Preliminary Results
Plexus Holdings Plc
28 September 2007
28 September 2007
Plexus Holdings plc
Preliminary Results for the year to 30 June 2007
Plexus Holdings plc ('Plexus' or 'the Company') the oil wellhead services
company and owner of the proprietary POS-GRIP (R) method of wellhead engineering
announces its preliminary results for the year ended 30 June 2007.
Results
• 52% increase in turnover to £10.3m (2006: £6.8m)
• 275% increase in EBITDA to £1.9m (before £0.8m gain on investment
disposal and FRS 20 share based payments charges of £0.1m) (2006: £0.5m)
• Group profit before tax increases to £1.5m, including £0.8m gain on
disposal (2006: loss of £0.1m)
• Disposal of investment in participating interest realising a gain of £0.8m
(not included in EBITDA)
• Basic earnings per share of 1.35p (2006: loss of 0.39p)
Highlights
• Continued strong growth
• Installation of the first production wellheads for the major
BP Shah Deniz project in the Caspian Sea
• Wellhead rental contract wins with Maersk Oil North Sea UK Limited
('Maersk'), BG International Ltd ('BG'), and Talisman Energy Norge AS
('Talisman')
• Overseas operational areas extended to include Caspian Sea, Egypt,
Brunei and Trinidad
• POS-GRIP technology development contract wins extending Plexus'
proprietary method of engineering into deep sea drilling activities and
for the first time into subsea applications
• Significant capital expenditure of £5.1m made during the year, of which
£4.8m was in tangible fixed assets, principally rental wellhead equipment
• 23% increase in personnel to 59 as at the year end (2006: personnel 48)
Chief Executive Ben van Bilderbeek said:
'This has been another busy period of growth for Plexus and I am very pleased
with the strong progress our Company has made in terms of financial performance,
sales activity, and technical advancements. With increasing demand, energy
prices have continued to rise which has resulted in the search for new reserves
in ever more challenging environments and, in particular, high pressure/high
temperature ('HP/HT') conditions. We believe that our proprietary POS-GRIP
technology is a key component in helping the operating companies succeed in
such conditions, which in turn should see Plexus' growth accelerate.
'We continue to develop our POS-GRIP technology as we work towards making it a
new industry wellhead standard recognised for its technical performance, safety
benefits, and time savings. In tandem with this, our research and development
team is focused on extending the application of POS-GRIP across a number of
other applications. To this end, we have in the last year entered into new
markets by contracting to supply a subsea wellhead cross-over system, which will
enable the conversion of pre-drilled wells to subsea production, as well as
being asked to develop new drilling products to help enable new and cost saving
deep sea drilling methods. These initiatives further corroborate the
particular advantages of POS-GRIP technology for the more unconventional and
technically challenging applications that the industry demands. I look forward
to Plexus playing an increasingly important role in and benefiting from such
opportunities.'
Summary of Results for the year ended 30 June 2007
2006
2007 Restated
£'000 £'000
Turnover 10,274 6,777
EBITDA - before the effect of FRS20 1,879 501
EBITDA - after the effect of FRS20 1,763 438
Profit/(loss) before taxation 1,534 (117)
Basic earnings/(loss) per share (pence) 1.35 (0.39)
Enquiries to:
Ben van Bilderbeek Plexus Holdings plc Tel: 020 7589 8555
Graham Stevens Plexus Holdings plc Tel: 020 7589 8555
Ken Fleming Brewin Dolphin Tel: 0141 221 7733
Elizabeth Kennedy Brewin Dolphin Tel: 0141 221 7733
Hugo de Salis St Brides Media & Finance Ltd Tel: 020 7242 4477
Felicity Edwards St Brides Media & Finance Ltd Tel: 020 7242 4477
Chairman's Statement
Business progress
I am pleased to report that the Company has built strongly on the progress made
during the first half of the year, and consequently reports a 52% increase in
turnover to £10.3m for the year to 30th June 2007, and a 275% increase in EBITDA
to £1.9m, (before the £0.8m gain on disposal of an investment and FRS20 share
based payment charges of £0.1m), resulting in earnings per share of 1.35p
against a loss of 0.39p last year.
Strategy
Plexus has made excellent headway during the last financial year which is
particularly pleasing in view of the constraints placed on exploration
activities at the end of the prior year as a result of widely reported rig
shortages in the North Sea. For this reason management accelerated its marketing
initiatives outside of its traditional North Sea base, and successfully secured
contracts with major operators in Egypt, Brunei and Trinidad which all commenced
drilling operations during the year.
Looking to the future Plexus continues to implement its strategy of raising the
profile and industry awareness of its proprietary POS-GRIP technology at every
opportunity including showing at, attending and addressing key tradeshows around
the world such as ADIPEC (Abu Dhabi International Petroleum Exhibition and
Conference), OTC (Offshore Technology Conference in Houston), MOC (Mediterranean
Offshore Conference in Egypt) and OE (Offshore Europe Oil and Gas Conference and
Exhibition in Aberdeen). Such initiatives combined with the winning of a record
number of contracts around the world is resulting in increased demand for our
technology, particularly for use in more challenging HP/HT drilling
environments.
Particularly important achievements during the year included the installation of
the first HP/HT gas platform production wellheads for BP in the major US$4.1bn
Shah Deniz Caspian Sea development, and the winning of a contract with BG
International Ltd for the development and supply of 20,000 psi ultra or extreme
('X-HP/HT') exploration wellhead equipment in the North Sea as part of a five
year framework agreement. Such high profile business activities further validate
and endorse the benefits of POS-GRIP technology to the wider oil and gas
industry.
As well as pursuing a strategy that is designed to establish over time POS-GRIP
technology as a new industry standard for wellheads, the Directors are confident
that, in addition, the POS-GRIP method of engineering is capable of being
applied to a wide range of equipment outside of wellheads. Much research and
development is ongoing and Plexus was successful during the year in winning
business from a major international US offshore drilling contractor to develop
and supply product that, once completed and proven, will help enable the
implementation of novel and cost saving deep sea drilling methods. Furthermore,
since the year-end we have announced our first move into the rapidly expanding
subsea market with an order win from AGR Petroleum on behalf of Silverstone
Energy Ltd for the supply of a subsea cross-over wellhead system. This will
enable the conversion of pre-drilled wells to subsea production, and will
incorporate our proprietary POS-GRIP activated metal-to-metal HG(R) seals, which
provide a high level of integrity, even in long-term gas production
applications.
It remains our intention to pursue licensing opportunities, although management
believes that the overheated market conditions of the last two years (where
manufacturers face demand greater than capacity) have meant that there has been
no particular need or incentive for the international wellhead companies to
actively pursue such initiatives. However, as our technology continues to raise
its profile and competition between manufacturers increases, we anticipate that
one of the large global suppliers will choose to partner with Plexus in due
course, enabling us to leverage our technology and relationships with the blue
chip customers that we have established to date.
In addition to the various current sales efforts, management is endeavouring to
generate additional sales opportunities outside of our current areas of
operation. Firstly, an entity has been established in Malaysia called Plexus
Ocean Systems (Malaysia) Sdn Bhd in which Plexus owns 49% and which would be
licensed to supply POS-GRIP equipment to Malaysian operators including Petronas
and CTOC. It is intended that a local base of operation would be established to
leverage into Malaysia the experience gained in the region in Brunei. Secondly,
Plexus is exploring whether it is possible to licence its technology to a Middle
East partner with the intention that the partner would co-ordinate the supply
and local manufacture of POS-GRIP equipment to national and international
operators.
Staff
On behalf of the Board, I would like to thank all of our employees, many of whom
are new to the Company, for their dedication and hard work during a year that
has continued to see great progress in all areas of operation.
Outlook
Global oil and gas exploration and production activity continues to go from
strength to strength with worldwide spending on projects by the oil and gas
companies reaching new heights. As the supply from mature oil and gas producing
areas declines over time the need for new technology and methods to help
facilitate extraction from the more unconventional HP/HT and extreme operating
environments becomes more acute. I believe that Plexus and its proprietary
POS-GRIP technology will therefore play an increasingly important role in these
industry trends as its unique capabilities combined with added safety benefits
and cost effectiveness from operational time savings continue to gain traction
within the industry. For these reasons we look forward to the future with
confidence and are committed to delivering further growth and success in the
current year.
Chief Executive's Review
Plexus' central objective at the time of admission to AIM was to accelerate the
roll out of our proprietary POS-GRIP technology as a superior, and in some
instances potentially uniquely enabling, alternative to existing wellhead
engineering.
Looking back on our first full year of trading on AIM I believe that tremendous
progress has been made in meeting this goal, and our technology has gained both
a wider audience and a higher profile within the oil and gas industry leading to
a significant increase in sales and profitability.
This progress has resulted in Plexus winning a number of important contracts
during the year which demonstrate and validate the technical capabilities and
benefits of POS-GRIP, and show how our proprietary method of engineering can
also be applied outside of wellhead equipment. Examples include:
• In August last year Plexus announced its first contract with Maersk for
the supply of HP/HT 15,000 psi equipment for two exploration wells in the
North Sea with an initial value of £0.8m.
• In September last year Plexus agreed to develop and qualify POS-GRIP
wellhead equipment to 20,000 psi (X-HP/HT) as part of a five year framework
agreement, with an initial value of £2.3m, to support BG's exploration
activities in new and more technically challenging fields in the North Sea.
• In June this year Plexus secured orders with an immediate value of
£0.46m from a major international US offshore drilling contractor to
develop and supply two new drilling products to help enable the
implementation of novel and cost saving deepwater drilling methods. One of
the products is a new application for Plexus' POS-GRIP method of
engineering which will be re-configured for remote hydraulic operation.
• In September this year we were able to announce that Plexus had secured
a purchase order from AGR Petroleum to supply a subsea cross-over wellhead
system enabling the conversion of pre-drilled wells to subsea production.
This is a milestone for Plexus as it marks the first subsea application for
POS-GRIP and incorporates our metal-to-metal POS-GRIP activated HG seals,
and has an initial value of £0.25m.
A particular milestone for Plexus during the year was the BP Shah Deniz
development in the Caspian Sea coming on-stream with gas production, following
installation of the first POS-GRIP production wellhead systems for this major
project, which was originally won in 2004. Further development and testing work
is continuing with BP, which we anticipate will lead to additional sales
opportunities with BP and others over the next few years.
It should be noted that, within our year-on-year sales increase to £10.3m from
£6.8m, the largest area of growth has been in the rental exploration category,
in particular HP/HT applications, where we increased our rental inventory from
three to ten systems. Rental sales increased by nearly 200% to £3.5m from £1.2m
last year, with HP/HT accounting for 67% of this, which further consolidates our
growing reputation in this specialist and expanding unconventional market. It is
anticipated that the successful completion of these more technically challenging
and higher profile projects such as X-HP/HT for BG will further accelerate our
rental sales opportunities, whilst also acting as a 'showcase' for our
technology. Over time this should encourage the operators to select our
equipment for production wells as well as for exploration wells, opening up
potential licensing opportunities with our larger multinational competitors.
I am particularly pleased to report that our strategy of diversifying away from
our traditional area of activity and focus in the North Sea has been successful
and has resulted in operational activities taking place during the year in the
Caspian Sea, Egypt, Brunei and Trinidad. The combination of growth in sales and
diversity of areas of operation has resulted in the need to increase both
personnel numbers and rental equipment inventory which are key investments for
the future. As at the year end the number of personnel had grown by 23% from 48
at the end of June 2006 to 59 as at the end of June 2007, to 64 currently. At
the same time, a sizeable capital investment programme has been implemented
which added £4.8m in tangible assets to our rental inventory which will underpin
future sales growth.
Looking to the future we have always said that our POS-GRIP technology can be
extended to applications outside of surface wellhead equipment where we believe
we have already been able to demonstrate that our technology is easier and
quicker to install, safer to use, lower in cost to manufacture and superior in
performance. Over time it is our opinion that such commercial opportunities will
increase significantly beyond the two contracts that we have already announced,
which is why we are increasing our research and development spend, our
development and testing programme and further extending our comprehensive patent
suite. These wins are an important milestone for Plexus and the inaugural subsea
application for POS-GRIP technology is expected to increase interest in the
subsea capabilities of POS-GRIP in the medium term.
In summary, I am more excited about the future prospects for Plexus and our
POS-GRIP technology than at any time in the past and look forward with
confidence to the many opportunities that are presenting themselves and
meeting the inevitable challenges along the way.
Financial Review
Turnover
Turnover for the year was £10.3m, up 52% from £6.8m in the previous year.
The rental business and related equipment and services account for over 50% of
turnover, with HP/HT generating the largest year on year sales increase of
nearly 300%.
Margin
Gross margins have increased to 45.1% from 28.6% in the previous year as rental
sales increase and economies of scale benefits associated with higher volumes
crystallise. It is anticipated that a further modest improvement in gross margin
will be achievable in the current financial year.
Overhead expenses
In line with sales and profit growth overhead expenses have increased so as to
be able to provide the necessary infrastructure and skill base to support our
customers around the world. This resulted in total overheads increasing to £3.4m
from £2.1m in the previous year within which overhead staff costs have increased
to £1.9m from £1.1m. Other items which increased significantly year on year were
rent and rates associated with a full year in the new Aberdeen base and
professional fees associated with a full year listed on AIM.
Participating interest
During the year Plexus disposed of an option to acquire 50% of the shares in a
precision engineering business for £1m which resulted in a profit on disposal of
£0.8m for this non-core asset. The proceeds of the disposal were principally
re-invested in additional inventory. In the prior year the participating
interest contributed £0.2m to the Profit and Loss Account. There was no
corresponding contribution this year prior to disposal.
EBITDA
The EBITDA for the year is £1.9m (before the £0.8m gain on disposal of the
participating interest and FRS 20 share based payment charges of £0.1m), up from
£0.5m the previous year. The Group's significant investment in people,
infrastructure and inventory since admission to AIM in December 2005 has
enabled Plexus to grow its sales and broaden its scope of operations thereby
delivering a strong year-on-year increase in EBITDA.
Profit before tax
Profit before tax of £1.53m includes the £0.79m gain on disposal of the non-core
option over the participating interest, and compares to a loss before tax last
year of £0.12m. Depreciation and amortisation increased to £1.02m against £0.61m
last year reflecting the increase in assets during the period. 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 full year is £0.12m
compared to £0.06m last year.
Tax
The Group UK Corporation Tax charge was significantly higher than the prior year
as a result of the rise in trading profitability, together with the capital gain
arising from the investment disposal. This resulted in a tax charge of £0.47m
for the year as compared to £0.1m last year.
EPS
The Group reports basic earnings per share of 1.35p compared to a loss of 0.39p
last year after adjusting for the effect of FRS 20.
Cash and Balance Sheet
The balance sheet reflects the growth in operations during the year with the net
book value of tangible assets including items in the course of construction
increasing to £6.6m from £2.4m last year. Debtors have increased to £5.0m as
compared to £2.6m as a result of the increase in sales revenues and the balance
of long term contracts. Net bank borrowings closed at £1.9m compared to a £2.9m
cash asset reflecting the Group's significant investment in the expansion of the
rental fleet and tangible assets totalling £4.9m, increase in working capital
requirements and ongoing investment in research and development and patent
extensions. Net cash outflow for the year was £4.7m as compared to net cash
inflow of £4.4m last year. In recognition of the ongoing capital expenditure
programme either completed or under construction the Group increased its bank
facilities during the year to £2.5m from the previous level of £0.75m.
Intellectual property
The Group carries in its balance sheet goodwill and intellectual property rights
of £5.6m. The directors have considered whether there have been any indications
of impairment and have concluded that there have been no such indications. The
directors therefore consider the current carrying values to be appropriate.
Indications of impairment are considered annually.
FRS 20 (Share Based Payments)
FRS 20 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. The charge for the year was
£0.12m which compares to £0.06m for last year.
International Financial Reporting Standards ('IFRS')
The Group's IFRS implementation 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. The impact on the financial
statements is not expected to be material.
Consolidated Profit and Loss Account
for the year ended 30 June 2007
2006
2007 Restated
Notes £'000 £'000
Turnover 1 10,274 6,777
Cost of sales (5,640) (4,841)
------ -------
Gross profit 4,634 1,936
Administrative expenses (3,894) (2,331)
------ -------
Operating profit/(loss) 740 (395)
Other income 789 -
Income from participating interest - 225
Interest receivable and similar income 52 126
Interest payable and similar charges (47) (73)
------ -------
Profit/(loss) on ordinary activities before taxation 1,534 (117)
Tax on profit/(loss)on ordinary activities (450) (113)
------ -------
Profit/(loss) on ordinary activities after taxation
being profit/(loss)for the financial year 1,084 (230)
------ -------
Earnings/(loss) per share 3
Basic 1.35p (0.39)p
Diluted 1.35p (0.38)p
Statement of Total Recognised Gains/Losses
2006
2007 Restated
£'000 £'000
Profit/(loss) for the financial year 1,084 (230)
Prior year adjustment as explained in note 9 (63) -
Total gain recognised since last annual report 1,021 -
Consolidated Balance Sheet
at 30 June 2007
2006
2007 Restated
Notes £'000 £'000
Fixed assets
Intangible assets 4 6,264 6,375
Tangible assets 6,577 2,421
Investments - 200
------ -------
12,841 8,996
Current assets
Stock 3,123 1,238
Debtors 4,976 2,640
Cash at bank and in hand 128 2,910
------ -------
8,227 6,788
Creditors: amounts falling due within one year (4,670) (908)
------ -------
Net current assets 3,557 5,880
------ -------
Total assets less current liabilities 16,398 14,876
Provisions for liabilities
Deferred tax liability (322) -
------ -------
Net assets 16,076 14,876
------ -------
Capital and reserves
Called up share capital 5 802 802
Share premium account 15,596 15,596
Share based payments reserve 179 63
Profit and loss account (501) (1,585)
------ -------
Equity shareholders' funds 16,076 14,876
------ -------
Consolidated Cash Flow Statement
for the year ended 30 June 2007
2007 2006
Notes £'000 £'000
Net cash outflow from operating 6 (583) (1,646)
activities
Returns on investments and
servicing of finance
Interest paid (41) (80)
Interest received 41 124
------- -------
Net cash inflow from returns on
investments and - 44
servicing of finance
Taxation paid (24) (14)
Capital expenditure and financial
investment
Purchase of intangible fixed (230) (1,360)
assets
Purchase of tangible fixed assets (4,863) (1,151)
Proceeds of sale of tangible 28 -
fixed assets
Proceeds of sale of fixed asset 989 -
investments ------- -------
------ ------
Net cash outflow from capital (4,076) (2,511)
expenditure and financial investment ------ ------
Net cash outflow before financing (4,683) (4,127)
Financing
Repayment of loans - (1,735)
Loan advances to participating - (191)
interest
Proceeds of share issues - 10,466
------- -------
Net cash inflow from financing - 8,540
------ ------
(Decrease)/increase in cash in 8 (4,683) 4,413
the year
Net funds/(debt) at the start of the 2,910 (1,503)
year ------ ------
Net (debt)/ funds at the end of (1,773) 2,910
the year ------ ------
Reconciliation of Movements in Equity Shareholders' Funds
for the year ended 30 June 2007
2006
2007 Restated
£'000 £'000
Profit/(loss) for the financial year being retained
profit/(loss) 1,084 (230)
Reserve created for share based payments 116 63
New share capital issued - 14,658
------ -------
Net addition to equity shareholders' funds 1,200 14,491
Opening shareholders' funds: 14,876 385
------ -------
Closing equity shareholders' funds 16,076 14,876
------ -------
Notes to the Financial Information
1. Turnover
2007 2006
£'000 £'000
UK 4,173 1,499
Europe 1,459 550
Rest of World 4,642 4,728
------ -------
10,274 6,777
------ -------
Turnover is shown by destination as the origin of turnover is all from the UK.
2. Segment Reporting
The Group derives turnover from the sale of its POS-GRIP technology and
associated products, the rental of wellheads utilising the POS-GRIP technology
and service income principally derived in assisting with the commissioning and
ongoing service requirements of our equipment. These income streams are all
derived from the utilisation of the technology which the Group believes is its
only segment.
3. Earnings/(loss) per share
2006
2007 Restated
£'000 £'000
Profit/(loss) attributable to shareholders 1,084 (230)
-------- --------
Number Number
Weighted average number of shares in issue 80,182,569 59,545,669
Dilution effects of share schemes 258,510 505,583
-------- --------
Diluted weighted average number of shares in issue 80,441,079 60,051,252
-------- --------
Basic earnings/(loss) per share 1.35p (0.39)p
Diluted earnings/(loss) per share 1.35p (0.38)p
Basic earnings/(loss) per share is calculated on the results attributable to
ordinary shares divided by the weighted average number of shares in issue during
the year.
Diluted earnings/(loss) per share calculations include additional shares to
reflect the dilutive effect of employee share schemes and share option schemes.
4. Intangible fixed assets
Goodwill Intellectual Patent and Total
Property Other
Development
£'000 £'000 £'000 £'000
Cost
As at 1 July 2006 821 5,403 478 6,702
Additions - - 230 230
------- -------- --------- -------
As at 30 June 2007 821 5,403 708 6,932
------- -------- --------- -------
Amortisation
As at 1 July 2006 99 173 55 327
Charge for the year 41 270 30 341
------- -------- --------- -------
As at 30 June 2007 140 443 85 668
------- -------- --------- -------
Net Book Value at
30 June 2007 681 4,960 623 6,264
------- -------- --------- -------
Net Book Value at
30 June 2006 722 5,230 423 6,375
------- -------- --------- -------
5. Share Capital
2007 2006
£'000 £'000
Authorised:
Equity: 110,000,000 Ordinary shares of 1p each 1,100 1,100
------- --------
Allotted, called up and fully paid:
Equity: 80,182,569 Ordinary shares of 1p each 802 802
------- --------
6. Reconciliation of operating profit/(loss) to operating cash flows
2007 2006
£'000 £'000
Operating profit/(loss) 740 (395)
Depreciation and amortisation 1,022 608
Gain/(loss) on disposal of fixed assets (2) 35
Charge for share based payments 116 63
(Increase)/decrease in stocks (1,885) 47
Increase in debtors (2,326) (988)
Increase/(decrease) in creditors 1,752 (1,016)
------- --------
Net cash outflow from operating activities (583) (1,646)
------- --------
7. Reconciliation of net cash flow to movement in net debt
2007 2006
£'000 £'000
(Decrease)/increase in cash in the year (4,683) 4,413
Cash outflow from decrease in net debt - 1,735
------- --------
Change in net debt resulting from cash flows (4,683) 6,148
Loan set against debtor balance - 515
------- --------
Movement in net debt in year (4,683) 6,663
Net cash/(debt) at start of year 2,910 (3,753)
------- --------
Net (debt)/cash at end of year (1,773) 2,910
------- --------
8. Analysis of net debt
At beginning of Cash flow At end of year
year
£'000 £'000 £'000
Cash in hand and at bank 2,910 (2,782) 128
Overdrafts - (1,901) (1,901)
--------- -------- ------
Total 2,910 (4,683) (1,773)
--------- -------- ------
9. The financial information set out above does not constitute the Company's
statutory accounts for the years ended 30 June 2007 or 30 June 2006. The
comparative figures are based on the statutory consolidated accounts of the
Company for the year ended 30 June 2006, restated where applicable for the
first-time adoption of FRS20. Statutory accounts for 2007 will be delivered
in due course. The auditors have reported on those accounts (2007: Horwath
Clark Whitehill LLP, 2006: KPMG Audit Plc); their reports were unqualified
and did not contain statements under section 237(2) or (3) of the Companies
Act 1985.
Copies of this report will be sent to all Shareholders and will be available
to the public for at least one month from the date of posting to
Shareholders, free of charge, from the registered office of the Company,
Plexus House, 1 Cromwell Place, London, SW7 2JE.
10. These preliminary results were approved by the board of Plexus Holdings plc
on 27 September 2007.
This information is provided by RNS
The company news service from the London Stock Exchange
Monday, 13th May 2024
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