Perenti posts record $1.73B revenue but faces cash flow setbacks, Botswana project struggles, and mining services decline as it reaffirms FY25 guidance

ASX-listed mining services group Perenti Limited (ASX: PRN) has posted record half-year revenue with a 6 percent increase from 1H24, but flagged challenges in its Mining Services and idoba division, payment delays, and project underperformance in Botswana.

The company posted record half-year revenue of $1.73 billion and delivered underlying EBIT(A) of $155 million, up 3 percent year-on-year, and NPAT(A) of $82 million, marking a 4 percent increase. However, its free cash flow position declined to -$11.8 million, impacted by $42.4 million in late debtor receipts, which were received in early January.

Despite the cash flow setback, Perenti reaffirmed its FY25 guidance, projecting full-year revenue between $3.4 billion and $3.6 billion, EBIT(A) in the range of $325 million to $345 million, and free cash flow exceeding $150 million.

Contract Mining Drives Growth, But Risks Linger

Perenti’s contract mining division, which accounts for 72 percent of total revenue, remained the company’s strongest performer. The business secured a major contract with Nevada Gold Mines, marking Barminco’s entry into the U.S. market—a strategic milestone for the company.

However, Perenti acknowledged "financial underperformance" at its Zone 5 underground project in Botswana, which weighed on overall contract mining results. The company also absorbed the closure of three Australian underground nickel mines, illustrating the ongoing volatility of the resources sector.

Drilling Services Gains Scale, Now Second Largest Globally

The Drilling Services division, formed through the merger of Ausdrill and DDH1 businesses, has strengthened Perenti’s position in the market.

The company reported that Perenti Drilling Services is now the world’s second-largest drilling group, measured by total metres drilled.

While exploration drilling remains historically weak, Perenti expects activity to increase in the coming months, which could provide further upside.

Mining Services & idoba Underperforms

A key weak spot in Perenti’s results was its Mining Services and idoba division, where EBIT(A) fell by 81 percent year-on-year, while revenue declined by 9 percent. The underperformance of BTP’s rental fleet contributed to the decline, with utilization expected to recover in the second half.

The division’s struggles dragged down group EBIT(A) margins, which slipped from 9.1 percent to 9.0 percent.

Debt Reduction and Shareholder Returns

Perenti continued to focus on deleveraging, completing a $100 million partial redemption of its 2025 U.S. senior notes. However, net interest expenses rose to $34.2 million, reflecting higher borrowing costs.

Despite this, the company increased its interim dividend to 3.0 cents per share, up from 2.0 cents in 1H24, and executed a share buyback program, reducing outstanding shares by 1.3 percent.

Outlook: Confidence in FY25, But Market Risks Remain

Perenti remains bullish on its $4.7 billion work-in-hand portfolio and $17.1 billion contract pipeline, with CEO Mark Norwell rwell emphasising the company's ability to generate strong returns through commodity cycles.

Perenti CEO Mark Norwell.

“Our global and diversified portfolio, particularly in underground mining and drilling, has allowed us to navigate market fluctuations effectively,” Norwell said.

However, the company acknowledged potential risks, including continued weakness in exploration drilling, project underperformance in Botswana, and the impact of higher interest rates on debt servicing.

With Perenti holding firm on its FY25 guidance, investors will be watching closely to see if the company’s contract pipeline converts into sustained earnings growth.