Capital Limited (CAPD) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to the Capital Limited half-year results investor presentation. [Operator Instructions] Before we begin, we'd like to submit the following poll, I'm sure the company would be most grateful for your participation. I'd now like to hand over to Chairman, Jamie Boyton. Good morning.

Good morning. Welcome, everyone, to Capital Limited's first half 2023 results call. With me today, I have Rick Robson, as the group's CFO, based in London; and Conor Rowley, our Head of Corporate Development, also based in London. I'm cognizant of the fact that we released these results last week, so Rick and I are going to go through the presentation very quickly. So pleased to allow for that because I think, as I said, it's news from a week ago, and I think most people, I would be assuming, would be focused on the Q&A session. So I'll kick off with a financial overview. It was a pleasing half for us. Revenue growth just shy of 12%, EBITDA growth of 10%, cash flow from operations up 10%. When we released, we declared a dividend of $0.013 a share, that's flat on the corresponding period in 2022, and we maintained our revenue guidance of $320 million to $340 million. The business continued to generate strong returns, 23% return on capital. We've been running north of 20% return on capital for 5 to 6 years now, so very pleased with the returns profile of the business, maintaining modest gearing at 0.7x net debt to EBITDA, and we had a modest increase in our investment portfolio. But worth noting that, that does not include a revaluation of our stake in the unlisted Allied Gold Corporation, which is scheduled to list in the second half of this year. Some highlights for the first half. The drilling business utilization in the first half was 75%. Some of you might recall from last year, we made a very deliberate strategy in the second half of last year to pay back some of our activities at the more marginal jobs or smaller-scale jobs. We noted at the time that a sweet spot for utilization was 75%, being on target in the first half of the year. Particularly pleasing was announcing our second major mining contract, which was with Ivindo, which is the Belinga iron ore deposit in Gabon. It's with a global major FMG, fourth largest iron ore company in the world, and a really strong endorsement of our mining team. Particularly pleasing that we have a ramp-up phase now, and that is being done within our existing facilities without having to go to market, which is, I know, something that the market had been questioning us about in terms of the growth of that mining business. Labs business continues its rapid rollout. We'll get to that in another slide with very, very rapid rollout and being successfully executed. We increased our credit facilities. We added Nedbank to our lending syndicate, which again is just a sharp sign of the business reaching greater maturity in terms of its profile in the capital markets and another outstanding peer industry-leading performance with our safety. So very, very pleased with that. I won't dwell on the next couple of slides. They are the maps of our operations. I think the most pertinent point is that if we take a look at this versus 3 or 4 years ago, just the increase in the quality of the customer base, the increase in the quality of the projects that we're working on, it really is the absolute Tier 1 of projects across the Africa and Middle Africa and Middle East. Laboratories, look, the growth is extremely rapid and very pleasing. The footprint just gets stronger and stronger. Big progress has been made, particularly in Canada, over the last 8 months rolling out the Chrysos PhotonAssay units across the Abitibi gold belt and the Golden Triangle in [ BC ]. Macro continues to be very supportive. I'm sure those on the call have heard us talk about it before, but we still are in an up cycle. A little bit of softness in some of activity at the junior end of the market in the second quarter, no impact on capital. We had growth in our businesses across all operating businesses in the second quarter. The -- however, exploration spend is still 40-odd percent below previous peak cycle levels. CapEx spend 50% lower, so we're still operating in a very robust environment, strong tendering environment. I'll delve into the individual operating businesses. As you can see, the drilling business, modest growth in the first half. I think the most significant thing is that, a, operating at target utilization; b, starting some fairly significant jobs. Ivindo iron ore that I mentioned earlier with Fortescue in Gabon, that there's two parts to that contract or two parts to that project, I should say: A drilling contract and a mining contract. The drilling contract kicked off first. The Reko Diq copper project that will kick off in the current half. And these are just major global world-scale projects that we're working on. So very pleased again with our drilling business. And again, 85% of the drilling revenues generated from activities at mine sites continuing to provide resilience to our earnings stream. Mining. Gabon covered it. It's going to -- the contract, as we announced, is a $30 million per annum contract over a potential 5-year term, and that complements the existing -- very closely follows the existing 3-year reverse circulation and diamond contract that we had announced. It adds another feather in the cap for the mining team. Obviously, Sukari has been extremely successful and continues to hit all its production targets. This now brings us on stream with another customer, Sukari's live scale equipment. Gabon's small- to medium-scale equipment broadens our portfolio and broadens our presence in the mining market. That project is in ramp-up right now, so we'll see the benefits of that particularly in Q4 and Q1 of next year onwards. Laboratories. The top left really tells a pretty strong story, the sample growth has been exceptional. We've deployed or constructed another six rigs in the first half of the year. With the commissioning of the Chrysos PhotonAssay units across Canada, we're now the largest provider of these -- of this service globally. So we're very pleased with that, and we're on track for the full rollout of 21 units by 2025 and maintain our guidance this year of $40 million to $50 million and our longer-term guidance of $80 million in 2025. Investments. What is significant here, and I know there are questions in the Q&A, so I'll touch over this, but the portfolio has been significantly concentrated, ,reduced in terms of number of holdings over the last few years. And what's particularly pleasing is the model of early-stage investing and working with the companies as they mature through the mining cycle phase is starting to bear fruit. WIA Gold, which we actually had a hand in creating the portfolio of assets for WIA, they announced a maiden resource, they've now moved up the triangle into resource definition and development projects, and it's looking like a very promising deposit. Leo has started to produce DSO ore and move into full-scale production in the first half of next year. And Allied, where Capital provided financing back in 2019 for the purchase of their first gold mine, and they've now got three producing gold mines and, as I said earlier, are moving to an IPO in the second half of this year. So the investments are moving up the value chain very nicely. I'll skip over the innovation slide just for today, just in the interest of time and Q&A, and hand over to you for financials, please, Rick.

Thanks, Jamie. So we covered off a lot of the headlines. I think a couple of points to touch on here. So another strong performance for the half and importantly, across all key divisions as well as key regions within the group. EBITDA adjusted for the IFRS leases. So as a reminder for people, we are adjusting our EBITDA by the cash cost of our capitalized leases, is primarily the Chrysos leases in the labs division. We are consistent with the year-end presenting our EBITDA adjusted for that. Of traditional EBITDA, is adjustment of $3.5 million. That's a figure that over time, will grow as we roll out more leases within more Chrysos units within that division. So we're getting ahead of it. So again, $43.9 million EBITDA on the half at a margin of 28.5%, so consistent with the first half in 2022. Geared up for a strong second half with the ramp-ups, as Jamie referred to, at Ivindo drilling and Reko Diq in Pakistan, but also importantly the Ivindo mining contracts and the crushing services component in Gabon as well. Just on the investments. Net buyer in the half, $2.5 million invested. And at the 30th of June, we were at $42 million of mark-to-market value. As Jamie said, concentrated portfolio, over half of that value is held in Predictive. And importantly, again to reiterate, the Allied stake is valued at our own relative valuation as opposed to a reference to the IPO price and plans. So potentially some upside to that. And again, this is a strategy that over time, we're at a net investment here of $15 million, roughly, with a compelling return over 180%. Looking at the returns. So as I said, the EBITDA on adjusted basis, consistent level. We are seeing a little lower profitability coming through on the labs business just as a function of the rollout and the ramp-up of those laboratories. So those ramp-ups will have to take a little bit of time to get up to full capacity. On the return side, again, consistently good return now on the ROCE. We have got slightly elevated capital employed there on the half just because of the Ivindo CapEx on the mining side, particularly, which obviously cash flows and what -- EBIT and cash flows haven't come through yet. So that will change into the second half and certainly into next year. So I'm confident that we can maintain that high level of ROCE. Looking at the net debt, started the year at $47 million, finished the half at $66 million, is to take you through the journey. A lot of that is Ivindo mining coming through. So not only on the CapEx, where we're probably something [ new of ] 2/3 through the CapEx spend. We'll also see in working cap draw, inventory build. We included in that working capital amount is we procured the crushing equipment for on-sale to Ivindo, so that's an elevated component of that working cap. I think, on the interest and taxes, interest, particularly, we're seeing elevated finance charges in the group because of the [ 80 ] amount of debt we've taken on the [ B ], just the finance charges that higher that, given the base rate, is elevated at the [ minute ]. CapEx-wise, we previously guided $50 million to $60 million for the year. We increased that to 65 to 75 basis to [ $15 million ] of new CapEx for the Ivindo mining contract. 65 to 75 does sort of incorporate a higher sustaining CapEx base, given our increased scale of the business. And on the half there, we've spent [ $36 million ] of the guided amount. Importantly, that [ $36 million ] includes OEM debt financed assets. Just looking at the balance sheet. Gross debt, just under $100 million of gross debt. Half of that is a fully drawn RCF of $50 million. So the RCF, as Jamie mentioned, we upsized or doubled that to $50 million earlier in the year, brought on Nedbank alongside our traditional lender Standard Bank. So the main objective of the RCF was to be able to fund larger contracts as they come to us and not have to go back to market each time to raise funds. So the RCF is doing exactly what we intended it to do. We are midway through that mobilization as we speak for Ivindo in Gabon, so we're seeing that sort of peak debt level, which we -- as the cash flows come through, we have to delever our position. Macquarie asset-backed facility, they are secured against the [ kit ] in -- at Sukari. So at the half, it's about $26 million, with the residual being our OEM debt facilities with Epiroc and Sandvik in respective rig purchases. Overall, that's a net debt-to-EBITDA of 0.7, so a pretty modest level, which we feel comfortable with. And then just to finish up for me, declared the interim div of $0.013, in line with last year's interim. And I think it's -- we will maintain our disciplined approach to capital management here, and we are committed to a strong balance sheet and with payment date of div [ in and off for ] early October. Back to you, Jamie.

Okay. Thanks, Rick. Look, outlook is particularly pleasing, again, particularly solid, I should say. In the second half, we should see, we expect to see, and we're guiding to see a resumption of decent growth, with the first half numbers at 154, that implies off our guidance about 176 in the second half. The drivers of that really are going to be the ramp-up of activity in Ivindo and at Reko Diq. So we should start to see -- expect to start to see the benefits of a lot of hard work in the first half coming through in the second half. The sector remains very buoyant, demand remains strong, we're seeing a lot of opportunities. So on that note, I think I'm going to hand it over to the moderator or Conor, and we can move into the Q&A.

[Operator Instructions] Conor, if I may, I'll hand back to you, as you can see, you've had a number of questions from investors this morning. So thank you to everybody for your engagement. If I may please just ask you to read out the questions, and I'll pick it up from you at the end.

All right. So I think I'll, as usual, just try and group these together. So look, I'll start with some of the divisional questions, and then there are some general ones to go through. So maybe start with you, Jamie, there's quite a few questions on Capital DI. I guess, first of all, from a roadshow perspective and talk to institutional investors, what is their feedback on this division and their understanding of it?

I would say, generally, we get more acceptance of the model from our institutional client base than we seem to get from our retail -- sorry, client base, a retail institutional shareholder base than our retail shareholder base. Where it particularly resonates is with the resources funds because we end up finding a lot of dialogue taking place about the positions that we're invested in. . Conor, you might be well [ suited ] to answer this, given you -- I've not done this most recent roadshow. Obviously, you have.

Yes. I think the view that resonates is it's not seen as maybe retail does. It's sort of a -- it's just sort of sitting behind the computer and picking some stocks, it's much more about having a seat in the room with these companies finding what they're looking at, what assets they're looking at. It often adds to our BD pipeline in terms of who we go speak to, et cetera. So it's that sort of sort of secondary understanding of where this division gets us rather than purely just sitting like a fund manager was and just investing in stocks that we like the look of. But I guess given -- moving on from that, I mean, from -- the market clearly isn't giving us value. Can you talk about the net investments that we made in the first half and why?

Look, I referenced that question earlier. I took some notes on it, but the market is not giving us value, I think that is a valid point. But I'd also argue, I wouldn't necessarily just focus in on the investments, and so the market is not giving us value for the investment. I'd argue the market's not giving us value for the drilling business, the mining business or the labs business. If I go right back to 2019, 2020, at that stage, we really were a drilling business. At that stage, we were trading at discounts to the market despite a better margin profile, a better returns profile. In the ensuing period, we've grown the top line and the EBITDA line very strongly with -- obviously had a fantastic growth story in MSA, and we've had a very good performance in investments. I'd argue the market is not valuing any part of our business, particularly, favorably. I wouldn't just single out the investments. In terms of the investment portfolio, specifically, it does get a lot of focus from retail, as we said earlier. I think some numbers that are worth bringing into bearing is the net investment in this strategy is $15 million. The asset base of the company at the end of the first half, $440 million. So contextually, you're talking about 3% of the company's asset base that is in investments. Our net investments for the period between 2020 and the first half of 2023 net investments is $1.5 million against CapEx of just over $200 million. So I think just the context around that, I think, is pretty important. In terms of the first half, we made a net investment in -- it was Predictive. We first got involved with Predictive back in 2020 prediscovery after we reviewed the company and saw the potential in the portfolio in Guinea. We've contributed capital raisings from [ 0.8 of a cent ] over up to $0.18, the most recent was at $0.15. Share price today is $0.20. We have 200 million shares in the company. It's been an outstanding performer. And as Rick said, it represents about 50% of the portfolio. Where we are at the moment, portfolio is heavily concentrated. Predictive, Leo Lithium, Allied constitute about 80% of the portfolio, and we're very pleased with all three of those companies because they're moving through the value chain, and that's the critical point about the portfolio. They started as quite young companies. In the case of Allied, we provided bridging to allow them to buy their first producing mine, which is a bit of unusual pace. But that is going through the value chain coming to IPO second half of this year. Leo Lithium, we provided bridging finance back in 2020. We contributed through their life cycle, they go into production next year. Predictive have just reported a 5.4 million ounce -- upgrade to 5.4 million ounces scoping study due later this year, expecting permitting next year. I don't personally think they'll be around at the end of this time next year. It's an extremely attractive asset. So anyway, the question I think was, what did we invest in the first half? It was following our money with the capital raising with Predictive at $0.15 a share.

Okay. Just, I guess, to follow up on Predictive, there's a question that Predictive, so we are in 9.8% of Predictive [ gen ] shares. That is about correct, if it isn't exactly correct. What is our view? You mentioned from an investment there, but in terms of drilling and mining opportunities at that asset as well?

Well, we're currently drilling there, and we have been now for about three years. I think it's important to make this point as well to something you said earlier, Conor, the Investment Committee is a separate committee to the operating business. The Investment Committee has a number of people, including myself and Conor and a number of independent Board directors, and we look at investments on a stand-alone basis as well as then the operations people will look at operational contracts. In Predictive's case, we are doing the drilling. I know there's some discussions on lab, mining, that's further out. But obviously, any contract that we have with one of any of our investee companies is commercial arm's length because all of our investee companies have to go through a tendering process, which, again, has to be independent of the investment.

Okay. And another question on another of the portfolio, Allied. You mentioned everything moving up the supply -- up the value chain. Allied have been pretty public about an IPO happening. What are our thoughts on that investment?

Well, it's done -- first of all, it's done spectacularly well. I mean based on the published or advertised at IPO price, it will be a very good performer for us. We're very pleased with what the team has achieved. As I said earlier, we helped them for the purchase of their initial mine. They now have three operating mines, a fantastic development project called [ Kermit ] in Ethiopia, and coming to market in the second half of this year. Sorry, Conor, the other part of the question? Does that cover it?

That was -- covered it. What is our plan on that investment and...

Okay. So I got asked this question earlier. I mean, obviously, a lot of people are being a little more direct, how are you going to be selling it? Our response to that has been -- we would never publicly state our position about the equities we have, whether we plan to buy them, sell them. The comment I have made is that we're an early-stage investor. That is the approach we take, where we can provide assistance, both financially, strategically, operationally. And that is -- the model will follow with all our investments. With Allied early stage, we've provided assistance financially, we've provided assistance operationally. As the assets reach maturity, we can no longer provide the financial support. These are self-sufficient companies as they move towards production, coming to market. So it really -- it's a more mature asset, we're not a natural holder of more mature assets. But a direct question, the answer is it will depend entirely on the valuation. We take a very systematic and peer-based view on valuations. And obviously, we take that into account when the IPO takes place.

Okay. Great. Maybe we'll want some mining questions. There's a couple here about Ivindo, what kind of equipment have we bought for that asset? And what is the future of that project? And then also just -- sort of -- did we move any kit from Sukari into that project?

No, in terms of Sukari. Sukari is large scale, in fact, what you can see on this slide right now, that's a [ 78,550 ] tonne dump truck. You're talking much smaller equipment, 50-odd, 60-odd tonne ADTs, articulated dump trucks. So no equipment from Sukari. It is a smaller-scale operation at this stage, articulated dump trucks. We did, however, move some of the smaller excavators we had [ 6015s, 395s ]. For example, we have moved [ 6015 ] from West Africa. Sukari, we operate 1640s. We moved dozers and graders from West Africa. So it's a combination of new capital and existing capital that we've used to get this job off the ground. It's starting at a pretty small scale, I'm not sure that we've disclosed the actual tonnage, so I won't go into that, but it is not at a scale that is near Sukari at the start, but it is in ramp-up phase. And as I say to most investors, there's not very many cases where iron ore companies or iron ore mines run at lower volumes than gold mines. That's just not the way you do iron ore mining. So we're very excited that there will be upside. As the project reaches commissioning and settles in, we think there will be upside.

Okay. And then on Sukari, can you discuss the options of the what next for that contract and when we might know?

We're expecting to know to hear in the next couple of months. They -- I think they flagged the new mine plan within a month. Options -- on the options, and I say this that they're just running through feasible options. One is the contract is extended at the current capacity, I think, highly unlikely. This was a very definitive, discrete piece of CapEx. I don't think sentiment will be coming back to market and saying we're doubling down and doing it again. So I think realistic options here are an extended -- an extension on a reduced capacity or alternatively, the contract comes to a conclusion around the middle of next year. We don't know that with concrete plans yet. So we'll be -- we should know that, as I said, within the next couple of months. Currently, just to round that out, the broker forecasts have that contract coming to an end next year. So it goes to zero. We have -- effectively, we've backfilled the revenue in their models by winning the Ivindo contract. So their model is dropping Sukari off and now being replaced with Ivindo as it ramps up. Obviously, should we get an extension, that would be an increase to their numbers and our numbers. However, in the event that we don't get an extension, there are currently three tendering opportunities on the table that could utilize that fleet.

Yes. Maybe it's just worth adding just on the value of that fleet as well because I think consensus have it going to zero. I mean one or two have [ extended ], but the majority are heading out to zero. But also, they're assuming their numbers that can't just sort of disappear [ sort of having ] a sale of it or reuse in any way. Maybe talk about the value of that kit in this market?

Yes. I won't be specific about the written-down value, but what's happened since we purchased this fleet, and as I said earlier, it's a large-scale fleet, the 785 trucks, and 17 of them, there are [ 60-40 ] excavators or [ 60-20 ]. This is large-scale mining equipment, the market has just gotten increasingly tight over the last 3 or 4 years, which makes a fleet like this. I would think if you were to test the market now to procure this fleet, it's probably an 18-month exercise. So it makes this fleet strategically a lot more valuable. The other question we often get asked is the life of this kit, and that's all down to engine hours, [ frame ] hours. But if properly maintained with working on 3-, 4-year cycles, you can get up to 12 years out of it. We are -- obviously, the Sukari contract itself is about 3.5, 4 years. It was a mix of new and secondhand. So we've certainly got a good 1.5 cycles left in this equipment. So there is a lot of value still in this fleet.

Moving on to a couple of labs. So there was a recent Chrysos announcement. I'm going to assume this question is accurately confident [ basis ] from that RNS, saying historically, the companies, this is Chrysos, units have mainly been deployed to laboratory customers. Recently, the company's focus is shifting towards deployment on mine sites. Can you talk to this announcement and how it might affect MSALABS?

So they're pivoting from -- sorry, commercial to mine site, is that essentially the question?

Yes.

I couldn't talk to -- we do actually have the location of every one of their labs. And I think that's probably inaccurate. When I think through where they are, that's probably inaccurate statement. So yes, it's probably been properly cut and pasted. Certainly, let me speak our own footprint, we're probably 40% mine site, 60% commercial, so we're not really seeing the skew that way. But what has happened, which is what they might be talking to, is as this technology has become increasingly accepted, the major mining companies are engaging to put these units on their mine sites. Obviously, the first unit that was ever placed internationally was October 2021, which was Barrick, the Bulyanhulu mine in Tanzania, which we operate, and then they put one at Kibali, again, we operate. That has really led to an increase of demand from the majors because these units operate, they need about 35,000 to 40,000 samples per month, what I can process, I should say. So it's really the big mines that are interested, and that could be the demand dynamic they're talking to.

A question here on the non-Chrysos part of the business. Can you give an outlook? I mean, from -- we've clearly built some new labs that are non Chrysos in the first half. Is that an indication that demand is still strong for traditional? And what's the outlook for our traditional geochemistry business?

The demand is still strong, absolutely. They include some prep labs, which are smaller scale, some small fire assay labs. And the prep labs are actually -- whilst they're small, they're a very important part of the business because it's the hub-and-spoke model, where the prep labs are effectively the collection point. You prepare the samples, you obviously, therefore, reduce a lot of the volume before they sent that to the major labs for processing. So the traditional side of the business is very strong. The multi-element is picking up. Lithium testing, to state the obvious, is increasing. We actually set up a prep lab in Bougouni, Southern Mali. We've been doing work for -- in that lithium belt. So short answer is, yes, there's strength across both the Chrysos business and the traditional labs.

Okay. going. So before we get to general questions. One on innovation. I mean, maybe it's worth just touching on. So a reminder, what is the strategy with this business? How big a budget is there for it, what for it there? And just generally, how do we look at this from a returns basis, and sort of what's next, and what we're looking at here?

I'll tackle the strategy because I think I do recall seeing some questions and feedback that perhaps a misunderstanding the strategy was us investing in start-up technology. The predominant basis of this strategy is to -- it's a team that reviews technologies that can be applied to our business and potentially commercialized. And the genesis of this idea was Chrysos. We were first to market, internationally, with Chrysos. We went through a 2-year process of testing and discussing with Chrysos, and then we're starting to roll that out through our international network. This is a cut, paste, rinse, repeat, if you like, of that thematic. So we've now signed a joint venture with a company called [indiscernible] and rolling out mobile power solutions across a lot of our sites in Africa, growing our Well Force, tool, downhole tool business. But again, we're assessing technologies to determine their appropriateness to roll out across our business and commercialize. That is the strategy.

I think to answer the budget question, there are funds allocated to that innovation strategy, but it's relatively low levels, I think in the region of low or mid-single-digit million dollars for 2023. And this is where we're investing in these technologies to effectively create efficiencies and productivity gains elsewhere in the business. So there is a -- can be quite a quick benefit there if we're purchasing new equipment that then gets put into use pretty quickly.

I guess coming back to the general questions, I mean, lots of people have asked this in any different ways. But maybe just asked it very generally, what is your thoughts on the share price? Why do you think we are so cheap, especially in very recent -- the last month or two? Yes, what are your thoughts? And what is our sort of plan to sort of tackle it?

I'm going to let you take the first part, Conor, if I could. As usual, [ rate ] sort of touch points in recent times in the market and what we're doing about it, I'll tackle.

Sure. I think there's a number of points. So the one that we did see is some nervousness -- I do -- sort of chronologically, some nervousness, overall, some direct to selling, which will ask us a separate point, or maybe, Jamie, you can just touch on that when you respond. The second one that really hit us was we did have a number -- one or two institutional sellers, not massive, or sort of a top 20 are still broadly the same. But also, it happened to be in a time where savvy retail guys will know that our liquidity completely dropped out the market sort of late June, July, August. And so when you have a persistent seller in a very low-liquidity market, which isn't just us, I think it's the broader market, that hurt us. So I think there was a day when we jumped 6% randomly on a day. I'll tell you that's because we cleared that seller and then pop straight afterwards. I think the third point more recently is definitely West Africa. You've seen some of our West African [ players ] have similar more recent -- maybe you could tackle this one as well. West Africa's political stability has come up a lot, it came up a lot on the roadshow, and I think we'd sort of drag down by that Africa risk rather than anything specific to us. And then I think to a lesser extent, some -- a little bit of frustration with the investment portfolio that we haven't yet sort of recycled out of that, but I think we sort of -- we've addressed that earlier in terms of the plans there?

Okay. My response on direct to selling, I actually had a phone call with one of our major shareholders at the time that I sold some shares. These questions were pretty straightforward, which were, am I still committed to the business? The answer is yes. The reasons of selling, which I paired with him on a personal level for taking some money. And the third thing, most quickly said, when was the last time you sold stock? I said 2016, and I bought in 2020, and he went "Fine, got it." So that's direct to selling. I hope that covers it. I mean I've not sold stock for 7 years before selling this. [ In-store ] selling, I think you've covered. West Africa political stability, okay, [ had ] that was -- my first involvement with West Africa dates back to 1997. At the time, there was a coup going on in the Ivory Coast. In recent years, there's been coups in Mali, New Guinea, [ Burkina ] and most recently Niger. This isn't unusual for the regions in which we operate, but the market is giving a lot more attention. And when I get asked about Africa in general, our experience now spans 20 years, and we've had occasional strike action. In terms of full-loss production, we've lost about 1.5 days at one of our operations 13 years ago due to extended strike action. The headlines are obviously pretty negative. The reality on the ground is that business keeps functioning. That said, we do attract an Africa risk discount. I think it's important to point out that we are growing our platform in North America. When we first set up MSA labs or first really started to grow MSA labs, I should say, the initial growth was in Africa using Capital's network. Now that MSA, its revenues about half North or the Americas and Africa but it's opening up opportunities for our business to look in North America. And we think having some contract wins and expanding our presence in North America, where we hope start to appease the mark a little bit about the perception about the African discount. I should also point out that a big part of our business is obviously East Africa and Egypt or the biggest part, which have been very stable jurisdictions in recent years. Investment portfolio, I think we've covered, Conor, a bit. Recycling of capital is absolutely a focus, but these things don't happen overnight. As I said earlier, we invested early. Three of the portfolio acquisitions, the most significant are all reaching a maturity phase in the next 18 months that will have us look at them in a different lens. Other things to -- where we think we address the share price, I mean, I think looking at opportunities in the developed markets I've covered, second half revenue is going to start to show some decent growth as the projects ramp up, recycling of capital that I just referenced. And I think the other important one is that this rollout of MSA labs has taken the business from profitability in 2022 to being a loss maker in 2023. It's all part of the expansion plan, we're rolling out labs very aggressively. As that capacity utilization picks up profitability and it's proven again, we expect MSA to inflect back to profitability over the next 18 months. So as we look forward now, there's a number of catalysts that I think are going to have quite a material difference on the profile of the business, looking forward.

Okay. And I guess, one other that many people have asked here, given the share price weakness, what are your thoughts on buybacks?

I think -- look, I think we are -- look, we are cheap. On any metric, we're cheap. I've been asked this question before, and obviously, we've done a small buyback in the past. I've been asked this question in recent times, my answer to it is you can see we've been through a very elevated period of capital investment, in the last 3.5 years, a tad over $200 million. Where we've been investing is in projects that have the potential to be the next Sukaris and the next Geitas, where we've been operating for 20 years. So we need to always make that trade-off between our capital investment for what will be a portfolio position that will give us runway for the next decade versus the immediate benefit of a buyback. I see the compelling logic in a buyback. You can see what our CapEx guidance is for 2023. It certainly remains an option for the company. But with the current capital spend, it limits our options with respect to that.

Okay. Any more burning questions, get them in the queue quickly, but one quick easy one, maybe, for Rick. Is capital innovation spend OpEx or CapEx?

Yes. It was a mixture, really. So look, I guess, some of the very initial spend, we'll look to capitalize where we can. But as we sort of roll those strategies out within the business, they become a more OpEx-based point and in some cases, like in [ MPS ] and line power solutions, will hopefully generate return of [indiscernible], i.e., revenue and be, if you like, a profit center for us. So I think just to reiterate then, I think a decent amount of the spend this year, if you like, will be more of a CapEx end of the scale, with some P&L benefits to come.

I think it's worth stressing that the CapEx is in hardware, predominantly. When you're talking things like downhole survey tools that we were previously renting, we have now CapEx purchase those, that's for our Well Force business. It turns over about $4 million. The margins have been significantly improved by spending money on purchasing our own tools, increasing our margins, good returns, various sorts of initiatives. The [ MPS ] that Rick mentioned, that's purchasing remote power that reduces diesel cost, for example. This is an investment in start-up software that may or may not work. These are, as I said earlier, the proven technologies that we're rolling out through our platform.

That's great, Conor, as you say that takes care of all the questions. So thank you to everybody for your engagement once again. If any further questions do come in, we'll make those available to the company post today's meeting. Jamie, I know investor feedback is particularly important to you and to the company, and I'll shortly redirect those on the call to give you their feedback, but I wondered if I may before doing so just ask you for a few closing comments, and then I'll redirect investors.

Well, closing comments are fairly straightforward. I just want to thank everyone for dialing in and taking the time. And we appreciate the questions. We welcome the questions, encourage you to please submit feedback and keep the questions coming. But hopefully, the call was valuable for everyone. Thank you very much.

That's great. Jamie, Rick, Conor, thank you once again for updating investors today. [Operator Instructions] On behalf of the management team of Capital Limited, we'd like to thank you for attending today's presentation. Good morning.