Capital Limited (LON:CAPD), the mining services company, has said its business continued to perform strongly in the first half of 2020 despite the coronavirus (COVID-19) pandemic.
The company’s business is focused on African markets and gold mining in particular so the rocketing price of gold has been a boon for the company. Strong demand for drilling services is anticipated once the West African wet season has passed.
Revenue in the first half of the year rose to US$65.09mln from US$54.83mln the year before. Profit before tax soared to US$19.13mln from US$7.59mln in the first half of 2019, thanks largely to a US$9.98mln “fair value” gain on investments.
Underlying earnings (EBITDA) rose to US$15.4mln from US$12.7mln the previous year while earnings before interest and tax (EBIT) improved to US$9.6mln from US$7.9mln.
EBITDA margins increased to 23.7% from 23.2% in the first half of last year, despite higher labour costs associated with the management of COVID-19.
Net cash generated during the six months eased to US$7.0mln from US$10.5mln the year before, which Capital Limited attributed to asset pre-payments, increased inventory and the timing of receivables.
During the first half of 2020, the average fleet size was 99 drilling rigs, up from 91 in the same period of 2019; the fleet utilisation rate rose to 57% from 52%.
“We posted very strong revenue growth during the half-year period, up 18.8% on the prior corresponding period, primarily driven by an increase in assets at many of our long-term projects. In addition, activity undertaken during 2018 and in particular 2019 to build the pipeline and relocate assets into West Africa ensured we were well placed to start the year contributing further to this outstanding result, with the region contributing 31% of total revenues during the period,” Jamie Boyton, the executive chairman of Capital Limited said in the results statement.
“Our long-term contract portfolio strengthened further with the award of a two-year contract with Hummingbird in Mali. Additionally, we were awarded extensions at three existing long-term contracts with Resolute (Mali), Barrick North Mara (Tanzania) and AngloGold Ashanti (Tanzania), a positive reflection of our performance delivery at these sites,” Boyton added.
“While the COVID-19 pandemic still provides a level of uncertainty for the future, the gold price has reached record highs, and we anticipate strong demand for our services following the West African wet season in Q4 [fourth quarter]. This is encouraging for Capital due to our high gold sector exposure and established presence in the West African region. We have now filled key positions within our mining division, and the mining business is seeing increased tendering activity, providing further optimism of higher activity levels in the second half and into 2021," Boyton concluded.