Mitchell Services reported a transitional FY25 with revenue growth but earnings pressure from lower utilisation and mobilisation costs. The company secured key contracts and launched a decarbonisation joint venture, positioning for a stronger FY26.
- Revenue increased 17% to $196.7 million despite operational challenges
- EBITDA declined 36% to $25.7 million due to reduced utilisation and mobilisation expenses
- Net profit after tax fell 94% to $0.5 million
- Gross debt reduced by 46% to $9.7 million, the lowest since 2015
- New multi-year contracts in PNG and a decarbonisation joint venture 'Loop' offer growth potential
A Year of Transition Amid Operational Headwinds
Mitchell Services Limited (ASX, MSV) has released its full year results for FY25, marking a transitional period for the mining services provider. The company reported a 17% increase in revenue to $196.7 million, driven by new contract wins and market expansion. However, earnings were constrained by lower utilisation rates and significant mobilisation costs associated with these new projects, resulting in a 36% decline in EBITDA to $25.7 million and a sharp 94% drop in net profit after tax to just $0.5 million.
Operational disruptions played a notable role in the subdued earnings. Events such as an underground fire at the Grosvenor mine, temporary shutdowns at Oaky Creek and Moranbah North, as well as broader industry factors like corporate activity and adverse weather, contributed to reduced activity levels, particularly in the coal sector where prices have softened.
Strategic Contract Wins and Market Expansion
Despite these challenges, Mitchell Services successfully re-secured all major expiring contracts and made strategic inroads into new markets. Notably, the company entered Papua New Guinea with a multi-rig, multi-year contract awarded by a global gold mining major. Additionally, it secured multi-rig underground and surface contracts with Tier 1 clients, including a leading ASX-listed coal company.
These contracts underpin a balanced revenue mix, with approximately half derived from surface drilling and half from underground operations. Gold-related activities represent over 45% of revenue, and more than 80% of revenue stems from production, development, and resource definition drilling, highlighting the quality and stability of the company’s income streams.
Decarbonisation Joint Venture, Loop
A significant highlight of FY25 was the launch of Loop Decarbonisation Solutions, a 50/50 joint venture between Mitchell Services and Talisman Technical. Loop offers an end-to-end decarbonisation drilling service, integrating health, safety, environmental risk management, and operational readiness to support mining clients’ net zero ambitions. The venture has already completed its first project and is progressing feasibility work with a second customer, with a Letter of Intent in place for full in-field management of a decarbonisation project.
This initiative positions Mitchell Services at the forefront of ESG-driven mining services, tapping into growing investor and regulatory demand for emissions reduction. Loop represents a material growth opportunity that could reshape the company’s service offerings over time.
Financial Health and Outlook
Mitchell Services’ balance sheet remains robust, with gross debt reduced by 46% to $9.7 million; the lowest level since 2015. The company maintains strong liquidity, including an undrawn $15 million working capital facility and significant headroom on equipment finance facilities. Operating cash flow was constrained at $17.9 million due to increased working capital investments, particularly inventories to support new contracts, but management expects cash conversion to improve as FY26 progresses.
Looking ahead, the company enters FY26 with a significant portion of revenue contracted and a clear strategy to optimise profitability, ramp up utilisation, and expand services both domestically and offshore. The fixed nature of many costs means that earnings leverage could be substantial once utilisation normalises, potentially driving a rebound in shareholder returns, including through share buy-backs.
Bottom Line?
Mitchell Services’ FY25 challenges set the stage for a potential earnings rebound as new contracts ramp up and decarbonisation services gain traction.
Questions in the middle?
- How quickly will utilisation rates recover to pre-transition levels and drive EBITDA growth?
- What is the expected timeline and scale for Loop’s contribution to overall revenue and profitability?
- How will ongoing coal sector dynamics and mining industry disruptions impact FY26 performance?