XENITRA LIMITED — Earnings Release 2013

Aug 5, 2013

MEDIA/ASX RELEASE

6 August 2013

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Titan Energy Services announces $9.1m NPAT for FY13 and FY14 $21m - $23m EBIT target

www.titanenergyservices.com.au ASX ticker: TTN

2012/13 (FY13) Highlights

 Record full year result – well above guidance

• Net profit after tax (NPAT) quadrupled to $9.1m

• Earnings before interest and tax of $14.5m– up 272% year-on-year – and double the company’s initial target for FY13

 Strong shareholder returns

• Full Year earnings per share of 22.2 cents – 147% improvement on the prior corresponding period, including an $18m capital raising for Hofco Oilfield Services

• Fully franked 3.5 cents per share final dividend announced, taking FY13 dividends to 5.5 cents per share – 175% improvement on FY12

 Business growth

• Fourth Atlas Drilling rig built and deployed on 1+1 contract

• Resources Camp Hire expansion – 674 rooms at 30 June (186% increase on June 2012 capacity)

• $1.9m EBIT from Nektar Remote Hospitality in first full year of trading - 62,694 man days catered during year

• Hofco Oilfield Services acquired for $20.9m[1] – forecast 2H EBIT of $2.6m achieved

• Debt facilities increased, an additional $10m in capital expenditure funding over FY14 and FY15

• Investment in key leadership roles throughout the group

 Outlook – continued growth expected

• $21m – $23m EBIT expected for FY13 (52% increase on FY13)

• Strong growth prospects in Queensland CSG and other markets

• Continuing focus on diversification

• Ongoing consideration of opportunities to grow organically and through acquisition

Note

(1) Adjustment to the acquisition price from $21.7m to $20.9m due to improvement in Hofco cash position from the time of announcement to settlement of the acquisition.

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Results summary

Results ($ million unless stated otherwise)	FY13	FY12	Variance
Revenue EBIT Margin NPAT Margin EPS	72.9 14.5 19.9% 9.1 12.5% 22.2c	33.5 3.9 11.6% 2.3 6.9% 9.0c1	118% 272% 8.3% 296% 5.6% 147%
Dividend	5.5c	2.0c	175%

Results overview

Titan Energy Services (TTN) today released audited accounts for the 12 months to 30 June 2013.

As foreshadowed in the unaudited results release on July 23, the company comfortably exceeded earnings guidance in its first full year of trading since listing in December 2011.

During FY13, Titan achieved EBIT of $14.5m, 272% growth on the $3.9m EBIT recorded during FY12.

Other highlights included:

• NPAT of $9.1m – up 296% on the previous corresponding period; and

• Strong earnings per share growth to 22.2 cents per share, compared to 9.0 cents per share during FY12.

Titan’s directors also declared a fully franked 3.5 cents per share final dividend. This reflects a 25% return of NPAT to shareholders, in line with the company’s dividend policy.

The final dividend takes total dividends declared during FY13 to 5.5 cents per share, a 175% improvement on FY12.

Titan’s Board has also declared that the company’s Dividend Reinvestment Plan (DRP) will apply to the final dividend and a 5% discount will apply to the price of shares issued under the DRP. A timetable for the final dividend payment, along with key DRP details, is included in the appendix to this announcement.

“FY13 has been a successful year for the Titan group by many measures,” managing director Jim Sturgess said.

“We have exceeded forecasts and delivered record returns for shareholders in our first full year since listing.

“At the same time, we have invested in company infrastructure and systems that will support our goals for future diversification and growth.

“This investment included the acquisition of a fourth business, Hofco Oilfield Services, during the second half. Integration continues, with Hofco adding an important dimension to our portfolio of services.

“We have also invested in our people and made some key appointments this year, including pivotal leadership, safety, operational and business development roles.”

Note

(1) EPS of 10.81 previously reported for the year ended 30 June 2012 has been retrospectively adjusted to reflect the impact of share issues during the current year that if in existence at 30 June 2012, would have impacted the EPS calculation, per the requirements of AASB 133.

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Operational Review

With the acquisition of Hofco Oilfield Services during the second half, the Titan group now has four core business units:

• Atlas Drilling

• Resources Camp Hire (RCH)

• Nektar Remote Hospitality; and

• Hofco

Atlas Drilling delivered record results during FY13, with utilisation increasing from 82% during FY12 to 91% during FY13.

Utilisation is expected to remain strong during FY14 with three of the four rigs on longer term contracts.

Rig 1 will come off contract in September, however early discussions with potential clients have generated interest and positive feedback.

RCH also delivered a record result and improved utilisation during a period of significant expansion.

Room numbers almost tripled during the year, from 236 at June 2012 to 674 at June 2013 while achieving utilisation of 84%.

During the year, RCH built a strong team to manage the growth and expand the business. This team includes newly hired sales staff tasked with broadening the company’s client and geographic base.

Nektar, a start-up business, secured eight contracts and generated $1.9m in EBIT in its first full year.

Nektar is growing in line with sister business RCH and has significant opportunity to expand into new markets, not only through servicing portable accommodation camps but also in permanent camp management and catering and niche management opportunities.

Already, the business has enjoyed some success in this regard, with Nektar recently awarded a contract to manage the Roma Airport Café. A business development manager has also been appointed to help facilitate future growth.

Hofco, a business that was established in 1980 and has grown to become one of Australia’s leading downhole tool-rental companies, providing drilling tools and oilfield equipment, performed to expectations both operationally and financially, since acquisition during the second half.

Hofco has moved into new premises, which will support its goals for growth and product range expansion during FY14.

Titan has also invested in its people with a view to improving capacity, service delivery and sales capability.

Balance Sheet and Cashflow

Net debt was $12.4m at 30 June 2013, compared to $8.0m for the corresponding period last year. The increase reflects Titan’s investment in capital expenditure to build Rig 4 and deferred consideration payable on the Hofco acquisition ($5.8m).

Titan recently agreed commercial terms for increased funding facilities with GE Commercial Corporation. As a result, an additional $10m in capital expenditure funding has been provided, taking total facilities to $34.7m. Titan expects this funding will be sufficient to meet its capital expenditure requirements over the medium term.

Capital expenditure for FY13 was $9.7m, with the majority allocated to the investment in Rig 4, growth of the RCH business and additional rental equipment within Hofco.

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Outlook

Titan expects FY14 EBIT between $21m and $23m. If this range is achieved it will be a 52% improvement on the FY13 result.

Titan’s growth in FY14 is expected to be driven by strong contributions from the company’s core business units, with:

• RCH ready to target new geographic markets and sectors. The business starts the new financial year 46% ahead of the weighted average number of rooms held in FY13

• Hofco contributing a full year of earnings in FY14 (only half year in FY13);

• Atlas Rig 4 operating for a full year in FY14 (1+1 contract), compared to 8 days in FY13; and

• Nektar aligned to RCH growth and ready to expand into new markets

Looking ahead, Mr Sturgess said the Titan group had invested in strong business systems, infrastructure and key roles to support ongoing growth in a rapidly expanding sector.

“Within the Queensland CSG sector, major projects are ramping up,” he said.

“We have the systems and people in place to ensure we maximise our opportunities in that space, as well as pursuing our diversification strategy into new geographies and segments.

“Diversification opportunities include:

• New CSG opportunities outside Queensland – drilling, camps, catering, rental and other

• New geographies within Queensland, the Northern Territory, South Australia and elsewhere

• New industry segments, including non-Queensland CSG, Oil and Gas infrastructure, rail, road and pipeline ; and

• Examining new opportunities to grow organically and through acquisition.

“As a group and within each of our businesses, we are well positioned for solid growth.”

ENDS

For investor or media inquiries:

Mr Jim Sturgess Managing Director Tel: 0402 890 654

About Titan

Titan Energy Services Limited (ASX: TTN) provides diversified energy and infrastructure services to the oil and gas, mining, pipeline, rail, road and infrastructure sectors.

Through its operating businesses Atlas Drilling, Hofco Oilfield Services, Resources Camp Hire (RCH) and Nektar Remote Hospitality, Titan provides expertise in CSG drilling, drilling equipment hire, camp hire and camp management and catering services.

Titan operates four drilling rigs, is a leading provider of oilfield down-hole tool rental in Australia and overseas, operates and rents remote self-contained camps, and manages catering and camp management contracts.

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APPENDIX

Summary Results

Annual Result ($million unless otherwise stated)
	FY13	FY12	Variance
Total Revenue	72.9	33.5	118%
EBITDA	18.9	7.4	155%
EBITDA margin - %	25.9%	22.1%	3.8%
Depreciation	4.4	3.5	26%
EBIT	14.5	3.9	272%
EBIT margin - %	19.9%	11.6%	8.3%
Interest	1.2	0.6	100%
NPBT	13.3	3.3	303%
Tax Expense Rate	4.2 31.7%	1.0 30.0%	320%
NPAT	9.1	2.3	296%
Basic earnings per share – cents	22.2	9.01	147%
Dividends declared per share – cents	5.5	2.0	175%

Proposed Dividend Timetable and DRP details

Date	Details
6 August 2013	Announcement of Dividend and shares commence tradingon a ‘cum basis’
12 August 2013	Shares commence trading on an ‘ex basis’
16 August 2013	Record date and final date for submission of DRP election forms
19 August 2013 to 30 August 2013	DRP pricing period
6 September 2013	Dividend payment date

The shares issued under the DRP will rank equally with existing shares issued by the company.

The ten day DRP market pricing period of shares sold on the ASX will commence on Monday 19 August 2013. The calculated DRP price per share will be announced on Monday 2 September 2013.

Shareholders wishing to participate in the DRP will need to submit their DRP election forms with Link Market Services Limited no later than 5.00pm AEST on Friday 16 August 2013.

Information about the DRP and a complete copy of the DRP rules can be found on the company website at www.titanenergyservices.com.au.

(1) EPS of 10.81 previously reported for the year ended 30 June 2012 has been retrospectively adjusted to reflect the impact of share issues during the current year that if in existence at 30 June 2012, would have impacted the EPS calculation, per the requirements of AASB 133.

Note

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