Mitchell Services (ASX:MSV) talks business overview and outlook.
Jessica Amir: Hello I’m Jessica Amir for the Finance News Network. Joining me from Mitchell Services Limited (ASX:MSV) is CEO, Andrew Elf. Andrew, welcome to the Finance News Network.
Andrew Elf: Thank you very much.
Jessica Amir: First up, can you give us an introduction to Mitchell Services?
Andrew Elf: Mitchell Services is an ASX listed drilling services company, market capitalisation of around about $50 million. Provide a wide range of drilling services across Australia, to a number of tier one global mining exploration clients and energy clients. Been back in the market now for about four years and we’ve bought a lot of assets at the bottom of the market, when it was down and assets were cheap. And now in an improving market, it’s starting to put some of those assets back to work.
Jessica Amir: Can you detail your drilling services for us now?
Andrew Elf: The business’s revenue was around about $40 million last year, to the 30th of June. And the business is roughly split 50/50 across the coal business and base metals. So a good split across those sectors. Of the base metals, probably about 30 per cent of the revenue is from underground. So certainly a good mix of income by commodity and by different drilling types as well.
Jessica Amir: Now to your fleet and your competitive advantage. Can you tell us about that?
Andrew Elf: The fleet that we’ve got gives us a very large competitive advantage in the market. We re-entered the Australian market in late 2013, and since bought assets of various drilling companies that went into receivership and liquidation. We picked up assets for $15 million that would have cost in the order of $90 million plus. And certainly now in an improving market, we’re getting those assets back out to work. Mitchell Services is like a Qantas, the assets that we’ve got are like a BMW. So it’s not a Tiger Air and they’re not Corollas we’re putting out. It’s a really high quality fleet, high quality clients and long-life contracts.So that fleet certainly holds us in good stead as the market improves.
Jessica Amir: Turning the page now to financials. Can you tell us some of the highlights from your first half?
Andrew Elf: The last year has certainly been better. It’s been a long hard road obviously being in mining services, but finally nice to see some light at the end of the tunnel. The business was cash flow positive in the last financial year, more rigs are going out. We’ve had some wonderful announcements to the market in recent times about contract wins, including BHP Billiton (ASX:BHP) at Olympic Dam, Glencore PLC (LON:GLEN) in Queensland and various contract wins in New South Wales. So importantly for us, the revenue being split across those different segments of energy and base metals. Also seeing a distribution across different geographies now, moving into New South Wales and South Australia and then those sorts of things.
Jessica Amir: Can you tell us about your strategy and long-term ambition?
Andrew Elf: The vision for the company is to be Australia’s leading provider of drilling services to the global energy, mining and exploration industries. Previously Nathan Mitchell had a very large privately owned company that he sold, many years ago now, for over $150 million. That company had 30-odd rigs, this company’s got 60 plus rigs and some fantastic clients on board. So I think the vision’s good and looking forward to a very positive future, as the market continues to improve.
Jessica Amir: What about short-term, what do you foresee happening over the next 12 months?
Andrew Elf: Certainly a lot of demand for the services coming through now, the market’s really picking up. It’s still early days of course, but if things continue the way they are, it should be a very good year ahead. Most important thing for us, number one, stay safe. If you haven’t got a good safety record in this business, you haven’t got a business. And then delivering for our existing clients, so making sure we keep doing a quality job, a good job. That’s what sets us apart. And importantly our people as well, it doesn’t matter how good our gear is, this is a peoples’ business, a services business. We’ve got to make sure we’ve got good people and keep looking after our clients. I think if we do those things, then the shareholders will benefit longer-term.
Jessica Amir: Andrew Elf, CEO of Mitchell Services, thank you so much.
Andrew Elf: Thanks very much.