As anticipated at the half year, I believe that we are moving
into a phase of development where the increased recognition of the
capabilities and advantages of our proprietary POS-GRIP friction
grip technology, combined with the steady increase in the number of
completed contracts for a growing list of 'blue chip' international
and national oil and gas operators, is beginning to accelerate the
acceptance and adoption of our technology. This is particularly the
case for HP/HT rental exploration applications where Plexus offers
a number of unique advantages and solutions in terms of operational
performance, time savings, and safety which are so important for
more unconventional and deeper formations that require superior and
enabling technology.
The financial progress made during the year has been driven by a
number of key contract wins with both existing and new customers
and these have once again enabled us to penetrate into new
territories including Australia, South America, and Russia. The
most significant commercial as well as strategic developments
during the period were as follows:
-- November 2010 - Plexus commenced an HP/HT exploration
contract for new customer Apache Energy Australia in Australia with
a value in excess of GBP1m. This is anticipated to lead to further
opportunities in the region.
-- November 2010 - a contract for two standard pressure
exploration wells with a value of GBP0.5m was secured from new
customer Murphy Suriname Ltd in a new territory Suriname, South
America.
-- March 2011 - Statoil Petroleum AS chose to extend its
relationship with Plexus and awarded a contract for GBP0.7m for an
HP/HT gas exploration well in the Norwegian Continental Shelf.
-- March 2011- a GBP3.3m multi-well contract was won with
Centrica Energi Norway Consortium which includes Detnor and Faroe
Petroleum, for both HP/HT and standard pressure wells. This
contract includes a customer option for an additional three wells
with a value of approximately GBP2m.
-- April 2011 - an initial contract was secured for the first
time supply of mudline suspension equipment to LLC Gazflot a
subsidiary of Gazprom in the Okhotsk Sea, Russia with a value of
US$0.5m.
-- April 2011 - a new customer, BG Egypt, was secured in Egypt
where Plexus already has business with BP Egypt, GDF Suez Egypt,
and Shell Egypt, for the supply of standard pressure equipment with
a value of GBP0.2m. This was then in May followed by a second
contract for HP/HT equipment with a value of GBP0.55m.
-- A particularly important development concerned the successful
conclusion to a dialogue with the American Petroleum Institute
('API'), combined with the completion of an assessment of
friction-grip technology by Det Norske Veritas ('DNV'). This
culminated in enabling Plexus to market POS-GRIP technology where
applicable as compliant with API Spec 6A wellhead standards, as
well as the equivalent ISO 10423.
Post year end, we have been particularly active with a number of
new customer wins including:
-- A contract signed to supply Niko Resources Limited in
Trinidad, which has which has a value of between GBP1m and
GBP3.25m.
-- An HP/HT contract win with Gaz de France Suez E&P Ltd for
the UK North Sea with a value of GBP1.7m.
-- A first time contract win via Vantage Drilling Company Inc.
to supply the major Malaysian oil and gas operator with a value of
US$1m.
-- A further contract with Centrica Energy for an HP/HT well in
the North Sea for GBP0.8m.
-- A two year framework agreement with Transocean Drilling U.K.
Limited for the supply of standard 10,000 psi wellhead equipment to
Applied Drilling Technology International ('ADTI') the turnkey
drilling division of Transocean with an estimated value of GBP2m
over the next two years.
-- At a time when subsea drilling activities are becoming
increasingly important and there is worldwide focus on the
standards required to meet the challenges that such an environment
inevitably generates, Plexus has seen an increased level of
interest in the capabilities of POS-GRIP technology subsea. Two
post period end contract wins which further validate the
significant future potential of the subsea arena for Plexus were
the award in July 2011 of a GBP0.5m engineering design contract by
Wintershall Noordzee B.V. for the development of an HP/HT subsea
wellhead crossover system, and the contract announced in August
2011 with new customer Dana Petroleum PLC for the supply of
standard pressure equipment for one well also with subsea crossover
to production well capability with an approximate value of
GBP0.2m.
The organic and strategic progress that has and is being made
within Plexus, and the way we engage with the wider industry is I
believe now combining to ensure that more than ever before we are
being considered as a real alternative to established conventional
wellhead systems. This clearly helps us further towards our long
term goal of becoming a new wellhead standard. This growing
interest in our technology was clearly in evidence at the bi-annual
"Offshore Europe" tradeshow in Aberdeen in September 2011 where we
had one outdoor and one indoor stand, and benefitted from a number
of valuable opportunities to further promote our POS-GRIP
equipment.
This progress, and the gaining of a large number of contracts in
the year, some of which are of a longer term nature, has culminated
in a 17% year on year revenue growth resulting in sales of
GBP15.42m, with rental of HP/HT exploration equipment accounting
for the majority at GBP10.64m which was an increase of 13% over the
prior year. The growing HP/HT business activities helped to further
increase gross margins to 60.1% as compared to 58.5% last year, and
EBITDA (before IFRS2 share based payment charges) increased by 37%
to GBP4.69m from GBP3.42m. Profits before tax increased by 144% to
GBP1.57m compared to GBP0.65m last year, and profit after tax
increased 77% to GBP1.24m, against GBP0.70m last year. Sales by
territory were more evenly balanced than last year with the UK
accounting for 46% of sales, Africa 20%, Europe 14%, Australia 11%,
Asia 5%, and America 4%.
As has always been stressed, it is essential with a new
technology in a critical industry to ensure that personnel and
infrastructure are kept in balance with a steadily growing rental
wellhead equipment inventory. This is especially true at a time
when the number of customers and territories that we are servicing
is larger than ever before, and we pursue new product development
initiatives outside of the core exploration jack-up rental
activities. For these reasons total overheads increased to GBP7.59m
from GBP6.92m in the previous year, and employee headcount
increased to 91 at the year end as compared to 88 in the prior
year. This number is expected to increase further in 2011/12 in
support of the new product development projects and in particular
the new subsea wellhead design, 'HGSS'. In addition our capital
investment programme continued, totalling GBP2.34m compared to
GBP3.26m last year. However, we expect this to more than double in
2011/12 as we anticipate further progress and market penetration.
Similarly, R&D, which totalled GBP0.7m in the period and was
essentially unchanged from GBP0.75m in the prior year, is also
expected to increase significantly in 2011/12 as a result of the
ongoing innovative design and development programmes.
In summary I am very pleased with this strong set of results and
the progress that we have made in a number of key areas during the
year. It is important to stress that Plexus and the
commercialisation of our proprietary POS-GRIP technology is not
just about working hard to deliver a good set of annual financial
results, but is perhaps even more importantly about continuing to
invest in the future development of POS-GRIP technology and its
many applications, including subsea equipment, production wellhead
equipment, fracking, geothermal, and CO2 storage that it can
address outside of simply jack-up rental exploration. Such
investment I believe will result in the creation of significant
shareholder value as the POS-GRIP method of wellhead engineering
steps up to meet and exceed existing standards, and indeed takes
safer and superior operational features to new levels, particularly
for subsea where the advantages of non threaded connector
methodology is so material. What is particularly encouraging about
the new subsea opportunity is that the global deepwater market is
growing all the time, and it was only in September 2011 that energy
analyst Douglas-Westwood raised its forecast by $7bn to $225bn as
the amount to be spent in the period 2011-2015. At around the same
time Alastair Birnie of Subsea UK acknowledged that the UK subsea
market has become renowned throughout the industry for its
innovative and pioneering nature, and that 30% of all goods and
services supplied to the subsea sector worldwide are supplied from
the UK. I believe that Plexus and POS-GRIP can play an important
role in such developments and opportunities not only independently,
but also eventually in conjunction with suitable licensees and
alliance partners.
Ben van Bilderbeek
Chief Executive
17 October 2011
Financial Review
Revenue
Revenue for the year was GBP15.42m, up 17% from GBP13.14m in the
previous year, reflecting a strong sales performance underpinned by
a series of contract wins and the gaining of new customers in new
territories around the world.
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