TIDMPOS
RNS Number : 5315V
Plexus Holdings Plc
29 October 2014
Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil
equipment & services
29 October 2014
Plexus Holdings plc ('Plexus' or 'the Group')
Preliminary Results for the year to 30 June 2014
Plexus Holdings plc, the AIM quoted oil and gas engineering
services business and owner of the proprietary POS-GRIP(R) method
of wellhead engineering, announces its preliminary results for the
year ending 30 June 2014.
Financial Results
-- Record revenue, EBITDA, profit before tax and profit after tax
-- 65.1% increase in profit after tax to GBP5.05m (2013: GBP3.06m)
-- 5.7% increase in revenue to GBP27.02m (2013: GBP25.57m)
-- 18.7% increase in EBITDA to GBP9.02m (2013: GBP7.60m)
-- 25.9% increase in profit before tax to GBP5.38m (2013: GBP4.27m)
-- 62.9% increase in basic earnings per share to 6.01p (2013: 3.69p)
-- 12.7% proposed increase in final dividend to 0.62p per share (2013: 0.55p)
Highlights
-- Strong financial performance driven by core business of
renting proprietary POS-GRIP(R) friction-grip exploration wellhead
equipment, particularly High Pressure/High Temperature ('HP/HT')
applications, resulting in repeat business and the winning of new
major international oil and gas customers in new territories around
the world
-- HP/HT rental equipment contract wins with existing customers
included Statoil Petroleum AS ('Statoil') for GBP2.5m, Glencore
Exploration Cameroon Ltd ('Glencore') for GBP1.6m, Maersk Oil
Danish Unit ('Maersk') for GBP1.1m, GDF Suez E&P UK Ltd ('GDF')
for GBP1.5m, and post period end from Det Norske Oljeselskap ASA
('Det Norske') for GBP1m, and BG Group UK ('BG') for GBP2m
-- New customer wins included a third Australian customer Eni
Australia Limited ('Eni Aus') for GBP1.0m (adding to Apache Energy
Australia ('Apache') and Santos Ltd), as well as new customers in
new territories Galp Energia Tarfya B.V. ('Galp') in Morocco
(GBP0.6m), and Shell China Exploration and Production Company
Limited ('Shell China') offshore Hainan Island, China
-- Three year contracts secured - firstly renewal of Wintershall
Noordzee B.V. ('Wintershall') contract for the supply of
exploration equipment for the North Sea offshore Netherlands, and
secondly with leading drilling engineering company, AGR Well
Management Limited ('AGR'), which has already generated a contract
for a new user, Svenska Petroleum Exploration AB ('Svenska'), in
another new territory, Guinea Bissau in West Africa (GBP0.4m)
-- Production wellhead equipment order secured from Centrica
North Sea Gas Ltd ('Centrica') for GBP0.85m which further
demonstrates Plexus' ability to supply wellhead equipment not only
for exploration wells but also long term production wells which is
a significantly larger addressable market
-- Continuing evidence of the need for safer and better
technology and equipment following the Macondo incident in the Gulf
of Mexico in 2010, particularly in relation to HP/HT drilling and
subsea where a number of related major industry initiatives have
been launched. Plexus firmly believes that for wellheads and
metal-to-metal sealing, POS-GRIP technology offers a uniquely
superior solution to the challenges faced by operators in the
field
-- Significant progress being made with the new subsea wellhead
design 'HGSS'(TM) Joint Industry Project ('JIP') - design of the
prototype frozen, testing of components well underway, and running
of a prototype planned for 2015
-- Strong industry support for HGSS JIP as evidenced by both
Senergy Holdings Limited ('Senergy') and post period end, BG
International Ltd joining alongside existing consulting partners
Eni S.p.A. ('Eni'), Maersk Oil North Sea UK Ltd ('Maersk North
Sea'), Oil States Industries Inc. ('Oil States'), Shell
International Exploration and Production B.V. ('Shell
International'), Total E&P Recherche Developpement SAS
('Total'), Tullow Oil plc ('Tullow'), and Wintershall
-- HP/HT Tie-Back Connector JIP reached another milestone with
full product testing commencing post period end, and is due for
completion before the calendar year end - technical sales
discussions are in progress with an international oil and gas
operator regarding opportunities in the UK and Egypt
-- Capital investment in additional rental wellhead assets was
GBP2.32m, a planned reduction on the prior year's record level
(2013: GBP5.72m)
-- Research and Development ('R&D') spend, excluding cost of
building test fixtures, increased by 61% to GBP2.37m (2013:
GBP1.46m)
-- Spending on intellectual property ('IP') patent development
and filings increased by 42.7% to GBP0.18m (2013: GBP0.12m)
Corporate
-- Strategy to create an Asian business hub gained momentum with
Plexus Ocean Systems (Singapore) Pte Ltd ('Plexus Singapore') post
period end completing the formation of a new Malaysian Joint
Venture ('JV') company Plexus Products (Asia) Sdn Bhd ('PPA') in
conjunction with a local oil and gas partner, Integrated Petroleum
Services Sdn Bhd ('IPS') - first aim is to secure local licences
for the supply of Plexus wellhead equipment
-- February 2014 - Sir Ian Wood's "UKCS Maximising Recovery
Review: Final Report" ('Wood Report') published stating the need to
exploit HP/HT resource potential, deploy the best and most cost
effective technology, and leverage the capabilities of the UK's own
oil and gas supply chain
-- Acquisition in July 2013 of a 25% interest in a private
manufacturer of specialist oil and gas equipment for a
consideration of GBP0.7m through the purchase of 100% of the share
capital of Afrotel Corporation Ltd
-- Placing in December raised GBP2.50m from the issue of new
ordinary shares before expenses to support various organic and
strategic growth strategies as well as broadening the shareholder
base and increasing liquidity
-- Expansion of Aberdeen HQ - Plexus doubled the size of its
operational headquarters in Dyce through the purchase for GBP2.4m
of a circa 36,000 sq. ft. work shop and office facility from
leading oilfield services company Baker Hughes post period end in
September 2014
-- Strengthening of Board - Charles Jones joined the Board as a
non-executive director in September with over 30 years of senior
management and board experience in the US energy sector and will
advise and assist in building relationships in the US wellhead
equipment market
-- Bank facilities renewed and increased with the Bank of
Scotland, comprising an existing GBP5m revolving credit facility on
a three year term with an additional GBP2m overdraft on a yearly
term in September 2014 - also a five year GBP1.5m term loan was put
in place to part fund the purchase of the additional Aberdeen
facility
-- Proposing a 12.7% increased final dividend of 0.62p per share
(2013: 0.55p), which will be subject to shareholder approval at the
Annual General Meeting ('AGM') to be held on 11 December 2014 -
this follows on from the 9.1% increase in the interim dividend (to
0.48p) making a total dividend for the financial year of 1.1p per
share. If approved the final dividend will be paid on 17 December
2014 to all members appearing on the register of members on the
record date 7 November 2014. The ex-dividend date for the shares is
6 November 2014
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
Nick Tulloch Cenkos Securities PLC Tel: 0131 220 9772
Derrick Lee Cenkos Securities PLC Tel: 0131 220 9100
Felicity Edwards St Brides Media & Finance Tel: 020 7236 1177
Ltd
Frank Buhagair St Brides Media & Finance Tel: 020 7236 1177
Ltd
Chief Executive Ben van Bilderbeek said:
"I am pleased to report another excellent set of financial
results which delivered a record performance in terms of revenues,
margins, and profitability during a period that continued to
experience a number of global economic and political uncertainties.
As a result of such strong on-going progress I am delighted to
announce that the Board proposes a 12.7% increase in the final
dividend of 0.62p per share for the year ended 30 June 2014, which
will be submitted for approval at the Annual General Meeting on 11
December 2014.
"The robust financial performance relates to our organic jack-up
drilling business activities where we were able to grow our non UK
and non-European 'Rest of the World' revenues by 17% year on year.
This is in contrast to the UK and European North Sea territory
which experienced only marginal growth as a result of a decline in
exploration drilling activities in the UK Continental Shelf
('UKCS') during the period. As the North Sea has historically been
our most important market, the decline in activity in the region
validates our strategy of seeking growth beyond Europe. As such we
have been making good progress with regard to contract wins in
Asia, Australasia, and West Africa. In the longer term we also see
significant sales opportunities in the Gulf of Mexico, and in
Russia where, subject to sanction considerations, I believe Plexus
can address a number of widely reported technical challenges facing
conventional wellhead technology in the Artic.
"The cornerstone of our on-going success is our patented
POS-GRIP friction-grip method of engineering which enables us to
design wellheads that are able to uniquely, simply, and cost
effectively suspend casing and form a metal-to-metal seal in a way
that conventional wellhead designs cannot. We not only continue to
expand our engineering capabilities as a result of considerable and
effective R&D investment which in turn generates new and
valuable IP and patents, we also continue to develop and refine the
scientific and empirical principals that we communicate to the
industry, and which underpin why we can become a new global
wellhead standard, operating at safety and performance levels that
I believe cannot be equalled.
"The key to this strategy is that we have identified the most
critical aspect of wellhead technology as the ability to deliver
the force necessary to hold casing hangers and metal seals rigid,
as any degree of seal movement destroys seal integrity. Furthermore
it is critical that the energising of metal seals is monitored and
audited in real time, so that installation parameters can be
confirmed for every connection, whilst ensuring that wellhead test
and qualification standards can for the first time match those of
premium couplings. The ability to deliver true auditability of
wellhead seal performance, which in our view conventional wellhead
designs cannot do is, I believe, a critical 'must have' for the
industry, particularly subsea. Without this ability it is not
possible to demonstrate to operators, regulators, and
environmentalists that an 'out of sight out of mind' subsea
wellhead seal is truly performing over the long term, or indeed at
all. As Paul Day, Global Director of Business Development, Wells
Completion Technology for Weatherford said last year in a subsea
related interview with Drilling Contractor: "Reliability is
absolutely key because the equipment in these wells has to work the
first time and also work for the life of the well".
"I am highly confident therefore that Plexus has an exciting
future, and believe that our technology has a unique role to play
in addressing the range of sealing and long term integrity
challenges that face conventional wellhead designs particularly as
temperature and pressure ratings increase with the growth in HP/HT
and X-HP/HT drilling. These challenges, and indeed limitations,
were subject to immense scrutiny post the Gulf of Mexico 2010
incident, and continue to reverberate around the world with
operators, equipment suppliers, regulators, and safety bodies. For
this reason I am delighted with the excellent technical progress of
our subsea wellhead design JIP which Senergy and BG International
Ltd have now also joined, and the significant commercial
opportunities that I believe will arise either organically, or in
conjunction with partners and licences as we openly seek to work
with the wider industry to bring our superior solutions to the
global marketplace.
"Finally I would like to welcome Charles Jones onto the Board as
an additional non-executive director, and I am confident that
Charles with over 30 years of senior management and board
experience in the US drilling equipment sector will be able to
guide and support the executive team as we begin to pursue a number
of initiatives to develop our organic business and explore
corporate activity opportunities in the US."
Summary of Results for the year ended 30 June 2014
2014 2013
GBP'000 GBP'000
Revenue 27,024 25,566
EBITDA - before the effect of
IFRS 2 9,019 7,598
EBITDA - after the effect of IFRS
2 8,993 7,457
Profit before taxation 5,375 4,269
Basic earnings per share (pence) 6.01 3.69
Chairman's Statement
Business progress
I am pleased to report that the Group made significant progress
during the year in terms of operational, financial, and strategic
developments. The increase in activity levels resulted in a 5.7%
increase in revenue to GBP27.02m for the year to 30 June 2014
(2013: GBP25.57m) with the non UK and European revenues from the
Rest of the World increasing by 17%; an 18.7% increase in EBITDA to
GBP9.02m (2013: GBP7.60m); a 25.9% increase in profit before tax to
GBP5.38m (2013: GBP4.27m); and a 65.1% increase in profit after tax
to GBP5.05m (2013: GBP3.06m) helped by a lower effective tax rate,
delivering a 62.9% increase in basic earnings per share of 6.01p
(2013: 3.69p). Sales revenue growth reflects the growing reputation
of our POS-GRIP wellhead equipment to deliver operational time
savings and safety benefits, as evidenced by the winning of orders
from new customers in new geographic territories including China,
particularly for challenging HP/HT applications. Investment in
R&D, IP, and the expansion of our rental wellhead fleet is
on-going. Importantly we continue to experience industry support
and encouragement for extending our POS-GRIP technology beyond our
core business of renting exploration wellheads for jack-up rigs.
Such support is particularly welcomed for our new HGSS subsea
wellhead design JIP where the testing of key components is now well
underway, and which saw Senergy the global energy services provider
and member of Lloyd's Register Group, join as an additional
consulting partner alongside a number of existing major operating
company members. In addition, post period end BG International Ltd
also joined the JIP, and we look forward to their valuable
contribution to this important project.
Overview
This year's excellent set of results continues to demonstrate
that the benefits of Plexus' proprietary POS-GRIP wellhead
equipment are recognised by an increasing number of international
oil and gas companies operating in the jack-up drilling exploration
market, where we remain the dominant supplier in the North Sea and
where we are extending our global reach, for example in West Africa
and in China with Shell.
The new Strategic Report which forms part of these accounts
provides a detailed narrative of all important aspects of our
business, and I therefore wish to provide an overview of some of
the key operational and strategic influences, developments, and
drivers that took place throughout the year. It is important to
note that we have been able to continue to expand our customer base
with the addition of new first time users of our technology, as
well as extending our geographic reach to new territories such as
China and Morocco. HP/HT exploration drilling equipment, where our
superior technology excels, continues to drive revenues and margins
and we are seeing evidence of a developing trend where operators
are selecting our HP/HT equipment for use on standard pressure
wells so as to benefit from the associated safety and operational
benefits.
As Plexus continues to grow its organic rental exploration
drilling business it is essential that we make the necessary
investment in infrastructure to support operations, and future
expansion. This investment takes a variety of forms from plant,
property, and equipment to staff, R&D, IP, Information
Technology ('IT '), and Health and Safety. Of particular note was
our GBP2.4m acquisition in September of an additional 36,000 sq.
ft. work shop and office facility in Aberdeen, effectively doubling
the size of our main operational headquarters, as well as further
investment in our rental inventory fleet and on-going R&D and
IP, particularly associated with our new subsea wellhead JIP. In
the current financial year we anticipate as a demonstration of our
confidence in the future investing a further GBP3.8m in R&D,
patents, and software, and approximately GBP6.0m in additional
plant and wellhead equipment.
With Plexus operating in the international oil and gas space it
is inevitable that our 'day to day' progress must be placed in the
context of a number of macro considerations and drivers, both local
and global. Fortunately for Plexus, although there are inevitably
uncertainties that arise from time to time in the industry such as
the recent volatile oil price, I believe that the fundamental
bedrock of the superior nature of our patented technology will
continue to support our global aspirations and ability to become a
new global wellhead standard.
More cautiously, a number of macro and geopolitical negatives
have arisen over the past year, and it remains to be seen what
impact they will have both in the current financial year and beyond
in terms of operators business activity and investment levels. For
example questions about the health of the Eurozone and in
particular Germany, oil price falls, reduction of Quantitative
Easing in the US and Europe, health of emerging markets, Middle
East conflicts, and even Ebola in West Africa all make a
particularly toxic mix for world economic confidence. However at a
more micro level we believe Plexus will benefit from increased
industry receptiveness to new and superior technology driven by
regulatory and government initiatives focused on improving
operational performance and safety standards. This trend is
particularly relevant to subsea following the Gulf of Mexico
incident in 2010. Plexus is confident that in particular our subsea
JIP will be able to address such concerns head on, and provide
solutions previously not able to be provided by conventional
technology such as monitoring of all annuli in subsea wellheads
with remedial capabilities, and that such innovative solutions will
lead to Plexus wellheads being recognised as truly the best
available and safest technology ('BAST'). Industry support for the
JIP continues to be strong as evidenced by BG and Senergy having
now joined the project alongside the other international oil and
gas company members. The scale of this opportunity can be clearly
demonstrated by 2013 Rystad Energy data which stated that the
subsea industry "within twenty years will be equal to the
production of traditional oil and gas offshore".
Closer to home the UKCS continues to be our most important
market, and accounted for 37% of revenues despite a continuing low
level of exploration drilling activity. Encouragingly Oil and Gas
UK are acutely aware of the need to address this, and has stated in
its "Economic Report 2014" there is "an urgent need for
substantially more exploration to discover the untapped sources
that will feed the future development of new oil and gas fields".
This is helpful to Plexus as we have nearly 100% of the UKCS
exploration jack-up drilling market so any increase in activity
will have a very positive impact. However, Oil and Gas UK also say
that three remedies need to be applied for this reversal to happen
- radical change in the industry's fiscal regime; prompt and full
implementation of the "Wood Report"; and the tackling of cost,
efficiency, and productivity challenges. Encouragingly the UK
Government has endorsed the Wood Report and HM Treasury has opened
a formal consultation on how best to incentivise through tax regime
measures exploration and investment in the ultra-high pressure high
temperature opportunities in the UKCS. The results of the "Fiscal
Review" are expected to be announced in December 2014. Should these
Government led tax incentives result in the desired increase in
exploration activity Plexus expects to benefit. I should also
mention the Scottish referendum and the fact that the oil and gas
industry welcomed the "No" vote in September 2014. For example Ben
van Beurden, chief executive of Royal Dutch Shell, said that the
outcome cut the risk to continuing investment in the North Sea and
that "Shell welcomes the decision by the people of Scotland to
remain within the UK, which reduces the operating uncertainty for
businesses based in Scotland".
Away from the North Sea we are focusing on growing our presence
around the world, and in particular in Asia where we now have
subsidiaries in Brunei, Malaysia, and Singapore. We see this as an
important and growing hub for business activities in the region, as
well as being able to service for example Australia, China, India,
and Indonesia as suitable sales opportunities arise. In addition we
are also looking to further commercial opportunities in; Japan both
for conventional and unconventional energy sources such as methane
hydrates and mud volcanoes; Mexico where recent drilling success
suggests that it is emerging as a major oil and gas opportunity;
and Russia subject to sanction considerations where we think
opportunities in the Artic drilling space are significant.
Such activities, and the unique nature of the POS-GRIP
friction-grip method of engineering that drives them, must be
communicated to the wider industry, and an effective method for
this has been proven to be international HP/HT conferences. In
September 2014 at the "World Oil HPHT Drilling and Completions
Conference" in Houston, Texas we were invited to make a POS-GRIP
metal sealing presentation, and also made a similar presentation at
the Oil and Gas iQ "HPHT Wells Summit 2014" in London regarding
pioneering techniques and technology in HP/HT drilling and
completions. These initiatives are important not only to
communicate the scientific principles that lie behind POS-GRIP, but
also to show that we are reaching a stage, particularly with our
new subsea wellhead design where we are open to finding ways to
share and accelerate the adoption of our technology with the wider
industry. Such opportunities come into sharp focus, for example in
"Subsea world news" in September which referred to a Frost &
Sullivan consultant's report saying that "as attractive returns and
higher recovery rates position subsea exploration to challenge the
near-shore and onshore industry, demand for subsea equipment will
continue to grow". However an important related dynamic is that as
a Frost & Sullivan Energy and Environmental Industry Analyst
said, "Mergers, acquisitions and partnerships will help subsea
equipment suppliers leverage expertise across the board and
penetrate the market successfully. Major participants must
especially partner with or acquire hardware suppliers and software
providers to widen their products and service portfolios". Plexus
intends to make every effort to play its role in such
opportunities.
Staff
On behalf of the Board, I would like to thank all our employees
for their dedication and hard work during another successful year
that has not only delivered another set of record financial results
but which, importantly and necessarily, has also seen us further
increase our staff numbers from 135 at the beginning of July 2013
to 144 at the end of June 2014 and 149 currently as we continue to
expand our business activities. Such efforts contributed to Plexus
being declared, post period end, the winner of the 'Commitment to
Innovative Use of Research and Development' award at the Northern
Star Business Award 2014, the flagship event for the Aberdeen &
Grampian Chamber of Commerce. Plexus was also a finalist in the
'Outstanding Contribution to the Energy Sector' and I congratulate
our team on this engineering and operationally led recognition. I
would also like to welcome as a non-executive director Charles
Jones who will be advising the Board in respect of interacting with
US oil and gas operators and service companies, industry bodies,
and regulators, particularly in relation to the subsea arena.
Outlook
Looking forward it is necessary to consider the widely reported
geopolitical events and negative sentiment in relation to the
global economy that seem to be so prevalent at the current time,
including the falling price of oil. During our financial year we
have seen the Brent crude oil price start at circa US $103 per
barrel, rising at the end of June 2014 to close near a high for the
period of US $115 per barrel before falling sharply to almost US
$80 per barrel in October 2014, the lowest point in nearly four
years. Such price volatility, which is showing signs of reversing,
can lead to a slowdown in investment and places a question mark
over the longer term viability of certain unconventional energy
sources such as shale drilling should this trend continue for any
length of time. Notwithstanding short term oil market dynamics, it
is clear that long term the demand for energy will continue to
trend higher and with it the demand and need for innovative and
safer oil service solutions. Douglas-Westwood in their recent
quarterly publication of "The World Oilfield Services Market
Forecast" expects "sustained and substantial growth" in the global
oilfield services market which they forecast will grow from US
$354bn in 2014 to US $521bn in 2018, an increase of 47%. A number
of such positive oil services demand forecasts exist, particularly
in relation to subsea drilling where Rystad Energy consultancy see
the subsea market doubling in size by 2020, are underpinned by
equally positive demand led market analysis. ExxonMobil in their
2014 "The Outlook for Energy: A View to 2040" ('Exxon Report')
forecast that by 2040 the global population will increase by two
billion, resulting in a 35% greater demand for energy, and
importantly that 60% of demand will be supplied by oil and natural
gas despite the efforts being made to promote alternative energy
sources. Global demand for natural gas where Plexus is able to
offer safer and lower operating cost wellhead designs, particularly
for HP/HT and X-HP/HT, is forecast in the same report to rise by
65% from 2010 to 2040. For these reasons I believe that the markets
that Plexus addresses have a healthy future.
In addition, as advances in technology play a critical role in
meeting global energy demand, Plexus is well placed to capitalise
on a number of important trends in the industry. These include an
increased need for oil and gas companies to operate at the highest
safety standard levels with calls for the use of the BAST
equipment, as well as the need to improve efficiency and reduce
costs. I believe that Plexus is able to offer a unique solution in
the wellhead market that combines superior safety and cost saving
opportunities driven by the simplicity of the technology and its
ability to facilitate operations such as side-tracking in a way
that cannot be done by conventional wellhead technology. The need
for such features is clearly demonstrated by the results of a
survey with leading global oil and gas and service company
participants conducted by Lloyd's Register Energy, which only this
month released findings in relation to technical innovation in the
sector and what they see as the key future investment drivers.
Safety improvements were top of the list closely followed by
improving operational efficiency, and reducing costs. POS-GRIP
wellheads deliver on all three of these drivers and offer a
compelling safety and business case for their utilisation. Indeed,
with increasing regulatory scrutiny post the 2010 Gulf of Mexico
incident on-going around the world, evidenced by the new EU
Directive on offshore oil and gas safety, we believe we are in a
very strong position to answer the many questions being raised in
relation to conventional wellhead designs such as the need for
instant casing hanger lock down, monitoring, and in our view most
importantly what constitutes a true long term metal-to-metal
seal.
In terms of current trading we have a healthy order book and
good visibility for our organic jack-up rental exploration
business, and anticipate this continuing subject to any unforeseen
downturn in exploration activity by our customers. The UK North Sea
importantly contributed 37% of our revenues during the financial
year against a backdrop of only 15 exploration wells drilled in the
North Sea in 2013 according to Oil & Gas UK's "Economic Report
2014". Helpfully the UK industry knows that this needs to increase
substantially and the important Wood Report will we hope be a
positive catalyst and blue print for a resurgence in the future,
particularly for HP/HT activity where new UK tax incentives have
been introduced.
We further believe that there is a significant commercial
opportunity for Plexus to expand into the subsea rental exploration
and production wellhead markets with our new HGSS subsea wellhead
design either directly, or through potential licences with third
parties. In addition we are actively pursuing other strategic
initiatives such as the volume surface production market, and
specialist applications such as our unique up to 20,000psi HP/HT
Tie-Back Connector. I was particularly pleased to note in relation
to the HGSS subsea wellhead project that Senergy and BG both joined
the JIP, adding to the formidable list of consulting partners that
are actively contributing to and supporting the joint goal of
designing and developing a superior subsea wellhead where we
anticipate running a prototype for the first time in the second
half of 2015. These important drivers lie behind our decision in
September 2014 to double the size of our Aberdeen facility with the
acquisition of an additional 36,000 sq. ft. building, and our plan
to invest over GBP13m during the current financial year in tangible
and intangible assets.
For these reasons I am confident in the future prospects for our
company and its ability to deliver significant shareholder value
from our patented POS-GRIP friction-grip method of engineering
which can deliver a range of applications in the coming years both
within and outside the oil and gas industry. The 12.7% proposed
final dividend increase is a further demonstration of the Board's
confidence in the future.
J Jeffrey Thrall
Non-Executive Chairman
28 October 2014
Strategic Report
Principal Activity
The Group markets a patented method of engineering for oil and
gas field wellheads and connectors, named POS-GRIP, which involves
deforming one tubular member against another within the elastic
range to effect gripping and sealing. This superior method of
engineering for wellheads offers a number of important advantages
to operators, particularly for HP/HT applications and can include
improved technical performance, improved integrity of metal seals,
significant installation time savings, reduced operating costs and
enhanced safety. Revenues predominantly derive from the rental of
POS-GRIP wellheads for jack-up exploration, although the range of
commercial and safety benefits of POS-GRIP also apply to surface
production and subsea wellheads. The Directors believe that the
Company's proprietary technology has additional wide ranging
applications both within and outside the oil and gas industry, and
may well extend beyond conventional oil and gas to for example
undersea deposits of methane hydrates, and geothermal drilling.
Financial Results
Revenue
Revenue for the year was GBP27.02m, up 5.7% from GBP25.57m in
the previous year. The steady growth in sales was supported by a
number of on-going and new contract wins both from existing and
importantly new customers around the world. Geographically, a
particularly strong year on year performance was seen in Africa and
Australia which grew 68% and 18% respectively, whilst the UK North
Sea only grew by 2%, and accounted for 37% of total sales,
highlighting the need for additional incentives for the North Sea
oil and gas market to encourage investment as recommended in the
influential Wood Report.
The rental of exploration wellhead and related equipment and
services again accounted for approximately 95% of revenue which
continues to reflect the fact that the Company's current business
model is centred on the supply of rental surface exploration
wellhead equipment and services as opposed to sold production
surface well equipment. Looking forward, although Plexus' organic
rental equipment business continues to grow, it is the Company's
intention to begin to address both the surface production wellhead
market and the subsea exploration and production markets, ideally
in conjunction with a larger partner. Plexus' wellhead designs are
already proven for production wells, a far larger market than
rental exploration, and a contract worth approximately GBP0.85m was
secured from Centrica in November 2013 for a standard pressure
production well. HP/HT rental equipment sales continued to account
for the majority of sales, rising to GBP23.3m up from GBP22.0m last
year, an increase of 5.7%, and accounted for 86.2% of total sales.
The continued growth in HP/HT revenue resulted from contracts for a
number of existing and new customers including Centrica, Glencore,
and Petronas. Such additional activity required further capital
investment with GBP2.3m invested in rental assets including two
additional HP/HT rental wellhead sets. Standard pressure equipment
sales reduced by 19.6% to GBP1.71m from GBP2.13m in the prior year,
and accounted for 6.3% of total sales. This decline reflected an
on-going reduction in exploration activity in the UKCS where it has
been reported to be at an all-time low. This year revenues of
GBP0.37m were generated by engineering and testing as opposed to
none last year.
Margin
Gross margins have been maintained at 71.1% (compared to 71.0%
in the previous year) as the majority of rental activity sales
continued to be HP/HT delivering higher margins than low pressure
equipment contracts.
Overhead expenses
Sales and product development activities expanded in absolute
and global reach terms and, as anticipated, overhead expenses
increased to provide the necessary additional infrastructure and
personnel to support these organic and on-going new product
development initiatives. This resulted in total overheads
increasing slightly to GBP13.93m from GBP13.78m in the previous
year, although efficiency gains were made as these accounted for
51.5% of revenues compared to 53.9% for the prior year. Overhead
staff costs was the most significant component, and increased
marginally to GBP8.17m from GBP8.09m, reflecting the need to ensure
that the Group's increased activity levels can be managed in line
with customer and operational requirements, with the employee
headcount increasing at the year-end to 144 compared to 135 for the
prior year, an increase of 6.7%. Other items which increased year
on year as a result of the increased activity levels, staff
increases, and expansion of infrastructure were recruitment fees,
training, health and safety, advertising and marketing, and travel
and subsistence. These increases were in part offset by economies
of which the main benefit came from reduced freight and courier
costs as a result of a higher level of recharging.
EBITDA
EBITDA for the year (before IFRS 2 share based payment charges
of GBP0.03m) was ahead of recently upgraded market expectations at
GBP9.02m, increased from GBP7.60m (before IFRS 2 share based
payment charges of GBP0.14m) the previous year, an increase of
18.7%. EBITDA margin for the year was higher at 33.4% as compared
to 29.7% last year, an increase of 12.4%. This strong EBITDA
performance is the result of operational efficiencies, coupled with
maintaining the higher margins associated with HP/HT rental
activity where the proprietary nature of the Plexus POS-GRIP
friction-grip technology enables Plexus to deliver superior
performance in terms of enhanced safety, time savings, and
operational efficiencies, all of which add substantial value to our
customers.
Profit before tax
Profit before tax increased significantly to a record GBP5.38m
compared to a profit last year of GBP4.27m, an increase of 25.9%,
and was ahead of recently upgraded market expectations. This
increase has been achieved after absorbing higher depreciation and
amortisation charges of GBP3.40m, up from GBP2.96m last year, the
largest component being depreciation of rental assets which
increased by 15.3%, reflecting the on-going investment in Plexus'
wellhead rental inventory. Share of Associate profit contributed
GBP0.21m. The profit before tax is stated after an IFRS 2 charge
for share based payments under reporting standard IFRS 2; the
charge for the full year is GBP0.03m compared to GBP0.14m last
year.
Tax
The Group shows an income tax expense of GBP0.33m for the year
as compared to GBP1.21m for the prior year. The Group has an
effective tax rate for the year of 6% (2013: 28%) which is below UK
corporation tax rates. This lower effective tax rate for the year
is due to a reduced tax charge arising as a result of SME enhanced
R&D tax credits, which arise from the Group's continuing
significant R&D programme, and credits available against tax in
respect of gains arising on share options exercised by employees.
Last year's effective rate of tax was as previously reported higher
than UK corporation tax rates due to adjustments made in 2013 for
deferred tax that had not been provided for in 2012.
It is currently anticipated that for the foreseeable future, the
Group will continue to report an effective tax rate that is lower
than the prevailing UK corporation tax rate. This lower effective
rate will depend upon the continuing eligibility to claim enhanced
R&D tax credits as part of the on-going R&D programme; the
expected potential reductions in tax rates arising from the Patent
Box tax regime; and future movements in the Group's share price,
which has the potential to have a positive or negative effect on
the overall effective tax charge, in respect of both gains arising
on share options exercised by employees and the deferred tax
related thereto.
EPS
The Group reports basic earnings per share of 6.01p compared to
3.69p in the prior year, an increase of 62.7%.
Cash and Statement of Financial Position
The statement of financial position reflects the growth in
operations during the year and in particular on-going capital
expenditure, plus the acquisition of a 25% interest in a private
manufacturer of specialist oil and gas equipment. The net book
value of property, plant and equipment including items in the
course of construction increased to GBP13.28m compared to GBP13.17m
last year. Capital expenditure on tangible assets reduced as
planned to GBP3.02m compared to GBP6.65m last year as it normalised
following a record level in the prior year when ten more HP/HT
wellhead equipment sets were added in preparation for a broader
geographic presence. The net book value of intangible assets,
including IP rights and R&D, increased by 20.1% to GBP10.44m
compared to GBP8.69m last year. Capital expenditure on intangibles
totalled GBP2.41m compared to GBP1.49m last year, an increase of
61%, of which importantly 57% related to additions in respect of
the HGSS subsea wellhead JIP. Receivables increased to GBP6.46m
compared to GBP4.92m last year. Net cash at bank closed at GBP2.35m
compared to net bank borrowings of GBP1.39m last year reflecting
net cash inflow for the year of GBP3.74m after absorbing total
capital expenditure of GBP5.42m (2013: GBP8.14m), the acquisition
of an associate investment for GBP0.73m, and receipt of GBP2.5m
from the placing of new shares in December 2013. Following the post
period end acquisition of an additional 36,000 sq. ft. work shop
and office facility in Aberdeen in September for GBP2.4m the Group
decided to increase its existing GBP6m working capital lending
facilities structure with Bank of Scotland Corporate to GBP7m. In
addition, to part fund the acquisition of the additional Aberdeen
facilities, a GBP1.5m five year term loan was entered into. These
facilities are anticipated to be adequate to meet on-going capital
expenditure, R&D and related project commitments.
Intellectual Property
The Group carries in its statement of financial position
goodwill and intangible assets of GBP11.2m, an increase of 18.5%
from GBP9.45m last year, reflecting the Group's on-going investment
in the development of its POS-GRIP technology and in particular
patent development fee costs which increased 42.7% year on year,
the most important elements of which continued to be in relation to
POS-GRIP technology and the new subsea wellhead development
project. The Directors have considered whether there have been any
indications of impairment of its IP and have concluded, following a
detailed asset impairment review, that there have been no such
indications. The Directors therefore consider the current carrying
values to be appropriate. Indications of impairment are considered
annually.
Research and Development
Significant R&D expenditure continues to be an important and
necessary investment in protecting and developing a range of
applications for our proprietary POS-GRIP friction-grip method of
engineering. This is at a time when R&D is increasingly being
recognised as an essential component for the future success of the
oil and gas industry, to help drive down costs, increase safety,
and to develop enabling technology that can provide solutions to
the growing challenges of unconventional drilling conditions,
particularly subsea HP/HT. Plexus has always subscribed to the
value of R&D expenditure, and yet ironically Nick Butler a
former strategist at BP was recently quoted as saying that some
operators may be cutting R&D "just when it matters" and relying
more on the service companies. Plexus is confident that such a
trend will help it to continue to play an important role in
addressing the well reported wellhead integrity challenges which
conventional wellhead equipment faces, particularly in the field of
metal sealing where the unique advantages of POS-GRIP technology
are so easy to demonstrate. Such a role manifests itself in a
number of ways, with one specific R&D driven initiative being
our on-going HGSS subsea wellhead JIP, which was launched at the
request of an international operator in response to the 2010
incident in the Gulf of Mexico. This subsea wellhead JIP addresses
a number of technical issues identified as part of the
investigations into the incident, and is now supported by six major
international oil and gas operators who are consulting partners to
the project. A second R&D driven project is the up to 20,000
psi HP/HT Tie-Back Connector JIP, part funded by Maersk Oil North
Sea UK Limited, which is designed to allow HP/HT exploration wells
and pre-drilled production wells to be converted to either subsea
or platform producing wells as opposed to abandoning such HP/HT
wells and writing off typical costs of GBP50m to GBP200m. R&D
activities such as these, utilising our proprietary technology,
generate important opportunities to expand and extend our
comprehensive range of POS-GRIP based patents thereby protecting
the Company's significant level of investment in its IP, and
maximising the opportunity of achieving financial returns on that
investment over the long term. R&D spend increased by 67.7%,
including the cost of building new test fixtures, to GBP3.19m from
GBP1.91m in the prior year, and will continue during the 2014/15
financial year as the HGSS subsea JIP progresses and the POS-GRIP
product range including the HP/HT Tie-Back Connector broadens.
IFRS 2 (Share Based Payments)
IFRS 2 charges have been included in the accounts, in line with
reporting standards. The "fair value" of share based payments has
been computed independently by specialist consultants and is
amortised evenly over the expected vesting period from the date of
grant. The charge for the year was GBP0.03m which compares to
GBP0.14m last year.
Dividends
The Company announced on 27 March 2014 the payment of an
increased interim dividend of 0.48p per share which was approved
for payment on 25 April 2014.
In further recognition of the Group's on-going progress the
Directors have decided to propose a 12.7% increase in the final
dividend of 0.62p per share for the year ending 30 June 2014
compared to 0.55p last year, which will be recommended for formal
approval at the Annual General Meeting to be held on 11 December
2014. Subject to this the dividend will be paid on 17 December 2014
to all members appearing on the register of members on the record
date 7 November 2014. The ex-dividend date for the shares is 6
November 2014.
Operations
As Plexus continues to grow and expand its operations beyond the
UK and the Continental North Sea it is essential that on-going
investment is made in infrastructure including plant and equipment,
IT operating systems and, crucially, personnel. The need for such
initiatives is driven by the contract wins secured from existing
and new customers in relation to our core rental exploration
wellhead supply activities. The most significant contracts that
underpinned our progress during the year were as follows:
-- July 2013 - new customer win with ENI Aus for the supply of
standard pressure equipment offshore Australia with a value of
GBP0.28m, adding to Apache and Santos in the region
-- July 2013 - Statoil contract for two HP/HT exploration wells
in the Norwegian Continental Shelf with a value of GBP2.5m, plus
two options for Statoil to extend the contract for a further two
years
-- November 2013 - production well contract from Centrica for
the supply of a standard pressure wellhead for the southern North
Sea with a value of GBP0.85m
-- November 2013 - Glencore order for additional HP/HT wellhead
equipment for two wells offshore Cameroon with value of GBP1.6m
-- February 2014 - first time Maersk Danish business unit
contract for the supply of HP/HT equipment for standard pressure
exploration well in the Danish North Sea with a value of
GBP1.1m
-- February 2014 - two three year contract extensions. Firstly
with Wintershall for offshore Netherlands, and secondly with AGR
for the supply of standard pressure and HP/HT wellhead equipment
where the first order for GBP0.4m was for a new territory Guinea
Bissau for Svenska
-- February 2014 - GDF additional well order for the UK Central
North Sea for HP/HT equipment for a standard pressure well with a
value of GBP1.5m
-- April 2014 - new customer and new territory win with Galp for
the supply of HP/HT equipment for a standard pressure well offshore
Morocco with a value of GBP0.6m
-- May 2014 - new customer and new territory win with Shell
China for the supply of HP/HT equipment for exploration well
offshore Hainan Island
-- June 2014 - second well for Maersk Danish business unit with a value of GBP1.4m
Post year end contracts included:
-- August 2014 - our long standing customer Det Norske placed an
order for HP/HT wellhead equipment for offshore Norway with a value
of GBP1m
-- October 2014 - BG order for supply of HP/HT equipment for an exploration well in the UKCS
Day to day operations are driven by our core jack-up exploration
business activities, and it is essential that we continue to invest
in expanding our rental wellhead inventory, personnel recruitment
and training, and infrastructure both close to our headquarters in
Aberdeen, and further afield where we have established a base of
operations in Singapore. Sales activities outside of the UK and
Europe, which we designate as the Rest of the World, accounted for
38% of total sales which is an increase of 17% over the prior year
and demonstrates that we can win business from such regions and are
right to focus on identifying and building on such
opportunities.
As part of our Rest of the World growth strategy we announced in
August 2014 that our Plexus Ocean Systems (Singapore) Pte Ltd
('Plexus Singapore') subsidiary had completed the formation of a
new Malaysian JV company Plexus Products (Asia) Sdn Bhd ('PPA') in
conjunction with a local Malaysian oil and gas partner, IPS. The
establishment of PPA is a key part of our strategy to create a
fully operational Asian business hub which can target the important
and growing Australian, Brunei, Indonesian, Malaysian, Thai and
Singaporean oil and gas exploration and production markets. Our
business partner IPS is a well-known upstream support services
business to the offshore oil and gas industry in Malaysia and the
Asia Pacific region with in-house manufacturing facilities, and is
an approved vendor to Petronas, and actively participates in the
bidding and tendering process to provide support services to its
Production Sharing Contract ('PSC') operators such as Petronas
Carigali, Shell, Talisman, ExxonMobil, Murphy Oil, Newfield, and
Hess. IPS's first task is to seek to obtain the necessary local
licences required to supply Plexus POS-GRIP wellhead equipment in
the important Malaysian market. PPA's intended future business
activities will complement Plexus' existing activity in the Asian
and Oceanic regions where business has already been generated with
Apache, Eni Australia, Petronas, Santos, Shell Brunei, and recently
Shell China. Plexus is slowly growing the number of employees based
in the region and we hope to report more progress in the coming
months as Plexus Singapore is already able to inspect and refurbish
wellhead equipment and service local markets, which also generates
efficiency savings by not having to ship the equipment back to
Aberdeen.
Closer to home, a significant investment was made post period
end in September 2014 with the acquisition for GBP2.4m of the
adjacent 36,000 sq. ft. building previously occupied by the leading
oilfield services company Baker Hughes; effectively doubling the
size of the main operational headquarters location in Dyce,
Aberdeen. As Aberdeen continues to be at the heart of Plexus
R&D, technical development, and operational support functions
the opportunity to expand in such a logistically efficient manner
was quickly seized. The additional site will provide extra work
shop, warehouse, service bay, and office space and will strengthen
our ability to support and respond to the growing demand for our
equipment and services at a time when the UK, and Aberdeen in
particular, is widely recognised as the technological leader in
subsea technology, an area where we anticipate being able to offer
a new standard of wellhead equipment over the coming years.
As highlighted in the R&D section of our Strategic Report,
Plexus currently has two JIP's on-going. First is our HP/HT up to
20,000psi Tie-Back Connector, an innovative and unique product
sponsored by Maersk. The Tie-Back Connector features our
metal-to-metal HG(R) seals and will for the first time allow HP/HT
exploration and pre-drilled production wells to be converted to
either subsea or platform producing wells delivering significant
savings in terms of capital expenditure and the acceleration of
bringing a well into production. Full product testing commenced
post period end and will be completed by the end of the 2014
calendar year. Technical sales discussions are in progress with an
international oil and gas operator for opportunities in Egypt and
the UK, although any potential Egyptian opportunities may be
disrupted by current events in the region. The second JIP is our
innovative and superior new subsea HGSS wellhead design project
where good progress is being made with the support of our
consulting partners to design and develop a safer and more
technically advanced subsea wellhead. Innovative features of the
product have been protected through various patent applications
which further extend the life of our IP. Testing commenced post
period end and it is anticipated it will be completed by the end of
the 2014 calendar year. Furthermore, discussions continue with the
JIP members and two international oil and gas operators regarding
commercial opportunities for the new subsea wellhead in 2016 post
the running of a prototype, for which a commitment will be sought
for the second half of the 2015 calendar year.
Staff and staff development remains a key factor in our current
and future success. It is well known that the oil and gas industry
has one of the tightest labour markets and experiences consequent
skill shortages, and therefore our ability to recruit and retain
staff is paramount. Fortunately because Plexus offers the market a
unique product range we believe that this appeals to seasoned
industry personnel who have an opportunity to work in an
entrepreneurial 'can do' environment with new and ground-breaking
technology that can raise the standards bar to a new level. As a
result the year on year total employee numbers increased from 135
to 144, and currently stands at 149. It is particularly gratifying
to note that 40% of our recruitment comes from employee referral
which is not only cost effective, but importantly demonstrates that
our staff happily encourage others to join Plexus. To help meet
these goals the training budget was trebled and a number of key
deliverables were established to ensure the investment was
effective. These included a leadership change programme for
operating company directors, a bespoke supervisory and management
skill training programme for all supervisors and managers, and the
commencement of a "Competency@Plexus" initiative for our field
service technicians. In recognition of the importance that we place
on such initiatives at a time when safety is so key for the
industry, we are on target to submit our programme for industry
accreditation by Offshore Petroleum Industry Training Organisation
('OPITO') by early 2015.
Health and Safety is an operational area which is quite rightly
at the forefront of the industry, and is one of our key performance
indicators. Plexus is committed to delivering the highest safety
standards, and we continue to manage safety risks through
assessment, implementation of controls, continual monitoring, and
hiring and developing staff to meet the competency levels required.
In particular we encourage our personnel to intervene and to
challenge any unsafe act or condition and to ensure transparent
reporting. Recent audits by Lloyds Register Quality Assurance, our
certifying body, and clients demonstrates that we are operating to
the recognised industry and national standards. We also actively
seek to share Health and Safety Executive ('HSE') best practice
with our customers and industry bodies.
IT services are an additional area of operations essential for
the delivery of fast, accurate, and secure data and hardware
support. Investment in IT staff and associated infrastructure has
increased to support the on-going growth of the business, and to
address recognised risks that are identified as part of our
on-going risk assessment and management process. Such risk
management is a key priority for IT and therefore our internal
software systems have been extended to include planning and MRP
modules which enable us to better manage sales opportunities
leading to a more cost effective supply chain process. The IT
department is currently reviewing the adoption, where appropriate
and effective, of the ISO 27001 standard for information security
management systems ('ISMS'). Such certification can help protect
systems against computer assisted fraud, cyber-attack, sabotage,
and viruses, and is increasingly being sought by customers, trading
partners, and other key stakeholders as a way of demonstrating that
such security risks are taken seriously.
Finally, Plexus has to date, chosen not to own its own
manufacturing capacity, but in July 2013 acquired the whole issued
share capital of a private company which holds a 25% interest in a
private UK engineering company which manufactures specialist oil
and gas equipment. This investment complements our growth strategy
as it is anticipated to support our capital equipment needs whether
it be the expansion of our rental wellhead inventory or for
engineering and prototype development capacity for the on-going
JIPs.
Strategy and Future Developments
Technology
The Plexus strategy centres on our unique and patented POS-GRIP
friction-grip method of engineering which has wide ranging
applications both within and outside of the oil and gas industry.
The strategy is primarily focused on delivering a new and highest
standard of wellhead design for the upstream oil and gas markets
where it has proved uniquely advantageous in terms of safety
features, operational efficiency, and cost savings for jack-up
drilling HP/HT applications.
In simple terms POS-GRIP wellhead designs, whether for
exploration or production for the surface or in due course subsea,
offer a proven range of advantages over conventional "slip and
seal" and "mandrel hanger" wellhead technologies and can include
larger metal-to-metal seal areas, virtual elimination of movement
between parts, fewer components, simplified design and assembly,
enhanced corrosion resistance, simpler manufacture, long term
integrity, annulus management, and reduced installation cost. With
the growing importance of unconventional HP/HT and deep-water
reservoir developments, the oil and gas industry is facing
increasing technical challenges to meet rigorous regulatory and
health and safety requirements, whilst maintaining the economic
viability and safety of operations at a time when the price of oil
is under pressure. POS-GRIP wellheads address many of these
challenges and we believe that our equipment is a new standard
which will over time break out of its current niche jack-up
exploration drilling and into the mainstream volume production
wellhead market, as well as subsea, whether organically or through
partners.
The validation of the potential of our technology came post the
Gulf of Mexico 2010 incident when we were asked to consider
applying POS-GRIP technology to the design of a new subsea wellhead
which we have termed HGSS, and which uniquely provides instant
casing hanger lock-down, and has no need for wearbushings, lock
rings, or lock-down sleeves, and can provide easy release for
side-track applications. This JIP has gained significant attention
from the industry and our consulting partners now include BG
International Ltd, Eni, Maersk North Sea, Oil States, Senergy,
Shell International, Total, Tullow and Wintershall which we believe
is the best supported JIP of its kind.
The importance of and need for superior and enabling technology
is widely recognised by the industry, and as the 2014 Exxon Report
stated, "Advances in technologies will play a critical role in
meeting global energy demand because they enable the discovery of
new resources, access to harsh or remote locations and the
development of challenged reservoirs that previously were not
economic to produce". Plexus is preparing to play an important role
in the supply of such technology in the wellhead market, and to
this end we recently commissioned an extensive in depth report by
an international independent engineering consultancy, OTM
Consulting Inc, ('OTM') which assessed POS-GRIP wellhead designs
against competing conventional technology. OTM concluded that
Plexus wellheads using its HG metal seals, offer the "best possible
sealing performance through a metal-to-metal seal that none of the
existing designs can match. Moreover, sealing performance is not
effected by pressure/temperature cycles as there are no movable
components". OTM concludes that after evaluating POS-GRIP sealing
technology against existing competing technologies, "it is the best
and safest technology due to its enhanced safety performance".
Although Plexus in no way underestimates the challenge of
competing against long established multinational wellhead companies
who often provide an equipment 'package' solution, we believe that
such analysis and conclusions regarding the strengths of our
technology are a sound base from which to continue to build market
share. Additionally the HP/HT technology led sector in which Plexus
specialises is known to need critical solutions. As a panel of
international oil and gas industry experts including GE, Shell, and
Maersk confirmed to Lloyd's Register Energy in a recent survey, at
the very top of the list of the "high impact technologies going
mainstream in the medium term (around 2020)" was "High-pressure
high-temperature drilling, wellheads, and related technologies"
according to 60% of the respondents. Such innovative technology
also appeals to certain important markets where there is a growing
desire and need not to become or remain reliant on imported
technology and equipment. For example it was recently reported that
Rosneft and Gazprom may cooperate on the development of
technologies for oil and gas exploration in the Artic Shelf.
Business Model and Markets
The core organic market that Plexus has historically addressed
is the supply of adjustable rental wellhead equipment and
associated running tools for jack-up exploration drilling in the
UKCS. Initially this was only for standard pressure equipment of
10,000 psi or less, but with the development of POS-GRIP HP/HT
equipment Plexus has secured nearly 100% of the UKCS market as a
result of the superior nature of our technology. This business has
since expanded into the European markets including Norway,
Netherlands, and Denmark, and beyond into global markets,
particularly for the supply of HP/HT wellhead equipment where we
have extended our reach to territories that include Australia,
Brunei, Cameroon, Egypt, Malaysia, and Russia. Plexus also provides
service technicians to install and maintain the equipment at
various stages during the drilling of each well.
This advantage of focusing on rental exploration is that it
allows customers to experience and validate the many benefits of
POS-GRIP technology on wells of a temporary nature, as opposed to
production wells where the wellhead equipment is in the field for
the life of the well which can be over twenty years. This model has
also mitigated the need for Plexus to develop internal
manufacturing capabilities with attendant fixed overheads as it
currently outsources all of its wellhead manufacturing to a select
number of third parties.
Whereas the jack-up wellhead exploration market can be
considered a niche market estimated to be worth circa US $300m per
annum, OTM estimate that in 2014 the global combined worth for
exploration and production wellheads is around US $4.5bn. Clearly
therefore the opportunity for a superior and unique wellhead that
has the potential to become a new global standard is considerable,
and OTM has calculated that as a conservative estimate, if POS-GRIP
captures just 1% of the wellhead market for production wet and dry,
and exploration wet equipment, between 2014 and 2018 "it will
generate revenues of circa US $280m in the same period". Such
analysis is relevant to both Plexus from an organic opportunity
perspective, and also from a potential international partner's
perspective, as the ability to offer a 'package' equipment supply
solution, of which an innovative and superior wellhead would
comprise an important element, helps to drive sales of other items
such as control equipment.
In terms of revenue generation Plexus owns an expanding fleet of
rental wellheads which are quickly able to return their capital
cost, and through a programme of on-going refurbishment are able to
continue to generate rental revenue for an extended period of time
that in some instances has exceeded fifteen years. The majority of
the rental fleet now comprises HP/HT wellheads, and it is relevant
to note a developing trend for the demand for such wellheads for
standard pressure applications, as operators seek to use BAST.
Plexus is working hard to not only continue to grow the jack-up
rental business in both its traditional and new market territories,
but also to take its proven technology into the mainstream volume
production wellheads market, and the important and growing subsea
market. The subsea market which includes wellheads is according to
Quest Offshore expected to be highly active and grow by over 60% in
the next five years, from a US $49.7bn market for the previous five
year period 2009 to 2013. It is also relevant to note the industry
is beginning to focus on capital discipline and has increased its
search for lower cost solutions. This trend is likely to grow
further should the recently reduced oil price become the norm.
Plexus is ready to play its part in delivering such important
cost savings for the operator, and crucially we believe that we can
do this while also delivering a superior wellhead solution.
Importantly not only can our surface jack-up wellheads be supplied
at a cost that equates to less than the time savings for the
operator, thereby making them cost negative, but looking forward,
and as OTM have analysed, "for subsea wells, the reduced number of
trips (the process of removing the drill string from the wellbore
and running it back in the hole) is estimated to result in savings
of 5-6 days for a 10,000 ft. water depth, with an average rig cost
of US $1m per day", which would mean a saving of up to US $6m for
the operator. This is because we are not aware of any other
wellhead that can deliver instant casing hanger lockdown, effective
long term metal sealing integrity, and monitoring, whilst having no
need to install lock rings or a lock down sleeve, as well as then
being able to offer the availability of readily implemented
multiple side tracking capability. Features such as these underpin
the value of our IP and give an indication of the growth potential
of Plexus as our business model seeks to extend into these new
markets.
As well as significant cost benefits, the superior nature of our
technology can be readily applied to new addressable markets such
as floating production storage and offloading vessels known as
'FPSO's' which are offshore production facilities that house both
processing equipment and storage usually tied to multiple subsea
wells. This market is expected to grow significantly over the next
10 years, particularly in the Gulf of Mexico. Plexus can deliver a
system whereby the connections from the hanger to the subsea
wellhead, the subsea wellhead to the tie back tool, and the surface
hanger to the surface wellhead all match the integrity of the
premium couplings in the system, which again we consider to be the
BAST solution.
Strategy
Plexus has been working for a number of years to validate its
POS-GRIP technology, and this has been successfully achieved in the
exploration jack-up drilling market sector which remains the core
organic business activity. However our technology has also been
proven for the volume production wellhead market, and we are
currently working in our JIP towards addressing the growing subsea
market where significant commercial opportunities exist, and which
could be best met through potential partnerships, for example
through a licensing model. We will be actively exploring this
corporate strategy at the appropriate time.
Whilst we continue to expand our core business, and develop new
strategic goals, it is important to ensure that we plan for and
implement the necessary infrastructure that is needed to support
this future growth, both in the UK and abroad. Plexus has extensive
sales, engineering, assembly, procurement and service facilities in
Aberdeen, which lies at the heart of the UK's oil and gas industry,
and as a sign of confidence in both Aberdeen and our own future we
doubled the size of our main facility with the acquisition in
September of a 36,000 sq. ft. ex-Baker Hughes facility for GBP2.4m.
This additional space will enable us to plan for further on-going
expansion of our rental exploration fleet, whilst ensuring that
Aberdeen maintains its role as the centre of our supply hub.
Looking into the future we see a strategy developing to
establish a number of regional hubs that can service local
customers without having to return equipment back to Aberdeen
providing cost saving and utilisation efficiency advantages. The
first of these hubs is Plexus Singapore where we have established a
local service base that can reach out to Australia, Brunei, and
Malaysia, and hopefully in due course other markets such as
Indonesia and Vietnam. The base is already being used to service a
new customer, Shell China, and sizeable time and cost savings are
expected to result.
On-going development of our IP continues to be an important
strategy not only in terms of protecting existing IP, but also in
terms of developing continuations and new IP that is able to
deliver an on-going series of 20 year patent protections. This IP
strategy has most recently been particularly active for subsea
related designs and technology and we are confident that as these
are based around our proprietary POS-GRIP technology that the many
new patent applications that we have submitted will in due course
be granted.
Creating IP is of course only part of the story - 'know-how' in
terms of how to apply our IP is critical. Plexus products and
business are all developed around our POS-GRIP friction-grip method
of engineering which can be applied to additional upstream and
downstream applications where it is necessary to join concentric
tubular members, or engage remotely operated connectors, all
without the need for threads. Examples include deepwater riser
systems, stress joint connectors, riser tensioning systems, LNG
terminal solutions, geothermal wellheads pipeline connections, and
of course subsea wellheads where our JIP is well advanced and
anticipate running a prototype in the field in 2015 calendar year.
A further example of such a new product in the process of final
testing, and sponsored by Maersk, is our HP/HT Tie-Back Connector
system which for the first time will allow HP/HT exploration and
pre-drilled wells to be converted to either subsea or platform
producing wells. Not only would this enable production to be
brought on-line quicker, but it also saves significant amounts of
capex for the operator that otherwise would be written off when
wells were previously abandoned. We are therefore in the best
position to know how to apply the POS-GRIP 'recipe' to such
engineering led solutions, and we hope to be able to progress these
opportunities over the coming years.
In line with our strategy of extending sales territories and
product ranges, we also keep a close eye on commercial
opportunities that arise from new or growing energy sources. These
can relate to the actual energy source itself, or physical
locations. For example we recently undertook a sales visit to Japan
to assess what opportunities may exist for our technology.
Discussions extended beyond our core business technology, and
included early stage future planned extraction of methane hydrates
where safety and sealing are paramount, (methane is the chief
ingredient of natural gas and can be found all over the world
beneath the seafloor or underneath Artic permafrost), as well as
mud volcanos for geothermal applications where high temperature
wellheads would be required. Further opportunities have also been
identified in the Artic offshore Russia and Norway where the
ability to disconnect and reconnect wellhead equipment without the
use of threaded connectors would have clear cost and safety
advantages, and also offshore Western Greece where new offshore
licencing rounds are being prepared as a result of nearby Italian
and Albanian discoveries which share similar geology.
In summary our key strategic goal over time is for POS-GRIP
wellheads, whether for surface or subsea exploration and production
applications, to become a new industry standard which is recognised
as a superior method of engineering that delivers a quality of
metal seal that cannot be matched by conventional wellhead
technology. The science based driver for our ability to achieve
this goal is simply that unlike conventional wellhead designs
available from all other wellhead suppliers, Plexus is uniquely
able to deliver and maintain enough interface stress between the
perimeter of a metal seal and the wellhead bore, within Hertzian
Contact Stress limits, throughout the life of the well. In line
with this strategy, we are beginning to actively explore how best
to exploit this simple message with potential partners
worldwide.
Key Performance Indicators
The Directors monitor the performance of the Group by reference
to certain financial and non-financial key performance indicators.
The financial indicators include revenue, EBITDA, profit and
earnings per share. Non-financial indicators include Health and
Safety statistics, equipment utilisation rate, geographical
diversity of customer revenues, effectiveness of a range of
research and development initiatives for example in relation to new
patent activity, and employee headcount and turnover rates.
Principal Risks and Risk Management
There are a number of potential risks and uncertainties that
could have an impact on the Group's performance which include the
following.
(a) Political and environmental risks
We participate in a global market where the oil and gas reserves
and their extraction can be severely impacted by changes in the
political, operational, and environmental landscape. The
introduction of sanctions is one example of such a risk. As a
supplier to the industry we in turn can be adversely affected by
such events which can disrupt the markets, and affect our ability
to execute work for customers and/or collect payment for services
performed. To help address such risks, the Group has continued to
broaden its geographic footprint and customer base.
(b) Technology
The Group is still at a relatively early stage in the
commercialisation, marketing and application of its POS-GRIP
friction-grip technology beyond jack-up rental exploration wellhead
equipment, particularly with regard to new product developments.
Current and future contracts may be adversely affected by
technology related factors outside the Group's control. These may
include unforeseen equipment design issues, test delays during a
contract and final testing and delayed acceptances of deliveries,
which could lead to possible abortive expenditure, reputational
risk and potential customer claims or onerous contractual terms.
Such risks may materially impact on the Group. To mitigate this
risk the Group continues to invest in developing and proving the
technology and has a policy of on-going training of our own
personnel and where appropriate our customers.
(c) Competitive risk
The Group operates in highly competitive markets and often
competes directly with large multi-national corporations who have
greater resources and are more established. Product innovation or
technical advances by competitors could adversely affect the Group
and lead to a slower take up of the Group's proprietary technology.
To mitigate this risk Plexus maintains an extensive suite of
patents and trademarks, and actively continues to develop and
improve its IP to ensure that it continues to be able to offer
unique superior wellhead design solutions.
(d) Operational
Shortage of experienced personnel in the oil and gas industry is
widely recognised and could deprive Plexus of key personnel
necessary for operational activities and research and development
initiatives. To mitigate this risk Plexus has developed effective
recruitment and training procedures, which combined with the appeal
of working in a company with unique technology and engineering
solutions has enabled us to continue to grow our staff numbers, and
achieve to date a low rate of turnover of personnel.
(e) Liquidity and finance requirements
In an economic climate that remains volatile and unpredictable
it has become increasingly possible for both existing and potential
sources of finance to be closed to businesses for a variety of
reasons that have not been an issue in the past. Some of these may
even relate to the lender itself in terms of its own capital ratios
and lending capacity. Although this is a potential risk the Group
took appropriate steps during the year to mitigate this risk by
successfully renewing and extending its bank facilities with Bank
of Scotland. The Group is required to meet certain financial
criteria agreed as covenants in connection with its bank loans and
monthly management accounts are prepared and reviewed against the
covenant requirements to ensure that the Group's obligations can be
met.
(f) Credit
The main credit risk is attributable to trade receivables. As
the majority of the Group's customers are large international oil
companies the risk of non-payment is much reduced, and therefore is
more likely to be related to client satisfaction and/or trade
sanctions. Customer payments can involve extended period of times
especially from countries where exchange control regulations can
delay the transfer of funds outside those countries. The Group has
credit risk management policies in place and exposure to credit
risk is monitored continuously.
Risk assessment
The Board has established an on-going process for identifying,
evaluating and managing the significant risks faced by the Group.
One of the Board's control documents is a detailed "Risks
assessment & management document" which categorises risks in
terms of - business (including IT), compliance, finance, cash,
debtors, fixed assets, other debtors/prepayments, creditors, legal,
and personnel. These risks are assessed on a regular basis and
could be associated with a variety of internal and external sources
including regulatory requirements, disruption to information
systems, control breakdowns and social, ethical, environmental and
health and safety issues.
Ben van Bilderbeek
Chief Executive
28 October 2014
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2014
2014 2013
Notes GBP'000 GBP'000
Revenue 1 27,024 25,566
Cost of sales (7,817) (7,402)
Gross profit 19,207 18,164
Administrative expenses (13,928) (13,772)
Operating profit 5,279 4,392
Finance income 5 7
Finance costs (124) (130)
Share of profit of associate 215 -
Profit before taxation 5,375 4,269
Income tax expense 3 (329) (1,213)
Profit after taxation 5,046 3,056
Other comprehensive income - -
Total comprehensive
income for the year attributable to the owners
of the parent 5,046 3,056
Earnings per share 5
Basic 6.01p 3.69p
Diluted 5.75p 3.51p
All income arises from continuing operations.
Consolidated Statement of Financial Position
at 30 June 2014
2014 2013
Notes GBP'000 GBP'000
Assets
Goodwill 760 760
Intangible assets 6 10,437 8,691
Investment in associate 7 941 -
Property, plant and equipment 8 13,284 13,168
Deferred tax asset 751 545
Total non-current assets 26,173 23,164
Inventories 5,256 6,032
Trade and other receivables 6,463 4,922
Cash and cash equivalents 6,353 2,609
Total current assets 18,072 13,563
Total Assets 44,245 36,727
Equity and Liabilities
Called up share capital 9 849 828
Share premium account 20,138 17,288
Share based payments reserve 2,476 2,741
Retained earnings 11,117 6,335
Total equity attributable to equity holders
of the parent 34,580 27,192
Liabilities
Bank loans 4,000 4,000
Total non-current liabilities 4,000 4,000
Trade and other payables 5,482 5,226
Current income tax liabilities 183 309
Total current liabilities 5,665 5,535
Total liabilities 9,665 9,535
Total Equity and Liabilities 44,245 36,727
Consolidated Statement of Changes in Equity
for the year ended 30 June 2014
Called Share
Up Share Share Based
Capital Premium Payments Retained Total
GBP'000 Account Reserve Earnings GBP'000
GBP'000 GBP'000 GBP'000
Balance as at 30 June 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
Issue of ordinary shares 1 8 - - 9
Net 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 year - - - 5,046 5,046
Share based payments reserve
charge - - 26 - 26
Transfer of share based payments
reserve
charge on exercise of options - - (599) 599 -
Issue of ordinary shares (net
of issue costs) 21 2,850 - - 2,871
Net deferred tax movement on
share options - - 308 - 308
Dividends - - - (863) (863)
Balance as at 30 June 2014 849 20,138 2,476 11,117 34,580
Consolidated Statement of Cash Flows
for the year ended 30 June 2014
2014 2013
GBP'000 GBP'000
Cash flows from operating activities
Profit before taxation 5,375 4,269
Adjustments for:
Depreciation, amortisation and impairment
charges 3,405 2,956
Loss on disposal of property, plant and equipment 95 108
Loss on expiry of option - 60
Charge for share based payments 26 141
Investment income (5) (7)
Interest expense 124 130
Share of result in associate (215) -
Changes in working capital:
Decrease in inventories 776 15
(Increase)/decrease in trade and other receivables (1,541) 1,138
Increase/(decrease) in trade and other payables 256 (106)
Cash generated from operating activities 8,296 8,704
Income taxes paid (353) (926)
Net cash generated from operating activities 7,943 7,778
Cash flows from investing activities
Acquisition of associate (726) -
Purchase of intangible assets (2,403) (1,491)
Purchase of property, plant and equipment (3,016) (6,650)
Proceeds of sale of property, plant and equipment 57 125
Net cash used in investing activities (6,088) (8,016)
Cash flows from financing activities
Net proceeds from issue of new ordinary shares 2,330 -
Proceeds from share options exercised 541 9
Interest paid (124) (130)
Interest received 5 7
Equity dividends paid (863) (778)
Net cash generated from/(used in) financing
activities 1,889 (892)
Net increase/(decrease) in cash and cash equivalents 3,744 (1,130)
Cash and cash equivalents at 1 July 2013 2,609 3,739
Cash and cash equivalents at 30 June 2014 6,353 2,609
Notes to the Consolidated Financial Statement
1. Revenue
2014 2013
GBP'000 GBP'000
By geography
UK 9,892 9,663
Europe 6,905 7,157
Rest of World 10,227 8,746
27,024 25,566
The revenue information above is based on the location of the
customer.
2. Segment reporting
The Group derives revenue from the sale of its POS-GRIP
technology and associated products, the rental of wellheads
utilising the POS-GRIP technology and service income principally
derived in assisting with the commissioning and on-going service
requirements of our equipment. These income streams are all derived
from the utilisation of the technology which the Group believes is
its only segment.
Per IFRS 8, the operating segment is based on internal reports
about components of the group, which are regularly reviewed and
used by the board of directors being the Chief Operating Decision
Maker ("CODM").
All of the Group's non-current assets are held in the UK.
The following customers each account for more than 10% of the
Group's revenue:
2014 2013
GBP'000 GBP'000
Customer 1 5,110 1,183
Customer 2 4,472 437
Customer 3 3,576 1,121
3. Income tax expense
(i) The taxation charge for the year comprises: 2014 2013
GBP'000 GBP'000
UK Corporation tax:
Current tax on income for the year 483 701
Adjustment in respect of prior years (350) (391)
133 310
Foreign tax:
Current tax on income for the year 81 91
Adjustment in respect of prior years 13 10
94 101
Total current tax 227 411
Deferred tax:
Origination and reversal of timing differences
including share options (42) 247
Adjustment in respect of prior years 144 555
Total deferred tax 102 802
Total tax charge 329 1,213
The effective rate of tax is 6% (2013: 28%)
(ii) Factors affecting the tax charge for the
year
Profit on ordinary activities before tax 5,375 4,269
Tax on profit at standard rate of UK corporation
tax of 22.5% (2013: 23.75%) 1,209 1,014
Effects of:
Expenses not deductible for tax purposes 217 263
Income from associate not subject to tax (48) -
Effect of R&D tax credits (279) (277)
Effect of change in tax rate (128) (14)
Tax adjustments on share based payments (449) 53
Adjustments in respect of prior year (193) 174
Total tax charge 329 1,213
(iii) Movement in deferred tax asset balance
Deferred tax asset at beginning of year 545 473
Charge to statement of comprehensive income (102) (802)
Deferred tax movement on share options 308 874
Deferred tax asset at end of year 751 545
(iv) Deferred tax balance
The deferred tax asset balance is made up of
the following items:
Difference between depreciation and capital
allowances (1,232) (1,107)
Share based payments 1,956 1,620
Tax losses 27 32
Deferred tax asset at end of year 751 545
4. Dividends
2014 2013
GBP'000 GBP'000
Ordinary Shares
Interim paid for the period to
31 December 2013 of 0.48p (2013: 0.44p) per
share 407 364
Ordinary Shares
Final dividend for the year ended
30 June 2014 of 0.62p (2013: 0.55p) per share 526 456
The proposed final dividend has not been accrued at the
statement of financial position date in accordance with IFRS.
5. Earnings per share
2014 2013
GBP'000 GBP'000
Profit attributable to shareholders 5,046 3,056
Number Number
Weighted average number of shares in issue 83,991,918 82,747,275
Dilution effects of share schemes 3,728,098 4,275,461
Diluted weighted average number of shares in
issue 87,720,016 87,022,736
Basic earnings per share 6.01p 3.69p
Diluted earnings per share 5.75p 3.51p
Basic earnings per share is calculated on the results attributable
to ordinary shares divided by the weighted average number of
shares in issue during the year.
Diluted earnings per share calculations include additional shares
to reflect the dilutive effect of employee share schemes and
share option schemes.
6. Intangible fixed assets
Patent and
Intellectual Other Computer
Property Development Software Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 July 2012 6,440 3,895 157 10,492
Additions - 1,458 33 1,491
As at 30 June 2013 6,440 5,353 190 11,983
Additions - 2,367 36 2,403
As at 30 June 2014 6,440 7,720 226 14,386
Amortisation
As at 1 July 2012 2,032 562 136 2,730
Charge for the year 330 219 13 562
As at 30 June 2013 2,362 781 149 3,292
Charge for the year 330 308 19 657
As at 30 June 2014 2,692 1,089 168 3,949
Net Book Value
As at 30 June 2014 3,748 6,631 58 10,437
As at 30 June 2013 4,078 4,572 41 8,691
As at 30 June 2012 4,408 3,333 21 7,762
Patent and other development costs are internally generated.
7. Investment in associate
The summary financial information of the Group's associate,
extracted on a 100% basis from the accounts for the 11 months ended
30 June are as follows:
GBP'000
Assets 8,464
Liabilities 5,037
Revenue 8,158
Profit 862
Value of associate investment
Investment in associate during the year 726
Share of profit in the year 215
Investment in associate at 30 June 2014 941
8. Property, plant and equipment
Assets
Tenant under
Improvements Construction Motor
Buildings GBP'000 Equipment GBP'000 Vehicles Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 1 July
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 77 430 2,505 2 3,016
Transfers - - 2,904 (2,904) - -
Disposals - - (535) - - (535)
As at 30 June
2014 974 430 25,393 260 44 27,101
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 80 50 2,612 - 6 2,748
On disposals - - (383) - - (383)
As at 30 June
2014 405 126 13,257 - 29 13,817
Net book value
As at 30 June
2014 569 304 12,136 260 15 13,284
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
9. Share Capital
2014 2013
GBP'000 GBP'000
Authorised:
Equity: 110,000,000 (2013: 110,000,000) Ordinary
shares of 1p each 1,100 1,100
Allotted, called up and fully paid:
Equity: 84,892,673 (2013: 82,768,672) Ordinary
shares of 1p each 849 828
Share issue during the year:
Number Share Share
of shares capital premium Total
GBP'000 GBP'000 GBP'000
At 30 June 2013 82,768,672 828 17,288 18,116
On 29 July 2013 36,377 - 16 16
On 5 December 2013 2,087,624 21 3,004 3,025
Less share issue costs - - (170) (170)
At 30 June 2014 84,892,673 849 20,138 20,987
During the period the Group issued new shares as a result of the
following transactions:
Aggregate Total
Price
Number of per nominal aggregate
shares 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.
10. Reconciliation of net cash flow to movement in net cash/(debt)
2014 2013
GBP'000 GBP'000
Increase/(decrease) in cash in the year 3,744 (1,130)
Movement in net cash/(debt) in year 3,744 (1,130)
Net debt at start of year (1,391) (261)
Net cash/(debt) at end of year 2,353 (1,391)
11. Analysis of net cash/(debt)
At At
beginning end
of year Cash flow of year
GBP'000 GBP'000 GBP'000
Cash in hand and at bank 2,609 3,744 6,353
Bank loans (4,000) - (4,000)
Total (1,391) 3,744 2,353
12. Post balance sheet events
Subsequent to the year end, the Group acquired an additional
facility adjacent to its existing operational headquarters in Dyce,
Aberdeen. The consideration paid for the facility was
GBP2,400k.
The financial information above does not constitute the
company's statutory accounts for the year ended 30 June 2014 but is
derived from those statements.
The statutory financial statements and this preliminary
statement for the year ended 30 June 2014 were approved by the
Board on 28 October 2014. On the same date the company's auditors,
Crowe Clark Whitehill LLP issued an unqualified report on those
financial statements. The audit report did not include reference to
any matters to which the auditor drew attention by way of emphasis
without qualifying the report or contain a statement under section
498(2) or (3) of the Companies Act 2006. The financial information
for the year ended 30 June 2013 is derived from the statutory
accounts for that year which have been delivered to the Registrar
of Companies. The auditors reported on those accounts; their report
was unqualified and did not draw attention to any matters be way of
emphasis and not contain a statement under s498(2) or (3) of the
Companies Act 2006 or equivalent preceding legislation. The
Company's financial statements have been prepared in accordance
with International Financial Reporting Standards, as adopted by the
EU. A copy of the statutory accounts will be delivered to the
Registrar of Companies in due course.
The Annual Report will be circulated to all shareholders and
thereafter, copies will be available from the registered office of
the company, Thames House, Portsmouth Road, Esher, Surrey, KT10
9AD.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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