June 7, 2018 - 5:00 PM EDT
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Major Drilling Announces Annual and Fourth Quarter Results

MONCTON, New Brunswick, June 07, 2018 (GLOBE NEWSWIRE) -- Major Drilling Group International Inc. (TSX:MDI) today reported results for the year and fourth quarter of fiscal year 2018, ended April 30, 2018.


In millions of Canadian dollars
(except loss per share)
 Q4 2018  

Q4 2017

YTD 2018

YTD 2017
Revenue$95.4 $81.5 $342.3 $300.6 
Gross profit
  As percentage of revenue




  As percentage of revenue




Net loss (4.3) (8.2) (22.5) (42.1)
Loss per share (0.05) (0.10) (0.28) (0.52)
(1) Earnings before interest, taxes, depreciation and amortization, excluding contingent consideration true-up (see “non-GAAP financial measure”)
  • Quarterly revenue was $95.4 million, up 17% from the $81.5 million recorded for the same quarter last year.
  • Gross margin percentage for the quarter improved to 24.3%, compared to 24.1% for the corresponding period last year.
  • EBITDA was up 86% to $10.2 million for the quarter, as compared to the same quarter last year.
  • Net loss was $4.3 million or $0.05 per share for the quarter, compared to a net loss of $8.2 million or $0.10 per share for the prior year quarter.

“Yearly revenue was up for the first time since fiscal 2012 and the Company recorded the strongest quarterly revenue since July 2013, which indicates that the industry has started recovering from a prolonged downturn.  We continue to see a gradual increase in activity month by month, and this trend is continuing into our first quarter of fiscal 2019.  The fourth quarter revenue increase came mainly from improved activity levels, but pricing has also started to improve in most of our regions,” said Denis Larocque, President and CEO of Major Drilling Group International Inc. 

“Global exploration spending improved as most senior and intermediate companies have increased their exploration budgets for calendar 2018.  This quarter, we saw an increase for copper exploration, rising to 22% of our revenue from 15% three months ago, as the copper industry is facing a supply deficit in the coming years.  Prices for drilling services continue to improve, although these improvements are presently offset by an increase in labour, mobilization and repair costs, which is typical in a ramp-up environment.  As utilization rates gradually improve, we should start to have considerable leverage to increase revenue and profits as we move forward.”

“The Company maintains a strong working capital position with net cash (net of debt) of $1.9 million.  The decrease this quarter was due to a net working capital increase, mostly from higher receivables related to increased activity.  As well, we spent $4.8 million on capital expenditures this quarter, adding 4 new rigs to our fleet while disposing of 19 older, inefficient and more costly rigs, bringing the fleet total to 628 rigs,” added Mr. Larocque.

“Indications support our belief that the industry is still early in the exploration cycle, with most industry watchers pointing to depleting mineral reserves for the foreseeable future as mining companies continue to search for significant discoveries.  The number of large exploration projects is still very low compared to the last cyclical peak in 2012, confirming this lack of significant discoveries.  As mining companies begin to discover meaningful levels of resources, they will then have to engage in a period of enhanced infill drilling.  With the easily accessible mineral reserves getting depleted around the world, attractive deposits will be in areas increasingly difficult to access and deeper in the ground, which will bring a resurgence in demand for specialized drilling.”

“One of the challenges in drilling services is the shortage of experienced drill crews in the industry, a factor that will put some pressure on cost and productivity as we move forward.  With safety and training in mind, we continue to deploy technologies that will aid in the continued development of safe, competent employees while at the same time, in our quest for zero harm, reduce the number of incidents involving new recruits as compared to previous cycles.   These enhancements to our recruiting and training systems will produce continuous improvements over the next few years.  As well, there are several innovation initiatives under way to help improve productivity going forward.”

“The Company expects to spend approximately $30 million in capital expenditures in fiscal 2019 to meet customers’ demands, improve rig reliability, productivity and utilization, as well as to invest in our continuous improvement initiatives.  However, we will remain vigilant and flexible in order to react and adjust to unforeseen market conditions.” 

Fourth quarter ended April 30, 2018

Total revenue for the quarter was $95.4 million, up 17.1% from revenue of $81.5 million recorded in the same quarter last year, despite the unfavorable foreign exchange translation impact for the quarter, compared to the effective rates for the same period last year, estimated at $3 million on revenue. The foreign exchange impact on net earnings for the quarter was negligible.

Revenue for the quarter from Canada - U.S. drilling operations decreased by 4% to $45.5 million, compared to the same period last year.  Delayed startups at the beginning of the quarter and the completion of a large percussive drilling program affected revenue in the region.  As well, high repair and training costs coming into the fourth quarter affected margins in the region.

South and Central American revenue increased by 43% to $32.5 million for the quarter, compared to the same quarter last year. Almost half the increase is attributable to growth in Chile, primarily from copper projects.  There were also increases in Argentina, Brazil and Colombia.

Asian and African operations reported revenue of $17.4 million, up 55% from the same period last year.  This increase was driven by stronger activity in most areas but particularly in Mongolia.

The overall gross margin percentage for the quarter was 24.3%, up from 24.1% for the same period last year.  The increased margins resulted from improved market conditions and better production, offset slightly by increased wages and benefits and consumable expenses, while all other direct costs have remained consistent relative to the same quarter last year.

With the ramp-up in activity from lower levels compared to the same quarter last year, general and administrative costs were up 4% at $12.2 million. 

Other expenses were $1.3 million compared to $2.6 million for the same quarter last year.  This decrease is attributed to a decrease in bad debt expense compared to the same quarter last year and a true-up of $0.7 million, recorded in the same quarter last year, on the contingent consideration due to better than expected results arising from the Taurus acquisition.

The income tax provision for the quarter was an expense of $2.5 million compared to an expense of $0.2 million for the prior year period.  The tax expense for the quarter was impacted by non-tax affected losses and non-deductible expenses.

Net loss was $4.3 million or $0.05 per share ($0.05 per share diluted) for the quarter, compared to a net loss of $8.2 million or $0.10 per share ($0.10 per share diluted) for the prior year quarter.

Non-GAAP Financial Measure

The Company uses the non-GAAP financial measure, EBITDA.  The Company believes this non-GAAP financial measure is key, for both management and investors, in evaluating performance at a consolidated level. EBITDA is commonly reported and widely used by investors and lending institutions as an indicator of a company’s operating performance and ability to incur and service debt, and as a valuation metric. This measure does not have a standardized meaning prescribed by GAAP and therefore may not be comparable to similarly titled measures presented by other publicly traded companies, and should not be construed as an alternative to other financial measures determined in accordance with GAAP.

Forward-Looking Statements

Some of the statements contained in this news release may be forward-looking statements, such as, but not limited to, those relating to: worldwide demand for gold and base metals and overall commodity prices; the level of activity in the mining industry and the demand for the Company’s services; the Canadian and international economic environments; the Company’s ability to attract and retain customers and to manage its assets and operating costs; sources of funding for its clients (particularly for junior mining companies); competitive pressures; currency movements (which can affect the Company’s revenue in Canadian dollars); the geographic distribution of the Company’s operations; the impact of operational changes; changes in jurisdictions in which the Company operates (including changes in regulation); failure by counterparties to fulfill contractual obligations; and other factors as may be set forth as well as objectives or goals including words to the effect that the Company or management expects a stated condition to exist or occur. Since forward-looking statements address future events and conditions, by their very nature, they involve inherent risks and uncertainties. Actual results in each case could differ materially from those currently anticipated in such statements by reason of factors such as, but not limited to, the factors set out in the discussion on pages 13 to 16 of the 2017 Annual Report entitled “General Risks and Uncertainties”, and such other documents as available on SEDAR at www.sedar.com. All such factors should be considered carefully when making decisions with respect to the Company. The Company does not undertake to update any forward-looking statements, including those statements that are incorporated by reference herein, whether written or oral, that may be made from time to time by or on its behalf, except in accordance with applicable securities laws.

About Major Drilling

Major Drilling Group International Inc. is one of the world’s largest drilling services companies primarily serving the mining industry. Established in 1980, Major Drilling has over 1,000 years of combined experience within its management team alone.  The Company maintains field operations and offices in Canada, the United States, Mexico, South America, Asia, Africa and Europe. Major Drilling provides all types of drilling services including surface and underground coring, directional, reverse circulation, sonic, geotechnical, environmental, water-well, coal-bed methane, shallow gas, underground percussive/longhole drilling, surface drill and blast, and a variety of mine services.

Webcast/Conference Call Information

Major Drilling Group International Inc. will provide a simultaneous webcast and conference call to discuss its quarterly results on Friday, June 8, 2018 at 9:00 AM (EDT).  To access the webcast, which includes a slide presentation, please go to the investors/webcast section of Major Drilling’s website at www.majordrilling.com and click on the link.  Please note that this is listen-only mode.

To participate in the conference call, please dial 416-340-2216 and ask for Major Drilling’s Fourth Quarter Results Conference Call.  To ensure your participation, please call in approximately five minutes prior to the scheduled start of the call.

For those unable to participate, a taped rebroadcast will be available approximately one hour after the completion of the call until midnight, Friday, June 22, 2018.  To access the rebroadcast, dial 905-694-9451 and enter the passcode 1135239#.  The webcast will also be archived for one year and can be accessed on the Major Drilling website at www.majordrilling.com.

For further information:
David Balser, Chief Financial Officer
Tel: (506) 857-8636
Fax: (506) 857-9211
[email protected] 

Major Drilling Group International Inc. 
Condensed Consolidated Statements of Operations 
(in thousands of Canadian dollars, except per share information) 
  Three months ended  Twelve months ended 
  April 30  April 30 
  2018  2017  2018  2017 
 TOTAL REVENUE $95,412  $81,469  $342,326  $300,588 
 DIRECT COSTS  72,266   61,860   268,043   240,370 
 GROSS PROFIT  23,146   19,609   74,283   60,218 
 OPERATING EXPENSES                
  General and administrative  12,243   11,678   47,716   44,594 
  Other expenses  1,289   2,627   3,504   5,239 
  (Gain) loss on disposal of property, plant and equipment  (157)  (316)  (206)  48 
  Foreign exchange (gain) loss  (395)  780   (1,390)  390 
  Finance costs  225   90   782   331 
  Depreciation of property, plant and equipment  11,817   12,104   47,496   48,955 
  Amortization of intangible assets  -   660   657   2,625 
   25,022   27,623   98,559   102,182 
 LOSS BEFORE INCOME TAX  (1,876)  (8,014)  (24,276)  (41,964)
  Current  2,633   2,858   7,824   8,999 
  Deferred  (163)  (2,641)  (9,648)  (8,899)
   2,470   217   (1,824)  100 
 NET LOSS $(4,346) $(8,231) $(22,452) $(42,064)
 LOSS PER SHARE                
 Basic $(0.05) $(0.10) $(0.28) $(0.52)
 Diluted $(0.05) $(0.10) $(0.28) $(0.52)

Major Drilling Group International Inc. 
Condensed Consolidated Statements of Comprehensive Earnings (Loss) 
(in thousands of Canadian dollars) 
  Three months ended  Twelve months ended 
  April 30  April 30 
  2018  2017  2018  2017 
 NET LOSS $(4,346) $(8,231) $(22,452) $(42,064)
 Items that may be reclassified subsequently to profit or loss                
  Unrealized gain (loss) on foreign currency translations (net of tax)  10,164   11,724   (16,766)  24,891 
  Unrealized gain (loss) on derivatives (net of tax)  8   (86)  (127)  (163)
 COMPREHENSIVE EARNINGS (LOSS) $5,826  $3,407  $(39,345) $(17,336)

Major Drilling Group International Inc. 
Condensed Consolidated Statements of Changes in Equity 
For the twelve months ended April 30, 2018 and 2017 
(in thousands of Canadian dollars) 
          Share-based  Retained  Foreign currency     
  Share capital  Reserves  payments reserve  earnings  translation reserve  Total 
 BALANCE AS AT MAY 1, 2016 $239,726  $326  $18,317  $105,876  $61,896  $426,141 
 Exercise of stock options  25   -   (4)  -   -   21 
 Share-based compensation  -   -   937   -   -   937 
   239,751   326   19,250   105,876   61,896   427,099 
 Comprehensive earnings:                        
  Net loss  -   -   -   (42,064)  -   (42,064)
  Unrealized gain on foreign currency                        
    translations  -   -   -   -   24,891   24,891 
  Unrealized loss on derivatives  -   (163)  -   -   -   (163)
 Total comprehensive loss  -   (163)  -   (42,064)  24,891   (17,336)
 BALANCE AS AT APRIL 30, 2017 $239,751  $163  $19,250  $63,812  $86,787  $409,763 
 Exercise of stock options  1,513   -   (310)  -   -   1,203 
 Share-based compensation  -   -   781   -   -   781 
   241,264   163   19,721   63,812   86,787   411,747 
 Comprehensive earnings:                        
  Net loss  -   -   -   (22,452)  -   (22,452)
  Unrealized loss on foreign currency                        
    translations  -   -   -   -   (16,766)  (16,766)
  Unrealized loss on derivatives  -   (127)  -   -   -   (127)
 Total comprehensive loss  -   (127)  -   (22,452)  (16,766)  (39,345)
 BALANCE AS AT APRIL 30, 2018 $241,264  $36  $19,721  $41,360  $70,021  $372,402 

Major Drilling Group International Inc. 
Condensed Consolidated Statements of Cash Flows 
(in thousands of Canadian dollars) 
  Three months ended  Twelve months ended 
  April 30  April 30 
  2018  2017  2018  2017 
 Loss before income tax $(1,876) $(8,014) $(24,276) $(41,964)
 Operating items not involving cash                
  Depreciation and amortization  11,817   12,764   48,153   51,580 
  (Gain) loss on disposal of property, plant and equipment  (157)  (316)  (206)  48 
  Share-based compensation  166   232   781   937 
 Finance costs recognized in loss before income tax  225   90   782   331 
   10,175   4,756   25,234   10,932 
 Changes in non-cash operating working capital items  (18,013)  (7,783)  (8,397)  (8,036)
 Finance costs paid  (225)  (90)  (782)  (331)
 Income taxes paid  (1,285)  (1,581)  (5,883)  (5,810)
 Cash flow (used in) from operating activities  (9,348)  (4,698)  10,172   (3,245)
 Repayment of long-term debt  (756)  (829)  (3,207)  (5,445)
 Proceeds from draw on long-term debt  -   -   15,000   - 
 Issuance of common shares due to exercise of stock options  -   -   1,203   21 
 Cash flow (used in) from financing activities  (756)  (829)  12,996   (5,424)
 Payment of consideration for previous business acquisition  -   -   (5,135)  (3,881)
 Acquisition of property, plant and equipment                
  (net of direct financing)  (4,757)  (7,267)  (22,510)  (17,652)
 Proceeds from disposal of property, plant and equipment  799   1,666   2,662   3,223 
 Cash flow used in investing activities  (3,958)  (5,601)  (24,983)  (18,310)
 Effect of exchange rate changes  839   1,560   (2,904)  2,726 
 DECREASE IN CASH  (13,223)  (9,568)  (4,719)  (24,253)
 CASH, BEGINNING OF THE PERIOD  34,479   35,543   25,975   50,228 
 CASH, END OF THE PERIOD $21,256  $25,975  $21,256  $25,975 

Major Drilling Group International Inc. 
Condensed Consolidated Balance Sheets 
As at April 30, 2018 and April 30, 2017 
(in thousands of Canadian dollars) 
  2018  2017 
  Cash $21,256  $25,975 
  Trade and other receivables  88,372   72,385 
  Note receivable  495   476 
  Income tax receivable  4,517   5,771 
  Inventories  82,519   88,047 
  Prepaid expenses  2,924   3,210 
   200,083   195,864 
 NOTE RECEIVABLE  559   1,055 
 PROPERTY, PLANT AND EQUIPMENT  185,364   221,524 
 GOODWILL  57,851   58,432 
  $467,053  $494,570 
  Trade and other payables $55,906  $48,359 
  Income tax payable  3,794   3,036 
  Contingent consideration  -   5,135 
  Current portion of long-term debt  1,934   3,291 
   61,634   59,821 
 LONG-TERM DEBT  17,407   4,544 
   94,651   84,807 
  Share capital  241,264   239,751 
  Reserves  36   163 
  Share-based payments reserve  19,721   19,250 
  Retained earnings  41,360   63,812 
  Foreign currency translation reserve  70,021   86,787 
   372,402   409,763 
  $467,053  $494,570 

(in thousands of Canadian dollars)


The Company’s operations are divided into three geographic segments corresponding to its management structure: Canada - U.S.; South and Central America; and Asia and Africa. The services provided in each of the reportable segments are essentially the same. The accounting policies of the segments are the same as those described in note 4 presented in the Notes to Consolidated Financial Statements for the year ended April 30, 2018. Management evaluates performance based on earnings from operations in these three geographic segments before finance costs, general and corporate expenses and income tax.  Data relating to each of the Company’s reportable segments is presented as follows:

  Q4 2018  Q4 2017  YTD 2018  YTD 2017 
  (unaudited)  (unaudited)         
Canada - U.S.* $45,536  $47,500  $185,879  $179,789 
South and Central America  32,511   22,803   93,714   71,420 
Asia and Africa  17,365   11,166   62,733   49,379 
  $95,412  $81,469  $342,326  $300,588 
Earnings (loss) from operations                
Canada - U.S. $(3,640) $(2,661) $(10,727) $(15,529)
South and Central America  3,711   (160)  (4,115)  (11,375)
Asia and Africa  525   (2,425)  (1,516)  (7,165)
   596   (5,246)  (16,358)  (34,069)
Finance costs  225   90   782   331 
General corporate expenses**  2,247   2,678   7,136   7,564 
Income tax  2,470   217   (1,824)  100 
   4,942   2,985   6,094   7,995 
Net loss $(4,346) $(8,231) $(22,452) $(42,064)
Depreciation and amortization                
Canada - U.S. $6,195  $6,997  $24,694  $28,457 
South and Central America  3,188   3,205   13,239   12,876 
Asia and Africa  2,370   2,229   9,914   8,325 
Unallocated and corporate assets  64   333   306   1,922 
Total depreciation and amortization $11,817  $12,764  $48,153  $51,580 

*Canada - U.S. includes revenue of $27,369 and $24,142 for Canadian operations for the three months ended April 30, 2018, and 2017 respectively, and $95,840 and $83,992 for the twelve months ended April 30, 2018 and 2017 respectively.

**General corporate expenses include expenses for corporate offices, stock options and certain unallocated costs.

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Source: GlobeNewswire (June 7, 2018 - 5:00 PM EDT)

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