Turnover increased but earnings per share (EPS) fell as Capital Drilling (CAPD) felt the sting of the mining sector slowdown. Higher depreciation and tax charges were compounded by a tough second half of the year, but a solid first half and a higher rig count kept the numbers respectable. Management are now turning their attention toward keeping up margins by getting tougher on costs.
Meanwhile, junior explorers have all but run out of money and the majors have stopped acquiring big new development projects, leaving an unpleasant air of uncertainty surrounding the companies contracting out the drilling rigs. Yet Capital Drilling is better equipped than most to deal with the downturn, if indeed the sector has entered a longer-term bear market. It has a strong balance sheet with limited debt; a blue-chip customer base with minimal exposure to exploration; one of the newest rig fleets in the industry; and a lot of its business is in higher-growth jurisdictions such as Latin America and Africa.
Still, that only results in muted growth for 2013 and beyond because of increased pressure on pricing for new contracts and a reduction in overall fleet utilisation. Broker Liberum Capital estimates adjusted EPS of 9.9¢ in 2013 and 10.2¢ in 2014 (10.5¢ in 2012).
CAPITAL DRILLING (CAPD) | ||||
|---|---|---|---|---|
| ORD PRICE: | 41p | MARKET VALUE: | £55m | |
| TOUCH: | 40.5-41p | 12-MONTH HIGH: | 90p | LOW: 16p |
| DIVIDEND YIELD: | nil | PE RATIO: | 6 | |
| NET ASSET VALUE: | 69¢ | NET DEBT: | 21% | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
| 2009 | 59.0 | 6.6 | 6.7 | nil |
| 2010 | 75.3 | 12.9 | 9.5 | nil |
| 2011 | 130 | 21.7 | 13.1 | nil |
| 2012 | 159 | 18.9 | 10.5 | nil |
| % change | +22 | -13 | -20 | - |
£1=$1.51 | ||||
