Perenti has delivered an FY21 result consistent with its revised expectations, achieving solid operational performance and growth from its underground mining business and an improved second half performance from its surface mining business. This solid result was delivered in a year where the company’s financial performance was impacted by headwinds including the ongoing impacts of the COVID-19 pandemic on its international operations, a tighter Australian labour market and a strengthening Australian dollar.
Perenti continues to invest in its people, systems and mining equipment to build strong foundations and support the ramp-up of the company’s key growth projects in FY22 to deliver business growth in FY23 and beyond.
Mark Norwell, Managing Director and CEO of Perenti, said: “Firstly, I want to recognise our people, who provided high quality mining services to our clients with a focus on continuity of operations to deliver enduring value and certainty.
“Our underground business continued to be a standout performer, delivering a third consecutive year of earnings growth with a strong FY21 contribution. Impressively, this growth has been delivered in a year where we saw the slower than anticipated ramp up at several recently secured international projects due to the prolonged, and ever-changing, nature of the COVID-19 pandemic.
“As expected, due to the planned contraction of our surface mining business following our strategic transition out of Yanfolila and Boungou, FY21 revenue, EBIT(A) and margins were softer than FY20. Pleasingly during 2H FY21, earnings and margins generated by the Surface business more than doubled compared to 1H21. This tangible and sustainable improvement in performance is attributable to the implementation of the findings of the AMS Strategic Review and continued solid performance from our Australian business. We are in a good position to move our AMS business forward and are encouraged by securing the Motheo and Iduapriem contracts, both of which are examples of the quality of contracts that AMS will pursue.
“The Investments business navigated difficult conditions during FY21 with softer east coast equipment rental market conditions impacting revenue and earnings. In response, we revitalised the leadership team and have increased our market activities including the implementation of a more targeted sales strategy, which has increased asset utilisation rates by 5% since December 2020.
“We continue to look to the future. Throughout FY21 we made prudent investments in our people and systems, while managing our balance sheet to ensure we are well positioned to fund our 2025 strategic growth aspirations. An integral part of this strategic growth is our technology driven service offering, idoba, launched in July. Through idoba, we plan to improve our competitive advantage by developing a unique capability in emerging digital mining, technology and innovation.”
Since 30 June 2020, the company has been devastated by the tragic loss of two colleagues.
- On 18 May 2021, Daniel Nuertey-Kwao Quaynortey, an employee of Underground Mining Alliance, a joint venture between Perenti and Ghanaian contractor, Rocksure, was fatally injured at the Obuasi Mine in Ghana.
- On 14 July 2021, Troy Cameron was fatally injured in an underground incident at the Hemlo Mine in Canada.
The company extends its deepest condolences to the family, friends and colleagues of Daniel and Troy and continue to provide ongoing counselling and support services throughout this very difficult time.
Perenti has sought to continuously improve safety performance. Most recently, in June 2020, the company completed a thorough review of its safety strategy and safety improvement plan. This review identified three key pillars of focus, including:
- Improving its safety leadership and culture.
- Improving its critical risk management.
- Simplifying its safe work practices through improved systems.
Throughout FY21, Perenti made significant improvements across each of these three pillars and remains committed to its objective of nil life changing events and ensuring that its people go home safely at the end of their shift.
This year, Perenti published its second sustainability report outlining progress against its FY21 environmental, social and governance (ESG) commitments and ESG goals for FY22. During FY21, the company proactively engaged with independent ESG research and ratings agencies to improve their understanding of Perenti’s sustainability commitments and performance to achieve improved recognition and assessment of its ESG credentials.
The company continued to focus on working capital management, delivering operating cash flow (before interest and tax) of AUS$398.9 million, representing an EBITDA to operating cash flow conversion of 105% (FY20: 96%).
In FY21 the company recognised one-off NPAT adjustments of AUS$90 million primarily related to the strategic transition out of Yanfolila and Boungou as well as the non-cash impairment and provision for inventory obsolescence at BTP.
At the end of FY21, Perenti’s available liquidity was AUS$567.9 million (FY20: AUS$605.5 million) comprising AUS$264.7 million of cash and cash equivalents (FY20: AUS$327.5 million) and AUS$303.2 million of undrawn debt facilities (FY20: AUS$278 million). During FY20, liquidity was supported by an increase of AUS$130 million to the company’s revolving credit facility (RCF). This increase was secured due to the uncertainty surrounding COVID-19. In FY21 the company retired these additional debt facilities as the COVID-19 impacts became better understood.
With a continued focus on efficient capital and liquidity management, net debt was reduced by 10% to AUS$503.3 million (FY20: AUS$556.4 million), net leverage ratio was 1.3x (FY20: 1.3x) and gearing was 27.8% (FY20: 28.4%).
During 2H21, in Australia, demand for domestic labour increased resulting in higher employee turnover and wage growth, which impacted margins. Recognising this, Perenti redirected significant resources into recruitment while implementing talent attraction and development strategies to ensure it has the right number of people in the right roles to continue to deliver excellence for its current and prospective clients. The company also has graduate and apprentice programmes to “grow its own” staff into the future.
Its focus on this area saw the successful mobilisation of a labour force of 110 highly experienced underground employees to the Savannah Nickel Project in Western Australia, where the company is building up to an expected labour force of 170 during FY22.
Outlook and strategy
As at 30 June 2021, Perenti’s work in hand stood at AUS$6.6 billion, which includes approximately AUS$2.8 billion of new contracts and extensions secured during FY21, with 55% being underground projects. Furthermore, of the AUS$2.8 billion secured, 50% of contracts are for projects in Australia, Canada and Botswana, reflecting the ongoing execution of the company’s 2025 strategy.
Based on FY21 revenue of approximately AUS$2 billion, Perenti has over three years of work in hand and when combined with a strong tender pipeline of AUS$11.0 billion, the medium to long-term outlook looks positive for the contract mining business. As it continues to deliver on its 2025 strategy, including the growth of its capital light technology driven services business, idoba, Perenti is well positioned for the future.
In FY22, on a 100% basis, Perenti expects to deliver revenues of between AUS$2 billion and AUS$2.2 billion, with over 90% already secured, and EBIT(A) of between AUS$165 million and AUS$185 million at an Australian dollar to US dollar exchange rate of 0.75. This guidance is on the basis that the impacts of the COVID-19 pandemic do not worsen throughout FY22.
Read the article online at: https://www.globalminingreview.com/finance-business/26082021/perenti-announce-fy21-results/
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