Master Drilling defers dividend until disruption caused by Ukraine invasion plays itself out

A fire damaged building following a blast at around 4am during Russian artillery strikes in Kyiv, Ukraine, on Friday, Feb. 25, 2022. Ukraines president said Moscow-led forces were continuing attacks on military and civilian targets on the second day of their invasion after the U.S. and its allies imposed new sanctions on Moscow and U.S. President Joe Biden warned of "a dangerous moment for all of Europe." Photographer: Erin Trieb/Bloomberg via Getty Images

BUSINESS is booming for contract raise boring and drilling group Master Drilling but management continues to take a cautious outlook despite predicting a “bull run” for its operations and has not declared an annual dividend.

That’s despite the comments by CEO Danie Pretorius that the recovery in Master Drilling’s operations had reached the point where “… the requirements for being able to pay a dividend are met”.

According to Pretorius: “The massive global uncertainty caused by the recent outbreak of hostilities between Russia and Ukraine, and by the current and potential further responses of various countries to this situation, makes it advisable to defer a dividend decision until more certainty exists regarding how this situation and its possible consequences may unfold.

“The board will consider declaring a dividend as soon as that becomes possible, which may be by way of a special dividend rather than a normally scheduled dividend.”

For the year to December Master Drilling boosted US dollar revenues by 40% to $171.8m which in turn drove US dollar earnings up 500% to 13.2c a share. Pretorius described the group’s order book as “stable” at $237.6m and its project pipeline as “healthy” at $507.1m.

Master Drilling also reduced its debt to $32.1m at December 31 from $42.1m a year previously which improved its gearing ratio – including cash – to 5.8% from 10.3% previously.

Said Pretorius: “In the short to medium term the sales pipeline is expected to normalise and increase with further tactical acquisitions and joint ventures supporting performance.

“Having made significant investments in its fleet, technology and geographical diversification over the past couple of years, the group is now positioned to capitalise on the predicted bull run without requiring additional capital investment.”

Pretorius told Miningmx the dividend decision “had everything to do with the Russia/Ukraine situation” and he wanted to see how that played out. He added that he was “very excited” about the current business situation with the commodities super cycle  underway since 2020 but he still remained cautious about what could happen.

Master Drilling has operations in Africa and throughout the Americas but the annual statement has flagged Africa as “the key area for the group and we are aggressively pursuing further opportunities in this market”.

Asked for specifics Pretorius replied that the two major contracts Master Drilling now had in South Africa for projects with Anglo American Platinum and Northam Platinum were very important for the group.

In addition to this Master Drilling was looking for more work on the copper and cobalt mines in the Democratic Republic of Congo and was about to start work on a long-term contract in Tanzania on which Pretorius commented: “We believe this country will be an important contributor in the future”.