TIDMPOS
RNS Number : 2906D
Plexus Holdings Plc
27 March 2014
Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil
equipment & services
27 March 2014
Plexus Holdings plc ('Plexus' or 'the Group')
Interim Results for the six months ended 31 December 2013
Plexus Holdings plc, the AIM quoted oil and gas engineering
services business and owner of the proprietary POS-GRIP(R)
friction-grip method of wellhead engineering announces its interim
results for the six months to 31 December 2013.
Highlights
Financial
-- 12% increase in sales revenue to GBP12.64m (2012: GBP11.31m)
-- 8%increase in EBITDA to GBP3.66m (2012: GBP3.38m)
-- 13% increase in profit after tax to GBP1.54m (2012: GBP1.36m)
-- 21% increase in Research and Development ('R&D') to GBP0.71m (2012: GBP0.59m)
Operating
-- Strong sales performance for POS-GRIP rental wellhead
equipment - number of new supply contracts from both existing and
first time international oil and gas operators, particularly for
high pressure high temperature ('HP/HT') applications
-- Norwegian sector of the North Sea generated contract wins for
two HP/HT rental wellhead systems from Statoil Petroleum AS
('Statoil') with a value of circa GBP2.5m, and an additional HP/HT
wellhead system for an appraisal well for Centrica Energi
Norway
-- Securing of third Australian customer with new customer Eni
Australia Limited ('Eni Aus') (adding to existing customers Apache
Energy Australia and Santos Ltd) contracting for the supply of
standard pressure rental equipment for an exploration well offshore
Australia
-- Post period end a further new customer Maersk Oil Denmark
contracted for an exploration well in the Danish North Sea, and AGR
Well Management Limited ('AGR') agreed a new three year contract
which generated a first contract for a new user Svenska Petroleum
Exploration AB ('Svenska') in a new territory Guinea Bissau, our
second in West Africa
-- Wintershall Noordzee B.V. post period end renewed for a
further three years a contract to supply surface wellhead and
mudline equipment services for exploration activities in the North
Sea offshore Netherlands
-- Further diversification away from the UK Continental Shelf
('UKCS') was demonstrated by an additional two wells for Glencore
Exploration Cameroon Ltd ('Glencore') which we hope together with
the Svenska new user win will help underpin additional
opportunities in the West African region
-- HP/HT Tie-Back product saw the full 'internals' testing cycle
successfully completed, and the 'externals' testing requirements
will be completed over the next few months after which time sales
initiatives will commence to run alongside the installation of a to
be identified prototype opportunity
-- Joint Industry Project ('JIP') to develop and commercialise a
new and safer POS-GRIP subsea wellhead ('HGSS(R) ') is progressing
well, and post period end secured further industry recognition with
Senergy Holdings Limited ('Senergy') in February joining existing
JIP consulting partners Eni S.p.A., Maersk, Shell International
Exploration and Production B.V. ('Shell'), Total E&P Recherche
Developpement SAS ('Total'), Tullow Oil plc, Wintershall, and Oil
States Industries Inc.
Corporate
-- Strategy to create an Asian business hub underway to service
markets including Australia, Brunei, Indonesia, Malaysia, Thailand,
and Singapore - premises secured in Singapore and negotiations
underway with a potential Malaysian partner in relation to securing
a Petronas licence for the supply of wellhead equipment
-- Acquisition of a 25% interest in a private manufacturer of
specialist oil and gas equipment for a consideration of
GBP0.73m
-- GBP2.50m raised from the issue of new ordinary shares before
expenses to support growth strategy focused on international
expansion and extending the range of POS-GRIP applications, as well
as increasing liquidity and broadening the institutional
shareholder base
-- Significant increase in R&D spend, excluding costs of
building test fixtures, increased by 21% to GBP0.71m, and
intellectual property ('IP') spend on legal costs for patent
filings increased 109% to GBP0.07m
-- Sir Ian Wood's "UKCS Maximising Recovery Review: Final
Report" published 24 February 2014 - emphasises the importance of
making more of HP/HT resource potential, deploying the best and
most cost effective technology, and leveraging the capabilities of
the UK's own oil and gas supply chain
-- Bank facilities renewed in October 2013 comprising a GBP5m
credit facility on a three year revolving basis with an additional
GBP1m overdraft on a yearly term
-- 12% increase in basic earnings per share to 1.85p (2012: 1.65p)
-- 9% increase in interim dividend to 0.48p per share approved
for payment on 25 April 2014 to all shareholders appearing on the
register of members on the record date 4 April 2014
Plexus' Chief Executive Ben van Bilderbeek said,
"I am delighted to report another set of strong results for the
first six months of our financial year, a period where we have
continued to drive forward our important new HGSS subsea wellhead
JIP, as well as developing sales initiatives designed to increase
our POS-GRIP presence outside of the North Sea where a significant
decline in exploration activity has been widely reported. One such
initiative is the establishment of an Asian hub which I believe
will in the future play an important role in the growth of our
business.
"Our organic rental wellhead exploration business activities
continue to make good progress with the addition of further new
customers in new territories. I am confident that additional
opportunities beyond our traditional core markets will present
themselves as the reputation of POS-GRIP technology and the
benefits it delivers in terms of safety and operational time and
cost savings continues to grow. Looking longer term I am
particularly pleased with the progress we are making with various
strategic initiatives including our important new HGSS subsea
wellhead design JIP which Senergy has recently joined as an
additional consulting partner, as well as the early stage
activities in relation to our Plexus Singapore and Plexus Malaysia
subsidiaries. In addition, an in-depth independent technology study
that we commissioned some months ago to analyse and compare our
POS-GRIP friction-grip technology against conventional wellhead
systems is close to conclusion. I believe this report will
empirically demonstrate that POS-GRIP is genuinely the best
available and safest technology ('BAST'), and indeed a new and
superior wellhead standard that can address many of the concerns
that regulators and operators around the world are raising in
relation to certain technical challenges. These include instant
casing hanger lock down and long term metal-to-metal sealing
requirements. Such initiatives will further help us communicate the
significant commercial opportunity that exists for both Plexus and
potential future joint venture or licensing partners, and which
would accelerate the "available" element of BAST requirements.
"It is important not to lose sight of the foundations of our
current and future success and why I believe our POS-GRIP wellhead
equipment can eventually compete globally with our large
established multi-national competitors. Wellheads are the weak link
in respect of qualification standards, but now can be designed to
be qualified as the strong link in the well chain, even exceeding
the integrity of premium couplings. Our unique ability to do this
is the result of being able to deliver sufficient 'force' to the
casing hanger interface to keep the assembly rigid under all
operating conditions, whether surface or subsea, and eliminating
the systemic design deficiencies of conventional systems.
"Our ability to deliver such benefits is becoming ever more
relevant and important to the industry. Indeed whilst the oil price
remains stable at around the USD$100 range and operating costs
increase in relation to the technical difficulties of new projects
such as offshore fields in deep water, the need to contain and
control costs is growing in importance as was recently highlighted
at the IHS Cera Week conference in Houston. The chief executive of
Total, Christophe de Margerie was recently quoted as saying that
Total is introducing a new process for designing projects to build
in cost control right from the start and reshape relationships with
service companies. He said that you need to create a new culture
with safety and the environment first, but that "at the same time,
cost is important" and "to achieve a project with lower cost is
good". As Plexus wellheads are proven to deliver significant cost
savings on surface applications to the extent that our service is
often cost negative to the operator, we are confident that in
subsea applications our POS-GRIP method of engineering can do even
better by eliminating many installation trips which in some areas
of the world can cost as much as USD$2m each, depending on water
depth. In addition to these very important operational cost
benefits, I would like to re-emphasise that our subsea wellhead
design will also address significant systemic design deficiencies
thereby improving long term safety to operations and the
environment. For these reasons we are increasingly confident in our
future prospects and the value of our unique combination of safety
and cost benefits, including long term seal integrity that we can
offer existing and future customers.
"Looking closer to home, I was delighted to note in the Budget
last week that the Chancellor further endorsed the Sir Ian Wood
report published in February 2014 aimed at maximising recovery of
the UK's remaining oil and gas reserves when he said that he would
"take forward all recommendations". In particular the Chancellor
announced incentives to develop HP/HT fields which demand higher
spending and where for exploration our technology has been proven
to be particularly beneficial. Mr Osborne also promised a review of
"the whole tax regime to make sure it is fit for purpose of
extracting every drop of oil we can". Already the industry body Oil
and Gas UK has according to Malcolm Webb the chief executive,
predicted that the widening of allowances could encourage a further
GBP5bn - GBP6bn investment in new North Sea projects, which would
reverse the current decline and potentially increase our UKCS
activity level considerably. As Ed Daniels the chairman of Shell UK
Ltd recently wrote, talk of the need for the UK to find the next
North Sea is premature and "the real North Sea still has a bright
future".
"Finally, due to the positive trading over the last six month
period and strong outlook, I am delighted to announce that the
directors of the Group have approved the payment of an increased
interim dividend of 0.48p per share which will be paid on 25 April
2014."
For further information please visit www.posgrip.com or
contact:
Ben van Bilderbeek Plexus Holdings Tel: 020 7795
PLC 6890
Graham Stevens Plexus Holdings Tel: 020 7795
PLC 6890
Derrick Lee Cenkos Securities Tel: 0131
PLC 220 9100
Alan Stewart Cenkos Securities Tel: 0131
PLC 220 9774
Felicity Edwards St Brides Media Tel: 020 7236
& Finance Ltd 1177
Frank Buhagiar St Brides Media Tel: 020 7236
& Finance Ltd 1177
Chairman's Statement
Business Progress
I am pleased to report that the Group continued to make good
progress in the first half of the year as we built on the record
performance and activity levels reported at the last year end at
both the organic rental wellhead business activity level, where we
again gained new customers in new territories, and in relation to a
number of on-going and new strategic initiatives. This performance
resulted in a 12% increase in turnover to GBP12.64m, an 8% increase
in EBITDA to GBP3.66m (before IFRS 2 share based payment charges),
and a 13% increase in profit after tax to GBP1.54m. This continued
success and the momentum that we believe we are building in
relation to communicating the significant operational and safety
benefits of POS-GRIP technology, all help underpin the decision to
increase the interim dividend by 9% to 0.48p share.
Organically the on-going mix of rental wellhead exploration
contract wins was pleasing particularly in the expanding HP/HT
market where our reputation and the market's awareness of the
benefits of POS-GRIP friction-grip wellheads continues to grow, for
example with our third customer win in Australia with Eni Aus. Such
contracts lessen our historic dependence on the UKCS at a time when
exploration activities have shown a marked decline, however there
are very encouraging signs that with appropriate tax breaks and
government incentives there could well be a UKCS renaissance which
we believe would be very positive for our closer to home business
activities. Strategically we have been progressing on a number of
fronts. These include focusing on establishing an Asian sales and
service hub where we have contracted for office and service base
space in Singapore from the 1 February 2014, and are progressing
negotiations with a local Malaysian Joint Venture partner as part
of our goal of obtaining a Petronas licence for the supply of
wellhead equipment. In addition we are progressing our existing
HGSS new subsea wellhead design JIP where we were recently pleased
to announce that Senergy the well engineering expert and member of
Lloyd's Register has joined as a new consulting partner. Senergy
has importantly committed to assist the JIP by providing an
installation time and cost study of the HGSS design against
existing conventional subsea wellhead products which we believe
will demonstrate empirically the projected major cost and safety
benefits of HGSS to oil and gas operators.
Operating Review
The first half of the financial year has once again been a
period of expansion with on-going investment in personnel, rental
wellhead inventory, and infrastructure both in the UK and abroad.
Such investment is essential as it ensures that we continue to
build firm foundations for our growth strategy, and importantly our
ability to respond to customer requirements for what we believe is
superior wellhead equipment in terms of safety, time savings, and
operational performance. The extent to which we are now moving
beyond the North Sea (both UK and Europe), is reflected in our
sales mix for the first half period where the Rest of the World
accounted for 49% of sales compared to 28% for the same period last
year. HP/HT gas applications in high technology oil and gas fields
continued to account for circa 86% of all sales revenues.
It is important to remember that the oil and gas industry is
highly regulated, and post the 2010 Gulf of Mexico incident there
is a significantly heightened sense and awareness of the importance
of safety from both a procedural and a technical perspective. This
incident led directly to a renewed emphasis, and indeed implied
legal requirement, for operators to select the BAST equipment
solution. Such regulatory initiatives are pertinent to the
wellhead, which we believe is the most important and often ignored
component of an oil and gas well, and is in effect the 'foundation'
of a well. It is important to understand that a wellhead fulfils
several critical functions including the ability to resist huge
mechanical loads resulting from pressure and temperature inside the
well, as well as external forces induced by the sheer weight of
casing and the well control system installed on top of it.
Furthermore the wellhead must also be able to lock down casing
hangers with sufficient capacity to withstand open well blowout
conditions (particularly critical for HP/HT environments), and
wellhead annular seals have to provide a mechanical sealing barrier
across the annuli as a second line of defence above the cement seal
between the casing strings. One of our key tasks therefore is to
prove to the industry and regulators that POS-GRIP wellheads are
indeed the BAST solution both for surface exploration and
production applications, and in due course also for subsea.
Such external regulatory factors are directly relevant to our
core business model which is to offer a proven patented proprietary
wellhead technology to the industry, one we believe is uniquely
able to deliver superior safety and integrity features. In response
to such developments we are working at the request of the industry
through our HGSS JIP to bring our POS-GRIP technology from the
surface to subsea. The goals of the new subsea wellhead design
include instant casing hanger lock down; avoidance of acknowledged
problems with the use of lock rings and lock down sleeves as
required by other wellhead designs; rigid metal annular seal
technology qualified to match the standards for premium casing
couplings; and in due course annulus monitoring and bleed-off
capability to address sustained casing pressure situations with
diagnostic and remedial capability. To date such monitoring
capability is simply not available or has proved impossible for
conventional competing systems. Our JIP partners now importantly
include Eni S.p.A.; Maersk; Shell; Senergy; Total; Tullow Oil;
Wintershall; and Oil States Industries Inc.
Good progress is being made with the subsea HGSS JIP, and we are
pleased to report that the project continues to advance in line
with the estimated schedule previously reported, with completion of
the concept testing programme planned for the beginning of the
fourth quarter 2014. Key milestones continue to be reached, all raw
materials for the qualification test fixtures have now been
delivered, and the manufacture of the first components has begun.
Our target is to qualify the new HGSS wellhead 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,
and in our view make the wellhead the strong link rather than the
weak link in the well chain. Qualification testing is expected to
start in the second quarter 2014, with completion targeted for
early fourth quarter of calendar year 2014, at which point the JIP
will move to building a prototype and target a first time
installation in 2015.
Our second JIP which is nearing completion is the design of an
up to 20,000 psi HP/HT Tie-Back connector product which has been
sponsored by Maersk. The Tie-Back product utilising POS-GRIP
friction-grip technology is innovative and unique. Utilising our
'metal-to-metal' HG(R) seals it will for the first time allow HP/HT
exploration and pre-drilled production wells to be 'converted' to
either subsea or platform producing wells. To date this has never
been considered possible due to the limitations of threaded
connections which cannot be reliably engaged and disengaged in a
subsea, remote, HP/HT environment, and is a further demonstration
of how the simplicity of design and operational execution of our
non-threaded connector technology is so advantageous. Clearly the
ability to convert such wells delivers significant financial
benefits to operators who would previously have had no choice but
to abandon such a well and 'write off' the capital cost which we
estimate as ranging from GBP50m to GBP300m. The Tie-Back design has
now been fully tested to a standard equivalent to ISO 13679 FDIS
2011 CAL IV as used for casing connection
qualification. The connection was tested with 20,000 psi
internal pressure, 10,000 psi external pressure, at temperatures of
between 0 and 350 degrees Fahrenheit, with tension and compressive
loads in excess of 2.2 million pounds and applying a bending force
equivalent to 40% of the Connection Yield strength. The conclusion
of these testing milestones means that we are now beginning to
market this product where some interest is already being shown
ahead of seeking a field trial with a suitable operating
partner.
Such operational growth and strategic initiatives all need to be
supported by on-going investment in and expansion of key functions
and areas including personnel, infrastructure, rental inventory,
IT, research and development, and IP. Personnel numbers increased
by 27 to 139 compared to the previous half year period end, and
currently stand at 145. Not only do we look to recruit suitably
skilled staff, but we place great emphasis on training,
development, and retention. Much is being achieved this year in
terms of such development, and the training budget for this
financial year has trebled, which includes last December's launch
of "Progression@Plexus" a performance management programme focused
on career progression and personal development. Capital expenditure
as planned is lower than the prior year's record levels, and
totalled GBP1.8m for two additional HP/HT rental wellhead sets,
bringing the total number of sets in our inventory to sixty-two.
Investment in IT, both software and hardware continued, with
SharePoint 2013 installed to help employees better share
information, manage projects, and access organisation wide business
processes. A purchasing module was also completed which will allow
for better control of our supply chain. Helping to underpin our
future rental and sales opportunities is our Research and
Development activity which increased by 21% as we continue to
invest in the development of our proprietary technology. Meanwhile
expenditure on IP related legal costs in relation to patent filings
to further expand our patent suite increased 109%.
These operational initiatives and our expenditure on tangible
and intangible assets clearly need to be funded, and we continually
work to ensure a suitable balance is struck between deploying free
cash flow and utilising external funding, whilst ensuring a prudent
level of headroom. Bank facilities were renewed during the period,
comprising of a three year revolving GBP5.0m credit facility, and
an additional GBP1.0m overdraft facility agreed on a yearly term.
In addition during the period a successful placing of new shares
raised GBP2.5m before expenses. This had the further advantage of
increasing liquidity and broadening our institutional shareholder
base.
Interim Results
Revenue for the six month period ended 31 December 2013 was
GBP12.6m, a 12% increase on the previous year's figure of GBP11.3m.
The rental wellhead equipment and associated services business
activities for exploration drilling contracts accounted for over
93% of sales revenues. The largest sales component remains the
supply of our HP/HT wellhead equipment which increased by 15% to
GBP10.9m compared to GBP9.5m last year, and accounted for
approximately 86% of total revenues compared to 84% last year.
Revenue generated by the rental of 10,000 psi standard pressure
wells decreased by 24% to GBP1.1m from GBP1.5m last year,
reflecting the widely reported reduced activity in North Sea
exploration activities, which for all pressures accounted for 51%
of sales against 72% the previous year. Conversely the Rest of the
World sales outside of the North Sea accounted for 49% of sales up
from 28% last year in part reflecting our increased
diversification.
First half gross margins remained strong at 69.0% compared to
70.7% in the comparative period last year. The level of gross
margin achieved once again reflects the activity levels associated
with higher margin HP/HT rental operations as opposed to low
pressure equipment contracts.
There was an anticipated increase in administration and overhead
expenses during the six month period to GBP6.9m compared to GBP6.2m
last year as we continued to invest in personnel and
infrastructure. This planned increase in expenditure was not only
in relation to supporting sales growth from an increased range of
customers and territories, and our HGSS subsea wellhead JIP
development project, but also for the on-going development and
training of our staff who are so important to a growing company in
a critical industry. Personnel numbers increased by 9% during the
period to 139, an increase of 27 compared to the previous year as
part of our on-going plan to increase our organic activities
capacity and strategic initiatives, and has since increased by a
further six. The proportion of these expenses as a percentage of
sales revenues decreased marginally to 54.3% as opposed to 54.9% in
the previous year.
Profit before tax increased 10% to GBP1.90m compared to the
equivalent period last year (2012: GBP1.73m). This improved
performance was achieved after absorbing higher rental asset and
other property, plant and equipment depreciation and amortisation
costs totalling GBP1.68m in the period up from GBP1.40m for the
same period last year, an increase of 20%. The higher level of
depreciation and amortisation reflects the record increase in
capital expenditure and resultant addition of ten HP/HT wellhead
sets during the last financial year. On-going investment in Plexus'
rental wellhead equipment inventory continued, and a further two
HP/HT rental wellhead sets were added to our inventory during the
period. Profit before tax is stated after charges for share based
payments under IFRS2; the charge for the half year to December 2013
is GBP0.01m, which compares to GBP0.13m for the corresponding
period last year. The Group has provided for a charge to UK
Corporation tax at a rate of 22% which is expected to be the rate
of tax for the full year and compares to a rate of 24% last year.
The effective rate of tax for the six months is 19% (2012: 21%)
after the application of both R&D tax credits relating to both
the current and prior years and offsets for disallowable
expenditure. It is expected that in the future a respectable
improvement to our tax charge will be achieved as a result of the
application of the relatively new 'Patent Box' regime which started
on 1 April 2013, and where an element of our profits should become
taxable at a lower 10% rate. Following the acquisition of a 25%
interest in a private manufacturer of specialist oil and gas
equipment in July 2013, a share of profits from the associate has
for the first time been recorded as GBP0.11m. Profit after tax
increased 13% to GBP1.54m compared to the equivalent period last
year (2012: GBP1.36m). Basic earnings per share amounted to 1.85p
per share (2012: 1.65p).
The balance sheet continues to reflect the on-going investment
in operations and IP related strategic initiatives in line with our
growth strategy. Property, plant and equipment including items in
the course of construction stand at GBP13.4m as at the end of
December 2013, compared to GBP11.1m at the end of December 2012, an
increase of 21%. This increase in tangible assets follows on from
the last financial year's record level of capital expenditure
investment, and continues to be focussed primarily on the expansion
of rental inventory assets which in the period totalled GBP1.8m a
planned decrease of 42% compared to GBP3.1m last year, as well as
R&D activity which increased by 21% to GBP0.71m against
GBP0.56m in the same period last year. IP continues to be an
important component of our balance sheet and the development and
protection of new IP will support our business in the subsea space
for up to twenty years. As a result spend on IP and associated
legal costs for patent filings increased 109% to GBP0.07m. This
continued investment reflects our confidence in the superior nature
of our proprietary technology and equipment, and scale of the
market opportunity that exists. With regards to cash flow, GBP2.6m
was paid to suppliers for capex during the period compared to
GBP3.5m in the same period last year. The Group closed the period
end with net cash of GBP2.7m after paying a final dividend of
GBP0.4m during the period and incurring capital expenditure and
R&D, together totalling GBP2.6m. The GBP2.5m issue of ordinary
shares raised before expenses from the successful and
oversubscribed December 2013 share placing, together with receipts
totalling GBP0.4m in relation to the exercise of options, combined
with bank facilities totalling GBP6.0m (comprising a three year
revolving GBP5.0m credit facility and an additional GBP1.0m
overdraft facility agreed on a yearly term) will be deployed to
fund future activities. These include planned R&D activity,
on-going rental inventory additions, capital expenditure related to
the HGSS subsea JIP project over the next 12 to 18 months, and
support for the early stages of the Asian hub sales and service
strategy.
Outlook
I am pleased with this set of financial results and the growth
in sales and profits achieved in a period where once again we have
been able to secure new customers in new territories outside of the
UKCS where a significant slowdown in exploration activity has been
widely reported. This performance and the increased spread of our
areas of operation, particularly in West Africa and Asia, provides
confidence for the second half and furthermore supports the Board's
decision to once again increase the interim dividend.
As we look forward I am particularly encouraged that, despite
well reported geopolitical events and turmoil around the world, the
global oil and gas industry continues to plan and invest for
increasing levels of demand for oil and gas. Barclays recently
published their "Global 2014 E&P Spending Outlook" and reported
that exploration and production ('E&P') spending is set to
reach a new record of USD$723bn in 2014, up 6.1% from USD$682bn in
2013 which would be the fifth consecutive year of growth.
Importantly the report states "that the mix of spending is poised
to shift away from large infrastructure projects towards greater
drilling, evaluation, and completion activity". This positive
spending outlook was recently extended over a much longer time
horizon by Rex Tillerson the Chairman and CEO of Exxon Mobil
Corporation in a presentation made in Brazil on 18 March - "Outlook
for Energy: Prospects for 2040". One of the conclusions was that
the world will need all forms of energy over the next 25 years to
meet a 35% increase in demand driven by population growth, improved
living standards, and growing urbanisation. I should point out
however that oil and gas is of course regionally structured and can
be subject to significant variations. For example Barclays expect
to see the fastest growth to take place in the Middle East, Latin
America and Russia where currently Plexus does not operate,
although we have identified Russia as a potential new market. I was
also interested to note that the Barclays report believes that the
Chinese market could open up by as much as 50% in the next five
years, and this would fit well with our declared strategy to build
an Asian sales and service hub.
In terms of the UKCS, which remains our most important market, I
should point out that exploration and appraisal drilling has been
shown to be declining significantly. The Deloitte Petroleum
Services Group ('PSG') published their report for 2013 in January
2014, which noted that although the number of fields starting
production rose to the highest level for five years, there was a
noticeable drop in exploration and drilling activity. Oil & Gas
UK reported that during 2013 only 15 wells were drilled compared to
44 in 2008. Although Plexus has been able to expand its sales
activities outside of the UKCS, to the extent that the UKCS
accounted for 29% of revenues in the first half compared to 41% in
the same period last year, it is relevant to report on the current
situation as, if it can be reversed, it is likely that it would
benefit Plexus significantly in the future. In this regard Graham
Sadler, the managing director of PSG, helpfully said that more
needs to be done to encourage drilling on the UKCS, including
incentives for exploration activity, while Oil & Gas UK
economics director Mike Tholen said that a doubling of exploration
spending may be needed to maintain the rate of discoveries required
to keep production rates close to current levels into the next
decade". This view was powerfully reinforced by Sir Ian Wood's
February 2014 report for the Government "UKCS Maximising Recovery
Review". The report makes a number of key recommendations on how to
ensure continued investment in the area to address UKCS exploration
being at a "worrying" all-time low, and needing Government action
such as tax breaks. The report called on the Government to
"urgently assess the potential to stimulate exploration" and stated
that "the fiscal regime failed to provide sufficient incentive to
explore". Encouragingly the Government has immediately taken this
message on board and Ed Davey the Energy Secretary declared on the
day of publication that he accepted Sir Ian's recommendations in
full, "and the Coalition Government will start implementing them
immediately", and that this was a "huge opportunity" to exploit
remaining deposits which are a "massive prize". This overdue set of
initiatives, if implemented effectively, should ensure that the
UKCS continues to underpin our growth aspirations outside of the
North Sea. Already the industry has acted favourably - for example
Maersk Oil CEO Jakob Thomasen said: "The proposed HP/HT allowance
provides a welcome boost to new and challenging projects and can
contribute to energy security, jobs and the economy."
Currently whichever markets we operate in, jack-up rig
exploration rental wellhead business activities remain our core
business where significant expansion opportunities exist in regions
such as Asia, Gulf of Mexico, Middle East and Russia, as well as
closer to home. It is important to remember however that it is not
just about accessing expanding markets or avoiding declining ones,
but that wellheads and control equipment are a global multi-billion
dollar industry and that we have yet to address either the major
surface production wellhead market, or the exploration and
production subsea market. We are confident however that the
innovative and uniquely enabling benefits of our POS-GRIP
friction-grip technology which delivers significant safety,
operational, and cost advantages, combined with the growing
awareness and reputation of Plexus and POS-GRIP and the increased
need and demand for BAST technology, means that in time we will
penetrate all wellhead markets, and achieve our goal of becoming a
new standard. Furthermore we continue to be confident that such a
breakthrough will most likely be achieved in association with a
large scale joint venture or licensing partner or partners who
would be able to leverage a global presence, and deliver
significant value creation for our shareholders.
Finally, I would like to thank all those involved with the Group
for their hard work and commitment during the last six months. We
remain confident of on-going growth during the current financial
year and beyond, as market awareness and acceptance of our unique
POS-GRIP technology continues to gain momentum. Even at a time when
various geopolitical tensions and ever increasing technical
challenges present themselves to the industry as a whole, I believe
that the clear need for BAST equipment safety standards will help
to ensure more value creation for our shareholders, and in due
course the global recognition of POS-GRIP wellheads as a new
superior standard.
Jeff Thrall
Chairman
26 March 2014
Plexus Holdings Plc
Unaudited Interim Consolidated Statement
of Comprehensive Income
For the six months ended 31 December
2013
Six months Six months
to 31 to 31 Year to
December December 30 June
2013 2012 2013
GBP 000's GBP 000's GBP 000's
Revenue 12,643 11,314 25,566
Cost of sales (3,923) (3,313) (7,402)
---------- ---------- ----------
Gross profit 8,720 8,001 18,164
Administrative expenses (6,865) (6,207) (13,772)
---------- ---------- ----------
Operating profit 1,855 1,794 4,392
Finance income 3 4 7
Finance costs (65) (70) (130)
Share of profit of associate 105 - -
Profit before taxation 1,898 1,728 4,269
Income tax expense (note
5) (360) (363) (1,213)
Profit after tax 1,538 1,365 3,056
Other comprehensive income - - -
Total comprehensive income 1,538 1,365 3,056
========== ========== ==========
Earnings per share (pence)
Basic (note 6) 1.85p 1.65p 3.69p
Diluted (note 6) 1.76p 1.57p 3.51p
Plexus Holdings Plc
Unaudited Interim Consolidated Statement of Financial
Position
As at 31 December 2013
31 December 31 December 30 June
2013 2012 2013
GBP 000's GBP 000's GBP 000's
ASSETS
Goodwill 760 760 760
Intangible assets 9,173 8,161 8,691
Investment in associate 830 - -
Property, plant and equipment
(note 8) 13,426 11,103 13,168
Deferred tax assets 789 2,411 545
Total non-current assets 24,978 22,435 23,164
----------- ----------- ---------
Inventories 5,352 6,607 6,032
Trade and other receivables 4,462 5,603 4,922
Cash and cash equivalents 6,734 1,976 2,609
Total current assets 16,548 14,186 13,563
----------- ----------- ---------
TOTAL ASSETS 41,526 36,621 36,727
=========== =========== =========
EQUITY AND LIABILITIES
Called up share capital 849 827 828
Share premium account 20,138 17,280 17,288
Share based payments
reserve 2,803 3,796 2,741
Retained earnings 7,612 5,008 6,335
Total equity attributable
to equity holders
----------- ----------- ---------
of the parent 31,402 26,911 27,192
----------- ----------- ---------
Deferred tax liabilities - - -
Bank loans 4,000 4,000 4,000
Total non-current liabilities 4,000 4,000 4,000
----------- ----------- ---------
Trade and other payables 5,459 4,542 5,226
Current income tax liabilities 665 1,168 309
Total current liabilities 6,124 5,710 5,535
----------- ----------- ---------
Total liabilities 10,124 9,710 9,535
----------- ----------- ---------
TOTAL EQUITY AND LIABILITIES 41,526 36,621 36,727
=========== =========== =========
Plexus Holdings Plc
Unaudited Interim Statement of Cash Flows
For the six months ended 31 December 2013
Six months Six months
to 31 to 31 Year to
December December 30 June
2013 2012 2013
GBP 000's GBP 000's GBP 000's
Cash flows from operating
activities
Profit before taxation 1,898 1,728 4,269
Adjustments for:
Depreciation, amortisation
and impairment charges 1,683 1,398 2,956
Loss on disposal of property,
plant and equipment 60 59 108
Loss on expiry of option - 60 60
Charge for share based
payments 12 132 141
Investment income (3) (4) (7)
Interest expense 65 70 130
Share of result in associate (105) - -
---------- ---------- ---------
3,610 3,443 7,657
Decrease / (increase)
in inventories 680 (560) 15
Decrease in trade and
other receivables 460 457 1,138
Increase / (decrease)
in trade and other payables 233 (790) (106)
Cash generated from operations 4,983 2,550 8,704
Income taxes paid (4) (19) (926)
Net cash generated from
operating activities 4,979 2,531 7,778
---------- ---------- ---------
Cash flows from investing
activities
Acquisition of associate (725) - -
Purchase of intangible
assets (796) (663) (1,491)
Purchase of property,
plant and equipment (1,729) (3,192) (6,650)
Proceeds of sale of property,
plant and equipment 42 41 125
Net cash used in investing
activities (3,208) (3,814) (8,016)
---------- ---------- ---------
Cash flows from financing
activities
Proceeds from issue of
new ordinary shares 2,500 - -
Transaction costs from
issue of new ordinary
shares (170) - -
Proceeds from share options
exercised 541 - 9
Interest paid (65) (70) (130)
Interest received 3 4 7
Equity dividends paid (455) (414) (778)
Net cash generated from
/ (used in) financing
activities 2,354 (480) (892)
---------- ---------- ---------
Net increase / (decrease)
in cash and cash equivalents 4,125 (1,763) (1,130)
Cash and cash equivalents
at 1 July 2,609 3,739 3,739
Cash and cash equivalents
at 31 December 6,734 1,976 2,609
========== ========== =========
Plexus Holdings Plc
Unaudited Interim Statement of Changes
in Equity
For the six months ended 31 December 2013
Share
Called Share Based
Up Share Premium Payments Retained
Capital Account Reserve Earnings Total
GBP GBP GBP GBP
000's 000's GBP 000's 000's 000's
Balance as at 1 July
2012 827 17,280 1,726 4,057 23,890
Total comprehensive
income for the year - - - 3,056 3,056
Share based payments
reserve charge - - 141 - 141
Share options exercised 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
Total comprehensive
income for the period - - - 1,538 1,538
Share based payments
reserve charge - - 12 - 12
Issue of ordinary
shares 10 2,490 - - 2,500
Share issue costs - (170) - - (170)
Share options exercised 11 530 (194) 194 541
Deferred tax movement
on share options - - 244 - 244
Dividends - - - (455) (455)
Balance as at 31
December 2013 849 20,138 2,803 7,612 31,402
========= ======== ========= ========= ======
Notes to the Interim Report December 2013
1. This interim financial information does not constitute
statutory accounts as defined in section 435 of the Companies Act
2006 and is unaudited.
This unaudited interim report has been prepared on the basis of
the accounting policies set out in the annual report for the year
ended 30 June 2013 and which are also expected to apply for 30 June
2014.
The interim financial information is compliant with IAS 34 -
Interim Financial Reporting.
The accounting policies are based on current International
Financial Reporting Standards ("IFRS"), International Financial
Reporting Interpretation Committee ("IFRIC") interpretations and
current International Accounting Standards Board ("IASB") exposure
drafts that are expected to be issued as final standards and
adopted by the EU such that they are effective for the year ending
30 June 2014. These standards are subject to on-going review and
endorsement by the EU and further IFRIC interpretations and may
therefore be subject to change.
2. This interim report was approved by the board of directors on
26th March 2014.
3. During the interim period the Group paid a final dividend on
ordinary shares of GBP455,428. The directors have approved the
payment of an interim dividend of 0.48p per share which will be
paid on 25th April 2014 to members appearing in the register on the
record date of 4th April 2014.
4. There were no other gains or losses to be recognised in the
financial period other than those reflected in the Statement of
Comprehensive Income.
5. Taxation on the operating profit after interest has been
provided at a rate of 22% for the six months ended 31 December 2013
(2012: 24%) which is the estimated rate of UK tax for the full
year. The effective rate of tax for the six months is 19% (2012:
21%) after adjustments made to reflect R&D tax credits received
relating to the current and prior years and offsets for
disallowable expenditure.
6. Basic earnings per share are based on the weighted average of
ordinary shares in issue during the half-year of 83,208,567 (2012:
82,746,672). The calculation of fully diluted earnings per share is
based on the weighted average number of ordinary shares in issue
plus the dilutive effect of outstanding share options being
4,196,929 (2012: 3,991,426). The number of shares included in the
calculation of fully diluted earnings per share was 87,405,496
(2012: 86,738,095).
7. The Group derives revenue from the sale of its POS-GRIP
friction-grip technology and associated products, the rental of
wellheads utilising the POS-GRIP friction-grip technology and
service income principally derived in assisting with the
commissioning and on-going service requirements of its equipment.
These income streams are all derived from the utilisation of the
technology which the Group believes is its only segment. Business
activity is not subject to seasonal or cyclical fluctuations.
8. The Group acquired 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. The consideration for the purchase was GBP725,000
and it is reported as an associate interest.
9. Property, plant and equipment
Assets
Tenant under
Improve-ments Constru-ction Motor
Buildings GBP'000 Equipment GBP'000 Vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
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
Additions 2 - 265 1,462 - 1,729
Transfers - - 1,689 (1,689) - -
Disposals - - (436) - - (436)
As at 31 December
2013 974 353 24,112 432 42 25,913
Depreciation
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
Charge for
the year 46 23 1,298 - 2 1,369
On disposals - - (334) - - (334)
As at 31 December
2013 371 99 11,992 - 25 12,487
Net book value
As at 31 December
2013 603 254 12,120 432 17 13,426
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
10. During the period the Group issued new shares as a result of
the following transactions:
Aggregate Total
Number Price nominal aggregate
of shares per share value value
GBP GBP
29 July 2013
- Share options 31,313 41.00p 313 12,838
- Share options 5,064 60.00p 51 3,038
36,377 364 15,876
----------- ---------- -----------
5 December 2013
- Issue of new
shares 1,020,408 245.00p 10,204 2,500,000
- Share options 125,445 38.50p 1,254 48,296
- Share options 439,871 41.00p 4,399 180,347
- Share options 38,630 54.75p 386 21,150
- Share options 310,152 59.00p 3,102 182,990
- Share options 153,118 60.00p 1,531 91,871
2,087,624 20,876 3,024,654
----------- ---------- -----------
Total 2,124,001 21,240 3,040,530
=========== ========== ===========
Split by type
Issue of new shares 1,020,408 10,204 2,500,000
Share options 1,103,593 11,036 540,530
Total 2,124,001 21,240 3,040,530
=========== ========== ===========
The excess net proceeds have been credited to the share premium
account.
11. The comparative figures for the financial year ended 30 June
2013 are not the Company's statutory accounts for that financial
year. Those accounts have been reported on by the company's
auditors, Crowe Clark Whitehill LLP, and delivered to the registrar
of companies. The report of the auditors was (i) unqualified, (ii)
did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under section 498(2) or (3)
of the Companies Act 2006.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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