8th Mar 2007 07:01
Plexus Holdings Plc08 March 2007 FOR IMMEDIATE RELEASE 8th March 2007 Plexus Holdings plc Interim Results for the six months ended 31st December 2006 Plexus Holdings plc ("Plexus" or "the Group") the AIM quoted oil and gasengineering services business and owner of the proprietary POS-GRIPTM method ofwellhead engineering announces its interim results for the six months to 31December 2006. Highlights • 186.0% increase in turnover to £4.4m (2005: £1.6m) • 288.8% increase in EBITDA (before FRS 20 share based payment charges) to £0.556m (2005: £0.143m) • Profit before tax increased to £0.12m (2005: loss before tax of £0.16m) after adopting FRS20 for the first time • Installation of the first production wellheads for the major BP Shah Deniz project in the Caspian Sea • Wellhead rental wins with BG International Ltd (BG), and Maersk Oil North Sea UK Limited (Maersk) • Significant capital investment in expansion of rental inventory and in particular high pressure/high temperature (HP/HT) wellheads • Continuing development of proprietary wellhead technology for 20,000 psi applications and engineering of additional products such as valves and connectors Plexus' CEO, Ben van Bilderbeek, commented: "I am very pleased with the progress we have made during our first 12 months asan AIM listed company. This has been a particularly active period in which wehave had to increase our infrastructure considerably to accomodate our growingsales activities in new markets and with new customers around the world. Thesignificant increase in sales generated by our high pressure/high temperature(HP/HT) rental wellhead equipment is particularly gratifying as thisdemonstrates the growing acceptance by the industry of the technical benefits ofour proprietary method of engineering and its unique combination of benefits interms of safety; performance; and time savings". For further information please visit www.posgrip.com or contact: Plexus Holdings plc Tel: +44 (0)20 7589 8555Bernard van Bilderbeek, Chief ExecutiveGraham Stevens, Finance Director St Brides Media & Finance Tel: +44 (0)20 7242 4477Isabel Crossley Bell Lawrie (Nominated Advisor and Broker) Tel: +44 (0)141 221 7733Elizabeth Kennedy, Director Corporate FinanceKen Fleming, Director Corporate Finance Chairman's Statement Introduction I am pleased to report that the Group has continued to make good progress duringthe first half of the year delivering a 186.0% increase in turnover and a 288.8%increase in EBITDA (before FRS 20 share based payment charges) against the sameperiod last year, and generating a number of new business opportunities outsideof our traditional North Sea base of operation. Interim Results Turnover for the 6-month period was £4.44m, up 186.0% from £1.55m the previousyear. The rental business and related equipment and services account for themajority of Plexus' business activities of which HP/HT wells continue to grow inimportance, with sales up 179.4% for the six months to December 2006 versus thesame period to December 2005. In line with the project cycle, the large BP ShahDeniz wellhead supply project related income grew for the 6-month period to£1.27m from £0.31m last year, but will reduce in the second half as delivery ofequipment for the first stage of the project nears completion. Gross margins have reduced to 45.4% in the first half of the year from 61.9% inthe comparative period last year as a result of the lower margin BP Shah Denizbusiness activities accounting for a higher percentage of overall turnover, plusthe dilutive margin effect of pass-through sales of Xmas Trees (well controlvalves) which are not Plexus products and are sold at cost. It should be notedhowever that rental gross margins have improved upon the comparative period as aresult of economies of scale associated with higher volumes. Administration expenses have continued to grow year on year and totalled £1.71mfor the period up from £0.99m last year. This increase reflects the necessarystep up and implementation of expanded premises, personnel, and associatedinfrastructure to meet the demands of sales growth, which is now more diverseboth in terms of product mix and geographical spread. The business is nearingthe necessary cost base to service customer requirements for the foreseeablefuture, with minor headcount expansion planned for the second half of thefinancial year. The profit before tax of £0.12m compares to a loss before tax for the sameperiod last year of £0.16m, with depreciation and amortisation increasing to£0.42m in the period against £0.24m for the same period last year. The profitbefore tax is stated after charging amortisation of share based payments for thefirst time under reporting standard FRS 20; the charge for the half-year toDecember 2006 is £0.06m compared to £0.01m in the corresponding period lastyear. The PBT figure includes a contribution of £94k from our participatinginterest in a precision engineering business. The Group does not anticipate acharge to UK Corporation Tax due to the utilisation of brought forward losses,which have not been provided for in the accounts as a deferred tax asset. Thetax charge for the period of £17k represents foreign corporation tax. Earningsper share amounted to 0.13p per share (2005 - loss of 0.41p) on a fully dilutedbasis. The balance sheet reflects the growth in operations during the period withtangible assets including items in the course of construction increasing to£4.70m at the end of December 2006 from £1.57m at the end of December 2005. Thisis primarily due to investment in expansion of rental inventory, which is due tocomplete throughout the rest of 2007 and be income generating as it comes onstream. Debtors have increased to £4.56m at the end of the period as comparedto £0.84m at the end of December 2005, primarily as a result of the increase insales revenues and the balance due on long term contracts. Net cash positionclosed at £0.17m compared to £7.31m at the end of December 2005 reflecting theGroup's investment in expanding the rental fleet of equipment and the funding ofmanufacture on long-term contracts. In recognition of the capital expenditurecommitments either completed or under construction the Group has recentlyincreased its bank facilities from £0.75m to £2.5m. FRS 20 (Share Based Payments) charges have been included in the accounts for thefirst time, in line with reporting standards. The "fair value" of share basedpayments has been computed independently by specialist consultants and isamortised evenly over the expected vesting period from the date of grant. Thiscomputation is unaudited in these accounts and will be audited for the firsttime at 30 June 2007. The impact of this policy is detailed in note 5. The Group's IFRS (International Financial Reporting Standards) conversionprogramme is at an early stage. Compliance with IFRS is required for the yearending 30 June 2008 with comparatives restated accordingly for the year ending30 June 2007. At this stage it is not possible to say what the impact uponearnings will be. However the key areas of potential impact identified so farare IFRS 2 - share based payments and IAS 28 - Investments in Associates. Operating Review Plexus' focus during the first six months of the year has continued to be onwinning new contracts with the emphasis on HP/HT rental wellheads; establishingthe necessary infrastructure and personnel to support increased levels ofbusiness activity; whilst at the same time fulfilling our ongoing commitmentsfor the BP Shah Deniz project in the Caspian Sea. As the reputation and awareness of Plexus continues to make progress, increasingopportunities are presenting themselves to introduce our proprietary POS-GRIPTMtechnology to new territories and to new customers. Of particular note duringthe period was the winning of two new major customers for our HP/HT wellheadequipment, namely BG International and Maersk. In the case of BG InternationalPlexus has been asked to develop and qualify POS-GRIP wellhead equipment to20,000 psi as part of a five-year framework agreement to support BG'sexploration activities in new and more technically challenging fields in theNorth Sea. It is anticipated that the successful conclusion of this project overthe next nine months will help us in due course to make further inroads into theburgeoning X (ultra)-HP/HT marketplace and lead to additional business with BGInternational. Such rental activity growth is anticipated to generate over timenew opportunities for the supply of production wellheads as the market placebecomes more familiar with our POS-GRIP technology. To be able to service and support such diverse growth opportunities it has beennecessary to increase the Group's rental wellhead inventory through a sizeablecapital expenditure programme, which in turn needs to be engineered and operatedby an increased number of personnel. These growth requirements are reflected inincreased overheads, where for example, the number of personnel has grown from37 at the end of December 2005 to 55 currently. The Group's major BP Shah Deniz project, which began in 2004, has reached animportant milestone; the first POS-GRIP wellhead systems have been installed,and the platform is producing gas. Further development and testing work iscontinuing with BP, which we anticipate will lead to a greater understanding andacceptance of POS-GRIP and its capabilities and will also be relevant forpotential future major projects with other operators. It is important to note that operating conditions in the North Sea, which is theGroup's traditional area of activity and focus, have been particularlychallenging for operators in terms of widely reported steep cost increases andgeneral shortage of skilled personnel and in some cases rigs. Over time it isanticipated that exploration and production activity and therefore associatedinvestment in the North Sea will decline and this is reflected in the recentround of new licenses granted where the 'super majors' chose not to participate.Furthermore the Treasury has recently reduced its tax revenue forecasts. Forthese reasons Plexus' strategy of seeking new business from other areas aroundthe world such as Egypt, Brunei, and Trinidad has been proved correct, althoughat the same time the greater geographical spread of activity can lead to supplychains being stretched and in some cases contract execution and equipment uptakedelays. In addition to the ongoing activities of our wellhead business, an increasingamount of engineering and new POS-GRIP product development activity is takingplace. These new technologies include specialist riser and conductor connectorsand a project to develop X-HP/HT (30,000 psi) capability for tubing hangers.Discussions also continue with major operators and rig contractors wherePOS-GRIP technology can provide enabling advantages as part of the revolutionaryhardware that is needed for new drilling technology methods under development.Related to this, and in recognition of the fast growing importance of subseaactivities, Plexus is recruiting engineering specialists with skills outside ofour current core business activities who will assist with the development ofremote subsea setting capabilities for POS-GRIP. Outlook Our strategy continues to be that of growing organically our rental and productsales around the world, whilst using these as a 'showcase' for pursuinglicensing opportunities and potential joint ventures in selected regions wherePlexus POS-GRIP wellheads could be manufactured locally. Importantly, theglobal outlook for oil and gas exploration and production is such thatunconventional HP/HT operating environments are becoming ever more vital. Inline with this, the unique capabilities of our POS-GRIP technology are expectedto be able to play an increasingly important role within the wellhead market,which will underpin our goal of POS-GRIP wellheads becoming over time the newwellhead standard. This bodes well for the future and we continue to be excitedabout the growth prospects for your company over the coming years. Finally I would like to thank all those involved with the Company for their hardwork and commitment during the last six months. Robert AdairChairman7th March 2007 Unaudited Consolidated Profit and Loss Account for the half year ended 31 December 2006 Six months Six months Year ended ended ended 31/12/06 31/12/05 30/06/06 £000 £000 £000 Turnover 4,439 1,552 6,777 Gross profit 1,920 961 1,936 Administration expenses (1,711) (988) (2,035) Income from participating interest 94 - 225 Operating profit/(loss) before amortisation 303 (27) 126 Amortisation (168) (68) (233) Operating profit/(loss) 135 (95) (107) FRS 20 Share compensation expense (note 5) (57) (6) (63) Net interest receivable / (payable) 42 (62) 53 Profit/(loss) on ordinary activities before taxation 120 (163) (117) Taxation (note 6) (17) - (113) Profit/(loss) on ordinary activities after taxation 103 (163) (230) Earnings/(loss) per ordinary share (note 7) 0.13p (0.41)p (0.39)p Fully diluted earnings/(loss) per ordinary share (note 7) 0.13p (0.41)p (0.38)p Summary Unaudited Group Balance Sheet at 31 December 2006 31/12/06 31/12/05 30/06/06 £000 £000 £000Fixed assets Tangible assets 4,696 1,569 2,421Intangible assets 6,208 6,448 6,375Investments 200 - 200 11,104 8,017 8,996 Working capital Stocks 1,644 2,948 1,238Debtors 4,563 842 2,640Creditors (2,445) (1,565) (908)Long term contract payments on account - (2,739) - 3,762 (514) 2,970 Net cash/(debt) 170 7,313 2,910 Taxation - 85 - 15,036 14,901 14,876 Capital and reservesOrdinary share capital 802 802 802Preference share capital - - -Share premium account 15,596 15,611 15,596Share based payments reserve (note 5) 120 6 63Profit and loss reserve (1,482) (1,518) (1,585) 15,036 14,901 14,876 Summary Unaudited Consolidated Cash Flow Statement for the half year ended 31 December 2006 Six months Six months Year ended ended ended 31/12/06 31/12/05 30/06/06 £000 £000 £000 Net cash (outflow)/inflow from operating activities (note 8) (237) 1,969 (962) Net interest received / (paid) 42 (62) 44 Returns on investment and servicing of finance (195) 1,907 (918) Taxation (17) 15 (14) Purchase of intangible fixed assets - (5,421) (5,513)Purchase of tangible fixed assets (2,528) (108) (1,200)Purchase of investments - - (159) Capital expenditure (2,528) (5,529) (6,872) Net cash outflow before financing (2,740) (3,607) (7,804) FinancingProceeds of share issues net of issue expenses - 14,673 14,658Loan advances to participating interest - - (191)Repayment of loans - (2,250) (2,250) (Decrease)/increase in cash (2,740) 8,816 4,413 Reconciliation of net cash/(debt) Opening net cash / (debt) 2,910 (3,753) (3,753) Net cash (outflow) / inflow (2,740) 11,066 6,663Closing net cash/ (debt) 170 7,313 2,910 Reconciliation of Movements in Consolidated Shareholders' Fundsfor the half year ended 31 December 2006 Six months Six months Year ended ended ended 31/12/06 31/12/05 30/06/06 £000 £000 £000 (Loss)/profit for the period 103 (163) (230) Dividends - - - Result for period 103 (163) (230) Share CapitalOrdinary shares issued - 602 602Preference shares converted - (400) (400) - 202 202 Share PremiumOn issue of ordinary shares - 15,740 15,740Less: Expenses of share issues - (1,269) (1,284) - 14,471 14,456 Share Based Payments amortisation charge 57 6 63 Net increase /(decrease) in shareholders' funds 160 14,516 14,491 Opening shareholders' funds 14,876 385 385 Closing shareholders' funds 15,036 14,901 14,876 Notes to the Interim Report December 2006 1. 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 2006 with the exception that FRS 20 "Share Based Payments" has been adopted for the first time in the interim financial statements. Accordingly, the comparative figures have been restated where appropriate for FRS 20 impact. 2. This interim report was approved by the board of directors on 7 March 2007. 3. The directors do not recommend payment of an interim dividend. 4. There were no other gains or losses to be recognised in the financial period other than those reflected in the profit and loss account. 5. Amortisation of share based payments is included for the first time under the adoption of FRS 20. The charge to the profit and loss account for the period amounted to £57k. The comparative figures have been restated to incorporate a prior year adjustment for the adoption of FRS 20, which results in a charge of £6k in the half year to December 2005. The change in policy did not result in any change to Shareholders' equity. 6. Taxation on the operating profit after interest has been provided at a rate of 0% for the six months ended 31 December 2006 (2005: 0%) which is the estimated rate of UK tax for the full year, after accounting for brought forward tax losses. The taxation charge in the period relates to foreign corporation tax deducted at source by BP Exploration Shah Deniz Ltd. 7. Basic and pre-exceptional earnings per share are based on the weighted average of ordinary shares in issue during the half-year of 80,182,569 (2005: 39,261,962). 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 193,472 (2005: 300,824). The number of shares included in the calculation of fully diluted earnings per share was 80,376,041 (2005: 39,562,786). 8. Net cash inflow/ (outflow) from operating activities Six months Six months Year ended ended ended 31/12/06 31/12/05 30/06/06 £000 £000 £000 Operating profit/(loss) 135 (95) (107) Income from participating interest (94) - (225) Amortisation 168 68 233 Depreciation 253 170 375 (Increase)/ decrease in working capital (699) 1,826 (1,238) (237) 1,969 (962) 9. The comparative figures for the financial year ended 30 June 2006 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditors 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 237(2) or (3) of the Companies Act 1985. 10. Copies of this report will be sent to all Shareholders and will be available to the public for at least one month, free of charge, from the registered office of the Company, Plexus House, 1 Cromwell Place, London, SW7 2JE. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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