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    Swick Posts Strong Quarterly Performance, Earnings Growth Anticipated in FY20

    Drilling contractor Swick Mining Services Limited (ASX: SWK) has announced strong unaudited Drilling Business results for 3Q FY19.

    The company reported a revenue of $35.1 million, EBITDA of $7.3 million, and EBIT of $2.5 million for the three months ended 31 March 2019. Meanwhile, cash from operations for 3Q FY19 was reported to be $7.0 million.

    Swick said that the strong earnings were driven by its strategy of resetting market rates and targeting lower operating costs, plus short‐term rates on two contracts through to end 3Q FY19.

    The company has provided full year FY19 Drilling Business guidance, with Revenue of $138-$143 million and EBITDA of $27.5-$29.5 million.

    Swick reported $210 million in renewals and new contracts awarded in H2 FY19. This is anticipated to set a strong platform to drive earnings growth and enhanced cash generation in FY20.

    Strong Results for 3Q19

    For 3Q19, Swick has reported earnings before interest, tax, depreciation, and amortisation (EBITDA) of $7.3 million. This is 58% higher than the prior corresponding period (3Q FY18: $4.6 million). The revenue for 3Q19 is reported to be $35.1 million, which is 7% higher than 3Q FY18’s revenue of $32.9 million.

    Cash from operations for 3Q FY19 was reported to be $7.0 million, which is 77% higher than 3Q FY18’s $4.0 million. This represents a 110% conversion of EBITDA to cash at the Group level. Across 3Q19, Swick reported 265,634 total metres drilled and Total Fleet Utilisation of 71%.

    The Success of Swick’s Strategy

    The company noted that its continuation in earnings turnaround reflects the ongoing success in its strategy of shifting drill rigs onto better performing contracts or new projects and reducing operating and non-operating costs, ensuring each contract is profitable on a standalone basis.

    FY19 Drilling Business guidance

    Swick has provided full year FY19 guidance for its Drilling Business, with revenue of $138-$143 million (Y18: $137.1 million) and EBITDA of $27.5-$29.5 million (FY18: $19.1 million) expected.

    The company cautioned that 2H FY19 earnings are expected to be lower than 1H FY19. This is attributed to the transition of rigs taking place during 4Q FY19 plus short-term rates concluding as planned at two prior contracts at the end of March 2019.

    Contracts worth $210 Million

    Swick’s Managing Director Kent Swick said that in the March quarter the company had secured $210 million in contracts that were being pursued. This includes new work at Northern Star’s Pogo gold mine in Alaska, rig expansion at BHP’s Olympic Dam in South Australia, and contract extensions at Kirkland Lake Gold’s Cosmo gold mine and Newmont Australia’s Tanami gold mine.

    The company said that these contracts have expanded Swick’s order book to $295 million at target margins, providing it with a strong platform to deliver earnings growth in FY20.

    In addition, Swick has also mobilised two rigs at the Telfer project for Newcrest on a short six-month contract, with an opportunity to tender for longer term work towards the end of the short-term contract.

    Swick’s MD Mr. Kent Swick said: “The recent award of $210 million in work has provided a strong base for the business, with many rigs moving from low margin, long-term work to target margin, long-term work.

    Our ability to secure rate adjustments where necessary as well as locking in fixed shift contract rates at projects where production may be at risk for various reasons has been key in significantly de-risking the business on a commercial basis.

    Each mine site is unique, which means we sometimes look at fixed shift contract rates to ensure we do not overpromise to clients. For example, fixed shift rates are quoted when productivity cannot be accurately predicted, such as in deep drilling or challenging ground conditions. What we can guarantee is mechanical uptime, crew utilisation, safe and skilled crews, and the most powerful and versatile drill rigs. We have had good feedback from many clients on this approach.”

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    • Delayed Prices (USD) - Last Updated 27-06-2022
    • Gold $1,826.40
    • Silver $21.14
    • Platinum $908.00
    • Palladium $1,802.00
    • Dalian Iron Ore i2209 $113.98
    • Aluminium $2,456.00
    • Cobalt $72,400.00
    • Copper $8,381.00
    • Lead $1,915.00
    • Nickel $22,400.00
    • Tin $24,590.00
    • Zinc $3,350.00