Mitchell Services (MSV) Q1 2025 TU earnings summary

Executive summary

• Operating rig count has likely bottomed, with new long-term contracts secured with major miners, positioning the business for gradual improvement as mobilizations progress.

• FY24 saw strong demand for drilling services, with all expiring key contracts re-won and inflationary pressures easing.

• Loop Decarbonization Solutions JV received its first purchase order and is negotiating its first drilling contract, expected to commence late this year or early next.

• Net profit after tax and return on invested capital increased significantly year-over-year.

• Temporary reduction in utilisation due to external factors, but business is considered in its best-ever position and well positioned for future growth.

Financial highlights

• FY24 revenue was $236.8m, down 3% from $243.1m in FY23; Q1 FY25 revenue was $52.7m, down 19% year-over-year.

• EBITDA was $40.4m in FY24, down 2% from $41.2m in FY23; Q1 FY25 EBITDA was $7.0m, a 39% decrease year-over-year.

• Profit after tax rose 21% to $9.2m in FY24; Q1 FY25 NPAT was essentially break even.

• Net debt reduced by 89% since June 2023, closing at $1.9m, but increased to $4.8m in Q1 FY25 due to shareholder returns and mobilization costs.

• Operating cash flow increased 21% to $43.1m in FY24, but Q1 FY25 saw a 44% year-over-year decline to $5.8m.

Outlook and guidance

• Year is expected to be tougher, but gradual improvement anticipated as new contracts are mobilized and utilisation increases in Q3 and Q4 FY25.

• FY25 earnings anticipated to be lower than FY24 due to short-term mobilisation impacts, with improvement expected in the second half.

• No formal EBITDA or CapEx guidance provided; free cash flow remains sensitive to these metrics.

• Cash tax payments expected to begin late FY2025 or early FY2026, with franking credits on dividends from FY2026.

• Capital allocation will balance dividends, buy-backs, growth, and debt management, with a long-term debt ceiling of $15m.