Imdex (ASX:IMD) - 1H22 results & outlook

Interviews

by Melissa Darmawan

Imdex (ASX:IMD) CEO Paul House discusses drivers behind the company's 1H22 performance, research and development, and outlook.

Melissa Darmawan: Thanks for tuning into Finance News. I'm Melissa Darmawan. Joining me from Imdex (ASX:IMD) is Chief Executive Officer Paul House. Paul, nice to meet you, and welcome back to the network.

Paul House: Thanks, Mel. Pleasure to be here.

Melissa Darmawan: Welcome back. Paul, I can see that Imdex has been around for some 40 years, and in the recent times, you've hit a sweet spot in terms of revenue growth and profitability. Firstly, congratulations on a stellar 2022 result. What were the key contributors that you can point to?

Paul House: Thank you. Look, obviously very strong top-line growth for us at 35 per cent for the half, which is important because it's above the total metres drilled in the industry, which was circa 20 to 25 per cent. And so, that strong above-market growth I think is a strong testament to our strategy and the investment that we make in R&D.

We've won significant market share gains in some key markets around the world, particularly with our key gyro technologies, and we've been increasing our solutions sales to provide more comprehensive value to customers, principally through our IMDEXHUB-IQ platform. So, that is driving a lot of that incremental leverage, which obviously drops down into a very strong EBITDA and NPAT result as well.

Melissa Darmawan: And when it comes to things like the supply chain and other companies, it hindered their performance. But in this situation with Imdex, it seems to have not been such an issue. What have you done to manage it?

Paul House: Well, it's been pretty hard work. It's a bit like a duck on a river. The legs were going faster under the water than maybe you could see. But, look, the supply lines of raw materials and shoring those up over the last half in particular has been a big focus for us, as well as putting a little bit more inventory into the system. The role of our procurement team and some of our key partners around the world has been vital and ended up being very supportive in what is otherwise a very, very busy time.

And that investment in some of the inventory that we carry just to deal with those longer freight times is now complete, and we're well positioned to make sure that we can maintain supply to our customers.

Melissa Darmawan: Now, nearly half of your revenue comes from the Americas. Is this where you see your best revenue growth potential?

Paul House: We do, Mel. We're getting strong growth all around the world, but certainly there is a lot more money being poured into North America and South America both, and between Canada and the US and the rest of the Southern American regions, they all behave slightly differently, but equally all of them are growing significantly. And on top of the money moving into that market, we also see significant market share opportunities in the USA market.

Melissa Darmawan: Then on the topic of R&D projects, the company seems to be continuing progress in this space. Many of your sensors and software are patented. Can you tell our viewers the ones that are making the biggest impact?

Paul House: Imdex places technical leadership really at the front of its strategy, and that investment in R&D leads to those patents and that intellectual property, which we think is vital to actually giving benefits to the industry. In the near term, our hub connected sensors and our gyros have certainly driven a big portion of the change that you see in our financial results. We do, however, have quite a broad portfolio. And, looking forward, I think some of the most exciting opportunities come from our investments into the production stage of the mining cycle, where our software investments and our Blast DOG project are going to have the strongest impact.

Melissa Darmawan: Now, in regards to making that type of impact, do you have any other key drivers for growth that you can talk to us about?

Paul House: Two things. I think increasingly we are working on providing more integrated solution sales to the market, and that means that we're making all of our products work together so that one plus one equals five. And whilst it obviously is designed to deliver more value to our customer, the happy accident, of course, is that it delivers more value to Imdex as well.

Those patented sensors and software platforms work together, that mean that we can provide that integrated solution in near real time in a way that is otherwise not available in the industry.

Melissa Darmawan: Then, in regards to, let's say, running a lean business, which has been a key focus for Imdex, could you give us some colour on your digital 2.0 transformation project and how it could further streamline cost to serve?

Paul House: For sure. So, our digital 1.0 transformation project very successfully made our employee and customer experience much leaner and much faster for our sensors business. The digital 2.0 transformation aims to do exactly the same thing for our fluids and our software business. And, as we saw that margin growth improve as we rolled out digital 1.0, we expect to repeat that with digital 2.0 over that next three-year period while we undertake that program.

Melissa Darmawan: Last question from me. Given that outlook for Imdex is bright, what are the things that you're most excited about?

Paul House: Well, so many things, Mel, but I think the overall external trend towards decarbonisation is hugely exciting. Personally, it excites me in terms of the community I live in, and professionally, that presents great growth opportunities. And Imdex and its suite of technologies is very well positioned to help the mining industry deliver those decarbonisation-type opportunities, and we will benefit from that trend, and I think that's a pretty exciting place to be. It's certainly an exciting place to work.

Melissa Darmawan: Paul, it was great to speak with you. I look forward to seeing how 2022 unfolds.

Paul House: Thanks very much for your time, Mel.

Melissa Darmawan: You're welcome.


Ends

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