The Perenti Global Ltd (ASX: PRN) share price is one to watch as the mining services company reported a record revenue result despite weak profits.
What does Perenti do?
Perenti is a global mining services company with subsidiaries covering surface mining, underground mining and mining support services.
That includes exploration drilling, production drilling, blasting, equipment supply and maintenance to name a few.
Formerly known as Ausdrill Limited (ASX: ASL), Perenti rebranded in August 2019.
The group has operations in 13 countries across 4 continents, has more than 8,000 employees and currently has a market capitalisation of $834 million.
Why is the Perenti share price on watch?
The Perenti share price will be worth watching after reporting an 84.9% slump in statutory profit after tax from continuing operations to $23.84 million.
That weak bottom line came despite full-year revenue climbing 3.8% higher to $2.04 billion thanks to significant depreciation expenses. Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 6.8% to $443.8 million with EBITDA margin up 60 basis points to 21.7%.
Perenti’s underground segment contributed 64% of total revenue with surface (30%) and investment (6%) generating the remainder.
The coronavirus pandemic did weigh on the full-year result despite an overall strong result from the group.
Gold remained the primary revenue generator by commodity with 68% of earnings, followed by nickel (10%) and zinc (5%).
In terms of geography, Australia (44%), Ghana (19%) and Burkina Faso (14%) were the biggest contributors.
The group continues to focus on transforming its AMS business with a focus on earnings, cash conversion and capital management.
This follows the tragic incident involving AMS employees that shut down operations and saw the Perenti share price fall lower in November 2019.
Group cash conversion climbed to 96% in FY20, up from 89% in FY19 with return on average capital employed of 16.6%.
Net cash flow jumped 31.6% higher to $110.3 million thanks to a 50% surge in operating cash flow.
Total asset backing jumped 8.2% to $1,614.9 million during the year. That came as increased cash reserves and AASB16 accounting impacts offset a drop in plant and equipment.
Dividend
The Perenti share price is one to watch after reporting a 7.0 cents per share (cps) full-year dividend.
That includes a 3.5 cps final dividend, fully-franked, to go with the 3.5 cps interim dividend announced in February.
Based on yesterday’s closing Perenti share price of $1.20, that dividend represents a 5.8% dividend yield.
Outlook
Perenti reported work in hand of $5.4 billion for FY20 with a further $2 billion in negotiation.
$1.7 billion of revenue for this financial year is secured by order book with 82% of that in the Underground segment. That includes 69% gold exposure which is underpinned by soaring gold prices.
The Perenti share price is worth watching after reporting a near-term pipeline of $8.8 billion comprising 57 opportunities.
A geographical expansion across North America and significant internal investment is slated for FY21.
How has the Perenti share price performed lately?
The Perenti share price remains down 25.3% for the year while the S&P/ASX 200 Index (ASX: XJO) has fallen 8.4%.
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