ADES International Holding Ltd Results For the Six-Month Period Ending 30 June 2017

For the purpose of the Transparency Directive the Home Member state of the issuer is the United Kingdom.

LONDON & DUBAI, UAE--(BUSINESS WIRE)--ADES International Holding (“ADES” or “the Group”), the London-listed company providing offshore and onshore oil and gas drilling and production services in the Middle East and Africa through its subsidiaries, announced today its results for the six-month period ended 30 June 2017.

1H2017 Headline Figures

Revenue	EBITDA^1	Net Profit^2	Number of Rigs	Utilisation^3	Backlog
USD 88 million ▲ 46% y-o-y	USD 45 million ▲ 43% y-o-y	USD 22 million ▲19% y-o-y	14 rigs	Av. Fleet Utilization > 90% since 2012	USD 430 million

Summary Income Statement

(USD ‘000)	1H2017	1H2016	% change
Revenues	87,846	60,351	45.6%
Gross Profit	41,039	31,948	28.5%
Gross Profit Margin	46.7%	52.9%	-6.2 pts
Adjusted EBITDA^1	45,034	31,562	42.7%
Adj. EBITDA Margin	51.3%	52.3%	-1.0 pts
Net Profit	17,331	18,429	-6.0%
Net Profit Margin	19.7%	30.5%	-10.8 pts
Normalised Net Profit^2	21,894	18,429	18.8%
Normalised Net Profit Margin	24.9%	30.5%	-5.6 pts
Earnings per Share (USD)	0.50^4	0.58	-13.9%
No. of Shares (000s)	42,203	31,900

Financial Highlights

• Revenue increased 45.6% year-on-year to USD 87.8 million in 1H2017, driven by high utilisation of the Group’s employed rigs, the ramp up of the Group’s operations in the Kingdom of Saudi Arabia (“KSA”), commencement of operations of ADES 3 in Algeria and the introduction of Mobile Offshore Production Unit (MOPU) services.
• Gross profit rose 28.5% year-on-year to USD 41.0 million in 1H2017 (USD 31.9 million in 1H2016), with an associated gross profit margin impacted by the introduction of three offshore units in the KSA.
• Adjusted EBITDA increased by 42.7% year-on-year to USD 45.0 million in 1H2017 (USD 31.6 million in 1H2016) aided by the devaluation of the Egyptian pound.
• Net profit decreased by 6.0% year-on-year to USD 17.3 million in 1H2017 as the Group incurred a one-time expense in relation to its IPO in May 2017 totalling USD 4.6 million.
• Normalised net profit excluding the one-time USD 4.6 million IPO expense in 1H2017 was USD 21.9 million in 1H2017, an 18.8% year-on-year increase, and generating a net profit margin of 24.9%.
• Cash balances stood at USD 163.5 million at 30 June 2017, supported by funds raised at the IPO.
• Net debt stood at USD 65.6 million as at 30 June 2017.

Operational Highlights

• Continued exemplary safety performance, achieving over 22.3 million man hours with a Recordable Injury Frequency Rate (“RIFR”) (per 200,000 working hours) at 0.45, below the IADC worldwide standard rate of 0.58.
• Total backlog reached USD 430 million as at 30 June 2017 compared to USD 501 million as at 31 December 2016, reflecting the realisation of USD 88 million in contractual agreements and the addition of new contract awards and renewals.
• New contract awards for Admarine 88 with Belayim Petroleum Co. (Petrobel), a joint venture between ENI IEOC and Egyptian General Petroleum Corporation (EGPC), for a three-month drilling campaign. Additionally, Admarine VIII was awarded a farm-in agreement with Fanar Petroleum Company. Operations and revenue generation for both contracts will commence upon rig deployment.
• Contract renewals for Admarine VI with General Petroleum Company (GPC) for a one-year period to March 2018, and for Admarine V with Petrobel for one year (including an optional six-month extension).
• Finalised exclusive marketing agreements with leading shipyards enabling ADES to market new build offshore jack-up rigs, including high specification rigs to deploy these assets on a revenue-sharing basis. This innovative approach broadens ADES’ service offerings and allows it to penetrate new markets and capture a larger market share, while simultaneously maintaining our low-cost model.

Current Trading and Outlook

• Scaling existing operations and penetrating new markets through participation in a substantial pipeline of active tenders across the Middle East, in existing geographies as well as the UAE and onshore Iraq. Management expect a number of these tenders to close during 2H2017 with revenue contribution to commence in 1H2018.
• 2H2017 expected to witness organic double-digit revenue growth while maintaining similar margins to 1H 2017. ADES now expects certain contracts won during 1H2017 to commence in early 2018. As a result, 2H2017 performance is currently expected to be broadly in line with 1H2017 performance.
• Acquisition opportunities continue to be reviewed in line with the Company’s strategy set out at IPO with the ADES well placed due to its strong cash position.

Commenting on the half-year performance, Dr. Mohamed Farouk, Chief Executive Officer of ADES International said:

“The first half of 2017 was a milestone period for ADES. We joined the ranks of internationally recognised oil and gas services companies listed on the London Stock Exchange following our successful IPO in May, and announced multiple contract awards and renewals for our assets. Our sustained operational performance and exemplary safety performance with an RIFR⁵ of 0.45 has allowed us to deliver strong financial results and stands as a testament to the success of our business model. Our revenue grew by 46% year-on-year while maintaining our standard low-cost base, resulting in an EBITDA margin of 51% highlighting the continued activity in development and production operations in the geographies in which we operate.

ADES’ ability to deliver strong operational results is underpinned by its three-pillar strategy, including the build-up of our current backlog through contract extensions, significant participation in tender activity to increase our market share in existing and new markets, and targeting smart acquisition opportunities. Execution of this strategy is made possible thanks to our lean cost structure, operational excellence, impeccable safety record and robust balance sheet.

As new contracts won in 1H2017 are expected to commence operations in 2018, we believe 2H2017 will be broadly in line with 1H2017, with the business continuing to deliver organic double-digit revenue growth while maintaining similar margins in the current financial year.

Closing our IPO during this critical time in our growth trajectory has provided the necessary liquidity that will help us take advantage of acquisition opportunities.

We will continue to capitalise on our recent successes during the first half of the year by leveraging our established platform, expanding our presence in existing markets, entering new markets in the GCC through active participation in tenders and executing profitable acquisitions aimed at securing long-term growth.

In parallel, ADES aims to continue leveraging its lean cost structure and low operating expenses to maximise profitability and continue delivering exceptional shareholder value.”

Conference Call

ADES’ management team will present the 1H2017 Results and will be available for a Q&A session with analysts and investors today at 14:00 BST.

About ADES International Holding (ADES)

ADES International Holding extends oil and gas drilling and production services through its subsidiaries and is a leading service provider in the Middle East and Africa, offering onshore contract drilling as well as workover and production services in Egypt, Algeria and Saudi Arabia. The Group is pre-qualified in markets including Egypt, Saudi Arabia, Algeria, India, Mexico and the Saudi–Kuwaiti Neutral Zone. Its over 1,200 employees serve clients including major national oil companies (“NOCs”) such as Saudi Aramco and Sonatrach as well as joint ventures of NOCs with global majors including BP and Eni. While maintaining a superior health, safety and environmental record, the Group currently has a fleet of nine jack-up offshore drilling rigs, three onshore drilling rigs, a jack-up barge, and a mobile offshore production unit (“MOPU”), which includes a floating storage and offloading unit. The Group is the largest offshore drilling operator in Egypt by number of rigs. www.adesgroup.com

The full announcement including legal disclaimers is available at: http://www.londonstockexchange.com/exchange/news/market-news/market-news-detail/ADES/13359127.html

1	Adjusted EBITDA - Operating profit for the year before depreciation and amortization, foreign exchange (gain)/loss, provision for impairment of accounts receivable, provisions and impairment of assets under construction
2	Normalised Net Profit – Net Profit for the year before the one-time IPO expense of USD 4.6 million during 1H 2017
3	Utilisation rate is calculated based on assets under contract
4	Based on the weighted average number of shares of 34,843,723 shares
5	RIFR - Reportable Injury Frequency Rate