Orbit Garant Drilling reports fiscal 2015 first quarter financial results

VAL-D'OR, QC, Nov. 13, 2014 /CNW/ - Orbit Garant Drilling Inc. (TSX: OGD) ("Orbit Garant" or the "Company") today announced its financial results for the three-month period ended September 30, 2014. All dollar amounts are in Canadian currency unless otherwise stated. Percentage calculations are based on numbers in the financial statements and may not correspond to rounded figures presented in this news release.

First Quarter Summary

¹ In accordance with IFRS, reported gross profit and margin include certain depreciation expenses. For comparative purposes, adjusted gross margin is also shown excluding these depreciation expenses.
² EBITDA = Earnings before interest, taxes, depreciation, and amortization.

"Our quarterly revenue growth of 12 percent resulted from increased metres drilled and greater pricing stability for the period," said Eric Alexandre, President and CEO of Orbit Garant. "Our decreased margin resulted primarily from a decline in specialized drilling activity, which is typically charged at a higher rate. Current pricing levels, our volume of metres drilled, which remains well below our peak run rates of 2012, and the decline in specialized drilling activity reflect current difficult market conditions."

"During this period, we have focused on what we can control, managing our staff and inventory levels, capital expenditures and balance sheet accordingly, to ensure we are well positioned for profitable growth when the market environment improves," added Eric Alexandre. "We have also focused on protecting our market share and that means continuing to support our core competitive strengths through our commitment to technology innovation, specialized drilling, highly skilled personnel, and leading health, safety and environmental standards. We are still in the early stages of capitalizing on our computerized monitoring and control drilling technology. All 21 of our computerized drill rigs are currently deployed on customer projects and they are consistently outperforming conventional drill rigs. Over time, as we continue to deploy more computerized rigs in the market, we believe we will benefit both in terms of customer loyalty and profitability. We are also positioning the Company for greater international market exposure, as we incorporated a new subsidiary in Ghana during our first quarter and secured our first mineral drilling contract in Chile, which is scheduled to commence this quarter. We look forward to raising the profile of Orbit Garant in both Chile and Ghana." 

First Quarter Results

For the three months ended September 30, 2014 ("Q1 FY2015") revenue increased 12.1% to $20.7 million, compared to $18.5 million for the three-month period ended September 30, 2013 ("Q1 FY2014"). Canada revenue was $20.5 million, an increase of 16.1% from $17.7 million in Q1 FY2014. International revenue was $0.2 million, down from $0.8 million in Q1 FY2014. Increased revenue is primarily attributable to an increase in domestic metres drilled, partially offset by a decrease in international metres drilled. Orbit Garant's fleet drilled a total of 230,922 metres in Q1 FY2015, an increase of 14.6% from 201,503 metres in Q1 FY2014. Average revenue per metre drilled was $89.12 compared to $89.31 in Q1 FY2014. 

Gross profit for Q1 FY2015 was $2.0 million unchanged from $2.0 million in Q1 FY2014. Gross margin decreased to 9.5% from 10.7% in Q1 FY2014. In accordance with IFRS, depreciation expenses totalling $2.3 million are included in cost of contract revenue for Q1 FY2015, compared to $2.4 million in Q1 FY2014. Adjusted gross margin, excluding depreciation expenses, was 20.6% in Q1 FY2015, compared to 23.5% in Q1 FY2014. The decline in gross margin and adjusted gross margin is primarily attributable to a reduction in specialized drilling activity, which is typically charged at a higher rate, in addition to higher employee-related fixed costs on a lower international revenue base, and start-up costs for a new project in Chile.

General and administrative (G&A) expenses totalled $2.7 million (13.0% of revenue) in Q1 FY2015, compared to $3.1 million (16.8% of revenue) in Q1 FY2014.  In accordance with IFRS, depreciation and amortization expenses of $0.4 million are included in G&A expenses for Q1 FY2015, compared to $0.5 million in Q1 FY2014. Adjusted G&A expenses, excluding depreciation and amortization expenses, were $2.3 million (11.0% of revenue) in Q1 FY2015, compared to $2.6 million (14.3% of revenue) in Q1 FY2014. 

The decrease in adjusted G&A expenses resulted from the proactive measures taken by the Company to reduce expenses in response to current market conditions, partially offset by additional administrative costs incurred to support the Company's new offices in Chile and Ghana. 

Earnings before interest, taxes, depreciation and amortization ("EBITDA")¹ was $2.1 million in Q1 FY2015, compared to $1.7 million in the first quarter a year ago.

The Company's net loss for Q1 FY2015 was $0.6 million ($0.02 per share) compared to $1.1 million ($0.03 per share) in Q1 FY2014. The net loss for Q1 FY2015 is primarily attributable to the reduction in gross margin and adjusted gross margin as explained above.

During Q1 FY2015, the Company repaid a net amount of $1.3 million of its $30.0 million revolving Credit Facility (the "Credit Facility"). As at September 30, 2014, the Company's long-term debt, including the current portion, was $7.2 million, compared to $8.5 million as at June 30, 2014. Orbit Garant had working capital of $38.6 million at September 30, 2014 ($37.1 million as at June 30, 2014), and 33,276,519  common shares issued and outstanding.

Orbit Garant was in breach of certain financial covenants under its senior credit facility (the "Credit Facility") as at June 30, 2014. On August 28, 2014, the Company entered into an amendment to the Credit Facility that effectively waives this breach. As at the end of September 2014, the Company complied with all covenants in the Credit Agreement. The Company is discussing a potential extension of the Credit Agreement with the lenders along with adjustments of a number of covenants of the Credit Agreement to take into account the current market environment.

Orbit Garant's unaudited interim condensed consolidated financial statements and management's discussion and analysis for the fiscal year ended September 30, 2014 are available via the Company's website at www.orbitgarant.com or SEDAR at www.sedar.com.   

Conference call

Eric Alexandre, President and CEO, and Alain Laplante, Vice President and CFO, will host a conference call for analysts and investors on Thursday, November 13, 2014 at 10:00 a.m. (ET). The dial-in numbers for the conference call are 647-427-7450 or 1-888-231-8191. A live and archived webcast of the call will be accessible via Orbit Garant's website at: http://www.orbitgarant.com/en/sites/fog/investors.aspx

To access a replay of the conference call dial 416-849-0833 or 1-855-859-2056, passcode: 27288072. The replay will be available until November 20, 2014.

About Orbit Garant
Headquartered in Val-d'Or, Quebec, Orbit Garant is one of the largest Canadian-based mineral drilling companies, providing both underground and surface drilling services in Canada and internationally through its 214 drill rigs and approximately 600 employees. Orbit Garant provides services to major, intermediate and junior mining companies, through each stage of mining exploration, development and production. The Company also provides geotechnical drilling services to mining or mineral exploration companies, engineering and environmental consultant firms, and government agencies. For more information please visit the Company's website at www.orbitgarant.com  

(1) Management believes that EBITDA is a useful supplemental measure of operating performance before interest, taxes, depreciation and amortization. However, EBITDA is not a recognized earnings measure under IFRS and does not have a standardized meaning prescribed by IFRS. Investors are cautioned that EBITDA should not be construed as an alternative to net income or loss (which is determined in accordance with IFRS) as an indicator of the performance of the Company or as a measure of liquidity and cash flows. The Company's method of calculating EBITDA may differ materially from the methods used by other public companies and, accordingly, may not be comparable to similarly named measures used by other public companies.

Forward-looking information
This news 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.

SOURCE Orbit Garant Drilling Inc.