Interim Report January-September, Restructuring and adaptation to the market is beginning to show results

Transcription

1 Drillcon AB (publ) Interim Report January-September, 2016 Restructuring and adaptation to the market is beginning to show results The third quarter was an intense one, during which restructuring efforts and adaptation to the market for Drillcon Scandinavia is beginning to take shape, generating increased production volumes. Establishing the new subsidiary Drillcon Americas SpA in Chile gave immediate results in the form of a first raise boring contract. Production will commence in January/February We have also visited other countries in South America to gain a greater understanding of the current market situation. Our efforts to grow in our existing markets will continue, and we will continue actively seeking to conclude contracts in new markets. Patrik Rylander, President Net revenue for the period January to September amounted to KSEK 189,981 compared to last year s KSEK 188,803 for continuing businesses. The operating profit (EBITDA) for the period was KSEK 30,887 as compared to KSEK 34,073 last year, with the result adjusted for the closed company last year, SMOY. Drillcon s profit after taxes was KSEK 12,391 (11,683) and earnings per share came in at SEK 0.28 (0.17). Cash flow from current operations amounted to KSEK 36,837 (14,698). In the table below, the Finnish subsidiary is included in the comparative numbers for Key financial indicators for the Group Jul-Sep Jul-Sep Jan-Sep Jan-Sep Full year Net revenue (KSEK) 62,803 74, , , ,975 Operating result EBITDA (KSEK) 10,895 11,010 30,887 30,181 24,969 Operating margin EBITDA 17.3% 14.9% 16.2% 14.0% 9.5% Result after taxes (KSEK) 4,420 3,568 12,391, 7,686 5,230 Cash and cash equivalents (KSEK) 42,565 35,283 42,565, 35,283 38,595 Equity ratio 55% 54% 55% 54% 59% Note: The comparative data for 2015 includes subsidiary Suomen Malmi Oy (Smoy), which was closed in December 2015 as follows: Net revenue KSEK 10,323 (Jul-Sep), KSEK 27,404 (Jan-Sep), KSEK 34,749 (full year) and effect on operating result EBITDA KSEK 709 (Jul-Sep), KSEK 3, 892 (Jan-Sep), KSEK (full year).

2 President s brief comments on the current situation Five intense months have now passed since I took over as CEO. My focus is to continue working on our strategy and its implementation. At the forefront is the practical work to restructure and adapt Drillcon Scandinavia (the former Drillcon Core) to the market. Drillcon Iberia continues to deliver results and demand or our services continues to be good. The work with ISO/EHS processes is ongoing and precertification of in accordance with OHSAS will be accomplished during the fourth quarter of We have also started a trainee program for the purpose of creating tomorrow s drillers and a platform for long-term production. New subsidiary Drillcon Americas SpA The company will be domiciled in Santiago, Chile, and is fully operational since the end of October The reason for our establishment is the growing interest for our services on the part of customers in South America. By establishing Drillcon Americas SpA we get closer to our customers and our offering of services becomes more accessible and can be adapted to the needs of the customers. The decision to establish Drillcon Americas SpA for the purpose of penetrating this geographic market quickly gained a positive response in the form of our first customer order. The contract is for raise boring in two shafts in Chuquicamata-Calama and the project will begin during January-February 2017 and is expected to be completed during October The business Demand for our services continues to grow and we are therefore recruiting new drill operators and starting our trainee programme in November. The objective is to develop staff skills and to create tomorrow s drill operators in Drillcon. It is also important to get closer to markets and customers. We have therefore chosen to intensify our restructuring work in an effort to create a larger production volume. Drillcon Iberia began the year on a strong note. The volume decreased slightly during the second quarter, but the situation reversed in the third quarter. The loss was reversed during the third quarter. Revenue for the first nine months was KSEK 120,453 (121, 922). Drillcon Iberia will initially handle Drillcon Americas SpA s operations in the interest of transferring Drillcon s values and drilling competence to our new subsidiary. Drillcon Scandinavia (previously Core) is beginning to sense increased demand. Revenue for the first nine months is KSEK 72,308 (69, 259). Nora, 4 November 2016 Patrik Rylander President, Drillcon AB

3 Operating segments by country where each entity is domiciled, provided such unit is subject to operating revenue accountability Net revenue Jul-Sep Jul-Sep Jan-Sep Jan-Sep Full year Sweden 21,806 17,956 72,308 69,259 90,218 Finland 0 10, ,404 34,749 Portugal 41,484 41, , , ,419 Norway DDE machine rental 3,716 3,788 11,210 11,249 15,369 Elimination, intra-segment sales* ,317 14,646 13,964 20,507 Total 62,802 74, , , ,975 Intra-segment sales, largely consisting of machinery rental and sales between segments and internal sales of supplies. Operating result (EBITDA) Jul-Sep Jul-Sep Jan-Sep Jan-Sep Full year Sweden 2, ,025 3,546 3,036 Finland ,892 6,511 Portugal 5,340 7,470 16,834 20,268 24,317 Norway DDE machine rental 3,461 3,580 10,137 10,387 14,127 Write-down BR Smoy* 7,616 Bad debts** 2,383 Total 10,895 11,010 30,887 30,181 24,969 Result before taxes (EBT) Jul-Sep Jul-Sep Jan-Sep Jan-Sep Full year Sweden 1, ,938 1,089 2,820 Finland 0 1, ,480 8,944 Portugal 4,581 6,806 14,819 18,342 21,557 Norway DDE machine rental ,525 Write-down BR Smoy* 7,616 Bad debts** 2,383 Total 5,933 5,209 17,002, 12,416 1,318 In Sweden the cost of acquiring machinery is accounted for as depreciation, financial leasing and finance cost. In Portugal and Finland, however, the majority of machinery is rented from Drillcon Drilling Equipment and is accounted for as other costs. Notes: * Refers to write-down of assets and liabilities in Suomen Malmi Oy (Smoy). The company filed for bankruptcy on 28 December All balance sheet items were therefore carried at 0 in the year-end financial statements. ** Refers to bad debts in Drillcon AB, Drillcon Drilling Equipment AB and Drillcon Core AB caused by the bankruptcy of Smoy. Also includes a loan from Drillcon AB to Smoy secured by surplus collateral. Claims were written down to zero. The end result will depend on final outcome of the trustee s in bankruptcy winding down the business in Smoy. 2

4 Net capital expenditures Jul-Sep Jul-Sep Jan-Sep Jan-Sep Full year Sweden ,207 1,115 1,148 Finland ,282 Portugal 1, ,079 1, Norway ,358 DDE machine rental ,115 1,624 7,574 0 Total 3,500 7,154 7,663 11,039 13,705 Net capital expenditures in tangible non-current assets, including financial leasing and adjustment for foreign exchange fluctuations, amounted to KSEK 7,663 (11,039) during the period. Capital expenditures during the period consisted largely of drill pipe, investment in a new core drilling rig and upgrading of machinery and instruments. Sweden Segment Sweden includes the Parent Company, Drillcon AB and Drillcon Scandinavia AB. Sweden Jul-Sep Jul-Sep Jan-Sep Jan-Sep Full year Net revenue 21,806 17,956 72,308 69,259 90,218 EBITDA 2, ,025 3, Net capital expenditures ,207 1,115 1,148 Metres of core drilling 35,278 23,373 86,881 90, ,454 Drillcon Core became Drillcon Scandinavia Restructuring and recruitment of a new chief executive is in full swing in an effort to adapt Drillcon Scandinavia to the market. We are already seeing that this is having an effect and the number of customer inquiries has increased during the third quarter. Production Underground drilling assignments continue for Boliden at Garpenberg, for LKAB at Malmberget and Kiruna and for Zinkgruvan Mining. At Renströmgruvan Drillcon Scandinavia is performing raise boring with excellent support from Drillcon Iberia. This is a part of building up our expertise in raise boring in Scandinavia. Surface field exploration is under way in Austria. Drilling in Iceland has now ended. In the area of construction and civil engineering drilling activity continued to be low again during the third quarter.

5 Portugal Segment Portugal includes Drillcon Iberia SA Portugal Jul-Sep Jul-Sep Jan-Sep Jan-Sep Full year Net revenue 41,484 41, ,453, 121, ,419 EBITDA 5,340 7,470 16,834 20, Net capital expenditures 1, ,079 1,598 2,358 Metres of core drilling 10,710 6,301 25,803 16,810 21,707 Metres of completed raisebored shafts 1,270 2,357 5,082 5,760 6,922 Metres of raise-bored pilot holes 1,492 2,363 5,969 6,968 9,677 The year began with a very strong first quarter, which faded during the second quarter, only to recover during the third quarter. Iberia supports Drillcon Scandinavia in terms of competence building in the area of raise boring by participating in the production at Renströmgruvan. Production Boring jobs were performed during the period in Portugal for Somincor (Lundin Mining) and Aljustrel (Almina), in Spain for MATSA and its sister mines in the area. The assignment at Chelopech Mines in Bulgaria continues. Core Drilling is in progress, both surface exploration drilling for the Almina mine and drilling underground at the Somincor mine. Norway Segment Norway includes Drillcon Norway AS Norway Jul-Sep Jul-Sep Jan-Sep Jan-Sep Full year Net revenue EBITDA Net capital expenditures The Norwegian subsidiary Drillcon Norway AS markets and contracts the Group s services on the Norwegian market. We regard our presence there as strategically important. Revenue is derived from rental of a service technician to Iberia. All other work in Norway is performed by other Drillcon entities in accordance with principles for the segment reporting. 4

6 Drillcon AB (publ) Drillcon AB (publ), with subsidiaries Drillcon Core AB, Drillcon Iberia SA and Drillcon Norway AS performs core drilling and raise boring primarily for the European mining and construction industries. Together We Make the Difference! Vision Drillcon shall provide superior services within Mining & Construction which gives best value to the customers' operations. This will position Drillcon as the customers' first choice and establish Drillcon's core value: Together we make the difference! This vision is the driving force behind the Group s corporate responsibility to create and achieve sustainable results and value-added for customers production. The goal is continuously to develop people in our organization, to use modern, safe and proven technology. We shall also stay in close contact with our customers and offer the best possible best safety, health and environment (SHE). This will promote customer satisfaction and deliver sustainable productivity to our customers. Business concept Drillcon shall provide the mining and construction industries with a service level that creates added value to the customer for each ton produced in the areas of: - Core drilling and geoservice for reliable geologic information - Core drilling for reinforcement of, and foundations in concrete and rock - Raise boring with secure technical solutions

7 Risk factors and accounting policies Risk and uncertainty factors There are a number of risks that may affect the Drillcon Group s business and results. There have been no changes in risk levels compared to what is stated in in Drillcon s Annual Report for Refer to information about risks and uncertainty factors (page 22) in the Drillcon AB (publ) Annual Report, which is available at Accounting policies Similarly to the consolidated financial statements 2015, the consolidated financial statements for the second quarter of 2016 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by EU, and the Swedish Annual Accounts Act. The Parent Company s accounts have been prepared in accordance with the Swedish Annual Accounts Act and RFR 2, Accounting for Legal Entities of the Swedish Financial Reporting Board. This Interim Report has been prepared in accordance with IAS 34 and RFR 1 Supplementary Accounting Rules for Groups. The term IFRS in this document includes application of IAS and IFRS as well as interpretation of the standards as published by IASB s Standards Interpretation Committee (SIC) and the International Financial Reporting Interpretations Committee (IFRIC). New accounting policies for 2016 In the Annual Report for 2016 the Group and the Parent Company will for the first time be applying the amended standards and interpretation statements to be applied for financial years commencing 1 January 2016 or later. None of the amendments and interpretations of existing standards to be applied from the financial year beginning 1 January 2016 have any significant effect on the Group s or the Parent Company s financial reports. New and amended standards and interpretations relevant for the Group not yet in force and which have not been applied prior to coming into force. A number of new and changed standards and interpretation statements will come into force only in future financial years and have not been applied in advance of coming into force when preparing these financial statements. News and changes that come into force in the coming financial year are not planned to be applied prior to coming into force. To the extent that expected effects on the financial reports of the application of new or changed standards and interpretation statements are not described below, Drillcon has made the assessment that they will have no material effect on the Group s accounting. The effects of IFRS 9 that deals with reporting of financial instruments and IFRS 15, the new revenue standard that enters into force in 2018, has not yet been analysed. An investigation will commence in coming years to investigate how IFRS 9 and IFRS 15 will affect the financial reporting for the Group and the Parent Company. The effects of IFRS 9 that deals with reporting of financial instruments and IFRS 15, the new revenue standard that enters into force in 2018, has not yet been analysed. An investigation will commence in coming years to investigate how IFRS 9 and IFRS 15 will affect the financial reporting for the Group and the Parent Company. IFRS 16 Leases replaces IAS 17 starting 1 January No evaluation of the effects of this standard has yet been started. 6

8 The share Drillcon s share is traded on First North Premier*. First North is an alternative marketplace operated by NASDAQ OMX Stockholm AB. Companies, the shares of which are traded on First North are not required to follow the same rules as companies on the main list. The companies adhere to a less extensive set of rules primarily adapted to smaller companies and growth companies. An investment in a company trade on First North can therefore be more risky than an investment in a stock-exchange-listed company. * Companies listed on First North Premier undertake to follow the stricter rules regarding disclosure of information in force on NASDAQ OMX Stockholm AB. The symbol for the share is DRIL. The current trading lot is 1 share. Share price and order depth can be followed at and elsewhere. All companies whose shares are traded on First North have a Certified Adviser who oversees that the company complies with First North s set of rules. Drillcon has Remium Nordic AB as its Certified Adviser. Information will be provided by Patrik Rylander, President, Drillcon AB (publ) Industrivägen 2, SE Nora, Sweden Telephone: Website: Organization number: The information in this press release is of a kind that Drillcon AB (publ) is obliged to publish in accordance with the Market Abuse Directive (596/2014/EU) of the European Parliament and Commission (MAR). The information was provided by the above named person for publication at 8:00 a.m. (CET) on 4 November This press release, as well as additional information about Drillcon AB, is available at Reporting schedule 17 February 2017, Year-end Report 2016 This report has not been subject to review by the Company s auditors. Certified Adviser at NASDAQ OMX First North Remium Nordic AB, Kungsgatan 12-14, SE Stockholm, Sweden. Telephone:

9 Income Statement and Statement of Comprehensive Result Income Statement Group Jul-Sep Jul-Sep Jan-Sep Jan-Sep Jan-Dec Net revenue 62,803 74, , , ,975 Other operating income ,803 74, , , ,874 Operating expenses Raw materials and supplies 8,099 10,965 23,016 28,758 36,569 Other external costs 19,266 25,156 58,282 64,532 86,900 Personnel costs 24,542 27,539 78,058 93, ,819 51,907 63, , , ,288 Profit before depreciation 10,895 11,010 30,887 30,181 32, Depreciation 5,374 5,543 14,511 16,190 21,942 5,374 5,543 14,511 16,190 21,942 Operating profit 5,521 5,467 16,376 13,991 10,643 Result from finance items Interest income and similar items , Interest expense and similar items ,625 1,773 Profit after finance items 5,933 5,209 17,002 12,416 1,318 Taxes on the period s profit 1,513 1,641 4,611 4,730 6,549 Net profit for the period 4,420 3,568 12,391 7,686 5,230 Profit for the period attributable to: The Parent Company s equity holders 4,420 3,568 12,391 7,686 5,230 Earnings per share, calculated based on profit attributable to the Parent Company s equity during the period (in SEK per share) Earnings per share before and after dilution

10 Statement of Comprehensive Result Group Jul-Sep Jul-Sep Jan-Sep Jan-Sep Jan-Dec Result for the period 4,420 3,568 12,391 7,686 5,230 Other comprehensive result Reposted items or items that may be reposted to net result for the period: Translation differences attributable to restatement of foreign operations , ,851 Items that may not be reposted to the period s result Total comprehensive result for the period 4,979 4,402 13,657 6,935 7,081 Period s comprehensive result attributable to the Parent Company s equity holders 4,979 4,402 13,657 6,935 7,081 Statement of Financial Position Group KSEK Assets Intangible non-current assets Goodwill 2,808 2,808 2,808 Tangible non-current assets Buildings and land 4,067 4,276 4,218 Machinery and equipment 85,239 99,223 91,937 Financial non-current assets Other long-term receivables Total non-current assets 92, ,407 99,063 Current assets Inventories 13,011 26,291 15,313 Trade receivables 54,187 81,620 46,626 Other receivables 11,489 4,586 10,019 Prepaid expenses and accrued income 2,557 4,364 3,836 Cash and cash equivalents 42,565 35,283 38,595 Total current assets 123, , ,389 Total assets 216, , ,452 Equity and liabilities Equity Share capital (44,600,000 shares) 1,784 1,784 1,784 Other contributed capital 92,158 92,158 92,158 Reserves ,026 Retained earnings 24,970 45,563 32,647 Total equity 119, , ,563 Long-term liabilities Deferred tax liability 6,853 5,958 6,688 Other long-term interest-bearing liabilities 21,327 29,394 27,046 Total long-term,liabilities 28,180 35,352 33,734

11 Current liabilities* Interest-bearing liabilities to credit institutions 7,935 8,932 8,615 Trade payables 22,018 29,008 18,751 Other current liabilities 20,095 15,353 7,668 Accrued expenses and prepaid income 18,645 30,326 19,121, Total current liabilities 68,692 83,619 54,155 Total equity and liabilities 216, , ,452 * Approved, unutilized committed credit facility amounts to KSEK 2,500 in Sweden and a total of KEUR 200 for Portugal. Statement of Cash Flows Group Jul-Sep Jul-Sep Jan-Sep Jan-Sep Jan-Dec SEK Operating activities Profit before depreciation 10,895 11,010 30,887 30,181 24,969 Other items not affecting cash and cash equivalents ,141 Interest income , Interest expense ,444 1,586 Income tax paid 1, , ,382 Cash flow from operating activities before changes in working capital 9,794 9,465 26,902 28,199 25,206 Cash flow from changes in working capital Operating receivables (increase /decrease +) 10,438 15,872 7,754 21,845 7,683 Inventories (increase / decrease +) 2, ,303 1,195 1,164 Operating liabilities (increase + / decrease ) 5,715 3,980 15,384 7,149 7,588 Cash flow from operating activities 7,486-1,683 36,837 14,698 24,137 Investment activities Acquisition of tangible non-current assets 3,500 7,365 10,188 11,646 14,337 Disposal of tangible non-current assets , Cash flow from investment activities 3,500 6,726 7,663 10,784 13,475 Cash flow from investment activities 5,426 5,426 5,426 Financing activities 2,190 2,235 6,400 6,620 8,956 Increase in financial liabilities 720 Decrease in financial liabilities ,070 22, ,300 Disposal of subsidiary Dividend to the Parent Company s shareholders 2,190 3,191 26,470 23,494 26,550 Cash flow from investment activities ,218 2,704-19,580 15,888 Cash and cash equivalents at beginning of period 40,211 40,241 38,595 55,039 55,039 Translation difference in cash and cash equivalents , Cash and cash equivalents at end of period 42,565 35,283 42,565 35,283 38,595 10

12 Statement of Changes in Equity Group Other Translation KSEK Share contributed of foreign Retained Total capital capital operations earnings equity Change in equity Jan-Dec 2015 Opening balance ,784 92, , ,944 Dividend 22,300 22,300 Comprehensive result for the year 1,851 5,230 7,081 Closing balance ,784 92,158 1,026 32, ,563 Change in equity Jan--Sep 2015 Opening balance ,784 92, , ,944 Dividend 22,300 22,300 Comprehensive result for the year 750 7,686 6,936 Closing balance ,784 92, , ,580 Change in equity Jan-Sep 2016 Opening balance ,784 92,158 1,026 32, ,563 Dividend 20,070 20,070 Comprehensive result for the year 1,266 12,391 13,657 Closing balance ,784 92, , ,150

13 Key Financial Indicators Key financial indicators Jul-Sep Jul-Sep Jan-Sep Jan-Sep Jan-Dec for the Group KSEK unless otherwise stated Net revenue 62,803 74, , , ,975 Operating profit, EBITDA 10,895 11,010 30,887 30,181 24,969 Operating profit, EBIT 5,521 5,467 16,376 13,991 3,027 Result after taxes 4,420 3,568 12,391 7,686 5,230 Operating margin, EBITDA, % Operating margin, EBIT, % Profit margin, EBT, % Number of shares outstanding, thousands 44,600 44,600 44,600 44,600 44,600 Earnings per share in SEK Equity per share in SEK Equity Return on equity for the period, % neg. Return on total equity for the period, % Cash flow from operating activities 7,486 1,683 36,837 14,698 24,137 Equity ratio, % Debt equity ratio Quick ratio Current ratio Result before taxes per employee in SEK 33,708 11,678 96,602 56,693 6,220 12