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LONDON (Alliance News) - Plexus Holdings PLC Wednesday reported an increase in pretax profit following rises in revenue during its recent financial year.
The oil-field services company said it is increasing spending on research and development and plans to continue to expand outside of Europe to counter lower activity in its main market in the North Sea.
During the financial year ended June 30, Plexus increased its pretax profit to GBP5.4 million compared to GBP4.3 million in the 2013 financial year. The increase comes as revenue also increased to GBP27 million from GBP25.6 million.
The increase in sales comes from a strong performance from the company's rental of its POS-GRIP friction-grip wellhead equipment, especially in high pressure and temperature applications, it said in a statement.
The company saw repeat business from existing customers during the year for its wellhead equipment, it said, including a GBP2.5 million contract with Statoil, a GBP1.6 million contract with Glencore Exploration Cameroon Ltd and a GBP2 million contract with the BG Group UK.
The new customers and contracts it obtained during the year included a GBP1 million contract with Eni Australia Ltd and new contracts with Shell China Exploration and Production Co Ltd and Galp Energia Tarfya BV in Morocco.
Plexus company has increased its final dividend by 13% to 0.62 pence per share, compared with 0.55p paid the year before, giving a full-year pay out of 1.1p per share.
"I am pleased to report another excellent set of financial results which delivered a record performance in terms of revenues, margins, and profitability during a period that continued to experience a number of global economic and political uncertainties," said Chief Executive Ben van Bilderbeek.
"The robust financial performance relates to our organic jack-up drilling business activities where we were able to grow our non UK and non-European 'rest of the world' revenues by 17% year on year. This is in contrast to the UK and European North Sea territory which experienced only marginal growth as a result of a decline in exploration drilling activities in the UK Continental Shelf during the period," he added.
Plexus aims to grow beyond Europe due to the decline in activity in the North Sea, which it still sees as its most important market, and has been making progress to secure contracts in Asia, Australasia and West Africa and sees further opportunities in the long-term future in the Gulf of Mexico, the Arctic and in Russia, dependent on the sanctions that have been imposed on the country, it said in a statement.
"The UK Continental Shelf continues to be our most important market, and accounted for 37% of revenues despite a continuing low level of exploration drilling activity," said Plexus.
During its strong performance during the year, the company increased its expenditure on research and development by 61% to GBP2.4 million compared with the GBP1.5 million it invested in the previous year, after it purchased a new workshop to double the size of its headquarters. It is focusing on developing its subsea well-head JIP and has pledged to spend an additional GBP3.8 million in research and development next year, alongside a GBP6 million expenditure to purchase new plant and wellhead equipment.
"Significant research and development expenditure continues to be an important and necessary investment in protecting and developing a range of applications for our proprietary POS-GRIP friction-grip method of engineering. This is at a time when R&D is increasingly being recognised as an essential component for the future success of the oil and gas industry, to help drive down costs, increase safety, and to develop enabling technology that can provide solutions to the growing challenges of unconventional drilling conditions," said Plexus in a statement.
Despite the company's growth during the year, it has been affected by lower investment levels by customers due to the variety of geo-political negatives over the last year, it said in a statement.
"For example questions about the health of the Eurozone and in particular Germany, oil price falls, reduction of quantitative easing in the US and Europe, health of emerging markets, Middle East conflicts, and even Ebola in West Africa all make a particularly toxic mix for world economic confidence," said Plexus.
"However at a more micro level we believe Plexus will benefit from increased industry receptiveness to new and superior technology driven by regulatory and government initiatives focused on improving operational performance and safety standards," it added.
Global demand for natural gas, where Plexus said it is able to offer a safer and a lower-cost wellhead design, particularly for high pressure and temperature applications, is forecast to rise by 65% from 2010 to 2040, the company said.
"In terms of current trading we have a healthy order book and good visibility for our organic jack-up rental exploration business, and anticipate this continuing subject to any unforeseen downturn in exploration activity by our customers," said Plexus.
"Although Plexus in no way underestimates the challenge of competing against long established multinational well-head companies who often provide an equipment package' solution, we believe that such analysis and conclusions regarding the strengths of our technology are a sound base from which to continue to build market share," said the company.
Plexus shares were up 4.6% to 248.00 pence per share Wednesday morning.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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