Join our community of smart investors

Capital keeps shine in crisis

Exploration work at risk but drilling company says majority of revenue secure from gold miners
Capital keeps shine in crisis

Capital Drilling’s (CAPD) fortunes are linked to gold – this puts it in a mixed position currently, with miners pumping out cash but warily eyeing their balance sheets.

IC TIP: Buy at 30p
 

Around 80 per cent of Capital’s revenue comes from grade control and blast hole drilling at operating mines. “With gold at these levels they want to keep producing,” executive chairman Jamie Boyton said. Gold has recently hovered around $1,500 (£1,298) an ounce (oz) after falling from over $1,600 an oz in mid March.

Larger gold miners have not been immune to the Covid-19 sell-off either, with the Van Eck gold miners ETF (US:GDX) down almost 30 per cent since 9 March. Further down the chain is where the malaise will bite. Capital’s exploration jobs - around 10 per cent of revenue - are likely to drop off after the current programmes are done, Mr Boyton said. 

Capital has lowered its final dividend for 2019 to 0.7c (6p), handing shareholders a third less for the full year despite net cash from operations being marginally up on 2018. 

The drilling company judges its performance on the number of rigs out in the field and how much each is bringing in. In 2019, its rig utilisation rate was 3 percentage points higher than the year before at 54 per cent, although the average revenue per operating rig fell from $194,000 to $176,000.

CAPITAL DRILLING (CAPD)   
ORD PRICE:30pMARKET VALUE:£40.9m
TOUCH:26-32p12-MONTH HIGH:75pLOW: 30p
DIVIDEND YIELD:4.0%PE RATIO:5
NET ASSET VALUE:63ȼNET CASH:$3.7m*
Year to 31 DecTurnover ($m)Pre-tax profit ($m)Earnings per share (ȼ)Dividend per share (ȼ)
201578.7-5.54-7.63.6
201693.3-0.98-3.62.5
20171199.693.91.7
201811612.65.72.1
201911514.67.71.4
% change-1+16+35-33
Ex-div:09 Apr   
Payment:04 May   
£1=$1.16 *Includes $0.7m in lease liabilities