Imdex maintains growth in slow drilling market

Staff reporter

Process of unlocking value at customer sites with technology ‘remains at the early stages of its full potential’

Short-term market softness and margin pressure is unlikely to slow Imdex’s investment in future growth after the company posted record annual revenue for FY23 with large recent acquisition, Devico’s, first four months of sales input.

The ASX-listed mining technology and services company lifted revenue more than 20% year-on-year to A$411.4 million in its latest financial year, while EBITDA was down 1.4% yoy at $100.5m.

Imdex kept its annual EBITDA margin around 30% (29.8%) without including more than $22m of Devico-related costs, legal fees and other, smaller one-off costs.

Net profit after tax was down 21.7% yoy at $35m. Imdex upped dividend payments for the year to 3.6c-a-share from 3.4c/sh in FY22. Net debt was at $64.9m at the end of June.

Imdex’s US$242 million acquisition of Norway’s Devico at the start of 2023 added international market-leading mineral drilling navigation and sensing technology to Imdex’s exploration and mining tech portfolio. It also expanded Imdex’s global footprint, particularly in Europe and the Americas.

Imdex estimates it is on more than 70% of mineral drill sites worldwide.

Devico reportedly contributed $20.6m of revenue to the full-year Imdex result – a similar annual revenue run-rate to 2022 for Devico – with conversion of sensor unit sales to Imdex’s rental model expected to be a drag on Devico’s previous cadence in the short term.

Imdex is also looking to connect Devico sensors to its Hub-IQ cloud platform to improve reporting and increase customer engagement. While the number of customers connected to Hub-IQ, ex-Devico, increased 10% in FY23, Imdex’s overall percentage of IQ-connected sensors dropped to 30% with the addition of Devico’s fleet.

“Connecting the Devico sensors continues to remain a key integration activity,” Imdex CFO Paul Evans said this week.

Asked if Devico would contribute the $29m of EBITDA flagged when Imdex bought it, after it reported $8.5m for four months, Evans said: “That would be our aim and target.”

CEO Paul House said while the proportion of Imdex’s top 250 clients using more than three of its products edged up from 44% to 46% in FY23, the process of “optimising the technology solutions to unlock value at any customer site remains at the early stages of its full potential”.

“We have a clear pathway to grow this to five or more products overtime, optimised for each site,” he said in the company’s latest annual report.

Imdex also continues to invest heavily in R&D ($32.5m in FY23 vs $29.5m in FY22: 7.9% of FY23 revenue vs 8.6% in FY22) to expand core product lines, while other key investments, Krux Analytics (40%-owned) and Datarock (49.1%) are adding to Imdex’s tech stack and revenue mix.

The company has more than doubled its annual revenue level (up 133%) since FY17. Global mineral exploration budgets have risen about 53% in the same time, according to S&P data, with the calendar 2022 US$12.4 billion total exploration spend still well below the 2012 peak at $21b.

S&P forecasted a 20% contraction of exploration investment in calendar 2023, but improvement in 2024.

Imdex’s commercialisation of products for the “substantially larger … and less cyclical” mining production market meanwhile continues to gain momentum.

Analysts heard this week the company had 11 of its new BHS mine blast-hole stabilisation fluid/fluid delivery units deployed and five new trial sites. It is understood to have built more than 20 Blast Dog robots, designed for multi-parameter measurement of blast holes, for commercial contracts and trials.

House said Imdex also had four deployed BOLT (underground production hole survey system) commercial prototypes at sites and two new scheduled trials.

Imdex was “leveraging existing core capabilities in drilling optimisation, rock knowledge sensors and data and analytics”, in the mine production area.

“Whilst we are earning Blast Dog revenues from three sites today we see the immediately addressable market to be in excess of 100 sites,” House said this week.

He said while the level of commercial Blast Dog revenue generated in FY23 was low, “we’ve matured our go-to market strategy … [and] instead of short-form free trials we’re doing longer-form paid trials that then grow in commercial revenue over time”.

Imdex shares dipped nearly 16% Monday to $1.52, capitalising the company at about $770 million.

The shares have come off a 52-week high of $2.64 earlier this year.


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