Mitchell Services (ASX:MSV) has recorded its highest ever revenue for any single quarter in the company’s history.
The coompany reports increased revenue and EBIDTA for the June quarter (FY23 Q4), based on the company’s un-audited consolidated management accounts.
The $94.06 million market capitalisation mining services company reports FY23 has seen material improvements across all operational and financial metrics. The full-year revenue and EBITDA of $243.1 million and $41.2 million respectively are record numbers for the company.
The significant revenue increase was driven by a combination of increased productivity and pricing as well as the continuation of a favourable shift in the mix of revenue by drilling type with a larger portion of the fleet now providing highly technical specialist drilling services.
“It is pleasing to note that the company recorded its highest ever revenue for any single quarter in its history”
In the company’s latest investor update for FY23 Q4, Mitchell Services Chief Executive Officer Andrew Elf says: “It is pleasing to note that the company recorded its highest ever revenue for any single quarter in its history. Revenue for FY23 Q4 was $65.8 million which represents a 17.6% increase when compared to the FY22 Q4 figure of $56 million.”
The CEO adds: “As I reflect on what a challenging but successful year FY23 has been, I am extremely excited to enter the new financial year. Underpinned by a highly skilled workforce of over 750 valued employees, and with one of Australia’s largest and highest quality fleets, the company is extremely well placed to generate increased earnings year-on-year and continue to return surplus cash to shareholders in accordance with a disciplined capital management policy.”
The CEO says it is “exceptionally pleasing” to note that Mitchell Services also recorded its highest ever EBITDA for any single quarter. EBITDA for FY23 Q4 was $15.3 million (at an EBITDA margin of 23%) representing an increase of 155% when compared to the FY22 Q4 figure of $6 million.
The EBITDA performance is reflective of what the business can achieve when trading conditions are not negatively affected by material mobilisations and demobilisations, COVID, wet weather or unplanned contract variations, even with a drop in the average number of operating rigs when compared to FY22Q4 (76 versus 82).
Based on the un-audited management accounts, Mitchell Services expects that its reported post tax profit for FY23 will be between $6.5 million and $7.5 million. Given the company reported a profit of just $100,000 for the first half of FY23, “this is an outstanding result and talks to the strength of the second half and its full-year earnings potential”.
In the FY23 Q3 investor update, the company highlighted that the softer operating cashflow performance was temporary and driven by working capital requirements that were necessary to fund growth in revenue and new contract inventory.
Mitchell Services reports the FY23 Q4 saw the business deliver operating cashflows of $22.9m, representing a cashflow to EBITDA conversion ratio of over 150% and a fivefold improvement on FY22 Q4. The company says this result was aided by the reduction in Q4 working capital requirements and also by favourable timing differences whereby a portion of debtor receipts were received in late June as opposed to early FY24 Q1 when we would ordinarily have expected to receive them.
Meanwhile, the company will prioritise a portion of free cash flow to reduce leverage net debt peaked at $39.2 million on 30 June 2022 following the completion of the FY22 capital investment program.
Elf adds: “I am proud to report that given the exceptional cash generation in FY23 Q4, net debt on 30 June 2023 was $17.6m which represents a 12-month reduction of 55%. Allowing for the continuation of shareholder returns the company remains on track to meet its net debt target of $15.0m by June 2024.”
Maintenance capital expenditure will continue to be deployed as required with growth capital expenditure limited where the CEO says it makes sense to do so.
Total capital expenditure for FY23 was $12.6 million, which represented a reduction of 71% when compared to the FY22 corresponding figure of $44 million. The company says maintenance capex (while lower than FY22 levels) continues to support high levels of availability across all equipment with breakdown rates remaining negligible. This lower maintenance capex spend is also a function of the lower average age of the fleet given the recent LF160 purchases and the sale of older equipment in advance of upcoming capital overhauls.
Write to Adam Orlando at Mining.com.au
Images: Mitchell Services Ltd
