TIDMPOS
RNS Number : 1440R
Plexus Holdings Plc
23 October 2013
Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil
equipment & services
23 October 2013
Plexus Holdings plc ('Plexus' or 'the Group')
Preliminary Results for the year to 30 June 2013
Plexus Holdings plc, the AIM quoted oil and gas engineering
services business and owner of the proprietary POS-GRIP(R) method
of wellhead engineering, announces its preliminary results for the
year ending 30 June 2013.
Results
-- Record revenue, EBITDA, profit before tax and profit after tax
-- 29.7% increase in revenue to GBP25.57m (2012: GBP19.71m)
-- 38.3% increase in profit before tax to GBP4.27m (2012: GBP3.09m)
-- 25.7% increase in profit after tax to GBP3.06m (2012: GBP2.43m)
-- 21.8% increase in EBITDA to GBP7.60m (2012: GBP6.24m)
-- 23.6% increase in basic earnings per share to 3.69p (2012: 2.99p)
Highlights
-- Strong sales revenues as a result of POS-GRIP(R)
friction-grip rental wellhead equipment continuing to gain market
share following contract wins with a number of new international
oil and gas operators, and existing customers
-- Growing evidence of heightened awareness for the need to
adopt the best available and safest technology ('BAST') driven by
regulator and industry bodies leading to calls for initiatives to
solve long term challenges such as subsea annulus monitoring and
management
-- Further industry support secured for on-going Joint Industry
Project ('JIP') for the development of the new Plexus POS-GRIP
HGSS(TM) subsea wellhead design, with Total E&P Recherche
Developpement SAS ('Total') signing up as an additional consulting
partner alongside existing partners Eni S.p.A. ('Eni'), Maersk Oil
North Sea UK Ltd ('Maersk'), Shell International Exploration and
Production B.V. ('Shell'), Tullow Oil plc ('Tullow'), and
Wintershall Noordzee B.V. ('Wintershall')
-- Secured initial High Pressure/High Temperature ('HP/HT')
contracts from three new customers totalling GBP3.7m: Lotos
Exploration and Production Norge AS ('Lotos') for GBP1.0m, Lundin
Norway AS ('Lundin') for GBP2.0m, and Glencore Exploration Cameroon
Ltd ('Glencore') for GBP0.7m
-- HP/HT contract wins with existing customers included Talisman
Energy Inc. ('Talisman') for GBP1.15m, Maersk for GBP1.5m, Gaz de
France Suez E&P UK Ltd ('GDF') for GBP1.0m, and Det Norske
Oljeselskap ASA ('DetNor') for GBP2.0m
-- Additional 4 year multi-well contract secured with Brunei
Shell Petroleum Sdn Bhd ('Shell Brunei') for the supply of standard
pressure and HP/HT exploration wellhead equipment with an initial
value of circa GBP2.0m
-- Post period end secured a first time contract with new
customer Eni Australia Limited ('Eni Aus') for the supply of
standard pressure equipment, an HP/HT contract from Statoil
Petroleum AS ('Statoil') for GBP2.5m, a standard pressure contract
for Centrica Energy Norway ('Centrica') for GBP0.75m, and an
additional standard pressure contract for BG International Egypt
('BG Egypt') for GBP0.35m
-- Post period end acquisition of a 25% interest in a private
manufacturer of specialist oil and gas equipment for a
consideration of GBP0.73m
-- Post period end, HP/HT Tie-Back has successfully completed
the full 'internals' testing cycle and will be shortly completing
the 'externals' testing requirements after which we will begin to
engage through the sales team with the industry
-- Initiatives underway to strengthen Plexus presence in the
important Asian region, particularly Singapore, Malaysia, and
Brunei with new subsidiaries incorporated in Singapore and
Brunei
-- Capital investment, primarily in additional wellhead rental
inventory sets, increased by 76.2% to GBP8.14m (2012: GBP4.62m)
-- Research and Development ('R&D') spend, excluding costs
of building new test fixtures, increased by 22.0% to GBP1.46m
(2012: GBP1.20m)
-- Renewal of bank facilities in October 2013 of GBP5m credit
facility on a three year revolving basis with an additional GBP1m
overdraft on a yearly term
-- The Board is today proposing a 10% increased final dividend
of 0.55p per share (2012: 0.5p), which will be subject to
shareholder approval at the Annual General Meeting ('AGM') to be
held on 5th December 2013. That follows on from the 12.8% increase
in the interim dividend (to 0.44p) making a total dividend for the
financial year of 0.99p per share. If approved the final dividend
will be paid on 13th December 2013 to all members appearing on the
register of members on the record date 1st November 2013. The
ex-dividend date for the shares is 30th October 2013
For further information please visit www.posgrip.com or
contact:
Ben van Bilderbeek Plexus Holdings PLC Tel: 020 7795 6890
Graham Stevens Plexus Holdings PLC Tel: 020 7795 6890
Jon Fitzpatrick Cenkos Securities PLC Tel: 020 7397 8900
Ken Fleming Cenkos Securities PLC Tel: 0131 220 6939
Felicity Edwards St Brides Media & Finance Tel: 020 7236 1177
Ltd
Frank Buhagair St Brides Media & Finance Tel: 020 7236 1177
Ltd
Chief Executive Ben van Bilderbeek said:
"It is once again pleasing to be able to report an excellent set
of financial results achieved in a year that was particularly
active for Plexus, which delivered record revenues, profits, and
earnings per share. This strong on-going progress means that I am
delighted to announce that the Board proposes a 10% increase in the
final dividend of 0.55p per share for the year ended 30 June 2013,
which will be submitted for approval at the Annual General
Meeting.
"The strong year on year growth in revenues is an important
indicator of the momentum that we are continuing to build in a
market dominated by a small number of large multi-national oil
service companies. I have always believed in the superior nature of
our proprietary patented POS-GRIP friction-grip method of
engineering when compared to conventional technology, and at a time
when the industry is calling for solutions to problems such as long
term wellhead integrity including seal life, monitoring, and
pressure management, this belief can only strengthen. The number of
new and repeat orders that we have reported, and expect to report
in the current year with major oil and gas operators around the
world is an endorsement of our technology and the multiple benefits
and advantages that our equipment offers customers in terms of
safety, functionality, and cost and time savings.
"Post the 2010 Gulf of Mexico incident there is an increased
awareness among regulators and operators of the need for improved
safety procedures, the selection of BAST equipment, and of
heightened standards and practices. I should note that as has been
widely reported, July 2013 marked twenty five years since the Piper
Alpha tragedy, and this anniversary highlights the need to focus on
safety with a renewed sense of purpose. The Cullen Inquiry twenty
five years ago transformed the approach to oil and gas safety in
the North Sea and helped propel UK standards to be recognised as
some of the best in the world. Nevertheless, as the Oil & Gas
UK Piper 25 Conference held in June reminded the audience there is
no room for complacency. Such a warning is wholly appropriate
because although operators are required to demonstrate a safety
case that they have reduced the risks of operation to 'as low as
reasonably practical' ('ALARP'), there is still room for ambiguity
with regard to certain key practices and equipment selection
options. For example, unlike POS-GRIP wellheads which are known as
"through the blow out preventer ('BOP')", some designs of surface
wellheads require the blowout preventers to be removed to allow
access to install the casing hanger and annulus seal assembly. I
have been saying for over twenty five years that such a practice is
dangerous, unless absolutely necessary, as there is a risk that the
well may become unstable which can lead to an uncontrolled major
blowout incident, as indeed happened with the Montara well offshore
Australia in 2009. The Health and Safety Executive ('HSE') and Oil
& Gas UK state that the use of such a wellhead, "should be
discouraged" and "should not be used.". I maintain that clearer
direction is warranted and that "should" ought to in fact be
"must". The need for such clearer industry guidelines is something
we are actively encouraging, and I will once again be communicating
these messages later this month when presenting at the Oil &
Gas iQ "HP/HT Wells Summit 2013".
"In addition to our organic operational activities we continue
to actively pursue various strategic initiatives. The HP/HT
Tie-Back system design up to 20,000 psi JIP is progressing well and
subject to final testing, we are preparing to initiate sales
promotion activity. Meanwhile, although the design process of the
HGSS subsea wellhead design JIP has been completed, in response to
industry demands we are now considering accelerating the inclusion
of annulus monitoring, one of the target features which has gained
prominence alongside instant casing lock down, as evidenced by a
recent call made by the Industry Technology Facilitator ('ITF').
With regard to on-going sales and marketing initiatives, we are
putting in place a strategy to expand our sales activities in Asia,
including Australia, and this is already generating a number of
exciting opportunities.
"I believe our proprietary patented technology places us in a
unique position to benefit from industry demands both in terms of
safety and operational capability. This is particularly the case
for HP/HT and X-HP/HT where the Chairman of BG Group, one of our
customers, only last month wrote that "HP/HT subsea well systems
will be a game-changer in terms of cost and reliability". We agree
with such comments and fully expect to be able to play an important
role in such future developments, which is why the Board remains
confident about the future and our ability to continue to deliver
significant value to shareholders over the comings years."
Summary of Results for the year ended 30 June 2013
2013 2012
GBP'000 GBP'000
Revenue 25,566 19,706
EBITDA - before the effect of
IFRS 2 7,598 6,238
EBITDA - after the effect of IFRS
2 7,457 5,987
Profit before taxation 4,269 3,088
Basic earnings per share (pence) 3.69 2.99
Chairman's Statement
Business progress
I am pleased to report that the Group made significant progress
during the year, both at the operational and financial level. The
increase in activity levels seen in the first half accelerated into
the second half, resulting in a 29.7% increase in turnover to
GBP25.57m for the year to 30 June 2013 (2012: GBP19.71m), a 21.8%
increase in EBITDA to GBP7.59m (2012: GBP6.24m), a 38.3% increase
in profit before tax to GBP4.27m (2012: GBP3.09m), and a 25.7%
increase in profit after tax to GBP3.06m (2012: GBP2.43m),
delivering a 23.6% increase in basic earnings per share of 3.69p
(2012: 2.99p). The increase in sales revenues was driven by a
combination of repeat and new business contract wins for our
exploration rental wellheads, particularly for the more technically
challenging HP/HT applications where our reputation continues to
grow. Importantly industry support for our proprietary POS-GRIP
friction-grip method of engineering is gaining momentum not only in
terms of rental contract wins, but also in terms of our strategic
initiatives, particularly our new HGSS subsea wellhead design JIP,
which saw Total join a number of other major operating companies as
a consulting partner.
Strategy
As can be seen from the strong set of financial results, Plexus
has made excellent progress across all aspects of our business, in
terms of organic sales of our POS-GRIP wellhead rental equipment in
the North Sea and other regions around the world, and also with
regards to a range of strategic initiatives associated with
extending the range of applications that our patented friction-grip
method of engineering can be designed for. Importantly, all the
activity undertaken during the year under review further raises the
profile and awareness of our technology and the many safety and
operational advantages that it delivers.
It is important to highlight that the market share penetration,
primarily in the jack-up drilling sector, that we have achieved to
date with a range of blue chip international oil and gas operators,
has been achieved by winning business from major multi-national
competitors. Our ability to do this is made possible by the fact
that our proprietary wellhead technology is superior when compared
against established conventional technology, particularly for HP/HT
fields. The industry is now clearly recognising that the range of
features that we have built into our designs is more relevant than
ever, especially with wellhead integrity a priority in a heightened
safety and regulatory environment.
POS-GRIP wellhead technology is unique. As a result we are
focused on ensuring that the industry, whether customers,
competitors, or regulators understand what our core wellhead design
features offer. These include not lifting the BOP for all surface
drilling applications; casing and casing tubing hangers being able
to be locked down 'instantly' and with sufficient capacity; and
seals that do not lose integrity throughout the life cycle of the
well. Crucially we maintain that we are able to provide a wellhead
that can meet enhanced test standards that reflect 'true' field
life conditions and match the accepted higher standards of premium
couplings, ensuring the wellhead is not the weak link in the well
architecture 'chain'. These are simple but powerful messages and
ones where more than ever before common sense and logic is
beginning to prevail, for example in relation to the 'instant'
locking down of casing which industry best practice calls for,
because an unlocked casing has the potential to lift, destroying
the annular seals and with it the integrity of the well. It is
therefore very surprising that before the 2010 Gulf of Mexico
incident it was common practice to leave off locking rings on
subsea wellheads and hence leave the casings unlocked. The reason
for this is that most subsea locking devices are difficult to
deploy and are unreliable, hence why they can by choice be left off
meaning that the operator relies instead on a lockdown sleeve which
is run at the end of the drilling process. Clearly such practices
are risky, and a new technology such as ours that is aiming to
resolve such issues for subsea wellheads is we believe exactly the
sort of 'game changer' that is being demanded.
The growing realisation and acknowledgement that conventional
equipment and methods need to be revised and improved, particularly
for HP/HT and subsea environments has been widely reported. An
important manifestation of such developments is the establishment
by the USA Bureau of Safety and Environmental Enforcement ('BSEE')
of the independent Ocean Energy Safety Institute ('OESI'). The U.S.
Department of the Interior announced in May that the OESI will
assess best international practices, and that importantly it will
form a balanced panel of technical experts to make recommendations
to the BSEE on issues relating to BAST. In particular, "this will
include making recommendations on candidate technologies for
evaluation and estimated budgets and timelines for such
technologies", and will "work with standards organisations to
develop testing protocols". We see these changes as very positive,
particularly as they begin to address the controlling influence
that the American Petroleum Institute ('API') has had over wellhead
standards for many years, which we have always maintained has acted
as a brake on the adoption of new and superior technology. I make
no apologies for illustrating the clear need for these changes by
quoting from the U.S. National Commission that reported directly to
President Obama on the Gulf of Mexico spill. The report stated
that, based on meetings and discussions with leading members of the
oil and gas industry, "...it is clear that API's ability to serve
as a reliable standard-setter for drilling safety is compromised by
its role as the industry's principal lobbyist and public policy
advocate." The Report goes onto say that, "According to statements
made by industry officials to the Commission, API's proffered
safety and technical standards were a major casualty of this
conflicted role", and that, "API proposed safety standards have
increasingly failed to reflect "best industry practices" and have
instead expressed the "lowest common denominator" ".
Our ability to communicate these messages and the important role
that Plexus can play in addressing these issues all stems from the
fact that as far as we are concerned the wellhead is 'Job 1'. This
is behind the growth that we are seeing, and gives us the
confidence to invest further in developing our IP, and the funding
of new initiatives such as our two current JIPs. Furthermore we are
experiencing an increased level of interest in our views and
technology. For example Plexus has been invited to speak at the Oil
& Gas iQ "HP/HT Wells Summit 2013" on pioneering techniques and
technology in HP/HT drilling and completions, which includes
looking at gaps in available technologies. Events such as these,
and the growing emphasis on preventing incidents through the use of
superior engineering design methodology and practices is not
difficult to find high level support for. It was only in 2010 that
ExxonMobil's Rex Tillerson said to Congress that the emphasis must
be on preventing blowouts in the first place "because when they
happen, we're not very well equipped to deal with them". Such focus
on safety issues extends to academic institutions. For this reason
we continue to sponsor the "Plexus Industrial Safety Lecture" with
the University of Aberdeen Industrial Psychology Research Centre.
This year's speaker was Professor Patrick Hudson PhD of the
Universiteit Leiden, Netherlands who is one of the world's leading
authorities on the human factors of safety management, who gave a
lecture in August titled "The Macondo Blowout: A Systemic
Analysis". The nature of such safety driven developments was
clearly summarised at a European Drilling Engineering Association
event in September 2013 at which Plexus was invited to present a
paper - "Quality assurance and well integrity". The event discussed
the industry pushing wells to longer reach, higher temperatures,
higher pressures, while at the same time the public pressure and
demand for minimising environmental impact and maximizing safety
has become stronger, which is why there is such a push for new and
improved well integrity related features.
A specific example of such needs was a research 'call' in June
2013 by the ITF, a not for profit organisation owned by major
international oil and gas operators and service companies, whose
objectives are to identify technology needs, foster innovation and
facilitate the development and implementation of new technologies.
The call, which we have responded to, seeks solutions to deal with
subsea annulus pressure management, a major issue for the industry
for many years, and which we believe POS-GRIP technology is
uniquely able to address. Annulus management capability is sought
to deal with sustained casing pressure ('SCP') situations that can
be caused when fluid is trapped between the cement seal lower down
the annulus and the casing hanger seal in the wellhead heats up
during production, leading to well control incidents. On surface
applications access to the casing annuli is readily available, but
to date such annulus management facilities and capabilities are
simply not available subsea. It is key innovative solutions such as
these that we are engineering into our new HGSS subsea wellhead
design. The issue with current subsea wellheads is that unlike
operating on the surface, one cannot readily and safely provide
penetrations through the wellhead body to gain access to the
various casing annuli. The POS-GRIP engineering method however will
be designed to provide removable seal sleeves in the wellhead bore
to open and close porting systems which remain within the wellhead
shell, and these monitoring ports can eventually be directed
through the tubing hanger into the subsea tree, providing operators
with continuous access to selected casing annuli.
The HGSS JIP project has been underway for nearly eighteen
months and now, with the addition of Total, has the support of six
major oil and gas operators, as well as the interest of others. A
number of key milestones have been reached. Our HG(R) annular seal
system, which is at the heart of our technology, has been qualified
to 20,000 psi at 375OF. Our target is to qualify the system to a
standard that exceeds the requirements as defined by the API, which
for the first time will match the integrity of premium casing
couplings. The activation method for POS-GRIP mechanisms has been
finalised, the non-requirement for wearbushings has been agreed by
JIP members, and simple non rotational casing hanger running tools
have been developed. The manufacture of test fixtures is expected
to commence end of calendar year 2013 into first quarter 2014, with
system testing expected to be completed during the third quarter of
2014 calendar year. As the project progresses additional
opportunities arise to extend the initial scope and features of the
JIP, and as was seen with the ITF call the renewed emphasis on
addressing SCP and annulus pressure management has encouraged us to
look sooner at providing monitoring, bleed-off, and an ability to
remediate both the B and C annuli.
Our second on-going JIP that I would like to report on is our
unique up to 20,000 psi Tie-Back Connector which has the support of
Maersk. This product has been designed to enable for the first time
HP/HT exploration and pre-drilled production wells to be converted
to either subsea or platform producing wells. Conventional wellhead
technology is not able to offer such a solution as it uses threaded
connections which cannot be reliably engaged and disengaged in a
subsea controlled, remote, HP/HT environment. The connector has
been tested successfully with external pressures at 350OF and the
final test procedures are now underway. Once testing is complete
the next step will be a field trial. We remain excited about this
additional POS-GRIP application and its scope for operators to make
significant cost and capex savings. Currently exploration and
pre-drilled production wells are abandoned after costs ranging
between GBP50m and GBP200m have been incurred, and the anticipated
first time user of the system estimates a saving for such a well in
the region of GBP80m.
The common thread that runs through all these various strategic
opportunities is our ability to design and develop POS-GRIP
patented friction-grip method of engineering equipment. Whether our
equipment designs are for the surface or subsea the on-going
development and protection of our intellectual property ('IP') is
key, which is why we continue to invest in R&D and patents. As
a result the time spent by our engineers on R&D increased 25.1%
during the year. Meanwhile patent filing activity costs increased
235.1% year on year, as we extended our patent activities,
particularly in the subsea arena, where the HGSS JIP has generated
a number of innovative features and improvements which also apply
across all our POS-GRIP and HG seal technology. It should be noted
that the strength of our patent suite and extensive know-how built
up over many years underpins our sales and profits, and for this
reason the start of the 'Patent Box' tax regime from the 1st April
2013 is particularly relevant. This legislation has been introduced
to encourage innovation, and a key benefit is a lower effective
rate of corporation tax on profits attributable to UK or European
patents. This is a transitional arrangement, but subject to tax
computations and qualification we would expect shareholders to
benefit as the corporation tax rate on applicable profits reduces
to circa 15% and then 10% by 2017.
None of this progress would of course be possible without our
ability to recruit and retain skilled staff across all areas of the
business including engineering, finance, human resources,
marketing, operations, and sales. This focus has enabled us to
increase our headcount by 19.5% year on year, whilst successfully
maintaining a fast moving 'can do' culture that fits well with an
innovative company, and which we believe sets us apart from our
competitors. Employee development and satisfaction is important to
our company, and a Plexus Management Development programme has now
been implemented for all supervisors and managers, whilst also
bolstering technical training for Field Service Technicians and
enhancing onshore training facilities. Such personnel initiatives
are a key part of building, developing, and improving the
infrastructure needed to support the growth of our organic and
strategic initiatives. As we look to expand our product range, and
explore the possibility of creating one or more additional rental
inventory 'hubs', we took the opportunity post period end to
acquire a 25% interest in a private UK engineering company, a
manufacturer of specialist oil and gas equipment for a
consideration of GBP0.73m. We believe this is a sound investment
which will help support the anticipated growing need for
manufacturing capacity.
Regarding our bank facilities I am pleased to report that we
continue to operate comfortably within our established bank
facilities with Bank of Scotland Corporate, which have recently
been renewed at last year's level of GBP6.0m.
Staff
On behalf of the Board, I would like to thank all our employees
for their dedication and hard work during another successful year
that has not only delivered another set of record financial results
but which, importantly and necessarily, has also seen us increase
our staff numbers from 113 at the beginning of July 2012 to 135 at
the end of June 2013 and 142 currently as we continue to expand our
business activities particularly in the HP/HT rental wellhead
market and progress various on-going strategic initiatives.
Outlook
It is clear that a number of important macro dynamics are
supporting us in our quest for our equipment to become a new and
superior standard that can in time become the industry's wellhead
of choice. Our ability to deliver enhanced safety, time savings,
and operational efficiencies at the surface, particularly for HP/HT
wells, together with our belief that we will also in due course be
offering the market a unique combination of design features for
subsea exploration and production wells such as instant casing
hanger lockdown, long term metal-to-metal seals, annulus pressure
monitoring, all combine to ensure a positive outlook for
Plexus.
One such dynamic is record global expenditure by oil and gas
companies as reported by Barclays in their June "Global 2013
E&P Spending Update". Barclays believes the industry is "in the
early stages of a strong sustained upcycle". Longer term prospects
are also healthy, and only this month Peter Voser the CEO of Royal
Dutch Shell, predicted that demand for energy will double over the
next 50 years spurred by rapid industrialisation of China and
across Asia. We look forward to benefitting accordingly, and are
developing plans to accelerate sales in key regions such as Asia,
including Australia. Following the incorporation of new
subsidiaries in Singapore and Brunei to compliment Plexus Malaysia,
we are strengthening our relationships in the region with both
customers and local manufacturing and engineering companies, and we
are also looking to establish a local inventory of rental
equipment.
A second important element which we believe improves our outlook
further is the growing regulatory pressure emanating particularly
from the USA, for example the formation of the OESI, to pursue the
use of BAST equipment and technology. For a number of reasons we
believe that our POS-GRIP wellhead designs have the ability to be
promoted as the BAST option, particularly as we believe we can
match our wellhead standards to those required for premium
couplings so that the wellhead can no longer be described as the
'weak link'. We see such developments as evidence that the industry
is finally moving away from treating the wellhead as a "commodity
item", and is the reason why the industry is actively pursuing new
and innovative engineering solutions, and why our subsea wellhead
JIP is so well supported by a range of major international oil
companies.
All of these positive indicators are reasons why we look forward
to the future with confidence and believe that the long term
prospects and outlook for Plexus are excellent. As a result we
believe shareholder value will continue to grow over time. Such
progress will be achieved through organic growth, combined with the
increasing prospect of securing potential alliance partners and
licencees for our technology, as we begin to focus on opportunities
to make our surface production wellhead applications, and our
emerging subsea exploration and production applications, more
widely available. The 10% increase in our final dividend is a
further demonstration of the Board's confidence in the future.
J Jeffrey Thrall
Non-Executive Chairman
22 October 2013
Chief Executive's Review
Plexus has delivered another record set of results and made
excellent progress throughout the period with a particularly active
second half of the year that led to a profit upgrade announcement
at the end of July 2013. These results were achieved during a
period where the oil price volatility that existed during the prior
year settled to a point where the Brent Crude price per barrel was
reported as ranging from USD$92 at the beginning of the financial
year to USD$100 at the end. Looking forward Barclays in its "Global
2013 E&P Spending Update" reported that exploration and
production companies were basing their spending budgets on oil
prices of USD$101 for Brent.
These more positive macro trading conditions, together with the
growing recognition of the range of features that our POS-GRIP
friction-grip method of engineering can deliver to the operator,
resulted in a number of new contracts for our rental sales from
both existing and new customers in different regions around the
world. Such progress stems from the benefits of our unique
technology in terms of operational performance, time savings, and
enhanced safety which are particularly relevant for HP/HT
applications, an area which once again saw the most growth. As a
result sales increased across all of our key geographic regions
including the UK continental shelf ('UKCS') where sales rose by
5.4% to GBP9.66m, and the European Continental Shelf where sales
rose by 2.1% to GBP7.16m. Of particular note however was the
performance of the rest of the world which accounted for 34.2% of
all sales, nearly double the 17.9% reported in the 2012 financial
year. The key growth regions were seen in Australia where sales
increased 584.7% over last year, Africa where sales increased by
170.3%, and encouragingly the Asian region continued last year's
momentum and delivered a year on year sales increase of 125.6%. Our
growing confidence in the Asian region where we are developing
commercial relationships in Brunei, Malaysia, and Singapore, has
led us to incorporate subsidiaries in both Singapore and Brunei and
we will be looking to secure warehouse and office space in
Singapore and recruit associated staff during the current 2014
financial year.
The contract wins secured from existing and new customers in
relation to our core rental exploration wellhead business
activities all help to underpin our future order book, and
demonstrate the broadening base of our organic business model. The
most significant developments during the period were as
follows:
-- October 2012 - a further four years contract with Shell
Brunei for the supply of HP/HT and standard pressure wellhead
systems for a multi-well exploration programme in Brunei. Initial
value estimated at GBP2.0m
-- October 2012 - Talisman contract for a standard pressure and
an HP/HT well with a value of GBP1.15m in the Norwegian North
Sea
-- October 2012 - new customer win with Lotos for the supply of
HP/HT wellhead equipment in the Norwegian North Sea with a value of
GBP1.0m
-- October 2012 - new customer win with Lundin, another
Norwegian operator, for two HP/HT wells with a value of GBP2.0m
-- January 2013 - new customer win for the supply of HP/HT
wellhead equipment to Glencore in Cameroon initially for one well
with a value of circa GBP0.7m
-- February 2013 - contract extension with Maersk for the supply
of HP/HT equipment with an initial value of GBP1.5m
-- May 2013 - continuing business with GDF for the supply of one
HP/HT wellhead system for the UK North Sea with a value of
GBP1.0m
-- June 2013 - additional contract signed with DetNor for
GBP2.0m for two HP/HT wells to be drilled in Norwegian Continental
Shelf - new contract for 2 wells
Post year end wellhead rental exploration activity has continued
to remain buoyant. This activity level has validated the decision
to significantly increase capital expenditure particularly in
relation to the addition of ten HP/HT wellhead sets during the
financial year:
-- July 2013 - new customer win with Eni Aus for a standard
pressure wellhead system with an initial value of circa GBP280k and
an option for continuing use which could lead to a further three
wells. This was the third customer secured in Australia following
on from Apache Energy Australia and Santos Ltd, and bodes well for
future business in the region
-- July 2013 - award of new contract from Statoil for two HP/HT
wells in the Norwegian Continental Shelf with a value of
approximately GBP2.5m. Statoil are recognised as operating at the
pinnacle of operational and equipment safety standards and
requirements, and we believe that Plexus' equipment fits such
criteria
-- September 2013 - HP/HT Tie-Back has successfully completed
the full 'internals' testing cycle and will be shortly completing
the 'externals' testing requirements after which we will begin to
engage through the sales team with the industry
-- October 2013 - award of a new standard pressure well contract
from Centrica Energy Norway for GBP0.75m, and an additional
standard pressure well contract for BG Egypt for GBP0.35m
In support of current and anticipated future growth, Plexus
acquired post period end the whole issued share capital of a
private company which holds a 25% interest in a private UK
engineering company which is a manufacturer of specialist oil and
gas equipment for a consideration of GBP0.73m. At the current time
Plexus continues to choose not to own its own manufacturing
facility, and therefore this strategic investment compliments our
on-going growth strategy as it helps to support our capital
equipment needs whether these are for increased organic wellhead
rental inventory, or for new engineering and prototype development
capacity for our on-going JIP's.
In addition to our expanding organic business activities which
centre on the rental of exploration wellhead equipment around the
world, it is clear to us that significant commercial opportunities
exist for our proprietary POS-GRIP technology particularly in the
subsea and surface production wellhead market sectors. What unites
all these opportunities is an increasing global awareness of the
technical challenges posed by the need to explore and produce from
ever more complex and hostile environments, and in particular in
deeper formations where extreme HP/HT conditions exist. These
challenges were of course brought into sharp focus following the
2010 Gulf of Mexico incident, and the ramifications of the lessons
learned are still very much being felt today, especially in terms
of increased regulation and the call for the introduction of higher
industry standards and improved safety procedures and equipment,
including for wellheads. In the USA these initiatives have in part
come together under one banner known as the need for identifying
and using BAST.
Plexus believes that it is uniquely placed to address such
considerations where the wellhead is concerned and in the future
where HP/HT wells will require limits of up to 30,000 psi and/or
temperatures of up to 500OF. There has clearly therefore never been
a more important time for wellhead standards to be raised, and
indeed for wellheads to have an ability to match the standards of
premium couplings, which is not the case at the moment. In our
opinion, this currently leaves the wellhead as the weak link in the
well architecture chain, unacceptable in light of the dangers that
are now so much better understood. Only recently Oil and Gas iQ, in
advance of the 9th Annual HP/HT Wells Summit 2013 at which I will
be presenting, highlighted that HP/HT wells have become more
numerous as conventional reserves become depleted, and identified
the biggest challenges faced by HP/HT operators as well control and
intervention. Crucially for Plexus the area with the single largest
knowledge gap is seals where our technology excels. Indeed only
recently the vice president for drilling and completion for Total,
when being interviewed about critical challenges, said that HP/HT
"remains a frontier technology" and that "it makes us review all or
many of our standard practices". As POS-GRIP wellheads are able to
offer operators superior long term metal-to-metal seal performance
together with a range of other unique safety and time saving
features, we are confident in our ability to set and achieve such
evolving and more stringent standards, and in the process continue
to gain market share.
Such key industry issues and concerns, following the 2010 Gulf
of Mexico incident, acted as the catalyst for Plexus originally
being asked to bring our wellhead technology from the surface to
subsea, leading to the establishment of our JIP to develop a new
superior subsea wellhead. The goal is for the new HGSS subsea
wellhead design to address the main technical issues and
requirements highlighted by regulators and incorporating into our
wellhead design a combination of safety and performance features
never before seen in a subsea wellhead. The project is progressing
well and the design concept has been finalised in terms of the
original scope. We are now considering expanding the scope of the
original design to incorporate new and evolving industry
requirements. Importantly the JIP continues to gain support from
the industry and major international oil companies including
Maersk, Shell, Wintershall, Tullow and Eni. I was very pleased to
welcome Total, the major worldwide French oil and gas operator, as
a new consulting partner last December. Total's contribution to the
on-going project is welcomed and it is hoped that in the future
they will become an end user of the HGSS wellhead.
It is once again pleasing to be able to report that the efforts
by the Plexus team, together with increased levels of investment in
R&D and IP have not only continued to develop and enhance our
core POS-GRIP technology but have delivered a record set of
financial results for shareholders. Revenues increased 29.7% year
on year resulting in sales of GBP25.57m, with rental of HP/HT
exploration equipment accounting for the majority at GBP22.01m, an
increase of 36.6% over the prior year. The continued growth in our
HP/HT business, where the benefits of our technology can be most
easily demonstrated, helped to maintain gross margins at a level of
71.0% as compared to 70.9% last year, while EBITDA increased by
21.8% to GBP7.60m from GBP6.24m. Profits before tax increased by
38.3% to GBP4.27m compared to GBP3.09m last year and profit after
tax increased 25.7% to GBP3.06m, against GBP2.43m last year. Sales
by territory reflected the increasing global nature of our business
activities with the UK accounting for 38% of sales compared to 46%
last year, Europe 28%, Africa 13%, Asia 12%, Australia 8% and
Americas 1%.
As industry interest in, and customer support for, our equipment
continues to grow, it is essential that the necessary level of
investment is made in personnel and infrastructure to support
operations in the field. In a critical industry such as oil and gas
it would be unacceptable to grow sales and not be able to properly
execute, especially where a new and fast emerging technology is in
many cases being tried for the first time by customers. Expenditure
has therefore increased across a range of activities, including
human resources, particularly in relation to recruitment and
training, and IT hardware and software. Management information
systems have been further developed, and inventory management,
workflow and equipment scheduling have also been upgraded. Overhead
costs therefore increased to GBP13.77m from GBP10.78m in the
previous year, and our employee headcount increased by 19.5% to 135
at the year end, compared to 113 in the prior year, and currently
stands at 142. This increase follows on from a 24.2% increase in
the prior year, and in view of the widely recognised tightness of
the oil and gas labour market demonstrates the effectiveness of our
HR department, and the attractiveness of our technology and company
prospects to potential candidates. Looking to the future and the
need to expand our sales capacity in terms of hardware rather than
simply infrastructure, we continued our capital expenditure
programme, the largest element of which was the addition of new
rental wellhead sets at GBP5.72m. Total year on year capex spend
increased by 76.2% to GBP8.14m compared to GBP4.62m last year. An
additional area of investment is R&D where spend (inclusive of
new test fixtures) totalled GBP1.90m, a 38.1% increase over
GBP1.38m in the prior year which demonstrates the progress we are
making both with regard to the continual development of our
POS-GRIP technology and new applications.
The strong progress made at both the organic and strategic level
has enabled us to engage with a wider industry audience covering
engineering, corporate, and public relations. The resultant raised
profile and market presence is ensuring that we are being offered a
greater number of opportunities to present our views and
technology, and this can only help the future prospects for our
superior wellhead technology being seen as a new, superior, and
necessary standard. In addition to a number of speeches, events,
and submissions that we were invited to and engaged with, we once
again exhibited at the bi-annual "Offshore Europe" tradeshow in
Aberdeen in September 2013. Our stand featured our new HGSS subsea
technology and once again provided a good opportunity to promote
our technology to a range of interested parties that included
industry, operators, and regulators.
Although separate from day to day Plexus activities, I should
mention that, as a reflection of the achievements of all of the
Plexus team, I was pleased to receive in January the "Entrepreneur
of the Year 2013" award at the annual Grant Thornton Quoted Company
Awards, and more importantly to also receive in February the award
for "Best Oil & Gas Plc" at the annual Stock Market Wire Awards
2013. Such awards are not of course our priority but I view them as
recognition of the flair, professionalism, and dedication of all of
our personnel. In addition they also provide further encouragement
and proof that the message we are bringing both to the financial
markets and the oil and gas industry itself, is one that is
increasingly being heard as we all work hard to become a new global
wellhead standard not only for surface applications, but in due
course for subsea.
In summary I am very pleased to be able to report another strong
set of results. It is particularly gratifying that the hard work
and significant investment over the last few years has once again
been successfully translated into record sales and profits after
tax. Importantly for our long term growth prospects, our loyal
customer base continued to generate repeat business whilst at the
same time we added three new customers during the financial year,
and one post year end. This strong performance funds the continuing
development of our proprietary IP, and other important on-going
strategic initiatives, in particular our HP/HT Tie-Back JIP, and
our HGSS subsea wellhead design JIP where in the current year we
are moving to the stage of purchasing raw material for the subsea
test fixture. An important backdrop to these operational activities
is the potentially game changing need for oil and gas service
companies to be able to design and supply drilling equipment that
can perform in the most challenging conditions, particularly the
evermore complex and hostile HP/HT and Ultra-HP/HT environments
where we can demonstrate that our POS-GRIP technology is uniquely
advantageous. This need is being driven by both operators and
regulators and opens up significant commercial opportunities for
innovative companies such as Plexus, where the BAST concept creates
more of a 'level playing field' when being considered against
conventional equipment which is now being increasingly questioned
in terms of its ability to provide important features such as
subsea annulus management functionality. To address such technical
challenges the industry recognises the need for a new type of
subsea wellhead which can give access to the annuli. This is
precisely the opportunity that we at Plexus are vigorously pursuing
and which encouraged us to look at bringing forward the subsea
annular monitoring feature as part of the current HGSS design. To
further underpin these organic and strategic opportunities it is
very positive that oil and gas company spending continues to
increase not only in the UKCS but also globally. Barclays in its
recent "Global 2013 E&P Spending Update" confirmed that oil and
gas companies will spend a record USD$678 billion on exploration
and production ('E&P') in 2013, a 10% increase on the previous
year. The report offered a bullish outlook on the energy industry
with oil demand continuing to outstrip supply driving up
exploration activity levels. Closer to home Malcolm Webb, CEO of
Oil & Gas UK, has said that new tax allowances have encouraged
investment in the UKCS and that it is expected that it will total
an all-time record of GBP13.5bn in 2013, almost three times that of
2009. Such positive economic drivers can only be welcomed, and will
further help us achieve our goal of Plexus becoming an increasingly
important supplier to the industry that can deliver a new and
superior standard of wellhead, not only independently, but also in
time with the support of suitable partners and licencees.
Ben van Bilderbeek
Chief Executive
22 October 2013
Financial Review
Revenue
Revenue for the year was GBP25.57m, up 29.7% from GBP19.71m in
the previous year, resulting from a strong sales performance led by
a series of on-going and new contract wins both from existing and
importantly, a number of new customers around the world.
Particularly strong year on year performance was seen in Africa,
Asia, and Australia.
The rental of exploration wellhead and related equipment and
services accounted for over 95% of revenue which was slightly
increased from last year and continues to reflect the fact that the
company's business model is centred on the supply of rental
exploration equipment and services as opposed to sold production
well equipment. Looking to the future, whilst the company's rental
equipment activities continue to expand around the world attention
is beginning to be brought to bear on addressing additional
wellhead market opportunities whether organically or in conjunction
with potential partners, particularly the volume surface production
wellhead market, and the fast expanding exploration and production
subsea market. Once again HP/HT rental equipment sales category
generated the largest year on year sales increase rising to
GBP22.01m up from GBP16.11m last year, an increase of 36.6%, and
accounted for 86.1% of total sales. The robust HP/HT revenue growth
resulted from the increase in demand from both existing customers
and three new customers in Lotos, Lundin, and Glencore, and post
year end Eni Aus, and is supported by the increased wellhead
inventory capacity made possible by the significant step up in
capital expenditure, which in the year to end June 2013 resulted in
ten more HP/HT wellhead sets, an increase of 40%. Standard pressure
equipment sales reduced by 9.6% to GBP2.13m from GBP2.35m in the
prior year, and accounted for 8.3% of total sales. This trend
reflected a period of reduced exploration activity in the UKCS as
previously reported by Oil & Gas UK, although according to Oil
& Gas UK this decline is anticipated to reverse between 2013
and 2015 as access to finance shows signs of easing, although
conversely access to drilling rigs remains a serious constraint on
activity. This year, no revenues were generated by engineering and
testing as opposed to GBP0.70m last year as customer support for
the development of our technology consisted during the year of time
and expertise commitment by a number of international oil companies
as consulting partners to our on-going new subsea JIP.
Margin
Gross margins have essentially remained unchanged at 71.0%
compared to 70.9% in the previous year as the higher percentage of
HP/HT rental activity sales continued to deliver higher margins
than low pressure equipment contracts.
Overhead expenses
As sales and product development activities continue to expand
in absolute and global reach terms overhead expenses increased to
provide the necessary additional infrastructure and personnel to
support the organic and on-going new product development
initiatives. This resulted in total overheads increasing to
GBP13.78m from GBP10.78m in the previous year, of which overhead
staff costs was the most significant and increased to GBP8.09m from
GBP6.77m, reflecting the need to ensure that the Group's increased
sales activity levels are able to be executed in line with customer
and company operational requirements. In relation to staff levels
and their associated costs the employee headcount at the year end
increased to 135 compared to 113 for the prior year, an increase of
19.5%. Other items which increased significantly year on year as a
result of the increased activity levels, staff increases, and
expansion of infrastructure were overseas base costs, heat and
light, freight and courier, professional fees, training, health and
safety, and travel and subsistence.
EBITDA
EBITDA for the year (before IFRS2 share based payment charges of
GBP0.14m) was ahead of recently upgraded market expectations at
GBP7.60m, increased from GBP6.24m (before IFRS2 share based payment
charges of GBP0.25m) the previous year, an increase of 21.8%.
EBITDA margin for the year was marginally lower at 29.7% as
compared to 31.6% last year. The continued strength of the
company's EBITDA performance is the result of a combination of
higher margins associated with HP/HT rental activity and the
proprietary nature of the Plexus POS-GRIP friction-grip technology
which supports a pricing model supported by the ability to deliver
superior performance in terms of enhanced safety, time savings, and
operational efficiencies.
Profit before tax
Profit before tax increased significantly to a record GBP4.27m
compared to a profit last year of GBP3.09m, an increase of 38.3%,
and was ahead of recently upgraded market expectations. This
increase has been achieved after absorbing higher depreciation and
amortisation charges of GBP2.96m, up from GBP2.71m last year, the
largest component being depreciation of rental assets, reflecting
the on-going investment in Plexus' wellhead rental inventory. The
profit before tax is stated after an IFRS2 charge for share based
payments under reporting standard IFRS 2; the charge for the full
year is GBP0.14m compared to GBP0.25m last year.
Tax
Group UK Corporation Tax resulted in a tax charge of GBP1.21m
for the year as compared to GBP0.66m for the prior year. The Group
has an effective tax rate of 28% (2012: 21%) which is above UK
corporation tax rates mostly as a result of deferred tax
adjustments in respect of prior years accelerated capital
allowances.
EPS
The Group reports basic earnings per share of 3.69p compared to
2.99p in the prior year, an increase of 23.6%.
Cash and Statement of Financial Position
The statement of financial position reflects the growth in
operations during the year and in particular a significant increase
in capital expenditure. The net book value of property, plant and
equipment including items in the course of construction increased
by 44.0% to GBP13.17m compared to GBP9.14m last year. Importantly
capital expenditure on tangible assets totalled GBP6.65m compared
to GBP3.47m last year, an increase of 91.6%. This record increased
investment level reflects the company's confidence in the future,
particularly in relation to the GBP5.72m spend on the addition of
ten more HP/HT wellhead equipment sets, bringing the HP/HT rental
fleet to 35 from 25 last year. Receivables decreased to GBP4.92m as
compared to GBP6.06m which reflects the contractual nature of the
business and is in no way a reflection on the quality of the debtor
book. Net bank borrowings closed at GBP1.39m compared to GBP0.26m
last year reflecting net cash outflow for the year of GBP1.13m
after absorbing a significant increase in total capital expenditure
of GBP9.63m (2012: GBP4.62m). Although this compares to net cash
inflow of GBP0.30m last year it should be noted that last year
included the receipt of GBP1.68m from the placing of new shares in
January 2012. The Group has decided to retain its existing GBP6.0m
lending facilities structure with Bank of Scotland Corporate, and
these facilities are anticipated to be more than adequate to meet
on-going capital expenditure, R&D, and related project
commitments.
Intellectual Property
The Group carries in its statement of financial position
goodwill and intangible assets of GBP9.45m, an increase of 10.9%
from GBP8.52m last year, reflecting the Group's on-going investment
in the development of its POS-GRIP technology and in particular
patent development fee costs which increased 235.1% year on year,
the most important element of which was in relation to the new
subsea wellhead development project. 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.
Research and Development
R&D expenditure continues to be a key element in the Group's
development both in relation to the further development of our
existing POS-GRIP equipment applications, and also with regard to
new applications. Importantly for a proprietary technology led
business, the active POS-GRIP technology R&D programme includes
the development and application of extensive new as well as
continuation patents which has the benefit of extending the life of
technology related to existing patents, as well as the registration
of new ones. As POS-GRIP is a proprietary method of engineering it
has scope to be applied outside of the current surface rental
exploration wellhead technologies and into associated areas such as
the new HP/HT Mudline Tie-Back product JIP and the new HGSS subsea
wellhead design JIP. The Tie-Back product JIP, is nearing
completion and is part way through its final testing programme and
attention will turn towards the marketing of the product to the
exploration and production companies so as to be able to offer the
industry, for the first time, the ability to convert an HP/HT
exploration well to a production well without having to abandon the
well and re-drill leading to additional costs and delays. The HGSS
subsea wellhead project, launched with the encouragement of the
industry post the 2010 Gulf of Mexico incident, is approximately
half way through the development timetable with the manufacture of
special test fixtures planned for the end of 2013, with actual
testing planned between quarter one 2014 calendar year through to
quarter three, with a target prototype build date of quarter two
2015. R&D spend increased by 38.1%, including cost of building
new test fixtures, to GBP1.91m from GBP1.38m in the prior year, and
is expected to continue during the 2013/14 financial year as the
subsea JIP progresses and the POS-GRIP product range broadens.
IFRS 2 (Share Based Payments)
IFRS2 charges have been included in the accounts, 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 GBP0.14m which compares to
GBP0.25m last year.
Dividends
The Company announced on 27 March 2013 the payment of an
increased interim dividend of 0.44p per share which was approved
for payment on 26 April 2013.
In further recognition of the Group's on-going progress the
Directors have decided to propose a 10% increase in the final
dividend of 0.55p per share for the year ending 30 June 2013
compared to 0.5p last year, which will be recommended for formal
approval at the Annual General Meeting to be held on 5 December
2013. Subject to this the dividend will be paid on 13 December
2013.
Graham Stevens
Finance Director
22 October 2013
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2013
2013 2012
Notes GBP'000 GBP'000
Revenue 1 25,566 19,706
Cost of sales (7,402) (5,727)
Gross profit 18,164 13,979
Administrative expenses (13,772) (10,770)
Operating profit 4,392 3,209
Finance income 7 8
Finance costs (130) (129)
Profit before taxation 4,269 3,088
Income tax expense 3 (1,213) (657)
Profit after taxation and comprehensive income
for the year attributable to the owners of
the parent 3,056 2,431
Earnings per share 5
Profit for the year attributable to Plexus
Holdings shareholders
Basic 3.69p 2.99p
Diluted 3.51p 2.92p
All income arises from continuing operations.
Consolidated Statement of Financial Position
at 30 June 2013
2013 2012
Notes GBP'000 GBP'000
Assets
Goodwill 760 760
Intangible assets 6 8,691 7,762
Financial assets - 60
Property, plant and equipment 7 13,168 9,145
Deferred tax asset 545 473
Total non-current assets 23,164 18,200
Inventories 6,032 6,047
Trade and other receivables 4,922 6,060
Cash and cash equivalents 2,609 3,739
Total current assets 13,563 15,846
Total Assets 36,727 34,046
Equity and Liabilities
Called up share capital 8 828 827
Share premium account 17,288 17,280
Share based payments reserve 2,741 1,726
Retained earnings 6,335 4,057
Total equity 27,192 23,890
Liabilities
Bank loans 4,000 4,000
Total non-current liabilities 4,000 4,000
Trade and other payables 5,226 5,332
Current income tax liabilities 309 824
Total current liabilities 5,535 6,156
Total liabilities 9,535 10,156
Total Equity and Liabilities 36,727 34,046
Consolidated Statement of Changes in Equity
for the year ended 30 June 2013
Called Share
Up Share Share Based
Capital Premium Payments Retained Total
GBP'000 Account Reserve Earnings GBP'000
GBP'000 GBP'000 GBP'000
Balance as at 1 July 2011 802 15,596 950 2,293 19,641
Total comprehensive income
for the period - - - 2,431 2,431
Share based payments reserve
charge - - 251 - 251
Issue of ordinary shares 25 1,975 - - 2,000
Share issue costs - (291) - - (291)
Deferred tax movement on share
options - - 525 - 525
Dividends - - - (667) (667)
Balance as at 30 June 2012 827 17,280 1,726 4,057 23,890
Total comprehensive income
for the period - - - 3,056 3,056
Share based payments reserve
charge - - 141 - 141
Issue of ordinary shares 1 8 - - 9
Deferred tax movement on share
options - - 874 - 874
Dividends - - - (778) (778)
Balance as at 30 June 2013 828 17,288 2,741 6,335 27,192
Consolidated Statement of Cash Flows
for the year ended 30 June 2013
2013 2012
GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 4,269 3,088
Adjustments for:
Depreciation, amortisation and impairment
charges 2,956 2,709
Loss on disposal of property, plant and equipment 108 70
Loss on expiry of option 60 -
Charge for share based payments 141 251
Investment income (7) (8)
Interest expense 130 129
Changes in working capital:
Decrease/(increase) in inventories 15 (1,998)
Decrease/(increase) in trade and other receivables 1,138 (2,517)
(Decrease)/increase in trade and other payables (106) 2,645
Cash generated from operating activities 8,704 4,369
Income taxes paid (926) (426)
Net cash generated from operating activities 7,778 3,943
Cash flows from investing activities
Purchase of intangible assets (1,491) (1,150)
Purchase of property, plant and equipment (6,650) (3,471)
Proceeds of sale of property, plant and equipment 125 55
Net cash used in investing activities (8,016) (4,566)
Cash flows from financing activities
Proceeds from issue of new ordinary shares 9 2,000
Transaction costs from issue of new ordinary
shares - (291)
Interest paid (130) (129)
Interest received 7 8
Equity dividends paid (778) (667)
Net cash (used in)/generated from financing
activities (892) 921
Net (decrease)/increase in cash and cash equivalents (1,130) 298
Cash and cash equivalents at 1 July 2012 3,739 3,441
Cash and cash equivalents at 30 June 2013 2,609 3,739
Notes to the Consolidated Financial Statement
1. Revenue
2013 2012
GBP'000 GBP'000
By geography
UK 9,663 9,172
Europe 7,157 7,009
Rest of World 8,746 3,525
25,566 19,706
Revenue is shown by destination as the origin of revenues is all
from the UK.
2. Segment reporting
The Group derives revenue 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.
Per IFRS 8, the operating segment is based on internal reports
about components of the group, which are regularly reviewed and
used by the board of directors being the Chief Operating Decision
Maker ("CODM").
All of the Group's non-current assets are held in the UK.
The following customers each account for more than 10% of the
Group's revenue:
2013 2012
GBP'000 GBP'000
Customer 1 3,590 2,554
Customer 2 3,020 1,283
3. Income tax expense
(i) The taxation charge for the year comprises: 2013 2012
GBP'000 GBP'000
UK Corporation tax:
Current tax on income for the year 701 919
Adjustment in respect of prior years (391) (42)
310 877
Foreign tax:
Current tax on income for the year 101 27
Total current tax 411 904
Deferred tax:
Origination and reversal of timing differences 247 (243)
Adjustment in respect of prior years 555 (4)
Total deferred tax 802 (247)
Total tax charge 1,213 657
The effective rate of tax is 28% (2012: 21%)
(ii) Factors affecting the tax charge for the
year
Profit on ordinary activities before tax 4,269 3,088
Current tax charge at 23% (2012: 24%) 982 741
Effects of:
Expenses not deductible for tax purposes 242 151
Capital allowances for the year (greater than)/less
than depreciation (153) 122
Effect of R&D tax credits (268) (135)
Foreign tax 11 12
Adjustments in respect of prior year (391) (42)
Effect of change in tax rate (12) 55
Current tax charge for the year 411 904
(iii) Movement in deferred tax balance
Deferred tax (asset)/liability at beginning
of year (473) 299
Charge to Statement of Comprehensive Income 802 (247)
Deferred tax movement on share options (874) (525)
Deferred tax asset at end of year (545) (473)
(iv) Deferred tax balance
The deferred tax balance is made up of the
following items:
Difference between depreciation and capital
allowances 1,107 336
Share based payments (1,620) (776)
Tax losses (32) (33)
Deferred tax asset at end of year (545) (473)
4. Dividends
2013 2012
GBP'000 GBP'000
Ordinary Shares
Interim paid of 0.44p (2012: 0.39p) per share
for the year ended 30 June 2013 364 322
Ordinary Shares
Final dividend after the year end of 0.55p (2012:
0.5p) per share 455 414
The proposed final dividend has not been accrued at the balance
sheet date.
5. Earnings per share
2013 2012
GBP'000 GBP'000
Profit attributable to shareholders 3,056 2,431
Number Number
Weighted average number of shares in issue 82,747,275 81,331,287
Dilution effects of share schemes 4,275,461 2,054,063
Diluted weighted average number of shares in
issue 87,022,736 83,385,350
Basic earnings per share 3.69p 2.99p
Diluted earnings per share 3.51p 2.92p
Basic earnings 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 per share calculations include additional shares
to reflect the dilutive effect of employee share schemes and
share option schemes.
6. Intangible fixed assets
Patent and
Intellectual Other Computer
Property Development Software Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 July 2011 6,440 2,758 144 9,342
Additions - 1,137 13 1,150
As at 1 July 2012 6,440 3,895 157 10,492
Additions - 1,458 33 1,491
As at 30 June 2013 6,440 5,353 190 11,983
Amortisation
As at 1 July 2011 1,702 399 113 2,214
Charge for the year 330 163 23 516
As at 1 July 2012 2,032 562 136 2,730
Charge for the year 330 219 13 562
As at 30 June 2013 2,362 781 149 3,292
Net Book Value
As at 30 June 2013 4,078 4,572 41 8,691
As at 30 June 2012 4,408 3,333 21 7,762
As at 30 June 2011 4,738 2,359 31 7,128
Patent and other development costs are internally generated.
7. Property, plant and equipment
Assets
Tenant under
Improvements Construction Motor
Buildings GBP'000 Equipment GBP'000 Vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 July
2011 685 81 14,739 552 27 16,084
Additions - 132 573 2,734 32 3,471
Transfers - - 2,435 (2,435) - -
Disposals - - (653) - (12) (665)
As at 1 July
2012 685 213 17,094 851 47 18,890
Additions 287 140 736 5,487 - 6,650
Transfers - - 5,679 (5,679) - -
Disposals - - (915) - (5) (920)
As at 30 June
2013 972 353 22,594 659 42 24,620
Depreciation
As at 1 July
2011 135 - 7,942 - 15 8,092
Charge for the
year 124 39 2,022 - 9 2,194
On disposals - - (530) - (11) (541)
As at 1 July
2012 259 39 9,434 - 13 9,745
Charge for the
year 66 37 2,279 - 12 2,394
On disposals - - (685) - (2) (687)
As at 30 June
2013 325 76 11,028 - 23 11,452
Net book value
As at 30 June
2013 647 277 11,566 659 19 13,168
As at 30 June
2012 426 174 7,660 851 34 9,145
As at 30 June
2011 550 81 6,797 552 12 7,992
8. Share Capital
2013 2012
GBP'000 GBP'000
Authorised:
Equity: 110,000,000 (2012: 110,000,000) Ordinary
shares of 1p each 1,100 1,100
Allotted, called up and fully paid:
Equity: 82,768,672 (2012: 82,746,672) Ordinary
shares of 1p each 828 827
Share issue during the year:
Number Share Share
of shares capital premium Total
GBP'000 GBP'000 GBP'000
At 1 July 2012 82,746,672 827 17,280 18,107
On 21 June 2013 22,000 1 8 9
At 30 June 2013 82,768,672 828 17,288 18,116
On 21 June 2013, 10,000 ordinary shares with an aggregate
nominal value of GBP100 were issued at a price of 38.5p per share
and 12,000 ordinary shares with an aggregate nominal value of
GBP120 were issued at a price of 41p per share, the total aggregate
value was GBP8,770. The excess net proceeds have been credited to
the share premium account.
9. Reconciliation of net cash flow to movement in net debt
2013 2012
GBP'000 GBP'000
(Decrease)/increase in cash in the year (1,130) 298
Movement in net debt in year (1,130) 298
Net debt at start of year (261) (559)
Net debt at end of year (1,391) (261)
10. Analysis of net debt
At At
beginning end
of year Cash flow of year
GBP'000 GBP'000 GBP'000
Cash in hand and at bank 3,739 (1,130) 2,609
Bank loans (4,000) - (4,000)
Total (261) (1,130) (1,391)
The financial information above does not constitute the
company's statutory accounts for the year ended 30 June 2013 but is
derived from those statements.
The statutory financial statements and this preliminary
statement for the year ended 30 June 2013 were approved by the
Board on 22 October 2013. On the same date the company's auditors,
Crowe Clark Whitehill LLP issued an unqualified report on those
financial statements. The audit report did not include reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying the report or contain a statement under section
498(2) or (3) of the Companies Act 2006. The Company's financial
statements have been prepared in accordance with International
Financial Reporting Standards, as adopted by the EU. A copy of the
statutory accounts will be delivered to the Registrar of Companies
in due course.
The Annual Report will be circulated to all shareholders and
thereafter, copies will be available from the registered office of
the company, Thames House, Portsmouth Road, Esher, Surrey, KT10
9AD.
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR NKBDQABDDPKB
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