REG - Plexus Holdings Plc - Preliminary Results
25/11/2022 07:00
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RNS Number : 5658H Plexus Holdings Plc 25 November 2022
Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil equipment &
services
25 November 2022
Plexus Holdings plc ('Plexus' or 'the Group')
Preliminary Results
Plexus Holdings plc, the AIM quoted oil and gas engineering services business
and owner of the proprietary POS-GRIP® method of wellhead engineering,
announces its preliminary results for the year ending 30 June 2022.
FINANCIAL SUMMARY
· Continuing operations sales revenue £2,306k (2021: £2,017k)
· Adjusted EBITDA on continuing activities £2.78m loss (2021:
£2.69m loss)
· Continuing operations operating loss £4,291k (2021: £4,546k)
· Continuing operations loss before tax £5,556k (2021: £4,372)
· Continuing operations operating loss after tax £7,457k (2021:
£4,110k)
· Basic loss per share from continuing activities 7.42p (2021:
4.09p loss)
· Cash and cash equivalents of £5.84m (2021: £5.18m)
· Bank borrowing of £3.96m (2021: £2.04m) relating to a drawn
down Lombard facility
· The Group has £0.1m invested in financial assets (2021: £3.04m)
OPERATIONAL OVERVIEW
Revenue streams are derived from both direct sales and the licencing of the
Plexus' POS-GRIP method of engineering technology to third parties, including
Schlumberger. The goal is to establish the Company's proprietary and patented
leak-proof wellhead systems and specialist engineering solutions across the
oil and gas industry, whilst helping to meet ESG and NetZero goals by offering
'through the BOP' (Blow out Preventer) designs, and leak-proof seals capable
of retaining their integrity for the life of well thereby avoiding costs
associated with maintenance and well shut ins.
· June 2022 - secured Oceaneering order for Plug & Abandonment
("P&A") equipment and services estimated to generate revenues of circa.
£500,000
· March 2022 - suspended activities with LLC Gusar ("Gusar"), its
Russian licencee partner following the outbreak of the war in Ukraine, with
little or no impact on the Company's finances during the period.
· December 2021 - signed a contract with a leading North Sea
Operator for a POS-GRIP surface production wellhead system
· December 2021 - expanded market reach via revised non-exclusive
licence agreement terms with Cameron International Corporation ("Cameron"),
Schlumberger's wellhead company enabling Cameron to:
o Design, market and sell Plexus' POS-GRIP and HG® metal-to-metal seal
method of wellhead engineering for surface production wellheads to its
existing clients
o Add additional territories to the agreement to make the licence worldwide
and where higher royalty rates will apply in the range of 3% to 6% of the
revenues generated from the sale, lease, or rental of surface wellheads
· August 2021 - re-entered the Jack-up Exploration Rental Wellhead
market, through a collaboration agreement with Cameron
· July 2021 - received the London Stock Exchange's Green Economy
Mark awarded to companies and funds where 50% or more of their revenues are
attributable to environmental solutions which contribute to the global green
economy, in alignment with NetZero and ESG principles
POST PERIOD END
· October 2022 - raised £1,550,000 through the issue of
Convertible Loan Notes ("CLNs"), which will be used for working capital and to
fund the Group's activities as it seeks to capitalise on the increasing
pipeline of opportunities within its target markets.
Chief Executive Ben Van Bilderbeek said:
"During the year to 30(th) June 2022, the Group made a loss before tax on
continuing operations of £5.56m compared to a loss in the prior year of
£4.37m. The board is focussing reversing this performance and several pivotal
decisions have been taken. Perhaps the most significant being the Company's
re-entry into the drilling from Jack-up rigs exploration rental wellhead
business. This is the sector in which Plexus initially built its name and
reputation, before we elected to exit this market in 2018 following the
collapse of the oil price in 2014 and 2015. During that time, capital
investment in exploration activity dwindled away and, six years on, the oil
and gas market has changed once again.
During the pandemic we saw a major shift in geopolitics and industry sentiment
led initially by a boom in renewable energy. Followed by Russia's war against
Ukraine which has subsequently led to the recognition of the need to increase
and deliver energy security closer to home. This has flagged the importance of
the oil and gas industry investing in exploration and production activities
as, without this, as suggested by Saudi Arabia, the world could be short of
approximately 30 million barrels of oil a day in eight years' time, while
currently the world consumes circa 100 million barrels per day.
This change of industry circumstances is beginning to have a positive effect
as evidenced by the significant increases in profits of the oil and gas
operators, and it is anticipated that the oil services companies will
similarly benefit. As reported by Rystad Energy, global oil and gas
investments will rise 4% to US$628 billion this year from US$602 billion in
2021, while Schlumberger's CEO recently said that it is "one of the strongest
outlooks for the energy services industry in recent times", and Baker Hughes
head said there are "very busy years ahead" in an "accelerating multiyear
upcycle". In the same vein, Shell suggested it will cost billions of dollars
just to keep production flat as production from existing wells declining at
circa 15% to 20% a year; this requires investment tied to older wells as well
as having to discover and develop new wells to replenish portfolios.
However, it is not all plain sailing for the industry as investors,
governments, and regulators are no longer tolerating the oil and gas
industry's previously accepted practices as far as emission levels are
concerned, which are now recognised as being too high and unsustainable.
Pressure continues to build with operators required to operate more
sustainably with the aim of achieving a 45% reduction in emissions by 2030 and
NetZero targets by 2050. While in the past, many oil companies have focused on
using/fixing old solutions and infrastructure, their hands are now being
forced to invest in and utilise new technology that can help to prevent rather
than cure emissions. I believe that as a result, companies like Plexus, which
can offer leak proof wellheads with long term integrity for the life of a
well, are well positioned to benefit from these major green initiatives,
whilst also helping to significantly reduce the amount of methane gas being
released into the atmosphere as a result of fugitive emissions, the polite
name for leaks.
A major step forward in the journey towards a greener and more responsible oil
and gas industry was the introduction of the Inflation Reduction Act ('IRA')
in August this year by US President Biden. This is a US$369bn package of
investment designed to tackle the climate crisis, which holds major oil and
gas companies in the US to account for their operations and the amount of
methane gas leaked into the atmosphere. Estimates suggest that it could cut US
greenhouse gas emissions by 40% by 2030. Aside from penalising the worst
polluters, the fund has set aside US$1.5bn in subsidies to help the companies
affected invest in the technology to fix the leaks, as well as providing tax
breaks for those that invest in green energy solutions. It is hoped that, as
suggested by Jonathan Banks at the Clean Air Task Force, a similar fee "could
be repeated elsewhere in the world".
I believe that Plexus can make a meaningful contribution to such emission
reduction demands, particularly in relation to supplying the industry with its
HG® metal-to-metal wellhead seals which can deliver leak proof performance
for surface and subsea production wellheads, and specialist POS-GRIP
applications such as P&A. We gained a boost in recognition of our green
technology credentials in July 2021 when Plexus was recognised by the London
Stock Exchange as contributing to the green economy by deriving more than 50%
of revenues from environmental solutions with the Green Economy Mark
accreditation.
Encouragingly, we are experiencing an increased level of interest in our
Exact-EX 'through the BOP' exploration wellhead rental services, Centric-15
mudline hangers and our POS-GRIP "HG" surface production wellhead technology,
for which we are positioning the Company to benefit, by way of planned
investment in additional rental inventory and increased customer, industry
partner and licencee engagement.
For example, in December 2021, we signed a purchase order for a POS-GRIP
surface production wellhead system for a leading North Sea operator, and we
are pursuing a number of other additional prospects. This is in line with our
IP-led strategy to gain surface production wellheads market share in
conjunction with a licence co-operation agreement signed with Cameron, a
Schlumberger Group company, the scope of which was expanded in mid-December
2021.
Our research and development ("R&D") team continues to work hard to ensure
that our innovative patented POS-GRIP technology is fully utilised and
deployed across various applications. For example, the high-growth,
multi-billion P&A market, which focuses on preparing a well to be closed
permanently at the end of its life, is such an opportunity. Towards the end of
the period in June 2022, we were delighted to announce a Purchase Order for
P&A equipment and services from Oceaneering International Services Limited
("Oceaneering"), a division of Oceaneering International Inc., a leading
subsea engineering and applied technology company, to support its vessel-based
P&A services for a six-operator joint campaign in the Dutch Sector of the
North Sea. Given the size and rapid growth prospects for the P&A market,
we hope this project will lead to other similar work in the North Sea and
internationally both with Oceaneering and other customers.
Another pressing topic we believe that we can help address is the mitigation
of problems related to subsea wellheads such as Sustained Casing Pressure
("SCP"), which is a major threat to subsea wellhead integrity and for which no
means of remediation currently exists. Since 2015, following an industry
Joint Industry Project, Plexus has considered a unique subsea annulus
management solution, as part of our patented Python® subsea wellhead system,
without needing penetrations through the wellhead body in line with API
standards. As subsea wellheads are difficult and expensive to access and
maintain, and in some cases are not able to have remedial work carried out at
all, the new regulations and demands bring into sharp focus the argument that
Plexus has always promoted which is that prevention is better than supposed
cures.
As the oil and gas industry transitions to being more responsible and
innovative, an area that is developing fast, where I believe Plexus can also
play a part is gas storage, whether natural gas, CO2, or indeed hydrogen. Such
long-term gas storage applications demand equipment and infrastructure that
can last for periods well beyond that expected of conventional oil and gas
equipment. Wellheads are still required, but for injection rather than
extraction purposes, and being able to supply leak proof wellheads, where our
unique seal design can address corrosive conditions, such as exists with CO2
delivers unique benefits. With one of the largest potential carbon dioxide
storage capacities in Europe, the North Sea, the UK Government is committed to
supporting the deployment of large-scale carbon capture, usage, and storage
facilities. Accordingly, in June, the North Sea Transition Authority ("NSTA")
launched the UK's first carbon storage licensing round, inviting applications
for 13 areas across the United Kingdom Continental Shelf ("UKCS"), which,
alongside the six licences issued previously, could have the ability to store
circa 20-30 million tonnes of CO2 by 2030. We are assessing how Plexus could
play a part in this unfolding opportunity.
To help ensure Plexus continues to have sufficient working capital to expedite
our growth plans, post period end, in October 2022, we raised £1,550,000
through the issue of Convertible Loan Notes ("CLNs"). My fellow board
member, Jeffrey Thrall, and my family interests took part in this raise,
demonstrating our belief in the contributions Plexus can once again make to
the oil and gas industry in reaching NetZero targets, and confidence that its
increasingly diversified product and services mix will deliver value to
shareholders. The funds raised will be used to support day to day activities
including re-entering the Jack-up Exploration (Adjustable) Rental Wellhead
market, and our ongoing R&D programme.
In summary, I am optimistic that as momentum grows for greater efficiency and
environmentally responsible extraction of fossil fuels, oil and gas companies
will look to innovative engineering companies like Plexus to support their
growth trajectory with the provision of safer, more reliable, and sustainable
solutions. Furthermore, those companies in related industries such as gas
storage and carbon capture can also benefit from using our technology. I look
forward to reporting on progress during the 2022 /2023 financial year."
For further information please visit www.plexusplc.com
(http://www.plexusplc.com) or contact:
Plexus Holdings PLC info@plexusplc.com
Ben van Bilderbeek, CEO
Graham Stevens, CFO
Cenkos Securities PLC Tel: 0131 220 6939
Derrick Lee
Pete Lynch
St Brides Partners Ltd plexus@stbridespartners.co.uk
Isabel de Salis
Ana Ribeiro
Summary of Results for the year ended 30 June 2022
2022 2021
£'000 £'000
Revenue (continuing operations) 2,306 2,017
Adjusted EBITDA (continuing operations) (2,780) (2,692)
Operating Loss (continuing operations) (4,291) (4,546)
Loss before taxation (continuing operations) (5,556) (4,372)
Loss after taxation (continuing operations) (7,457) (4,110)
Loss after taxation (discontinued operation) - (392)
Loss after taxation (combined) (7,457) (4,502)
Basic loss per share (pence) (continuing operations) (7.42p) (4.09p)
Basic (loss) / earning per share (pence) (discontinued operation) - (0.39p)
CHAIRMAN'S STATEMENT
Business progress
The Group's revenues increased in the 12 months to 30 June 2022 to £2,306k
(2021: £2,017k), with a loss on continuing operations before tax of £5.56m
compared to loss in the prior year of £4.37m in the prior year.
Encouragingly, the global outlook for growth in oil and gas development in the
coming years is, as a result of the war in Ukraine and the consequent increase
in global energy prices, becoming more stable and positive after a period of
extreme volatility. In the North Sea, and internationally, there is a
continued pickup in activity for exploration and appraisal, production
drilling and P&A work. As is usual in the cyclical oil and gas business,
operators' initial priority in the up cycle is to increase production from
existing wells and assets, and then turn to pursuing new exploration work and
field developments.
The August 2021 co-operation agreement with Cameron has enabled Plexus to
re-enter the Jack-up exploration rental wellhead market with the proven Exact
and Centric wellhead and mudline suspension products. With the significant
increase in the planning of new exploration wells, and an established
reputation in the exploration drilling market, Plexus is well positioned to
benefit from this growth in activity. During the period, Plexus has
manufactured and tested several sets of this equipment in response to
enquiries and an anticipated growth in demand from customers.
This year saw a major order from Oceaneering for decommissioning work with
innovative Plexus products. The initial project scope will take place during
the first half of 2023 where the equipment will be deployed on several wells
in the Dutch sector of the North Sea. Importantly, this contract has the
potential for follow-on work both with Oceaneering and with other contractors
and operators with similar requirements.
As Plexus continues to be known as experts in Jack-up exploration drilling and
mudline suspension systems and has knowledge of many of the legacy wells in
the North Sea and worldwide which are now being considered for re-entry and
permanent decommissioning, there is plenty of scope for gaining contracts in
this growing space. Plexus has also been active in general product engineering
and support for several specialised projects, such as P&A.
The Company's investment in associate company Kincardine Manufacturing
Services Limited ("KMS") has, like many other similar companies in the sector,
suffered a downturn in business over the past two years, primarily driven by
the effects of the COVID-19 pandemic. KMS has managed to navigate through
these turbulent times with reasonable success by careful management of costs
and utilisation of available Government support, such as the furlough scheme.
In the period, earnings have been lower than previous years and KMS has not
been in a position to pay dividends. Accordingly, an impairment charge of
£109k has been taken by the Company after an Impairment Review as required
under IAS36. Management is confident that KMS is well positioned to recover as
activity levels continue to pick up in the second half of 2022 and into 2023.
Plexus' primary core strength is its intellectual property ("IP"), together
with its broad family of products and associated equipment, which feature and
incorporate this IP. The IP consists of a mix of patents, confidential test
results and analysis methods, as well as field experience and extensive
product know-how, and has in the year been recognised by the LSE for its
emissions reducing features with the accreditation of the Green Economy Mark.
This all combines to continue to give Plexus a robust and long-term level of
protection, which is evidenced by ongoing licensing with industry majors
TechnipFMC and Schlumberger. Although product patents expire over time, the
additional IP surrounding the technology continues to protect all Plexus and
licenced products. In addition to this, new Method Patents for POS-GRIP are
expected to be published in the coming months, which are anticipated to give
Plexus and its licensees further general protection of the POS-GRIP method for
another 20 years in the UK and worldwide.
Overview
Plexus is a wellhead engineering and engineering technology led business.
While the industry norm is often for companies to try to win business with
products which just meet the lowest acceptable technical requirement at the
lowest price, Plexus has always pushed for ways to significantly enhance
safety and performance of the products offered to result in a significantly
improved value proposition for the end user, especially when considered over
the life of a well. These proprietary products are invariably protected by
Plexus IP, such as POS-GRIP technology and "HG" metal-to-metal seals. The
Company has demonstrated that its products and technology perform and can be
profitable over a wide range of products and applications and has also
licenced its technology to industry majors, whilst at the same time delivering
green ESG and NetZero compliant features in relation to being "through the
BOP" and most importantly offering leak-proof sealing throughout the life of a
well thereby avoiding periodic and often unsuccessful seal maintenance.
As well as supporting licensees to begin to deploy the Plexus technology on a
worldwide basis in markets that Plexus is best placed to reach through its
licencee partners, the Company continues to pursue surface and subsea wellhead
opportunities directly. In addition to this, Plexus is also actively pursuing
opportunities in the Jack-up exploration wellhead business through a second
licensing deal with Cameron which enables Plexus to offer Exact exploration
wellhead and Centric mudline suspension systems once again.
Staff
On behalf of the Board, I would once again like to thank all our employees for
their dedication and hard work during the year. Following the relaxation of
COVID-19 working restrictions we were pleased to welcome all staff back to
working in our Dyce, Aberdeen operational headquarters. Having weathered this
difficult period, I am sure that future developments and the anticipated
increase in sales activity will be positive for our staff, and for future
employment opportunities within Plexus.
Outlook
The past year has highlighted the critical need for energy independence, and
it is clear that the West is still beholden to a variety of global
macroeconomic factors, with some of these beyond its control. Whilst in an
ideal world energy independence would come solely from renewable energy, the
world is still a long way from that being possible, and at the same time
population growth and energy demand continues to grow. In the meantime, with
natural gas being recognised and utilised as a cleaner transitional energy
source, it is vitally important that it is extracted as cleanly as possible.
The major importance of gas, and the unavoidable role that it has to play in
the world's energy future needs was perhaps most clearly illustrated by
statements made very recently to the Financial Times by Saad al-Kaabi the
chief executive of QatarEnergy. He argues that natural gas, which emits
significant carbon when burnt but less than oil and coal, should be central to
the world's energy transition, and said - "I agree with going green, but I
always say gas is not a transition fuel, it is a destination fuel. If you look
at the base load of electricity in the world, it's either going to be gas, or
nuclear for the ones that accept to have nuclear and can afford it. The rest
is going to be some fuel oils and a lot of renewables."
The war in Ukraine and closure of the Nord Stream 1 gas pipeline highlighted
the need for energy security in the UK and Europe, leading to a demand for a
resurgence in the exploration and development of oil and gas fields, including
in the North Sea. Governments across the globe have a precarious tightrope to
walk - delivering on promises to cut methane emissions in half by 2030 whilst
safeguarding the reliable supply of energy to its population. It is clear
that currently hydrocarbons have a key role to play in energy provision and
will do so for many years to come.
We are confident that Plexus' proprietary POS-GRIP HG wellhead sealing
technology, which offers leak-free performance over the life of the well, can
be utilised to simultaneously help operators secure energy independence whilst
helping achieve pledges on methane emissions reductions in line with ESG and
NetZero strategies of governments, regulators, and organisations
worldwide. This is key; as Durwood Zaelke, president of the Institute for
Governance & Sustainable Development pointed out when he said, "If you
think of fossil fuel emissions as putting the world on a slow boil, methane is
a blow torch that is cooking us today."
Accordingly, we are delighted with positive progress being made in this
regard. Recently, the USA issued a first-of-its-kind fee on methane leaks
from the oil and gas sector, with the law imposing a charge of US$900 per ton
of fugitive methane emitted from oil and gas company wells. Whilst some of the
oil and gas majors have pushed back on this, others, including Shell, have
supported this approach, which we hope will galvanise the industry into
eradicating leaks wherever possible whilst recognising that leaking wellheads
would always be better addressed through prevention rather than cure.
Another positive step towards reducing methane emissions is the creation of a
Responsibly Sourced Gas ("RSG") stamp, which certifies and demonstrates to a
buyer that the gas has been produced with minimal or even zero methane leaks
or other environmentally 'responsible' procurement practices. In time, I am
hopeful that stamps like these and other similar steps will become more
commonplace to ensure that natural gas is the clean transitional energy source
that it has been earmarked to become.
With this fast-changing background and following the recent raising of
£1,550,000 through the issue of convertible loan notes which I supported
alongside CEO Ben van Bilderbeek's family interests, I am confident that our
sales team will convert the increasing number of enquiries and tenders into
contracts, and that accordingly Plexus' outlook is a positive one.
J Jeffrey Thrall
Non-Executive Chairman
24 November 2022
Principal Activity
The Group markets oil and gas industry wellhead and associated equipment that
utilises its patented friction grip method of engineering known as POS-GRIP
Technology. This involves squeezing one tubular member against another within
the elastic range to effect gripping between the components and can also set
metal-to-metal seals, known as "HG" ® Seal Technology. This superior method
of load support and sealing for wellheads offers several important and unique
advantages to operators, particularly for HP/HT surface and subsea production
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.
The Company has developed a range of products based on this technology, and is
focused on pursuing surface production, abandonment, subsea and geothermal
wellhead opportunities, as well as connectors and the subsea market. It has
also recently re-entered the rental exploration wellhead from Jack-up rigs
market through a licence arrangement with Schlumberger and it is hoped that
this can be a main focus for Plexus to generate revenues from.
In addition to Plexus' organic activities, the Company also pursues licencing
opportunities, and is currently supporting Cameron International Limited, a
Schlumberger group company, to enable Cameron to use the Company's technology
under a non-exclusive licence for the development of conventional and
unconventional oil and gas surface production wellheads. Cameron is in the
process of testing, completing Performance Verification Testing, and marketing
two new POS-GRIP products, which should lead to a royalty revenue stream for
the Company.
The Company retains the right to pursue Jack-up exploration rental wellhead
related business with POS-GRIP products in Russia and the CIS where it has
existing licence agreements with LLC Gusar and CJSC Konar. However, the
licence agreement with Gusar is currently suspended due to the war in Ukraine
and resulted in a bad debt provision of £277k being recognised in the year.
Following the sale of the Company's POS-GRIP based rental wellhead exploration
business to TFMC in 2018 revenues fell away as focus was turned to building up
a new range of activities, namely production wellheads and other specialist
engineering opportunities, and longer-term subsea wellheads. This change of
strategic direction coincided with market challenges, and losses have had to
be incurred over the past few years. However, having re-entered the rental
wellhead sector, and having begun to make progress in the production wellhead
sector it is anticipated that this situation will begin to reverse in the 2023
calendar year.
Financial Results
Statement of Comprehensive Income
Revenue
Continuing revenue for the year was £2,306k, an increase from £2,017k in the
previous year. The increase in continuing sales revenue is a result of
increased operational project work taking place during the year.
Margin
Gross margin on continuing operations increased to 64.7% (compared to 47.3% in
the previous year). The increase in margin is largely driven by higher margins
on sold equipment being achieved when compared to the prior year.
Additionally, cost of sales includes a stock provision charge of nil in the
current year compared to £569k in the prior year.
Overhead expenses
Continuing activities administrative expenses have increased when compared to
the prior year with expenditure of £5.78m (2021: £5.50m). Included within
administrative expenses is a bad debt provision of £277k, relating to a
licensing fee due from Gusar LLC which has been compromised by the suspension
of activities due to the war in Ukraine. Overhead expenses also include an
impairment charge of £109k following a review of the carrying value of the
Group's associate undertaking KMS.
Continuing salary and benefit costs remain the largest component of
administrative expenses at £2.87m compared to £2.79m in the prior year.
Non-recurring item
The statement of comprehensive income includes a fair value adjustment on an
asset held for sale of £1.03m, relating to the write-down in a building's
value to its fair value.
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.
Adjusted EBITDA on continuing operations for the year was a loss of £2.78m,
compared to a loss of £2.69m in the previous year. Adjusted EBITDA on
continuing operations is calculated as follows:
2022 2021
£'000 £'000
Operating loss (4,291) (4,546)
Add back:
-Depreciation 449 482
-Amortisation 1,230 1,219
Share in profit / (loss) of associate 111 (77)
Fair value adjustment on financial assets (513) 19
Impairment charge on associate undertaking 109 -
Other income 125 211
----- -----
Adjusted EBITDA on continuing operations (2,780) (2,692)
------- -------
Loss Before Tax
Loss before tax on continuing operations of £5.56m compared to a loss in the
prior year of £4.37m. The loss on discontinued operations is nil compared to
a profit of £0.02m in the prior year.
Tax
The Group shows a total income tax credit of £0.04m for the year compared to
a tax credit of £0.39m for the prior year. The income tax credit wholly
relates to continuing activities compared to the prior year split of £0.26m
credit on continuing activities and £0.41m charge on discontinued activities.
Investments
In December 2018, Plexus acquired a 49% shareholding in Kincardine
Manufacturing Services Limited ("KMS"), for a consideration of £735k plus
associated legal fees of £50k. At the year-end a share in profit of associate
of £111k (2021: loss £77k) has been recognised. Following an impairment of
the investment overhead expenses include an impairment charge of £109k (2021:
nil).
EPS
The Group reports basic loss per share on continuing activities of 7.42p
compared to a loss per share of 4.09p in the prior year. The basic loss per
share on discontinued activities of nil, compared to a loss per share of 0.39p
in the prior year.
Statement of Financial Position
Intangible Assets and Intellectual Property ("IP")
The net book value of goodwill and intangible assets was £9.17m, a decrease
of 4.9% from £9.64m last year. This movement represents investment of £0.45m
less the annual amortisation charge of £0.93m.
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 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 and related activities.
The loss in the year and the market capitalisation of the company being less
than the carrying value of the assets are clear indicators of impairment.
Following a thorough review, including a discounted cashflow model which has
included cashflows for 20 years. the Directors have concluded no impairment of
IP is required. Therefore, the Directors consider the current carrying values
to be appropriate.
Research and Development ("R&D")
R&D expenditure including patents increased from £0.24m in 2021 to
£0.45m in 2022. Continued investment as and where necessary in R&D
demonstrates the Group is protecting, developing, and broadening the range of
proprietary POS-GRIP friction-grip method of engineering applications, related
IP and Plexus products.
Tangible Assets
The net book value of property, plant and equipment including items at the
year-end was £0.82m compared to £2.96m last year. Current assets include a
property held for sale with a carrying value of £1.1m. Capital expenditure on
tangible assets increased to £0.25m compared to £0.17m in the prior year.
Cash and Cash Equivalents
Net cash at the year-end was £1.88m (cash and cash equivalents of £5.84m
less the bank Lombard facility of £3.96m) compared to net cash of £3.14m in
the prior year (cash and cash equivalents of £5.18m less the bank Lombard
facility of £2.04m) reflecting a net cash outflow for the year of £1.26m
(net increase in cash of £0.66m per Statement of Cash Flows plus net increase
in bank borrowings of £1.92m).
The increase in bank borrowing represents £3.96m, which has been drawn down
on a Lombard facility. This facility was repaid in its entirety in July 2022.
It should also be noted that the Group has financial asset investments with a
value of £0.10m (2021: £3.04m) 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 suspend 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 and associated
products and services.
The Company's primary focus continues to be the marketing of its
POS-GRIP-enabled products and supporting licensees of the technology, as well
as the re-entry to the rental exploration market with its non-POS-GRIP
equipment designs. Plexus continues to supply surface production wellheads and
is also pursuing supplemental business opportunities relating to well
abandonment and decommissioning, which are anticipated to be growth areas as
the world's older producing oil and gas fields, such as in the North Sea, come
to the end of their lives.
Plexus continued to invest in R&D during the year, with significant focus
on optimising the Exact rental exploration wellhead product range for the
current market, and also to complete product development and testing required
for the Oceaneering decommissioning work. R&D remains an important
operational activity 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, particularly in relation
to greener leak-proof technologies and equipment, 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 2022 (excluding non-executive directors) comprised of
35 employees, including 1 international employee, which compared to a weighted
average total of 35 in the current year and 33 in the prior year.
Competency across the business has continued to evolve and broaden, with a
system developed and implemented within the existing appraisal process, to
demonstrate the competency of office-based personnel. The Company continues
to maintain the OPITO accreditation for its competency management system,
ensuring a robust assessment of employees in safety-critical roles.
Public Health Scotland is no longer delivering a Healthy Working Lives Award
but Plexus' commitment to the health and wellbeing of its employees will
continue with a programme of activities aiming to encourage habits of
wellbeing and inspiring individuals to take responsibility for their own
health.
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. This is reflected in the business being once again lost time injury
("LTI") free this year. Plexus has now passed its seventh anniversary of this
milestone in September 2022.
Plexus continues to comply with the requirements of the API Q1/ISO 9001 and
ISO 45001 standards to include the retention of both API 6A and 17D Licences.
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.
Plexus has continued to develop its in-house systems to ensure the Company is
able to react swiftly to changing market requirements, and constantly review
the Company's IT infrastructure.
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, whilst at the same time
creating 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, and for
surface production. The Company is now focused on replicating this past
success in other wellhead markets including surface production, subsea, gas
storage and geothermal, as well as other initiatives such as a POS-GRIP Crown
Plugs and POS-GRIP Lateral Trees. Plexus' re-entry into the exploration rental
wellhead for the Jack-up drilling market will be built on non-POS-GRIP
technology but with specific benefits and features including "through the
BOP".
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(®)
Subsea Wellhead as well as the POS-SET Connector(®) 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 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, including
licensees. In line with this strategy, in November 2020 Plexus entered into
a licence agreement with Cameron International Limited, which grants the
Schlumberger group company a non-exclusive licence to use the POS-GRIP and
HG® metal-to-metal seal method of wellhead engineering for the development of
conventional and unconventional oil and gas surface wellheads. The scope of
this licence was further expanded in December 2021. Schlumberger continue to
make good progress with their engineering and testing of their new wellhead
which will incorporate Plexus technology, and it is anticipated that marketing
and sales by Schlumberger to its customers will begin in the first half of
2023 calendar year.
In addition to POS-GRIP Technology, Plexus is now re-entering the Jack-up
Exploration Wellhead market with Cameron's Exact and Centric wellhead and
mudline suspension products. These products are tried and tested, and well
suited to the exploration market as they are "through the BOP" products which
deliver crucial time savings and safety benefits over conventional wellhead
products. As the exploration market regrows in the North Sea and
internationally, these products, combined with Plexus' experience and
reputation in this business means that we are well placed to win a significant
share of the work now being planned.
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 over time 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. In addition to this there is a
surge in interest in subsurface storage wells for gas, CO2 and hydrogen, for
which POS-GRIP technology is also ideally placed.
Plexus has a good reputation for the agility and customer focus required to
succeed in the Jack-up Exploration Wellhead market, and so the agreement with
Cameron to allow Plexus to re-enter this market with field proven products is
welcome and is anticipated to see an addition to revenues as global
exploration activity increases.
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 Plexus 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.
The Company has taken on the Cameron Exact adjustable wellhead and Centric
mudline suspension products. This has resulted in initial minor orders for
P&A and decommissioning work associated with this equipment. We expect
that the increase in activity and revenue from this business will be positive
and will also allow
Plexus to re-engage with customers at the exploration stage, which then has
the potential to lead to further production and subsea opportunities.
As the world and the oil and gas industry strives to implement a range of ESG
compliant initiatives, particularly in relation to achieving NetZero. Plexus
believes that its technology can make a valuable contribution in terms of its
leak-free sealing capabilities, and its 'through the BOP' wellhead designs.
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.
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.
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, 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. This has for example been evidenced by the impact of the war in
Ukraine. The current global political and environmental landscape,
particularly in relation to climate change issues and NetZero goals, 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 commercial opportunities and trading
conditions. Some risks are of course unforeseen, and one such significant risk
took the form of the global pandemic caused by COVID-19 which materialised in
2020 and continued in the prior year. 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. For example ongoing and future changes to oil and gas industry
windfall taxes may have an adverse impact on investment levels. To help
address and balance such risks, the Group where possible seeks to broaden its
geographic footprint and customer base, as well as actively look to forge
commercial relationships with large industry players.
The Company continues to closely monitor the potential impact and risks of the
UK's exit ("Brexit") from the European Union ("EU"). This includes assessing
and monitoring 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
resulting from 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 as well as the COP26 and COP 27 pronouncements, together
with 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.
However, it is 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 for the foreseeable future. It should be noted that the
climate change impact of methane is now better understood by
environmentalists, regulators and the oil
and gas industry and that it is essential that methane wellhead leaks are
prevented whenever and wherever possible. The impending Methane Emissions
Reduction Act in the US and similar legislation being progressed in Europe
demonstrate regulations are increasingly becoming more stringent.
(c) Technology
Having originally proved the superior qualities of POS-GRIP technology within
the Jack-up wellhead exploration market which culminated in the sale of that
business to FMC Technologies Limited, a subsidiary of TechnipFMC (Paris:FTI,
NYSE:FTI) (jointly "TFMC"), in early 2018, the Company has focused on
establishing its technology and equipment in other markets including surface
production wellheads, subsea and de-commissioning, both organically and
through licence partners. Plexus has since re-entered the rental exploration
wellhead market with non-POS-GRIP designed equipment following a licence
agreement with Schlumberger in August 2021. Further, in November 2020 Plexus
entered into a licence agreement with Cameron International Limited, which
grants the Schlumberger group company a non-exclusive licence to use the
POS-GRIP and HG® metal-to-metal seal method of wellhead engineering for the
development of conventional and unconventional oil and gas surface wellheads.
The scope of this licence was further expanded in December 2021.
(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 recent years as a
result of the large oil service company competitors becoming even larger and
more influential through a series of mergers and acquisitions. These major
oil service and equipment company consolidations 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, including adding to its existing extensive 'know-how' 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
volatile oil price and market challenges and a corresponding reduction in
drilling activity and related levels of capex spend. These adverse trading
conditions had been magnified since early 2020 by the Covid-19 pandemic, which
in turn has coincided with an acceleration in the world's desire to reduce its
dependence on hydrocarbons, particularly following the start of the war in
Ukraine in February 2022. Therefore, although there are now some encouraging
signs of a pick-up 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 R&D initiatives, at the rate that may
be required. 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 help to mitigate such
risks. In addition, there are signs that certain pressure groups such as Just
Stop Oil and Extinction Rebellion are increasing their level of activity and
this may also impact on oil and gas investment and drilling activities, at
least in the West.
(f) Going Concern, liquidity, and finance requirements
In an economic climate that in many ways remains 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 where financial pressures and constraints can
apply. Also, the significant decline in the size of Plexus' market cap is a
negative factor if consideration is given to raising additional funds in the
public markets. Furthermore, a number of large and influential institutions
have actively divested oil and gas investments and declared that further
investments and funding will not be made available for oil and gas projects as
a result of climate change concerns and as part of the move to NetZero. The
Group undertakes cashflow forecasting throughout the year to ensure the
going-concern assumption is still appropriate. The recent raising of funds
from convertible loans is an example of this and helps to ensure the Group has
adequate working capital headroom to see it through the next 12 months.
(g) Credit
The main credit risk is attributable to trade receivables. Where 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. Where smaller
independent oil and gas companies are concerned, credit risk can be a factor.
Customer payments can 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 as and
when appropriate 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
Although the regulations around COVID-19 were relaxed during the year, Plexus
places the health and safety of its employees as its highest priority and in
line with this has implemented various protocols. The Board continuously
monitors the situation, should Government guidance change.
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 communicating our strategy and objectives, we seek to
maintain continued support from our investor base. Such opportunities have
been compromised by the financial performance of Plexus over the past few
years, and the resultant decline in the size of the market cap of the
business. It is the Directors' intention that as soon as positive news flow
begins to be generated a fresh approach to the investment community market to
both existing and new potential shareholders will take place in conjunction
with its advisors. Important issues include 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, although over the past years, as
a result of the Covid pandemic, such interactions have been adversely
impacted; in common with many other businesses those impacts have gradually
lessened over the past year since the rollout of the vaccine programme and we
are able to resume "normal" interaction levels. During the year, the Finance
Director supported by other members of the executive team, the Company's
broker, and the Investor Relations advisor, engaged where possible with
investors by email, presentations, direct conversations, and ad-hoc meetings.
In the prior year the Company re-launched its website to provide investors and
other stakeholders with an improved platform to access information about the
Company. The website includes details of the LSE "Green Economy Mark" status,
which was awarded in July 2021, and associated NetZero commentary. During the
year several key decisions were made by the board, including the re-entering
of the exploration market, the decision to sell a building (currently held as
an asset held for sale at the financial year end), and post year end the
raising of funds through convertible loans. All of these decisions are aimed
at increasing long-term shareholder value.
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. The
Company is engaged with a specialist firm of benefits advisers who are able to
offer a comprehensive service to employees as well as to the Company. The
Company consults with employees on matters of competency, training, and health
and safety as detailed in the Corporate Governance Report. During the year,
the Company successfully achieved seven continuous years with no Lost Time
Incidents (LTI's) and this successful safety culture has continued beyond that
anniversary to the date of writing. In the course of the year under review,
there was a gradual return of staff from home-working to permanent working in
the office; at the time of writing, all staff are now fully returned to office
based working. The challenges of maintaining close contact with employees
presented by remote working were very successfully managed by use of
appropriate software such as Microsoft Teams alongside the use of a secure VPN
and other network security protocols. The easing of restrictions has enabled
more in-person contact to be achieved and the Company is now operating under
normal - and importantly, safe - direct conditions.
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 to
support their efforts to achieve commercial success by holding as and when
required technical workshops, technical training and data transfer. Following
the announcement in November 2020 of entering into a non-exclusive surface
wellhead licencing agreement with Cameron and the extension of this agreement
in December 2021, regular Teams meetings and occasional face to face meetings
have been held as part of the process of transferring Plexus' relevant IP so
that Cameron can design and develop its own low-cost wellhead with POS-GRIP
technology inside. The licence agreement with our Russian partner LLC Gusar
was indefinitely suspended by Plexus in March 2022 following the Russian
invasion of Ukraine and remains suspended.
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
24 November 2022
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2022
Notes 2022 2021
£'000 £'000
Revenue 1 2,306 2,017
Cost of sales (813) (1,062)
------- -------
Gross profit 1,493 955
Administrative expenses (5,784) (5,501)
------- -------
Operating loss (4,291) (4,546)
Finance income 164 143
Finance costs (640) (103)
Share in profit / (loss) of associate 111 (77)
Other income 125 211
Non-recurring item
Fair-value adjustment on asset held for sale (1,025) -
------- -------
Loss before taxation (5,556) (4,372)
Income tax charge / (credit) 3 (1,901) 262
------- -------
Loss after taxation from continuing operations (7,457) (4,110)
Loss after taxation from discontinued operations 4 - (392)
------- -------
Loss for year (7,457) (4,502)
Other comprehensive income - -
------- -------
Total comprehensive (7,457) (4,502)
income for the year attributable to the owners of the parent
------- -------
Loss per share 5
Basic from continuing operations (7.42p) (4.09p)
Diluted from continuing operations (7.42p) (4.09p)
Basic from discontinued operations - (0.39p)
Diluted from discontinued operations - (0.39p)
Consolidated Statement of Financial Position
at 30 June 2022
Notes 2022 2021
£'000 £'000
Assets
Goodwill 767 767
Intangible assets 6 9,165 9,644
Property, plant and equipment 7 821 2,961
Financial assets 10 101 3,042
Investment in associate 9 723 721
Deferred tax asset 3 - 1,899
Right of use asset 941 1,245
------- -------
Total non-current assets 12,518 20,279
------- -------
Asset held for sale 8 1,100 -
Inventories 1,394 575
Trade and other receivables 971 1,051
Cash and cash equivalents 5,840 5,175
------- -------
Total current assets 9,305 6,801
------- -------
Total Assets 21,823 27,080
------- -------
Equity and Liabilities
Called up share capital 11 1,054 1,054
Shares held in treasury 12 (2,500) (2,500)
Share based payments reserve 674 674
Retained earnings 16,307 23,764
------- -------
Total equity attributable to equity holders of the parent
15,535 22,992
------- -------
Liabilities
Lease liabilities 761 1,085
------- -------
Total non-current liabilities 761 1,085
------- -------
Trade and other payables 1,245 643
Lease liabilities 324 316
Bank Lombard facility 3,958 2,044
------- -------
Total current liabilities 5,527 3,003
------- -------
Total liabilities 6,288 4,088
------- -------
Total Equity and Liabilities 21,823 27,080
------- -------
Consolidated Statement of Changes in Equity
for the year ended 30 June 2022
Called Up Shares Held in Treasury Share Based Payments Reserve Retained Total
Earnings
Share Capital
£'000 £'000 £'000 £'000 £'000
Balance as at 30 June 2020 1,054 (2,500) 674 28,266 27,494
Total comprehensive income for the year - - - (4,502) (4,502)
------- ------- ------- ------ ------
Balance as at 30 June 2021 1,054 (2,500) 674 23,764 22,992
Total comprehensive income for the year - - - (7,457) (7,457)
------- ------- ------- ------ ------
Balance as at 30 June 2022 1,054 (2,500) 674 16,307 15,535
------- ------- ------- ------- -------
Consolidated Statement of Cash Flows
for the year ended 30 June 2022
2022 2021
Notes £'000 £'000
Cash flows from operating activities
Loss before taxation from continuing activities (5,556) (4,372)
Loss before taxation from discontinued activities - 20
------- -------
Loss before tax (5,556) (4,352)
Adjustments for:
Depreciation and amortisation charges 1,679 1,701
Profit on disposal of property, plant and equipment (4) (1)
Share in (profit) / loss of associate (111) 77
Property rental and dilapidations income (114) (123)
Lease liability re-assessment - 25
Fair value adjustment on asset held for sale 1,025 -
Impairment of associate 109
Fair value adjustment on financial assets 513 19
Investment income (164) (143)
Interest expense 127 84
Changes in working capital:
(Increase) / decrease in inventories (819) 295
Decrease / (increase) in trade and other receivables 80 (255)
Increase / (decrease) in trade and other payables 602 (135)
------- -------
Cash used in operating activities (2,633) (2,808)
Income taxes (paid) / refunded (2) 157
------- -------
Net cash used in operating activities (2,635) (2,651)
------- -------
Cash flows from investing activities
Funds divested / (invested) in financial instruments 2,428 (66)
Property rental and dilapidations income 114 123
Purchase of intangible assets (447) (235)
Purchase of property, plant and equipment (253) (170)
Preparation costs for asset held for sale (180) -
Proceeds of sale of property, plant and equipment 3 1
Interest and investment income received 164 143
Dividend income from associate - 100
Deferred proceeds from sale of discontinued operation - 2,186
------- -------
Net cash generated in investing activities 1,829 2,082
------- -------
Cash flows from financing activities
Draw down of Lombard facility 1,914 2,044
Repayments of lease liabilities (347) (342)
Interest paid (96) (45)
------- -------
Net cash inflow from financing activities 1,471 1,657
------- -------
Net increase in cash and cash equivalents 665 1,088
Cash and cash equivalents at 1 July 2021 5,175 4,087
------- -------
Cash and cash equivalents at 30 June 2022 15 5,840 5,175
------- -------
Notes to the Consolidated Financial Statements
1. Revenue
2022 2021
£'000 £'000
By geographical area
UK 1,984 1,992
Europe 277 -
Rest of World 45 25
----- -----
2,306 2,017
----- -----
The revenue information above is based on the location of the customer.
2022 2021
£'000 £'000
By revenue stream
Rental 417 401
Service 167 235
Sold Equipment 1,289 835
Royalty Fees 277 386
Rebillables 24 19
Support services and Engineering 132 141
----- -----
2,306 2,017
----- -----
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:
2022 2021
£'000 £'000
Customer 1 1,471 1,485
Customer 2 277 -
Customer 3 - 386
3. Income tax credit
(i) The taxation charge for the year comprises: 2022 2021
£'000 £'000
UK Corporation tax:
Adjustment in respect of prior years - (83)
------ -----
- (83)
----- -----
Foreign tax
Current tax on income for the year 2 1
Adjustment in respect of prior years - -
----- -----
2 1
----- -----
Total current tax charge / (credit) 2 (82)
----- -----
Deferred tax:
Origination and reversal of timing differences (14) (23)
Adjustment in respect of prior years (23) 255
----- -----
Total deferred tax (37) 232
(
----- -----
Total tax (credit) / charge (35) 150
----- -----
The effective rate of tax is 19% (2021: 19%)
Tax charge on discontinued activities - 412
Tax credit on continuing activities (35) (262)
----- -----
Total tax (credit) / charge (35) 150
----- -----
(ii) Factors affecting the tax charge on continuing activities for the year 2022 2021
£'000 £'000
Loss on ordinary activities before tax (5,784) (4,372)
Tax on (loss)/profit at standard rate of UK (1,098) (831)
corporation tax of 19% (2021: 19%)
Effects of:
Expenses not deductible for tax purposes 282 186
Effect of change in tax rate (257) (816)
Tax adjustments on share-based payments
Adjustments in respect of prior year (22) (92)
Foreign tax rates -
Deferred tax not recognised 1,060 1,291
----- -----
Total tax credit on continuing activities (35) (262)
----- -----
(iii) Movement in deferred tax asset balance 2022 2021
£'000 £'000
Deferred tax asset at beginning of year (1,899) (2,130)
Debit to Statement of Comprehensive Income 1,899 231
----- -----
Deferred asset at end of year - (1,899)
----- -----
(iv) Deferred tax asset balance 2022 2021
£'000 £'000
The deferred tax asset balance is made up of the following items:
Difference between depreciation and capital allowances - 1,131
Tax provisions (1)
Tax losses - (3,029)
----- -----
Deferred tax asset at end of year - (1,899)
----- -----
As outlined in the accounting policy (note 1f) deferred tax assets are
recognised only to the extent that it is probable that future taxable profit
will be available. The deferred tax asset relates to losses and is reviewed at
the end of each reporting period. The Group has previously recognised a
deferred tax asset based upon its mid-term forecast profitability. On the
basis losses have not been utilised in the current financial year management
consider that the probable threshold is not met and have released the asset to
the extent there are not sufficient taxable temporary differences. Once this
threshold can be demonstrated an asset will be recognised. At 30 June 2022 the
Group has tax losses available of £21.5m and have not recognised a potential
deferred tax asset in relation to these of £4.29m.
4. Discontinued Operations
On 1st February 2018 the Group sold its "Jack-up Business" to TFMC for an
initial gross consideration of £15m, with an additional sum of up to £27.5m
payable dependent on the future performance of the Jack-up Business during a
three year earn-out period.
The recognised profit on discontinued operations in the prior year represented
an increase in the expected deferred consideration received.
2022 2021
£'000 £'000
Revenue - -
Expenses - 20
Gain / (loss) before tax of discontinued operations - 20
Income tax charge - (412)
Loss after tax of discontinued operations - (392)
----- -----
Loss after taxation from discontinued operations - (392)
----- -----
The Statement of cash flows includes the following amounts related to
discontinued operations:
2022 2021
£'000 £'000
Operating activities - -
Investing activities - -
Financing activities - -
----- -----
Net cash generated/(used) from discontinued activities - -
----- -----
5. Loss per share
2022 2021
£'000 £'000
Loss attributable to shareholders - continuing operations (7,457) (4,110)
Loss attributable to shareholders - discontinued operations - (392)
----- -----
Loss attributable to shareholders (7,457) (4,502)
------ ------
Number Number
Weighted average number of shares in issue 100,435,744 100,435,744
Dilution effects of share schemes - -
---------- ----------
Diluted weighted average number of shares in issue 100,435,744 100,435,744
---------- ----------
Loss per share
Basic Loss per share for continuing operations (7.42p) (4.09p)
Diluted Loss per share for continuing operations (7.42p) (4.09p)
------ ------
Basic Loss per share for discontinued operations - (0.39p)
Diluted loss per share for discontinued operations - (0.39p)
------ ------
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 Other
Intellectual Property Development Computer
Software
Total
£'000 £'000 £'000 £'000
Cost
As at 30 June 2020 4,600 13,455 261 18,316
Additions - 235 - 235
Disposals - - - -
----- ----- ----- -----
As at 30 June 2021 4,600 13,690 261 18,551
Additions - 447 - 447
Disposals - - (17) (17)
----- ----- ----- -----
As at 30 June 2022 4,600 14,137 244 18,981
----- ----- ----- -----
Amortisation
As at 30 June 2020 3,313 4,422 256 7,991
Charge for the year 237 676 3 916
On disposals - - - -
----- ----- ----- -----
As at 30 June 2021 3,550 5,098 259 8,907
Charge for the year 238 687 1 926
On disposals - - (17) (17)
----- ----- ----- -----
As at 30 June 2022 3,788 5,785 243 9,816
----- ----- ----- -----
Net Book Value
As at 30 June 2022 812 8,352 1 9,165
----- ----- ----- -----
As at 30 June 2021 1,050 8,592 2 9,644
----- ----- ----- -----
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 considers 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,
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 2042 to
ensure the full benefit of all current projects is realised. The rationale for
using a timescale up to 2042 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 surface, subsea and other
equipment markets, including the recent re-entry into the Jack-up exploration
rental wellhead sector. As the Group is starting from a base point of trading
the growth rates are expected to be 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,
including a sensitivity analysis, 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 and other intangibles would be impaired.
Patent and other development costs are internally generated Note 1h provides
additional information on intangible assets.
7. Property plant and equipment
Tenant Assets under construction Motor vehicles
Buildings Improvements Equipment £000 £000 Total
£000 £000 £000 £000
Cost
As at 30 June 2020 3,740 714 5,393 - 17 9,864
Additions - - 42 128 - 170
Transfers - - 128 (128) - -
Disposals - - (2) - - (2)
----- ----- ----- ----- ----- -----
As at 30 June 2021 3,740 714 5,561 - 17 10,032
Additions - 130 69 54 - 253
Transfers - - 54 (54) - -
Reclassified to assets held for sale (3,055) - (3) - - (3,058)
Disposals - - (321) - - (321)
----- ----- ----- ----- ----- -----
As at 30 June 2022 685 844 5,360 - 17 6,906
----- ----- ----- ----- ----- -----
Depreciation
As at 30 June 2020 1,490 525 4,569 - 7 6,591
Charge for the year 153 41 284 - 4 482
On disposals - - (2) - - (2)
----- ----- ----- ----- ----- -----
As at 30 June 2021 1,643 566 4,851 - 11 7,071
Charge for the year 153 40 252 - 4 449
Reclassified to assets held for sale (1,111) - (3) - - (1,114)
On disposals - - (321) - - (321)
----- ----- ----- ----- ----- -----
As at 30 June 2022 685 606 4,779 - 15 6,085
----- ----- ----- ----- ----- -----
Net book value
As at 30 June 2022 - 238 581 - 2 821
----- ----- ----- ----- ----- -----
As at 30 June 2021 2,097 148 710 - 6 2,961
----- ----- ----- ----- ----- -----
The value in use of property, plant and equipment is not materially different
from the carrying value.
8. Asset held for sale
2022 2021
£'000 £'000
Cost 3,058 -
Accumulated depreciation (1,114) -
----- -----
Net book value 1,944 -
Preparation costs 172 -
Cost of sale 9 -
----- -----
Fair value adjustment (1,025) -
----- -----
1,100 -
----- -----
The asset held for sale relates to a property that will be sold during the
financial year ended 30 June 2023.
The Group has agreed a sale in principle prior to the year end, with the
building having been previously marketed for sale. In line with IFRS5 the
asset is held for sale at the lower of its carrying value and fair value. A
fair value adjustment to reduce the carrying value of the asset to its fair
value has been recognised as shown above. The fair value was assessed by
reference to an independent property agent.
9. Investment in associate
£'000
Investment in associate at 30 June 2020 898
Share of loss for the period (77)
Dividends received (100)
-----
Investment in associate at 30 June 2021 721
-----
Share of profit for the period 111
Impairment of investment (109)
-----
Investment in associate at 30 June 2022 723
-----
On 14 December 2018 Plexus Ocean Systems Limited acquired a 49% interest in
Kincardine Manufacturing Services Limited ("KMS") for a consideration of
£735k 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 2022, 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 £109k.
The summary financial information of KMS, extracted on a 100% basis from the
accounts for the 6 months to 30 June 2022 are as follows:
2022 2021
£'000 £'000
Non-current assets 846 1,066
Current assets 1,951 1,822
Current liabilities 844 787
Non-current liabilities 836 1,211
Revenue 3,473 3,313
(Loss) / profit before tax (196) (194)
KMS have a December 31 year-end date. Therefore, the profit before tax figure
is based on management accounts for the 12-month period to 30 June 2022.
10. Financial Assets
2022 2021
£'000 £'000
Financial instruments held at fair value 101 3,042
----- -----
101 3,042
----- -----
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 £513k (2021: £19k). The fair value of the investment is
evaluated by reviewing the portfolio on a quarterly basis, including the
reporting date of 30 June 2022.
11. Share Capital
2022 2021
9
£'000 £'000
Authorised:
Equity: 110,000,000 (2021: 110,000,000) Ordinary shares of 1p each 1,100 1,100
----- -----
Allotted, called up and fully paid:
Equity: 105,386,239 (2021: 105,386,239) Ordinary shares of 1p each 1,054 1,054
----- -----
12. Shares held in treasury
2022 2021
9
£'000 £'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.
13. Reconciliation of net cash flow to movement in net
cash/debt
2021 2020
£'000 £'000
Movement in cash and cash equivalents 1,088 (1,065)
Repayment of bank loans - 75
Drawdown of Lombard facility (2,044)
----- -----
(Decrease)/increase in net cash in year (956) (990)
Net cash at start of year 4,087 5,077
----- -----
Net cash at end of year 3,131 4,087
----- -----
14. Reconciliation of net cash flow to movement in net
cash/debt
2022 2021
£'000 £'000
Movement in cash and cash equivalents 665 1,088
Drawdown of Lombard facility (1,914) (2,044)
----- -----
(Decrease) in net cash in year (1,249) (956)
Net cash at start of year 3,131 4,087
----- -----
Net cash at end of year 1,882 3,131
----- -----
15. Analysis of net cash/(debt)
2022: At beginning of year Cashflow At end of year
£'000 £'000 £'000
Cash in hand and at bank 5,175 665 5,840
Bank Lombard facility (2,044) (1,914) (3,958)
Lease Liability (1,401) 316 (1,085)
----- ----- -----
Total 1,730 (933) 797
----- ----- -----
2021: At beginning of year Cashflow At end of year
£'000 £'000 £'000
Cash in hand and at bank 4,087 1,088 5,175
Bank Lombard facility - (2,044) (2,044)
Lease Liability (1,679) 278 (1,401)
----- ----- -----
Total 2,408 (678) 1,730
----- ----- -----
The financial information above does not constitute the company's statutory
accounts for the year ended 30 June 2022 but is derived from those statements.
The statutory financial statements and this preliminary statement for the year
ended 30 June 2022 were approved by the Board on 24 November 2022. 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 2020 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, Highdown
House, Yeoman Way, Worthing, West Sussex, BN99 3HH.
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