Interim Results
Plexus Holdings Plc
08 March 2007
FOR IMMEDIATE RELEASE 8th March 2007
Plexus Holdings plc
Interim Results for the six months ended 31st December 2006
Plexus Holdings plc ('Plexus' or 'the Group') the AIM quoted oil and gas
engineering services business and owner of the proprietary POS-GRIPTM method of
wellhead engineering announces its interim results for the six months to 31
December 2006.
Highlights
• 186.0% increase in turnover to £4.4m (2005: £1.6m)
• 288.8% increase in EBITDA (before FRS 20 share based payment charges) to
£0.556m (2005: £0.143m)
• Profit before tax increased to £0.12m (2005: loss before tax of £0.16m)
after adopting FRS20 for the first time
• Installation of the first production wellheads for the major BP Shah
Deniz project in the Caspian Sea
• Wellhead rental wins with BG International Ltd (BG), and Maersk Oil
North Sea UK Limited (Maersk)
• Significant capital investment in expansion of rental inventory and in
particular high pressure/high temperature (HP/HT) wellheads
• Continuing development of proprietary wellhead technology for 20,000 psi
applications and engineering of additional products such as valves and
connectors
Plexus' CEO, Ben van Bilderbeek, commented:
'I am very pleased with the progress we have made during our first 12 months as
an AIM listed company. This has been a particularly active period in which we
have had to increase our infrastructure considerably to accomodate our growing
sales activities in new markets and with new customers around the world. The
significant increase in sales generated by our high pressure/high temperature
(HP/HT) rental wellhead equipment is particularly gratifying as this
demonstrates the growing acceptance by the industry of the technical benefits of
our proprietary method of engineering and its unique combination of benefits in
terms of safety; performance; and time savings'.
For further information please visit www.posgrip.com or contact:
Plexus Holdings plc Tel: +44 (0)20 7589 8555
Bernard van Bilderbeek, Chief Executive
Graham Stevens, Finance Director
St Brides Media & Finance Tel: +44 (0)20 7242 4477
Isabel Crossley
Bell Lawrie (Nominated Advisor and Broker) Tel: +44 (0)141 221 7733
Elizabeth Kennedy, Director Corporate Finance
Ken Fleming, Director Corporate Finance
Chairman's Statement
Introduction
I am pleased to report that the Group has continued to make good progress during
the first half of the year delivering a 186.0% increase in turnover and a 288.8%
increase in EBITDA (before FRS 20 share based payment charges) against the same
period last year, and generating a number of new business opportunities outside
of our traditional North Sea base of operation.
Interim Results
Turnover for the 6-month period was £4.44m, up 186.0% from £1.55m the previous
year. The rental business and related equipment and services account for the
majority of Plexus' business activities of which HP/HT wells continue to grow in
importance, with sales up 179.4% for the six months to December 2006 versus the
same period to December 2005. In line with the project cycle, the large BP Shah
Deniz wellhead supply project related income grew for the 6-month period to
£1.27m from £0.31m last year, but will reduce in the second half as delivery of
equipment for the first stage of the project nears completion.
Gross margins have reduced to 45.4% in the first half of the year from 61.9% in
the comparative period last year as a result of the lower margin BP Shah Deniz
business activities accounting for a higher percentage of overall turnover, plus
the dilutive margin effect of pass-through sales of Xmas Trees (well control
valves) which are not Plexus products and are sold at cost. It should be noted
however that rental gross margins have improved upon the comparative period as a
result of economies of scale associated with higher volumes.
Administration expenses have continued to grow year on year and totalled £1.71m
for the period up from £0.99m last year. This increase reflects the necessary
step up and implementation of expanded premises, personnel, and associated
infrastructure to meet the demands of sales growth, which is now more diverse
both in terms of product mix and geographical spread. The business is nearing
the necessary cost base to service customer requirements for the foreseeable
future, with minor headcount expansion planned for the second half of the
financial year.
The profit before tax of £0.12m compares to a loss before tax for the same
period last year of £0.16m, with depreciation and amortisation increasing to
£0.42m in the period against £0.24m for the same period last year. The profit
before tax is stated after charging amortisation of share based payments for the
first time under reporting standard FRS 20; the charge for the half-year to
December 2006 is £0.06m compared to £0.01m in the corresponding period last
year. The PBT figure includes a contribution of £94k from our participating
interest in a precision engineering business. The Group does not anticipate a
charge to UK Corporation Tax due to the utilisation of brought forward losses,
which have not been provided for in the accounts as a deferred tax asset. The
tax charge for the period of £17k represents foreign corporation tax. Earnings
per share amounted to 0.13p per share (2005 - loss of 0.41p) on a fully diluted
basis.
The balance sheet reflects the growth in operations during the period with
tangible assets including items in the course of construction increasing to
£4.70m at the end of December 2006 from £1.57m at the end of December 2005. This
is primarily due to investment in expansion of rental inventory, which is due to
complete throughout the rest of 2007 and be income generating as it comes on
stream. Debtors have increased to £4.56m at the end of the period as compared
to £0.84m at the end of December 2005, primarily as a result of the increase in
sales revenues and the balance due on long term contracts. Net cash position
closed at £0.17m compared to £7.31m at the end of December 2005 reflecting the
Group's investment in expanding the rental fleet of equipment and the funding of
manufacture on long-term contracts. In recognition of the capital expenditure
commitments either completed or under construction the Group has recently
increased its bank facilities from £0.75m to £2.5m.
FRS 20 (Share Based Payments) charges have been included in the accounts for the
first time, in line with reporting standards. The 'fair value' of share based
payments has been computed independently by specialist consultants and is
amortised evenly over the expected vesting period from the date of grant. This
computation is unaudited in these accounts and will be audited for the first
time at 30 June 2007. The impact of this policy is detailed in note 5.
The Group's IFRS (International Financial Reporting Standards) conversion
programme is at an early stage. Compliance with IFRS is required for the year
ending 30 June 2008 with comparatives restated accordingly for the year ending
30 June 2007. At this stage it is not possible to say what the impact upon
earnings will be. However the key areas of potential impact identified so far
are IFRS 2 - share based payments and IAS 28 - Investments in Associates.
Operating Review
Plexus' focus during the first six months of the year has continued to be on
winning new contracts with the emphasis on HP/HT rental wellheads; establishing
the necessary infrastructure and personnel to support increased levels of
business activity; whilst at the same time fulfilling our ongoing commitments
for the BP Shah Deniz project in the Caspian Sea.
As the reputation and awareness of Plexus continues to make progress, increasing
opportunities are presenting themselves to introduce our proprietary POS-GRIPTM
technology to new territories and to new customers. Of particular note during
the period was the winning of two new major customers for our HP/HT wellhead
equipment, namely BG International and Maersk. In the case of BG International
Plexus has been asked to develop and qualify POS-GRIP wellhead equipment to
20,000 psi as part of a five-year framework agreement to support BG's
exploration activities in new and more technically challenging fields in the
North Sea. It is anticipated that the successful conclusion of this project over
the next nine months will help us in due course to make further inroads into the
burgeoning X (ultra)-HP/HT marketplace and lead to additional business with BG
International. Such rental activity growth is anticipated to generate over time
new opportunities for the supply of production wellheads as the market place
becomes more familiar with our POS-GRIP technology.
To be able to service and support such diverse growth opportunities it has been
necessary to increase the Group's rental wellhead inventory through a sizeable
capital expenditure programme, which in turn needs to be engineered and operated
by an increased number of personnel. These growth requirements are reflected in
increased overheads, where for example, the number of personnel has grown from
37 at the end of December 2005 to 55 currently.
The Group's major BP Shah Deniz project, which began in 2004, has reached an
important milestone; the first POS-GRIP wellhead systems have been installed,
and the platform is producing gas. Further development and testing work is
continuing with BP, which we anticipate will lead to a greater understanding and
acceptance of POS-GRIP and its capabilities and will also be relevant for
potential future major projects with other operators.
It is important to note that operating conditions in the North Sea, which is the
Group's traditional area of activity and focus, have been particularly
challenging for operators in terms of widely reported steep cost increases and
general shortage of skilled personnel and in some cases rigs. Over time it is
anticipated that exploration and production activity and therefore associated
investment in the North Sea will decline and this is reflected in the recent
round of new licenses granted where the 'super majors' chose not to participate.
Furthermore the Treasury has recently reduced its tax revenue forecasts. For
these reasons Plexus' strategy of seeking new business from other areas around
the world such as Egypt, Brunei, and Trinidad has been proved correct, although
at the same time the greater geographical spread of activity can lead to supply
chains being stretched and in some cases contract execution and equipment uptake
delays.
In addition to the ongoing activities of our wellhead business, an increasing
amount of engineering and new POS-GRIP product development activity is taking
place. These new technologies include specialist riser and conductor connectors
and a project to develop X-HP/HT (30,000 psi) capability for tubing hangers.
Discussions also continue with major operators and rig contractors where
POS-GRIP technology can provide enabling advantages as part of the revolutionary
hardware that is needed for new drilling technology methods under development.
Related to this, and in recognition of the fast growing importance of subsea
activities, Plexus is recruiting engineering specialists with skills outside of
our current core business activities who will assist with the development of
remote subsea setting capabilities for POS-GRIP.
Outlook
Our strategy continues to be that of growing organically our rental and product
sales around the world, whilst using these as a 'showcase' for pursuing
licensing opportunities and potential joint ventures in selected regions where
Plexus POS-GRIP wellheads could be manufactured locally. Importantly, the
global outlook for oil and gas exploration and production is such that
unconventional HP/HT operating environments are becoming ever more vital. In
line with this, the unique capabilities of our POS-GRIP technology are expected
to be able to play an increasingly important role within the wellhead market,
which will underpin our goal of POS-GRIP wellheads becoming over time the new
wellhead standard. This bodes well for the future and we continue to be excited
about the growth prospects for your company over the coming years.
Finally I would like to thank all those involved with the Company for their hard
work and commitment during the last six months.
Robert Adair
Chairman
7th March 2007
Unaudited Consolidated Profit and Loss Account for the half year ended 31 December 2006
Six months Six months Year
ended ended ended
31/12/06 31/12/05 30/06/06
£000 £000 £000
Turnover 4,439 1,552 6,777
Gross profit 1,920 961 1,936
Administration expenses (1,711) (988) (2,035)
Income from participating interest 94 - 225
Operating profit/(loss) before amortisation 303 (27) 126
Amortisation (168) (68) (233)
Operating profit/(loss) 135 (95) (107)
FRS 20 Share compensation expense (note 5) (57) (6) (63)
Net interest receivable / (payable) 42 (62) 53
Profit/(loss) on ordinary activities before taxation 120 (163) (117)
Taxation (note 6) (17) - (113)
Profit/(loss) on ordinary activities after taxation 103 (163) (230)
Earnings/(loss) per ordinary share (note 7) 0.13p (0.41)p (0.39)p
Fully diluted earnings/(loss) per ordinary share (note 7) 0.13p (0.41)p (0.38)p
Summary Unaudited Group Balance Sheet at 31 December 2006
31/12/06 31/12/05 30/06/06
£000 £000 £000
Fixed assets
Tangible assets 4,696 1,569 2,421
Intangible assets 6,208 6,448 6,375
Investments 200 - 200
11,104 8,017 8,996
Working capital
Stocks 1,644 2,948 1,238
Debtors 4,563 842 2,640
Creditors (2,445) (1,565) (908)
Long term contract payments on account - (2,739) -
3,762 (514) 2,970
Net cash/(debt) 170 7,313 2,910
Taxation - 85 -
15,036 14,901 14,876
Capital and reserves
Ordinary share capital 802 802 802
Preference share capital - - -
Share premium account 15,596 15,611 15,596
Share based payments reserve (note 5) 120 6 63
Profit and loss reserve (1,482) (1,518) (1,585)
15,036 14,901 14,876
Summary Unaudited Consolidated Cash Flow Statement for the half year ended 31 December 2006
Six months Six months Year
ended ended ended
31/12/06 31/12/05 30/06/06
£000 £000 £000
Net cash (outflow)/inflow from operating activities (note 8) (237) 1,969 (962)
Net interest received / (paid) 42 (62) 44
Returns on investment and servicing of finance (195) 1,907 (918)
Taxation (17) 15 (14)
Purchase of intangible fixed assets - (5,421) (5,513)
Purchase of tangible fixed assets (2,528) (108) (1,200)
Purchase of investments - - (159)
Capital expenditure (2,528) (5,529) (6,872)
Net cash outflow before financing (2,740) (3,607) (7,804)
Financing
Proceeds of share issues net of issue expenses - 14,673 14,658
Loan advances to participating interest - - (191)
Repayment of loans - (2,250) (2,250)
(Decrease)/increase in cash (2,740) 8,816 4,413
Reconciliation of net cash/(debt)
Opening net cash / (debt) 2,910 (3,753) (3,753)
Net cash (outflow) / inflow (2,740) 11,066 6,663
Closing net cash/ (debt) 170 7,313 2,910
Reconciliation of Movements in Consolidated Shareholders' Funds
for the half year ended 31 December 2006
Six months Six months Year
ended ended ended
31/12/06 31/12/05 30/06/06
£000 £000 £000
(Loss)/profit for the period 103 (163) (230)
Dividends - - -
Result for period 103 (163) (230)
Share Capital
Ordinary shares issued - 602 602
Preference shares converted - (400) (400)
- 202 202
Share Premium
On issue of ordinary shares - 15,740 15,740
Less: Expenses of share issues - (1,269) (1,284)
- 14,471 14,456
Share Based Payments amortisation charge 57 6 63
Net increase /(decrease) in shareholders' funds 160 14,516 14,491
Opening shareholders' funds 14,876 385 385
Closing shareholders' funds 15,036 14,901 14,876
Notes to the Interim Report December 2006
1. This unaudited interim report has been prepared on the basis of the
accounting policies set out in the annual report for the year ended 30 June
2006 with the exception that FRS 20 'Share Based Payments' has been adopted
for the first time in the interim financial statements. Accordingly, the
comparative figures have been restated where appropriate for FRS 20 impact.
2. This interim report was approved by the board of directors on 7 March 2007.
3. The directors do not recommend payment of an interim dividend.
4. There were no other gains or losses to be recognised in the financial period
other than those reflected in the profit and loss account.
5. Amortisation of share based payments is included for the first time under
the adoption of FRS 20. The charge to the profit and loss account for the
period amounted to £57k. The comparative figures have been restated to
incorporate a prior year adjustment for the adoption of FRS 20, which
results in a charge of £6k in the half year to December 2005. The change in
policy did not result in any change to Shareholders' equity.
6. Taxation on the operating profit after interest has been provided at a rate
of 0% for the six months ended 31 December 2006 (2005: 0%) which is the
estimated rate of UK tax for the full year, after accounting for brought
forward tax losses. The taxation charge in the period relates to foreign
corporation tax deducted at source by BP Exploration Shah Deniz Ltd.
7. Basic and pre-exceptional earnings per share are based on the weighted
average of ordinary shares in issue during the half-year of 80,182,569
(2005: 39,261,962). The calculation of fully diluted earnings per share is
based on the weighted average number of ordinary shares in issue plus the
dilutive effect of outstanding share options being 193,472 (2005: 300,824).
The number of shares included in the calculation of fully diluted earnings
per share was 80,376,041 (2005: 39,562,786).
8. Net cash inflow/ (outflow) from operating activities
Six months Six months Year
ended ended ended
31/12/06 31/12/05 30/06/06
£000 £000 £000
Operating profit/(loss) 135 (95) (107)
Income from participating interest (94) - (225)
Amortisation 168 68 233
Depreciation 253 170 375
(Increase)/ decrease in working capital (699) 1,826 (1,238)
(237) 1,969 (962)
9. The comparative figures for the financial year ended 30 June 2006 are not
the company's statutory accounts for that financial year. Those accounts
have been reported on by the company's auditors and delivered to the
registrar of companies. The report of the auditors was (i) unqualified, (ii)
did not include a reference to any matters to which the auditors drew
attention by way of emphasis without qualifying their report and (iii) did
not contain a statement under section 237(2) or (3) of the Companies Act
1985.
10. Copies of this report will be sent to all Shareholders and will be available
to the public for at least one month, free of charge, from the registered
office of the Company, Plexus House, 1 Cromwell Place, London, SW7 2JE.
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