Capital Limited maintains guidance after mixed first half

Mining service provider Capital Limited reported first-half revenue of $154.3m in an update on Wednesday, up 11.7% year-on-year.

The London-listed company said its forecast for full year revenue continued to be in the range of $320m to $340m.

EBITDA for the first half, adjusted for IFRS 16 leases, was ahead 10% at $43.9m, although the EBITDA margin saw a slight dip, clocking in at 28.5% compared to 28.9% in the first six months of 2022.

Net profit after tax was meanwhile down 15.6%, amounting to $16.8m.

Capital said the value of its strategic investments, boosted by an unrealised net gain of $0.8m from equity investments in the period, jumped to $42.1m from $38.7m at the end of December.

Notably, the valuation of its stake in Allied Gold Corp remained consistent with the December assessment, irrespective of Allied's impending public listing aspirations.

Capital’s net debt widened by 82.7% to $66.5m, which the board put down to the funding of the company's second major mining services contract with Ivindo Iron without having to resort to equity market funding.

With its investments of $42.1m, adjusted net including investments stood at $24.4 million.

The board declared an interim dividend of 1.3 cents per share, scheduled for payment on 3 October for those registered by 1 September.

Looking ahead, Capital maintained its $320m to $340m revenue guidance for the full year, with EBITDA margins predicted to hover between 25% and 30%.

The estimated capital expenditure for the year was pegged at $65m to $75m - an approximate $15m escalation from the guidance shared during the 2022 results.

That was primarily to cater to additional equipment requisitioned for the newly-announced mining and crushing services contract with Ivindo Iron in June.

The company said it was expecting revenue boosts in the second half from the inauguration of premium contracts at Reko Diq, Pakistan, and Ivindo, Gabon, as well as a potential restart of operations at the Meyas Gold Project in Sudan.

Capital Mining was forecasting similar upward revenue trajectories in the period, driven predominantly by the Ivindo contract in Gabon and the consistent performance of the Sukari earth-moving contract.

Furthermore, MSALABS was projected to perpetuate its multi-year laboratory expansion, primarily emphasising the ‘Chrysos PhotonAssay’ units, with its revenue guidance for 2023 pitched at $40m to $50m, up from $27.3m in 2022.

“We are delighted with the performance delivered across all business divisions of the group,” said chief executive officer Peter Stokes.

“Through the half we were particularly pleased to announce our second significant mining services contract, fortifying our position as a full-service provider to the mining industry.

“This strategic move, combined with our efforts in strengthening our drilling business and enhancing MSALABS, sets us on a trajectory of continued growth and success in the years to come.”

Stokes said that despite temporary operational disruption through the period, namely the Meyas Sand Gold Project in Sudan, the underlying demand from customers continued to remain strong, with the firm confident in its revenue guidance for 2023 of between $320m and $340m.

“We remain active in tendering across the business, with our capital allocation strategy biassed towards returns and not a singular business division.

“Given the strength in the business, we have now also announced an interim dividend of 1.3 cents per share, a testament to our commitment to creating value for our shareholders and our confidence in the bright future ahead for our company.”

At 0835 BST, shares in Capital Limited were down 3.4% at 82.5p.

Reporting by Josh White for Sharecast.com.