Imdex Limited (IMD) Earnings Call Transcript & Summary

Thank you for standing by and welcome to the Imdex Limited FY '20 Results Presentation. [Operator Instructions] I would now like to hand the conference over to Mr. Paul House, CEO. Please go ahead.

Thank you and welcome, everyone. Joining me on the call today is Paul Evans, our Chief Financial Officer and company Secretary. It is a pleasure to report on our performance and operations for the 2020 financial year. IMDEX is committed to its vision in being a leading global mining-tech company. The opportunity ahead of us remains exciting, and the progress we have made in 2020, both because of and in spite of COVID-19, has exceeded our expectations. This presentation will take approximately 15 to 20 minutes, and then we will turn the call over to the operator, who will moderate a question-and-answer session. I'll begin with an overview of our company performance, vision and its technologies. However, like our previous presentations, we have included some additional information in the appendices. Commencing on Slide 3, which highlights IMDEX' investment proposition. We have a market cap in excess of $0.5 billion. Our 4-year revenue and EBITDA CAGR at 13% and 24%, respectively, is a direct reflection of our investment in value-added technologies for clients. Our balance sheet continued to strengthen throughout FY '20, including the fourth quarter, and we have a strong net cash position. We have presence on approximately 70% of drilling programs globally, which provides an excellent opportunity to expand our integrated product offering. Our product suite continues to grow, and IMDEX has the most complete offering for the mining value chain. And we have a stronger pipeline of new technologies than at any time in the past. It is these unique technologies which will continue to build sustainable earnings growth in the coming years. Moving to Slide 4, which illustrates the 3 key components of our offering and how they improve the process of identifying and extracting mineral resources globally. Our drilling optimization products reduce the cost of drilling, enhance safety and are critical drivers in improving the exploration success, particularly with deeper drilling or drilling under cover. Our rock knowledge sensing tools are best-in-class and deliver quality data across all 4 components of rock knowledge: location, grade, texture and mineralogy. And our cloud-based software and services work to aggregate, store and distribute data to where it needs to be anywhere in the world with secure chain of custody. Increasingly, these services are yielding analytics capabilities that facilitate critical decision-making. We help drilling contractors and resource companies both. We help them drill faster and smarter. We help them understand their ore bodies in real time, and we do this right across the mining value chain. Looking now at Slide 5. So why is real-time rock knowledge and quality data important to our clients? Repeatedly, we see billion-dollar capital investment decisions based on 1% of 1% of the ore body being sampled. The key limitation is quality data in real time that is representative of the ore body. Our technologies seek to answer the questions, "Where to drill next?" and "How can processing be optimized?" However, in order to be of value, these questions must be answered further upstream in the mining cycle than they are today. Timely upstream decisions can deliver substantial economic benefits to resource companies as the asset owners, drilling contractors and other stakeholders right throughout the mining value chain. Improving drilling productivity by greater than 30% and by using smarter tools to give visibility to the ore body enable earlier decision-making to drive improvements in mine-to-mill efficiency by in excess of 15%. Looking at our highlights in FY '20 on Slide 6. As we announced in our release this morning, we are pleased with the results given the disruption of COVID-19. Importantly, we continued to outperform minerals industry market growth. We achieved our strongest 9-month revenue to March, and our full year result of $237.7 million was marginally down on the record we achieved in FY '19. Our EBITDA of $54.4 million was also slightly down on a like-for-like basis. The directors declared a final fully franked dividend and sustained our NPAT payout ratio of 30%. And we maintained the strength of our balance sheet, and our net cash position was up on FY '19. Operationally, there were also a number of significant highlights. We continued to strengthen our rental fleet with more sophisticated connected technologies. This delivered an 8% increase in the average monthly revenue per instrument from FY '19. We exercised our option to acquire Flexidrill and its COREVIBE and MAGHAMMER technologies. We advanced BLAST DOG for further extension into the larger and less cyclical mining market. We continued to streamline our operations and realize the benefits of our internal digital transformation program. We established an ESG committee to enhance our reporting and disclosure. We achieved the highly sought-after ISO 27001 certification, which is critical to the secure handling of data on behalf of resource companies. And our team successfully negotiated challenges related to COVID-19 in all the regions we operate. It is important to highlight that the majority of our mining regions have moved beyond the initial response phase and are moving to resumption of all mining activities where possible. An indicator of this resumption is the recovery of our rental tool fleet. As of 14 August, the number of instruments on rent had recovered to our pre-COVID peak. I will now hand over to Paul Evans to cover the financials in more detail.

Thank you, Paul. Looking at Slide 8 and our key metrics. You will note we have included a comparative column for FY '20 to highlight adjustments relating to the leasing accounting standard, AASB 16, which came into effect this reporting period. We achieved revenue of $237.7 million, which is a 2% decrease on the record achieved in FY '19. EBITDA was $54.4 million, excluding the $3.6 million gain from the sale of the Vaughn Energy Services investment and including the $6.4 million benefit from the new leasing standard. We recorded a net profit after tax of $21.8 million. Earnings per share was $0.0564, which compares to $0.0737 for the prior corresponding period. Our operating cash flow increased 31% on the prior year on a like-for-like basis. Net assets were $221.6 million as at 30 June, and net cash was $32.2 million, up 38% on FY '19. In line with our sustainable dividend policy, our directors declared a fully franked final dividend of $0.007 per share, taking the full year dividend to $0.017 per share. This equates to and maintains a dividend NPAT payout ratio of 30%. Moving now to Slide 9. Our strong growth to March 2020 was largely driven by increased delivery of our integrated technologies, which provides additional value to clients. As you can see from the graph, our positive trend of revenue growth was impacted by the sharp decline in 4Q '20 activity across mining regions globally due to COVID-19. The interruption to our business stabilized at the end of April 2020. And as Paul mentioned, we are seeing the resumption of all mining activities where possible. Approximately 34% of our FY '20 revenue was generated in Asia Pacific, 41% in the Americas and the balance in Africa and Europe. These revenue splits are broadly in line with recent years. Moving now to Slide 10 and our EBITDA performance. Our FY '20 result of $54.4 million was slightly down on FY '19 once adjusted for AASB 16. On a like-for-like basis, there was a decline of 9% from the impact of COVID-19 in 4Q '20, offset in part by savings introduced in response to the pandemic. Additional costs included increased engineering and product development expenditure in response to changing client needs and associated M&A expenses and cost to protect our IP. During the period, we continued to benefit from a growing percentage of revenue that yields higher gross margin and our digital transformation and supply chain initiatives. Slide 11 shows the reconciliation from our EBITDA result to the net cash flow from operations. From the EBITDA result of $54.4 million, there was a net inflow of operating cash of $52.4 million. On a like-for-like basis, this represents an uplift of 31% on the prior corresponding period. This uplift was achieved by a combination of strong EBITDA conversion and a release of working capital in 4Q '20. You will note our tax paid was higher than FY '19 with a greater offset from carryforward tax losses in that year. As business activity improves, we anticipate the working capital investment to normalize. Historically, we have achieved a working capital investment ratio of approximately $0.30 to $0.35 for every dollar of incremental revenue. Looking briefly now at our balance sheet as at 30 June 2020. Excluding AASB 16, the strong cash generation was reflected in our gross cash position, which was up 29.8% on the prior corresponding period. The 3 balances I'd like to call out for FY '20 include: fixed assets, which -- with an additional $36.5 million of leased assets; intangibles, which includes $25.5 million relating to Flexidrill IP; and the other liabilities and provisions, which includes lease liabilities of $41.5 million and deferred consideration for the purchase of Flexidrill of $14.7 million, which, as a reminder, is only paid out over time as sales of new products occur and MAGHAMMER technologies is commercialized. Importantly, we continue to invest in leading technologies to drive future growth. And as at 30 June 2020, our return on equity and return on capital employed were 10% and 12%, respectively. Maintaining a robust balance sheet remains a priority. We are comfortable with our net cash position, which allows us the flexibility to fund our future growth strategy. Before handing back to Paul, I would like to briefly review our recent ESG initiatives on Slide 13. As we mentioned previously, we are taking a step-wise approach to ensure consistent quality and relevant information is provided. During the year, we established an ESG committee, which is working towards a sustainability report in accordance with the Global Reporting Initiative within 3 years. This committee is responsible for identifying activities that enhance our reporting and disclosure and our ability to contribute to sustainability as a company and by supporting the sustainability of our clients' operations. We also undertook a climate change gap analysis based on recommendations by the Task Force on Climate-related Financial Disclosures. This analysis, together with a materiality study, will be used to establish our objectives for FY '21. You will note at the bottom of the slide the policies and documents supporting our ESG strategy available on our website. I will now hand over to Paul to cover our operations and strategy.

Thanks, Paul. Commencing on Slide 15 and a review of our market. Table shows the evolution of government-mandated restrictions in response to COVID-19 on the mining regions in which we operate. As you can see, restrictions in the majority of regions are easing. However, activity in South America remains restricted, and secondary outbreaks are resulting in renewed restrictions in places like New Zealand. Resource companies in all regions continue to place a high priority on resuming activity as soon as possible. Our regional teams are working closely with clients to ensure continuity of service. Turning now to Slide 17. Our fundamental strategy to deliver long-term sustainable growth remains unchanged. It includes growing our core business in exploration and development and further extension into the adjacent mining and production market, which is larger and less cyclical. To do this, we pursue technology-focused strategic acquisitions, maintain our technology leadership by ongoing and disciplined investment in R&D and collaborate with industry partners and research associations. These growth pathways enhance our suite of drilling optimization products, rock knowledge sensors and data and analytics solutions. This integrated suite will help enable us to realize growth opportunities within our core market and substantial growth opportunities within the mining and production market. Our record revenue performance to March was delivered by our existing portfolio of technologies in our core markets. This is represented by the bottom-left quadrant on the slide. The acquisition of AusSpec brings new technologies to our core markets, and there are opportunities to apply the AusSpec technology in the mining market, which is represented by the quadrants to the right. On Slide 18, I'd like to highlight several points in relation to our ongoing R&D for our core business. It is a continuous process, albeit a very disciplined one, and is the reason we have market-leading technologies and a presence in some form across 70% of mineral drilling projects globally. Connecting our technologies to IMDEXHUB-IQ is a priority. In addition to having 58 of our top 100 clients HUB-enabled, we expanded the number of sites within each client. Importantly, HUB engagement has increased by 70% of our top 100 clients and now utilizing 3 or more of our products. And finally, a reminder that connected clients continue to generate over 60% more revenue for IMDEX. This is achieved by pulling together an increasing number of products into comprehensive real-time solutions that provide additional value to clients. Like our core business, we have made good progress with our premium drilling optimization technologies throughout FY '20. Looking now to the progress on the right of Slide 19. Successful client trials with COREVIBE were undertaken throughout the 9 months to March 2020, which resulted in a number of tools on commercial rent. Following the impact of COVID-19, the majority of client trials were placed on hold due to limited access to sites for nonessential personnel. Interest in the technology remains high, and we are confident our full pipeline of trials will convert into active rentals as restrictions ease and trials recommence. Development of MAGHAMMER continued to progress well at our test site in New Zealand, and testing has now resumed following the COVID-19-related restrictions. Further XTRACTA trials are scheduled during the first quarter '21, beginning in North America. These trials are made possible by our boots on the ground around the world and our new online IMDEX Academy training capabilities. Moving now to our BLAST DOG for IMDEX mining technologies, which is the top-right quadrant of our strategy graphic. During 4Q '20, we secured access to 2 test benches in Queensland, which enabled us to continue development of BLAST DOG. Notably, we were able to accelerate progress with its autonomous operation mode and sensor refinement. During the balance of this year, we will continue to leverage our global presence and strong support for METS Ignited partners, Orica, Anglo American and Teck Resources, to advance our IMDEX mining technologies for further extension into this larger, less cyclical mining market. As a reminder, the total addressable market and the potential upside for our company and indeed the industry is substantial. Slide 21 summarizes the key benefits of our strategic acquisition of AusSpec. These benefits were detailed in our announcement on 7 July. I draw your attention to 4 key points. The AusSpec technology is on strategy and enhances our rock knowledge offering within -- with spectral mineralogy and AI technologies. Its SaaS platform aiSIRIS product is proven and is ready to be scaled by our global distribution network. This human-trained AI that underpins aiSIRIS has been built from a library of more than 2 million spectral images. And AusSpec has world-leading mineralogy expertise and well-established relationships with major resource companies around the world. That concludes our review of our operations, so I will finish with the outlook and summary, commencing on Slide 23. The fundamentals underpinning our business growth remain. Positive drivers include: the large and mid-cap resource companies are increasing their expenditure to replace diminishing reserves. Resource companies are embracing innovation and new technologies to lower costs, increase safety and achieve greater productivity. New discoveries continue to be likely to be [ found ] under cover and at depth, resulting in larger drilling campaigns. And strong commodity prices are being driven by demand across a broad range of sectors, including consumer, industrial and government-related industries. The recent strength in capital raisings ensures strong funding for the industry. We have had a positive start to FY '21. The recovery that commenced in May 2020 has continued and is reflected in our growing instrument fleet. As at 14 August, the fleet has recovered to our pre-COVID peak. Similarly, demand for our cloud-connected products has heightened to support remote operations and expedite drilling programs. Finally, I would like to leave you with a message that highlights how well positioned IMDEX is as a growth business. We have a resilient core business that generates sustainable recurring revenue and strong cash flow from operations. We are expanding market share and margins. This is driven by an unrivaled range of leading technologies and the benefits of being the first mover for cloud-enabled instruments. We have a strong financial position to support product and market extension. We have an established global footprint that helps commercialize technologies, and we have an experienced leadership team with a successful track record of developing and commercializing these technologies. That concludes the formal presentation. And I would like to hand over to the moderator for questions.

[Operator Instructions] The first question today comes from Michael Aspinall from Jefferies.

You mentioned that tools on rent as at 14th of August are up on the PCP. Are you able to give us a sense of what that looks like by region? I'm just trying to get a sense of if South America is still a drag on that number and if any other regions have also been slow to switch back on.

Michael, yes, you're quite right. We have had growth in our tool fleet in North America, in particular, and the Asia Pac region. So the South America region, which is continuing to be constrained by some of those COVID-19 restrictions, hasn't recovered to the same degree. And we expect that as those restrictions continue to ease, which is a bit more protracted, we would see the tool fleet continue to grow in that area.

Okay. Great. Can you give us any kind of sense of how much South America is back to pre-COVID levels? Is it 50% back? Or still less than that?

Probably a little less than that, but it's not a number we've called out specifically.

Okay. Great. That's useful. And you mentioned that average monthly rental rates are up 8% in FY '20. Do you have a sense of what that metric looked like pre-COVID? And then would a similar trend be present in August as well?

Yes. It's fairly -- the tool fleet moved up and down fairly -- so that 8% is a reflection of the change in our tool fleet mix. And so to the extent that COVID moved up and down, that ratio held -- that 8% improvement held fairly consistent before and after. So it's just a -- it's a reflection of the changing tool fleet in total.

Yes. And I think we've talked about this before, but the percentage of the fleet that are the new tools versus the older tools, that still has quite a bit of way to go, does it? Do you have a number of how much is the old tools versus the new tools?

Yes, it does. I don't have an exact number for you offhand. But yes, you're quite right, that's -- continuing part of our R&D work is to grow the amount of connected fleet or HUB-connected fleet.

Okay. You moved quickly to take out cost in response to COVID. Now that the market's recovered much faster than I would have expected, do you have to get back out there and rehire for roles in your organization?

I think the -- a number of the head count adjustments that we made as we came into 30 June, the majority of them will stay out. And partly -- that is partly due to the change in work practices that have come from adopting digital technologies, such as the remote customer care or online customer care and the online training solutions. So the whole business has trimmed up in response to COVID and taking advantage of that trend. There's a small number of roles that we would be looking to bring back in. However, we'd be adjusting the business internally and making sure that we bring the right capability in looking forward and how we see that demand changing in this sort of new, more online world.

Okay. So it sounds like a quite significant element of that cost out was structural rather than just responding to the cycle on the lower demand?

Yes. There was a good element of that, that's right.

Okay. Just last 2 quick ones from me. How would you describe what the competitive environment was like during the COVID disruption around the world?

So the -- we've always called out the competitive environment as being high on individual products and in individual markets around the world. That remained the case throughout the COVID period. We did -- by virtue of our global footprint and where we happen to have people in most major mining regions, number one, and because of our online digital presence, number two, we were able to win some market share away from competitors during that time, which is why I think our overall recovery rate is faster than what you would see in the general mining market.

Great. And the last one for me. On the engineering and product development costs now running at $18 million, is that the full run rate that we should expect there for at least in the near term? And can you just talk to what that investment is going to deliver?

Yes is the answer to that. We will -- in terms of meeting the demands, as we've gone through COVID and the changing request from clients, that's where that additional spend has come from. And we would expect that to be similar for '21.

And just then to what that investment is going to deliver for both yourselves and your customers?

Yes, sure. It's -- now I think when you look at the strategy and where we're -- what we're talking about there in terms of those additional HUB-connected elements in order to get real-time data to clients, it is building that suite of products out to do that.

The next question comes from Ben Brownette from CLSA.

Just, Paul Evans, on the depreciation. What went on there in the second half? Is that some sort of abnormality? Or is that the sort of run rate going forward?

Look, that is -- so the -- I suppose the additions profile is why we saw that increase from first half to second half in underlying core depreciation. Within the D&A number for the full year is the lease amortization, which is about $5.6 million. And also, you've got the new amortization coming through of -- associated with the Flexidrill IP and amortizing that over a 10-year profile and, obviously, half of that in for this FY '20, which was about $1.4 million in the FY '20 year, $2.7 million as an annualized number going forward.

So is it $2.7 million in amortization for Flexidrill going forward?

Correct.

And sorry, can you just explain again, not the lease impact, the -- just the underlying increase in depreciation in first half on second half?

Yes. So we had -- full year additions were $23.2 million. It's just over $11 million per half or thereabouts. And with that profile coming through and depreciating broadly over 3 years is what's given rise to that step-up between first half, second half.

Okay. And then the inventory build in the second half?

Yes. Look, we called out before that we did build the inventory initially when we went into the COVID period in response to clients. And we have -- and that was a combination of what it occurred up to March 2020 as we saw those first 3 strong quarters. We have run down that extra inventory that we put on initially with COVID introduction. But as an overall comment, with activity resuming, we are -- we had that additional inventory in the business to support the clients going forward.

Okay. And then one more for you. Will you have to pay the payables down a little bit? And then with respect to -- with your comment before on working capital build as the business grows. Are you expecting the working capital will build a little bit more in '21, reversing out some of what you just did?

Yes. Look, it's a good point. I'm pleased you called that out because I would like to highlight that. Obviously, the -- most of that release has come through, obviously, through the debtor profile. And at June '20, as we saw that tail off from April, our debtor balance is slightly lower at this point. And as we see that return of business in '21, I do expect to see that release that we saw in '20 be taken up again in '21 as business gets back to normal levels. And my comments around the trend of $0.30 to $0.35 is as we get back to that normalized state, and we see that steady growth, I'd expect to see that investment ratio return.

Yes. Okay. Great. On the segments, the U.S. looks like it did a second half EBIT loss. Can you talk about North America versus South America? And exactly sort of what drove that loss? And then with the loss, you still managed to maintain gross margin. So can you talk about both of those dynamics?

Yes, sure. And we really need to go back [ most shortly ] to -- as we entered FY '20, we were gearing up for the Nevada joint venture. And that work -- as the merger occurred or as that arrangement went into play, that business largely went on hold [ so ] Barrick and Newmont, it really -- we did not see any material volumes in FY '20, but we had geared up for that. As COVID then hit, we -- that was further impacted. And then we are seeing that starting to return now as we look to the U.S. market. So they were carrying additional costs for that additional business, which we're only now just starting to see.

Okay. And on the GPM, I mean, I know that you've always said you expect that you could maintain that. Was there anything special that you're doing to maintain that? And obviously, with ARPU increasing, do you still expect that to be increasing over time?

Yes. So with the gross margin, the -- that product mix that Paul called out earlier, as we bring the newer technologies into the fleet, we do expect to see a continuing trend of a stronger gross margin coming through that rental business. Does that answer the question?

Yes. Yes. No, that's right. And Paul House, are we cycling August -- is August cycling the downtime in North America with respect to Nevada? And is that sort of giving you a little bit of a better uptick on the tools month -- year-on-year? Or are you saying that the tools are higher -- is higher in general, and we should expect to see that kind of growth going forward, [ et cetera, as probable ]?

Look, within the U.S. -- within the North American market, that recovery or that growth that I called out earlier is more weighted towards Canada. The U.S.A. market is coming back online, not at the same pace as Canada, but it is growing, and we think there is still some room for growth in that particular market. There's a number of areas that are still under -- so Arizona, for example, is quite tight. Nevada is coming back fairly strongly, but still has some room to grow. And if you might remember, the contrast last year is that with the Nevada Gold JV, that Nevada region closed up pretty tight in July. So you will see some contrast this year over last year.

[Operator Instructions] The next question comes from Josh Kannourakis from UBS.

Can you hear me okay?

Yes, we can, Josh.

Great. Just a couple of things. A few of the questions have already been asked. But just on the operating cost base, can you just run us through a little bit about some of the cost savings you had in the fourth quarter? And just in terms of how many of them you think you'll be able to hold into FY '21? I know you made the point around some of the structural head count, but also just in terms of, obviously, STIs and things like that, not getting paid. Just want to get a bit of an idea of how we should be looking at the cost base for this business into FY '21.

So all right, Josh, so the -- I could probably look at the costs in about 4 buckets. So the structural head count, we've talked about. The pay rate, you might recall in previous updates. In the fourth quarter, the majority of our regions around the world from the Board right through to the frontline took a salary reduction of 20% in order to steer us through that fourth quarter. As we've gone into Q1 FY '21, we've brought the majority of our workforce back to 1.0 from 0.8 in response to the growing demand and recognizing the importance of that network in our business. So there's been a short-term saving that -- for that cost comes back in FY '21, save for the structural adjustments we've made. The other 2 areas I'd call out would be, obviously, travel and so on fell away fairly substantially. The ability or the need to replace that has been diminished by the adoption of some of the online training structure that we've put in place. And the ability to do the online customer care as well, both of which were initiatives that we had, which have been rapidly accelerated by what we estimate is about 2 years in terms of adoption rate because we haven't been able to travel, and we've had to provide service on site. So I don't expect to see that travel cost for care, that travel cost for training to come back in the way it was before COVID. And finally, we continue on our digital transformation match-fit supply chain initiatives. That's an ongoing discipline inside the business that continues to -- we look for opportunities to streamline that cost base on a look-forward basis.

Got it. And just in terms of -- so when we go back to the head count, if you do think about a significant recovery in exploration over the next 12 to 24 months, how much more does the cost base have to move upwards to be able to facilitate that? Or do you think from sort of the first quarter of '21, you're pretty comfortable on that expectation not having to waver?

Right. So for the majority of our core business, we can absorb -- we get a fair bit of leverage out of our core business into core markets as that exploration market grows. As we continue to push into new areas, there is a capability -- there's a slight capability shift, so we'll be looking to bring people in, in that mining and production space. But that will be in line with those technologies being commercialized into that space.

Okay. I understand. And just following on, and I came onto the call a little bit later, apologies if it's been answered. But just in terms of the second half, maybe one for Paul Evans, is the second half '20 depreciation, amortization figure. So I just came in, in the back of that. So the expectation is that we can keep that and sort of grow off that base into '21 and beyond? Or were there any other adjustments that we need to take into account moving forward?

Yes. For the core depreciation number, that run rate is -- will continue into '21, around that $20 million, [ which I'll use ] as a number going forward. The lease amortization will be similar to FY '20. It's really the Flexidrill IP amortization which -- with only half a year's amortization charge in there currently. And for the full year, that will increase from the $1.4 million that we've got in FY '20 to an annualized rate of $2.7 million for FY '21 and going forward.

Okay. Understand. And then just maybe in terms of, I guess, on that gross margin mix as well and obviously, a good margin at the moment. As that sort of recovery comes through, have you got an expectation on what gross margins look like into first half '21 and beyond in terms of that -- as that mix continues to improve?

Yes. Look, I think from a forecasting point of view, I think we'd see that margin being maintained. And so I think as a -- that you can comfortably do that.

[Operator Instructions] The next question comes from Hamish Murray from Bell Potter Securities.

Just a quick one from -- or quick 2 from me. But the first one might be a misunderstanding on my behalf. But in the result, you guys talk about tools on rent being up in August versus PCP as at the 14th, which is a great result. And then I think Paul House called out that the fleet had recovered to pre-COVID peaks. Just interested to know how those 2 reconcile. Because by memory, I think the pre-COVID peak was in the March quarter somewhere. Yes, could you just talk me through that because I think I've misunderstood those 2 things?

No, you're quite right, Hamish. We did call out that we had surpassed the PCP, and we have surpassed or recovered to our pre-COVID peak. And so the pre-COVID peak was already up on our high from FY '19. So both of those statements are true.

And so that means that, I mean just thinking about this in terms of where we're at right now, the tools on rent have gone past the peak -- pre-COVID peak, and that's despite the headwinds that are still in the South American business, but recovering. So that would be upside?

Yes, that's right. So we're right back at about that pre-COVID peak right now. So we recovered to the pre-COVID peak is, I think, the language we used. And I think that's the call out I used between the accelerated recovery I think that we're seeing in North America and particularly Canada is balancing out the slower resumption coming out of South America.

And maybe one just quick for Paul Evans. The allowance for doubtful debt, so I just noticed that jumped a little bit in FY '20. Just wondering whether you could comment on maybe how that's looked in the first couple of months as things have gone a little bit better in the world the first couple of months of FY '21?

Yes. No, sure. Look, I think we've obviously been working hard on managing that collection profile. And it's fair to say that we were taking a slightly more conservative view at 30 June given the COVID environment we've got, and therefore, have taken up further provisioning in that area.

The next question is a follow-up from Ben Brownette from CLSA.

I understand if you're not going to give the answer, but I'll ask. In terms of the first half '21 revenue, from what you're saying, it should be materially better than second half '20 and maybe not quite as good as first half '20, but somewhere in between that or towards one end or the other? Is there any kind of indication you can give us?

Yes. Ben, we're -- I think what we've called out previously is that we were looking for H1 '21 to be a reverse mirror of H2 '20. We are seeing -- and there was quite a steep drop-off in April, and so tracking back out of that -- remember, it isn't just a tools business. The fluids business plays into that mix as well. And so we're still looking for that longer tail probably out through the balance of H1 as the total business recovers and the exposure that we have in the fluids business in South America and Nevada and the like still has to come through into those numbers.

Right. So like flat outcome sounds reasonable for '21 at this point in time...

Yes. Again, so I think there's some risk to the -- there's some definitely upside potential for all the reasons we've talked about earlier. We're obviously just -- the demand on the resource company side is high and supported by commodity prices and all the feedback we get from our clients. The risk is that available rigs, available labor and secondary interruptions impact that -- the ability to deliver that. So we have had, for example, a few client sites that have started to resume, but then they've gone back into shutdown again, either because they've had restrictions imposed on them such as in New Zealand or Victoria, secondary restrictions, or they've had little epicenter outbreaks themselves at a particular site. So whilst we see that upside potential is very real for all the underlying fundamentals that are there, we will be looking at it on a case-by-case basis around the world.

At this time, we're showing no further questions. I'll hand the conference back to Mr. House for closing remarks.

Thank you. In closing, I would simply comment on 3 things. Firstly, we're pleased with the FY '20 results, both the strong performance over the first 9 months and how we navigated the COVID-19 response as a team and as a business both. We stand ready to respond to any further COVID-19-related interruptions. Secondly, the business itself is firmly in growth mode. Our growth strategy itself is intact, and demand for our technologies is increasing as evidenced by our comments on the recovery of the tool fleet. Thirdly, the market outlook is positive. Commodity prices, capital raisings and the underlying fundamentals of mining are strong. Mining activity is resuming wherever possible around the globe, and demand for innovative technologies, such as ours, is in growth mode. In conclusion, IMDEX has a resilient core business with strong prospects for sustainable growth. I'd like to thank you all for joining us today.