TIDMPOS
RNS Number : 2904Q
Plexus Holdings Plc
18 February 2019
Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil
equipment & services
The information contained within this announcement is deemed by
the Company to constitute inside information under the Market Abuse
Regulation (EU) No. 596/2014.
Plexus Holdings PLC ('Plexus' or 'the Company')
Trading Update
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, known for its safety,
time and cost saving capabilities, provides the following update on
trading:
Trading Update
Following the sale of the jack-up rental wellhead exploration
business to TFMC last year (with the exception of Russia and the
CIS territories), the Company has now completed the first half of
the current financial year which will be reported on late March.
Ahead of this, the Company now provides the market with a trading
update for the full year to 30 June 2019 ("FY2019").
The Company's revenues for FY2019 are running broadly in line
with expectations, with Plexus encouraged by an increasing level of
incoming enquiries for its POS-GRIP-enabled products during the
last seven months. It is currently anticipated that EBITDA and LBT
for FY2019 will be below market expectations due to a combination
of lower than anticipated gross margins and higher overheads. The
reduced margins are associated with certain key contracts where the
Company has factored in the importance of showcasing Plexus'
technology, raising its profile and proving it in the field. Higher
overheads have been incurred as the baseline costs for the business
have been refined, with the increase partly due to bringing forward
certain investment costs from the next financial year as the
Company prepares for the possibility of having to service a higher
than expected pipeline of opportunities.
In February 2018 the Company announced that it had completed the
disposal of Plexus' wellhead exploration equipment and services
business for jack-up applications (the "Jack-up Business") and the
licencing of certain intellectual property to TFMC. This
transaction repositioned the Company as an IP-led business with a
range of POS-GRIP related products and services to be developed and
deployed within the wider energy sector, with an initial focus on
surface production opportunities. The initial net proceeds from the
sale of the Jack-up Business left the Company with a strong cash
balance, with further cash payments payable to Plexus subject to
the future performance of the Jack-up Business during a three year
earn out period. This has enabled Plexus to finance the acquisition
of a 49% interest in KMS Ltd (a specialist engineering business),
the buyback of Plexus ordinary shares held by LLC Gusar (OOO Gusar)
and provided the flexibility for the Company's accelerated
expenditure for growth in recent months. The Company's cash
position remains strong, although as a result of the lower gross
margin and higher expenses noted previously, together with the KMS
Ltd investment and recent share buyback from Gusar it is expected
that the Company's cash balance at the end of FY2019 will be lower
than previously anticipated.
Strategy
Plexus' long-term goal is to establish POS-GRIP technology as a
new industry standard for wellhead and metal-to-metal sealing
designs, whilst continuing to develop a range of new Plexus
products, which can also offer multiple benefits and advantages to
the industry in terms of improved safety, performance, and
operational cost and time savings.
Having proven the significant advantages of Plexus POS-GRIP
wellheads for jack-up rental wellhead exploration applications to a
wide range of mostly international oil companies and having
completed the sale of the Jack-up Business to TFMC last year,
Plexus is now focused on extending its business activities into the
volume surface production and subsea exploration and production
sectors. An example of product extensions for POS-GRIP technology
is the Company's connector technology which is ideal for high
integrity, low fatigue applications. The Directors believe wellhead
connectors, riser connectors, subsea jumper connectors, pipeline
connectors, tether tensioners and even vessel mooring connectors
can all benefit from the simplicity of POS-GRIP. The simplicity of
Plexus' technology and its ability to deliver unequalled levels of
integrity mean also that target markets can include decommissioning
and abandonment such as with the Company's POS-SET(TM) Connector
product recently supplied to Oceaneering.
The sale of the Jack-up Business to TFMC represented a clear
endorsement of Plexus' proprietary technology and marked a
significant strategic step for the Company, whilst leaving Plexus
in a position to continue to participate in the major Russian
hydrocarbon market through its licensee Gusar where encouraging
progress is being made. At the same time the transaction realigned
Plexus as an IP-led research and development business and enables
greater resources and focus to be directed to the development of
new and existing POS-GRIP applications outside of jack-up
exploration drilling, including through the collaboration agreement
signed with TFMC, which establishes a framework for the two parties
to work together on potential new applications.
Importantly Plexus believes that as the world moves increasingly
towards gas production and consumption, the need for gas-proof
wellhead metal sealing technology (and in due course valve
technology) is more critical than ever, especially in terms of
containing the toxic nature of methane leakage which is coming
under increased scrutiny from oil company investors, as well as the
Green lobby. The Directors believe this lies behind a heightened
level of interest in the Company's surface production technology.
The Saudi Arabian energy minister only recently underlined this
trend when he said that their efforts will be focused on creating a
"global gas" business, as many of the world's energy majors are
increasingly investing in gas, as the growth of demand outpaces
that for oil. The Company is therefore pursuing its strategy of
gaining market share in the mainstream production sector both
organically (as highlighted by the Spirit Energy production
wellhead order in late 2017 which is in the process of being
drilled now) and through licensees and partners.
Plexus' CEO Ben Van Bilderbeek said, "We believe that the
Company's short-term financial performance should not be seen as
the key performance indicator, with the critical strategic goal
being the continued and growing interest in Plexus' POS-GRIP
technology.
The difference between market expectations and the likely
reported full year numbers is in part due to investments that we
have and will be making over the course of the period in support of
the growth strategy we have been working on post the sale of our
jack-up rental wellhead exploration business to TechnipFMC in 2018.
The TFMC transaction has ensured that we have the capital and time
to re-invent our business, particularly in respect of surface
production wellhead opportunities. Our overall objective therefore
is to establish our 'gas proof' POS-GRIP equipment as an enabling
technology for the wider energy industry. Our strategy to achieve
our goal is centred on securing orders for our suite of POS-GRIP
products for applications outside of jack-up exploration, and in
particular surface production and abandonment operations; designing
and developing, both organically and with partners,
POS-GRIP-enabled products for new markets such as geothermal and
renewables; and supporting our Russian partner's efforts to secure
a major order for POS-GRIP equipment in the country.
"In line with the above and in response to a higher level of
enquiries we are receiving from around the world than previously
envisaged at this stage, we have brought forward expenditure from
the next financial year so that we are able to accommodate a
potential uptick in activity levels. Furthermore, we believe the
higher costs than originally anticipated associated with the supply
of the two wellheads and associated equipment sold to Gusar will
prove to be a worthwhile investment, as it has the potential to
bring forward the point at which our partner secures its first
major order for a POS-GRIP wellhead in the major Russian market.
Set against a backdrop of oil prices trading around the US$60 per
barrel level and the resultant higher levels of drilling activity,
the growing importance of natural gas in the hydrocarbon fuel mix,
and increasing calls for the energy industry to tackle gas and in
particular methane leaks, this is an exciting period for Plexus and
I look forward to providing further details in the upcoming half
yearly report."
**S**
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
NOTES:
AIM-traded oil and gas engineering services company Plexus (AIM:
POS) is an IP-led company that has developed a range of products
and applications based on its patent-protected POS-GRIP
friction-grip technology. Having proved the superior qualities of
POS-GRIP within the jack-up wellhead exploration market through the
sale of this business to FMC Technologies Limited, a subsidiary of
TechnipFMC (Paris:FTI, NYSE:FTI) (jointly "TFMC"), in early 2018,
the Company is now focused on establishing its technology and
equipment in other markets including surface production wellheads,
subsea and de-commissioning.
Its suite of ongoing products and applications include: "HG"(TM)
Wellheads, which combine POS-GRIP Technology with Gas Tight metal
sealing; the Python(R) Subsea Wellhead (a new standard for subsea
wellheads - developed in a JIP supported by Royal Dutch Shell, BG
(now owned by Shell), Wintershall, Total, Maersk (now owned by
Total), Tullow Oil, eni, Senergy (now Lloyds register), and Oil
States Industries Inc); the POS-SET(TM) Connector for the growing
de-commissioning and abandonment market; and Tersus-PCT, an
innovative HP/HT Tie-Back connector product. Importantly, the
Company also has a Collaboration Agreement with TFMC, which
provides a platform to further develop and commercialise these and
other applications based on its POS-GRIP technology.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
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END
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