IMDEX LIMITED — Annual Report 2011

Aug 14, 2011

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15 August 2011

IMDEX PRODUCES ITS BEST EVER RESULTS

Imdex Limited (ASX: IMD) today announced its results for the full year ended 30 June 2011, which saw the Company achieve its best ever results. Imdex’s global footprint, leading technologies and enhanced operations position the Company for strong future growth.

Key highlights:

• Record revenue from continuing operations (excluding interest), up 53% to $205.2 million (FY10: $134.3 million);

• Record EBITA from continuing operations (excluding non-operational items), up 132% to $48.1 million (FY10: $20.7 million);

• Record normalised net profit after tax from continuing operations (excluding nonoperational items), up 196% to $29.0 million (FY10: $9.8 million);

• Strategic bolt-on acquisitions expanding geographic footprint and improving margins;

• Net assets up 32.7% to $125.4 million (30 June 2010: $94.5 million);

• Exceptional increase in operating cash flow from $5.7 million (FY10) to $35.9 million, even after significant investment in growth capital;

• Continued investment in research and product development generating an exciting pipeline of new and improved products;

• Already comfortable gearing further improved with net debt / capital down to 13.4% (30 June 2010: 19.6%) even after acquisitions;

• New growth initiatives to drive ongoing revenue and earnings growth; and

• Final fully franked dividend of 2.75 cents per share following reinstatement of dividend in 1H11; total FY11 fully franked dividend of 4.5 cents per share (FY10: nil).

Commenting on the results, Imdex’s Managing Director, Mr. Bernie Ridgeway, said:

“The 2011 financial year was an exceptional year for Imdex, with the company achieving its best ever results. All four major mining regions, Asia-Pacific, the Americas, Africa and Europe, produced record financial results, reflecting the strength of Imdex’s underlying businesses and focused global strategy.

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“Even with recent volatility in world financial markets, global non ferrous mineral exploration expenditure is at record high levels which augers well for long term industry outlook and for our business.”

Mr. Ridgeway also noted that the increase in revenue was not only a result of trading conditions during the year, but also due to increased market share for both Imdex’s drilling fluids and chemicals and down hole instrumentation.

“Imdex’s commitment to its global strategy, and continuing expenditure on research and product development, has provided the Company with a strong growth platform. On the basis that there is no material deterioration to our end markets, Imdex is well positioned to continue growing given the strength of its underlying business, an enhanced global structure, additional expertise, and a superior suite of technologies,” he said.

Minerals Division

Financial performance

Imdex’s Minerals Division consists of AMC drilling fluids and chemicals, and Reflex down hole instrumentation. FY11 saw Minerals Division revenue grow by 60% to $177.7 million (FY10: $111.2 million). This represented 87% of Imdex’s revenue for the full year and reflects the strong trading conditions in each of the major mining regions globally that saw record performances across all of its regional businesses.

Key operating highlights and achievements

• Record sales across all of the major global mining regions;

• Strengthened market leadership with the Reflex range of down hole survey and core orientation instrumentation demonstrated by the growth in Reflex rental fleet numbers to a new record at 30 June 2011;

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• Rationalised Imdex’s drilling fluid brands from six individual brands to one global AMC brand;

• Implemented a regional reporting and operating structure to maximise cross selling opportunities between drilling fluids and down hole instrumentation;

• Seamlessly integrated Fluidstar which was acquired in September 2010;

• Further developed Imdex’s surface and underground Solids Control Units; and

• Announced the proposed acquisitions of Australian Drilling Specialties (Australia) and System Mud (Brazil) to further drive operational and geographic efficiencies and growth.

Oil & Gas Division

Financial performance

The Oil & Gas Division consists of AMC drilling fluid, production and completion chemicals, and Flexit down hole instrumentation. Revenue for this division was up 19% to $27.5 million (FY10: $23.1 million). The Oil & Gas Division revenue represented 13% of Imdex’s revenue.

Key operating highlights and achievements

• Acquired and integrated Mud-Data in Germany (renamed AMC Oil & Gas - Europe) which supplies drilling fluids and equipment to the oil & gas and geothermal industries in Europe;

• Formed a joint venture with DHSO Services for Flexit’s range of down hole instrumentation. The joint venture, in which Imdex has a 50% interest (effective 1 July 2011), provides down hole survey services to the oil & gas industry using Flexit technology. The business is based in Dubai and will initially concentrate on the Middle East market, and look to expand globally as the business matures;

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• Progressed the development of a north seeking MEMS gyro for down hole survey applications. Flexit is developing this pioneering down hole survey instrument with Sensonor, a Norwegian company which has specialised in MEMS technology for the past 25 years; and

• Continued investment in engineering and product development on existing and new instrumentation.

Mr. Ridgeway noted that “the Oil & Gas Division was positioned for further growth through a number of new initiatives on both the fluids and instrumentation lines of business.”

Dividends

Following reinstatement of Imdex’s dividend in 1H11, the Directors have declared a final fully franked dividend of 2.75 cents per share with an entitlement date of 7 October 2011 and a payment date of 21 October 2011. This brings the full year dividend to 4.5 cents per share, fully franked. The growing dividend reflects the strength of Imdex’s underlying earnings and future opportunities, as well as the Board’s commitment to paying a sustainable and growing dividend stream while balancing the capital needs of the business as it continues to grow.

Outlook

Mr. Ridgeway said that the FY12 outlook for Imdex was positive. The underlying fundamentals of Imdex’s key industry segments remain positive even after the recent short term volatility in global financial markets. Metals prices remain robust and importantly are still trading above their long term averages. The gold price continues to set new records and traditionally accounts for some 50% of worldwide non-ferrous mineral exploration expenditure. In addition, economic growth in China and India continues to be fuelled by their investment in infrastructure and urbanisation.

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“Subject to global financial markets stabilising, the underlying market fundamentals are likely to continue to fuel demand for commodities and drive exploration expenditure which is very encouraging for the continued growth of Imdex,” Mr. Ridgeway said.

Respected worldwide minerals information and consulting company, Metals Economics Group, has estimated that exploration expenditure will increase by 40% in calendar year 2011 over 2010. Similar industry data is showing levels of exploration and production expenditure growth within the oil and gas sector.

Drilling contractors are reporting strong demand from major, intermediate and junior mining/exploration companies, and rig utilisation rates are continuing to increase towards full utilisation.

Mr. Ridgeway also commented that Imdex’s investment in the oil & gas industry is a logical diversification for the business and the Company anticipates a significantly improved performance in FY12 and beyond from this sector.

“There are signs of continued resilient trading in the markets in which Imdex operates. The pace and sustainability of these markets is largely dependent on continued robust commodity prices and stable global financial markets. Whilst there has been recent short term volatility in global financial markets, as long as there is no material deterioration in our end markets, Imdex’s exposure to the global mining and energy markets, expanding geographic footprint, proprietary IP and leading technologies, and enhanced operating structure uniquely position the company to continue growing revenue and earnings,” said Mr. Ridgeway.

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Focus areas for FY12

In FY12, the Imdex Group is f ocused on:

• Growing the Mud-D a ta (AMC Oil & Gas – Europe) business in Germany and expanding the capability of the business;

• Rolling out the new D H SO oil & gas down hole instrumentation services joint venture based in Dubai;

• Manufacturing solids control technology, initially for the Asia Pa c ific market before moving to the other m a jor mining markets of Africa, Canada and L a tin America;

• Continuing to expand Imdex’s global operations servicing the mining and exploration industries;

• Expanding the drilling fluids, production and completion chemical s business in niche oil & gas markets; an d

• Continuing research a nd product development for both mining an d oil & gas.

Ross Kelly Imdex Limited, Chairman

For further information , ple a se contact:

Bernie Ridgeway, Managing Director Ross Kelly, Chairman Paul Evans, Chief Financial O fficer and Company Secretary Ph: +61 8 9445 4010 Email: imdex@imdexlimited. c om

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Imdex Limited Summary Financial Highlights for the Year Ended 30 June 2011

(Audited Results)

	Consolidated	Consolidated	Consolidated	Consolidated
	2009	2010	2011	10-11 Var
	$’000	$’000	$’000	%
Revenue from continuing operations(excluding interest income)	136,968 134,253 205,163 53%
Operating Profit before Interest, Tax, Depreciation & Amortisation Depreciation	27,817 24,893 53,867 116% (3,318) (4,182) (5,721) 37%
Earnings before Interest, Tax & Amortisation(EBITA)	24,499 20,711 48,146 132%
EBITA margin Amortisation	18.0% 15.0% 23.5% 56.7% (6,535) (6,363) (6,778) 7%
Earnings before Interest & Tax(EBIT)	17,964 14,348 41,368 188%
Net interest expense	(826) (771) (2,775) 260%
Netprofit before tax	17,138 13,577 38,593 184%
Income tax expense	(5,811) (3,781) (9,591) 154%
Net Profit after Tax(before non-operational items)	11,327 9,796 29,002 196%
Non-operational items Forex gain / (loss) on loan to SEH Impairment of SEH investment Impairment of operations Tax effect of non-operational items	1,057 (677) - - - (10,440) - - - (23,531) - - (317) 3,304 - -
Net Profit for the Year after Tax	12,067 (21,548) 29,002 -
Basic earnings /(loss) per share from continuing operations(cents)	6.37 ¢ (11.05 ¢) 14.69 ¢ -
Net Cashprovided by Operating Activities	16,175 5,700 35,861 529%
Cash on hand	11,975 9,007 18,388 104%
Net Assets	116,198 94,495 125,409 33%
Total Borrowings (incl deferred acquisitionpayments)	34,039 32,018 37,860 18%
Net Tangible Assets per Share	19.10 ¢ 22.83 ¢ 34.83 ¢ 53%

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