AJ Lucas Group Limited (ASX: AJL) shares have been among the best performers on the ASX today on the back of the company’s FY21 first-half (H1 FY21) results. By the market’s close, the AJ Lucas share price had risen an astonishing 120% to 5.5 cents. In earlier trade, AJ Lucas shares surged by as much as 380% to 12 cents before retracing to their current level.
Let’s take a closer look and see what’s driving the drilling services company’s shares.
What pushed the AJ Lucas share price higher?
The AJ Lucas share price rocketed higher in mid-afternoon trade as investors appeared upbeat with the company’s latest performance.
According to its release, AJ Lucas reported a drop in revenue, but a significant gain in net profit due to a stronger domestic market.
For the six months ending 31 December 2020, AJ Lucas delivered total group revenue of $61.3 million. This represents a fall of 20.9% from the prior corresponding period, driven by lower mining operations resulting from COVID-19.
However, its Australian operations grew over the first-half to offset the revenue loss. In addition, AJ Lucas achieved reduced losses from its United Kingdom operations, an R&D-related tax benefit and lower finance expenses.
This, in turn, helped support the company’s bottom line in which it booked a net profit of $9.9 million. The overall result represented a $20.2 million turnaround from AJ Lucas’ reported $10.3 million loss at the end of December 2019.
Earnings before interest, tax, depreciation and amortisation (EBITDA) came to $15 million from the company’s entire operations. This reflected a 63.5.% jump over the H1 FY20 period in which EBITDA stood at $9.1 million.
Management noted that it is continuing to look for opportunities to strengthen its Australian segment. It’s hoping to further improve on earnings diversification, profitability, and future resilience.
The group closed the calendar year with cash and equivalents of $12.5 million, and $83.5 million of debt obligations.
Words from the CEO
AJ Lucas group CEO Brett Tredinnick hailed the strong scorecard for the first-half, saying:
The result reflected the strong operational performance of Lucas Drilling during the half despite revenue being impacted by COVID-related and other interruptions to clients’ operations.
The drop in revenue in the period was more than offset by the increase in earnings resulting from a better mix of more technical, higher yielding drilling as well as the various operational and corporate efficiency measures taken. The Group is now better positioned to maximise growth opportunities and better withstand any possible future shocks.
The Board and management remain confident in the continued performance of the company’s drilling operations and are buoyed by a recent increase in levels of tender activity.
Outlook
Looking ahead, AJ Lucas advised that it is continuing to see its strong performance run into the second half. The company stated that cash generated from the drilling division will be used to service and reduce its debt. Furthermore, AJ Lucas will seek to explore other business opportunities where it can grow its revenue base.
The AJ Lucas share price is up over 20% since this time last year.
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Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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