Mitchell Services Limited (ASX:MSV) CEO Andrew Elf provides an overview of the company, discussing its COVID-19 response, operational highlights, revenue and outlook.Thanks very much Clive, and thanks for having me on. We'll just go to the preso and we'll take the disclaimers being read and just move on to the profile. So Mitchell Services, ASX listed drilling company. Obviously providing drilling services, and you can see there, we've got the founder connection with the Chairman, Nathan Mitchell, and also Scott Tumbridge who was the founder of Deepcore, which was a company that we acquired back in November 2019. So again, a couple of young founders on the board, still in their forties and, and keen to see the company continue to grow and develop. Importantly, there you can see institutional holdings set for 21%, including Soul Pattinson's and CBC amongst others. So quite a strong institutional register for a company of our size.
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As Paul mentioned in the previous presentation, I think the whole industry has done a fantastic job in regards to managing COVID best it can. Again, I won't run through these points here other than to say, I think being listed and having some sophisticated business systems and process in place held us in good stead when this happened, and still happening, versus some other companies that probably haven't got the systems and things like that to manage the COVID challenges. But positively, we only operate in Australia and the risk certainly is lower here from our perspective than some of the people operating overseas.
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So these numbers are a little bit older now, and I've got some first quarter numbers in here, but these are our numbers from FY 20. So again, the Deepcore acquisition training for seven months out of 12, revenue up, EBITDA up and net debt down 28% from December 19. So within a six-month period from December 19 through to 30 June, a 28% reduction in net debt. We are covered by Morgans and I think they've got us penciled in this year for just under $40 million EBITDA. Again, that debt has continued to reduce in the first quarter of FY 21.
Again, you can see there, that was certainly well under one times debt to EBITDA and producing strong cash. The business model was proven during the pandemic. I think we've done a fantastic job. The team as a whole has really done a great job managing the challenges that have existed, and to hit our targets and guidance and still pay a fully franked dividend in July was a testament to that. Importantly, I've mentioned the debt to EBITDA. Our balance sheet is strong, and that is going to give us some flexibility moving forward.
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So, with the highlights again, we hit our EBITDA guidance during the pandemic and the business model has proven itself and I'll talk a little bit more about that as we move into the next slides. We did have a hiccup on regularisation just with the COVID in March, but again, it's bouncing back. Diversity, it is a very diverse drilling company by commodity geography and the type of drilling which we undertake. Again, importantly, the quality of the business model and why it works is where our revenue comes from and that's tier clients on high quality mine sites, so that's not... I'll touch on that as I move through the presentation as well.
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So the utilisation, you can see here, this is the average number of rigs operating throughout the financial years. In FY20, 67.7 on average running throughout the year to generate that revenue. Again, we make the point in the middle on the box on the right, we anticipate further rig increases and rig count in FY21. And our previous speaker, Paul certainly spoke to some of the things that are in the marketplace that are driving that demand for drilling and we certainly agree with all of those comments. We've got about 101 rigs in the fleet. The rigs that we've got available to us are in good condition, don't need much CapEx to put them out, and so we've certainly do have the ability to put more rigs out and take advantage of an improving market. And important to note that into Q1, FY21, we had over 70 rigs out running. So certainly, we are seeing an increase moving into that next financial year.
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So this just talks to the quality of the business model. We can see the graph in the top left-hand corner there showing that 86%, or circa 90% of our revenue is coming from tier one clients. Why do we want to work for those clients? Multi-rig, multi-year projects and opportunities for ourselves. Their low cost operating mine sites that operate through the cycle, and if they're operating, they need drilling and that is a way for us to build a business that is sustainable through the cycle and it is a cyclical industry. So you can see down the bottom where our revenue comes from. It's from production and development and mindset expiration and resource definition, or delineation and that's about 90% of what we do. As Paul mentioned in that previous presentation, those tier one clients are looking at innovation and we are partnering with companies like Index and using their tools and giving them those things.
Those tier one clients want leading service, leading technology and that's certainly very much at the forefront of what Mitchell does, and the best way to think of Mitchell in this industry and drilling is like a Qantas in the airline industry. It's been around for 50 years. Very high quality and do a very good job. We still do service... The Greenfield exploration sector, that's about 10% of the revenue and our rigs can move in between. So as that work, there's a lot of money that's been raised in the market in recent times. We can certainly move rigs into that sector and service that sector as well. Well, some of those auto rigs we've got we can move in there too. So all in all, a very high quality revenue stream that is as protected as it can be in a cyclical industry.
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This just talks to the revenue diversity, the business we do operate, surface and underground in base metals and minerals. And we do operate on surface and underground in metallurgical coal. So zero exposure of thermal coal, and really the work we do is related to gas drainage and gas management in metallurgical coal mines. We're certainly remain mindful of this diversity, and where you talk about gold, a good exposure to gold and increasing. I think if you look at that revenue mix in FY 21, there are going to be about 50% gold, 20% base metals, and probably circa 30% metallurgical coal. So we do have offices in Victoria and certainly a good exposure to the emerging exploration opportunities in that sector.
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So these are our first quarter numbers, and you can have look at these here. The revenue $53m, EBITDA, strong operating cash flow importantly. As I mentioned, that net debt coming down, and again, the EBITDA to cash conversion rates strong as well. You can see on the right-hand side, the number of rigs operating, so above that 70 mark, and bearing in mind that in FY20, the average across the whole year was 67 odd. You can see there we've hit that first quarter in this financial year above 70, and then the number of shifts worked down below. So obviously a lot of shifts, and we've released these numbers quarterly to the market in Investor Updates, so you can see how the businesses is tracking as we go. As I mentioned, we do have that coverage from Morgans who have got us penciled in for circa just under $40 million EBITDA in FY 21.
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So reasons for optimism, and again, I think Paul covered it pretty well in the previous presentation and probably had a few more slides and a bit more data than I did here but for us, the amount of money being raised in Australia, capital getting raised has certainly been increased year on year, and those companies are now getting organised and getting their drilling plans and projects together and we think that money is going to start going into the ground next year. We are certainly see our pipeline is strong and we're getting busier. We've got our rigs available to deploy, and we think that money is going to go into the ground next year and it's going to start getting quite busy.
Importantly, for a company like us, we do have a level of capital expenditure given the nature of the business that we're in. The federal budget that's been handed down with the instant write-off will certainly reduce our income tax liability and have a positive impact on our cash flow. Again, that's just going to depend on what we spend from a CapEx perspective, but that's certainly going to be a benefit to us moving forward until 30 June 22.
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The outlook for Mitchell Services, again, as I mentioned, the pipeline is strong. The market looks good. I've just been up at the Noosa Mining and Investment Conference last week, and certainly the optimism at that conference is the best I've seen since we've returned to the market in Australia. Again, most positive since 2012. The pipeline is strong. There's money getting raised. There's demand for drilling services. The tier one clients who have operating mine sites are starting to put some money back into the ground as well. The demand for gold in particular is very strong. Again, Australian dollar gold is a strong story. Victoria in particular, there are more blocks getting released down there March, April next year. We've got an office in Bendigo, we are a local provider. So we've got a very, very strong position to take advantage of that sector as it continues to improve.
Again, all of those things taken into account, we expect FY21 revenue and EBITDA to continue to grow. As I mentioned previously, we do have more rigs running in Q1 than we did coming out of FY20, so we're confident in saying that. Having said that from a guidance perspective, again, with COVID and other things we haven't given guidance for this year yet. The last two years, we've given our guidance when we have released our half year results, and that'll be a board decision as to whether or not we do that again this year or not, or we'll wait and see what happens in that regard. I've mentioned as well that we are covered by Morgans, so if anyone is interested in learning a little bit more about the company I would certainly point you in that direction and have a read of that coverage.
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So in summary, we are leading provider of services to the global exploration mining and energy industries. We work all over Australia. Surface and underground. 50 years of experience, and certainly a high quality provider to leading clients. It is a very diversified business by commodities and I mentioned that the mix of commodities that we work in and the percentage of revenue that we expect to come from both in FY21, it's a high quality client base and a majority of the work is on mine sites and that certainly holds us in good stead as we move forward. We achieved our guidance in FY20, and we've got more rigs running in 21. We've paid a special franked dividend in the last two years. Again, paying it this time round with the pandemic hitting in March, I think was a testament to the quality of the business and our terms are quite often get asked but now there's no question time today just regarding dividends and what's our policy moving forward.
I think the board's intention is to leave it as a special dividend and keep the balance sheet strong, and then if we're in a position to take advantage of organic growth opportunities or alternatively potential acquisitions, that's certainly something that we can do, but they'll always assess the option of a special dividend if the capital is there to do so. Lastly, and most importantly, in this sector, a strong balance sheet. I know there's no question time today. So again, there is my contact details. Please feel free to call me directly on that line. That is my desk phone, you'll get through to me directly, or alternatively, you can jump on and email me or jump on the website and have a look. Thanks very much Clive and thanks for having me on.
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