Mitchell to post strong FY23 profit on revenue lift

Australian mineral drilling contractor Mitchell Services has flagged a A2c-a-share – circa-A$4.5-5 million – dividend payout to shareholders on the back of strong FY23 operating results.

The Australian Securities Exchange-listed company said record quarterly revenue of $65.8 million in Q4, up 17.6% year-on-year, had it on track to deliver full-year revenue of $243.1m and EBITDA of $42.1m, “[both] record numbers for the company”, and net profit of $6.5-7.5m.

Mitchell CEO Andrew Elf said the company’s 23% June-quarter EBITDA margin was 155% higher than the same time last year and “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]”.

As well as its planned partially franked dividend, Mitchell has spent about $2.6m buying back c7m of its shares at an average 37c-a-share.

Its share price is up nearly 23% in the past month at 43c, capitalising Mitchell at about A$94 million.

The company used some of its FY23 free cash flow to cut net debt by 55% during the year to $17.6m and says it can maintain its dividend payout ratio while meeting its June 2024 net debt target of $15m.

Capital expenditure plummeted 71% yoy to $12.6m in FY23. Elf said maintenance capex was also lower in the past 12 months, but “continues to support high levels of availability across all equipment with breakdown rates remaining negligible”.

“Maintenance capital expenditure will continue to be deployed as required with growth capital expenditure limited where it makes sense to do so,” he said.


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