TIDMPOS
RNS Number : 8352I
Plexus Holdings Plc
26 March 2018
Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil
equipment & services
26 March 2018
Plexus Holdings PLC ('Plexus', 'the Company' or 'the Group')
Interim Results
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 2017.
Financial Results
-- Following the announcement on 19 October 2017 in which Plexus
notified its intention to dispose of its wellhead jack-up
exploration application business ("the "Jack-up Business") to FMC
Technologies Limited ('FMCT'), a subsidiary of major oil services
provider TechnipFMC (Paris:FTI)(NYSE:FTI), and the subsequent post
period end completion of the transaction announced 1 February 2018,
the interim results and prior periods are reported as required on a
continuing and a discontinuing operations basis
-- Continuing operations sales revenue GBP40k (2016: GBP179k)
o Discontinuing operations sales revenue GBP2,411k (2016:
GBP3,591k)
-- Continuing operations EBITDA loss (GBP1,883k) (2016: GBP1,654k loss)
o Discontinuing operations EBITDA profit GBP105k (2016:
GBP1,528k)
-- Continuing operations loss after tax (GBP2,743k) (2016: Loss GBP2,592k)
o Discontinuing operations loss after tax (GBP1,008k) (2016:
profit GBP141k)
-- Basic loss per share from continuing activities (2.60p) (2016: 2.46p loss)
o Basic loss per share from discontinuing activities (0.96p)
(2016: 0.13p earning)
-- Net cash of GBP5.3m (2016: GBP10.1m). Following completion of
the post period end disposal and receipt of the initial GBP14.1m
net consideration from FMCT cash held by the Group stood at
GBP18.8m as at 1 February 2018.
-- The Company remains committed to distributing dividends to
its shareholders, however the Directors believe that it is prudent
to continue the suspension of the payment of dividends. The Company
will look to reinstate the dividend at the earliest opportunity
and, as previously announced, the Board intends to assess the
on-going capital requirements of the business and if appropriate
may consider paying a proportion of the proceeds of the sale of the
Jack-up Business to shareholders by way of a special dividend
Overview and Corporate Highlights
-- Continued low levels of exploration activity in the North Sea
and outside Europe impacted on the financial performance of the
Group
-- The higher oil price trend which saw the price rising to
circa US$57 per barrel by the end of the period and above US$60 per
barrel at the time of this report bodes positively for increased
investment across the sector
-- September 2017 - first production well order (continuing
operations) awarded by long-standing customer Centrica North Sea
Limited ('Centrica') now Spirit Energy, for a gas well in the UK
Southern North Sea due to spud around April 2018
o supports the strategy to focus on extending the application of
POS-GRIP technology beyond the discontinuing Jack-up Business and
into the mainstream production wellhead market
-- September 2017 - purchase order from new customer Rosneft
(TNK Vietnam B.V.) ('Rosneft Vietnam') for the supply of POS-GRIP
HP/HT adjustable rental jack-up wellhead equipment for an
exploration well in a new territory offshore Vietnam
-- October 2017 - Business Purchase Agreement ('BPA') signed for
the sale of Plexus' Jack-up Business for up to GBP42.5m to FMCT a
subsidiary of the top three global oil and gas services supplier
TechnipFMC - transaction completed post period end
-- Collaboration Agreement signed with FMCT together with the
formation of a joint Steering Committee to explore the development
of new and existing products based on POS-GRIP
-- Three year earn-out up to a maximum additional payment value
of GBP27.5m allows Plexus to benefit from FMCT's global reach and
relationships which should be further boosted by the anticipated
recovery in exploration drilling activity
-- Deal provides major industry recognition of Plexus' POS-GRIP
technology and acts as a catalyst for a strategic shift of focus to
market sectors beyond jack-up exploration such as production
surface, subsea exploration and production and decommissioning
-- February 2018 - (post period end) - sale of two POS-GRIP
HP/HT rental wellhead sets and associated equipment and tooling for
circa GBP1.4m to LLC Gusar (OOO Gusar) Ltd ('Gusar') Plexus'
partner and licencee in Russia
-- Strong balance sheet further strengthened by completion of the disposal with FMCT
Chief Executive Ben van Bilderbeek said:
"Since we first developed our proprietary friction-grip method
of engineering our objective has been to establish POS-GRIP as the
superior enabling technology behind a suite of products within the
wider energy sector, and in the process set new and higher industry
standards in terms of performance, reliability and safety. Today, I
firmly believe we have never been in a stronger position to achieve
our goal.
"While our first half financial performance bears the hallmarks
of the severe downturn that has continued to blight the sector in
recent years, what lies behind our confidence is the landmark sale
of our niche Jack-up Business for up to GBP42.5 million and the
signing of a Collaboration Agreement with FMCT where the two
companies have agreed to collaborate together on future
applications of the POS-GRIP method of engineering. As well as
boosting our already cash rich balance sheet following the receipt
of the initial GBP14.1 million net consideration post period end,
both the sale and Collaboration Agreement provide our technology
with the industry recognition from one of the world's leading oil
and gas service and equipment companies that we have been striving
for. In a sector where the adoption and acceptance of newer
technologies is typically slow, the decision by a global top three
oil services group to not only buy our Jack-up Business but to
agree to explore working with us to develop new products based on
our unique IP is a major vote of confidence in POS-GRIP, the Plexus
team and our vision.
"Furthermore, while we continue to work with FMCT to maximise
the three-year earn-out, our focus is no longer centred on the day
to day running of the Jack-up Business. The sale and Collaboration
Agreement with FMCT therefore not only provide us with cash
resources and an industry major as a partner, but also free up
capacity to develop and monetise other products based on our
ground-breaking technology which, through the Jack-up Business, has
been selected above conventional equipment many times over out in
the field. To date, POS-GRIP has been successfully deployed on over
350 jack-up exploration wells by blue-chip operators, including
Royal Dutch Shell and Statoil. By showcasing our technology, which,
as far as we are aware, is the only equipment that meets a higher
performance and safety standard recently set by a major operator,
our Jack-up Business has fulfilled the job it was set up to do. Now
that it has been sold, we can move onto the next phase of our
growth strategy: the development and roll-out of POS-GRIP enabled
applications for larger and more lucrative markets, such as
production and subsea wellheads, where we are confident POS-GRIP
can raise industry standards, just as it has done with jack-up
exploration.
"Importantly, we are not having to start from scratch. We have a
portfolio of tried and tested products in the production,
abandonment and subsea markets that have already been deployed out
in the field or are ready for commercial roll-out. Tangible
progress is already being made. In September 2017, we announced a
purchase order from a subsidiary of Centrica to supply our POS-GRIP
"HG" 10,000psi adjustable production wellhead for a gas production
well in the UK Southern North Sea. Production is a large and
lucrative market many times the size of the niche jack-up sector,
and if we can achieve the same level of success we enjoyed in
jack-up exploration, the potential for significant value generation
is clear. Together with our POS-SET Connector(TM) for abandonment
operations, our developed Python subsea wellhead, and our
Collaboration Agreement with FMCT to consider the development of
existing POS-GRIP IP for applications outside of jack-up
exploration, we have a strong platform in place to extend our
family of products into other segments of the energy sector, which
could include geothermal and fracking.
"Although our first half financial performance, which
incorporates a full contribution from the Jack-up Business,
reflects the low levels of exploration activity experienced during
the period, the half year under review witnessed a recovery in oil
prices to US$60 - US$70 per barrel. Together with an industry-wide
restructuring of cost bases over the last few years, we are hopeful
the seeds for a sustained pick-up in activity are in place. Plexus
stands to benefit from higher levels of exploration activity, not
only via the three-year earn-out with FMCT, but also via our
exclusive licence agreement with Gusar and CJSC Konar, two
independent Russian oil and gas equipment manufacturers, to
manufacture and rent Plexus' proprietary jack-up exploration
wellhead and associated equipment within the Russian Federation and
the other CIS states. We were therefore pleased to announce post
period end the sale of two wellheads to Gusar for GBP1.4 million
which is a key step towards POS-GRIP equipment being used in Russia
for shallow water jack-up drilling for the first time. Based on our
success in the North Sea and elsewhere around the world, once an
operator experiences our equipment we have found additional orders
typically follow and as a result we are hopeful our licensing
agreement in Russia, which falls outside the sale of the Jack-up
Business, will soon start to generate a growing licence royalty
revenue stream for Plexus.
"We are excited for the future. We have emerged from what has
been a severe and painful circa three year downturn for the oil and
gas industry as a whole with a strong balance sheet; a
Collaboration Agreement with a top tier oil and gas services
provider to look at expanding the reach of our existing POS-GRIP IP
into new areas of the energy sector; a licensing agreement covering
the Russian market; and a growing portfolio of POS-GRIP enabled
products that are ready for roll-out in large and lucrative
markets. We are entering a new phase in our development, one in
which we are focused on realising the full potential of our
ground-breaking technology and, at the same time, raising standards
throughout the wider energy industry.
"Finally I would also like to thank Geoff Thompson, who will be
retiring from his role of Non-executive Director and from the Board
of the Company with effect from 4 May 2018, for his dedication and
service to Plexus since his appointment in 2010."
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
Derrick Lee Cenkos Securities PLC Tel: 0131 220 9100
Frank Buhagiar St Brides Partners Ltd Tel: 020 7236 1177
Isabel de Salis St Brides Partners Ltd Tel: 020 7236 1177
Chairman's Statement
Business progress
The cyclical downturn in oil and gas markets may have weighed on
our first half financial performance, as it has done for many in
the sector, but it did not prevent us from achieving a number of
strategic objectives which we regard as being key to delivering on
our goal to position our POS-GRIP friction grip method of
engineering as the go-to technology for the energy industry.
Specifically, the sale of our Jack-up Business for up to GBP42.5
million to FMC Technologies Limited ('FMCT'), a subsidiary of top
tier services provider TechnipFMC (Paris:FTI)(NYSE:FTI), the
Collaboration Agreement we have also signed with FMCT, and the
contract we secured with a subsidiary of Centrica to supply one of
our POS-GRIP enabled wellheads for use on a production well are all
major milestones we have been working towards.
The sale of the Jack-up Business represents the culmination of
the first phase of our strategy. This was centred on firstly
proving our equipment out in the field and secondly gaining
industry recognition that our technology offers superior solutions
to conventional "slip and seal" and "mandrel hanger" wellhead
technologies. It is the simplicity of the theory and design that
lies behind the best in class performance, reliability and safety
that our patented POS-GRIP technology provides: compressive force
is applied to the outside of a wellhead or pipe to flex it inwards
and, as the bore of the vessel moves inwards, it makes contact with
an inner pipe (or hanger) on the inside, generating sufficient
contact force to hold the inner member (hanger) in place through
friction between the two components and create a superior
metal-to-metal seal. In addition, all movement between parts is
virtually eliminated, fewer components are used, and resistance to
corrosion is enhanced. This design has enabled us to match wellhead
test standards to those of premium couplings.
The Jack-up Business was established to deliver these highest
standards of wellhead design and more for operators to deploy on
niche jack-up exploration wells, specifically on high pressure /
high temperature ('HP/HT') applications. Since then, it has been
used on over 350 wells by a blue-chip roster of operators including
BP, Centrica, ConocoPhillips ENI, Maersk, Shell and Total, many of
whom have become long-standing customers. Furthermore, prior to the
downturn our POS-GRIP wellheads achieved a near 100% market share
of the HP/HT market in the North Sea and in particular was chosen
by Total for use on the Solaris well, which is believed to be the
highest pressure and highest temperature well ever drilled in the
North Sea. Having proved our wellhead technology is best in class
in all operating conditions, including the most extreme pressures
and temperatures, the sale of the Jack-up Business clearly provides
industry recognition from a top tier supplier of POS-GRIP's unique
capabilities.
Jack-up exploration drilling is niche compared to the much
larger production and subsea sectors and it is these and other
markets that we will be looking to penetrate going forward. It was
with this in mind that we were pleased to enter into the
Collaboration Agreement with FMCT. This agreement also provides for
the formation of a joint Steering Committee made up of personnel
from both Plexus and FMCT who will explore potential areas of
future collaboration. This is a non-exclusive arrangement and
potentially provides us with an excellent platform with which to
target new markets for our existing and new technology.
We already have a suite of products outside jack-up exploration
which are ready for roll-out as demonstrated by the award of a
contract to supply Centrica with a wellhead for a production well
in September 2017. We have previously supplied wellheads for
production wells, including on the BP Amethyst gas field in the
Southern North Sea and Tullow in the North Sea. Having demonstrated
how our equipment outperforms other competing products in jack-up
exploration, production has always been high on our list of
priority markets to target and we are confident that this contract
for a production well bodes well for future opportunities.
Momentum beyond our historic activities has been maintained in
the second half of the year. As well as completing the sale of the
Jack-up Business and signing the Collaboration Agreement with FMCT,
post period end we announced the sale of two wellheads and
associated mudline equipment and tooling to our licensee in Russia,
for circa GBP1.4 million. This is a significant step towards
breaking into the huge Russian market and the intention is for
Gusar to use these wellheads to secure a first jack-up rental
exploration gas well order within the Russian Federation. The
licence agreement falls outside of the Jack-up Business sold to
FMCT, and so any orders secured by our Russian partners will
generate royalties for Plexus as per the terms of our Licence
Agreement. Owing to its size, the importance of gas within its
energy mix and the ongoing import replacement programme where
locally manufactured and safest drilling technology is sought,
Russia has the potential to become a major revenue earner for
Plexus and we will continue to support our partners' efforts there
to secure a first order for our equipment.
Looking to the future, the sale of the Jack-up Business
demonstrates just one route to monetising POS-GRIP. With our
technology proven and now recognised by a global industry-leader,
licensing agreements, through which Plexus earns royalties for
equipment rented out or sold, can offer a more efficient route to
market for a company of our size than organic growth. Indeed
smaller technology led businesses with disruptive applications
often generate significant value for their shareholders via
licensing agreements. Being IP-led and having raised standards in
the jack-up exploration market, we consider ourselves to be such a
technology company with disruptive applications, albeit a company
that is, for the time being at least, focused on the energy sector.
When it is appropriate to do so, we will look to secure additional
licensing agreements either covering certain geographies and
applications, as we did with Russia, or specific products such as
our subsea and production wellheads, the Connector for abandonment
operations as well as additional products that are still at the
development stage. We are therefore excited to embark on this new
strategy.
Operating Review
With the sale of the Jack-up Business to FMCT completing post
period end on 1 February 2018, the six months under review includes
a full contribution from the rental wellhead business. While the
OPEC driven recovery in oil prices gathered pace during the period,
resulting in prices settling in the US$60-US$70 per barrel range,
lag effects mean the recovery in prices has yet to fully translate
into a full-blooded pick-up in industry investment levels. Subdued
exploration activity therefore persisted in the first half,
resulting in a year on year reduction in half yearly revenues.
In spite of the challenging trading conditions, in September
2017 we announced the award of two landmark contracts: a purchase
order from new customer Rosneft (TNK Vietnam B.V) ('Rosneft
Vietnam') for the supply of POS-GRIP HP/HT adjustable rental
jack-up wellhead equipment for an exploration well in a new
territory offshore Vietnam; and importantly a contract with
Centrica North Sea Limited ('Centrica') to supply a POS-GRIP "HG"
10,000psi adjustable wellhead for a gas production well in the UK
Southern North Sea. Both these contracts represent firsts for the
Company. The second order is the first awarded by Centrica for a
production well. As mentioned earlier, following the sale of the
Jack-up Business, production is a key target market for management,
as we look to replicate the success we enjoyed in jack-up
exploration in much larger and more lucrative markets.
As a backdrop to day to day operational activities, both
discontinued and continued, it is relevant to report that the
outlook for hydrocarbon demand is seen by the industry and various
independent bodies as being more robust than may be expected in
view of the focus on renewables and alternative energy sources.
Approximately 66% of oil consumption derives from transportation,
with vehicles accounting for circa 40% of that demand, whilst less
than 2% of new car sales are electric vehicles which in turn are
less than 0.2% of the total fleet. It is encouraging for the oil
services companies that it is widely reported that global
hydrocarbon demand will continue to increase, and S&P Global
Platts Analytics recently projected that oil production will have
to increase from about 100m barrels per day ('b/d') today to just
under 125m b/d in 2040.
These projections and the need to be ready for the anticipated
increase in operational activity were further reinforced earlier
this month by the International Energy Agency ('IEA') who stated
that the global oil market faces a supply cliff edge over the next
decade as demand for crude increases faster than even US shale
production. As a result the IEA warned that a supply crunch will
result unless more investment increases after 2020 due to what they
called the unprecedented reduction in investment during the oil
crash when the price collapsed from over US$100 a barrel in
mid-2014 to less than US$30 in early 2016. Further factors
highlighted in relation to future global oil demand growth include
economic growth in Asia, increased petrochemical activity in the US
and declining oil fields where the head of the IEA, Fatih Birol
said that more investment will be needed because "the world needs
to replace 3m barrels a day of declines each year, the equivalent
of the North Sea...".
Plexus intends to play its part in the recovery and stands to
benefit through the post period end earn out relationship with
FMCT, as well as organically or with partners for wellhead
equipment applications outside of jack-up exploration drilling
(with the exception of Russia and the CIS). These macro
developments clearly influence our future planning and strategy and
our job now post the completion of the transaction with FMCT is to
structure and position Plexus to be able to respond to such
opportunities. We have therefore worked hard operationally to
rebalance Plexus in terms of which personnel and related functions
to transfer to FMCT, and which are retained to ensure we have the
building blocks for necessary capabilities going forward. These
include maintaining our API6A and 17D Monogram licences.
Key functions within the business are HR, Health and Safety
('HSE'), IT and IP. HR's focus during the period has been on
managing the headcount and organisation structure appropriate for
meeting the operational needs of the business. With the post period
end sale of Plexus' Jack-up business to FMCT, a formal consultation
process with employees was carried out. At completion of the sale,
this resulted in 31 employees transferring under TUPE regulations
to FMCT and a restructuring of the continuing business. Emphasis
remains on maintaining and developing the right balance of
technical skills within the continuing business, and therefore
further training needs were met with, for example, the development
of in-house training modules for Gate Valves and Understanding
Capacity Charts, which were subsequently rolled out across the
Field Service Technician team. In addition competency assessments
were successfully completed for QC and material handling. Continued
development of the Competency Management System has been
undertaken, including the launch of the fourth safety critical
department competency system and work has been initiated to create
a competency framework for support staff. Importantly the Plexus
Business Code of Conduct, Modern Slavery Statement and
Whistleblowing procedures were finalised and rolled out across the
business.
HSE also continues to be an important area for any business, and
Plexus remains fully committed to delivering the highest safety
standards in everything we do. We maintain a positive safety
culture which is aligned with our Company Safety Values and are
pleased to report that our HSE culture remains strong across the
business with no findings identified during the most recent LRQA
certification surveillance audit against OHSAS 18001 standard.
Safety risks continue to be managed through assessment,
implementation of controls, continual monitoring, engaging and
developing staff to ensure that the required competency levels are
met. Plexus continues to reinforce the important message that the
health and well-being of our employees is a crucial feature of our
HSE and HR strategies. Personnel are encouraged to get involved and
have confidence to intervene and challenge any act or condition
that they are concerned about, suggest improvements, and to ensure
transparent reporting to meet our desired safety and quality
culture. A full review of our procedures and development of our
Business Management System has been conducted to ensure compliance
with the ISO 9001:2015 and API Q1 standards. As a result we have
now fully transitioned to ISO 9001:2015 with no adverse findings in
our most recent surveillance audit. This demonstrates our continual
commitment to attain and sustain the highest standards
possible.
Whatever trading conditions exist, IT Systems remain of vital
importance to Plexus, and the delivery of safe and secure services
to customers and Plexus itself is paramount. Ensuring
confidentiality, integrity and accessibility of information is
maintained, Plexus continually reviews and develops its computer
network and security monitoring systems capability. This is of
course very pertinent in view of the large number of cyber risks
and attacks that continue to arise. Precautions include penetration
testing and network monitoring to ensure our IT systems have not
been breached, while our anti-virus software is updated to newer
version malware protection and internet filtering is used to keep
our data secure. It is widely reported and understood that the fast
moving cyber world presents an increasing threat to the security of
IT systems and protection from cyber-attacks and keeping up to date
with evolving policies and regulations is a complex task. Plexus
continues to work towards ISO 27001 accreditation, designed to help
ensure that both internal and external risks are minimised.
Certification provides customers and key stakeholders with the
confidence that security risks are taken and addressed seriously.
Plexus relies on its own in-house developed software systems, and
these systems have the advantage of allowing the Company to develop
software solutions that can react quickly to urgent changes.
IP lies at the heart of Plexus, and in particular oil and gas
equipment design and development which utilises our proprietary
POS-GRIP friction grip method of engineering. POS-GRIP was designed
to address a number of limitations associated with conventional
technology particularly in terms of metal sealing, and this has led
to the raising of safety standards for HP/HT wellhead applications
whilst delivering significant operational and cost advantages. The
ongoing protection and development of our extensive IP suite
continues to be a priority for the Company, and ongoing investment
in research and development in a wide range of areas and
applications outside of jack-up exploration including surface
production and subsea wellhead equipment, as well as proprietary
connector technology is an important part of this strategy. This
strategy also of course becomes even more relevant following the
post period end sale of the Jack-up Business to FMCT where, having
now proven the merits of POS-GRIP in the jack-up exploration niche
market, we are free to pursue the larger market sector
opportunities with new products and applications. These include:
the Python(TM) Subsea Wellhead (a new standard for subsea wellheads
- supported by BG, Royal Dutch Shell, Wintershall, Maersk, Total,
Tullow Oil, ENI, Senergy, and Oil States Industries Inc); the
development and launch of the POS-SET(TM) Connector ('POS-SET')
product designed to re-establish a connection onto rough conductor
casing previously cut above the seabed to facilitate tieback or for
the growing de-commissioning and abandonment market operations;
development of HP/HT dual marine barrier risers to provide an
efficient, safe and cost effective solution for use on jack-up
rigs; an innovative HP/HT Tie-Back connector product; and a new
Well Tree product. Encouragingly a combination of a stronger oil
price and signs of increased drilling activity in the sector
suggests that the long running down cycle is beginning to reverse
and we believe that the combination of our superior oil and gas
equipment designs with more exploration and production activity
will be positive for Plexus going forward.
Ongoing operational activities and necessary R&D and capex
continue to be funded from cash reserves and if necessary our bank
facilities with the Bank of Scotland, comprising a GBP5m revolving
credit facility available to 30 September 2018 and a GBP1.5m term
loan (with a current balance of GBP0.5m) which runs to August
2019.
Interim Results
The six months to December 2017 continued to reflect the
significant down-turn in jack up exploration drilling activity
across the world, and particularly in the UK and European North Sea
which historically are the most important markets for Plexus. This
continued to impact adversely on our financial performance which is
not a reflection on the strength and value of our IP, as evidenced
by the exciting corporate activity that was taking place throughout
the period.
This corporate activity culminated post period end in the sale
of the Jack-up Business to FMCT which reaffirmed the strength of
our IP and much wider industry acceptance of Plexus' POS-GRIP
technology. The sale will allow the Group to develop further
applications for its technology, namely production wellhead systems
as well as the further development of the Group's Python subsea
wellhead system
As the sale of the Jack-up Business was completed in February
2018, all income and expenditure relating to the transferring
business unit has been reported as a discontinuing operation in
line with IFRS 5. Inevitably the income and expenditure figures
associated with discontinuing operations are larger than continuing
operations as for many years the Company's focus has been on the
discontinuing Jack-up Business.
Continuing operations revenue for the six-month period ended 31
December 2017 was GBP40k, compared to the previous year's figure of
GBP179k. However, the second half of the financial year will see a
significant increase in continuing operations revenues following
the supply of a production wellhead systems to Spirit Energy
(formerly known as Centrica) and the sale of mudline equipment to
Gusar.
Despite the pending sale of the Jack-up Business during the
period Plexus continued to concentrate on preserving and conserving
Group cash by minimising spending and investment on capex, opex and
non-essential R&D without compromising operations.
Continuing activities administrative expenses are broadly in
line with the prior year with expenditure for the 6 months to
December 2017 of GBP2.71m (2016: GBP2.66m). Within this total the
continuing salary component remained the largest at GBP1.07m which
is a 11.6% reduction compared to the prior year first half which
totalled GBP1.21m. Personnel numbers for continuing staff are
broadly in line with the prior year which have reduced by 1 from 36
as at 31 December 2016 to 35 at 31 December 2017.
For continuing operations the Group has reported a loss of
GBP2.7m which is in line with the prior year loss of GBP2.6m. The
loss comes after absorbing similar rental asset and other property,
plant and equipment depreciation and amortisation costs on
non-transferring assets totalling circa GBP0.9m. The stable nature
of this cost reflects the continued and planned low levels of
capital expenditure.
For discontinued operations for the six months to December 2017,
sales revenue was GBP2.4m in 2017, compared to GBP3.6m the prior
year. Administrative expenditure for discontinued operations was in
line with the prior year at GBP3.4m (2016: GBP3.5m). The Group made
a loss of GBP1.0m compared to a profit of GBP0.1m in the prior year
driven by the decline in sales revenues.
The Group has not provided for a charge to UK Corporation tax at
the prevailing rate of 20%. Basic loss per share for continuing
operations was 2.60p per share which compares to a 2.46p loss per
share for the same period last year. For discontinuing operations
the loss per share was 0.96p per share which compares to a 0.13p
profit per share for the same period last year.
The balance sheet continues to remain strong, and the current
level of intangible and tangible property, plant and equipment
asset values at GBP13.2m and GBP4.2m respectively illustrate the
amount of cumulative investment that has been made in the business.
Total asset values at the end of the period stood at GBP39.8m. The
non-essential R&D spend has decreased from GBP0.3m in December
2016 to GBP0.1m in December 2017, the reduction being driven by the
engineering team being heavily involved in on-going operational
activities. Such control on investment activity will not compromise
our IP and our ability to provide customers with our usual high
standard of equipment and service.
The Group's cash position remains strong. The Group closed the
period with net cash of approximately GBP5.3m, which post period
end has been further supplemented with the receipt of the first
GBP14.1m payment from the completion of the sale of the Jack-up
Business resulting in a cash balance of GBP18.8m as at 1 February
2018.
Bank facilities with the Bank of Scotland comprise a GBP5m
revolving credit facility available to 30 September 2018 and a
GBP1.5m term loan (with a current balance of GBP0.5m) which runs to
August 2019.
Outlook
Looking forward, we believe macro developments, both at the
cyclical and structural levels, are also moving in Plexus' favour.
In terms of the cycle, we believe the upward trend in the oil price
in recent months towards the US$60-70 per barrel range could
trigger a much-needed pick-up in oil and gas exploration from the
depressed levels of the last few years. As well as improve the
financial performance of those companies servicing the oil and gas
sector, this is needed to drive new hydrocarbon supplies to come on
stream in time to offset the natural decline in production from
maturing fields and meet continued growth in demand for energy. As
stated in BP's 2018 edition of its Energy Outlook: "If there were
no new investment in oil production from today, and existing
production declined at 3% p.a., global oil supplies would be around
45m b/d in 2040." Such forecasts speak for themselves.
According to EY's UK oil field services report, in 2017
operating costs per barrel in the UKCS stood at US$14.70, down from
US$26.30 in 2013, thanks to a concerted effort by operators and
suppliers to reduce costs and find efficiencies. Derek Leith, EY
partner and head of Oil and Gas Tax, said: "Industry leaders have
taken action to make operations as lean and efficient as possible
which has helped them ride out this downturn. However, cost-cutting
and headcount reduction cannot continue indefinitely. A shift
towards greater innovation in systems, processes and technologies
could help drive operational costs down further while also enabling
the sector to respond to an increase in activity which appears to
be on the horizon." POS-GRIP is one such technology that can help
drive costs lower. For example, our Tersus-PCT HP/HT Tie-Back
connector product, which utilises POS-GRIP, is the first product on
the market which allows HP/HT exploration and pre-drilled
production wells to be converted to either subsea or platform
producing wells. This has major cost benefits and we estimate time
and cost savings for operators could run into millions of dollars,
easily covering the cost of the Tie-Back connector many times over.
Similarly our Python subsea wellhead, with the benefit of a simpler
design which does away with the need for example for wear bushings
and lock rings can save multiple 'trips' when drilling which
equates to many millions of dollars of time savings that can exceed
the cost of the wellhead and the subsea tree.
Close to home the North Sea has to date been our most important
market, and it is encouraging to see recent announcements by
leading operators, such as Royal Dutch Shell and BP, that capital
is once again being allocated to the North Sea. Speaking about his
company's decision to develop the Penguins field, Royal Dutch
Shell's CEO Mr van Beurden said: "We remain committed to the UK, we
remain committed to the North Sea and we see more opportunities to
grow going forward." "We see there's a lot of rejuvenation going on
in the North Sea, we see much more running room and to underline
that to take a final investment decision on Penguins was important
for us to do as well. There's more to come". Meanwhile in January
2018, BP unveiled two discoveries, Capercaillie in the central
North Sea and Achmelvich west of Shetland. Royal Dutch Shell and BP
are not the only ones demonstrating their commitment to the North
Sea. According to Oslo-based consultancy Rystad Energy, "The UK
offshore oil and gas industry is stirring back to life, fuelled by
a robust uptick in the number of field development projects". This
has positive implications for Plexus not only as we look to
establish ourselves in new markets such as production and subsea
but also for the ability to secure up to GBP27.5 million from the
three-year earn-out formula that we have in place following the
sale of the Jack-up Business to FMCT.
At the structural level, how energy is produced is changing.
BP's Energy Outlook - 2018 Edition forecasts that, at 7% p.a.,
renewable energy is forecast to be the fastest growing source of
energy so that by 2040 oil, gas, coal, and non-fossil fuels are
each projected to provide approximately 25% of the world's energy.
However, within the fossil fuel mix, natural gas at 1.6% p.a. is
projected to grow considerably faster than either oil (0.5% p.a.)
or coal (flat), overtaking coal and converging on oil by 2040 to
become the second largest source of energy due to it being a lower
carbon alternative to electricity generation than coal. BP predicts
coal's share in primary energy will fall to 21%, the lowest since
the industrial revolution. For natural gas to live up to these high
expectations, new gas wells will need to be drilled. As POS-GRIP
wellheads are ideally suited to coping with extreme gas drilling
operating conditions, as demonstrated by the successful deployment
of our POS-GRIP wellhead by Total on the Solaris well we hope this
will be a positive trend for Plexus. Together with our plans to
extend the family of POS-GRIP enabled applications into newer and
faster growing sub-sectors of the energy industry such as
renewables, we believe that Plexus will prove to be one of the
winners of the energy transition that is currently underway.
In summary the half year period under review has seen us achieve
a series of firsts: the sale of our niche Jack-up Business
including our POS-GRIP wellhead inventory to FMCT; the
Collaboration Agreement with a major top tier supplier in FMCT; and
the award of our first contract to supply a wellhead for a
production well to a subsidiary of Centrica. The run of firsts has
continued into the second half with the sale of two wellheads to
our Russian partner which we are hopeful will result in a first
order for POS-GRIP equipment from a major local Russian operator
through our licensee. We are confident the momentum behind the
business will be maintained going forward as we build out our new
IP-led strategy. The tailwind provided by the tentative signs we
are seeing of a cyclical upturn in activity, together with the
longer term favourable structural gas drivers that now appear
well-entrenched, we believe will firmly embed our proprietary
POS-GRIP method of engineering within the wider energy sector and
as a result significantly increase the value of our IP further.
J Jeffrey Thrall
Non-Executive Chairman
23 March 2018
Plexus Holdings Plc
Unaudited Interim Consolidated Statement of Comprehensive
Income
For the Six Months Ended 31 December 2017
Six months Six months Year to
to 31 December to 31 December 30 June
2017 2016 2017
GBP 000's GBP 000's GBP 000's
Revenue 40 179 225
Cost of sales (88) (95) (180)
--------------- --------------- ---------
Gross profit (48) 84 45
Administrative expenses (2,705) (2,661) (5,468)
Operating loss (2,753) (2,577) (5,423)
Finance income 19 35 59
Finance costs (9) (50) (61)
Loss before taxation (2,743) (2,592) (5,425)
Income tax expense (note 5) - - 1,027
Loss after taxation from continuing
operations (2,743) (2,592) (4,398)
(Loss) / Profit after taxation
from discontinued operations (1,008) 141 (1,304)
--------------- --------------- ---------
Loss for Year (3,751) (2,451) (5,702)
Other comprehensive income - - -
Total comprehensive income (3,751) (2,451) (5,702)
=============== =============== =========
(Loss)/earning per share (note
6)
Basic from continued operations (2.60p) (2.46p) (4.17p)
Diluted from continued operations (2.60p) (2.46p) (4.17p)
Basic from discontinued operations (0.96p) 0.13p (1.24p)
Diluted from discontinued operations (0.96p) 0.13p (1.24p)
Plexus Holdings Plc
Unaudited Interim Consolidated Statement of Financial Position
As at 31 December 2017
31 December 31 December 30 June
2017 2016 2017
GBP 000's GBP 000's GBP 000's
ASSETS
Goodwill 767 767 767
Intangible assets 13,257 13,890 13,678
Property, plant and equipment
(note 8) 4,203 13,843 11,976
Deferred tax asset 287 - 287
Total non-current assets 18,514 28,500 26,708
----------- ----------- ---------
Asset held for sale (note 9) 13,134 - 396
Inventories 1,251 6,782 6,840
Trade and other receivables 705 715 1,008
Cash and cash equivalents 5,828 10,880 7,178
Current income tax asset 420 - 966
Total current assets 21,338 18,377 16,388
----------- ----------- ---------
TOTAL ASSETS 39,852 46,877 43,096
=========== =========== =========
EQUITY AND LIABILITIES
Called up share capital (note
11) 1,054 1,054 1,054
Share premium account 36,893 36,893 36,893
Share based payments reserve 767 862 767
Retained earnings (1,176) 5,826 2,575
Total equity attributable to
equity holders
----------- ----------- ---------
of the parent 37,538 44,635 41,289
----------- ----------- ---------
Bank loans 225 525 375
Deferred tax liabilities - 372 -
Total non-current liabilities 225 897 375
----------- ----------- ---------
Bank loans 300 300 300
Trade and other payables 1,789 994 1,132
Current income tax liabilities - 51 -
Total current liabilities 2,089 1,345 1,432
----------- ----------- ---------
Total liabilities 2,314 2,242 1,807
----------- ----------- ---------
TOTAL EQUITY AND LIABILITIES 39,852 46,877 43,096
=========== =========== =========
Plexus Holdings Plc
Unaudited Interim Statement of Changes in Equity
For the six months ended 31 December 2017
Called Share Share Based
Up Share Premium Payments Retained
Capital Account Reserve Earnings Total
GBP 000's GBP 000's GBP 000's GBP 000's GBP 000's
Balance as at 1 July 2016 1,054 36,893 766 8,277 46,990
Total comprehensive income
for the period - - - (5,702) (5,702)
Net deferred tax movement
on share options - - 1 - 1
Balance as at 30 June 2017 1,054 36,893 767 2,575 41,289
========= ========= =========== ========= =========
Total comprehensive income
for the period - - - (3,751) (3,751)
Net deferred tax movement
on share options - - - - -
Balance as at 31 December
2017 1,054 36,893 767 (1,176) 37,538
========= ========= =========== ========= =========
Plexus Holdings Plc
Unaudited Interim Statement of Cash Flows
For the six months ended 31 December 2017
Six months Six months Year to
to 31 December to 31 December 30 June
2017 2016 2017
GBP 000's GBP 000's GBP 000's
Cash flows from operating activities
Loss before taxation (3,751) (2,451) (7,033)
Adjustments for:
Depreciation, amortisation and
impairment charges 1,982 2,240 4,472
Profit loss on disposal of property,
plant and equipment - (4) (1)
Charge for share based payments - - -
Investment income (19) (35) (59)
Interest expense 9 50 61
Changes in working capital:
Increase in inventories (305) (56) (114)
(Increase)/Decrease in trade
and other receivables (429) 1,032 739
Increase/(decrease) in trade
and other payables 658 (552) (414)
Cash generated from operations (1,855) 224 (2,349)
Net income taxes received/ (paid) 546 280 (160)
Net cash generated from operating
activities (1,309) 504 (2,509)
--------------- --------------- ---------
Cash flows from investing activities
Purchase of intangible assets (100) (323) (632)
Interest paid (9) (50) (61)
Purchase of property, plant and
equipment (197) (27) (287)
Net proceeds of sale of property,
plant and equipment 396 28 45
Net cash used in investing activities 90 (372) (935)
--------------- --------------- ---------
Cash flows from financing activities
Repayment of loans (150) (5,150) (5,300)
Net proceeds from issue of new
ordinary shares - -
Proceeds from share options exercised - -
Interest received 19 35 59
Net cash generated from financing
activities (131) (5,115) (5,241)
--------------- --------------- ---------
Net (decrease) in cash and cash
equivalents (1,350) (4,983) (8,685)
Cash and cash equivalents at
brought forward 7,178 15,863 15,863
Cash and cash equivalents carried
forward 5,828 10,880 7,178
=============== =============== =========
Notes to the Interim Report December 2017
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 based on the
accounting policies set out in the annual report for the year ended
30 June 2017 and which are also expected to apply for 30 June
2018.
The comparative figures for the financial year ended 30 June
2017 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.
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 2017. 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
23 March 2018.
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 Statement of
Comprehensive Income.
5. No corporation tax provision has been provided for the six
months ended 31 December 2017 (2016: nil). As a result there is no
effective rate of tax for the six months ended 31 December 2017
(2016: 0%) 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 105,386,239 (2016:
105,386,239).
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 fluctuations.
8. 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 2016 4,379 600 30,130 58 34 35,201
Additions - 132 65 90 - 287
Transfers - - 126 (126) - -
Reclassified to
assets held for
sale (455) - - - (455)
Disposals - (26) (1,489) - (2) (1,517)
As at 30 June 2017 3,924 706 28,832 22 32 33,516
Additions - 10 28 159 - 197
Transfers - - 165 (165) - -
Disposals - - - - - -
Reclassified to
assets held for
sale - - (24,540) (16) (32) (24,588)
As at 31 December
2017 3,924 716 4,485 - - 9,125
Depreciation
As at 1 July 2016 808 250 18,551 - 25 19,634
Charge for the
year 250 72 3,112 - 4 3,438
On disposals - (26) (1,453) - (2) (1,481)
Reclassified to
assets held for
sale (51) - - - - (51)
As at 30 June 2017 1,007 296 20,210 - 27 21,540
Charge for the
year 96 35 1,329 - 1 1,461
On disposals - - - - - -
Reclassified to
assets held for
sale - - (18,051) - (28) (18,079)
As at 31 December
2017 1,103 331 3,488 - - 4,922
Net book value
As at 31 December
2017 2,821 385 997 - - 4,203
As at 30 June 2017 2,917 410 8,622 22 5 11,976
As at 30 June 2016 3,571 350 11,579 58 9 15,567
9. Assets held for sale
31 December 2017 Six months to 31 December 2016 Year to
30 June
2017
GBP'000 GBP'000 GBP'000
Buildings - - 404
Equipment 6,489 - -
Assets under construction 16 - -
Motor vehicles 4 - -
Inventories 5,894 - -
Trade debtors and other receivables 732 - -
Trade creditors (1) - -
Fair value adjustment - - (4)
Cost of sale - - (4)
13,134 - 396
================= =============================== =========
On 19 October 2017 Plexus Holdings PLC announced the sale of its
wellhead exploration equipment and services business for jack-up
applications (the "Jack-up Business") to FMC Technologies Limited
("FMCT"), a subsidiary of TechnipFMC (Paris:FTI) (NYSE:FTI) one of
the leading oil & gas service and equipment companies (the
"Disposal"). The sale completed on 1 February 2018.
In addition and as part of the Transaction, the company and FMCT
entered into a Collaboration Agreement ("CA") which establishes a
framework to work together both on the development of existing
POS-GRIP IP for applications outside of jack-up exploration, as
well as future new technologies.
The Disposal follows the signing of a conditional Business
Purchase Agreement ("BPA") by Plexus, POSL and FMCT. Under the
terms of the BPA, the Plexus Group received an initial GBP14.1m net
consideration, with an additional sum of up to GBP27,500,000
payable dependent on the future performance of the Jack-up Business
during a three-year earn-out period. The earn-out has the potential
to increase the gross consideration to GBP42,500,000.
Under IFRS5 those assets which have been identified as
transferring to FMCT on 1(st) February have been included in the
table above at fair value less cost of sale.
For the year to 30 June 2017 the asset held for sale relates to
a property that was sold on 14 July 2017. The Group had entered
into a sale agreement prior to the year end. In line with IFRS5 the
asset is held for sale at fair value less costs of sale.
10. Discontinued operations
31 December 2017 Six months to 31 December 2016 Year to
30 June
2017
GBP'000 GBP'000 GBP'000
Revenue 2,411 3,591 4,524
Expenses (3,419) (3,450) (6,133)
----------------- ------------------------------- ---------
(Loss)/Profit before tax of discontinued operations (1,008) 141 (1,609)
Tax - - 305
----------------- ------------------------------- ---------
(Loss)/Profit after tax of discontinued operations (1,008) 141 (1,304)
================= =============================== =========
11. Share Capital
Six months to 31 December 2017 Six months to 31 December 2017 Year to
30 June
2017
GBP'000 GBP'000 GBP'000
Authorised:
Equity: 110,000,000 (2017: 110,000,000)
Ordinary shares of 1p each 1,100 1,100 1,100
Allotted, called up and fully paid:
Equity: 105,386,239 (Dec 2016:
105,386,239, June 16: 105,386,239)
Ordinary shares of 1p each 1,054 1,054 1,054
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR LLFFAVFIVFIT
(END) Dow Jones Newswires
March 26, 2018 02:00 ET (06:00 GMT)
Plexus (LSE:POS)
Historical Stock Chart
From Aug 2024 to Sep 2024
Plexus (LSE:POS)
Historical Stock Chart
From Sep 2023 to Sep 2024