ORBIT GARANT DRILLING INC. ANNOUNCES STRONG FINANCIAL RESULTS FOR FISCAL 2008
Record 872,392 metres drilled
Normalized EBITDA increases to $23.6 million
Financial flexibility enhanced; long-term debt reduced to $5.8 million from $24.5 million at the IPO
Val-d’Or, Quebec, September 25, 2008 –
Orbit Garant Drilling Inc. (TSX OGD) (Orbit Garant or the company) today announced its financial results for the fourth quarter and fiscal year ended June 30, 2008. The company completed its Initial Public Offering (IPO) on June 26, 2008, resulting in a five-day stub period prior to fiscal year-end on June 30, 2008. Accordingly, to enable investors to get a better understanding of the company’s financial and operating results, Orbit Garant reported results for the full 2008 fiscal year. In addition, to facilitate a comparison with the previous year, the company provided comparable 12 month 2007 results. Full Financial Statements and Management’s Discussion and Analysis are available on the Company website at www.orbitgarant.com.
“The successful completion of our IPO has provided Orbit Garant with the enhanced financial flexibility to continue the strong growth we have delivered in recent years,” said Eric Alexandre, President and Chief Operating Officer. “We expect to continue to grow with our major and intermediate mining company customers in Canada, the United States, Mexico, and other stable mining jurisdictions, where our operations are protected from operating and currency risks.”
“As a result of our leading market position, low-cost operations, focus on specialized drilling services and vertical integration, our shareholders can expect to see solid momentum in both revenues and earnings,” added Mr. Alexandre.
“The Abitibi mining region remains the focus of Orbit Garant’s operations. Over the years, this region has produced millions of ounces of gold in addition to base metals. Today, this region is seeing a renaissance, as mining companies explore and develop around previous deposits and drill established ore bodies to deeper depths. This area is also the only gateway to prospective mining regions further north, towards James Bay and northeast, towards Chibougamau,” said Mr. Alexandre.
Orbit Garant is also pleased to note that, despite the recent turbulence in capital markets and general illiquidity, the Company has not been materially impacted by any delay, cancellation or cut back by clients in their drilling programs.
For the year ended June 30, 2008, Orbit Garant generated total revenues of $82.1 million, representing $43.4 million in Canadian underground drilling, $24.3 million in Canadian surface drilling, $8.4 million in International drilling and $6.1 million from manufacturing of drills for third party customers. Of the total generated revenue, approximately 60% is derived from the Company’s focus on higher margin specialized drilling projects.
Since the company was created by the combination of Quebec-based drilling services providers Orbit and Garant on January 31, 2007 and the acquisition of Drift Exploration Drilling Inc. (comprising U.S. and Mexican operations) on April 16, 2007, the financial results for fiscal 2008 are not directly comparable to those of fiscal 2007. To enable shareholders to assess the current results against those of previous periods, Orbit Garant provided financial information by adding the nine months of combined operations in 2007 to the three months ended September 30, 2006 of Garant. The increase in profitability reported and discussed below is attributable to those acquisitions and an increase in demand for the company’s drilling services resulting from robust activity in the mining industry.
In fiscal 2008, Orbit Garant drilled a total of 872,392 metres, compared to 597,443 metres in 12 months 2007. This was a record for the company and attributable to the combination of the companies and acquisition of Drift, described above, as well as the introduction of 13 new drilling rigs, including 8 in Q3 and 3 in Q4.
Three Months Ended June 30, 2008
For the quarter ended June 30, 2008, the company generated total revenue of $24.6 million, compared to $17.9 million for Q4 in fiscal 2007, an increase of 38%, This increase can be attributed primarily to an increase in number of drills, the increase in metres drilled, and the realized benefit from price increases previously negotiated.
The gross margin for Q4 in fiscal year 2008 was 35.4% compared to 30.1% for the Q4 period in fiscal 2007. Total gross profit in Q4 fiscal 2008 was $8.7 million compared to $5.4 million in Q4 fiscal 2007, representing an increase of 62%.
General and administrative expenses (G&A) were $2.3 million during the Q4 period in fiscal 2008, an increase of $1.3 million over the comparable in fiscal 2007, due primarily to the hiring of new employees. As a percent of sales, G&A was 9.3% during Q4 fiscal 2008 and 5.3% during Q4 fiscal 2007.
Consolidated normalized EBITDA in Q4 fiscal 2008 was $6.6 million compared to $4.6 million in Q4 fiscal 2007 and representing an increase of 43%. This is attributable to the efficiencies that were realized as the Company integrated Orbit, Garant, and Drift, as well as price increases, a record number of metres drilled, and the company’s continued focus on higher margin specialized drilling.
Net earnings for Q4 fiscal 2008 totalled $1.4 million or $0.07 per common share, compared to $1.2 million or $0.06 per common share in Q4 fiscal 2007, an increase of 14%. The average tax rate for the Company in 2008 Q4 fiscal period was 32% as compared to 34% in Q4 fiscal 2007.
At June 30, 2008, Orbit Garant’s long-term debt was $5.8 million, compared to $24.5 million at the date of the IPO, and $27.3 million at June 30, 2007. As anticipated in the final prospectus, the company applied approximately $21.9 million of its $25.1 million in net proceeds to the repayment of amounts outstanding under its credit agreement.
Fiscal Year Ended June 30, 2008
For the fiscal year ended June 30, 2008 Orbit Garant had contract revenue of $82.1 million compared to $43.2 million in 12 months 2007, representing an increase of 123%.
The increase is attributable to the acquisition of Orbit and Drift during 2007, the addition of drilling equipment, and improved pricing.
Underground drilling revenue in Canada increased to $43.4 million in fiscal 2008 from $30.1 million in the 12 months 2007, an increase of 44%. This increase is due primarily to the combination of Orbit’s underground division with the Company’s underground division.
Domestic Surface drilling contract revenue increased to $24.3 million in fiscal 2008 from $7.7 million in the 12 months 2007. Before February 1, 2007 the company did not have a surface drilling division and so the increase is a direct result of the acquisition of Orbit in addition to the price increase and the added drills.
International drilling contract revenue increased to $8.4 million in fiscal 2008, compared to $4.1 million in the 12 months 2007. Before February 1, 2007 the Company did not have an international surface drilling division and so the increase is a direct result of the acquisition of Orbit and Drift.
Revenue attributable to the sale of drills to unrelated third parties was $6.1 million during the 2008 fiscal year, compared to $1.4 million in the previous year. The company’s manufacturing capability, Soudure Royale, was acquired as part of the Orbit transaction and, as a result, all of this revenue is incremental to the company when compared to the same period in the prior fiscal year. In December 2007, Soudure Royale acquired assets to increase its production capacity from 20 drills annually to 50 on a single-shift-per-day basis, to enable Orbit Garant’s further growth.
The gross margin for the 2008 fiscal year was 35.1% compared to 28.9% for fiscal 2007. Total gross profit for fiscal 2008 was $28.8 million compared to $12.5 million in the 12 months 2007, an increase of 130%. The increase in gross profit results from the combined effects of: lower-margin underground contracts being replaced with several higher-margin contracts; the implementation of contractual price increases in all segments; and, the inclusion of Orbit’s Drift USA and Drift Mexico to the underground drilling divisions of the Company’s financial results.
The Company experienced increases in certain costs during the fiscal 2008, specifically labor and consumables, which partially offset revenue gains.
G&A was $5.8 million in fiscal 2008, compared to $2.4 million in the 12 months 2007. The increase is a consequence of the overhead of Orbit and Drift being included in fiscal 2008 and additions to the management team to accommodate growth. As a percent of sales, G&A was 7.1% during fiscal 2008 and 5.6% in the 12 months 2007.
Consolidated Normalized EBITDA for fiscal 2008 was $23.6 million, compared to $10.6 million in the 12 months 2007, an increase of 124%. This increase is attributable to the acquisitions of Orbit, Drift USA and Drift Mexico, as well as organic growth. The normalized EBITDA for fiscal 2008 represents 28.7% of sales, compared to 24.7% in fiscal 2007.
Net earnings for fiscal 2008 totaled $9.4 million, compared to $2.7 million in the 12 months 2007, representing a 246% increase. This increase relates primarily to the acquisition of Orbit and the addition of 13 new drills. The average tax rate for the Company in 2008 fiscal period was 32%, compared to 34.4% in fiscal 2007.
Conference Call
A conference call for analysts and interested listeners will be held Friday, September 26 at 10:00 a.m. (ET). The call-in numbers for participants are 416-644-3415 and 800-733-7560. A live audio feed of the call will also be available on the Internet at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2424620
A replay of the call will be available from 12:00 p.m. (ET) on Friday, September 26 until 11:59 p.m. on Friday, October 3, 2008. To access the replay, call 416 640 1917 or 877 289 8525 enter pass code number 21284147, and then press the pound # key. The replay can also be accessed over the Internet at the above address.
About Orbit Garant
Orbit Garant is one of the largest Canadian-based drilling companies, providing both underground and surface drilling services in Canada and internationally, operating with 119 drills and approximately 500 employees. Orbit Garant provides services to major, intermediate and junior mining companies, through each stage of mining exploration, development and production.
Forward-looking information
This press release may contain forward-looking statements (within the meaning of applicable securities laws) relating to business of Orbit Garant Drilling Inc. (the “Company”) and the environment in which it operates. Forward-looking statements are identified by words such as “believe”, “anticipate”, “expect”, “intend”, “plan”, “will”, “may” and other similar expressions. These statements are based on the Company’s expectations, estimates, forecasts and projections. They are not guarantees of future performance and involve risks and uncertainties that are difficult to control or predict. These risks and uncertainties are discussed in the Company’s regulatory filings available at www.sedar.com. There can be no assurance that forward-looking statements will prove to be accurate as actual outcomes and results may differ materially from those expressed in these forward-looking statements. Readers, therefore, should not place undue reliance on any such forward-looking statements. Further, a forward-looking statement speaks only as of the date on which such statement is made. The Company undertakes no obligation to publicly update any such statement or to reflect new information or the occurrence of future events or circumstances.
For further information:
| Eric Alexandre President and Chief Operating Officer (819) 824-2707 Ext. 233 | Philip Koven Investor Relations (416) 447-4740 Ext. 235 |