Master Drilling Group Limited (MDI) Earnings Call Transcript & Summary

Good morning to all our viewers and listeners. Am I right in saying it's the ninth presentation, half year presentation. And as usual, I will be giving you a high-level rundown on the strategy of the business. And then leave to Koos to give us a presentation or slide show on the technology of the business and the progress made on that space. And then Roelof will do the operations. Once Koos is done, then André, he will fill us in on the financials for the period under review. At the end of André's presentation, I'll give you a high-level -- just a high-level rundown on what I believe is important to share. And then for a Q&A, André, if I'm right? And just a few I'd like to share with you. I think top-of-mind should always be safety. The safety performance of the period under review with some improvement on the previous period. But given the COVID and the mental impact of COVID the last 18 months as well as the 700-odd employees that we employed in the business the last, last year, I think a good performance. So overall, on the safety side -- and Roelof will shed some more light on this in a later slide, I think the company, the [ pressure we're on ] given the circumstances. Revenue, I think all-time high for the first half. The back end of the year is normally better. But I think if you compare the '19 with some of the previous years, we've got a good run. The period under review certainly, certainly one of the better first halfs that we experienced. ROCE targets, our long awaiting target that we will really be battling to meet again. I think we've -- I believe I'm right in saying in '18 -- '17, '18, we've hit a 17% [indiscernible] So again, André will shed some more light on that later on. Then the confirmation of the MTB, and Koos will share with you the detail later on. Especially the capital that we've burnt in this project is something that we're really [ thought ] about. So we'll focus to shed some more light on that. Pipeline, we've never seen a record or a pipeline to the extent of $600 million and north of that, certainly something on the back of the commodity prices that we should be benefiting from. Utilization, both as a function of the capital -- weighted capital as well as the number of machines also nicely up. And again, Roelof will shed some light on that later on. Just on the business, maybe a step back for some of you who's not following the company for some years. The 4 main income streams in the business, the one being the traditional raise boring which we've been doing since 1986. The second one is the exploration business, geotechnical business that we've been doing. And then the one third is what Koos is keeping himself busy with, the [ technology ] view with the issues in the mining space with more focus on technology, especially the MTB and the [ shallow ] boring. And then the fourth one is what Roelof will explain later on. This is what we invested in [indiscernible], which is the 4 pillars of the business which you look at, the people, optimization, technology and sustainable growth support the so-called investments that we've made on a higher level. If we talk about the people, I think a couple of things are important. One of our top risk in the business is still people and for a number of reasons. You must appreciate that dealing in 23 or 26 countries today, covering just about all nationalities, this comes really in tall order, to align all those people with the company's culture and to make sure that they live the values, which we'll see on the left-hand side of the presentation, really, really something that keeps us busy. Apart from that, we've got some initiatives, and I'm happy to take some questions later on, on that. We've shared with you on the last presentation in March, I think, what we're busy with to try and deal with our people in the business. The one fit for purpose and alike, but happy again to take some more questions on that. On the optimization of profitability, I think the important part here to mention is certainly, I would say, a shift in focus and maybe the way we approach these larger contracts. We, in the past, have shied away from these bigger contracts. And in the past, we're happy to be the subcontractor or take a back seat when it comes to these big contracts for the reason, [ simple risk ]. And I think where we are today in the last 18 months last year, we reviewed or revisited the approach. And again, we will explain a bit later on the JV that we formed in Chile with Besalco. And [indiscernible] on some other larger projects to take the lead on these projects. So again, a shift in focus in the strategy. And I like to see more of these contracts, larger contracts be part of our order book business going forward. Technology. Again, I'm not going to go into the detail here. I think Koos got a comprehensive slide dealing with technology. But I think the one to single out is most certainly the award of that MTB contract at Mogalakwena. We've spent a lot of time, personally spending a lot of time and energy in this space and really something which I believe can change the industry going forward. On the sustainable growth side, the DNA of this company has always been to diversify, right or wrong, from the onset, we diversified the business. Again, operating today in 23, 26 countries. We've added on some services and the key to the success of this business, I believe. On that, if we look at the M&A in the last couple of years, I think, André, you will probably explain a bit more in the M&A space. And maybe the [ approach ] to M&A is in the way we deal with M&As and the rationale behind that. So the company is still committed to grow and -- given the capital available, obviously, to grow. So this is my part. Koos, if you can maybe take us through the technology and the overview, please.

Thank you, Danie. Good morning. It is with great excitement that we would like to take you through a technology update in our company. It's important for us to understand how the world is changing and how that would influence the value that will be generated by the technology that we'll be using in the future. We witnessed trends in the industry, decline access tunnels. We're busy with the onboarding for a project for Mogalakwena with Anglo American. And we will start decline excavations towards the end of the year. We are providing a turnkey operation with capabilities in terms of construction, logistics, projects management, in addition to just the normal excavation service. It's important for us to implement this project successfully. And we can already see the benefits of utilizing 2 of these machines to do a twin decline access to an ore body. And we want to resource ourselves in terms of technical and operational skills so that we can support this business in the future. It's very important for us to understand that we're competitive in relation to historical conventional costing models and also relevant in considering technology advances for the future. On shaft sinking diversification, our first shaft boring system capable of doing 4.5-meter diameter shaft, 1,500 meters deep in hard rock. We've received shareholder funding approval between ourselves and the IDC. We're busy with the design. The manufacturing is underway. We also received a letter of intent from a perspective South African project. We're busy engaging with this client in preparation for the project as well as converting this letter of intent to a letter of award. Then we've been approached by mining companies to develop nonexplosive mining capability. We do this in a phased approach. We do it in partnership with the mining companies. And it's very important to understand that different ore bodies dictate different mining systems and that we develop our expertise and knowledge in line with this. We're currently doing 2 projects where we've done conceptual study work. We're currently doing experimental work to validate concepts that will be used in the development of these services. We've also received indicative commitment for 2 more projects. And you might ask why nonexplosive mining? What is the advantage of this service or this thinking of technology? It's around consolidating your mining activities and concentrating it. It's around a continuous process, and it's around removing people from a potentially hazardous environment. We also take notice of international opportunities, and it's important for us to develop our capabilities to offer this as a specialized service to the mining industry. On technology optimization of our raise boring and exploration drilling divisions, we've manufactured RD6. You'll see a video with RD6 on the right. And this raise boring rig have been successfully implemented in Chile over the last 6 months. We're busy with the manufacturing of the second unit. We've expanded our directional drilling capability. We have 2 more systems where we will have a capability of not only steering to verticality of shafts, but to an absolute drill path that will enable us to guarantee shaft accuracy and also construct inclined infrastructure to a tight tolerance. We continue to expand our remote operation in semiautonomous control. We have manufactured a training simulator that we're busy commissioning. And we have an interest to develop a mobile small-to-medium raise boring system. On the exploration drilling, we're working with a leading OEM that will enable us to provide a new generation core drilling rig to the market. We're also expanding our capability in wire line logging for geophysics and geological logging that provides objective and accurate information compared to conventional or historic methods being used. And that information could be more readily available for use compared to the time it would have taken to provide this information from conventional methods. That being said, I'd like to hand over to Roelof. He will take you through our digitized technology diversification update. Thank you very much.

Thank you, Chris, and morning to everyone. To finish off the technology section today, I would like to share with you and give you an update on our progress with digitalization within the group. First of all, the last couple of years, we invested a lot of time and money and resources into our machines, making our machines much more intelligent. And using that data that the machine just generated -- is generating to drive better decision-making. So that is really having a look at the brain of the machine, understanding that better and using this data to start making some very nice predictions on machine performance going into the future. And that's definitely an area that we will continue to look into and invest into the future. A little bit more about the traditional raise bore business, digitalization in that area. Over the last couple of years, we spent a lot of time and resources to better understand the businesses that we operated globally. This means getting better data from our operations, supply chain, finance and HR and actually integrating that at a group level and start making predictions. And this is a really exciting area. And we look forward to the progress that we can report on back into the future. Then talking about some of the acquisitions that we've made during the last few months, first of all, AVA Solutions. We've concluded this transaction in the first half of the year. Since our investment into AVA Solutions, this business expanded. It's reached globally into a number of new countries. Some of these countries are Brazil, Peru, the DRC, Indonesia and Malaysia. And this company is on a very exciting growth path in the next 2 to 3 years. Then about the capital that was invested into AVA, this capital will be used to further grow the reach of the AVA Solutions business and further develop their platform capabilities, not just focusing on load and haul, but expanding that to other services within fleet the management range, which includes logistics. A few weeks ago, we've announced our acquisition into A&R Group. This is a 25% initial stake investment. A&R Group has been the leader in the market on proximity detection, collision avoidance, [ land ] management in South Africa now for a number of years now, providing this service and technology to most of the Tier 1 miners in South Africa and some parts of Africa. Today, A&R Group is tracking more than 250,000 devices on mines, underground and on surface in South Africa. These devices are being worn by people, equipment and various assets on mining operations. This data being generated by the 250,000 devices is very, very powerful. And this data can be used to influence safety behavior and ultimately increase operational efficiencies on mining sites across South Africa. Briefly on some of the new projects. [ Very excited ] project that A&R is busy deploying in Central America, and that is in Mexico. This project will be completed in the next 2, 3 -- 2 to 3 months. And we look forward of that project being the flagship project within the region. And then if we move on to the operational review. So today, in our operational review, I would like to start and say thank you to all the employees that gave us their commitment and support during the year. If it wasn't for the employees of this business and some of the sacrifices that they've made last year during COVID, it wouldn't have been possible here to stand today and give you these good results and present to you these good results for the first half of 2021. In our operational review today, we will have a look at a few aspects. We'll first start with our people and safety. We've seen a slight increase in our safety performance compared to 2020, and we'll talk a little bit about that. Next, we'll have a look at our utilization, which is significantly up. We'll also look at different-sized machines and their contribution to ARPOR and to utilization and provide you some more insights into that information. Then we'll cover our regional review, always a very important section to cover. And I think the highlights on the regional review today will be the turnaround of the South American business, that region returning to profitability again and a good performance coming from them for the first half of this year. And then lastly, we'll stand still at the order book, which is standing very strong in this moment. And then as Danie mentioned earlier, we're sitting with an exceptional and record pipeline. So I'll share with you some interesting insights in terms of that. So let's get going with our people and safety. As Danie mentioned earlier, we've employed a number of new employees into the Master Drilling Group. Our workforce is now standing at 2,000 employees. This is just basically a function of the market activity and an increase in utilization and the demand for our equipment globally. Then our LTIFR rate, this is the lost-time injury frequency rate. That is slightly down for the first half of the year to 1.08. And we're looking forward to more improvement in this LTIFR rate in the years to come. Then maybe just briefly on our commitment to safety. Master Drilling still believes in zero harm, and we live by that principle. And we will continue to invest in our machine and man interactions, safety leadership and, ultimately, our machine automization and remote drilling. And that will improve the safety of our employees significantly, especially employees working underground in very harsh conditions. Then briefly on our COVID vaccinations. Vaccinations are making steady progress throughout the group. We're happy to report like in some regions like Chile, all of our employees is vaccinated today. Then moving on to our revenue diversification, I'm talking about the different regions. The revenue for the first 6 months is sitting at $72 million, which is 25% up compared to H1 2020. This 25% was mainly driven by around 8%, 9%, which is as a result of the exchange rate, a stronger dollar -- or weaker dollar giving us that slight uptick. And the rest of the increase is really being driven by higher utilization rates across the group and ultimately, very strong ARPORs. That's the average revenue per month coming from our bigger rigs in the fleet that we will unpack a little bit later. Let's start with Central and North America. Gary and his team up in Central and North America did an excellent job to secure additional work for our -- one of our XX (sic) [ XXL ] machines up in Raglan Glencore. The region, although they have slightly contributed less to revenue for the first half of 2021, which is 14% compared to 17%, they are showing a healthy operating margin, which is up from the last reporting period, up to 12% now. Briefly on our flagship project in the region. That's the [indiscernible] contract up in [indiscernible] We can report back that this project is on track and performing very well. Briefly on Mexico. Mexico have seen strong bounce backs in the utilization rates, a lot of machines more allocated and we've mobilized additional machines to the region. And this is just higher demand coming from the market. And I think the higher silver price in that region is definitely helping us a lot. Moving on to South America. Very strong performance coming from South America, and this is something which I'm personally really proud of, bouncing back from a contribution last year the same period from 19% to a 26% contribution in revenue. And then I think more importantly, for the first half last year, this region was basically in a loss-making position. I think it was like an 18% negative operating profit for the region and now sitting at a 13% operating profit margin. So well done to those management teams turning around that region. Then on Peru. We've always, in these presentations, touched on Peru. About 2 years ago, we basically put this business in intensive care. We can report back now that most of those interventions were successful. And for the first half of this year, Peru have really given us good results. And this is probably the best results we've seen from Peru in the last 2 to 3 years. So well done on that management team there. On the Chile business, as Danie mentioned earlier, we've entered into a joint venture with Besalco Construction, a very reputable construction company within Chile. And in March this year, February this year, we've been awarded a significant contract at Codelco in one of the operations in the Northern part of Chile in Chuquicamata. Yes, so that project has started, and we're really looking forward for that to pick up steam in the second half of the year. Yes. And then on our Besalco joint venture, we look forward to a lot more projects into the future, and hopefully, a lot of opportunities to come -- will come from that venture. Then on the region, I think it's just important to mention, although we've seen this uptick in market activity, it's important to note that there's still some geopolitical uncertainty in the region and that will remain. And we will definitely see how that plays out in the next year in Chile and within Peru. Then moving on to Africa. Africa, once again, the top revenue contributor for the group, sitting at 59% for the first half of the year, up from 38% last year and a very, very healthy operating margin of 31%, which is testament to those operating teams in the area and the involvement of management there. I can report back that the operations in West Africa is doing good, the support base that was established there is to support the operations in, whether it's Obuasi or Subika are performing well. Africa footprint have been extended to the east side of Africa as well with some new contracts in that region. And we can report that we've been awarded to work in Zimbabwe, in Zimplats. And we're looking forward to completing a number of ventilation raises for them. It's worth mentioning the DRC as well. The DRC has always served us very, very well. And our machine that have been mobilized to Ivanhoe is performing well, and we look forward to more work coming from the DRC in the future. As we reported in March, we've started the [ drilling ] process with the Zondereinde flagship project here in South Africa. Once again, this is a 1452-meter shaft that we're excavating. This is a record-breaking hole and a groundbreaking hole. So we look forward to the completion of the shaft to come in May next year, May 2020 -- 2022. Briefly on the other regions. Important to note, our Scandinavian business, Bergteamet had a slow start to 2021. We expect that to tick up a little bit better for the second half of the year. India, as always, strong performance coming from India. We've mobilized additional machines to that region as well in the first half of the year. Talking about Russia. Russia, a very exciting region for us. And the last couple of months, we've basically mobilized the additional machine to that region as well. Australia, our expansion plans is in progress, and there are some promising opportunities laying in Australia for us. Talking about mining activity, revenue diversification. Not a big move here. Briefly on this. We've seen an increase in our production exposure. This is just due to miners increasing their production due to high commodity prices, hence, more production drilling coming in that phase. Commodity diversification by revenue. This is something we look at very, very closely. Our biggest exposure is basically sitting in gold, copper and polymetallics. Briefly talking about the movements that you see there. First of all, copper. Copper is slightly down. That is just due to Chile with a bit of a slow start in the beginning of the year and the way that we account for our joint venture that we have in Chile. Gold, basically stable across the board, and that's predominantly coming from our Africa operations. Polymetallics, a steady uptick in the last few reporting periods. That is just a function of Peru getting back online again. And then lastly to mention is basically platinum jumping to 6%, and that's a function of the increased activity in South Africa in the platinum space. And potentially, that will increase in the future if you look at our order book. Then if we move on to our ARPOR summary and utilization summary. This is always a very important slide to look at, and I will spend a little bit of time here. We've also presented some additional information here to help you understand the utilization and ARPOR rates better for the different classes of machines. So first of all, our utilization increased from 60% in 2020 to 69% for the first half of this year. We added 3 additional machines. Two of those machines were bigger machines, and they were directly deployed to projects in the group. Then in terms of the new split that you can see on the screen, we basically divided our fleet into raise bore machines higher or bigger than large raise bore machines and raise bore machines smaller than large raise bore machines. And this tells a very interesting story. So first of all, let's look at the bigger end of the machines. The utilization is up from 69% last year to 78% this year, which is very good, and that's very close to our target utilization rates for those machines, which is -- it's always important to mention that in an up cycle like this, most of these bigger machines get allocated to long-term contracts. So we expect the utilization rate to be very steady and high for the coming periods. Talking about the ARPOR, and that is really something positive, sitting at $135,000, which is the highest it has been in the last 2, 3 years. And yes, that's really just a testament to the possible return that these big machines can actually deliver on projects. Then looking at the smaller machines. So these are machines smaller than large raise bore machines, utilization up from 45% to 55%, which is a good jump. But the disappointing part really is ARPOR. We really want to get the ARPOR of these machines north of $80,000. So a little bit disappointing there and a lot of work to go into these smaller type of machines. Just maybe to put this into context, and this is very important to understand, where is the capital of the of the business really sitting? So if you look at the raise boring capital that has been deployed in the business, about 80% of the capital is really sitting in these larger machines. These are machines bigger than large raise boring machines, that first category there; and about 20% is sitting at the bottom part, which is the smaller type of raise boring machines. Just to put it into perspective how the balance sheet fits in here. Briefly on our slim drilling machines, utilization up from 48% to 60%, which is a nice increase. But ARPOR still around $30,000, which is below the target. I think for some of the movements in South Africa, the first part of the year with COVID and then some heavy rains in certain areas like the Rustenburg and Limpopo area that didn't help the production. So definitely increase required there. And then talking about the pipeline, and this is a record pipeline for us sitting at $602 million. The [ highest ] that's ever been. It basically doubled in the last 6 months. So yes, so there's a lot of activity in the market. And I think a lot of potential projects for us to execute into the future. Let's just quickly share with you some important things here. First of all is our committed orders that is sitting at $232 million. That is also very, very high. And on the next slide, we'll actually unpack that for you and talk to how that actually moved the last couple of months and reporting periods. Another important item to note here is the $92 million, which is still sitting to be executed this year. Usually, a small part of that gets carried over to the next year. But looking at that number, I believe we will have a very busy second half and very busy next few months ahead of ourselves. Then talking about the order book and the comparison of that over the last 12 months. This is the first time that we're sharing this information. So our order book was basically sitting at $145,000 in June last year, which was good. We've seen a number of new orders being awarded to us, about $231 million of work being awarded to us the last 12 months. We've executed around $72 million of it for the first half of the year. And now at June, our order book is sitting at $232 million, which is very healthy and good for the business. Then briefly on our awarded work and exposure of that, always something interesting to look at and something we monitor carefully. The highlight here for us is platinum leading the pack there, and that's really on the back of the RD8 project in Zondereinde and some additional work coming from that. And then finally, Koos and his team being awarded that MTB contract, which is something with the business he's really, really proud of. In conclusion from my side, I really believe that we have a very promising pipeline in the years ahead and strong order book. And I think the ball is in the operational team's court to make sure that execute we profitably on the work that have been allocated to us. Thank you very much. I'll hand it over to André for the numbers.

Thank you. Thank you, Roelof. Yes. So welcome to everybody. It's been interesting 6 months for us. Obviously, it's still tough environment given COVID and the challenges of doing business and for the clients also. But it's sometimes nice to have a bit of a low base to get improvements on the numbers that we've seen. You also noticed in our results that's been published, we also included the 2019 number just for ease of comparison to show pre-COVID numbers, post-COVID numbers. So the numbers here, the highlights for the year, that's basically compared to 2020. So as Roelof mentioned, revenue was up by 25%, which was very good. The HEPS and the HEPS numbers are very nice. But even if you compare that to 2019 numbers, it's more than 10% up in 2019 numbers. So we quite chuffed about the performance in the half year. Pipeline, Roelof spoke about it. That shows some -- and maybe the correction of the market, a lot of demand for the services [ might as well ] jump in now with the commodities prices picking up. So we're going to have a busy next couple of years ahead if we get awarded a number of those projects. And then just on a healthy cash balance, I think a lot of work has been done in the last 6 months -- actually, the last 18 months of working on improving the cash generation, getting gearing levels down, working on the working capital. So I think that, that has been a very nice positive for this period as well. If we look at the midline earnings in rand and in dollars, you'll note the nice increase in the half year. It's been a bit of a strange half year with stronger emerging currencies. So the HEPS in dollar terms are not as good as the HEPS in rand terms, the movement. But still, that's been our business, diversifying into commodities and currencies. So you always have a bit of a hedge here with a lot of our revenue in dollar terms. Sometimes it works in your favor, sometimes not. But given the 10-year history, the benefit is clear that being a dollar-based business has its benefits. If we go to the EBITDA numbers, I'm glad to note that our EBITDA margin has increased about 5% from previous year, up to 22.7%. Still a bit down from the numbers we'd like to be. I think we communicated before that we'd like to be at 25% margin on EBITDA. But that is the environment we're in. It's logistics, it's quite costly at the moment to move equipment around, moving people around, so that had quite a bit of an impact on the EBITDA. But the EBITDA, nice, up to $11 million (sic) [ $17 million ] for half year and on the revenue of $72 million for this half year. If we look at the profit after tax, we've been -- we had a small benefit on taxation, increasing our profit after-tax margin to just over 12%. We had some tax assets that we raised with Peru becoming profitable again. So we were able to raise a bit of the tax asset there, so reducing the tax rate for the group. If we look at the balance sheet, just a couple of things. I think it's a very healthy position we're in. I think the benefit of working hard on the balance sheet the last 2, 3 years, it's evident here. Gearing ratio very low, down to 9% gearing. You'll see a lot of our debt move to current liabilities with our ABSA facility that we need to settle June next year. So moving to current, but still in a very good position. We are in discussions with ABSA to -- with renewal of facilities. Also on the gearing, we are taking conservative view. We never want to go above 30%, but we're very low at 9% as mentioned before. But maybe hovering around 20% is a good number for our business that we feel comfortable on. On the movement in the noncurrent assets, not a lot of investment done this half year on new capital, mostly on replacement capital. And some of the projects that Chris is working on, some capital spend on that side. If we move to the income statement, which I mentioned, the 3 columns, just for comparison. Gross profit margin, roughly 30%, which is a bit down from where we would like to be. But it's, I think, positive where we are with a lot of moving parts at the moment, a lot of new projects starting out, some initial expenses to get the projects up. So I think it was a good performance. And looking at the ARPORs and like Roelof mentioned, the ARPORs in the utilization and the order book where we are for second half of the year, so good position for full year numbers. I think operating expenses, we see the benefit here of the savings that we did in 2020, although we obviously had to employ again more people with the ramp-up. But I think there's been a structural cut in costs there, which assisted the group in being more profitable. Finance charges, nicely down from where we were, and that's with the reducing facility and lower interest rates at the moment. And visible there is a lower tax number there, giving us a 12% profit after tax percentage. If we look at the impact on the currency, as mentioned, it's been a bit of a funny 6 months with strong emerging currencies. So the benefit this time around has not been so good, only $300,000 benefit on the numbers due to the mix in revenue and costs not in the same currency. You'll note that 52% of our revenue is in U.S. dollars and 48% in emerging currencies, but only 35% of our costs are dollar-based. The rest, emerging currencies. If we look at the cash flow, this has been very positive. On the cash from operations, again, $11 million generated for the 6 months. So consistent with previous year, every year, we're generating a lot of cash out of our operations. And on the investing, 5 -- there were $5 million in CapEx and a small amount paid pre half year for the acquisitions of AVA. Then on the financing activities, a repayment of about $7 million on our debt, giving us a net movement of negative $1.3 million for the year. If we look at the revenue waterfall, I think it's mostly covered Roelof through the presentation with the movement of ForEx and the fleet mix, giving us the $8 million benefit there of the bigger machines being operational. And on the fleet expansion, not a big benefit yet for the 6 months with the 2 machines, big machines added only operating for 1, 2 months. So in the second half, one will see a benefit from there. And then on the working capital breakdown, I think we see the benefit here of our hard work. Our working capital days, down to 112 days. It's nearly a 30% improvement from half year last year. On the inventory side, not a lot that we can do with reducing that. But we're doing a lot of moving of inventory between countries and not so much procuring outside. Then on the trade receivables, although the number is up a bit with the increased revenue generated, the up cycle, obviously, the trade receivables will increase a bit. But I think we did well. Especially if you look at the aging of the debtors, more than 85% of our aging is on normal terms and 1 month past due. That's a quite significant improvement from previous years. So the work there is obviously paying off. If we look on some of the balance sheet ratios, like Danie mentioned, on the EBITDA return on capital employed, we hit our targets for the first time in several years with 17% return on capital in dollar terms achieved. So we chuffed with that number. On EBIT, 12%. The working capital days, 112, and as mentioned, the gearing quite low at 9%. So I think the operational guys did quite a great job here. On the cash flow waterfall, just visualize what has happened, nice cash from operations that we see there, $11 million generated. I think it's quite -- I don't want to say easy, but in a downswing, sometimes, it's easier to generate cash from operations with working capital movement. I think we did well with the upswing in operations to generate that amount of cash from operations. So finishing the half year on $22 million cash in the bank, and that puts us in a good position for the next 6 months, 12 months with everything that's happening at the moment. If we look at the capital spend, only $5 million capital spend this half year. Mostly of that on maintenance capital, keeping our equipment in a position to utilize our new projects, upgrading equipment, et cetera, and small portion is spent on expansion, mostly on Koos' side. I think the last slide, we're going to leave for Danie again to talk on the salient features. And after that, the Q&A for questions. Thank you very much.

Thank you, André. Thanks [ for the low 20 base ], André.

Yes.

Just to wrap up then, enough said on the pipeline. I think more important is probably to talk about the capital spend and maybe just to rewind a bit on the historic spend. And André, you need to refresh my memory, help me with my memory. We when listing with IPO had in the fleet in the order of about 70, 80 eligible machines. And I think the latest number today is 148 [indiscernible] if I'm right. So we've bulked up from around about 80 to 140 or 148. Just in the last 6, 7 years, we've spent $110 million adding another 33 machines to the fleet. And then obviously, through M&As that we've done adding the rest. And I think the point I'd like to get across is the following: unlike some of the miners and unlike some of the other businesses, you can't spend -- or you can't try and grow a business in this space when there's an up cycle. Imagine if we had to try and grow this business from where we are today, if we had 80 machines in the fleet to 130, 140, taking into account you'll probably build the machine in 9 or 12 months, impossible. So again, the point I would like to get across is that in this type of business, you need to spend capital responsibly in the down cycle. So I think just for what it's worth, of the $110 million -- just as a side note, $50 million of that $110 million spend in the last 5, 6 years was directly related to the capital for machines, drill pipe and [indiscernible] I think the next one, we've already touched on, I think enough said on the geographic expansion. As part of the [ DNA ] of the business, we're going to commission the second and third and maybe the fourth machine up in Russia in the next couple of years and then move on to the next country. So that's part of [ DNA ] and something which I still believe as well as the next slide or next point on that slide. The geographic expansion diversification has been key to this business. Just -- [ let's move on ] to diversification. Roelof touched on that earlier on, again, just to emphasize our focus on A&R and AVA, just to try and internationalize those businesses. They're both local businesses. And I really believe the real upside for both those businesses is going to be doing more business with our current clients internationally, not just in South Africa. Technology, maybe 2 things to add to what Koos has just said on technology. I really hope that we today make ourselves very clear when it comes to restaging the business and the focus given where the industry is and what Koos and his team is keeping himself busy with. I again want to emphasize that this company is committed to try and make a change in the mining space, to try and mechanize current mining operations to move away from current drilling blast techniques. There's no way we believe that production will again go up and costs go down. There is just no way, unless they do something very, very different. And I would like to emphasize it for the third time. I really think what Koos and his team has been doing today is probably going to ultimately tick one of those boxes. In terms of the future, again, I think the fact that we've ramped up the business and bulk up the business the last couple of years, 7, 8 years, and we're in a position today with around about 140-odd machines, I think we're really ready for this up cycle and probably benefit from the investments made in the last 10 years. Nothing else from my side. Now over to the Q&A. Thank you.

Okay. So the first question comes from Andrew [indiscernible] He says on Slide 27, why do you say EBITDA was only $11 million? In the financials, the EBITDA looks closer to $16 million.

Yes. Andrew, well picked up. I think that the page that we had on the screen, that was wrong. Sorry, it is close to $17 million, so you're right.

Next question is from [indiscernible] Do you have any pressure on your [ BEE ] credentials? Are you considering any transactions to enhance BEE credentials?

I think on the BEE in both our exploration company and the current raise bore business, I think, it's well positioned. And that's just part of doing business in South Africa. So there's no -- nothing on the radar today to try and better that. I think what we need to do is it's very clear, and I think we're complying with both companies.

Next question from Keith McLachlan at Integral Asset Management. Is the order book and sales pipeline weighted towards more or less exploration, CapEx and/or production?

So if you look at our order book and especially the pipeline, they -- there's a bit of a shift happening. I think what we've seen is a number of new capital projects being evaluated, which is part of our pipeline. A number of capital projects is being fast-tracked by client. So into the future, it's very difficult to predict, but I really think that there will be a little bit of increase and more exposure to capital projects in the future, in the next 2 to 3 years.

Two more questions from Keith. Second one is, how will the new acquisitions be integrated with the broader group? Or are they more stand-alone? Are there other potential acquisitions in this parallel technology space that you are looking at?

So thanks for that question, Keith. I think it's -- the question is regarding A&R and AVA in the digitalization space. These businesses today, we've taken a minority stake initially in these businesses. The ramp-up of our stake within those businesses, we will evaluate in the next year. Yes, those businesses today are stand-alone businesses from a business point of view and from a brand point of view with their own individual strategies. I think as Danie mentioned earlier, the real opportunity and where Master Drilling can really contribute to those businesses is, first of all, all capital. And second of all, to internationalize these businesses. As we've just reported, especially in the AVA business, we've seen tremendous growth and various new regions opening up. So I really think that is what we can do to -- in these businesses to grow them into the future.