Delta SBD Ltd : 28-02-2014 DSB ASX Media Release

ASX Announcement
28 February 2014

ASX: DSB

Board of Directors

Gordon Galt - Chairman

Stephen Bizzaca - Managing

Director - CEO

Glyn Dawkins - Non Executive

Director

Geoffrey Garside - Non Executive

Director

To : Australian Securities Exchange

Company Announcement

December 2013 Half Year Results.

Company Secretary

Tony McFadden

Principal Contact

Stephen Bizzaca - Managing

Director - CEO Phone: 02 4629 0300

Tony McFadden - Company

Secretary - CFO Phone: 02 4629 0300

Yours Faithfully
Tony McFadden
Chief Financial Officer and Company Secretary

Registered office

Suite 220, Centric

4 Hyde Parade

Campbelltown NSW 2560

Telephone: 02 4629 0300

Facsimile: 02 4629 0399

Website: www.deltasbd.com.au

• Revenue of $35.4m
• Underlying earnings before interest tax, depreciation and amortisation (EBITDA) of $1.0m
• Underlying net loss after tax of $1.0m
• Statutory net loss of $30.7m (profit of $5.2m in pcp)
• Result impacted by non-cash Goodwill impairment of $29.2m
• Pleasing momentum in new and recurring work awards, as well as contract extensions
• Improved competitiveness and profitability program on track with momentum in new and recurring work and overhead reductions
• Debt reduction initiatives resulting in a 40% decrease in group debt levels

$m H1 2013

Revenue 35.4 73.8 (52%)

Underlying EBITDA 1.0 10.9 (91%)

EBITDA margin, % 2.9 14.6 --

Delta SBD recorded an underlying net loss of $1.0m for the period, largely reflecting a 52% reduction in revenue as general weakness in the Australian coal industry continued throughout the period.
Underlying Earnings Before Interest Tax and Depreciation (EBITDA) was $1.0 million, while EBITDA
margins contracted to 2.9%.
As previously announced, the non cash impairment charge has removed all goodwill intangible assets from the balance sheet. The majority of the assets on the balance sheet now comprise plant and equipment of
$37.6m. Loan liabilities against this equipment total $15m.

The company's cash position was impacted by various redundancies, which should be considered non- recurring, with the value of employee benefits in the six months, reducing by $2.9m ($6.9m to $4.0m).

Commenting on the results, DSB's Chief Executive Officer Steve Bizzaca said:
"This has been an extremely challenging period both for the entire mining services sector and for Delta SBD. The management team has been active in reducing our site labour and organisation costs and debt levels. The cost reductions achieved have ensured that the company is more competitive, is providing a value added solution to our clients in this difficult environment and is positioned appropriately when market conditions ultimately begin to improve.
"Pleasingly we have been successful in a number of contract awards, for both new and recurring work, and contract extensions evidencing our ability to be competitive. As most of the new contracts will be undertaken in the second half, personnel numbers are expected to increase by 20%" he said.

Major new services undertaken/commenced in the first half include:
• Peabody Energy - Wambo mine (NSW) completed conveyor installation and salvage and in
December 2013, commenced mobilisation for a longwall relocation.
• Whitehaven's Narrabri mine (NSW) - Completed longwall relocation (commenced in FY13) and in December 2013, commenced mobilisation for an additional longwall relocation (includes equipment).
• BHP Billiton's Appin mine (NSW) - Completed conveyor installation and conveyor civils, commenced drill and blast excavation for overcasts and installation of a ventilation booster fan.
• BHP Billiton's Dendrobium and West Cliff mines (NSW) - Longwall relocation equipment hire.
• BMA's Broadmeadow mine (QLD) - Mining equipment hire.
Ongoing works consisted of:
• Boral's Berrima mine (NSW) - Whole of mine operations until October 2013 then transition to care and maintenance.
• BHP Billiton's Appin mine (NSW) - Roadwork development (two units), secondary support, dyke drill and blast excavation and other mine services activities.
• Peabody's Metropolitan mine (NSW) - Secondary support and other mine services activities continued.
Recent new contract awards, with services commencing in first quarter of 2014, include:
• The civil works for the Appin Area 9 project (BHP Billiton)
• Recurring longwall relocation project for Blakefield (Glencore)
• New, first time longwall relocation projects for Austar (Yancoal), Ulan West (Glencore) (includes equipment) and Tahmoor (Glencore)
• Longwall equipment for Broadmeadow (BMA)
• Option to assist in longwall relocations for the Peabody group mines in 2014
The contract for Appin roadway development was also extended to 30 December 2014.

As announced at the Company's AGM in November 2013, management embarked on a debt reduction program which successfully reduced interest bearing liabilities from $25m in June 2013 to $15m at December 2013, an overall decrease of 40%.
Initiatives undertaken as part of this program included:
• Refinancing of some equipment, resulting in a reduced principal amount by application of associated security deposits.
• The Dividend Reinvestment Plan reduced unsecured loans.
• Sale of one of the group's continuous miners.

Maintaining the health and safety of the Delta SBD workforce and of our clients remains a core value of the group.
Overall the company is pleased to advise an improvement in the Total Recordable Injury Frequency Rate from 18.1 to 12.9. Leading safety measures remained on target over the reporting period.

The company's expectations for the January to June 2014 period are set against a framework of continuing general weakness in the coal industry in Australia.
Notwithstanding this the company forecasts improved performance for the second half of the 2014 fiscal year as the company will continue to provide value added services to Illawarra Coal as well as undertake a number of longwall relocation projects including recurring work at Wambo, Narrabri (including equipment), Blakefield and Broadmeadow (equipment only), new work at Austar, Ulan West (including equipment) and Tahmoor, and Appin's Area 9 major civil work over the next 12 months.
To address the Group's ongoing cashflow requirements the Group's major shareholders have given a commitment to provide an invoice finance facility with a limit of $3.5 million at market terms and conditions. This facility is subject to board approval and will only be established in the event that negotiations surrounding the following facility cease.
The Group has accepted indicative terms and conditions from an external financier for an invoice finance facility for $4.65 million. The finalisation of the facility and execution of the agreement on the indicative terms and conditions offered is subject to the external financier completing due diligence procedures. The directors are of the view that the due diligence procedures will be satisfactorily completed and the
$4.65 million facility will be established during March 2014, in sufficient time for the first drawn down need.

Geoff Fowlstone
Fowlstone Communications
T: 02 9955 9899
M: 0413 746 949
E: geoff@fowlstone.com.au

Delta SBD is one of Australia's largest underground coal mining contractors servicing Australia's underground coal producers. The Group is geographically diverse, with operations across NSW at the Southern, Western, Hunter Valley and Narrabri coalfields and the Bowen Basin in Queensland.
The Group's objective is to provide value-added services to clients by forging profitable long term partnerships. Delta SBD provides each project/mine at which it works with competent work teams, "fit for purpose" equipment and excellent site management backed by a supportive corporate management. The Group uses safe and efficient work methods enabling on-time completion of works and services to client requirements.

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