioritising local employment, with more than 90% of the Group's workforce
consisting of national employees.
We have now also formalised our existing mining technology expertise within
the Group with the creation of 'Capital Innovation' which will channel new
technologies and business ventures to market. Having successfully become early
adopters of the innovative Chrysos technology, we are now aiming to provide
solar hybrid power solutions both to our mining customers and our own
operations through our new 50:50 joint venture Mine Power Solutions Limited
with our partner Enerwhere Limited. We are also trialling a number of other
technologies that could add significant value to our customers in years to
come.
Capital's focus on its mine site services, Tier 1 asset client base, and the
embracing of proven and more sustainable technology in the mining sector
continues to underpin our growth trajectory, of which 2023 will see yet
further progress."
Capital Limited will be hosting a live webcast presentation at 09:00 BST on
Thursday 16 March 2023, where questions can be submitted through the platform.
The webcast presentation link:
https://www.lsegissuerservices.com/spark/CapitalDrillingLtd/events/a575a2fd-3c6b-4e68-b1b5-fd89859ab8e0
(https://www.lsegissuerservices.com/spark/CapitalDrillingLtd/events/a575a2fd-3c6b-4e68-b1b5-fd89859ab8e0)
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
investor@capdrill.com
Jamie Boyton, Executive Chairman
Peter Stokes, Chief Executive
Officer
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 Cleary
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; maintenance; and geochemical
analysis. The Group's corporate headquarters are in London and it has
established operations in Canada, Côte d'Ivoire, Egypt, Guinea, Kenya, Mali,
Mauritania, Nigeria, Saudi Arabia, Sudan and Tanzania.
Financial Review
Capital Limited has delivered another strong performance in 2022 across all
our business divisions. We have taken important steps over the past year, both
operationally and financially, to ensure the business is well positioned to
continue to grow.
Revenue increased by 28% to US$290.3 million (2021: US$226.8 million). H2
revenue (US$152.2 million) was 10% higher than H1 revenue (US$138.1 million)
primarily due to the continued ramp up of MSALABS as well as new drilling
contract wins through the year, notably the material drilling services
contract at B2Gold's Fekola mine in Mali.
Profitability of Group operations remained robust with a YoY EBITDA increase
of 22.9% and a YoY EBIT increase of 15%. EBITDA (adjusted for IFRS 16
leases), where we take into account the cash cost of these IFRS 16 leases, was
up 19% YoY.
Our investment portfolio booked a US$19.8 million mark-to-market loss
reflected in the Profit and Loss. The portfolio remains concentrated around
key holdings valued at US$38.7 million at the end of 2022 (compared to a net
investment to date of ~US$12.5 million). During the year we were net sellers
with net proceeds of US$1.6 million.
Our cash capital expenditure remained broadly in line with 2021 at US$48.5
million (2021: US$49.9 million) as we funded both organic and inorganic
growth. On top of replacement rigs which we incorporate in our sustaining
capex guidance, we directly purchased a number of rigs to grow our fleet
towards our initial year end 2022 guidance of 120 (up from 109 rigs at the end
of 2021). We subsequently raised guidance to 130 rigs following the purchase
of 10 rigs and associated equipment from African Mining Services (AMS), part
of Perenti Group, to facilitate the delivery of the new contract at the Fekola
mine. The remainder of the Group's growth capex funded the expansion of
MSALABS.
Through 2022 we took a number of steps to improve our financial flexibility.
In addition to purchasing rigs through OEM financing, we also refinanced our
Macquarie asset backed loan facility, taking advantage of the excellent
condition of the mining equipment at Sukari, which provided US$10.6 million of
new liquidity. In addition, we renewed our corporate RCF facility with
Standard Bank and increased the facility from US$15 million to US$25 million.
Cash generated from operations was notably 73% higher YoY at US$73.5 million
(2021: US$42.6 million) reflective of stronger fleet utilisation and the new
contract wins. Including the cash cost of lease payments, cash generated from
operations (adjusted for IFRS 16 leases) was US$69.8 million, up 68% YoY
(2021: US$41.7 million). This is despite a large working capital outflow
primarily as a result of inventory build in connection with new contracts and
a decision to hold higher inventories in view of supply chain constraints
globally. Closing cash was US$28.4 million (2021: US$30.6 million) with net
debt of US$47.2 million (2021: US$31.9 million).
The business remains very robust and is a testament to our continued focus on
long-term mine site contracts which reduces the volatility of earnings.
Nevertheless, we have evaluated a downside scenario to assess the aggregate
effect of the reasonable downside short term risks and demonstrated that the
business is robust to scenarios far worse than experienced or expected.
STATEMENT OF COMPREHENSIVE INCOME
US$ millions 2022 2021
Revenue 290.3 226.8
Gross Profit 134.4 106.3
PBT 32.6 82.0
NPAT 22.7 70.3
Basic EPS (cent) 11.1 37.0
Adjusted for loss/ gain on investments
EBITDA1 (#_ftn1) 90.1 73.3
EBIT1 (#_ftn2) 59.7 51.9
Adjusted NPAT(1) 42.5 36.6
Basic EPS (adjusted)(1) (cent) 21.5 19.2
Adjusted for loss/ gain on investment and IFRS 16 lease payments
EBITDA (adjusted for IFRS 16 leases)(2) 86.4 72.4
Gross Profit (%) 46.3% 46.9%
EBITDA (adjusted for IFRS 16 leases)(2) (%) 29.8% 31.9%
EBIT (%) 20.6% 22.9%
1 EBITDA, EBIT Adjusted Net Profit After Tax and Basic Earnings Per Share
(adjusted) are pre fair value loss/gain on investments.
(2) EBITDA (adjusted for IFRS 16 leases) is pre fair value loss/ gain on
investments and includes the cash cost of the IFRS 16 leases.
Average rig utilisation increased to 79% (2021: 75%) on a larger average fleet
size of 118 (2021: 104). Average revenue per operating rig (ARPOR) per month
remained broadly in line with the prior year at US$180,000 (2021: US$181,000).
Non-drilling revenues saw another notable increase in contribution to Group
revenues in 2022, driven both by the Sukari mining contract achieving its
first year of continuous steady state operations as well as the continued ramp
up of MSALABS. 2022 contribution to revenue from non-drilling services was 28%
(2021: 24%).
EBITDA increased 22.9% to US$90.1 million delivering a 31% margin (2021:
US$73.3 million/32%). EBITDA (adjusted for IFRS 16 leases) increased 18% to
US$86.4 million delivering a 30% margin (2021: US$72.4 million, 32%). Margins
remained robust despite higher administration expenses of US$44.3 million
(2021: US$33.0 million). The increase in administration expenses YoY was
impacted by US$1.5 million of bad debts written off, US$3.0 million in
expected credit loss provisions and US$2.6 million in other operational
provisions.
EBIT increased 15% to US$59.7 million delivering a 21% margin (2021: US$51.9
million/23%).
Profit Before Tax (PBT) decreased by 60% to US$32.6 million (2021: US$82.0
million) however this was primarily impacted by the non-cash investment loss
of US$19.8 million (2021: US$33.7 million gain). These investments, while
making mark to market losses through the year, continue to be a strong
business development tool for the Group with revenue from investee companies
in 2022 of US$51.0 million up from US$41.0 million in 2021.
Net Profit After Tax (NPAT) decreased 68% to US$22.7 million (2021: US$70.3
million) again impacted by the non-cash investment loss of our equity
investments. Adjusted NPAT (excluding the impact of these investments) was
US$42.5 million in 2022 up 16% YoY (2021: US$36.6 million).
The Effective Tax Rate for 2022 was 30.2% (2021: 14.3%). The increase in ETR
in 2022 is primarily due to the significant unrealised decrease in fair value
of the Group's investment portfolio. Excluding the impacts of these
investments our ETR in 2022 was 18.8% down from 24.3% in 2021.
The Basic Earnings Per Share (EPS) for the year decreased 70% to 11.1 cents
(2021: 37.0 cents), although this is largely a result of the mark-to-market
losses on the investment portfolio. Excluding this impact, the Basic EPS
(adjusted) increased 12% to 21.5 cents (2021: 19.2 cents). The weighted
average number of ordinary shares used in the earnings per share calculation
was 189,653,369 (2021: 189,765,149).
STATEMENT OF FINANCIAL POSITION
US$ million 2022 2021
Non-current assets 198.9 162.4
Current assets 187.8 189.1
Total assets 386.8 351.5
Non-current liabilities 69.0 53.0
Current liabilities 78.9 75.6
Total liabilities 147.9 128.6
Shareholders' equity1 (#_ftn3) 233.3 219.2
1 Attributable to equity holders of parent
Non-current assets increased by 22% YoY to US$198.9 million (2021: US$162.4
million) reflecting a net investment in the fleet (rig size increased from 109
at the end of 2021 to 129 at the end of 2022) in addition to a 69% YoY
increase in the right-of-use asset base to US$16.7 million (2021: US$9.9
million) primarily in connection with the roll out of Chrysos PhotonAssay(TM)
units in MSALABS.
Current assets decreased to US$187.8 million (2021: US$189.1 million)
primarily as a result of a 55% YoY increase in inventory offset by a 36% YoY
decrease in the fair value of the investment portfolio. Inventory increased by
US$20.8 million to US$58.7 million (2021: US$37.9 million) to accommodate both
increased activity across the group and to provide comfort to the business
while we saw supply chain constraints globally. Investments held of US$38.7
million (2021: US$60.2 million) are the fair value of the equity investment
portfolio.
Non-current liabilities of US$69.0 million (2021: US$53.0 million) includes
US$56.9 million (2021: US$45.6 million) of long-term loans. Total long-term
debt includes US$25 million of the renewed Revolving Credit Facility, a
US$35.4 million asset backed facility with Macquarie and OEM financing direct
through Epiroc & Sandvik.
Current liabilities consisted of trade and other payables of US$44.9 million
(2021: US$46.5 million), the current portion of long-term liabilities of
US$18.0 million (2021: US$16.9 million), provisions of US$2.6 million (2021:
US$ nil) and tax liabilities of US$9.1 million (2021: US$10.0 million).
STATEMENT OF CHANGES IN EQUITY
US$ million 2022 2021
Opening equity 222.9 148.1
Share buyback (2.5) -
Share based payments 2.8 2.0
Total comprehensive income 22.7 70.3
Dividends paid (7.1) (4.8)
Gain on change in ownership - 5.1
NCI ex Business Combination - 2.2
Closing equity 238.9 222.9
As at 31 December 2022, shareholders' equity increased by 7% driven primarily
by net profit for the year of US$22.7 million. The Group distributed dividends
of US$7.1 million (2021: US$4.7 million) to shareholders. At the beginning of
2022 the Group also completed a share buyback of US$2.5 million.
STATEMENT OF CASH FLOWS
US$ million 2022 2021
Net cash from operating activities 56.6 30.4
Net cash used in investing activities (47.5) (50.1)
Net cash generated (used in)/ from financing activities (9.9) 15.5
Net (decrease)/increase in cash and cash equivalents (0.8) (4.2)
Opening cash and cash equivalents 30.6 35.7
Translation of foreign currency cash (1.4) (0.9)
Closing cash and cash equivalents 28.4 30.6
RECONCILIATION OF NET CASH (DEBT) POSITION
US$ million 2022 2021
Net (debt)/ cash at the beginning of the year (31.9) 5.0
Net (decrease) in cash and cash equivalents (0.8) (4.2)
(Increase) in long-term liabilities (13.1) (31.8)
Translation of foreign currency cash (1.4) (0.9)
Net debt at the end of the year (47.2) (31.9)
Net cash from operating activities reflects the strong performance of the
operations with cash generated of US$73.5 million (2021: US$42.6 million), an
increase of 73% year-on-year, offset in part by higher finance costs.
Adjusting cash generated from operations for the cash cost of the IFRS 16
leases reduces 2022 cash generated to US$69.8 million, up 68% YoY (2021:
US$41.7 million).
We continued to invest through 2022 to fund the growth in the rig fleet as
well as the expansion of MSALABS, although the investing cash flow have
decreased slightly year-on-year.
The refinancing of the Macquarie asset backed loan facility and the renewal
and upsizing of the revolving credit facility with Standard Bank provided new
funds of US$4.1 million, net of overall loan amortisation in 2022.
Despite this, financing activities in 2022 were a cash outflow of US$9.9
million primarily as a result of lease payments, the dividend cash payment of
US$7.1 million (2021: US$4.8 million) and the share buyback payment of US$2.5
million.
The dividend history for the past three years is as follows:
H1 2020 FY 2020 H1 2021 FY 2021 H1 2022 FY 2022
Declaration 20 Aug 2020 18 Mar 2021 19 Aug 2021 10 Mar 2022 18 Aug 2022 16 Mar 2023
Cents per share 0.9 1.3 1.2 2.4 1.3 2.6
Dividend amount (US$ m) 1.2 2.5 2.3 4.6 2.5 5.0
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE
INCOME
(Unaudited) Audited
2022 2021
US$ US$
Revenue 290,284,368 226,793,266
Cost of sales (155,852,595) (120,491,246)
Gross profit 134,431,773 106,302,020
Administration expenses 4 (44,330,562) (33,027,346)
Depreciation (30,416,239) (21,397,355)
Profit from operations 5 59,684,972 51,877,319
Interest income 34,835 244,998
Finance charges 6 (7,355,710) (3,833,766)
Fair value (loss)/gain on investments at fair value (19,797,969) 33,716,756
Profit before tax 32,566,128 82,005,307
Taxation 7 (9,835,969) (11,716,529)
Profit and total comprehensive income for the year 22,730,159 70,288,778
Profit and total comprehensive income for the year attributable to:
Owners of the parent 20,990,137 70,174,784
Non-controlling interest 1,740,022 113,994
22,730,159 70,288,778
Earnings per share:
Basic earnings per share (cents per share) 8 11.07 36.98
Diluted earnings per share (cents per share) 8 10.71 36.40
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
(Unaudited) Audited
Notes 2022 2021
US$ US$
ASSETS
Non-current assets
Property, plant and equipment 10 172,658,108 143,598,399
Right-of-use assets 16,652,318 9,851,343
Goodwill 1,296,387 1,252,348
Intangible assets 1,916,190 1,282,269
Other receivables 6,460,000 6,460,000
Total non-current assets 198,983,003 162,444,359
Current assets
Inventory 11 58,694,979 37,935,112
Trade receivables 12 41,541,867 42,212,147
Other receivables 20,073,008 17,681,623
Investments at fair value 38,727,041 60,151,667
Current tax receivable 399,683 499,361
Cash and cash equivalents 28,379,607 30,577,249
Total current assets 187,816,185 189,057,159
Total assets 386,799,188 351,501,518
EQUITY AND LIABILITIES
Equity
Share capital 13 19,287 19,006
Share premium 13 62,390,217 60,900,119
Treasury shares 14 (2,474,964) -
Equity-settled employee benefits reserve 4,469,402 3,185,450
Other reserve 190,056 190,056
Retained earnings 168,725,546 154,879,201
233,319,544 219,173,832
Non-controlling interest 5,572,540 3,767,589
Total equity 238,892,084 222,941,421
Non-current liabilities
Loans and Borrowings 15 56,864,811 45,567,668
Lease liabilities 12,127,384 7,354,745
Deferred tax 34,196 34,196
Total non-current liabilities 69,026,391 52,956,609
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (continued)
(Unaudited) Audited
2022 2021
US$ US$
Current liabilities
Trade and other payables 44,937,680 46,500,122
Provisions 16 2,636,640 -
Current tax payable 9,130,118 9,979,250
Loans and Borrowings 15 18,036,811 16,887,692
Lease liabilities 4,139,464 2,236,424
Total current liabilities 78,880,713 75,603,488
Total liabilities 147,907,104 128,560,097
Total equity and liabilities 386,799,188 351,501,518
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity-settled employee benefits reserve Total
attributable to the equity holders of the Group / Company
Non-controlling interest
Share capital Share premium Treasury shares Total share capital Other Total reserves Retained income Total
reserve
(Unaudited) equity
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Balance at January 1, 2022 19,006 60,900,119 - 60,919,125 190,056 3,185,450 3,375,506 154,879,201 219,173,832 3,767,589 222,941,421
Profit for the year - - - - - - - 20,990,137 20,990,137 1,740,022 22,730,159
Total comprehensive income for the year - - - - - - - 20,990,137 20,990,137 1,740,022 22,730,159
Issue of shares 281 1,490,098 - 1,490,379 - (1,490,379) (1,490,379) - - - -
Recognition of share-based payments - - - - - 2,774,331 2,774,331 - 2,774,331 - 2,774,331
Repurchase of own shares - - (2,474,964) (2,474,964) - - - - (2,474,964) - (2,474,964)
Adjustment arising from change in non-controlling interest - - - - - - - (54,608) (54,608) 54,608 -
Impact of acquisition of subsidiary - - - - - - - - - 10,321 10,321
Dividends - - - - - - - (7,089,184) (7,089,184) - (7,089,184)
Total contributions by and distributions to owners of company recognised 281 1,490,098 (2,474,964) (984,585) - (1,283,952) (1,283,952) (7,143,792) (6,844,425) 64,929 (6,779,496)
directly in equity
Balance at December 31, 2022 19,287 62,390,217 (2,474,964) 59,934,540 190,056 4,469,402 4,659,458 168,725,546 233,319,544 5,572,540 238,892,084
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total attributable to the equity holders of the Group / Company
Equity-settled employee benefits reserve
Non-controlling interest
Share capital Share premium Treasury shares Total share capital Other Total reserves Retained income Total
reserve
equity
(Audited)
US$ US$ US$ US$ US$ US$ US$ US$ US$ US$ US$
Balance at January 1, 2021 18,878 60,169,426 - 60,188,304 190,056 1,926,994 2,117,050 84,384,101 146,689,455 1,389,315 148,078,770
Profit for the year - - - - - - - 70,174,784 70,174,784 113,994 70,288,778
Total comprehensive income for the year - - - - - - - 70,174,784 70,174,784 113,994 70,288,778
Issue of shares 128 730,693 - 730,821 - (730,821) (730,821) - - - -
Recognition of share-based payments - - - - - 1,989,277 1,989,277 - 1,989,277 - 1,989,277
Adjustment arising from change in non-controlling interest
- - - - - - - 5,071,688 5,071,688 2,264,280 7,335,968
Dividends - - - - - - - (4,751,372) (4,751,372) - (4,751,372)
Total contributions by and distributions to owners of company recognised
directly in equity
128 730,693 - 730,821 - 1,258,456 1,258,456 320,316 2,309,593 2,264,280 4,573,873
Balance at December 31, 2021 19,006 60,900,119 - 60,919,125 190,056 3,185,450 3,375,506 154,879,201 219,173,832 3,767,589 222,941,421
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited) Audited
2022 2021
Note US$ US$
CASH FLOWS FROM OPERATING ACTIVITIES
Cash generated from operations 17 73,533,457 42,607,564
Interest income received 34,835 244,998
Finance costs paid (6,406,712) (3,423,815)
Tax paid (10,585,423) (9,030,977)
Net cash from operating activities 56,576,157 30,397,770
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (42,974,044) (46,303,585)
Proceeds from sale of property, plant and equipment 18,902 68,116
Purchase of intangible asset (633,921) (1,006,021)
Purchase of investments at fair value (9,010,521) (9,150,084)
Proceeds from sale of investments at fair value 10,637,179 9,774,463
Cash paid in advance for property, plant and equipment (5,542,523) (3,548,794)
Proceeds from sale of other investments - 107,805
Net cash from investing activities (47,504,928) (50,058,100)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from new loans 20,716,801 27,669,435
Repayment of loans (16,665,708) (6,973,921)
Repayment of leases (3,733,798) (946,920)
Advance payment on ROU assets (666,776) (418,782)
Dividends paid 9 (7,089,184) (4,751,372)
Repurchase of own (2,474,964) -
shares
Amount received from non-controlling interest on rights issue - 875,968
Net cash from financing activities (9,913,629) 15,454,408
Total cash movement for the year (842,400) (4,205,922)
Cash at the beginning of the year 30,577,249 35,701,894
Effect of exchange rate movement on cash balances (1,355,242) (918,723)
Total cash at end of the year 28,379,607 30,577,249
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
1. General information
Capital Limited (the "Company") is incorporated in Bermuda. The Company and
its subsidiaries (the "Group") provide drilling, 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 year ended 31 December 2022, the Group provided drilling services
in Côte d'Ivoire, Guinea, Egypt, Kenya, Mauritania, Mali, Saudi Arabia 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 office is located in Mauritius.
2. Accounting policies
This preliminary report, which is unaudited, does not include all the notes of
the type normally included in an annual financial report. This condensed
report is to be read in conjunction with the Annual Report for the year ended
31 December 2021, and any public announcements made by the Group during the
reporting period.
The annual financial statements for the year ended 31 December 2021 was
prepared in accordance with International Financial Reporting Standards
(IFRSs) issued by the International Accounting Standards Board and the
accounting policies applied in this condensed preliminary report are
consistent with the polices applied in the annual financial report for the
year ended 31 December 2021 unless otherwise noted. The auditor's report on
the 31 December 2021 financial statements was unqualified and did not draw
attention to any matters by way of emphasis. The financial information for the
year ended 31 December 2022 is unaudited.
The preliminary report has been prepared in accordance with accounting
policies compliant with International Financial Reporting Standards (IFRSs)
issued by the International Accounting Standards Board.
Going concern
As at 31 December 2022, the Group had a robust balance sheet with a low debt
gearing with equity of US$239.9 million and loans and borrowings of US$75.6
million. Cash as at 31 December 2022 was US$28.4 million, with net debt of
US$47.2 million. Investments in listed entities at the end of December 2022
amounted to US$30.4 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 2022
with increased revenue of 28% compared to 2021. Commercially, the Group
continues to secure and extend long-term mining contracts with high quality
customers, including the significant contract win at B2Gold's Fekola gold mine
and major extensions at the AngloGold Ashanti's Geita gold mine and Barrick's
Bulyanhulu gold mine. In addition, there are no major contracts due to expire
in 2023 which provides strong support for earnings over the coming year.
In determining the going concern status of the business, the Board has
reviewed the Group's forecasts for the 18 months to June 2024, including both
forecast liquidity and covenant measurements. In the assessment, management
took into consideration the principal risks of the business that are most
relevant to the going concern assessment and reverse stressed the forecast
model to identify the magnitude of sensitivity required to cause a breach in
covenants or risk the going concern of the business, alongside the Group's
capacity to mitigate. The most relevant sensitivity was considered to be
decrease in EBITDA through loss of contracts, with no redeployment of
equipment. EBITDA would need to fall over 70% for a 12-month period to breach
the covenant test. Given the strong market demand from existing clients and
across a large tendering pipeline, the Group's increased service
diversification and the limited contract expiries due during the year,
management consider the risk of a deep demand correction to be low.
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
2. Accounting policies (continued)
Going concern (continued)
Given the Group's exposure to high quality mine site operations, we consider a
decrease of such magnitude to be remote. Based on its assessment of the
forecasts, principal risks and uncertainties and mitigating actions considered
available to the Group in the event of downside scenarios, the Board confirms
that it is satisfied the Group will be able to continue to operate and meet
its liabilities as they fall due over the going concern period to June 2024.
Accordingly, the Board has concluded that the going concern basis in the
preparation of the financial statements is appropriate and that there are no
material uncertainties that would cast doubt on that basis of preparation.
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:
· 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.
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
3. Segment analysis (continued)
The following is an analysis of the Group's revenue and results by reportable
segment:
Africa Rest of world Consolidated
US$ US$ US$
2022 (Unaudited)
External revenue
Drilling services 202,201,283 6,361,164 208,562,447
Mining services 49,763,175 - 49,763,175
Laboratory services 13,803,750 13,500,935 27,304,685
Surveying services 4,333,017 321,044 4,654,061
Total external revenue 270,101,225 20,183,143 290,284,368
Segment profit (loss) 91,428,320 (31,302,839) 60,125,480
Central administration costs and depreciation (440,508)
Profit from operations 59,684,972
Interest income 34,835
Finance charges (7,355,710)
Fair value gain on investments at fair value (19,797,969)
Profit before tax 32,566,128
2021 (Audited)
External revenue
- Drilling services 167,104,052 5,433,307 172,537,359
- Mining services 33,300,731 - 33,300,731
- Laboratory services 7,384,006 8,267,311 15,651,317
- Surveying services 4,941,973 361,886 5,303,859
Total 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)
Net loss on financial assets at fair value through profit and loss 33,716,756
Profit before tax 82,005,307
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
3. Segment analysis (continued)
The following customers from the Africa segment
contributed 10% or more to the Group's revenue:
(Unaudited) (Audited)
2022 2021
% %
Customer A 15 16
Customer B 39 37
(Unaudited) (Audited)
2022 2021
US$ US$
Segment assets and liabilities:
The following is an analysis of the Group's assets and liabilities by
reportable segment:
Segment assets:
Africa 506,043,094 421,186,192
Rest of world 59,642,347 75,429,655
Total segment assets 565,685,441 496,615,847
Head office companies 280,828,362 278,034,723
846,513,803 774,650,570
Eliminations (459,714,615) (423,149,052)
Total Assets 386,799,188 351,501,518
Segment liabilities:
Africa 239,012,484 226,314,805
Rest of world 31,752,437 28,407,677
Total segment assets 270,764,921 254,722,482
Head office companies 315,694,862 269,589,374
586,459,783 524,311,856
Eliminations (438,552,679) (395,751,759)
Total Liabilities 147,907,104 128,560,097
Segmental reporting summary by region:
Revenue Non-current assets
(Unaudited) (Audited) (Unaudited) (Audited)
2022 2021 2022 2021
Middle East/North Africa 121,287,573 89,307,774 77,014,240 75,919,256
South & East Africa 70,266,325 52,055,578 36,970,552 34,338,287
West Africa 78,854,825 78,186,571 56,262,245 39,508,301
Others 19,875,644 7,243,343 28,735,966 12,678,515
290,284,368 226,793,266 198,983,003 162,444,359
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 CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
4. Administrative expenses
2022 2021
US$ US$
Employee cost (Note 6) 16,324,024 14,962,199
Professional fees 3,848,105 3,747,479
Insurance 1,886,037 1,412,108
Rental cost 1,549,375 1,268,795
Share based payment expenses 2,774,331 1,989,277
Bad debts written off 1,457,548 -
Expected credit loss provision 2,980,656 -
Travel & Accommodation 2,499,292 825,399
Bank charges 1,277,475 730,294
Foreign exchange loss 1,711,081 1,586,329
Software costs 1,104,203 535,765
Other expenses 6,918,435 5,969,701
Total administration expenses 44,330,562 33,027,346
5. Profit from operations
The following items have been recognised as expenses
in determining profit from operations:
Depreciation, amortisation and impairments
2022 2021
US$ US$
Rights of use assets 3,457,633 880,871
Computer software 4,178 4,179
Drilling rigs 10,373,050 7,959,524
Associated drilling equipment 3,134,579 2,022,454
Vehicles and trucks 3,180,506 1,870,873
Camp and associated equipment 1,389,635 1,207,651
Mining equipment 8,876,658 7,451,803
Total depreciation, amortisation and impairments 30,416,239 21,397,355
Operating lease expense
Short term equipment rental 6,457,446 7,601,916
Employee costs
Salaries, wages, bonuses and other benefits 79,560,382 65,554,872
Share based compensation expense 2,774,331 1,989,277
Total employee costs 82,334,713 67,544,149
Other
Loss on disposal of property, plant and equipment 668,817 453,869
Legal and professional fees 3,848,105 3,747,479
Stock write off and provision 945,103 313,250
Allowance for credit losses 2,980,656 -
Bad debts written off 1,457,548 -
Other taxes 333,257 278,487
(Decrease)/ increase in provisions for other taxes (287,678) 856,692
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
6. Finance costs
2022 2021
US$ US$
Lease liabilities 818,249 177,962
Interest on bank loans 4,219,977 2,517,390
Interest on supplier credit facilities 1,005,158 699,865
Amortised debt arrangement costs 438,663 -
Other interest paid 873,663 438,549
Total finance charges 7,355,710 3,833,766
7. 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 19 (Contingencies) for more detail on Tanzania, Zambia,
Mauritania, Mali and Ivory Coast.
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
8. Earnings per share
(Unaudited) (Audited)
2022 2021
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
20,990,137 70,174,784
Adjusted for:
Fair value loss/ (gain) on investments 19,797,969 (33,716,756)
Earnings for the year, used in the calculation of basic earnings per share
(adjusted)
40,788,106 36,458,028
Weighted average number of ordinary shares for the purposes of basic earnings 189,653,369 189,765,149
per share
Basic earnings per share (US$ c) 11.07 36.98
Basic earnings per share (adjusted) (US$ c) 21.51 19.21
(Unaudited) (Audited)
2022 2021
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 189,653,369 189,765,149
earnings per share
Shares deemed to be issued for no consideration in respect of:
- Effect of STIP and LTIP shares 6,263,799 3,021,654
Weighted average number of ordinary shares used in the calculation of diluted 195,917,168 192,786,803
earnings per share
Diluted earnings per share (US$ c) 10.71 36.40
Diluted earnings per share (adjusted) (US$ c) 20.82 18.91
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
9. Dividends
(Unaudited) (Audited)
2022 2021
US$ US$
Dividends 7,089,184 4,751,372
During the 12 months ended 31 December 2022, a dividend of 2.4 cents (2021:
1.3 cents) per ordinary share, totalling to US$4,607,599 (2021: US$2,470,713)
was declared as the final dividend for 2021 and paid to the shareholders on 10
May 2022 (2021: 04 May 2021) followed by a further dividend of 1.3 cents
(2021: 1.2 cents) per share which was declared as interim dividend for 2022
totalling US$2,481,586 (2021: US$2,280,658) and paid on 3 October 2022 (2021:
24 September 2021). The total dividend paid is US$7,089,184 (2021:
US$4,751,372).
In respect of the year ended 31 December 2022, the Directors propose that a
final dividend of 2.6 cents (2021: 2.4 cents) per share be paid to
shareholders on 9 May 2023 (2021: 10 May 2022). This final dividend 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 14 April 2023 (2021: 8 April 2022). The total estimated final
dividend to be paid is US$5.0 million (2021: US$4.59 million). The payment of
this final dividend will not have any tax consequences for the Group.
10. Property, plant and equipment
The net movement in property, plant and equipment in the year is an increase
of US$29.1 million (2021: US$54.6 million). This is primarily as a result of:
· additions in the year of US$56.7 million (2021: S$75.7 million)
on drilling rigs, heavy mining equipment and other assets to expand its
operations and replace existing assets;
· disposals of property, plant and equipment with a net book value
of US$0.7 million (2021: US$0.5 million) during the year; and
· Depreciation charge of US$27.0 million (2021: US$20.5 million).
The Group's property plant and equipment includes assets not yet commissioned
totalling US$24.6 million (2021: US$19.9 million). The assets will be
depreciated once commissioned and available for use. A loss of US$0.7 million
(2021: US$0.5 million) was incurred on the disposal of property, plant and
equipment. Not reflected in the Cash Flow is a US$9.0 million asset finance
facility obtained from Epiroc Financial Solutions for the purchase of 9 Rigs
and US$0.1 million of assets purchased on credit.
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
11. Inventory
2022 2021
US$ US$
Consumables 58,310,073 36,303,937
Goods in transit 1,035,386 2,197,983
Gross carrying value of inventory 59,345,459 38,501,920
Less impairment of inventory (650,480) (566,808)
58,694,979 37,935,112
The cost of inventories recognised as an expense in the current year amounts
to US$18.3 million (2021: US$13.4 million). During the year, the Group wrote
off US$0.2 million (2021: US$1.3 million) of inventory. A provision of US$0.7
million (2021: US$1.0 million - reversal of provision) was made during the
year, resulting in an increase in the carrying amount of the provision.
12. Trade receivables
(Unaudited) (Audited)
2022 2021
US$ US$
Trade receivables 44,522,523 42,212,147
Less: Allowance for credit losses (2,980,656) -
Total trade receivables 41,541,867 42,212,147
As the Group does not have historical credit losses, the expected loss rates
have been based on current and forward-looking information on micro
macroeconomic factors affecting the Group's customers. The Group has
identified the metals and mining sector's credit loss probability rates as the
key macroeconomic factor in countries where the Group operates.
The lifetime expected loss provision for trade receivables is as follows:
More than More than More than
30 days 60 days 120 days
31 December 2022 (Unaudited) Current past due past due past due Total
US$ US$ US$ US$ US$
Expected loss rate 1% 6% 13% 38% 7%
Gross carrying amount 35,802,704 1,299,057 740,146 6,680,616 44,522,524
Loss provision 232,820 80,441 99,522 2,567,873 2,980,656
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
12. Trade receivables (continued)
Movements in the impairment allowance for trade receivables are as follows:
(Unaudited) (Audited)
2022 2021
US$ US$
Opening provision for impairment of trade receivables - -
Increase during the year 4,438,204 -
Receivables written off during the year as uncollectible (1,457,548) -
At 31 December 2,980,656 -
13. Share capital and Share premium
(Unaudited) (Audited)
2022 2021
US$ US$
Authorised
2,000,000,000 (2021: 2,000,000,000) ordinary shares of US$0.0001 (2021:
US$0.0001) each
200,000 200,000
Issued share capital
192,864,738 (2021: 190,054,838) ordinary shares of US$0.0001 (2021: US$0.0001) 19,287 19,006
each
(Unaudited) (Audited)
Share premium 2022 2021
US$ US$
Balance at beginning of period 60,900,119 60,169,426
Share issue 1,490,098 730,693
Balance at end of period 62,390,217 60,900,119
In March and April 2022, the Company issued 2,809,900 new common shares
(valued at US$1,490,379) pursuant to the Company's employee short term
incentive plan. The shares rank pari passu with the existing ordinary
shares. Fully paid ordinary shares which have a par value of 0.01 cents,
carry one vote per share and carry rights to dividends.
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
14. Treasury shares
2022 2021
US$ US$
Balance at 1 January - -
Acquired in the year 2,474,964 -
Balance at 31 December 2022 2,474,964 -
The treasury shares reserve represents the cost of shares in Capital Limited
purchased in the market and held by the Company to satisfy options under the
Group's share options plans. The number of ordinary shares held by the Company
at 31 December 2022 was 1,973,551 (2021: nil).
15. Loans and borrowings
(Unaudited) (Audited)
2022 2021
US$ US$
Bank loans 57,944,781 48,735,961
Supplier credit facilities 17,674,372 13,719,399
75,619,153 62,455,360
Less: Unamortised debt arrangement costs (717,531) -
Total loans and borrowings 74,901,622 62,455,360
Current 18,036,811 16,887,692
Non-current 56,864,811 45,567,668
Total loans and borrowings 74,901,622 62,455,360
(a) US$25 million revolving credit facility ("RCF")
provided by Standard Bank (Mauritius) Limited
The RCF was renewed on 19 July 2022 for a further term of 3 years. The
interest rate on the RCF is the prevailing three-month SOFR (payable in
arrears) plus a margin of 5.75%, and an annual commitment fee of 2.275% is
charged on any undrawn balances. The amount utilised on the RCF is US$25
million as at 31 December 2022 (2021: US$15 million).
Under the terms of the RCF, the Group is required to comply with certain
financial covenants relating to:
• Interest Cover Ratio
• Debt EBITDA Ratio
• Debt Equity Ratio
• Total Tangible Net Worth
In addition, CAPD (Mauritius) Limited, as borrower, is also required to comply
with the Total Tangible Net Worth covenant.
Security for the Standard Bank (Mauritius) Limited facility
comprises:
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.
As at the reporting date and during the period under review, the Group has
complied with all covenants attached to the loan facilities.
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
15. Loans and borrowings (continued)
(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, Capital Drilling Egypt LLC and Capital Mining Services. The
Group drew an additional US$10.6 million in 2022. As at 31 December 2022, the
term loan was fully drawn.
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 31 December 2022, the total drawn
under these credit agreements was US$11.7m (2021: US$6.1 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 31 December 2022 the balance outstanding was
US$5.9 million (2021: US$7.5 million).
No covenants are attached to this facility.
16. Provisions
(Unaudited) (Audited)
2022 2021
Current US$ US$
At 1 January - -
Charge to profit or loss 2,636,640 -
At 31 December 2,636,640 -
-
Provisions relate to project closure (redundancy costs) in respect of
contracts concluded during the year and various operational claims and
disputes that are expected to be settled during 2023. The provisions represent
management's best estimate of the Group's liability as at 31 December 2022.
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
17. Cash generated from operations
(Unaudited) (Audited)
2022 2021
US$ US$
Profit before taxation 32,566,128 82,005,307
Adjustments for:
Depreciation, amortisation and impairments 26,958,606 20,516,484
Loss on disposals 668,817 453,869
Depreciation of Right of use assets 3,457,029 883,923
Share-based payment 2,774,331 1,989,277
Fair value loss/ (gain) on investments 19,797,969 (33,716,756)
Interest income (34,835) (244,998)
Finance costs 7,355,710 3,833,766
Unrealised foreign exchange loss on foreign cash held 1,355,242 918,723
Increase in expected credit loss provision 2,980,656 -
Bad debts written off 1,457,548 -
Changes in working capital:
Increase in inventories (20,759,867) (13,246,010)
Increase in trade and other receivables (4,883,111) (26,879,489)
(Decrease)/ increase in trade and other payables (2,797,406) 6,093,468
Increase in provisions 2,636,640 -
Cash generated from operations 73,533,457 42,607,564
18. Commitments
The Group has the following commitments:
(Unaudited) (Audited)
2022 2021
US$ US$
Committed capital expenditure 18,685,619 13,424,141
The Group had outstanding purchase orders amounting to US$29.7 million (2021:
US$30.3 million) at the end of the reporting period of which US$18.7 million
(2021: US$13.4 million) were for capital expenditure.
NOTES TO THE CONDENSED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS
For the year ended 31 December 2022
19. Contingencies
19.1 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, totalling Zambian Kwacha 150 million (US$8.2
million).
No subsequent communication has been received from the ZRA regarding this
matter since June 2016. As CDZ is in the final stages of a court approved
liquidation, the provision of US$1.6 million previously recognised has been
released during the year.
19.2 Tanzania tax
Capital Drilling (T) Ltd ("CDT")
2009-15 tax audit
Capital Drilling (T) Ltd ("CDT"), was party to a payroll tax claim (US$9.8
million including interest) made by the Tanzanian Revenue Authority ("TRA")
for the tax years 2009-2015.
During the year, CDT reached a final agreement with the TRA and the deed of
settlement was lodged with the Tax Revenue Appeals Tribunal on 29 June 2022.
The final payment of US$0.7 million was made in August 2022, bringing the
total paid to $1.8m. As part of the settlement, the TRA waived penalties and
interest in full.
2016-18 tax audit
The TRA issued an initial assessment of US$4.5 million for 2016-18 in December
2019. Through negotiation, the tax claim was reduced to US$2.4 million in May
2020 and a payment of US$0.7 million was made in order to proceed with lodging
formal objections.
During the year, the audit was formally closed with a further US$0.1 million
payment as final settlement, bring the total tax paid to US$0.8 million.
15.3 Ivory Coast 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$0.4 million has been provided in full as at 31 December 2022.
19.4 Mauritania Tax
2021 tax audit
During the year, the Mauritania tax authority ('MRA') commenced a routine tax
audit of Capital Drilling Mauritania ('CDM') for the year ended 31 December
2021. The exchange of information with the MRA is ongoing and no formal
assessment or demand for payment has been received.
20. Events after the reporting period
There have been no significant events affecting the Group since the year end.
GLOSSARY
A description of various acronyms is detailed below:
ARPOR Average Revenue Per Operating Rig
CAPEX Capital Expenditure
EBIT Earnings Before Interest and Taxes and fair value gain/loss on investments
EBITDA Earnings Before Interest, Taxes, Depreciation, Amortisation and fair value
gain/loss on investments
EBITDA (adjusted for IFRS 16 leases) EBITDA pre fair value gain/ loss on investments, net of cash cost of the IFRS
16 leases
Cash from operations (adjusted for IFRS 16 leases) Cash generated from operations net of cash cost of IFRS 16 leases
Basic EPS Basic Earnings Per Share
Basic EPS (adjusted) Basic Earnings Per Share adjusted for fair value gain/loss on investments
ETR Effective Tax Rate
HSSE Health, Safety, Social and Environment
KPI Key Performance Indicator
LTI Lost Time Injury
LTM Last Twelve Months
PBT Profit Before Tax
NPAT Net Profit After Tax
Adjusted NPAT NPAT pre fair value gain/ loss on investments
YOY Year-On-Year
Return on capital employed EBIT / Average capital employed
Average capital employed Average yearly capital employed pre investments at fair value and goodwill.
RECONCILIATION OF ALTERNATIVE PERFORMANCE MEASURES TO THE PRELIMINARY
FINANCIAL RESULTS:
2022 2021
US$ US$
ARPOR can be reconciled from the financial statements as per the below:
Revenue per financial statements ($) 290,284,368 226,793,226
Non-drilling revenue ($) (89,793,368) (57,130,266)
Revenue used in the calculation of ARPOR ($) 200,491,000 169,663,000
Monthly Average active operating Rigs 93 78
Monthly Average operating Rigs 118 104
ARPOR (rounded to nearest $'000) 180,000 181,000
EBITDA can be reconciled from the financial statements as per the below:
Profit for the year 22,730,159 70,288,778
Depreciation 30,416,239 21,397,355
Taxation 9,835,969 11,716,529
Interest income (34,835) (244,998)
Finance charges 7,355,711 3,833,766
Fair value adjustments 19,797,969 (33,716,756)
EBITDA 90,101,212 73,274,674
2022 2021
US$ US$
Operating profit (EBIT) 59,684,973 51,877,319
Depreciation, amortisation and impairments 30,416,239 21,397,355
EBITDA 90,101,212 73,274,674
Gross profit 134,431,773 106,302,020
Administration expenses (44,330,561) (33,027,346)
EBITDA 90,101,212 73,274,674
EBITDA Margin 31.0% 32.3%
EBITDA (adjusted for IFRS 16 leases):
EBITDA 90,101,212 73,274,674
Repayment of leases (3,733,798) (946,920)
EBITDA (adjusted for IFRS 16 leases) 86,367,414 72,327,754
Cash generated from operations (adjusted for IFRS 16 leases):
Cash generated from operations 73,533,457 42,607,564
Repayment of leases (3,733,798) (946,920)
EBITDA (adjusted for IFRS 16 leases) 69,799,659 41,660,644
Net cash (debt) can be reconciled from the financial statements as per the
below:
Cash and cash equivalents 28,379,607 30,577,249
Long-term borrowings (57,153,863) (45,567,668)
Current portion of long-term borrowings (18,465,290) (16,887,692)
Net debt (47,239,546) (31,878,111)
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