ADES International (ADES) has an advantage over other oil services companies in the current environment because its rigs in Saudi Arabia are its largest source of revenue. The Kingdom has recently increased oil production despite the oversupply scenario caused by Covid-19, with consultancy Rystad Energy forecasting a 28m barrel of oil per day (bopd) surplus this month.
ADES’ revenue more than doubled to $477m (£387m) in 2019, with $244m of this from Saudi Arabia. The overall increase was driven by debt-funded acquisitions in 2018 and 2019, and this flowed through to earnings, with cash profits growing 91 per cent last year, to $193m.
It also came through to its debt, with gearing now at well over 100 per cent excluding lease liabilities and hitting net debt-to-cash profit ratio at 3.1 times.
The group said it was insulated from the oil price crash and industry response because of its $1.3bn project backlog as well as its Saudi exposure.
ADES has made the bold statement that “it is unlikely that governments across the [Middle East] will impose further restrictions on the group’s operations”.
If operations are affected, the group has liquidity of $120m and another another $100m to draw from an existing facility, although if used this would take ADES closer to its debt covenant of four times net debt to cash profits.
| ADES International (ADES) | ||||
| ORD PRICE: | 850¢ | MARKET VALUE: | $369m | |
| TOUCH: | 850-875¢ | 12-MONTH HIGH: | 1,460¢ | LOW: 805¢ |
| DIVIDEND YIELD: | nil | PE RATIO: | 13 | |
| NET ASSET VALUE: | 1,021¢ | NET DEBT: | $628m* | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (p) |
| 2015 | 101 | 25.6 | n/a | nil |
| 2016 | 134 | 41.3 | 119 | nil |
| 2017 | 158 | 44.6 | 116 | nil |
| 2018 | 206 | 79.4 | 175 | nil |
| 2019 | 478 | 40.9 | 65 | nil |
| % change | +132 | -48 | -63 | |
| Ex-div: | na | |||
| Payment: | na | |||
| £1=$1.24 *Includes lease liability of $22m | ||||
