Drilling products and services company Imdex Limited (ASX: IMD) jumped close to 10% in early trade on the back of a pleasing first half result that is reinforcing belief that the tide has finally turned for the embattled company.
The stock jumped 3 cents to 35 cents after management revealed an increase in both first half revenue and underlying earnings and gave a reassuring outlook for the full year.
Total revenue jumped 12% to $114.4 million while normalised earnings before interest, tax, depreciation and amortisation (EBITDA) surged 32% to $8.6 million in the six months to end December 2014.
The normalised EBITDA number excludes the sale of shares in Sino Gas & Energy Holdings Limited (ASX: SEH), which generated a profit of $14.2 million for Imdex in the period, and a $2.1 million clean-up bill relating to a contamination incident in March last year.
The news is a welcome relief for shareholders who have seen the value of their holdings crash by over 50% in the last six months.
What is more encouraging is management's comments that demand for its products and services from mining clients has improved in the first half of 2014-15.
Sharp falls in commodity prices have forced miners to curb drilling activity, but as I wrote in late January, there were signs that market conditions were improving.
In fact, first half revenue from Imdex's mineral division increased in every country it operates in when compared to the first half of 2013-14.
This is also true for its oil & gas business, except for Europe, although the shock drop in global oil prices could drag on future profit.
However, the company (which provides more efficient drilling, data collection and monitoring solutions) makes well over 60% of sales from its traditional minerals business. Imdex had expanded into oil & gas in more recent years to help diversify away from the mining slump.
It may turn out that minerals will be the one to save Imdex instead, even though management remains confident that the multi-billion dollar market for oil and gas drilling fluids and equipment remains.
