Major Drilling Group International Inc. (“Major Drilling” or the
“Company”) (TSX: MDI), a leading provider of specialized drilling
services to the mining sector, today reported results for the
second quarter of fiscal 2023, ended October 31, 2022.
Quarterly Highlights
- Revenue of $201.7 million, an increase of 18% over the same
period last year.
- EBITDA(1) of $43.0 million (or $0.52 per share), up 40% vs.
same period last year.
- Net earnings of $23.6 million (or $0.29 per share), up 65% vs.
same period last year.
- Net cash grew by $42.8 million during the quarter to $51.3
million.
- Enhancement of fleet continues, replacing 11 drills with 14
new, more efficient models.
- Growth of electrification market driving incremental demand for
copper and battery metals.
- Release of inaugural Sustainability Report, highlighting ESG
initiatives and priorities around the world.
“Continued strength of demand for Major
Drilling’s services, especially our complex specialized drilling
services, once again drove solid quarterly results,” said Denis
Larocque, President and CEO of Major Drilling. “During the
quarter, we began to see the growing importance of the electric
vehicle and electrification market, with increased demand from
copper and battery metals customers. Combined with increased
activity from all three of our geographic segments, this more than
offset the slight softening in activity from the junior
miners.”
Ian Ross, CFO of Major Drilling, commented, “Our
operational leverage continued to generate excellent financial
results as activity levels remained robust with EBITDA up 40% to
$43 million compared to the same period last year. Major Drilling
generated net earnings of $23.6 million, or $0.29 per share, which
is an increase of 65% compared to the prior year. With continued
growth and strong operational performance, the Company has been
able to increase its net cash position by $42.8 million in the
quarter, to finish with net cash of $51.3 million. The Company is
also pleased to announce the renewal of our existing credit
facility, under the same terms and conditions, for another 5-year
term. Coupled with our net cash position, this provides tremendous
liquidity and flexibility moving forward. With the significant cash
growth in the quarter, the Company remained committed to investing
in the business by spending $13.3 million on capital expenditures,
buying 14 new drills while disposing of 11 older, less efficient
drills, bringing the total fleet count to 603.”
“As we enter our seasonally slower third
quarter, customer demand for calendar 2023 looks to remain strong,
and we are already in discussions with several senior customers.
Despite economic headwinds experienced since the beginning of 2022,
metal prices have remained at levels well above what is needed to
support exploration,” said Denis Larocque. “This, combined with the
growing supply shortfall in most mineral commodities, continues to
drive demand for our services. As the global demand for
electrification continues to grow, the world will require an
enormous volume of copper and battery metals, which is significant
for our outlook and the future of our business. We believe that
this will increase pressure on the existing supply/demand dynamic,
and lead to substantial additional investments in copper and other
base metal exploration projects. This increase in both activity
levels and diversification of commodities continues to drive demand
for our services. Our growing fleet ensures we retain utilization
capacity to meet this growing demand, and our capital availability
ensures we have the flexibility to increase our fleet count when
and where needed to consistently meet the needs of our customers
across the globe.”
“As we continue to move through the current
cycle, Major Drilling’s core strategy is to remain the leader in
specialized drilling as new mineral deposits will increasingly be
located in areas more challenging to access or requiring complex
drilling solutions. We are committed to providing top-quality
service to our valued customers through safe and productive drill
programs, as evidenced by our industry-recognized hole completion
rates. We leverage our worldwide expertise and utilize our
strong financial position to ensure we have the equipment and
inventory required to be a best-in-class service provider. With the
purchase of 14 new drills in the quarter, including 7 underground
drills in line with our diversification strategy, we are able to
offer a modern and productive fleet to meet the growing demand in
this industry,” continued Mr. Larocque.
"With our continued focus to be an industry
leader with respect to ESG, we are proud to have issued our
inaugural Sustainability Report during the quarter, highlighting
the tremendous efforts of our organization across the globe. The
collaborative efforts from our board, through to our drillers in
the field, ensure we are aligned as a company to progress our ESG
initiatives and it remains a priority moving forward," concluded
Mr. Larocque.
In millions of Canadian dollars (except earnings per share) |
|
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
Revenue |
|
$ |
201.7 |
|
|
$ |
170.7 |
|
|
$ |
401.6 |
|
|
$ |
321.7 |
|
Gross margin |
|
|
26.3 |
% |
|
|
22.0 |
% |
|
|
25.9 |
% |
|
|
21.1 |
% |
Adjusted gross margin(1) |
|
|
31.8 |
% |
|
|
28.3 |
% |
|
|
31.3 |
% |
|
|
27.3 |
% |
EBITDA(1) |
|
|
43.0 |
|
|
|
30.7 |
|
|
|
86.5 |
|
|
|
55.0 |
|
As percentage of revenue |
|
|
21.3 |
% |
|
|
18.0 |
% |
|
|
21.5 |
% |
|
|
17.1 |
% |
Net earnings |
|
|
23.6 |
|
|
|
14.3 |
|
|
|
47.9 |
|
|
|
25.4 |
|
Earnings per share |
|
|
0.29 |
|
|
|
0.17 |
|
|
|
0.58 |
|
|
|
0.31 |
|
(1) See “Non-IFRS Financial Measures”
Second Quarter Ended October 31,
2022
With all geographic regions contributing to the
growth, total revenue for the quarter was $201.7 million, up 18.2%
from revenue of $170.7 million recorded in the same quarter last
year. The favourable foreign exchange translation impact on revenue
and net earnings for the quarter, when comparing to the effective
rates for the same period last year, was approximately $6 million
and $1 million, respectively.
Revenue for the quarter from Canada - U.S.
drilling operations increased by 19.8% to $113.1 million, compared
to the same period last year. Senior and intermediate
activity levels more than offset a slowdown in junior activity in
this region.
South and Central American revenue increased by
13.3% to $41.7 million for the quarter, compared to the same
quarter last year. The growth from the prior year is mainly
attributable to a resumption of activity levels in jurisdictions
that were previously impacted by COVID-19 shutdowns.
Australasian and African revenue increased by
18.7% to $46.9 million, compared to the same period last year. The
Asian region was responsible for most of the growth in the quarter,
with new projects and contract renewals with improved pricing.
Gross margin percentage for the quarter was
26.3%, compared to 22.0% for the same period last year.
Depreciation expense totaling $11.2 million is included in direct
costs for the current quarter, versus $10.7 million in the same
quarter last year. Adjusted gross margin, which excludes
depreciation expense, was 31.8% for the quarter, compared to 28.3%
for the same period last year. Margins improved from the
prior year, mainly from enhanced productivity and price
adjustments, which more than offset inflation pressures.
General and administrative costs were $16.1
million, an increase of $2.0 million compared to the same quarter
last year, primarily due to increased employee compensation and
increased travel costs with the ease of COVID-19 restrictions.
Other expenses were $4.7 million, up from $3.4
million in the prior year quarter, due primarily to higher
incentive compensation expenses throughout the Company given the
increased profitability.
Foreign exchange loss was $1.1 million compared
to $0.9 million for the same quarter last year. While the Company's
reporting currency is the Canadian dollar, various jurisdictions
have net monetary assets or liabilities exposed to other
currencies, including the U.S. dollar, which strengthened with the
foreign exchange volatility experienced during the quarter.
The income tax provision for the quarter was an
expense of $7.5 million, compared to an expense of $4.5 million for
the prior year period. The increase from the prior year was
due to an overall increase in profitability.
Net earnings were $23.6 million or $0.29 per
share ($0.28 per share diluted) for the quarter, compared to net
earnings of $14.3 million or $0.17 per share ($0.17 per share
diluted) for the prior year quarter.
Non-IFRS Financial Measures
The Company’s financial data has been prepared
in accordance with IFRS, with the exception of certain financial
measures detailed below. The measures below have been used
consistently by the Company’s management team in assessing
operational performance on both segmented and consolidated levels,
and in assessing the Company’s financial strength. The Company
believes these non-IFRS financial measures are key, for both
management and investors, in evaluating performance at a
consolidated level and are commonly reported and widely used by
investors and lending institutions as indicators of a company’s
operating performance and ability to incur and service debt, and as
a valuation metric. These measures do not have a standardized
meaning prescribed by IFRS and therefore may not be comparable to
similarly titled measures presented by other publicly traded
companies and should not be construed as an alternative to other
financial measures determined in accordance with IFRS.
Adjusted gross profit/margin - excludes
depreciation expense:
(in $000s CAD) |
|
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
|
$ |
201,716 |
|
|
$ |
170,693 |
|
|
$ |
401,551 |
|
|
$ |
321,688 |
|
Less:
direct costs |
|
|
148,713 |
|
|
|
133,155 |
|
|
|
297,374 |
|
|
|
253,790 |
|
Gross
profit |
|
|
53,003 |
|
|
|
37,538 |
|
|
|
104,177 |
|
|
|
67,898 |
|
Add:
depreciation |
|
|
11,177 |
|
|
|
10,709 |
|
|
|
21,591 |
|
|
|
20,018 |
|
Adjusted
gross profit |
|
|
64,180 |
|
|
|
48,247 |
|
|
|
125,768 |
|
|
|
87,916 |
|
Adjusted
gross margin |
|
|
31.8 |
% |
|
|
28.3 |
% |
|
|
31.3 |
% |
|
|
27.3 |
% |
EBITDA - earnings before interest, taxes, depreciation,
and amortization:
(in $000s CAD) |
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
23,611 |
|
|
$ |
14,290 |
|
|
$ |
47,859 |
|
|
$ |
25,350 |
|
Finance
costs |
|
|
26 |
|
|
|
399 |
|
|
|
456 |
|
|
|
871 |
|
Income
tax provision |
|
|
7,541 |
|
|
|
4,501 |
|
|
|
14,826 |
|
|
|
7,216 |
|
Depreciation and amortization |
|
|
11,829 |
|
|
|
11,539 |
|
|
|
23,370 |
|
|
|
21,528 |
|
EBITDA |
|
$ |
43,007 |
|
|
$ |
30,729 |
|
|
$ |
86,511 |
|
|
$ |
54,965 |
|
Net cash (debt) – cash net of debt,
excluding lease liabilities reported under IFRS 16
Leases:
(in $000s CAD) |
|
October 31, 2022 |
|
April 30, 2022 |
|
|
|
|
|
|
|
Cash |
|
$ |
97,698 |
|
|
$ |
71,260 |
|
Contingent consideration |
|
|
(16,746 |
) |
|
|
(22,907 |
) |
Long-term debt |
|
|
(29,666 |
) |
|
|
(50,000 |
) |
Net cash (debt) |
|
$ |
51,286 |
|
|
$ |
(1,647 |
) |
|
|
|
|
|
|
|
|
|
Forward-Looking Statements
This new release includes certain information
that may constitute “forward-looking information” under applicable
Canadian securities legislation. All statements, other than
statements of historical facts, included in this news release that
address future events, developments, or performance that the
Company expects to occur (including management’s expectations
regarding the Company’s objectives, strategies, financial
condition, results of operations, cash flows and businesses) are
forward-looking statements. Forward-looking statements are
typically identified by future or conditional verbs such as
“outlook”, “believe”, “anticipate”, “estimate”, “project”,
“expect”, “intend”, “plan”, and terms and expressions of similar
import. All forward-looking information in this news release is
qualified by this cautionary note.
Forward-looking information is necessarily based
upon various estimates and assumptions including, without
limitation, the expectations and beliefs of management related to
the factors set forth below. While these factors and assumptions
are considered reasonable by the Company as at the date of this
document in light of management’s experience and perception of
current conditions and expected developments, these statements are
inherently subject to significant business, economic and
competitive uncertainties and contingencies. Known and unknown
factors could cause actual results to differ materially from those
projected in the forward-looking statements and undue reliance
should not be placed on such statements and information.
Such forward-looking statements are subject to a
number of risks and uncertainties that include, but are not limited
to: the level of activity in the mining industry and the demand for
the Company’s services; the level of funding for the Company’s
clients (particularly for junior mining companies); competitive
pressures; global political and economic environments; the
integration of business acquisitions and the realization of the
intended benefits of such acquisitions; the Company’s dependence on
key customers; exposure to currency movements (which can affect the
Company’s revenue in Canadian dollars); currency restrictions;
implications of the COVID-19 pandemic; the geographic distribution
of the Company’s operations; the impact of operational changes;
changes in jurisdictions in which the Company operates (including
changes in regulation); failure by counterparties to fulfill
contractual obligations; as well as other risk factors described
under “General Risks and Uncertainties” in the Company’s Annual
Information Form for the year ended April 30, 2022, available on
the SEDAR website at www.sedar.com. Should one or more risk,
uncertainty, contingency, or other factor materialize or should any
factor or assumption prove incorrect, actual results could vary
materially from those expressed or implied in the forward-looking
information.
Forward-looking statements made in this document
are made as of the date of this document and the Company disclaims
any intention and assumes no obligation to update any
forward-looking statement, even if new information becomes
available, as a result of future events, or for any other reasons,
except as required by applicable securities laws.
About Major Drilling
Major Drilling Group International Inc. is one
of the world’s largest drilling services companies primarily
serving the mining industry. Established in 1980, Major Drilling
has over 1,000 years of combined experience and expertise within
its management team alone. The Company maintains field
operations and offices in Canada, the United States, Mexico, South
America, Asia, Africa, and Australia. Major Drilling provides a
complete suite of drilling services including surface and
underground coring, directional, reverse circulation, sonic,
geotechnical, environmental, water-well, coal-bed methane, shallow
gas, underground percussive/longhole drilling, surface drill and
blast, and a variety of mine services.
Webcast/Conference Call Information
Major Drilling Group International Inc. will
provide a simultaneous webcast and conference call to discuss its
quarterly results on Friday, December 9, 2022 at 9:00 AM
(EST). To access the webcast, which includes a slide
presentation, please go to the investors/webcast section of Major
Drilling’s website at www.majordrilling.com and click on the
link. Please note that this is listen-only mode.
To participate in the conference call, please
dial 416-340-2217, participant passcode 9856483# and ask for Major
Drilling’s Second Quarter Results Conference Call. To ensure
your participation, please call in approximately five minutes prior
to the scheduled start of the call.
For those unable to participate, a taped
rebroadcast will be available approximately one hour after the
completion of the call until Monday, January 9, 2023. To
access the rebroadcast, dial 905-694-9451 and enter the passcode
8500719#. The webcast will also be archived for one year and
can be accessed on the Major Drilling website at
www.majordrilling.com.
For further information:Ian Ross, Chief
Financial OfficerTel: (506) 857-8636Fax: (506)
857-9211ir@majordrilling.com
|
|
Major Drilling Group International Inc. |
|
Interim Condensed Consolidated Statements of
Operations |
|
(in thousands of Canadian dollars, except per share
information) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
October 31 |
|
|
October 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL REVENUE |
|
$ |
201,716 |
|
|
$ |
170,693 |
|
|
$ |
401,551 |
|
|
$ |
321,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIRECT COSTS (note
7) |
|
|
148,713 |
|
|
|
133,155 |
|
|
|
297,374 |
|
|
|
253,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT |
|
|
53,003 |
|
|
|
37,538 |
|
|
|
104,177 |
|
|
|
67,898 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative
(note 7) |
|
|
16,068 |
|
|
|
14,130 |
|
|
|
32,242 |
|
|
|
27,738 |
|
Other expenses |
|
|
4,723 |
|
|
|
3,415 |
|
|
|
7,743 |
|
|
|
6,022 |
|
(Gain) loss on disposal of
property, plant and equipment |
|
|
(22 |
) |
|
|
(85 |
) |
|
|
(720 |
) |
|
|
(409 |
) |
Foreign exchange (gain)
loss |
|
|
1,056 |
|
|
|
888 |
|
|
|
1,771 |
|
|
|
1,110 |
|
Finance costs |
|
|
26 |
|
|
|
399 |
|
|
|
456 |
|
|
|
871 |
|
|
|
|
21,851 |
|
|
|
18,747 |
|
|
|
41,492 |
|
|
|
35,332 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS BEFORE INCOME
TAX |
|
|
31,152 |
|
|
|
18,791 |
|
|
|
62,685 |
|
|
|
32,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX EXPENSE
(note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
Current |
|
|
6,564 |
|
|
|
2,912 |
|
|
|
14,265 |
|
|
|
5,344 |
|
Deferred |
|
|
977 |
|
|
|
1,589 |
|
|
|
561 |
|
|
|
1,872 |
|
|
|
|
7,541 |
|
|
|
4,501 |
|
|
|
14,826 |
|
|
|
7,216 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
EARNINGS |
|
$ |
23,611 |
|
|
$ |
14,290 |
|
|
$ |
47,859 |
|
|
$ |
25,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EARNINGS PER SHARE
(note 9) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.29 |
|
|
$ |
0.17 |
|
|
$ |
0.58 |
|
|
$ |
0.31 |
|
Diluted |
|
$ |
0.28 |
|
|
$ |
0.17 |
|
|
$ |
0.58 |
|
|
$ |
0.31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Drilling Group International Inc. |
|
Interim Condensed Consolidated Statements of Comprehensive
Earnings |
|
(in thousands of Canadian dollars) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
October 31 |
|
|
October 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET EARNINGS |
|
$ |
23,611 |
|
|
$ |
14,290 |
|
|
$ |
47,859 |
|
|
$ |
25,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER COMPREHENSIVE
EARNINGS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Items that may be reclassified
subsequently to profit or loss |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on foreign currency translations |
|
|
15,079 |
|
|
|
(2,518 |
) |
|
|
11,987 |
|
|
|
(513 |
) |
Unrealized gain (loss) on derivatives (net of tax) |
|
|
54 |
|
|
|
5 |
|
|
|
(1,578 |
) |
|
|
182 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
EARNINGS |
|
$ |
38,744 |
|
|
$ |
11,777 |
|
|
$ |
58,268 |
|
|
$ |
25,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Drilling Group International Inc. |
|
Interim Condensed Consolidated Statements of Changes in
Equity |
|
For the six months ended October 31, 2022 and
2021 |
|
(in thousands of Canadian dollars) |
|
(unaudited) |
|
|
|
|
|
|
|
|
Retained |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
earnings |
|
|
Other |
|
|
Share-based |
|
|
Foreign currency |
|
|
|
|
|
|
Share capital |
|
|
(deficit) |
|
|
reserves |
|
|
payments reserve |
|
|
translation reserve |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY 1, 2021 |
|
$ |
243,379 |
|
|
$ |
(22,456 |
) |
|
$ |
1,067 |
|
|
$ |
5,559 |
|
|
$ |
52,614 |
|
|
$ |
280,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share issue (note 11) |
|
|
12,911 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
12,911 |
|
Exercise of stock options |
|
|
3,957 |
|
|
|
- |
|
|
|
- |
|
|
|
(1,090 |
) |
|
|
- |
|
|
|
2,867 |
|
Share-based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
175 |
|
|
|
- |
|
|
|
175 |
|
Stock options
expired/forfeited |
|
|
- |
|
|
|
23 |
|
|
|
- |
|
|
|
(23 |
) |
|
|
- |
|
|
|
- |
|
|
|
|
260,247 |
|
|
|
(22,433 |
) |
|
|
1,067 |
|
|
|
4,621 |
|
|
|
52,614 |
|
|
|
296,116 |
|
Comprehensive
earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
- |
|
|
|
25,350 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
25,350 |
|
Unrealized gain (loss) on foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency translations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(513 |
) |
|
|
(513 |
) |
Unrealized gain (loss) on derivatives |
|
|
- |
|
|
|
- |
|
|
|
182 |
|
|
|
- |
|
|
|
- |
|
|
|
182 |
|
Total comprehensive earnings
(loss) |
|
|
- |
|
|
|
25,350 |
|
|
|
182 |
|
|
|
- |
|
|
|
(513 |
) |
|
|
25,019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT OCTOBER
31, 2021 |
|
$ |
260,247 |
|
|
$ |
2,917 |
|
|
$ |
1,249 |
|
|
$ |
4,621 |
|
|
$ |
52,101 |
|
|
$ |
321,135 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT MAY 1,
2022 |
|
$ |
263,183 |
|
|
$ |
31,022 |
|
|
$ |
1,536 |
|
|
$ |
3,996 |
|
|
$ |
60,021 |
|
|
$ |
359,758 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise of stock options |
|
|
1,467 |
|
|
|
|
|
|
- |
|
|
|
(403 |
) |
|
|
- |
|
|
|
1,064 |
|
Share-based compensation |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
243 |
|
|
|
- |
|
|
|
243 |
|
|
|
|
264,650 |
|
|
|
31,022 |
|
|
|
1,536 |
|
|
|
3,836 |
|
|
|
60,021 |
|
|
|
361,065 |
|
Comprehensive
earnings: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
- |
|
|
|
47,859 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
47,859 |
|
Unrealized gain (loss) on foreign |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
currency translations |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
11,987 |
|
|
|
11,987 |
|
Unrealized gain (loss) on derivatives |
|
|
- |
|
|
|
- |
|
|
|
(1,578 |
) |
|
|
- |
|
|
|
- |
|
|
|
(1,578 |
) |
Total comprehensive earnings
(loss) |
|
|
- |
|
|
|
47,859 |
|
|
|
(1,578 |
) |
|
|
- |
|
|
|
11,987 |
|
|
|
58,268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCE AS AT OCTOBER
31, 2022 |
|
$ |
264,650 |
|
|
$ |
78,881 |
|
|
$ |
(42 |
) |
|
$ |
3,836 |
|
|
$ |
72,008 |
|
|
$ |
419,333 |
|
Major Drilling Group International Inc. |
|
Interim Condensed Consolidated Statements of Cash
Flows |
|
(in thousands of Canadian dollars) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
|
Six months ended |
|
|
|
October 31 |
|
|
October 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax |
|
$ |
31,152 |
|
|
$ |
18,791 |
|
|
$ |
62,685 |
|
|
$ |
32,566 |
|
Operating items not involving
cash |
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization (note 7) |
|
|
11,829 |
|
|
|
11,539 |
|
|
|
23,370 |
|
|
|
21,528 |
|
(Gain) loss on disposal of property, plant and equipment |
|
|
(22 |
) |
|
|
(85 |
) |
|
|
(720 |
) |
|
|
(409 |
) |
Share-based compensation |
|
|
131 |
|
|
|
97 |
|
|
|
243 |
|
|
|
175 |
|
Finance costs recognized in
earnings before income tax |
|
|
26 |
|
|
|
399 |
|
|
|
456 |
|
|
|
871 |
|
|
|
|
43,116 |
|
|
|
30,741 |
|
|
|
86,034 |
|
|
|
54,731 |
|
Changes in non-cash operating
working capital items |
|
|
13,316 |
|
|
|
(4,035 |
) |
|
|
(3,152 |
) |
|
|
(9,421 |
) |
Finance costs paid |
|
|
(26 |
) |
|
|
(399 |
) |
|
|
(456 |
) |
|
|
(871 |
) |
Income taxes paid |
|
|
(4,321 |
) |
|
|
(1,139 |
) |
|
|
(9,671 |
) |
|
|
(2,439 |
) |
Cash flow from (used in)
operating activities |
|
|
52,085 |
|
|
|
25,168 |
|
|
|
72,755 |
|
|
|
42,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FINANCING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of lease
liabilities |
|
|
(392 |
) |
|
|
(228 |
) |
|
|
(836 |
) |
|
|
(670 |
) |
Repayment of long-term debt
(note 6) |
|
|
- |
|
|
|
(83 |
) |
|
|
(20,000 |
) |
|
|
(355 |
) |
Issuance of common shares due
to exercise of stock options |
|
|
570 |
|
|
|
507 |
|
|
|
1,064 |
|
|
|
2,867 |
|
Proceeds from draw on
long-term debt |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
35,000 |
|
Cash flow from (used in)
financing activities |
|
|
178 |
|
|
|
196 |
|
|
|
(19,772 |
) |
|
|
36,842 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INVESTING
ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Business acquisitions (net of
cash acquired) (note 11) |
|
|
(6,289 |
) |
|
|
(181 |
) |
|
|
(6,289 |
) |
|
|
(38,050 |
) |
Acquisition of property, plant
and equipment (note 5) |
|
|
(13,334 |
) |
|
|
(11,125 |
) |
|
|
(26,488 |
) |
|
|
(22,778 |
) |
Proceeds from disposal of
property, plant and equipment |
|
|
548 |
|
|
|
418 |
|
|
|
2,839 |
|
|
|
1,781 |
|
Cash flow from (used in)
investing activities |
|
|
(19,075 |
) |
|
|
(10,888 |
) |
|
|
(29,938 |
) |
|
|
(59,047 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate
changes |
|
|
3,392 |
|
|
|
727 |
|
|
|
3,393 |
|
|
|
519 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INCREASE IN
CASH |
|
|
36,580 |
|
|
|
15,203 |
|
|
|
26,438 |
|
|
|
20,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH, BEGINNING OF THE
PERIOD |
|
|
61,118 |
|
|
|
27,470 |
|
|
|
71,260 |
|
|
|
22,359 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH, END OF THE
PERIOD |
|
$ |
97,698 |
|
|
$ |
42,673 |
|
|
$ |
97,698 |
|
|
$ |
42,673 |
|
Major Drilling Group International Inc. |
|
Interim Condensed Consolidated Balance Sheets |
|
As at October 31, 2022 and April 30, 2022 |
|
(in thousands of Canadian dollars) |
|
(unaudited) |
|
|
|
|
|
|
|
|
|
|
October 31, 2022 |
|
|
April 30, 2022 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
ASSETS |
|
|
|
|
|
|
Cash |
|
$ |
97,698 |
|
|
$ |
71,260 |
|
Trade and other receivables
(note 12) |
|
|
139,886 |
|
|
|
142,621 |
|
Income tax receivable |
|
|
2,270 |
|
|
|
2,037 |
|
Inventories |
|
|
106,990 |
|
|
|
96,782 |
|
Prepaid expenses |
|
|
12,769 |
|
|
|
8,960 |
|
|
|
|
359,613 |
|
|
|
321,660 |
|
|
|
|
|
|
|
|
PROPERTY, PLANT AND
EQUIPMENT (note 5 and note 11) |
|
|
203,766 |
|
|
|
198,196 |
|
|
|
|
|
|
|
|
RIGHT-OF-USE
ASSETS |
|
|
4,746 |
|
|
|
5,479 |
|
|
|
|
|
|
|
|
DEFERRED INCOME TAX
ASSETS |
|
|
3,565 |
|
|
|
4,351 |
|
|
|
|
|
|
|
|
GOODWILL (note
11) |
|
|
22,248 |
|
|
|
22,798 |
|
|
|
|
|
|
|
|
INTANGIBLE ASSETS
(note 11) |
|
|
3,726 |
|
|
|
4,596 |
|
|
|
|
|
|
|
|
|
|
$ |
597,664 |
|
|
$ |
557,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES |
|
|
|
|
|
|
Trade and other payables |
|
$ |
104,229 |
|
|
$ |
102,596 |
|
Income tax payable |
|
|
10,032 |
|
|
|
5,022 |
|
Current portion of lease
liabilities |
|
|
1,564 |
|
|
|
1,502 |
|
Current portion of contingent
consideration |
|
|
9,137 |
|
|
|
8,619 |
|
|
|
|
124,962 |
|
|
|
117,739 |
|
|
|
|
|
|
|
|
LEASE
LIABILITIES |
|
|
3,111 |
|
|
|
3,885 |
|
|
|
|
|
|
|
|
CONTINGENT
CONSIDERATION (note 11) |
|
|
7,609 |
|
|
|
14,288 |
|
|
|
|
|
|
|
|
LONG-TERM DEBT (note
6) |
|
|
29,666 |
|
|
|
50,000 |
|
|
|
|
|
|
|
|
DEFERRED INCOME TAX
LIABILITIES |
|
|
12,983 |
|
|
|
11,410 |
|
|
|
|
178,331 |
|
|
|
197,322 |
|
|
|
|
|
|
|
|
SHAREHOLDERS'
EQUITY |
|
|
|
|
|
|
Share capital |
|
|
264,650 |
|
|
|
263,183 |
|
Retained earnings |
|
|
78,881 |
|
|
|
31,022 |
|
Other reserves |
|
|
(42 |
) |
|
|
1,536 |
|
Share-based payments
reserve |
|
|
3,836 |
|
|
|
3,996 |
|
Foreign currency translation
reserve |
|
|
72,008 |
|
|
|
60,021 |
|
|
|
|
419,333 |
|
|
|
359,758 |
|
|
|
|
|
|
|
|
|
|
$ |
597,664 |
|
|
$ |
557,080 |
|
|
|
|
|
|
|
|
|
|
MAJOR DRILLING GROUP INTERNATIONAL
INC.NOTES TO INTERIM CONDENSED CONSOLIDATED
FINANCIAL STATEMENTSFOR THE THREE AND SIX MONTHS
ENDED OCTOBER 31, 2022 AND 2021 (UNAUDITED)(in
thousands of Canadian dollars, except per share
information)
1. NATURE OF ACTIVITIES
Major Drilling Group International Inc. (the
“Company”) is incorporated under the Canada Business Corporations
Act and has its head office at 111 St. George Street, Moncton, NB,
Canada. The Company’s common shares are listed on the Toronto Stock
Exchange (“TSX”). The principal source of revenue consists of
contract drilling for companies primarily involved in mining and
mineral exploration. The Company has operations in Canada, the
United States, Mexico, South America, Asia, Africa, and
Australia.
2. BASIS OF
PRESENTATION
Statement of complianceThese Interim Condensed
Consolidated Financial Statements have been prepared in accordance
with IAS 34 Interim Financial Reporting (“IAS 34”) as issued by the
International Accounting Standards Board (“IASB”) and using the
accounting policies as outlined in the Company’s annual
Consolidated Financial Statements for the year ended April 30,
2022.
On December 8, 2022, the Board of Directors
authorized the financial statements for issue.
Basis of consolidationThese
Interim Condensed Consolidated Financial Statements incorporate the
financial statements of the Company and entities controlled by the
Company. Control is achieved when the Company is exposed or has
rights to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee.
The results of subsidiaries acquired or disposed
of during the period are included in the Consolidated Statements of
Operations from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Intra-group transactions, balances, income and
expenses are eliminated on consolidation, where appropriate.
Basis of preparationThese
Interim Condensed Consolidated Financial Statements have been
prepared based on the historical cost basis, except for certain
financial instruments that are measured at fair value, using the
same accounting policies and methods of computation as presented in
the Company’s annual Consolidated Financial Statements for the year
ended April 30, 2022.
3. KEY SOURCES OF ESTIMATION UNCERTAINTY AND
CRITICAL ACCOUNTING JUDGMENTS
The preparation of financial statements, in
conformity with International Financial Reporting Standards
(“IFRS”), requires management to make judgments, estimates and
assumptions that are not readily apparent from other sources, which
affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results
may differ from these estimates.
Depending on the severity and duration of
disruptions caused by the COVID-19 pandemic, results could be
impacted in future periods. It is not possible at this time to
estimate the magnitude of such potential future impacts.
The estimates and underlying assumptions are
reviewed on an ongoing basis. Revisions to accounting estimates are
recognized in the period in which the estimate is revised, if the
revision affects only that period, or in the period of the revision
and future periods, if the revision affects both current and future
periods. Significant areas requiring the use of management
estimates relate to the useful lives of property, plant and
equipment for depreciation purposes, property, plant and equipment
and inventory valuation, determination of income and other taxes,
assumptions used in the compilation of fair value of assets
acquired and liabilities assumed in business acquisitions, amounts
recorded as accrued liabilities, contingent consideration,
allowance for impairment of trade receivables, and impairment
testing of goodwill and intangible assets.
The Company applied judgment in determining the
functional currency of the Company and its subsidiaries, the
determination of cash-generating units (“CGUs”), the degree of
componentization of property, plant and equipment, the recognition
of provisions and accrued liabilities, and the determination of the
probability that deferred income tax assets will be realized from
future taxable earnings.
4. SEASONALITY OF OPERATIONS
The third quarter (November to January) is
normally the Company’s weakest quarter due to the shutdown of
mining and exploration activities, often for extended periods over
the holiday season.
5. PROPERTY, PLANT AND EQUIPMENT
Capital expenditures for the three and six
months ended October 31, 2022 were $13,334 (2021 - $11,125) and
$26,488 (2021 - $22,778), respectively. The Company did
not obtain direct financing for the three and six months ended
October 31, 2022 or 2021.
6. LONG-TERM
DEBT
During the first quarter of fiscal 2023, the
Company made a discretionary payment of $20,000 on its revolving
term facility.
During the current quarter, the Company renewed
its existing credit facility agreement for a five-year term, with
the same terms and conditions as the previous agreement.
7. EXPENSES BY
NATURE
Direct costs by nature are as follows:
|
|
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation |
|
$ |
11,177 |
|
|
$ |
10,709 |
|
|
$ |
21,591 |
|
|
$ |
20,018 |
|
Employee
salaries and benefit expenses |
|
|
68,086 |
|
|
|
61,465 |
|
|
|
134,078 |
|
|
|
117,655 |
|
Cost of
material |
|
|
27,795 |
|
|
|
23,871 |
|
|
|
58,449 |
|
|
|
46,624 |
|
Other |
|
|
41,655 |
|
|
|
37,110 |
|
|
|
83,256 |
|
|
|
69,493 |
|
|
|
$ |
148,713 |
|
|
$ |
133,155 |
|
|
$ |
297,374 |
|
|
$ |
253,790 |
|
General and administrative expenses by nature are as
follows:
|
|
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
$ |
358 |
|
|
$ |
369 |
|
|
$ |
720 |
|
|
$ |
648 |
|
Depreciation |
|
|
294 |
|
|
|
461 |
|
|
|
1,059 |
|
|
|
862 |
|
Employee
salaries and benefit expenses |
|
|
8,165 |
|
|
|
7,605 |
|
|
|
16,830 |
|
|
|
15,468 |
|
Other
general and administrative expenses |
|
|
7,251 |
|
|
|
5,695 |
|
|
|
13,633 |
|
|
|
10,760 |
|
|
|
$ |
16,068 |
|
|
$ |
14,130 |
|
|
$ |
32,242 |
|
|
$ |
27,738 |
|
8. INCOME TAXES
The income tax provision for the period can be reconciled to
accounting earnings before income tax as follows:
|
|
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax |
|
$ |
31,152 |
|
|
$ |
18,791 |
|
|
$ |
62,685 |
|
|
$ |
32,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Statutory Canadian corporate income tax rate |
|
|
27 |
% |
|
|
27 |
% |
|
|
27 |
% |
|
|
27 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
income tax provision based on statutory rate |
|
|
8,411 |
|
|
|
5,074 |
|
|
|
16,925 |
|
|
|
8,793 |
|
Non-recognition of tax benefits related to losses |
|
|
491 |
|
|
|
158 |
|
|
|
647 |
|
|
|
647 |
|
Utilization of previously unrecognized losses |
|
|
(2,903 |
) |
|
|
(1,909 |
) |
|
|
(4,848 |
) |
|
|
(4,243 |
) |
Other
foreign taxes paid |
|
|
949 |
|
|
|
308 |
|
|
|
1,955 |
|
|
|
524 |
|
Rate
variances in foreign jurisdictions |
|
|
(64 |
) |
|
|
164 |
|
|
|
38 |
|
|
|
251 |
|
Derecognition of previously recognized losses |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
861 |
|
Permanent differences and other |
|
|
657 |
|
|
|
706 |
|
|
|
109 |
|
|
|
383 |
|
Income
tax provision recognized in net earnings |
|
$ |
7,541 |
|
|
$ |
4,501 |
|
|
$ |
14,826 |
|
|
$ |
7,216 |
|
The Company periodically assesses its
liabilities and contingencies for all tax years open to audit based
upon the latest information available. For those matters where it
is probable that an adjustment will be made, the Company records
its best estimate of these tax liabilities, including related
interest charges. Inherent uncertainties exist in estimates of tax
contingencies due to changes in tax laws. While management believes
they have adequately provided for the probable outcome of these
matters, future results may include favourable or unfavourable
adjustments to these estimated tax liabilities in the period the
assessments are made, or resolved, or when the statutes of
limitations lapse.
9. EARNINGS PER SHARE
All of the Company’s earnings are attributable
to common shares, therefore, net earnings are used in determining
earnings per share.
|
|
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
23,611 |
|
|
$ |
14,290 |
|
|
$ |
47,859 |
|
|
$ |
25,350 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic (000s) |
|
|
82,847 |
|
|
|
82,349 |
|
|
|
82,793 |
|
|
|
82,040 |
|
Diluted (000s) |
|
|
83,149 |
|
|
|
82,753 |
|
|
|
83,150 |
|
|
|
82,485 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share |
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
0.29 |
|
|
$ |
0.17 |
|
|
$ |
0.58 |
|
|
$ |
0.31 |
|
Diluted |
|
$ |
0.28 |
|
|
$ |
0.17 |
|
|
$ |
0.58 |
|
|
$ |
0.31 |
|
The calculation of diluted earnings per share
for the three and six months ended October 31, 2022 excludes the
effect of 210,000 and 180,897 options, respectively (2021 - 105,000
and 75,897, respectively) as they were not in-the-money.
The total number of shares outstanding on October 31, 2022 was
82,865,254 (2021 - 82,382,554).
10. SEGMENTED INFORMATION
The Company’s operations are divided into the
following three geographic segments, corresponding to its
management structure: Canada - U.S.; South and Central America; and
Australasia and Africa. The services provided in each of the
reportable segments are essentially the same. The accounting
policies of the segments are the same as those described in the
Company’s annual Consolidated Financial Statements for the year
ended April 30, 2022. Management evaluates performance based on
earnings from operations in these three geographic segments before
finance costs, general corporate expenses and income taxes.
Data relating to each of the Company’s reportable segments is
presented as follows:
|
|
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S.* |
|
$ |
113,066 |
|
|
$ |
94,390 |
|
|
$ |
225,666 |
|
|
$ |
179,249 |
|
South
and Central America |
|
|
41,725 |
|
|
|
36,784 |
|
|
|
89,178 |
|
|
|
71,974 |
|
Australasia and Africa |
|
|
46,925 |
|
|
|
39,519 |
|
|
|
86,707 |
|
|
|
70,465 |
|
|
|
$ |
201,716 |
|
|
$ |
170,693 |
|
|
$ |
401,551 |
|
|
$ |
321,688 |
|
*Canada - U.S. includes revenue of $42,389 and
$51,538 for Canadian operations for the three months ended October
31, 2022 and 2021, respectively and $88,412 and $98,537 for the six
months ended October 31, 2022 and 2021, respectively.
|
|
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
Earnings from operations |
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S. |
|
$ |
22,024 |
|
|
$ |
13,546 |
|
|
$ |
45,776 |
|
|
$ |
25,738 |
|
South
and Central America |
|
|
5,235 |
|
|
|
476 |
|
|
|
14,288 |
|
|
|
580 |
|
Australasia and Africa |
|
|
7,847 |
|
|
|
8,212 |
|
|
|
11,011 |
|
|
|
13,853 |
|
|
|
|
35,106 |
|
|
|
22,234 |
|
|
|
71,075 |
|
|
|
40,171 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
26 |
|
|
|
399 |
|
|
|
456 |
|
|
|
871 |
|
General corporate expenses** |
|
|
3,928 |
|
|
|
3,044 |
|
|
|
7,934 |
|
|
|
6,734 |
|
Income tax |
|
|
7,541 |
|
|
|
4,501 |
|
|
|
14,826 |
|
|
|
7,216 |
|
|
|
|
11,495 |
|
|
|
7,944 |
|
|
|
23,216 |
|
|
|
14,821 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
$ |
23,611 |
|
|
$ |
14,290 |
|
|
$ |
47,859 |
|
|
$ |
25,350 |
|
**General corporate expenses include expenses
for corporate offices and stock options.
|
|
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
Capital
expenditures |
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S. |
|
$ |
9,440 |
|
|
$ |
5,952 |
|
|
$ |
17,846 |
|
|
$ |
14,367 |
|
South and Central America |
|
|
2,062 |
|
|
|
1,562 |
|
|
|
5,393 |
|
|
|
4,010 |
|
Australasia and Africa |
|
|
1,832 |
|
|
|
3,611 |
|
|
|
2,984 |
|
|
|
4,401 |
|
Unallocated and corporate
assets |
|
|
- |
|
|
|
- |
|
|
|
265 |
|
|
|
- |
|
Total capital
expenditures |
|
$ |
13,334 |
|
|
$ |
11,125 |
|
|
$ |
26,488 |
|
|
$ |
22,778 |
|
|
|
Q2 2023 |
|
|
Q2 2022 |
|
|
YTD 2023 |
|
|
YTD 2022 |
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
|
|
|
|
Canada - U.S. |
|
$ |
6,126 |
|
|
$ |
5,510 |
|
|
$ |
11,521 |
|
|
$ |
10,021 |
|
South
and Central America |
|
|
2,650 |
|
|
|
2,487 |
|
|
|
5,163 |
|
|
|
5,024 |
|
Australasia and Africa |
|
|
2,989 |
|
|
|
3,423 |
|
|
|
6,402 |
|
|
|
6,307 |
|
Unallocated and corporate assets |
|
|
64 |
|
|
|
119 |
|
|
|
284 |
|
|
|
176 |
|
Total depreciation and amortization |
|
$ |
11,829 |
|
|
$ |
11,539 |
|
|
$ |
23,370 |
|
|
$ |
21,528 |
|
|
|
October 31, 2022 |
|
|
April 30, 2022 |
|
Identifiable
assets |
|
|
|
|
|
|
Canada - U.S.* |
|
$ |
270,842 |
|
|
$ |
236,669 |
|
South
and Central America |
|
|
141,103 |
|
|
|
128,791 |
|
Australasia and Africa |
|
|
202,462 |
|
|
|
203,370 |
|
Unallocated and corporate
liabilities |
|
|
(16,743 |
) |
|
|
(11,750 |
) |
Total identifiable
assets |
|
$ |
597,664 |
|
|
$ |
557,080 |
|
*Canada - U.S. includes property, plant and
equipment as at October 31, 2022 of $63,292 (April 30, 2022 -
$56,469) for Canadian operations.
11. BUSINESS ACQUISITION
McKay Drilling PTY LimitedEffective June 1,
2021, the Company acquired all of the issued and outstanding shares
of McKay Drilling PTY Limited (“McKay”), a leading specialty
drilling contractor based in Western Australia.
The acquisition was accounted for using the
acquisition method. The Company acquired 20 drill rigs, support
equipment and inventory, existing contracts and receivables, as
well as retaining the operation’s management team, and other
employees, including experienced drillers.
The purchase price for the transaction was
$71,073, consisting of $38,050 in cash (net of cash acquired),
$12,911 in Major Drilling shares and an additional payout of
$20,112 (discounted) tied to performance. The maximum amount of the
contingent consideration is $25,000 AUD, with a payout period
extending over three years from the effective date of June 1, 2021,
contingent upon achievement of certain EBITDA (earnings before
interest, taxes, depreciation and amortization) milestones. During
the current quarter, the Company made the first payment on the
contingent consideration arising out of the McKay Drilling PTY
Limited acquisition for $6,289 ($7,000 AUD).
Goodwill arising from this acquisition was equal
to the excess of the total consideration paid over the fair value
of the net assets acquired and represents the benefit of expected
synergies, revenue growth, an experienced labour force and future
market development.
The valuation of assets and purchase price
allocation have been finalized. The net assets acquired at fair
value at acquisition were as follows:
Net assets
acquired |
|
|
Trade and other receivables |
$ |
10,475 |
|
Inventories |
|
1,595 |
|
Prepaid expenses |
|
1,773 |
|
Property, plant and
equipment |
|
44,466 |
|
Goodwill (not tax
deductible) |
|
15,543 |
|
Intangible assets |
|
5,558 |
|
Trade and other payables |
|
(7,379 |
) |
Deferred income tax
liabilities |
|
(958 |
) |
Total assets |
$ |
71,073 |
|
|
|
|
Consideration |
|
|
Cash |
$ |
39,031 |
|
Less: cash acquired |
|
(981 |
) |
Contingent consideration |
|
20,112 |
|
Shares of Major Drilling |
|
12,911 |
|
Total consideration |
$ |
71,073 |
|
|
|
|
|
Subsequent to the date of acquisition, the trade and other
receivables included in the above net assets acquired have been
fully collected. Intangible assets acquired are amortized over five
years.
The above consideration includes non-cash
investing activities, which are not reflected in the Interim
Condensed Consolidated Statements of Cash Flows, including the
issuance of 1,318,101 shares of Major Drilling for a total of
$12,911, and contingent consideration of $20,112 (discounted).
In the previous year, the Company incurred
acquisition-related costs of $454 relating to external legal fees
and due diligence costs. These acquisition costs have been included
in the other expenses line of the Interim Condensed Consolidated
Statements of Operations.
The results of the McKay operations are included
in the Interim Condensed Consolidated Statements of Operations from
June 1, 2021.
12. FINANCIAL INSTRUMENTS
Fair valueThe carrying values
of cash, trade and other receivables, demand credit facilities and
trade and other payables approximate their fair value due to the
relatively short period to maturity of the instruments. The
carrying value of contingent consideration and long-term debt
approximates their fair value as the interest applicable is
reflective of fair market rates.
Financial assets and liabilities measured at
fair value are classified and disclosed in one of the following
categories:
- Level 1 - quoted prices (unadjusted) in active markets for
identical assets or liabilities;
- Level 2 - inputs other than quoted prices included in level 1
that are observable for the assets or liabilities, either directly
(i.e., as prices) or indirectly (i.e., derived from prices);
and
- Level 3 - inputs for the assets or liabilities that are not
based on observable market data (unobservable inputs).
The Company has entered into certain derivative
financial instruments to manage its exposure to interest rate and
market risks, including an interest rate swap, with a notional
value of $20,000 maturing in May of 2023, and share-price forward
contracts with a combined notional amount of $5,983, maturing at
varying dates through June 2025.
The fair value hierarchy requires the use of
observable market inputs whenever such inputs exist. A
financial instrument is classified to the lowest level of the
hierarchy for which a significant input has been considered in
measuring fair value.
The Company’s derivatives, with fair values as
follows, are classified as level 2 financial instruments. There
were no transfers of amounts between level 1, level 2 and level 3
financial instruments for the quarter ended October 31,
2022.
|
|
October 31, 2022 |
|
|
April 30, 2022 |
|
|
|
|
|
|
|
|
Interest rate swap |
|
$ |
334 |
|
|
$ |
- |
|
Share-price forward contracts |
|
$ |
614 |
|
|
$ |
5,468 |
|
|
|
|
|
|
|
|
|
|
Credit riskAs at October 31,
2022, 93.5% (April 30, 2022 - 94.0%) of the Company’s trade
receivables were aged as current and 1.4% (April 30, 2022 - 1.2%)
of the trade receivables were impaired.
The movements in the allowance for impairment of
trade receivables during the six and twelve-month periods were as
follows:
|
|
October 31, 2022 |
|
|
April 30, 2022 |
|
|
|
|
|
|
|
|
Opening balance |
|
$ |
1,517 |
|
|
$ |
1,638 |
|
Increase
in impairment allowance |
|
|
1,148 |
|
|
|
744 |
|
Recovery
of amounts previously impaired |
|
|
(25 |
) |
|
|
(303 |
) |
Write-off charged against allowance |
|
|
(729 |
) |
|
|
(549 |
) |
Foreign
exchange translation differences |
|
|
23 |
|
|
|
(13 |
) |
Ending balance |
|
$ |
1,934 |
|
|
$ |
1,517 |
|
|
|
|
|
|
|
|
|
|
Foreign currency risk As at
October 31, 2022, the most significant carrying amounts of net
monetary assets and/or liabilities (which may include intercompany
balances with other subsidiaries) that: (i) are denominated in
currencies other than the functional currency of the respective
Company subsidiary; and (ii) cause foreign exchange rate exposure,
including the impact on earnings before income taxes (“EBIT”), if
the corresponding rate changes by 10%, are as follows (in 000s
CAD):
|
|
Ratevariance |
|
USD/CAD |
|
MNT/USD |
|
MXN/USD |
|
IDR/USD |
|
USD/AUD |
|
ARS/USD |
|
USD/CLP |
|
|
Other |
Net exposure on monetary
assets (liabilities) |
|
|
|
22,990 |
|
10,463 |
|
4,832 |
|
4,095 |
|
2,961 |
|
2,762 |
|
(3,739 |
) |
|
1,132 |
EBIT impact |
|
+/-10% |
|
2,554 |
|
1,163 |
|
537 |
|
455 |
|
329 |
|
307 |
|
415 |
|
|
126 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity riskThe following table details
contractual maturities for the Company’s financial liabilities:
|
|
1 year |
|
|
2-3 years |
|
|
4-5 years |
|
|
Thereafter |
|
|
Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade and other payables |
|
$ |
104,229 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
104,229 |
|
Lease
liabilities (interest included) |
|
|
1,676 |
|
|
|
2,026 |
|
|
|
808 |
|
|
|
352 |
|
|
|
4,862 |
|
Contingent consideration (undiscounted) |
|
|
8,617 |
|
|
|
9,613 |
|
|
|
- |
|
|
|
- |
|
|
|
18,230 |
|
Long-term debt (interest included) |
|
|
662 |
|
|
|
1,992 |
|
|
|
31,992 |
|
|
|
- |
|
|
|
34,646 |
|
|
|
$ |
115,184 |
|
|
$ |
13,631 |
|
|
$ |
32,800 |
|
|
$ |
352 |
|
|
$ |
161,967 |
|
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