Plexus Regulatory News (POS)

28 Sep 2007 07:03

Plexus Holdings Plc28 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 servicescompany and owner of the proprietary POS-GRIP (R) method of wellhead engineeringannounces 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 pleasedwith the strong progress our Company has made in terms of financial performance,sales activity, and technical advancements. With increasing demand, energyprices have continued to rise which has resulted in the search for new reservesin ever more challenging environments and, in particular, high pressure/hightemperature ("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 anew industry wellhead standard recognised for its technical performance, safetybenefits, and time savings. In tandem with this, our research and developmentteam is focused on extending the application of POS-GRIP across a number ofother applications. To this end, we have in the last year entered into newmarkets by contracting to supply a subsea wellhead cross-over system, which willenable the conversion of pre-drilled wells to subsea production, as well asbeing asked to develop new drilling products to help enable new and cost savingdeep sea drilling methods. These initiatives further corroborate theparticular advantages of POS-GRIP technology for the more unconventional andtechnically challenging applications that the industry demands. I look forwardto Plexus playing an increasingly important role in and benefiting from suchopportunities." Summary of Results for the year ended 30 June 2007 2006 2007 Restated £'000 £'000 Turnover 10,274 6,777EBITDA - before the effect of FRS20 1,879 501EBITDA - after the effect of FRS20 1,763 438Profit/(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 8555Graham Stevens Plexus Holdings plc Tel: 020 7589 8555Ken Fleming Brewin Dolphin Tel: 0141 221 7733Elizabeth Kennedy Brewin Dolphin Tel: 0141 221 7733Hugo de Salis St Brides Media & Finance Ltd Tel: 020 7242 4477Felicity 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 madeduring the first half of the year, and consequently reports a 52% increase inturnover to £10.3m for the year to 30th June 2007, and a 275% increase in EBITDAto £1.9m, (before the £0.8m gain on disposal of an investment and FRS20 sharebased 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 isparticularly pleasing in view of the constraints placed on explorationactivities at the end of the prior year as a result of widely reported rigshortages in the North Sea. For this reason management accelerated its marketinginitiatives outside of its traditional North Sea base, and successfully securedcontracts with major operators in Egypt, Brunei and Trinidad which all commenceddrilling operations during the year. Looking to the future Plexus continues to implement its strategy of raising theprofile and industry awareness of its proprietary POS-GRIP technology at everyopportunity including showing at, attending and addressing key tradeshows aroundthe world such as ADIPEC (Abu Dhabi International Petroleum Exhibition andConference), OTC (Offshore Technology Conference in Houston), MOC (MediterraneanOffshore Conference in Egypt) and OE (Offshore Europe Oil and Gas Conference andExhibition in Aberdeen). Such initiatives combined with the winning of a recordnumber of contracts around the world is resulting in increased demand for ourtechnology, particularly for use in more challenging HP/HT drilling environments. Particularly important achievements during the year included the installation ofthe first HP/HT gas platform production wellheads for BP in the major US$4.1bnShah Deniz Caspian Sea development, and the winning of a contract with BGInternational 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 fiveyear framework agreement. Such high profile business activities further validateand endorse the benefits of POS-GRIP technology to the wider oil and gasindustry. As well as pursuing a strategy that is designed to establish over time POS-GRIPtechnology as a new industry standard for wellheads, the Directors are confidentthat, in addition, the POS-GRIP method of engineering is capable of beingapplied to a wide range of equipment outside of wellheads. Much research anddevelopment is ongoing and Plexus was successful during the year in winningbusiness from a major international US offshore drilling contractor to developand supply product that, once completed and proven, will help enable theimplementation of novel and cost saving deep sea drilling methods. Furthermore,since the year-end we have announced our first move into the rapidly expandingsubsea market with an order win from AGR Petroleum on behalf of SilverstoneEnergy Ltd for the supply of a subsea cross-over wellhead system. This willenable the conversion of pre-drilled wells to subsea production, and willincorporate our proprietary POS-GRIP activated metal-to-metal HG(R) seals, whichprovide a high level of integrity, even in long-term gas productionapplications. It remains our intention to pursue licensing opportunities, although managementbelieves that the overheated market conditions of the last two years (wheremanufacturers face demand greater than capacity) have meant that there has beenno 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 togenerate additional sales opportunities outside of our current areas ofoperation. Firstly, an entity has been established in Malaysia called PlexusOcean Systems (Malaysia) Sdn Bhd in which Plexus owns 49% and which would belicensed to supply POS-GRIP equipment to Malaysian operators including Petronasand CTOC. It is intended that a local base of operation would be established toleverage into Malaysia the experience gained in the region in Brunei. Secondly,Plexus is exploring whether it is possible to licence its technology to a MiddleEast partner with the intention that the partner would co-ordinate the supplyand local manufacture of POS-GRIP equipment to national and internationaloperators. Staff On behalf of the Board, I would like to thank all of our employees, many of whomare new to the Company, for their dedication and hard work during a year thathas continued to see great progress in all areas of operation. Outlook Global oil and gas exploration and production activity continues to go fromstrength to strength with worldwide spending on projects by the oil and gascompanies reaching new heights. As the supply from mature oil and gas producingareas declines over time the need for new technology and methods to helpfacilitate extraction from the more unconventional HP/HT and extreme operatingenvironments becomes more acute. I believe that Plexus and its proprietaryPOS-GRIP technology will therefore play an increasingly important role in theseindustry trends as its unique capabilities combined with added safety benefitsand cost effectiveness from operational time savings continue to gain tractionwithin the industry. For these reasons we look forward to the future withconfidence and are committed to delivering further growth and success in thecurrent year. Chief Executive's Review Plexus' central objective at the time of admission to AIM was to accelerate theroll out of our proprietary POS-GRIP technology as a superior, and in someinstances potentially uniquely enabling, alternative to existing wellheadengineering. Looking back on our first full year of trading on AIM I believe that tremendousprogress has been made in meeting this goal, and our technology has gained botha wider audience and a higher profile within the oil and gas industry leading toa significant increase in sales and profitability. This progress has resulted in Plexus winning a number of important contractsduring the year which demonstrate and validate the technical capabilities andbenefits of POS-GRIP, and show how our proprietary method of engineering canalso 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 fromthree to ten systems. Rental sales increased by nearly 200% to £3.5m from £1.2mlast year, with HP/HT accounting for 67% of this, which further consolidates ourgrowing reputation in this specialist and expanding unconventional market. It isanticipated that the successful completion of these more technically challengingand higher profile projects such as X-HP/HT for BG will further accelerate ourrental sales opportunities, whilst also acting as a 'showcase' for ourtechnology. Over time this should encourage the operators to select ourequipment for production wells as well as for exploration wells, opening uppotential licensing opportunities with our larger multinational competitors. I am particularly pleased to report that our strategy of diversifying away fromour traditional area of activity and focus in the North Sea has been successfuland has resulted in operational activities taking place during the year in theCaspian Sea, Egypt, Brunei and Trinidad. The combination of growth in sales anddiversity of areas of operation has resulted in the need to increase bothpersonnel numbers and rental equipment inventory which are key investments forthe future. As at the year end the number of personnel had grown by 23% from 48at the end of June 2006 to 59 as at the end of June 2007, to 64 currently. Atthe same time, a sizeable capital investment programme has been implementedwhich added £4.8m in tangible assets to our rental inventory which will underpinfuture sales growth. Looking to the future we have always said that our POS-GRIP technology can beextended to applications outside of surface wellhead equipment where we believewe 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 inperformance. Over time it is our opinion that such commercial opportunities willincrease significantly beyond the two contracts that we have already announced,which is why we are increasing our research and development spend, ourdevelopment and testing programme and further extending our comprehensive patentsuite. These wins are an important milestone for Plexus and the inaugural subseaapplication for POS-GRIP technology is expected to increase interest in thesubsea capabilities of POS-GRIP in the medium term. In summary, I am more excited about the future prospects for Plexus and ourPOS-GRIP technology than at any time in the past and look forward withconfidence to the many opportunities that are presenting themselves andmeeting 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% ofturnover, with HP/HT generating the largest year on year sales increase ofnearly 300%. Margin Gross margins have increased to 45.1% from 28.6% in the previous year as rentalsales increase and economies of scale benefits associated with higher volumescrystallise. It is anticipated that a further modest improvement in gross marginwill be achievable in the current financial year. Overhead expenses In line with sales and profit growth overhead expenses have increased so as tobe able to provide the necessary infrastructure and skill base to support ourcustomers around the world. This resulted in total overheads increasing to £3.4mfrom £2.1m in the previous year within which overhead staff costs have increasedto £1.9m from £1.1m. Other items which increased significantly year on year wererent and rates associated with a full year in the new Aberdeen base andprofessional 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 aprecision 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 principallyre-invested in additional inventory. In the prior year the participatinginterest contributed £0.2m to the Profit and Loss Account. There was nocorresponding contribution this year prior to disposal. EBITDA The EBITDA for the year is £1.9m (before the £0.8m gain on disposal of theparticipating 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 hasenabled 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-coreoption over the participating interest, and compares to a loss before tax lastyear of £0.12m. Depreciation and amortisation increased to £1.02m against £0.61mlast year reflecting the increase in assets during the period. The profit beforetax is stated after charging amortisation of share based payments for the firsttime under reporting standard FRS 20; the charge for the full year is £0.12mcompared to £0.06m last year. Tax The Group UK Corporation Tax charge was significantly higher than the prior yearas a result of the rise in trading profitability, together with the capital gainarising from the investment disposal. This resulted in a tax charge of £0.47mfor 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 0.39plast 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 netbook value of tangible assets including items in the course of constructionincreasing to £6.6m from £2.4m last year. Debtors have increased to £5.0m ascompared to £2.6m as a result of the increase in sales revenues and the balanceof long term contracts. Net bank borrowings closed at £1.9m compared to a £2.9mcash asset reflecting the Group's significant investment in the expansion of therental fleet and tangible assets totalling £4.9m, increase in working capitalrequirements and ongoing investment in research and development and patentextensions. Net cash outflow for the year was £4.7m as compared to net cashinflow of £4.4m last year. In recognition of the ongoing capital expenditureprogramme either completed or under construction the Group increased its bankfacilities 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 rightsof £5.6m. The directors have considered whether there have been any indicationsof impairment and have concluded that there have been no such indications. Thedirectors 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 linewith reporting standards. The "fair value" of share based payments has beencomputed independently by specialist consultants and is amortised evenly overthe 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 withIFRS is required for the year ending 30 June 2008 with comparatives restatedaccordingly for the year ending 30 June 2007. The impact on the financialstatements is not expected to be material. Consolidated Profit and Loss Accountfor the year ended 30 June 2007 2006 2007 Restated Notes £'000 £'000 Turnover 1 10,274 6,777Cost of sales (5,640) (4,841) ------ ------- Gross profit 4,634 1,936Administrative expenses (3,894) (2,331) ------ ------- Operating profit/(loss) 740 (395)Other income 789 -Income from participating interest - 225Interest receivable and similar income 52 126Interest 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 taxationbeing profit/(loss)for the financial year 1,084 (230) ------ ------- Earnings/(loss) per share 3Basic 1.35p (0.39)pDiluted 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 Sheetat 30 June 2007 2006 2007 Restated Notes £'000 £'000 Fixed assetsIntangible assets 4 6,264 6,375Tangible assets 6,577 2,421Investments - 200 ------ ------- 12,841 8,996Current assetsStock 3,123 1,238Debtors 4,976 2,640Cash at bank and in hand 128 2,910 ------ ------- 8,227 6,788Creditors: 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 liabilitiesDeferred tax liability (322) - ------ ------- Net assets 16,076 14,876 ------ ------- Capital and reservesCalled up share capital 5 802 802Share premium account 15,596 15,596Share based payments reserve 179 63Profit and loss account (501) (1,585) ------ ------- Equity shareholders' funds 16,076 14,876 ------ ------- Consolidated Cash Flow Statementfor the year ended 30 June 2007 2007 2006 Notes £'000 £'000 Net cash outflow from operating 6 (583) (1,646)activities Returns on investments andservicing of financeInterest paid (41) (80)Interest received 41 124 ------- ------- Net cash inflow from returns oninvestments and - 44servicing of finance Taxation paid (24) (14) Capital expenditure and financialinvestmentPurchase of intangible fixed (230) (1,360)assetsPurchase of tangible fixed assets (4,863) (1,151)Proceeds of sale of tangible 28 -fixed assetsProceeds 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) FinancingRepayment of loans - (1,735)Loan advances to participating - (191)interestProceeds of share issues - 10,466 ------- ------- Net cash inflow from financing - 8,540 ------ ------ (Decrease)/increase in cash in 8 (4,683) 4,413the year Net funds/(debt) at the start of the 2,910 (1,503)year ------ ------ Net (debt)/ funds at the end of (1,773) 2,910the year ------ ------ Reconciliation of Movements in Equity Shareholders' Fundsfor the year ended 30 June 2007 2006 2007 Restated £'000 £'000 Profit/(loss) for the financial year being retainedprofit/(loss) 1,084 (230)Reserve created for share based payments 116 63New share capital issued - 14,658 ------ ------- Net addition to equity shareholders' funds 1,200 14,491Opening 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 1,499Europe 1,459 550Rest 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 andassociated products, the rental of wellheads utilising the POS-GRIP technologyand service income principally derived in assisting with the commissioning andongoing service requirements of our equipment. These income streams are allderived from the utilisation of the technology which the Group believes is itsonly segment. 3. Earnings/(loss) per share 2006 2007 Restated £'000 £'000 Profit/(loss) attributable to shareholders 1,084 (230) -------- -------- Number NumberWeighted average number of shares in issue 80,182,569 59,545,669Dilution 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)pDiluted earnings/(loss) per share 1.35p (0.38)p Basic earnings/(loss) per share is calculated on the results attributable toordinary shares divided by the weighted average number of shares in issue duringthe year. Diluted earnings/(loss) per share calculations include additional shares toreflect 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 CostAs at 1 July 2006 821 5,403 478 6,702Additions - - 230 230 ------- -------- --------- -------As at 30 June 2007 821 5,403 708 6,932 ------- -------- --------- ------- Amortisation As at 1 July 2006 99 173 55 327Charge 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 608Gain/(loss) on disposal of fixed assets (2) 35Charge for share based payments 116 63(Increase)/decrease in stocks (1,885) 47Increase 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) 4,413Cash outflow from decrease in net debt - 1,735 ------- -------- Change in net debt resulting from cash flows (4,683) 6,148Loan set against debtor balance - 515 ------- -------- Movement in net debt in year (4,683) 6,663Net 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) 128Overdrafts - (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