A Mitchell Services drill rig. Source: Mitchell Services
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  • Mitchell Services (MVS) downgrades its earnings guidance for the 2022 financial year following severe weather and COVID-19 disruptions
  • Record rainfall across Australia has delayed the ramp up of operational drill rigs and the company has also seen its highest levels of COVID-related absenteeism
  • This has resulted in restricted revenue growth and MVS now expects EBITDA for FY22 to be between $31 million and $35 million, down from $40 million to $44 million
  • However, contract wins and extensions have offset impacts on revenue and with the disruptions seen as temporary, MVS remains optimistic about its long-term outlook
  • Company shares dipped 17.4 per cent to trade at 28.5 cents at 11:52 am AEST

Mitchell Services’ (MVS) share price has dipped to its lowest in a year following a downgrade to its earnings guidance for the 2022 financial year.

The global drilling services provider is positioned in exploration and mining centres across Australia including Queensland, New South Wales, South Australia and Western Australia.

Given record levels of rainfall from multiple severe wet weather events across the country, the company’s planned ramp up of operational drill rigs has been delayed.

Consequently, Mitchell has incurred material costs to commence these projects and said it will not be able to mobilise and generate gross margin from operations until the wet weather abates and it is dry enough to do so.

To make matters worse, the company has seen its highest levels of absenteeism since the pandemic started.

While these levels are anticipated to decrease as isolation requirements are relaxed, the
impact of absenteeism on revenue and operating costs remains ongoing.

As a result of the disruptions, Mitchell has downgraded its earnings before interest, tax, depreciation and amortisation (EBITDA) guidance for this financial year to between $31 million and $35 million, down from the previous guidance of $40 million to $44 million.

The impact on revenue has been offset by new contract wins and extensions, and as such the company confirms its revenue guidance for the financial year of between $200 million and $220 million.

Mitchell considers the impacts it has faced as temporary and remains optimistic about the long-term outlook for the company.

Company shares were down 17.4 per cent trading at 28.5 cents at 11:52 am AEST.

MSV by the numbers
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