Swick reveals staff cuts, profit falls

Swick Mining Services has revealed it cut staff numbers by 120 late last year to match a sharp fall in demand for its drill rigs as it delivers a 30 per cent fall in its interim net profit.

The company said that due to resource companies cutting expenditure on drilling services in light of current economic conditions, drill rig use fell from a peak of 40 in September to a low of 22 last month before improving in February.

"A series of labour reduction targets was set to match lower fleet utilisation, resulting in a cutback of approximately 120 employees in November and December amongst operations, engineering and corporate functions," Swick said in its half year report.

"In addition, the Company's new rig build programs were halted in November with the cancellation of approximately $33 million in new capital expenditure and the postponement of existing builds where possible."

As a result of the downturn in the base metals market, the company has shifted its focus towards existing clients and the iron ore and gold sectors, which has shown relative strength.

Swick said it has a "strong track record" in the gold sector with 45 per cent of the first half revenue for fiscal 2009 derived from the industry.

For the six months to the end of December 2008, Swick reported record revenue of $48.1 million, which was slightly below its expectations.

Net profit after tax was $2.3 million, down on the previous corresponding period's $3.3 million.

Swick said the profit result included a $1.3 million one-off expense, $300,000 relating to its expansion program into North America and employee options and performance rights of $400,000.

Swick said excluding these items, earnings before interest, tax, depreciation and amortisation was $12 million.

At the end of the period, Swick's cash position fell from $25.3 million to $4.3 million as a result of invesntory build-up and the purchase of components for future rig builds.

"The Company had built 17 new rigs by early November and had purchased componentry for a number of additional builds to be completed throughout the remainder of FY09 before the cancellation of $33 million in rig builds in November," Swick said.

"The cancellation of rig builds has left the Company holding some excess stock of componentry, primarily in the underground drilling division, which will be reduced as future rig builds are completed."

Shares in Swick were unchanged at 22 cents at 12:15 AEDT.