Evolution boosts dividend

MID-TIER gold producer Evolution Mining has posted a record full-year net profit after tax and overhauled its dividend policy, leading to an increased payout.
Evolution boosts dividend Evolution boosts dividend Evolution boosts dividend Evolution boosts dividend Evolution boosts dividend

The E42 pit at Cowal.

Kristie Batten

The company posted a record statutory profit after tax of A$217.6 million and underlying net profit of $206.6 million on an 11% rise in revenue to $1.47 billion.

Operating cashflow was up by 12% to a record $706.5 million, while net mine cashflow was up by 8% to a record $461.5 million.

Executive chairman Jake Klein said the result showed that Evolution had become an enduring and sustainable business.

“In other words, one that can prosper through the cycle,” he told investors and media.

Earnings before interest, tax, depreciation and amortisation rose by 17% to $713.9 million

The EBITDA margin rose by 7% to 49%, and is up by 50% since FY14.

“Our longest life assets are generating the highest margins,” Evolution chief financial officer Lawrie Conway said on a teleconference this morning.

The company made debt repayments of $325 million, reducing debt to $435 million.

Gearing peaked at 24.3% following the acquisition of Ernest Henry, but has now been reduced to 15.9%.

It was that gearing level that gave Evolution the confidence to change its dividend policy from revenue-linked to a payout ratio of 50% of post-tax earnings.

The new policy resulted in a final, fully franked dividend of 3c per share.

“[The change] is part of the evolution of Evolution, or the maturity of Evolution,” Klein said.

“If you look at the next five years, we’re going to be a very profitable company.”

Evolution only has $50 million of debt due this financial year, and not until June next year.

Due to higher major capital spend and higher dividends, Conway said the company would not be making accelerated debt repayments in the current half.

Major capital for FY18 is set to be $175-215 million, mostly associated with the Cowal expansion.

After producing a record 844,124 ounces of gold at all-in sustaining costs of $907 an ounce, guidance for FY18 has been set at 820,000-880,000oz at AISC of $850-900/oz.

“This includes the benefit of a full-year of contribution from Ernest Henry and a higher assumed copper price,” Conway said.

However, that would be offset by a $10-20/oz increase in power costs, with energy costs at Cowal to increase by 80% after a contract was recently renegotiated.

“We’re comfortable this is a one-off increase for the foreseeable future,” Klein said.

Shares in Evolution jumped by 4.2% to A$2.355.