MASTER Drilling delivered the goods for shareholders in the year to end-December 2024 earning record $270.8m and pushing up its dividend to 65 South African cents from 52.5c in its 2023 financial year.
This represents yet another year of steadily improving performance from the Fochville-based mining services contracting and technology company, although CEO Danie Pretorius remains as cautious as ever on prospects.
This is despite the group having a “stable” order book worth $332.5m at year-end and a “healthy” project pipeline worth $695m.
Pretorius is unapologetic about his approach commenting: “The instability of this world and this industry is beyond me. I say to the team: ‘don’t try and be clever. Don’t try and say what the commodities will be like next year and the following year and then try to motivate capital on that’. There are too many moving parts”.
“Who thought that Ukraine and the Russians would ever be in a war for this long? Who thought that Trump would ever get back and do what he is doing today? The list just goes on.
“In our business it’s all about capital allocation. I am still the major shareholder and I don’t want to undo all the good luck we have had and the work we have done for the past 40 years”.
Pretorius’ strategy is to diversify into new high-tech mining projects which would have higher profit margins than the group’s traditional raise-boring business which contributes around 80% of total revenues.
But he’s also looking at expanding Master Drilling’s raising boring business through merger and acquisition activity pointing out that the sector could do with consolidation.
He commented: “Some of our competitors are lagging behind in technology and that is putting a lot of pressure on their margins.
“We are involved in discussions with one particular company right now and, if successful, the acquisition would push our revenues from raise-boring from the current 80% to probably just below 90% of our total revenues.
“You could see developments in the next six to nine months”.
Headline earnings for 2024 were up 22% in dollar terms but basic earnings were down 15.4% because Master Drilling’s auditors insisted the group take impairments – which were non-cash items – against some of its equipment which was standing idle with no immediate prospects of new contracts.
That irked Pretorius in August when he reported the development at the interim stage and it clearly still does. “As an engineer that did not make sense to me.”
CFO Andre van Deventer commented: “From where we are sitting the auditors took a very conservative approach as they are required to”.
“What will play out this year will be very interesting. Once we start utilising that equipment they will probably have to write back some of that but let’s see what happens in the next few months,” he said.
