An AIM-listed oil and gas services making devices that support tubular pipes.  

Its POS-GRIP product is for the extreme operational environment for seabed and surface.

Plexus’s IPO price was £0.59/share when it got listed, and it raised net proceeds of £9.7m.

Today, the shares trade at £0.6/share meaning the average shareholders made no money.  

 

So, what went wrong?

Brent Crude (measures the oil price in the market) prices have collapsed since late 2014. Also, Plexus business is in the North Sea where high oil prices are needed to drill in areas that are hard to reach.

Now, the North Sea saw the lowest drilling activity since 1964 (it is drilling six wells).

The Macro factors affected Plexus’s business. But, does it present a buying opportunity, especially given its propriety technology?

 

Plexus, its financial and operational performance

Let us delve into the company.

1. Share price tumble

Like many oil-related businesses, Plexus saw its shares collapsed back to its IPO price. Dial back two years ago, Plexus’s shares were five times greater. The share price stood at £3.20/share giving it a £271m valuation.

And, even more so if you look these valuations, back in 2014:

Metrics

Multiples

P/S

10X

P/E

60X

P/B

8X

Dividend Yield (%)

0.0032

 

Although, to be fair Plexus’s net income grew by 50% from the previous year, but still below P/E.

 

2. Revenue slump

The factors causing this revenue slump are as follows:

A. The reliance on one geographic location;

B. the drop in oil price;

C. the lowest drilling activity in more than 50 years caused the company’s turnover to crash from £28.5m to £11.2m in one year. It marks the lowest Revenue produced since 2007.

 

A drastic fall of 61% in sales mean the company couldn’t cut its fixed costs fast enough.

 

3. Investors paid more in than what it got out

Since its IPO, Plexus has raised equity three times.…

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