Good afternoon, everyone. Thank you for joining today.

My name is Allen Chan from Bridge Street Capital Partners, and today we have Mitchell Services for the fourth quarter quarterly. Today we have Nathan, Executive Chair, Andrew Elf, CEO, and Greg Switala as the CFO to talk about the update.

Over to you, Andrew.

Thanks, Allen. Thanks very much for for having us, and thanks, everyone, for your interest.

Look, as as per the usual format, just be a a handful of remarks at the start, not nothing too long, and really it's the purpose of today's to to open up to questions and give everyone the opportunity to to direct some questions. Obviously, we're we're glad to have Nathan Mitchell, our Chairman, with as well.

Look, just a a few points. Obviously, a strong Q4, and importantly a a really strong financial year for us.

Obviously, EBITDA percentage strong, and that's flowing flowing through down to to the final NPAT figure, which is expected to be about $15.2 million, subject subject to tax being finalized and and release of the of the results. Obviously, the balance sheet has continued to strengthen, and we were in a net cash position as at 30 June.

That certainly gives us the ability you know to to have some optionality in the business, and I'm sure Nathan Nathan will talk to that in the in the questions, but obviously some very strong operating cash flow during the year. Commodity-wise, gold representing circa 60% of revenue versus coal 30 for the year, still making coal, and obviously we you know we've sort of made the point as well that we believe rig count has bottomed out, and we exited the year at 65, which certainly gives us the ability to grow further given the fleet that's available to us.

Capital management, obviously Nathan's here. We we had a a very strong dividend at at the end of the first half, you know and and Nathan can talk about some of those thoughts that the board or or he may have.

The LF business is currently drilling for its second client, and that project is going well. It's it's still early days with that business, and and it will take more time, as we've said to people, but it certainly does give us a an optionality for growth.

Then on some of the metrics, you know without touching on them too much, very pleased to see return on capital sort of 25% plus. I think that's a an excellent number, and and really a great effort from from all of the team to to deliver that.

Last week, just to finish up, last week we were all up at the Noosa Mining Conference, which is a a fantastic conference that we attend every year, and there was actually a good paper from from one of the analysts out there. I think the title was Drill, Baby, Drill, and and that was really the theme.

It was people are well-funded, they've raised money, they're putting the money into the ground. We're starting to see that come through.

Rig count is increasing, and certainly I think the the bookings for the rigs moving forward look fairly healthy, and we can see that rig count continue to increase throughout the first half. The business is in great shape.

The team's doing a great job, and we're very we're very thankful for for all the work that our clients give us, and we're doing our best to provide a good service to them, balance sheet strong, and and options available to us. Really really pleased with where we are and and importantly where we're going.

Nathan, I'm not sure if you want to add anything or just go to the questions. No,

I would I'd certainly reiterate what Andrew said. I think the team's done an excellent job, another amazing year.

Again, as we've said, we've come through the coal downturn and accelerated into the mining boom, and I think the team is on the up and up. The numbers speak for themselves with regards to last year versus this year.

As Andrew said before, we've paid a a great dividend first half. We will pay another dividend second half, and so that's that number yet I I'm sure whether we'll release that number as a cents-wise, but but there will be a second dividend for the year based on the numbers we're looking at.

I think from a opportunity point of view, we've we've sort of wound down the coal or or the coal has wound down, not us winding down. Essentially, both those mines have now been bought by new owners up in in the Bowen Basin.

A number of mines have traded hands over the last sort of I don't know, 2 months in the coal sector. That's a that's an interesting space.

We're certainly not relying on it. We've sort of moved our our business model into the minerals, and and that's been great for us.

You're seeing that that growth in the minerals, and we're expecting that to continue to grow into the this half and the next half. Minerals, as Andrew said before, is strong.

People have raised a lot of money at $5,000 an ounce, and exploration is is strong on the East Coast. Also strong on the West Coast, not that we do a lot on the West Coast.

Overall, we're I think we're in in a very good position from a debt point of view and from a rig allocation point of view. We're now sort of well and truly evened out across the east Eastern Seaboard, about 30/30/30 in Victoria, New South Wales, and Queensland and and and NT.

I I think that's and we we continue to look at opportunities all the time. I think our our balance sheet's very good.

Our share price is low, but our balance sheet is strong. We continue to look at new opportunities going into the new year.

No, beauty. Thanks, Nathan.

Might open it up to questions, Allen?

Yep, fantastic. Thank you, guys.

I think the first question's been answered by Nathan in regards to capital allocation. I think just to reiterate, there will be a second dividend, just a matter of the number.

Second question, any issues you are seeing with fuel supply, either clients or Mitchell itself?

Just before we move on to that, Alan, that one on the capital management side, I think Nathan's been pretty clear with everybody on these calls, and correct me if I'm wrong, Nathan, but it remains the same. You'll decide to allocate the capital to growth or dividends.

You might want to sort of later touch on that.

No, that's true. We're still seeing growth in the sector, we are looking at opportunities around growth, it's not just a pure dividend play.

We still believe that the shareholders deserve a dividend when things are looking very good, but certainly we are also looking at growth and growth opportunities. Again, the allocation is obviously we don't have any debt at the moment, there's no allocation to debt, and the other levers we've always talked about is obviously, share buybacks, dividends, or growth.

I think what we're looking at at the moment is growth and dividend.

No, that's really good, Nathan. Thank you.

Obviously, as Nathan said, it's the intention of the board to pay a dividend. It'll be fully franked, and the quantum of the dividend being announced when the full-year results are released in August.

As far as fuel goes, no issues. We've got a little bit of our own contingency supply in some of the yards that we have.

It's generally client-provided. Our clients are obviously a lot bigger than us and better access as well, but no issues to date.

A majority of our contracts are client provided fuel. In very few instances do we provide the fuel, and where we do, it's generally on a charge-back basis, not just supply, but if the price increases, due to unforeseen circumstances, then from a profit perspective, our exposure is really limited to lubricants and things like that, more so hydraulic oil and things like that.

That fuel is okay.

Thank you. Next question: Can you make some comments on new business pipeline and whether you would expect rig counts to continue to rise over the course of FY 2027?

Yes, I think Nathan touched on that just then. I think we do expect the rig count to increase through the first half, and then we'll reassess what we're seeing in the second half.

We're never going to sit here and say it's going to go from this to that and there's this many here and that many there, because you're never going to be right, and it's going to change. Certainly I think as Nathan said, with those companies that have raised the money, they've raised it already.

They've gone through the approval processes. We're seeing tenders come out.

We're seeing tenders get awarded, commitments are being made. Rig count will increase through the first half, and we're certainly very busy.

Thank you. A question from Peter: Obviously, well done on a great year.

As you previously forecast, CapEx was a fair bit higher second half versus first half, although similar year-on-year. Is that $21 million basically maintenance CapEx, or does it include any growth CapEx?

Do you expect that to be relatively consistent in future years?

Thanks, Allen. The $21 million for the year obviously was very similar to last year and yeah, primarily maintenance CapEx.

I think the first half, second half split was really just a function of timing in terms of when that work needed to be done. That said, there was one new rig to service a new contract that's included in that number.

A very small element of that was growth in the form of that new rig. Probably a little bit difficult sitting here in July to be putting firm forecasts on a CapEx number for this year.

I think broadly work on a similar number. There is obviously a very strong tender pipeline and subject to the success of that, we may need to sort of bring some of the maintenance CapEx forward a little bit, but probably too early to sort of give a firm number at this stage.

Thank you, Greg. Next question from Karim.

There's a few parts here, gentlemen. Can you provide an update on Moorvale North and Grosvenor?

His understanding is Moorvale North has been reopened with Mitchell's rigs working during Q4 '26? How of an impact could be the restart of Moorvale North has the company in terms of rigs in earnings?

First part.

Yep, Anglo, since they've had those challenges on those two respective sites, have kept pretty close to their chest where things are at. I think they really haven't released anything publicly that gives anyone any great guidance on what's happening.

As Nathan said, there's a sale process that is being undertaken, obviously. What we can say is that the intention of the new owners and Anglo was obviously to restart those mines and get going again.

At the moment, we've got one rig operating at Moorvale underground, and we've got no rigs operating at Grosvenor. That's probably about as much as we can probably say, Nathan.

You go back in time, we had three rigs at Grosvenor, and we had four rigs at Moorvale North. It's one rig across the two sites instead of seven.

Will it return to seven? We don't know.

We have no idea.

Part two: How many unused non-coal rigs do you guys have left? What are the prospects to put these to work?

Look, we never sit here and talk about individual rig counts. If we sat here and said how many underground minerals rigs are here and how many surface rigs are here and how many this or there, you'd just sit here picking it apart for hours on end.

The best way to think of it is there's this many in the fleet, there's this many running at 30 June, count's going to increase. We're very open in the quarterly at the average revenue per year per rig.

You can make an assumption on operating rigs and times it by the number. Obviously, you can do the maths.

We had seven running across two sites. We're now down to one.

There's six rigs, and three of them were damaged obviously with the Grosvenor event. There's some basic numbers there.

If opportunities come up, we'll be disciplined with the bidding and take advantage of them if they come up.

Thank you. Can you also provide an update on what is views an optimal balance sheet to be?

At year end, the company had entered a net cash position. Does the company aim to be debt-free going forward?

I think the answer to this is very similar to the comments by the other gentlemen in terms of the overall capital management structure and strategy. Obviously on a long-term basis, the business would look to keep it as low debt as possible, but it is going to depend on growth opportunities that may present themselves as well, and we've certainly done that in the past.

Leveraged up to a fairly conservative level, but then demonstrated that we've got the ability to pay that down. To the extent that those opportunities present themselves, we'd certainly look to use debt to fund them.

Fair to say the company's probably in a bit of a harvest phase now, and we've seen that with a dividend at the half year and the likely dividend at the full year, and debt's going to remain low to zero in the very short term, but again, that can obviously change based on growth opportunities that present themselves.

Thanks, Greg. I think we spoke about capacity, I'll move on to the next one.

This also maybe add to that coal view, Andrew, guys. You said the revenue from some of the large coal clients are half of what they've been historically.

Do you see getting back to those previous levels in FY 2027? Maybe add to that just your view on the coal sector, I guess, how you're seeing it.

I don't think so. There's definitely transactions occurring, but that will take time to wash out through the industry.

You've had a number of coal mines that have gone into receivership. Transactions are occurring, but that takes time to wind through, yeah, there may be they start up in 2027, but we're not budgeting for a sudden inrush of work in the coal sector in this year.

It certainly could happen in 2028, but a lot of them gone bad, but are now being picked up. There will be additional work coming on at some point, but again, we're not budgeting that way.

No, I agree with Nathan. I think the best way to think of it is the miners that are out there are doing the bare minimum.

There's nothing they're doing that they don't need to do. It's just the bare minimum, and do we see it bouncing back?

As Nathan said, no, not this year. When it does, it is an opportunity for us.

If that bounces back and more rigs are operating in that sector, it's obviously a opportunity for us when it does bounce back, but I certainly think we've got a very good year ahead of us, with the business where it is at the moment.

If they're buying the mine, they've got to keep it going at some point, and there's gas in those mines, they have to be drained and have to be safe in order to continue to operate, they will require ongoing drilling that they had. Greenfield new exploration, I doubt very much.

Maybe one or two mines here and there, but as long as the coal royalties stay where they are, then I can't see new mines starting up anytime soon, and so it'll be more around the restart of existing mines and their ongoing production maintenance drilling, which will have to be done.

Thank you. Question from Isaac: Are lower margins during the quarter due to mobilization and demobilization costs?

Primarily, yes. Andrew made the point in the letter that the rig count sort of troughed in April, it was about 59 at the time, and we exited obviously with 65.

Six rigs' mobilization over a 2-month period is fairly significant, and that obviously does come with the usual sort of mobilization costs in there would be the reason for the slightly lower margins. All

right, thanks, Greg. Any comments around performance of the specialist GI tech tool this year?

No, other than probably a lighter year than others. There wasn't a great deal of it.

There was a handful of projects, but certainly a lower percentage of revenue than we've seen in previous years. Again, it's very lumpy.

It stops, it starts. The opportunities come, the opportunities go, you take it when you can get it.

There's opportunities in the pipeline, but nothing really to note.

All right, thank you. Another question from Isaac, and just on the rig increase.

Rig increase, we saw that from clients in gold, mainly. Probably just to confirm that.

I think when the full year comes out in Investor Preso, there'll be a full breakdown of commodities. Again, I would just divide the average operating rig revenue by the relevant percentage of revenue this year and last year, and you'll get a bit of a feel for how gold has contributed to the movement.

All right, thank you. Again from Isaac: On new contract awards, obviously at the end of the first half result, we had verbals for 10 rigs: 6 10 rigs, 6 new and 4 at existing clients.

Any update on that?

Four rigs is signed, rigs out drilling before Christmas, hopefully, with no delays. Six rigs close to being signed.

Obviously, you're not going to say who it is or where it is, and those rigs will start at the back end of the year and into next year. All right.

Thank you. We'll go to the next one.

Obviously, a longer one, bear with me, you guys. Could you please give a bit more of an update on the outlook for LF?

If you feel the shares are undervalued, is there not more of a focus on buybacks likely in terms of the capital allocation mix? I think earlier this year you ruled out transformational M&A given how high vendor expectations were.

Could you walk us through vendor expectations and what you are looking for in terms of M&A that you don't have now? Finally, could you perhaps expand a bit more on what you are seeing in regards to EBITDA EBIT margins and cost base and cash costs from a lease CapEx and tax perspective?

Again, a bit to absorb, but definitely there's enough there to work with, guys.

Probably start with LF.

Okay. Maybe I'll start with LF a little bit.

I might let Nathan talk to M&A and acquisitions, just your views. Then maybe Greg at the end can just sort of cover off on some margin and cash, interest rates, things like that.

Look, I think the LF business, we're being very conservative purposefully with the way that we talk to people about it. I think we don't want to be spruiking and be running around saying it's going to do this and it's going to do that, and then it doesn't do it.

It is a wonderful opportunity. It is a genuine growth opportunity.

We've got a good jump on the competitors. We're proving the concept.

We've had a Fortune 500 company invest into that business at a $24 million val. It is taking time.

Coal miners are conservative. They don't like change.

They certainly don't like having to pay tax and spending money. I think I'm a believer in it, but I think it is going to take time.

One thing I would say is that the legislation as it stands, and we actually had a conversation with the board in a meeting we had this morning, was the requirement is for the coal miners to increase their emissions or whoever's the legislation's applicable to, has to increase their emissions on a compounding basis year-on-year, which means the tax and liability they've got will increase materially over time. Certainly, we're at the very early days of those people being on the ticker.

It doesn't hurt them that much yet, but it will start hurting more. Again, would I like things to happen quicker?

Of course. Do we believe in it?

Yes. Has it got a good growth opportunity?

Yes, it does. Are we doing a good job on the contract we're on right now?

Yes. Again, as we've said to people on the road when we go around, be conservative, value it at zero, have it as a growth option until we can come around and give you a bit more meat on the bone with this many rigs at this cost, running this much at this return, that sort of thing.

That's probably what I'd say about LF. Nathan, your view on M&A and that sort of thing, mate?

Look, I wouldn't say we're undervalued. We're certainly not overvalued.

I'm just saying that from a capital allocation point of view is that I think we've paid back something like $70-odd million over the last 4 years. I think shareholders like that, and we'll continue to do that.

I think again, the four levers that we've always had, we'll continue to look at those. At the moment, there's growth opportunities that we're looking at, M&A opportunities, growth opportunities.

We'll never say never, and we're always on the lookout. We're not a company that says we are stuck in the mud where we are, and we're just going to continue to do buyback and dividends.

We've done a number of M&A transactions over the years, and we'll continue to look at transactions. To Greg's point before, yeah, that's what we'll look at all the time, and that's why we look at dividends, special dividends in the first half or the second half, and those might change.

I think you never take it for granted that there will always be a dividend, because we are always looking at different opportunities in M&A. We are astute buyers.

We don't just buy for the sake of buy, and we probably also turn over a lot of rocks to find a gem. I think that's worked for us over the last decade, and so just because we've had a good year, doesn't mean that suddenly we'll overpay for something.

If we do buy something, it needs to be something that we can see for the future that is a growth opportunity and not a short-term investment. I think that's where we are on the capital.

That's really good, Nathan. For those that aren't aware, some of those things that Nathan's talking to, $77 million is a big swag of debt reduction, millions of shares bought back at an average price of $0.37-odd, and then some pretty chunky dividends, with more to come.

On the transaction side, Deepcore in 2019 into gold, Radco into underground coal, a very good acquisition, and then obviously, others at the bottom of the market, assets cents in the dollar, and a big organic growth program, levering up and then paying that debt back when we had COVID tax advantages available to us. I think, as Nathan says, over the years, some very very good capital allocation decisions.

Greg, maybe just margins, costs, interest rates, your views on that? Yes,

I think the best way to try and answer this question, firstly in terms of what we're seeing from an EBITDA perspective, we've publicly called out previously that we try and run this business on a 20% EBITDA basis. That's obviously a pretty strong number.

That continues to be the case. I think costs are largely under control, probably wages costs and access to labor in a scenario where rig count continues to increase is probably the main risk there.

From an EBIT perspective, it's probably not linear to be honest, and what I mean by that is there's a level of fixed depreciation in this business, which largely ties up to that maintenance CapEx number. Work on, for the sake of your modeling, work on sort of $21 million or thereabouts.

Then any incremental EBITDA, given that level of fixed D&A costs, does drop to your EBIT margin, you've kind of model on that basis to form a view around an EBIT margin. It's not linear, as I say.

You can't just take the revenue and call out an expected margin. From a cash costs perspective, the debt's practically zero now, nothing in terms of significant cash outlays for repayment of debt.

Probably worth pointing out to Andrew's point, though, the increased interest rate environment currently, back when we did that organic growth strategy, and the timing worked really well, mind you, we've got access to debt at about 3% or thereabouts for that CapEx. Probably looking in the order of 7% to 7.5% on equipment finance lines now.

CapEx question, I think we've answered earlier in terms of probably a little bit too early on in to form an exact number. Then tax, just cash tax 30% or maybe a tick over of the accounting profit before tax.

There is still, although to a much smaller extent these days, still a slightly higher cash tax rate in this business given the fact that we did benefit from that ATO instant asset write-off back when we undertook that growth strategy, but that sort of has continued to unwind, and it's not nearly as severe as what it once was. Maybe, 32%, 33% cash tax margins to take into account that.

I hope that makes sense, sorry.

Great. No, thank you, guys.

Now, we've touched on growth and business acquisitions. I think you've guys given an overview on gold.

Maybe we can talk about an update on the labor turnover and retention of quality of staff given the labor market tightness and obviously with the Olympics coming up. Any thoughts there?

I think gold where it is, people are still making fantastic returns. People are producing.

Generally, they're making very good returns where the gold price is, I think really no issues with the price where it is. As far as the gold price outlook goes, there's people out there that are much more qualified than I am to talk about that, you can make your own decision on gold price, but I certainly wouldn't say it's weak.

It's weakened a little bit, but it's still very strong. Look, and then on the labor side, it's a people business.

It's all about the people and how we run the business and provide that service to the clients, and we're very lucky that we're a larger driller. We've got a great reputation, a great brand, good gear, good clients, good contracts, people get good camps, good food, they get looked after with flights, and that they get looked around, and we train them, and they can progress and earn more money.

We've got a better chance than some to attract and retain, and we've never have been in a position where we haven't been able to deliver, and we hope that's the case moving forward. It is a business risk, of course.

We haven't started building anything in the east yet for the Olympics. When that does potentially start, it's harder to get people.

We'll wait and see, but at the moment, looking okay.

All right. Thanks, Andrew, we spoke about mobilization costs.

Maybe the last question here from Mark Horner goes towards you, Nathan. Obviously, you talked about growth.

Is that to come from market share or growth of the market? If both, then what is the percentage?

Hard to say at the moment. I think we're just looking at growth from the market, but again, as I said before, we'll always look at M&A opportunities, but they just need to be the right ones, but I think at the moment the additional rigs that are coming on that Andrew and Greg talked about before, that's really just growth in the market, growth in our clients.

Our clients think we're doing a good job, adding more rigs to the same projects, which is obviously beneficial for us. It's less mobilization costs, less effort, but also means we're displacing our competition, which is always a good news story, tells us we're doing something right.

That's where a number of these additional rigs in this first half are going into existing contracts, existing clients that are happy with what we're doing. Most of it is growth in market, growth in gold, it's obviously decline in coal, but I think there's been no rigs coming off in coal since we last had the last quarter anyways, been no decline in the hard rock business.

Fantastic. Thanks, Nathan.

That was the last question, guys. Again, great quarterly.

Thank you very much. For the audience, this is being recorded, I'll get that out to you guys.

If there are any other questions, feel free to forward them through and I can revert back to the company and have them answered. Nathan, Andrew, Greg, thank you again, and well done, guys.

Thanks, Allen.

Thanks, Allen. Really appreciate it.

Thanks, everyone.

Thanks, everyone. Thanks for your interest.

Thanks. Bye.