TIDMPOS
RNS Number : 1961H
Plexus Holdings Plc
02 December 2020
Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil
equipment & services
2 December 2020
Plexus Holdings plc ('Plexus' or 'the Group')
Preliminary Results for the year to 30 June 2020
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 2020.
Financial and Corporate Overview
Following the completion on 1 February 2018 of the sale of
Plexus' wellhead exploration equipment services business for
Jack-up applications ('the Jack-up Business') to FMC Technologies
Limited ('TFMC'), a subsidiary of one of the leading oil and gas
service and equipment companies TechnipFMC (Paris:FTI) (NYSE:FTI),
the year-end results and comparative prior year period have been
reported as required on a continuing and a discontinued operations
basis.
-- Continuing operations sales revenue GBP525k (2019: GBP3,611k)
o Discontinued operations sales revenue GBPnil (2019:
GBPnil)
-- Adjusted EBITDA on continuing activities GBP3.08m loss (2019: GBP2.27m loss)
-- Continuing operations operating loss GBP5,681k (2019: GBP4,010k)
o Discontinued operations operating loss GBP2,432k (2019:
GBP108k)
-- Continuing operations operating loss after tax GBP4,058k (2019: GBP3,227k)
o Discontinued operations loss after tax GBP2,549k (2019: GBP88k
loss)
-- Basic loss per share from continuing activities 3.92p (2019: 3.12p loss)
o Basic loss per share from discontinued activities 2.47p (2019:
0.09p earning)
-- Net cash of GBP4.09m (2019: net cash GBP5.08m)
-- The Group has GBP3.0m invested in financial assets (2019: GBP2.84m)
Operational Overview
-- Full year revenues principally generated through sale of
POS-GRIP(R) equipment for production, abandonment, and royalties
from Russian Jack-up exploration operations - a major departure
from previous years when revenues were dependent on the rental of
Jack-up exploration wellheads
-- March 2020 - Royalties earned from breakthrough order secured
by Russian Licensee Gusar LLC with global energy giant Gazprom, for
supply of POS-GRIP rental wellhead gas exploration equipment
-- Continued progress made towards establishing a diversified
portfolio of revenue streams based on products empowered by Plexus'
proprietary POS-GRIP(R) Technology - follows 2018 sale of Plexus'
wellhead exploration equipment services business for Jack-up
applications to FMC Technologies Limited ('TFMC'), a subsidiary of
top tier industry supplier TechnipFMC (Paris:FTI) (NYSE:FTI)
-- Focus on IP and R&D with industry-leading successful
extreme temperature qualification of POS-GRIP "HG"(R) Metal Seal
System for range of -75degto 400degF in November 2019
-- July 2020 - significant post year end production wellhead
supply contract award from Spirit Energy
-- November 2020 - major post year end Licensing Agreement
entered into with Cameron International Limited ('Cameron'), a
Schlumberger group company, the world's leading oilfield services
provider. The non-exclusive licence enables Cameron to use the
Company's POS-GRIP and "HG" metal to metal seal method of
engineering for the development of oil and gas surface
wellheads.
Chief Executive Ben van Bilderbeek said:
"For the 12 months ended 30 June 2020, our focus has been to
continue to develop our plans to promote POS-GRIP Technology and
"HG" metal to metal sealing technology in the production wellhead
and tree market, both by developing and selling our own products,
and by continuing our strategy of licensing our technology to
others for specific applications and territories. The Covid-19
pandemic and the consequential decline in the energy market and
global economy in general has inevitably impacted on our progress,
although I believe that we have weathered the storm well and are
now well placed to return to growth as our industry begins to
recover.
" Since we announced our results last year, we have announced a
follow up order from Spirit Energy for POS-GRIP surface production
wellhead equipment for a North Sea platform. We have also just
announced the non-exclusive licensing arrangement with Cameron, a
Schlumberger company, which is a key endorsement of our technology,
and opens up the potential for rapid deployment of POS-GRIP in the
commodity surface oil and gas wellhead market.
" Whilst oil and gas operators, together with service companies,
have had to scale back their operations and lay off thousands of
employees, we have been able to reduce our costs and survive the
period without any layoffs. This means we are well prepared to
benefit from the return to growth that the industry will
undoubtedly see in 2021, as we continue to target direct equipment
sales and support our licensees, in particular Cameron, to rapidly
introduce POS-GRIP to their customers and markets.
"Our full year financial performance reflects the challenges of
the period where a number of sales prospects were placed on hold ,
with sales revenues of GBP525k compared to GBP3,611k in 2019; and
an EBITDA loss of GBP3.08m (from GBP2.27m loss in 2019). However,
there have also been some positives, in particular the significant
deal with Cameron, which further validates Plexus' technology and
underpins the value of the Company's IP.
"Our goal is to fully capitalise on the potential of our
technology within the oil and gas industry and beyond, to improve
the performance of wellheads and other pressure containing
equipment, and to develop a portfolio of POS-GRIP-based products
and partners. As well as benefiting the environment and our
customers, the Board believes this approach will in time lead to
sustained and growing revenue streams and can ultimately deliver
value for our shareholders.
"Another casualty of the Covid crisis was drilling activity in
Russia. Whilst our licensee has an order from Gazprom for an
exploration well, the program was postponed until further notice.
We however continue to see good long-term potential in Russia and
the CIS for our POS-GRIP production and subsea wellheads through
the extension of existing deals, or the creation of new license
arrangements.
" Last year we announced that Plexus had formed Plexus Pressure
Control ('PPC') to enable us to supply valves and Xmas trees to
complement our POS-GRIP production wellhead products, particularly
to customers and markets which prefer a system package of
equipment. Whilst we have not yet supplied any Plexus branded
products through PPC, it remains an important element of our
planned growth through direct sales.
" I feel very positive that the Spirit Energy order, achieved
during the depths of lockdown, plus the Cameron license deal just
announced have demonstrated the resilience of the Company and the
continuing IP potential, and Plexus is well positioned to
capitalise on the opportunities which will become available as
market conditions improve."
For further information please visit www.plexusplc.com or
contact:
Ben van Bilderbeek Plexus Holdings PLC Tel: 020 7795 6890
Graham Stevens Plexus Holdings PLC Tel: 020 7795 6890
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Derrick Lee Cenkos Securities PLC Tel: 0131 220 9100
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Pete Lynch Cenkos Securities PLC Tel: 0131 220 9772
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Frank Buhagiar St Brides Partners Ltd Tel: 020 7236 1177
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Isabel de Salis St Brides Partners Ltd Tel: 020 7236 1177
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Summary of Results for the year ended 30 June 2020
2020 2019
GBP'000 GBP'000
Revenue (continuing operations) 525 3,611
Adjusted EBITDA (continuing operations) (3,076) (2,266)
Operating Loss (continuing operations) (5,681) (4,010)
Loss after taxation (continuing operations) (4,058) (3,227)
Loss profit after taxation (discontinued
operation) (2,549) (88)
Loss after taxation (combined) (6,607) (3,315)
Basic loss per share (pence) (continuing
operations) (3.92p) (3.12p)
Basic (loss) / earning per share (pence)
(discontinued operation) (2.47p) (0.09p)
Chairman's Statement
Business progress
As the news and global economy continues to be dominated by the
Covid-19 pandemic, we have seen marked lower revenues in the 12
months to 30 June 2020 amounting to GBP525k (2019: GBP3,611k).
However, we have been pleased to announce post year end some very
positive developments, including progress with entering new and
larger markets, which the Company is encouraged by. The Directors
are extremely optimistic about the likelihood of a recovery of
production wellhead sales, as well as the significant potential of
the Company's licence deal with Cameron. Accordingly, the Board
expects to see a pick-up in revenues throughout FY21 as a result of
these initiatives.
The Company's goal is to add a diverse set of revenue streams to
its portfolio, and the licence agreement with Cameron for the first
time brings a focus to the US and Middle East markets, to build on
the licenses already in place in Russia, and Plexus' local market
in the UK and the North Sea.
The Board remains convinced that POS-GRIP Technology is a key
enabler for the wellhead market, and that not only can it deliver
the technically best solution, which makes it the safest and
highest integrity solution - it can also become the most cost
effective solution. When life cycle costs are taken into account
(sometimes described as Totex, being Capex and Opex combined)
Plexus' technology can be significantly better than conventional
solutions. With a focus on greener, leak-free and more efficient
operations, operators are increasingly looking to embrace the full
potential of products they specify in their procurement strategies.
The license deal with Cameron is expected to accelerate industry
adoption of this approach.
This year saw the Company's first royalty income from Gusar, our
licensee for Russia and the CIS following a successful POS-GRIP
Wellhead deployment for a Gazprom offshore gas exploration well.
While we see further potential from similar activities next year
and beyond, it was disappointing that further activity in this
period was postponed due to the Covid crisis.
Plexus' investment in Kincardine Manufacturing Services Limited
('KMS') is performing well, and although KMS' revenues were
affected by the general industry downturn over the period, KMS
faired significantly better than certain of its competitors, who
have been forced to scale back or cease operations. After an asset
impairment review Plexus has written down the carrying value of its
investment in KMS, due to a reduction in dividend payments, but KMS
has the infrastructure to allow a quick recovery, and the potential
for significant growth as it picks up new work. Dividend payments
from KMS are expected to continue and should increase in line with
the recovery in local offshore energy business activity.
Plexus' primary and core strength is its POS-GRIP Intellectual
Property ('IP'), together with the broad family of products and
associated equipment which is enabled by this technology. Although
individual product patents inevitably expire over time, it is the
body of other registered IP, including new apparatus and method
patents which we file, together with unregistered and confidential
test results, know-how and experience which give us the ability to
continue with uniquely different friction grip technology.
Overview
Plexus is primarily a wellhead business, but unlike all other
wellhead companies, our value is underpinned by POS-GRIP IP, which
is a unique and proprietary design. Where others compete on a
volume manufacturing basis and fight for margins with very similar
products, Plexus' POS-GRIP proposition is truly different and
delivers enhanced value to customers. The Company has demonstrated
that its products perform and can be profitable without a low-cost
volume manufacturing base not only organically, but also by
adopting a licensing model to reach markets that Plexus cannot
naturally access.
As has been seen over the last 20 years, adoption of new or
alternative technology can be frustratingly slow, but the Board
believes there is a new momentum behind the Company's technology,
as there is unprecedented pressure on energy companies to change
their approach to how they operate, which is reinforced by Plexus'
licence deal with Cameron.
POS-GRIP Technology and HG Seals can offer a high integrity,
metal to metal sealing, leak proof wellhead system solution which
requires no significant maintenance. A combination of the best
possible environmental and production performance, together with
the lowest life of field Totex cost basis has never been more
important or relevant.
Staff
On behalf of the Board I would once again like to thank all our
employees both past and present for their dedication and hard work
during an extremely challenging year , not only for Plexus but also
for the wider oil and gas industry, especially as pressure
continues to grow on hydrocarbons and their associated impact on
climate change. The turmoil created by the Covid lockdown measures
on family and work life has brought new day to day challenges for
staff, in addition to the general pressure on the industry that we
see around us. Our dedicated and experienced team have coped well
with these challenges. We look forward to a period of stability as
the worlds emerges from the Covid pandemic, and I am sure that the
developments will be positive for our staff, and for future
employment opportunities within Plexus.
Outlook
The challenges facing the oil and gas market have been
exacerbated by the global Covid-19 pandemic, with significant
declines in revenue, and corresponding reductions in capital
expenditure by oil and gas majors. However, it is clear that there
will continue to be demand for hydrocarbons for decades to come,
and in particular for natural gas as a cleaner hydrocarbon energy
source, with an increasingly important potential to generate
hydrogen.
As the oil and gas market starts to show signs of recovery, and
subsequent investment by operators begins to pick up, we should see
sales prospects that are on hold beginning to progress again
together with new opportunities arising in oil and gas as well as
alternative energy markets, such as geothermal. Even if activity
only partially returns, Plexus only requires a small percentage of
market share to see significant growth in the specialised wellhead
market, as well as the significant growth and market share
potential from Cameron. We will also in due course pursue the
option of licensing to Cameron technology for further applications,
which if successful would bring additional royalty generating
opportunities.
What is exciting to us is that challenging times like these can
result in significant change, and we feel that now should be the
time for POS-GRIP technology to come into its own. The combination
of POS-GRIP's operational, environmental, and financial benefits
ought to resonate strongly with companies operating across the
energy sector. Our challenge is to ensure all operators are aware
of POS-GRIP Technology, its multiple benefits, and its various
applications. As the growing level of interest in POS-GRIP
equipment by customers and partners demonstrates, progress is being
made, although this will take time in what is a conservative
industry. After a difficult year, the Board is confident that the
signs of a recovery are real, and the substantial progress the
Company has made with licensing will lead to growth and value for
our shareholders.
J Jeffrey Thrall
Non-Executive Chairman
1 December 2020
Strategic Report
Principal Activity
The Group markets oil and gas industry equipment that utilises
its patented friction grip method of engineering, including
wellheads and connectors known as POS-GRIP. This involves deforming
one tubular member against another within the elastic range to
effect gripping and sealing. This superior method of engineering
for wellheads offers several important advantages to operators,
particularly for HP/HT applications, and can include improved
technical performance, improved integrity of metal to metal seals,
significant installation time savings, reduced operating and
maintenance costs and enhanced safety.
Following the 2018 sale of the Company's Jack-up exploration
wellhead rental operations to a division of leading oil and gas
service and equipment provider TFMC, the year under review saw the
Group continue to move towards an IP-led business model focused on
designing, developing and rolling-out a wider range of products
based on the POS-GRIP method of engineering. The Company retains
the right to pursue Jack-up exploration related business in Russia
and the CIS, the third largest hydrocarbon producing market in the
world, and where it has existing licence agreements with LLC Gusar
and CJSC Konar. In addition, Plexus continues to benefit from
Jack-up exploration drilling activity via its three year earn-out
arrangement with TFMC, which was part of the terms of the 2018 sale
agreement.
The Company is now focused on pursuing other markets including
surface production, abandonment, subsea and geothermal. In line
with this strategy, in July 2020, the Company announced a purchase
order for its POS-GRIP Surface Production Wellhead System from
Spirit Energy. Revenues from this contract will primarily be earned
in the fiscal year to June 2021.
The Directors believe that the Company's proprietary technology
has additional wide-ranging applications both within and outside
the oil and gas industry. Initiatives are currently underway to
develop additional POS-GRIP-enabled applications for new markets,
both independently and with partners, including TFMC with whom
Plexus signed a Collaboration Agreement to develop new POS-GRIP
products, and also with Cameron, with whom Plexus signed a
non-exclusive licensing deal in November 2020.
Financial Results
Statement of Comprehensive Income
Revenue
Continuing revenue for the year was GBP525k, a decrease from
GBP3,611k in the previous year. The decrease in continuing sales
revenue is a result of customer project timing delays and the fact
that the prior year revenue included a significant sale of
equipment to our Russian licence partner, Gusar LLC.
Margin
Gross margin on continuing operations increased to 57.1%
(compared to 48.4% in the previous year). The increase in margin is
largely driven by a change in the sales mix, with a significant
portion of current year revenue including royalty income which has
no direct cost of sale attached.
Overhead expenses
Continuing activities administrative expenses have increased
when compared to the prior year with expenditure of GBP5.98m (2019:
GBP5.76m). Within this total the continuing salary component
remained the largest at GBP2.90m compared to GBP2.69m in the prior
year. Overhead expenses include an impairment charge of GBP134k
following a review of the carrying value of the Group's KMS
associate undertaking. Following the adoption of IFRS 16 overhead
expenditure includes lease amortisation charges of GBP0.30m.
Adjusted EBITDA
The Directors use, amongst other things, Adjusted EBITDA on
continuing operations as a non-GAAP measure to assess the Group's
financial performance. The Directors consider Adjusted EBITDA on
continuing operations, which approximates the operational cash
generated by or used in the business, to be the most appropriate
measure of the underlying financial performance of the Group in the
period, given the continuing business will be the focus of the
Group going forward.
Adjusted EBITDA on continuing operations for the year was a loss
of GBP3.08m, compared to a loss of GBP2.27m in the previous year.
Adjusted EBITDA on continuing operations is calculated as
follows:
2020 2019
GBP'000 GBP'000
Operating loss (5,681) (4,010)
Add back:
-Depreciation 680 718
-Amortisation 1,216 904
Share in profit of associate 265 122
Fair value adjustment on financial assets 159 -
and investments
Other income 285 -
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Adjusted EBITDA on continuing operations (3,076) (2,266)
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Loss Before Tax
Loss before tax on continuing operations of GBP5.05m compared to
a loss last year of GBP3.71m. The loss on discontinued operations
was GBP2.55m compared to a loss of GBP0.09m in the prior year.
Tax
The Group shows a total income tax credit of GBP0.87m for the
year compared to a tax credit of GBP0.50m for the prior year. The
income tax credit has been split between continuing activities
(GBP0.99m, 2019: GBP0.48m) and discontinued activities (GBP0.12m
charge, 2019: GBP0.02m credit). The income tax credit for the year
is driven by the loss incurred during the financial period.
Investments
In December 2018 Plexus acquired a 49% shareholding in
Kincardine Manufacturing Services Limited ('KMS'), for a
consideration of GBP735k plus associated legal fees of GBP50k. At
the year-end a share in profit of associate of GBP265k (2019:
GBP122k) has been recognised. Following an impairment of the
investment overhead expenses include an impairment charge of
GBP134k (2019: nil).
EPS
The Group reports basic loss per share on continuing activities
of 3.92p compared to a loss per share of 3.12p in the prior year.
The basic loss per share on discontinued activities of 2.47p,
compared to a loss per share of 0.09p in the prior year.
Statement of Financial Position
Tangible Assets
The net book value of property, plant and equipment including
items at the year-end was GBP3.27m compared to GBP3.80m last year.
Capital expenditure on tangible assets decreased to GBP0.19m
compared to GBP0.53m last year.
Intangible Assets and Intellectual Property ('IP')
The net book value of goodwill and intangible assets was
GBP11.09m, a decrease of 4.7% from GBP11.64m last year. This
movement represents investment of GBP0.36m less the annual
amortisation charge of GBP0.91m.
Plexus owns an extensive range of IP which includes many
registered patents and trademarks across a number of jurisdictions,
and actively works to develop and protect new POS-GRIP methods and
applications where deemed commercially advantageous to do so. In
addition to registered IP, Plexus has developed over many years a
vast body of specialist know-how in relation to the POS-GRIP
friction grip method of engineering.
The Directors have considered whether there have been any
indications of impairment of its IP and have concluded, following a
detailed annual asset impairment review, that there is no evidence
of impairment. Therefore, the Directors consider the current
carrying values to be appropriate.
Research and Development ('R&D')
R&D expenditure including patents increased from GBP0.31m in
2019 to GBP0.36m in 2020. This increase demonstrates an investment
in protecting, developing, and broadening the range of proprietary
POS-GRIP friction-grip method of engineering applications and
related IP. Following the sale of the Jack-up Business in 2018 it
is likely that there will be a continued increase in R&D
investment to widen the Group's product offering as it enters new
target markets over the coming years.
Cash and Cash Equivalents
Net cash at the year end was GBP4.09m (cash and cash equivalents
of GBP4.09m less bank loans of GBPnil) compared to net cash of
GBP5.08m (cash and cash equivalents of GBP5.16m less bank loans of
GBP0.08m) in the prior year reflecting a net cash outflow for the
year of GBP0.98m (net decrease in cash of GBP1.06m per Statement of
Cash Flows plus net decrease in bank borrowings of GBP0.08m).
The reduction in bank borrowing represents GBP0.08m of
repayments on the property term loan, reducing the balance from
GBP0.08m to GBPnil.
It should also be noted that the Group has financial asset
investments with a value of GBP3.0m at the reporting date. These
investments are included in non-current financial investments in
the statement of financial position.
The expected future cash inflows and the cash balances held are
anticipated to be adequate to meet current on-going working
capital, capital expenditure, R&D and project related
commitments.
Dividends
The Company has not paid any dividends in the year and does not
propose to pay a final dividend at this time. Whilst the Company
remains committed to distributing dividends to its shareholders
when appropriate, the Directors believe that it is prudent to
consider the payment of dividends in light of the ongoing capital
and operational requirements of the business.
Operations
Progress has continued during the year with the Company's
strategy to build a portfolio of revenue streams based on its
POS-GRIP technology. In Jack-up exploration, activity was centred
on supporting the efforts of Gusar, Plexus' licensing partner in
Russia and CIS markets, in the execution of their first wellhead
order, from Gazprom, in the Russian and CIS markets. Royalty income
from this order was reflected in the accounts to June 2020. This
followed the GBP1.4m sale to Gusar in the prior year of two
POS-GRIP 18-3/4" rental wellhead sets and associated mudline
equipment to provide the basis for Gusar's own POS-GRIP rental
exploration wellhead inventory.
Outside Jack-up exploration, the Company's main focus continues
to be the marketing of its POS-GRIP-enabled production and subsea
wellheads, and its POS-SET Connector for abandonment operations.
Following the sale of the Jack-up Business in 2018, the much larger
production wellhead market is the key area of focus for the
Company. The Company is currently tendering for a number of such
contracts. Alongside this, the Company is actively pursuing
geothermal orders for its POS-GRIP surface production equipment,
which is ideally suited to that environment where wells can have a
very long-life span. Licensing opportunities remain very firmly in
focus for the Company and to this end, in November 2020, Plexus
announced an exciting licensing deal with Cameron, a division of
Schlumberger, for Cameron to use POS-GRIP technology in a specific
range of conventional and unconventional oil and gas surface
wellhead applications.
Following the successful application of Plexus' POS-GRIP surface
wellhead technology for Spirit Energy for its Chiswick well in
2019, Plexus was awarded a contract from Spirit in July 2020 for
its next well, which is expected to be delivered in Q1 of 2021.
Accordingly, revenues from this contract will be delivered in the
2020/2021 financial year.
Plexus continued to invest in R&D during the year. Of
particular note was the successful completion of a testing
programme in November 2019 which verified the performance of the
POS-GRIP "HG" Metal Seal System to be qualified in accordance with
API 6A standards at 10,000 psi pressure for an extreme temperature
range of -75deg to +400deg F. R&D remains an important
operational activity and underpins and further develops the value
of our IP and ability to extend the range of applications of
POS-GRIP technology. Innovation in the oil and gas industry
continues to be an essential part of developing both cost saving
initiatives and ever safer drilling methods, and the Board is
confident that Plexus can continue to play an important role in
delivering such solutions whilst raising wellhead standards to a
level that conventional technology cannot reach, such as passing
test standards equivalent to those used for premium couplings.
Staff at the end of June 2020 comprised 33 employees, including
1 international employee, which compared to a weighted average
total of 37 in both the current year and prior year.
The OPITO accredited competency system was updated in the
previous year to better reflect production equipment and to enhance
the robust assessment of employees in safety critical roles. A
thorough review of all standards across the system took place which
resulted in a complete restructure and rework for the workshop and
field service technician scopes. The revised system underwent a
monitoring audit in July 2019 and the Company has successfully
maintained its OPITO approval. The next audit was delayed by
COVID-19 but is now scheduled for Q4 of 2020.
As part of the continuing commitment to the health and wellbeing
of employees, the Healthy Working Lives programme aims to encourage
habits of wellbeing and inspires individuals to take responsibility
for their own health. Plexus continues to hold the Gold Award.
Health and Safety continues to be a pivotal part of the business
and remains at the centre of everything we do. Plexus remains fully
committed to continually improving safety standards and the safety
culture across the business, and this is reflected in the business
being lost time injury ('LTI') free once again this year. Plexus
has now passed the fifth anniversary of the milestone, in September
2020.
During the year, Plexus enhanced its Business Management System
(BMS) in order to comply with the new ISO 45001 standard which
replaces OHSAS 18001:2007 which will be discontinued in 2021.
Plexus achieved accreditation under the new standard in May 2020.
This followed the Quality Management System achieving API Q1
accreditation in February 2020. Plexus continues to hold Licences
for both API 6A and 17D. These accreditations demonstrate Plexus'
capability and determination to operate under the highest
standards.
The IT Department provides technology leadership for Plexus,
including governance, information security, software development
and expertise in deploying modern information technologies to
improve company efficiency. During these challenging times for all
industries due to COVID-19, Plexus has continued to develop its
in-house systems to ensure the Company is able to react swiftly to
changing market requirements, and to enhance the capability of all
office based employees to work from home as necessary, safely and
securely.
Strategy and Future Developments
Technology
Plexus' proprietary POS-GRIP technology involves applying
compressive force to the outside of a wellhead or pipe, to flex it
inwards. As the bore of the vessel moves inwards, it makes contact
with an inner pipe (or hanger) on the inside. Sufficient contact
force is generated to hold the inner member in place through
friction between the two components and creates a superior metal to
metal seal. The Company's strategy is primarily focused on
delivering the highest standard of wellhead design for the upstream
oil and gas markets around the world, and one which has already
proven to be uniquely advantageous in terms of safety features,
operational efficiency, and cost savings for Jack-up drilling,
especially HP/HT applications. The Company is now focused on
replicating this past success in other wellhead markets including
surface production, subsea and geothermal, as well as other
initiatives such as a POS-GRIP Crown Plugs and POS-GRIP Lateral
Trees.
POS-GRIP wellhead designs deliver many advantages over
conventional "slip and seal" and "mandrel hanger" wellhead
technologies for surface exploration and land and platform
production applications. These include larger metal to metal seal
contact 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 and maintenance costs.
Plexus' POS-GRIP enabled product suite also includes the
innovative Python (R) subsea wellhead as well as the POS-SET
Connector (R) for use in the growing decommissioning market. We
believe the Python subsea wellhead is important as it can eliminate
the need for wear bushings, pack-offs, lock-rings, and lockdown
sleeves, whilst delivering instant rigid lock-down in all
directions, and is fully reversible for ease of workover,
side-tracking or abandonment. These design simplifications and
features not only reduce the risk of installation problems and
safety issues, they also significantly reduce installation time and
the number of trips that are needed such that it has been
independently estimated that over ten days of savings per well can
be achieved in deep-water under certain conditions which, depending
on water depth, Plexus estimates could result in a saving of over
$10m for the operator. The POS-SET Connector, which is designed to
re-connect to bare conductor pipe for well re-entry or permanent
abandonment operations, creates a solid connection with reliable
sealing directly against the pipe, and retains bend and load
capabilities at 80% of pipe strength. The Directors believe that
such features mean that Plexus' wellhead equipment sets and
delivers a new and superior standard. Apart from the operational
time savings and related safety benefits, at an engineering level
the Company has demonstrated that its technology can raise and even
exceed the integrity of wellhead testing and sealing to that of
premium couplings, which supports its claim that wellheads no
longer need to be the weak link in the well architecture chain.
POS-GRIP friction-grip technology has wide ranging applications
both within and outside the oil and gas industry. As POS-GRIP is a
method of engineering and not a product in its own right, where
there is an opportunity for the technology to improve the
performance of conventional products the Company will look to
integrate POS-GRIP so that the benefits together with "HG" sealing
can be realised organically or in conjunction with partners.
Business Model and Markets
The Company is proprietary technology driven and its extensive
patent protected IP and many years' worth of specialist know-how
has been successfully deployed in hundreds of wells around the
world. Its superior performance, safety and operational advantages
led to the Company becoming established initially as a leading
equipment and services provider to the niche Jack-up exploration
wellhead market. The Directors believe that this success can be
replicated and extended to the wider and much larger energy sectors
including surface production, subsea, geothermal and fracking
applications based on its POS-GRIP technology.
Historically Plexus has focused on supplying adjustable
exploration wellhead equipment and associated running tools on a
rental basis for the niche Jack-up exploration drilling market in
the UK Continental Shelf ('UKCS'), achieving a near 100% market
share for HP/HT exploration wells. Over the years, Plexus'
equipment has been deployed in the ECS (Norway, Netherlands and
Denmark) as well as China, Russia, Egypt, Cameroon, Trinidad,
Venezuela, and Morocco. The exploration wellhead contracts were
supplied from a rental fleet of owned inventory of which the
majority were for 15,000psi HP/HT; and the remainder for 10,000psi
wellheads.
Following the sale of the Jack-up business to TFMC in 2018, the
Directors believe Plexus is well placed to pursue its strategy of
breaking into the significantly larger and more mainstream volume
production wellhead and subsea markets both organically and in
conjunction with partners, including licensees. The licensing deal
agreed with Cameron in November 2020 is a further endorsement of
this strategy.
Strategy
Plexus' long-term goal is to establish POS-GRIP technology as a
new industry standard for wellhead and metal sealing designs,
whilst continuing to develop new products, which can also offer
multiple benefits and advantages to the industry in terms of
improved safety, functionality, and cost and time savings. An
example of such 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.
Following the sale of the Jack-up Business, Plexus is today an
IP-led research and development business focused on extending its
business activities into the volume land, platform and subsea
sectors. This strategy will be pursued both organically and through
licensees and partners. Evidence of the successful emergence of
this strategy can be seen from both the contract award by Spirit
Energy in July 2020 and from the non- exclusive licence deal with
the Cameron division of Schlumberger in November 2020. Both of
these important events have occurred post year end and set a sound
foundation for future growth.
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 loss,
earnings per share, cash balances, and working capital resources
and requirements. The analysis of these is included in the
financial results section of this report, and highlights the Group
moving towards a supplier of production wellhead equipment.
Non-financial indicators include Health and Safety statistics,
equipment utilisation rates, geographical diversity of revenues and
customers, the level of ongoing customer interest and support,
geo-political considerations such as emissions concerns and
awareness, effectiveness of various research and development
initiatives; for example, in relation to new patent activity and
inventions, and appropriate employee headcount numbers and turnover
rates. The non-financial key performance indicators are included
within the strategic report.
Pr incipal 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, legal and environmental risks
Plexus participates in a global market where the exploration and
production of oil and gas reserves, and even the access to those
reserves can be adversely impacted by changes in political,
operational, and environmental circumstances. The current global
political and environmental landscape, particularly in relation to
climate change concerns and the relentless move away from
hydrocarbons to, for example renewables, continues to demonstrate
how any combination of such factors can generate risks and
uncertainties that can undermine stable trading conditions. A
significant risk in the form of the global pandemic caused by
COVID-19 has materialized this year and although Plexus has taken
all reasonable steps to mitigate the effects of this risk, both
economic and to the health and well-being of our employees,
customers and suppliers, by complying with legislation and taking
measures to ensure business continuity, the negative impact has
clearly been felt. Such risks also extend to legal and regulatory
issues and it is important to understand that these can change at
short notice. To help address and balance such risks, the Group
where possible seeks to broaden its geographic footprint and
customer base, as well as actively looking to
forge commercial relationships with large industry players.
The Company continues to closely monitor the potential impact
and risks of the UK's pending exit ('Brexit') from the European
Union ('EU') under various scenarios, including leaving the EU
without a deal. This includes assessing the potential impact of the
introduction of trade tariffs and the potential supply chain
disruption that could result from increased customs checks at
borders and related matters. Plexus has an IP-led business model
which provides it with operational flexibility and the ability to
respond to and mitigate some of the potential impacts of the
different scenarios regarding the UK's exit from the EU. In the
meantime, Plexus has amongst other activities obtained an Economic
Operator Registration and Identification ('EORI') number to enable
the Company to continue to import and export with the EU.
(b) Oil and Gas Sector Trends
It is readily understood that the world continues to move away
from coal as part of the COP21 and other climate change objectives
in relation to the ongoing need to urgently reduce CO2 and CH4
(methane) emissions. However, the commercial and environmental
dynamics between traditional hydrocarbons in terms of coal, oil and
gas is not the only trend to consider. New technologies,
particularly in relation to renewables such as wind and solar,
alternative energies and developments such as the increasing use of
electric vehicles and corresponding improvements in battery storage
life, and wave energy, could all in the future prove very
disruptive to the traditional oil and gas industry and the
corresponding demand for exploration and production equipment and
services. It is however also recognised that the world will
continue to need hydrocarbons as an energy and materials source,
and in particular gas for many years to come, and indeed currently
global demand for hydrocarbons is forecast to continue to grow.
(c) Technology
The Group is now focusing on the commercialisation, marketing
and wider application of its POS-GRIP friction-grip technology
beyond Jack-up rental exploration wellhead equipment, both with
regard to expanding into the surface land and platform production
market sector, as well as the target subsea market where the Plexus
POS-GRIP Python subsea wellhead offers numerous operational, time
savings and performance benefits. Current and future contract
opportunities may be adversely affected by technology related
factors outside the Group's control, especially where new product
developments are concerned. These may include unforeseen equipment
design issues, test delays during a contract and final testing, and
delayed acceptances of deliveries, as well as the slow uptake by
operators which could lead to possible abortive expenditure and
write downs, reputational risk and potential customer claims or
onerous contractual terms. Such risks may materially impact on the
performance of the Group. To help 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 partners and customers.
(d) 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, and who are more
resilient to extended adverse trading conditions. This risk has
become more concentrated over the past few years as the large oil
service companies have merged. These major oil service and
equipment company consolidations that have taken place over the
last few years have therefore magnified such issues as competitors
reduce in number but increase in size, influence, and reach.
Unforeseen 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.
(e) Operational
Plexus, like many other oil service companies, has had to make
significant reductions in its workforce numbers over the past few
years as a result of a lower oil price and a corresponding
reduction in drilling activity and related levels of capex spend.
Therefore, with any upturn in drilling activity, it is possible
that the industry and Plexus could experience difficulties in
rehiring past or new employees and this could deprive Plexus of the
key personnel necessary for expanding operational activities, as
well as research and development initiatives, at the rate that may
be required. To help 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 will hopefully minimise such risks.
(f) Liquidity and finance requirements
In an economic climate that remains in many ways uncertain it
has become increasingly possible for 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. In addition, a growing number of financial institutions
are actively divesting away from the oil and gas sector on the
grounds of climate change concerns. Furthermore, the sustained
period of record low interest rates is impacting on global finances
in a number of ways and could have a negative impact on business
activity.
(g) Credit
The main credit risk is attributable to trade receivables. As
the majority of the Group's customers are large international oil
and gas companies the risk of non-payment is significantly reduced,
and therefore is more likely to be related to client satisfaction
and/or trade sanction issues. Customer payments can therefore
potentially involve extended periods of time especially from
countries where exchange control regulations can delay the transfer
of funds outside those countries. As Plexus begins to establish
international licensee relationships there may be instances whereby
certain capital and royalty payments could be due some way into the
future and as such greater credit risk than exists under normal
payments terms could apply. The Group's exposure to credit risk is
monitored continuously.
(h) Risk assessment
The Board has established an on-going process for identifying,
evaluating and managing the more significant risk areas 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 and updated on a
regular basis and can be associated with a variety of internal and
external sources including regulatory requirements, disruption to
information systems including cyber-crime, control breakdowns and
social, ethical, environmental and health and safety issues.
(i) COVID-19 outbreak
Plexus places the health and safety of its employees as its
highest priority and in line with this has implemented various
protocols in relation to the current COVID-19 outbreak.
Accordingly, a business continuity programme has been put in place
to protect employees whilst ensuring the safe operation of the
Company. Following consultations with, amongst others, relevant
authorities, staff and contractors, strict protocols have been
implemented to reduce the risk of transmission of COVID-19 at all
the Company's operations. The situation in respect of COVID-19 is
an evolving one and the Board will continue to review its potential
impact on its staff and the business.
Section 172 Statement
This section serves as the section 172 statement and should be
read in conjunction with the full Strategic Report and the
Corporate Governance Report. Section 172 of the Companies Act 2006
requires directors to take into consideration the interests of
stakeholders in their decision making. The Directors continue to
have regard to the interests of the Company's employees and other
stakeholders, including shareholders, customers and suppliers,
Licence Partners and the community and environment, through
positive engagement and when making decisions. Acting in good faith
and fairly between members, the Directors consider what is most
likely to promote the success of the Company for its members in the
long term and to protect the reputation of the Company.
Shareholders
Plexus seeks to develop an investor base of long-term holders
that are aligned to our strategy. By clearly communicating our
strategy and objectives, we maintain continued support from our
investor base. Important issues include maintaining financial
stability and protecting and strengthening the value of our
intellectual property. Engagement with shareholders is a key
element to this objective and methods of engagement are detailed in
the Corporate Governance Report. During the year, the Finance
Director supported by other members of the executive team, the
Company's broker, and the Investor Relations advisor, engaged
directly with investors by email, presentations, direct
conversations and ad-hoc meetings. In addition to this, in October
2019 the Company re-launched its website to provide investors and
other stakeholders with an improved platform to access information
about the Company.
Employees
The Group's UK staff are engaged by the Company's subsidiary
Plexus Ocean Systems Limited based in Aberdeen, Scotland. Being a
relatively small company with just over 30 employees largely
operating in one location, there is a high level of visibility
regarding employee engagement and satisfaction. During the year,
the Board re-tendered the employee benefits adviser who are able to
offer a comprehensive service to employees as well as to the
Company. The Company proactively engages with employees on matters
of competency, training, and health and safety as detailed in the
Corporate Governance. During the year the Company successfully
achieved five continuous years with no Lost Time Incidents (LTI's)
and this successful safety culture has continued beyond that fifth
anniversary to the date of writing. In the latter part of the year,
the impact of COVID-19 and Government regulations caused a sudden
migration of many staff to be required to work from home. The
challenges of maintaining close contact with employees presented by
this have been very successfully managed by use of appropriate
software such as Microsoft Teams alongside the use of a secure VPN
and other network security protocols.
Customers and Suppliers
The Company is committed to acting ethically and with integrity
in all business dealings and relationships. Fostering good business
relationships with key stakeholders including customers and
suppliers is important to the Company's success. The Board seeks to
implement and enforce effective systems and controls to ensure its
supply chain is maintaining the highest standard of business
conduct in line with best practice including in relation to
anti-bribery and modern slavery.
Licence Partners
The Company engages with Licence Partners in a way that follows
the same principles as those applied to relationships with other
customers and suppliers. Additionally, the Company engages with its
Licence Partners in order to support their efforts to achieve
commercial success by holding technical workshops, technical
training and data transfer. As part of the transaction with TFMC in
2018, a five-year Collaboration Agreement was signed between the
two companies in order to explore areas where new products with
commercial opportunities can be jointly developed. The
Collaboration Steering Committee contains representatives from both
companies and meets on a regular basis at each quarter.
Community and Environment
The Company has minimal environmental impact in the localities
in which it operates. This clearly helps the Company meet its
corporate objectives in this regard but is never taken for granted.
In the year under review, the Company met its target for waste
management and in general continues to operate in a manner that is
open, honest and socially responsible.
G Stevens
Director
1 December 2020
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2020
Notes 2020 2019
GBP'000 GBP'000
Revenue 1 525 3,611
Cost of sales (225) (1,865)
------- -------
Gross profit 300 1,746
Administrative expenses (5,981) (5,756)
------- -------
Operating loss (5,681) (4,010)
Finance income 192 218
Finance costs (111) (41)
Share in profit of associate 265 122
Other income 285 -
------- -------
Loss before taxation (5,050) (3,711)
Income tax credit 3 992 484
------- -------
Loss after taxation from continuing
operations (4,058) (3,227)
Loss after taxation from discontinued
operations (2,549) (88)
------- -------
Loss for year (6,607) (3,315)
Other comprehensive income - -
------- -------
Total comprehensive
income for the year attributable to
the owners of the parent (6,607) (3,315)
------- -------
Loss per share 5
Basic from continuing operations (3.92p) (3.12p)
Diluted from continuing operations (3.92p) (3.12p)
Basic from discontinued operations (2.47p) (0.09p)
Diluted from discontinued operations (2.47p) (0.09p)
Consolidated Statement of Financial Position
at 30 June 2020
Notes 2020 2019
GBP'000 GBP'000
Assets
Goodwill 767 767
Intangible assets 6 10,325 10,876
Property, plant and equipment 7 3,273 3,804
Non-current financial assets 9 2,995 2,835
Investment in associate 8 898 907
Deferred tax asset 3 2,130 1,259
Other receivables - 4,515
Right of use asset 1,548 -
------- -------
Total non-current assets 21,936 24,963
------- -------
Inventories 870 698
Trade and other receivables 2,982 4,948
Current income tax asset 76 617
Cash and cash equivalents 4,087 5,152
------- -------
Total current assets 8,015 11,415
------- -------
Total Assets 29,951 36,378
------- -------
Equity and Liabilities
Called up share capital 10 1,054 1,054
Shares held in treasury 11 (2,500) (2,500)
Share based payments reserve 674 674
Retained earnings 28,266 34,873
------- -------
Total equity attributable to equity
holders of the parent 27,494 34,101
Liabilities
Lease liabilities 1,401 -
------- -------
Total non-current liabilities 1,401 -
------- -------
Trade and other payables 778 2,202
Lease liabilities 278 -
Bank loans - 75
------- -------
Total current liabilities 1,056 2,277
------- -------
Total liabilities 2,457 2,277
------- -------
Total Equity and Liabilities 29,951 36,378
------- -------
Consolidated Statement of Changes in Equity
for the year ended 30 June 2020
Called Shares Share Share Retained Total
Up Held Premium Based Earnings
Share in Treasury Account Payments
Capital Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance as at 30
June 2018 1,054 - 36,893 674 2,295 40,916
Total comprehensive
income for the year - - - - (3,315) (3,315)
Cancellation of
share premium - (36,893) - 36,893
Buyback of shares - (2,500) - - - (2,500)
Dividend paid - - - - (1,000) (1,000)
------- ------- ------- ------- ------ ------
Balance as at 30
June 2019 1,054 (2,500) - 674 34,873 34,101
Total comprehensive
income for the year - - - - (6,607) (6,607)
------- ------- ------- ------- ------ ------
Balance as at 30
June 2020 1,054 (2,500) - 674 28,266 27,494
------- ------- ------- ------- ------- -------
Consolidated Statement of Cash Flows
for the year ended 30 June 2020
2020 2019
Notes GBP'000 GBP'000
Cash flows from operating activities
Loss before taxation from continuing
activities (5,050) (3,711)
Loss before taxation from discontinued
activities (2,432) (108)
------- -------
Loss before tax (7,482) (3,819)
Adjustments for:
Depreciation and amortisation
charges 1,896 1,625
Loss on disposal of property, 6 -
plant and equipment
Share in profit of associate (265) (122)
Other income (285) -
Impairment of associate 134 -
Write-down of other receivable 2,432 -
Fair value adjustment on financial
assets 24 3
Investment income (192) (218)
Interest expense 87 8
Changes in working capital:
(Increase) / decrease in inventories (172) 1,173
(Increase) / decrease in trade
and other receivables (191) 1,762
Decrease in trade and other payables (1,328) (2,661)
------- -------
Cash used in operating activities (5,336) (2,249)
Income taxes refunded 545 26
------- -------
Net cash used from operating activities (4,791) (2,223)
------- -------
Cash flows from investing activities
Funds invested in financial instruments (183) (714)
Other income 285 -
Purchase of intangible assets (361) (311)
Investment in associate - (785)
Purchase of property, plant and
equipment (138) (530)
Dividend income from associate 140 -
Deferred proceeds from sale of 4,240 -
discontinued operation
Proceeds of sale of property,
plant and equipment 6 9
Interest and investment income
received 192 218
------- -------
Net cash generated / (used) in
investing activities 4,181 (2,113)
------- -------
Cash flows from financing activities
Repayment of loans and banking
facilities (75) (300)
Repayments of lease liabilities (315) -
Buyback of shares held in treasury - (2,500)
Dividend paid - (1,000)
Interest paid (65) (8)
------- -------
Net cash outflow from financing
activities (455) (3,808)
------- -------
Net decrease in cash and cash
equivalents (1,065) (8,144)
Cash and cash equivalents at 1
July 2019 5,152 13,296
------- -------
Cash and cash equivalents at 30
June 2020 13 4,087 5,152
------- ------
Notes to the Consolidated Financial Statements
1. Revenue
2020 2019
GBP'000 GBP'000
By geographical area
UK 13 1,511
Europe 489 2,086
Rest of World 23 14
----- -----
525 3,611
----- -----
The revenue information above is based on the location of the
customer.
2020 2019
GBP'000 GBP'000
By revenue stream
Rental - 531
Service 9 269
Sold Equipment 26 2,712
Royalty Fees 476 -
Rebillables 14 99
----- -----
525 3,611
----- -----
Substantially all of the revenue in the current and previous
periods derives from the sale, rental and the provision of services
relating to the Group's patent protected equipment.
2. Segment Reporting
The Group derives revenue from the sale of its POS-GRIP
technology and associated products, the rental of equipment
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 continuing revenue:
2020 2019
GBP'000 GBP'000
Customer 1 489 1,818
Customer 2 - 1,447
3. Income tax credit
(i) The taxation charge for the year 2020 2019
comprises:
GBP'000 GBP'000
UK Corporation tax:
Adjustment in respect of prior years (76) (620)
----- -----
(76) (620)
----- -----
Foreign tax
Current tax on income for the year - 1
Adjustment in respect of prior years 72 391
----- -----
72 392
----- -----
Total current tax credit (4) (228)
----- -----
Deferred tax:
Origination and reversal of timing
differences (648) (426)
Adjustment in respect of prior years (223) 150
----- -----
Total deferred tax (871) (276)
----- -----
Total tax credit (875) (504)
----- -----
The effective rate of tax is 19% (2019:
19%)
Tax credit on discontinued activities 117 (20)
Tax credit on continuing activities (992) (484)
----- -----
Total tax credit (875) (504)
----- -----
(ii) Factors affecting the tax charge on 2020 2019
continuing activities for the year
GBP'000 GBP'000
Loss on ordinary activities before tax (5,050) (3,711)
Tax on (loss)/profit at standard rate of
UK
corporation tax of 19% (2019: 19%) (960) (705)
Effects of:
Expenses not deductible for tax purposes 163 223
Effect of change in tax rate (153) 53
Tax adjustments on share-based payments 4 22
Adjustments in respect of prior year (46) (78)
Foreign tax rates - 1
----- -----
Total tax credit on continuing activities (992) (484)
----- -----
(iii) Movement in deferred tax asset 2020 2019
balance
GBP'000 GBP'000
Deferred tax asset at beginning of year (1,259) (984)
Credit to Statement of Comprehensive
Income (871) (275)
----- -----
Deferred asset at end of year (2,130) (1,259)
----- -----
(iv) Deferred tax asset balance 2020 2019
GBP'000 GBP'000
The deferred tax asset balance is made
up of the following items:
Difference between depreciation and capital
allowances 902 842
Share based payments - (4)
Tax provisions (2) -
Tax losses (3,030) (2,097)
----- -----
Deferred tax asset at end of year (2,130) (1,259)
----- -----
The deferred tax asset is reviewed at the end of each reporting
period. Following a review of the Group's financial models and
taxable profitability in the future it is considered appropriate to
recognise the deferred tax asset in full.
4 . Discontinued Operations
On 1(st) February 2018 the Group sold its "Jack-up Business" to
TFMC for an initial gross consideration of GBP15m, with an
additional sum of up to GBP27.5m payable dependent on the future
performance of the Jack-up Business during a three year earn-out
period.
Based on current revenue forecasts provided by TFMC, the earnout
was accrued at GBP8,839k. GBP2,167k of this balance is receivable
in a period due within one year and has been included in current
assets (2019: GBP4,515k due in a period greater than one year and
included in non-current assets, GBP4,325k due within 1 year and
included in current assets. The recognised loss on discontinued
operations in the year represents the impairment of deferred
consideration receivable presented in prepayments and other
amounts.
2020 2019
GBP'000 GBP'000
Revenue - -
Expenses (2,432) (108)
Loss before tax of discontinued operations (2,432) (108)
Income tax (charge)/credit (117) 20
Loss after tax of discontinued operations (2,549) (88)
----- -----
Profit/(Loss) after taxation from discontinued
operations (2,549) (88)
----- -----
The Statement of cash flows includes the following amounts
related to discontinued operations:
2020 2019
GBP'000 GBP'000
Operating activities - -
Investing activities - -
Financing activities - -
----- -----
Net cash generated/(used) from discontinued - -
activities
----- -----
5. Loss per share
2020 2019
GBP'000 GBP'000
Loss attributable to shareholders - continuing
operations (4,058) (3,227)
Loss attributable to shareholders - discontinued
operations (2,549) (88)
----- -----
Loss attributable to shareholders (6,607) (3,315)
------ ------
Number Number
Weighted average number of shares in
issue 103,406,041 103,406,041
Dilution effects of share schemes - -
---------- ----------
Diluted weighted average number of shares
in issue 103,406,041 103,406,041
---------- ----------
Loss per share
Basic Loss per share for continuing operations (3.92p) (3.12p)
Diluted Loss per share for continuing
operations (3.92p) (3.12p)
------ ------
Basic Loss per share for discontinued
operations (2.47p) (0.09p)
Diluted loss per share for discontinued
operations (2.47p) (0.09p)
------ ------
Basic loss 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 share option schemes. As a
loss was made on continuing operations for the current year the
option schemes are considered to be anti-dilutive.
6. Intangible Assets
Patent and
Intellectual Other Computer
Property Development Software Total
GBP'000 GBP'000 GBP'000 GBP'000
Cost
As at 30 June 2018 4,600 12,824 331 17,755
Additions - 310 1 311
Disposals - (38) - (38)
----- ----- ----- -----
As at 30 June 2019 4,600 13,096 332 18,028
Additions - 359 2 361
Disposals - - (73) (73)
----- ----- ----- -----
As at 30 June 2020 4,600 13,455 261 18,316
----- ----- ----- -----
Amortisation
As at 30 June 2018 2,838 3,150 298 6,286
Charge for the year 238 646 20 904
On disposals - (38) - (38)
----- ----- ----- -----
As at 30 June 2019 3,076 3,758 318 7,152
Charge for the year 237 664 11 912
On disposals - - (73) (73)
----- ----- ----- -----
As at 30 June 2020 3,313 4,422 256 7,991
----- ----- ----- -----
Net Book Value
As at 30 June 2020 1,287 9,033 5 10,325
----- ----- ----- -----
As at 30 June 2019 1,524 9,338 14 10,876
----- ----- ----- -----
When assessing the valuation of the Group's assets the key
assumptions on which the valuation is based are that:
-- Industry acceptance will result in continued growth of the
business above long-term industry growth rates, Management consider
this to be appropriate for a new technology gaining industry
acceptance,
-- Prices will rise with inflation,
-- Costs, in particular direct costs and staff costs are based
on past experiences, and management's knowledge of the
industry,
-- Staff wage inflation will be higher than general inflation
but will not rise in line with sales.
These assumptions were determined from the directors' knowledge
and experience.
The value in use calculation is based on cash flow forecasts
derived from the most recent financial model information available.
Although the Group's technology is proven and has proven commercial
value the exploitation of opportunities beyond the rental wellhead
exploration equipment services market are at a relatively early
stage and the commercialisation process is expected to be a long
term one. The cash flow forecasts therefore extend to 2040 to
ensure the full benefit of all current projects is realised. The
rationale for using a timescale up to 2040 with growth projections
which increase in the first five years and decline thereafter, is
that as time
progresses, Plexus expects to gain an increasing foothold in the
subsea and other equipment markets which are already well
established. As the Group are starting from a base point of trading
the growth rates are high in the initial years (varying from 50% to
400% depending on the model employed) then in later years where the
technology becomes established the expected rate of growth declines
(varying from 5% to 10 depending on the model employed).
The key assumptions used in these calculations include discount
rate, revenue projections, growth rates, expected gross margins and
the lifespan of the Group's technology. Management estimates the
discount rates using pre-tax rates that reflect current market
assessments of the time value of money and risks specific to the
Group and the markets in which it operates. Revenue projections,
growth rates, margins and technology lifespans are all estimated
based on the latest business models and the most recent discussions
with customers, suppliers and other business partners.
Management regularly assesses the sensitivity of the key
assumptions and the probability that any of them would change to
the degree that the carrying value would exceed the recoverable
amount. It would require significant adjustments to key assumptions
before the goodwill would be impaired.
Patent and other development costs are internally generated.
7. Property plant and equipment
Tenant Assets Motor
Buildings Improvements Equipment under construction vehicles Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
Cost
As at 30 June
2018 3,607 716 5,509 10 17 9,859
Additions 92 - 391 47 - 530
Transfers - - 57 (57) - -
Disposals - - (525) - - (525)
----- ----- ----- ----- ----- -----
As at 30 June
2019 3,699 716 5,432 - 17 9,864
Additions 41 - 144 - - 185
Disposals - (2) (183) - - (185)
----- ----- ----- ----- ----- -----
As at 30 June
2020 3,740 714 5,393 - 17 9,864
----- ----- ----- ----- ----- -----
Depreciation
As at 30 June
2018 1,158 381 4,315 - 1 5,855
Charge for
the year 180 85 450 - 3 718
On disposals - - (513) - (513)
----- ----- ----- ----- ----- -----
As at 30 June
2019 1,338 466 4,252 - 4 6,060
Charge for
the year 152 61 464 - 3 680
On disposals - (2) (147) - (149)
----- ----- ----- ----- ----- -----
As at 30 June
2020 1,490 525 4,569 - 7 6,591
----- ----- ----- ----- ----- -----
Net book value
As at 30 June
2020 2,250 189 824 - 10 3,273
----- ----- ----- ----- ----- -----
As at 30 June
2019 2,361 250 1,180 - 13 3,804
----- ----- ----- ----- ----- -----
The value in use of property, plant and equipment is not
materially different from the carrying value.
8. Investment in associate
GBP'000
Investment in associate during the
year 735
50
Share of profit for the period 50
Dividends received 122
-----
Investment in associate at 30 June
2019 907
-----
Share of profit for the period 265
Dividends received (140)
Impairment of investment (134)
-----
Investment in associate at 30 June
2020 898
-----
On 14 December 2018 Plexus Ocean Systems Limited acquired a 49%
interest in Kincardine Manufacturing Services Limited ('KMS') for a
consideration of GBP735k plus associated legal fees. KMS are a
precision engineering company which serves the oil and gas
industry. This is viewed as a long-term strategic investment by
Plexus. KMS are based at Sky House, Spurryhillock Industrial
Estate, Stonehaven, Aberdeenshire AB39 2NH.
Following the investment Graham Stevens PLC Finance Director was
appointed to the board of KMS. The company remains under the
control and influence of the 51% majority shareholders.
On 30 June 2020, an impairment review has been undertaken. The
investment has been revalued using a profit after tax earnings
model. This has resulted in an impairment charge of GBP134k.
The summary financial information of KMS, extracted on a 100%
basis from the accounts for the 6 months to 30 June 2020 are as
follows:
9. Financial Asset
2020 2019
GBP'000 GBP'000
Financial instruments held at fair
value 2.995 2,835
----- -----
2.995 2,835
----- -----
The financial asset relates to cash invested in an investment
portfolio, made up of high-yield bonds held at fair value in the
statement of financial position. The portfolio can be divested to
cash at any time. Included in the statement of comprehensive income
is a write-down in the carrying value of the financial asset of
GBP24k (2019: GBP3k). The fair value of the investment is evaluated
by reviewing the portfolio on a quarterly basis, including the
reporting date of 30 June 2020.
10. Share Capital
2020 2019
GBP'000 GBP'000
Authorised:
Equity: 110,000,000 (2019: 110,000,000)
Ordinary shares of 1p each 1,100 1,100
----- -----
Allotted, called up and fully paid:
Equity: 105,386,239 (2019: 105,386,239)
Ordinary shares of 1p each 1,054 1,054
----- -----
Trade and other payables are held at amortised cost. The
carrying value approximates fair value.
11. Shares held in treasury
2020 2019
GBP'000 GBP'000
Buyback of shares 2,500 2,500
----- -----
On 1 February 2019 Plexus Holdings PLC completed the acquisition
of 4,950,495 Ordinary Shares beneficially held by LLC Gusar.
Following the above transaction, the Company's issued share capital
comprises 105,386,239 Ordinary Shares, of which 4,950,495 Ordinary
Shares are held in treasury. The Company now has a total of
100,435,744 Ordinary Shares in issue with voting rights. This
figure, 100,435,744, should be used by shareholders as the
denominator when determining whether they are required to notify
their interest in, or a change to their interest in the Company
under the Financial Conduct Authority's Disclosure Guidance and
Transparency Rules.
12 . Reconciliation of net cash flow to movement in net cash/debt
2020 2019
GBP'000 GBP'000
Movement in cash and cash equivalents (1,065) (8,144)
Repayment of bank loans 75 300
----- -----
(Decrease)/increase in net cash
in year (990) (7,844)
Net cash at start of year 5,077 12,921
----- -----
Net cash at end of year 4,087 5,077
----- -----
13. Analysis of net cash/(debt)
2020: At beginning Cashflow At end of
of year year
GBP'000 GBP'000 GBP'000
Cash in hand and at bank 5,152 (1,065) 4,087
Bank loans (75) 75 -
Lease Liability (1,948) 269 (1,679)
----- ----- -----
Total 3,129 (721) 2,408
----- ----- -----
The lease liability has been recognised on day 1 of the
financial year on inception of IFRS 16 and is therefore not present
in the prior financial year.
2019: At beginning At end of
of year Cashflow year
GBP'000 GBP'000 GBP'000
Cash in hand and at bank 13,296 (8,144) 5,152
Bank loans (375) 300 (75)
----- ----- -----
Total 12,921 (7,844) 5,077
----- ----- -----
The financial information above does not constitute the
company's statutory accounts for the year ended 30 June 2020 but is
derived from those statements.
The statutory financial statements and this preliminary
statement for the year ended 30 June 2020 were approved by the
Board on 1 December 2020. On the same date the company's auditors,
Crowe U.K. L.L.P 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 2019 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, Elder House, St Georges Business Park Brooklands Road,
Weybridge Surrey, KT13 0TS.
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END
FR MZMGZLMGGGZM
(END) Dow Jones Newswires
December 02, 2020 02:00 ET (07:00 GMT)
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