Plexus Regulatory News (POS)

28 Mar 2006 07:01

Plexus Holdings Plc28 March 2006 FOR IMMEDIATE RELEASE 28 March 2006 Plexus Holdings plc Interim Results for the six months ended 31st December 2005 Plexus Holdings plc (Plexus or "the Company") the oil wellhead services companyand owner of the proprietary POS-GRIP(TM) method of wellhead engineering announces its maiden interim results for the six months to 31 December 2005. Highlights . successful flotation on AIM in December 2005 and the raising of circa £9.7million net of expenses and before repayment of loans and debt . transfer to larger 25,000 sq. ft. facility in Aberdeen . completion of "Extended Field Life Testing" of 18 3/4 inch POS-GRIP HG(TM)(metal to metal)seals to 15,000 psi Continuing Progress . securing of Plexus' first high pressure/high temperature (HP/HT) rentalcontract for BP Egypt with a value in excess of £750,000 . formation of a presence in Egypt to capitalise on the initial success of theBP Egypt rental contract win . BP Shah Deniz on schedule to deliver the first 5 wellhead sets (out of a totalof 9) before the financial year end . continuing development of proprietary intellectual property to broaden scopeand applications of the POS-GRIP method of engineering Plexus' CEO, Ben van Bilderbeek, commented: "Following the successful flotation of Plexus and its admission to AIM theCompany has rapidly increased its investment in new facilities; personnel; andassociated infrastructure to accelerate growth in both rental of explorationwellheads and sale of production wellheads. I am confident that the level ofinterest in our proprietary technology, particularly in the HP/HT arena willcontinue to strengthen as we are increasingly invited to present and demonstratethe benefits of our technology to major operators around the world". For further details please contact: Plexus Holdings plc Tel: +44 (0)20 7589 8555Bernard van Bilderbeek, Chief ExecutiveGraham Stevens, Finance Director Buchanan Communications Tel: +44 (0)20 7466 5000Tim Thompson / James Strong Notes to Editors The Plexus Group is an established oil and gas engineering, and service businessbased in Aberdeen, with an office in London and a presence in Houston, Texasthrough Plexus Deepwater Technologies. Plexus has developed and patented amethod of engineering for oil and gas field wellheads and connectors, named POS-GRIP, which involves deforming one tubular member against another to effectgripping and sealing. Plexus was admitted to trading on AIM in December 2005when it raised approximately £10m of new funds for the Company. POS-GRIP wellhead systems have been used in more than 60 oil and gas wells todate by international customers and end users including, ConocoPhillips, BHPBilliton, Talisman Energy, Tullow Oil, Global Santa Fe, Gaz de France andWintershall. In February 2004, BP contracted to purchase POS-GRIP gas platformproduction wellhead systems for the US$4.1 billion Shah Deniz development, oneof the major gas fields in the Caspian Sea. Between 2005 and the end of 2008,the Directors estimate that this relationship has and will generate revenues inexcess of £6.5 million for the Group. The Directors believe that the raising of the Company's corporate profilefollowing its recent Admission to AIM in December will accelerate the roll outof POS-GRIP technology as a superior alternative to current wellhead technology,and which has particular advantages in HP/HT oil and gas environments for whichthere is increasing demand throughout the world. The Company's long-term goal isto develop POS-GRIP technology as the future industry standard for wellheaddesign. This objective includes the distribution of POS-GRIP technology throughlicensees to maximise market penetration. The Directors believe that the PlexusGroup can over time become a member of the 'first tier' of global wellheadsystems suppliers. Chairman's Statement Introduction The first half of the year was dominated by the AIM flotation process, followingwhich Plexus has made significant progress in capitalising on its new publiccompany status enabling the company to accelerate the establishment of anoperational infrastructure that will allow it to support and service futuresales growth. This is particularly important as the focus of Plexus' targetedcustomer base is moving away from renting exploration wellheads to the smallerNorth Sea independent 'turn key' operators, and moving to the rental and sale ofwellheads to the major oil company operators around the world. It is particularly exciting to note that as anticipated at the time of floatthere is growing evidence of increased exploration and production activity(particularly of gas fields) in evermore technically challenging unconventionalfields, which are often HP/HT environments where equipment requirements areincreasingly stringent. We are confident that this trend, and in particular thegrowing need for HP/HT applications supports Plexus' strategy of becoming overtime a new wellhead standard: this will generate significant sales growth overthe years ahead as the company's HG metal to metal seal production wellheadsgain increased industry recognition. AIM listing and share issue On the 9th December the company issued 18.6 million new ordinary shares by wayof an institutional placing at £0.59 per share and the shares were admitted totrading on AIM. The placing raised £9.7 million net of expenses from which £2.7million was allocated to satisfy debt. The strengthened balance sheet increases Plexus ability to tender for moresignificant contracts, and funds have been invested to support our ambitiousgrowth plans in rental inventory; expanding the territorial reach of the salesforce; recruiting additional high calibre engineering and sales staff; anddeveloping and expanding the company's intellectual property portfolio for bothupstream and downstream applications. Interim Results Turnover for the 6 month period was £1.55m up 35% from £1.15m the previous year.The rental business continued to represent the majority of Plexus' businessactivities during the current period. In the second half and into the nextfinancial year the manufacture and delivery of the Shah Deniz productionwellhead contract for BP will then become a significant contributor. Grossmargins have improved due to the increased utilisation of the rental assets withminimal additional costs. Administration expenses have increased significantly,partly as a result of costs connected to the AIM listing, but principally due toPlexus investing in personnel and associated infrastructure to enable thebusiness to expand both in terms of product and service offering in ourtraditional North Sea market, as well as in new markets, such as Egypt. The loss before tax of £0.16m was slightly higher than the previous year due toincreased overhead, and tax has been recognised at nil effective rate which withthe losses brought forward is the estimated tax charge for the full year. Lossper share was 0.4p (2004 - 0.39p). The balance sheet has changed significantly following the new share issue andthe use of the funds. The Shah Deniz contract has also given rise to significantpayments received in advance to assist the financing of the production andmanufacture of the POS-GRIP wellheads, and this is shown as long term contractpayments on account. Operating Review Plexus operations up until flotation had been focused on inventing, patentingand proving POS-GRIP technology in the upstream oil and gas wellhead market,with operations being centred around the rental of its wellhead equipment tothird party 'turn key' well management companies operating on behalf of mainly"independent" exploration and production companies in the North Sea. Over timewe anticipate that this will reduce as a percentage of total revenues as salesof production wellhead equipment and rentals elsewhere grow much more rapidly.In addition, we anticipate that in time licence income arrangements will developinto an important contributor. In the short term it has become evident as previously announced that there hasbeen a significant tightening of exploration and appraisal well rig availabilityin the North Sea. This development has led to delays in the commencement ofcertain rental projects as wells are deferred. Although this impacts Plexus'wellhead rental income in the current financial year, we believe we will benefitonce more rigs become available for exploration drilling. This assumes that therecently announced increase in the supplementary corporation tax rate on NorthSea profits will not curtail current investment plans in the region. Despite the impact of rig shortages the opportunities and interest in the morespecialised HP/HT areas with the larger oil companies is continuing to grow withrecent rental contract tender wins generating work for BP Egypt andConocoPhillips. This provides a sound base for our future growth. Of particular note is the level of interest in Plexus' proprietary HG metal tometal seal production wellheads and discussions are now ongoing with a number ofoperators about significant longer term contract opportunities. This follows thesuccessful completion of qualification testing to 15,000 psi of the 18 3/4 inchHG metal to metal seal carried out to Plexus "Extended Field Life Testing"standards, which are more stringent than current industry standards. We now planto extend the qualified performance envelope of HG seal technology above 20,000psi, and to higher temperatures: this has already been achieved in prototypetesting. The importance and relevance of such progress is supported by therecent HSE (Health and Safety Executive) Report No. 409 which noted that thereare seal and integrity problems with current wellhead technology when applied inHP/HT conditions: this underlines the exciting opportunities available for ourtechnology. The supply of our equipment for the BP Shah Deniz project, which uses thequalified HG seals, continues to make good progress and the testing andmanufacturing programme is on track to deliver the first five wellhead systems(out of a total of 9) before the financial year end. This project is atremendous showcase for our technology and we expect the commercial benefits ofthis to be forthcoming in the future. The infrastructure of the company in terms of physical resources associated withour new facilities in Aberdeen and the increased number of personnel (doubledover the last 12 months) is now such that we have capacity for sales growth. Weare also able to increase our rental inventory and service capabilities as aresult of our move into the new Aberdeen facilities. Outlook The global market for the exploration and production of oil and gas continues toexpand in response to growing global demand and higher prices. Oil and gascompanies are having to explore in more extreme operating environments toreplace/add reserves. This means that oil and gas companies are increasinglyinterested in technological solutions as established technologies and methodsreach their limits especially in HP/HT wells. We believe that Plexus'proprietary POS-GRIP technology and its alternative method of wellhead design isuniquely positioned to capitalise on these market developments. We haveestablished a solid platform from which we believe excellent growth can beachieved. The increasing level of interest in our equipment confirms that ourstrategy of convincing the oil and gas industry of the technical, performance,cost, and safety benefits of wellheads utilising POS-GRIP remain firmly ontrack. I would also add that I have been very impressed by the inventiveness,enthusiasm and hard work put in by Ben and his team. I am therefore confidentthat Plexus will show excellent growth, as we continue to work towards becominga new 'standard' for the industry. Robert Adair Chairman 28th March 2006 Unaudited Consolidated Profit and Loss Account for the half year ended 31December 2005 Six Six Year months months ended ended ended 31/12/05 31/12/04 30/06/05 £000 £000 £000 Turnover 1,552 1,147 2,637 ======================= Gross profit 961 421 1,327 Administration expenses (988) (406) (903) Operating (loss)/profit before amortisation (27) 15 424 Amortisation (68) (27) (55) Operating (loss)/profit (95) (12) 369 Net interest payable (62) (67) (137) ----------------------- (Loss)/profit on ordinary activities beforetaxation (157) (79) 232 Taxation (note 5) - - (81) ----------------------- (Loss)/profit on ordinary activities aftertaxation (157) (79) 151 ======================= (Loss)/earnings per ordinary share (note 6) (0.40)p (0.39)p 0.76p Fully diluted (loss)/earnings per ordinaryshare (note 6) (0.40)p (0.13)p 0.25p Summary Unaudited Group Balance Sheet at 31 December 2005 31/12/05 31/12/04 30/06/05 £000 £000 £000 Fixed assets Tangible assets 1,569 1,204 1,631 Intangible assets 6,448 1,002 1,095 --------------------------- 8,017 2,206 2,726 Working capital Stocks 2,948 1,011 1,285 Debtors 842 759 2,009 Creditors (1,565) (297) (1,387) Long term contract payments on account (2,739) (226) (595) --------------------------- (514) 1,247 1,312 =========================== Net cash/(debt) 7,313 (3,478) (3,753) Taxation 85 180 100 --------------------------- 14,901 155 385 ============================ Capital and reserves (note 7) Ordinary share capital 802 200 200 Preference share capital - 400 400 Share premium account 15,611 1,140 1,140 Profit and loss reserve (1,512) (1,585) (1,355) ---------------------------- 14,901 155 385 ============================ Summary Unaudited Consolidated Cash Flow Statement for the half year ended 31December 2005 Six Six Year months months ended ended ended 31/12/05 31/12/04 30/06/05 £000 £000 £000 Net cash inflow/(outflow) from operatingactivities (note 8) 1,969 (397) 104 Net interest paid (62) (67) (137) ---------------------------- Returns on investment and servicing offinance 1,907 (464) (33) Taxation 15 - - Purchase of intangible fixed assets (5,421) - (121) Purchase of tangible fixed assets (108) - (585) ---------------------------- Capital expenditure (5,529) - (706) Net cash outflow before financing (3,607) (464) (739) Financing Proceeds of share issues net of issueexpenses 14,673 - - Repayment of loans (2,250) (454) (587) ---------------------------- Increase/ (decrease) in cash 8,816 (918) (1,326) --------------------------- Reconciliation of net cash/(debt) Opening net debt (3,753) (3,014) (3,014) Net cash inflow/ (outflow) 11,066 (464) (739) ---------------------------- Closing net cash/ (debt) 7,313 (3,478) (3,753) ============================ Reconciliation of Movements in Consolidated Shareholders' Funds for the halfyear ended 31 December 2005 Six Six Year months months ended ended ended 31/12/05 31/12/04 30/06/05 £000 £000 £000 (Loss)/profit for the period (157) (79) 151 Dividends - - - ---------------------------- Result for period (157) (79) 151 Share CapitalOrdinary shares issued 602 - -Preference shares converted (400) - - ---------------------------- 202 - - Share PremiumOn issue of ordinary shares 15,740 - -Less: Expenses of share issues (1,269) - - ----------------------------- 14,471 - - Net increase /(decrease) inshareholders' 14,516 (79) 151funds Opening shareholders' funds 385 234 234 ----------------------------- Closing shareholders' funds 14,901 155 385 ============================= Notes to the Interim Report December 2005 1. This unaudited interim report has been prepared on the basis of theaccounting policies set out in the annual report for the year ended 30 June2005. 2. This interim report was approved by the board of directors on 27th March2006. 3. The directors do not recommend payment of an interim dividend. 4. There were no other gains or losses to be recognised in thefinancial period other than those reflected in the profit and loss account. 5. Taxation on the operating loss after interest has been providedat a rate of 0% for the six months ended 31 December 2005 (2004: 0%) which isthe estimated rate of tax for the full year, after accounting for broughtforward tax losses. 6. Basic and pre exceptional earnings per share are based on theweighted average of ordinary shares in issue during the half-year of 39,261,962(2004: 20,000,000). In order to aid understanding and comparison, the number ofshares used for the calculation of shares in issue has been rebased at thecomparative dates following the conversion in November 2005 of each £1 ordinaryshare into 100 1p ordinary shares. The calculation of fully diluted earnings pershare is based on the weighted average number of ordinary shares in issue plusthe dilutive effect of outstanding share options being 300,824 (2004: nil) andconvertible preference shares being nil (2004: 40,000,000). The number of sharesincluded in the calculation of fully diluted earnings per share was 39,562,786(2004: 60,000,000). 7. Share Issues / Capital Reorganisation and Initial Use of Funds from IPO On 18 October 2005, the preference share capital of 400,000 £1 shares wasconverted to ordinary shares of £1 each; on the same date the authorised sharecapital was increased to £615,385 to accommodate the issue of 15,385 ordinary £1shares at £48.75 each. On 25 November 2005 each ordinary share of £1 was converted to 100 ordinaryshares of 1p each and the authorised share capital was increased to 110,000,000ordinary shares. On 8 December 2005 one ordinary share at a premium of £4,191,976.99 was issuedto Plexus International Limited to satisfy loans arising in connection with theconsideration payable by the Company pursuant to agreements relating to therestructuring of IP ownership. On 9 December 2005 an Initial Public Offering on the London AIM resulted in18,644,068 new ordinary shares being placed at an issue price of 59p per share,raising gross proceeds of £11.0m. Net proceeds after expenses were £9.7m fromwhich £2.7m was allocated to satisfy debt. Initial Use of Funds from IPO: £000 Gross proceeds of IPO 11,000Less: Expenses of share issue 1,269 ------ 9,731 Repayment of bank overdraft 1,408Repayment of loans from participating companies 1,320 Net proceeds of issue after settlement of debt 7,003 ======= 8. Net cash inflow/ (outflow) from operating activities Six months Six Year months ended ended ended 31/12/05 31/12/04 30/06/05 £000 £000 £000 Operating (loss)/ profit (95) (12) 369 Amortisation 68 27 55 Depreciation 170 124 282 Decrease/ (increase) in working capital 1,826 (536) (602) ----------------------------- 1,969 (397) 104 =========================== 9. The comparative figures for the financial year ended 30 June 2005 are not theCompany's statutory accounts for that financial year. Those accounts have beenreported on by the Company's auditors and delivered to the Registrar ofCompanies. The report of the auditors was unqualified and did not contain astatement under section 237(2) or (3) of the Companies Act 1985. The comparativefigures reflected in this report reflect consolidated numbers and previouslyconsolidated accounts were not prepared. Consolidated accounts have beenprepared to aid understanding and comparison for the current reporting period. 10. Copies of this report will be sent to all Shareholders and will be availableto the public for at least one month, free of charge, from the registered officeof the Company, Plexus House, 1 Cromwell Place, London, SW7 2JE. This information is provided by RNS The company news service from the London Stock Exchange