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DDH1 slides despite record results

DDH1 boss Sy van Dyk says the driller is well placed as its mining clients look to replace depleting reserves and are forced to look deeper to extend existing ore bodies and make new discoveries.

Mr van Dyk made the comments after the drilling contractor posted a 37.3 per cent fall in bottom line profit to $35.9 million, with last year’s result inflated by a one-off income tax benefit of $30.2m.

On an underlying proforma basis, the company booked record EBITDA of $113.6m, up 10 per cent on the previous period. The result assumed a full-year contribution from its recent acquisition of the Swick underground mining business.

Mr van Dyk said the record results came despite employee mobility challenges due to COVID restrictions and COVID absenteeism.

Despite the tight labour market, DDH1 added 258 employees to its ranks over the year for a total workforce of 1863 and added 14 rigs to its fleet to 183.

Mr van Dyk said the deep drilling specialist would benefit from the need for its mining customers to seek ore body extensions and new discoveries at ever increasing depths.

He said decarbonisation would drive a long-term up-cycle for battery and rare metals, but insisted the company could grow through commodity cycles because 87 per cent of its customer base were existing producers.

Mr van Dyk conceded the company was facing wage inflation across all its business units to ensure retention of a best-in-class workforce, but said DDH had been able to pass on the additional costs to its customers in the form of higher charge rates.

DDH1 declared a fully franked final dividend of 2.65¢ per share, bringing the total annual payout to 5.16¢.

The drilling contractor announced a buyback of up to 10 per cent of its shares last month, with chairman Diane Smith-Gander arguing the market was significantly undervaluing the stock.

Shares in DDH1 closed down 0.5¢ at 82¢ on Tuesday.

DDH1 has spent most of the year trading below the $1.10 issue price that early-stage investors bought their shares for in the company’s $150 million initial public offering early last year.

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