MITCHELL SERVICES LIMITED — Interim / Quarterly Report 2016

Feb 28, 2016

HALF-YEAR RESULTS PRESENTATION

December 2015

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DISCLAIMER

This investor presentation has been prepared by Mitchell Services Limited (“the Company”). Information in this presentation is of a general nature only and should be read in conjunction with the Company’s other periodic and continuous disclosure announcements to the ASX, which are available at: www.asx.com.au.

This presentation contains statements, opinions, projections, forecasts and other material (“forward-looking statements”) with respect to the financial condition, business operations and competitive landscape of the Company and certain plans for its future management. The words anticipate , believe , expect , project , forecast , estimate , likely , intend , should , could , may , target , plan and other similar expressions are intended to identify forward-looking statements. Such forward-looking statements are not guarantees of future performance and include known and unknown risks, uncertainties, assumptions and other important factors which are beyond the Company’s control and may cause actual results to differ from those expressed or implied in such statements. There can be no assurance that actual outcomes will not differ materially from these statements. Any forward-looking statements contained in this document are qualified by this cautionary statement. The past performance of the Company is not a guarantee of future performance. None of the Company, or its officers, employees, agents or any other person named in this presentation makes any representation, assurance or guarantee as to the accuracy or likelihood of fulfilment of any forward-looking statements or any of the outcomes upon which they are based.

The information contained in this presentation does not take into account the investment objectives, financial situation or particular needs of any recipient and is not financial product advice. Before making an investment decision, investors should consider their own needs and situation and, if necessary, seek independent professional advice.

To the maximum extent permitted by law, the Company and its directors and advisers of both give no warranty, representation or guarantee as to the accuracy, completeness or reliability of the information contained in this presentation. Further, none of the Company, it officers, agents or employees of accepts, to the extent permitted by law, any liability for any loss, claim, damages, costs or expenses arising from the use of this presentation or its contents or otherwise arising out of, or in connection with it. Any recipient of this presentation should independently satisfy themselves as to the accuracy of all information contained herein.

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SAFETY UPDATE

• Even though rig utilisation has increased the frequency and severity of safety incidents has continued to decrease .

• Mitchell Services has had no lost time injuries since November 2014.

• Numerous initiatives implemented to further .

• strengthen safety culture and performance

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1H16 BUSINESS OVERVIEW

Average rig utilisation 12 vs 20 HY2015 vs HY2016

Nitro acquisition and integration completed on time and on budget

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Tier 1 client revenue Total revenue
↑ ↑
178% 88%
25 2014 2015 OPERATING RIG COUNT
20
15
10
5
0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
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BUSINESS OPTIMISATION STRATEGY

Phase 1:Business Ready COMPLETE		Phase 2:Ramp Up COMPLETE		Phase 3:Refinement CONTINUING
• ISO certification and implementation of electronic safety, training and human resources management system • Review and implementation of Industrial Relations strategy to increase flexibility across the business • Moved operational base, corporate office and rented Townsville premises to major global defence contractor • Auction of surplus equipment • Increased rig utilisation from 3 to 12 rigs		• Implement initiatives to improve safety culture and performance • Reached goal of $24m operating revenue in FY 2015 • $20.2m capital raise for the acquisition of Tom Browne Drilling Services assets from receivers • Integration of Tom Browne Drilling Services including auction of surplus equipment • Increase “Tier 1” client base and increase rig utilisation		• Take advantage of strong position in key markets • Capitalise on long term revenue streams from high quality Tier 1 clients • Focus on reducing costs in the business • Deliver efficient, safe and quality services to our clients • Integration of Nitro assets • Upgrade asset fleet and sell non- core assets to reduce commercial debt levels and optimise asset mix

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BUSINESS REFINEMENT

Rigs in MSV Fleet

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Nitro Drilling
Tom Browne Acquisition Rationalisation
Acquisition
Drill Torque Rigs
28 28 28 29 29 29 29 29 29 29 52 52 52 52 52 52 52 52 77 73 73 65 52 52
•
An upgraded asset fleet ensures ability to capitalise on
continued opportunities with Tier 1 clients.
•
Sold non-core assets to reduce debt and optimise fleet
mix as part of refinement strategy.
Jan14 Feb14 Mar14 Apr14 May14 Jun14 Jul14 Aug14 Sep14 Oct14 Nov14 Dec14 Jan15 Feb15 Mar15 Apr15 May15 Jun15 Jul15 Aug15 Sep15 Oct15 Nov15 Dec15
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BUSINESS REFINEMENT

Use of Asset Sale Funds

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18%
Debt Repayments
44% Capital Expenditure
Evolution Ramp Up
38%
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Asset Sales Commercial Debt Facilities
7
6
6
5
5
4
4
3
3
2
2
1
1
- -
Millions ($)
Millions ($)
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• Strategic sales of non-core assets completed for $6.32 million.

• Reduction in commercial debt facilities.

• Optimisation of fleet mix to capitalise on long term revenue streams from high quality Tier 1 clients.

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RESULTS OVERVIEW

Statutory Profit & Loss

	1H16	1H15	Change
Revenue	$000's 18,472	$000's 9,808	% 88%
EBITDA	131	(1,113)	112%
EBIT	(2,467)	(2,607)	5%
NPBT	(3,116)	(2,917)	(7%)

Adjusted Profit & Loss

	1H16	1H15	Change
	$000's	$000's	%
Revenue	18,472	9,808	88%
EBITDA	2,009	(216)	1028%
EBIT	(589)	(1,711)	66%
NPBT	(1,238)	(2,020)	39%

Please note “Adjusted” figures represent non-IFRS information that has not been subject to an audit or review at 31 December 2015

Revenue ($000's)

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30,000
20,000
2H
10,000 2H 1H
1H
1H
-
FY14 FY15 FY16
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Statutory EBITDA ($000's)

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FY14 FY15 FY16
1,000
- 1H 1H
1H
(1,000)
2H
(2,000)
2H
(3,000)
(4,000)
(5,000)
Adjusted EBITDA ($000's)
FY14 FY15 FY16
3,000
2,000
1,000 1H
- 1H 1H
2H
(1,000) 2H
(2,000)
(3,000)
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REVENUE BY CLIENT TYPE

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$18.29m
Tier 1 operating income
Other operating income
VALUE OF TIER 1
•
Large / multinational mining
$9.63m $15.45m
and energy companies
•
Very high safety and
business system
$5.57m
requirements
•
$4.13m Generally brownfield work
$0.65m for existing mining operators
•
Longer term contracts
$4.06m
$3.47m
$2.83m
HY2014 HY2015 HY2016
large / multinational mining & energy companies
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OPERATING REVENUE BY COMMODITY

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HY2014 $4.13m HY2015 $9.63m HY2016 $18.29m
4.1% 3.3%
9.5%
13.2%
12.9%
2.6% 23.5%
21.1%
2.6% 44.4% 24.8%
21.2% 13.2% 5.6%
44.4%21.2%
18.5%
54.6%
18.5% 40.5%
Gold Copper Coal Lead/Zinc/Silver Other
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Strategic focus on diversifying commodity mix

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OPERATING REVENUE BY DRILLING TYPE

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HY2014 $4.13m HY2015 $9.63m HY2016 $18.29m
10.5% [1.6%] 5.9% [4.9%] 12.8% [1.3%]
87.9% 89.2% 85.9%
Surface Underground Other
Underground has grown by 314% from HY2015 to HY2016
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ADJUSTED EBITDA

ADJUSTED EBITDA ($000’s)

EVOLUTION RAMP UP COSTS

2,009

NITRO ACQUISITION RESTRUCTURE & INTEGRATION COSTS COSTS

131

REPORTED EBITDA ($000’s)

Please note ADJUSTED EBITDA represents non-IFRS information that has not been subject to an audit or review at 31 December 2015 and is used internally by management to assess the underlying performance of the business.

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BALANCE SHEET

	31 Dec 15	30 Jun 15	Change
	$000’s	$000’s	%
Cash and cash equivalents	3,295	516	539%
Trade and other receivables	5,514	7,149	(23%)
Other current assets	2,277	18,438	(88%)
Total current assets Property, plant and equipment Other non-current assets	11,086 26,534 2,994	26,103 18,287 2,996	(58%) 45% (0%)
Total non-current assets	29,528	21,283	39%
Total assets Bank overdraft Commercial facilities	40,614 600 1,326	47,386 1,130 2,293	(14%) (47%) (42%)
Other current liabilities	7,215	24,955	(71%)
Total current liabilities	9,142	28,378	(68%)
Commercial facilities	1,968	3,656	(46%)
Shareholder loans	8,500	0	100%
Other non-current liabilities	110	98	12%
Total non-current liabilities	10,578	3,754	182%
Total liabilities	19,719	32,132	(39%)
Net assets	20,895	15,254	37%

• Overall improved liquidity.

• Current ratio improved from 0.92 to 1.21 . • Commercial debt reductions of $2.6m.

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SECOND HALF OUTLOOK

• Continue to pursue strong pipeline of Tier 1 contracts.

• Focus on Tier 1 and brownfield / production drilling.

• Continue to increase rig utilisation .

• Purchase 4 additional rigs to service Tier 1 contracts post 31 December 2015 funded through a combination of cash and equipment finance.

• Continue to monitor and reduce costs across the business.

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MARKET OUTLOOK

• Competitive Profile of this market segment has continued to improve .

• New entrants are faced with barriers to entry such as high capital cost and inability to secure financing.

• Pipeline of identified opportunities continues to .

• grow

• Greenfield exploration sector remains subdued .

• Interest in gold is increasing .

• Ability to leverage to the upside when general market conditions improve .

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