It is a pleasure to report on our performance and operations for the 2020 financial year (FY20).
IMDEX is committed to its journey as a leading Mining-Tech company. The opportunity ahead of us remains very exciting, and the progress we have made
in 2020, both because of and in spite of COVID-19, has exceeded our expectations. We have a clear and consistent growth strategy, an exciting pipeline of technologies and a highly capable team that is positioned in every major mining region around the world. Together, we are looking forward to building upon our unique value proposition for clients, and delivering sustainable long-term earnings growth for our shareholders.
Our Unique Value Proposition and Growth Strategy
The IMDEX value proposition principally includes providing quality data and real-time rock knowledge for clients. That is, an informed understanding of the orebody from drilling data and sensing data derived from the drill hole or blast hole. We answer the questions ‘where to drill next’ and ‘how can processing be optimised’ – and we do it in real-time or near real-time.
The ability to make these decisions in a timely and efficient way can deliver substantial economic benefits to both the resource companies, as asset owners, and the drilling contractors. Whether it is improving the cost per metre to drill to target by >50%, or through providing optimised blasting solutions that can improve mill throughput by >15%, IMDEX strives to provide real value throughout the mining value chain.
We deliver this value via our integrated product offerings. These include:
- Drilling Optimisation – Products that reduce the cost of drilling and are critical drivers in improving exploration success, particularly with deeper drilling or drilling under cover;
- Rock Knowledge – Best-in-class sensing tools that deliver quality data across all four components of rock knowledge – location, grade, texture and mineralogy; and
- Data & Analytics – Our cloud-based services and software solutions aggregate, store and distribute data to the right client, at the right time, anywhere in the world. Our ISO27000 certification ensures all data is handled securely with clear chain of custody. Our IMDEXHUB-IQ™ cloud services integrate with a range of analytical software to facilitate interpretation, visualisation and critical decision making.
Our strategy to deliver long-term earnings growth for shareholders includes: growing our core business in exploration and development; and further extension into the adjacent mining and production market, which is larger and less-cyclical. To do this, we pursue technology-focused strategic acquisitions, maintain our technology leadership by ongoing and disciplined investment in research and development, and collaborate with industry partners and research associations.
Market Conditions and Financial Performance
It was an extraordinary year. We enjoyed a strong start to FY20 with activity increasing globally – most notably in Asia Pacific and Europe. Drilling activity around the world was impacted in 4Q20 as a direct result of government mandated restrictions in response to the COVID-19 crisis .
The table below summarises the impact of COVID-19 on IMDEX’s regions and the recovery to early August 2020. The Company continues to closely monitor all risks associated with secondary outbreaks or possible epicentres at mine sites.
Evolution of Government Mandated Restrictions on Mining Regions Due to COVID-19
The short-term interruption to our business stabilised by the end of April 2020. Pleasingly, the majority of mining regions around the world are through their initial response phase and are moving towards resumption of all mining activities where possible. An indicator of this resumption in activity is the recovery of our rental fleet. As at 14 August 2020, the number of instruments on rent exceeded the pre-COVID peak.
Given the disruption of COVID-19 we are pleased with our results for FY20 as we continue to outperform minerals industry market growth.
We achieved our strongest revenue results through to the end of 3Q20, and finished the full year with revenue of $237.7m, a 2% decline on the record achieved in FY19.
Our EBITDA result of $54.4 million was slightly down on FY19 on a like-for-like basis, due to the impacts of COVID-19 in 4Q20. It also reflected our:
- Growing percentage of rental revenue that yields higher gross margins;
- Ongoing benefits from our digital transformation and supply chain initiatives;
- Savings introduced during 4Q19 in response to COVID-19;
- Increased engineering and product development expenditure; and
- Associated M&A costs and costs to protect our IP.
Our digital transformation project realised real benefits and we maintained our unrelenting focus on being ‘match-fit’, streamlining operations, continuing our disciplined cost management and finding new ways to work throughout the year. We also accelerated our online
Customer Care and IMDEX Academy training platform, in response to demand. These initiatives enable us to provide comprehensive remote support to clients and lower the costs of managing our business for the long-term.
Our cash from operations was strong for the full year. The stronger EBITDA conversion during 2H20 can largely be attributed to our disciplined approach to working capital management.
The strength of our balance sheet and net cash position enabled us to sustain our capital management program and accelerate opportunities for future growth.
We have adhered to our capital management policy and paid dividends while continuing to invest in leading technologies throughout the cycle – including during the impact of COVID-19. This principle remains vital to driving growth for shareholders. The strategic acquisition of AusSpec International (AusSpec) to enhance our real-time rock knowledge offering for clients across the mining value chain is in line with our growth strategy .
Acquisition of AusSpec
We were pleased to announce our acquisition of AusSpec – the world’s leading provider of spectral mineralogy through its unique aiSIRIS platform (Artificial Intelligence Spectral InfraRed Interpretation System).
Every mine in the world makes capital investment and production decisions based upon four key components of rock knowledge. Our existing product offering addressed three of these components and now the aiSIRIS solution satisfies the fourth – mineralogy.
In line with our value proposition, aiSIRIS also enables the timely delivery of critical data. This in turn allows real-time decisions to be made, rather than having to wait weeks or months.
AusSpec is great growth story, having delivered four-years of consistent and profitable growth and generates revenue via a SaaS model. It has established both its technology and reputation in the marketplace.
The acquisition is immediately cash flow positive, will provide an additional recurring revenue stream and is expected to be earnings per share accretive from years 2-3. The opportunity to leverage our global network, integrate the aiSIRIS offering IMDEXHUB-IQ™ and our In-Field Geoanalysis solutions, will drive growth.
The transaction was completed on 22 July 2020 following payment of $1m cash and $5m in IMDEX shares. Further details regarding the risk-shared structure of the transaction are set out in the ASX announcement dated 7 July 2020.
We are looking forward to building on our existing relationship with AusSpec co-founders, Dr Sasha Pontual and Dr Paul Gamson, and their highly-knowledgeable team.
Premium Drilling Optimisation Technologies
On 6 January 2020 we completed our acquisition of Flexidrill and its unique Drilling Optimisation technologies – COREVIBE™ and MAGHAMMER™. In line with our conservative acquisition strategy, this transaction provided for further development and extensive testing of COREVIBE™ and MAGHAMMER™.
Successful client trials with COREVIBE™ were undertaken throughout 1H20 and 3Q20. These trials continued to validate the significant benefits of this unique technology, including substantial increases in productivity.
Following the impact of COVID-19, the majority of client COREVIBE™ trials were placed on hold due to limited access to sites for non-essential personnel. Interest in the technology remains high, and we are confident our full pipeline of leads will convert into active rentals as restrictions ease and trials recommence..
Development of MAGHAMMER™ continued to progress well at our test site in New Zealand and has resumed following the COVID-19 related restrictions.
XTRACTA™, which was developed solely through in-house R&D, is also progressing well and while trials were also interrupted by COVID-19 restrictions, we have already rescheduled client trials for 1Q21.
IMDEX Mining Technologies
Once again COVID-19 limited access to operating sites to continue trials. We maintained development of the BLASTDOG™ product during 4Q20, however, by establishing our own test benches on properties in Queensland. Notably, we were able to accelerate our progress its autonomous operation mode and sensor refinement.
During the balance of this year we will continue to leverage our global presence and strong support from METS Ignited partners – Orica, Anglo America and Teck Resources – to advance our IMDEX Mining Technologies for further extension into the larger, less-cyclical mining market.
Outlook for FY20
The strong fundamentals underpinning our business growth remain in place despite COVID-19. These drivers include:
- The major and intermediate resource companies are increasing their expenditure to replace diminishing reserves;
- Resource companies are embracing innovation and new technologies to lower costs, increase safety and achieve greater productivity;
- New discoveries are likely to be under cover and at depth resulting in larger drilling campaigns; and
- Strong commodity prices supported by demand across a broad range of sectors including consumer, industrial and government related industries.
Our growth strategy remains on track. Furthermore, demand and opportunities for our drilling optimisation products and cloud-connected sensors have been heightened to support remote operations and expedite new drilling programs.
A Great Team
IMDEX has a great team of people around the world. The manner and speed with which our team rose to the challenge presented by COVID-19 was exemplary. The leadership and ownership at every level – in protecting our people and protecting our business – has been the highlight of a difficult time. Into this team I am pleased to warmly welcome our AusSpec colleagues.
IMDEX is a strong and resilient business and I look forward to working with you all in FY21.