TIDMPOS
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(R) method
of wellhead engineering, announces its preliminary results for the
year ending 30 June 2022.
FINANCIAL SUMMARY
-- Continuing operations sales revenue GBP2,306k (2021: GBP2,017k)
-- Adjusted EBITDA on continuing activities GBP2.78m loss (2021: GBP2.69m loss)
-- Continuing operations operating loss GBP4,291k (2021: GBP4,546k)
-- Continuing operations loss before tax GBP5,556k (2021: GBP4,372)
-- Continuing operations operating loss after tax GBP7,457k (2021: GBP4,110k)
-- Basic loss per share from continuing activities 7.42p (2021: 4.09p loss)
-- Cash and cash equivalents of GBP5.84m (2021: GBP5.18m)
-- Bank borrowing of GBP3.96m (2021: GBP2.04m) relating to a drawn down Lombard facility
-- The Group has GBP0.1m invested in financial assets (2021: GBP3.04m)
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. GBP500,000
-- 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(R)
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
-- October 2022 - raised GBP1,550,000 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 GBP5.56m compared to a loss
in the prior year of GBP4.37m. 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(R) 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(R) 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 GBP1,550,000 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 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
GBP'000 GBP'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 GBP2,306k (2021: GBP2,017k), with a loss on continuing
operations before tax of GBP5.56m compared to loss in the prior
year of GBP4.37m 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 GBP109k 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 GBP1,550,000 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" (R) 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 GBP277k 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 GBP2,306k, an increase from
GBP2,017k 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 GBP569k in the prior year.
Overhead expenses
Continuing activities administrative expenses have increased
when compared to the prior year with expenditure of GBP5.78m (2021:
GBP5.50m). Included within administrative expenses is a bad debt
provision of GBP277k, 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 GBP109k 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 GBP2.87m compared to GBP2.79m in the
prior year.
Non-recurring item
The statement of comprehensive income includes a fair value
adjustment on an asset held for sale of GBP1.03m, 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 GBP2.78m, compared to a loss of GBP2.69m in the previous year.
Adjusted EBITDA on continuing operations is calculated as
follows:
2022 2021
GBP'000 GBP'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 GBP5.56m compared to
a loss in the prior year of GBP4.37m. The loss on discontinued
operations is nil compared to a profit of GBP0.02m in the prior
year.
Tax
The Group shows a total income tax credit of GBP0.04m for the
year compared to a tax credit of GBP0.39m for the prior year. The
income tax credit wholly relates to continuing activities compared
to the prior year split of GBP0.26m credit on continuing activities
and GBP0.41m charge on discontinued activities.
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 GBP111k (2021: loss
GBP77k) has been recognised. Following an impairment of the
investment overhead expenses include an impairment charge of
GBP109k (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
GBP9.17m, a decrease of 4.9% from GBP9.64m last year. This movement
represents investment of GBP0.45m less the annual amortisation
charge of GBP0.93m.
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 GBP0.24m in
2021 to GBP0.45m 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 GBP0.82m compared to GBP2.96m last year.
Current assets include a property held for sale with a carrying
value of GBP1.1m. Capital expenditure on tangible assets increased
to GBP0.25m compared to GBP0.17m in the prior year.
Cash and Cash Equivalents
Net cash at the year-end was GBP1.88m (cash and cash equivalents
of GBP5.84m less the bank Lombard facility of GBP3.96m) compared to
net cash of GBP3.14m in the prior year (cash and cash equivalents
of GBP5.18m less the bank Lombard facility of GBP2.04m) reflecting
a net cash outflow for the year of GBP1.26m (net increase in cash
of GBP0.66m per Statement of Cash Flows plus net increase in bank
borrowings of GBP1.92m).
The increase in bank borrowing represents GBP3.96m, 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 GBP0.10m (2021: GBP3.04m) 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 (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 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(R) 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(R) 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
GBP'000 GBP'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 (1,025) -
for sale
------- -------
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
income for the year attributable to
the owners of the parent (7,457) (4,502)
------- -------
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
GBP'000 GBP'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 Shares Share Based Retained Total
Up Held in Payments Earnings
Share Capital Treasury Reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 GBP'000 GBP'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 1,025 -
for sale
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 (180) -
sale
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
GBP'000 GBP'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
GBP'000 GBP'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
GBP'000 GBP'000
Customer 1 1,471 1,485
Customer 2 277 -
Customer 3 - 386
3. Income tax credit
(i) The taxation charge for the year 2022 2021
comprises:
GBP'000 GBP'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 2022 2021
on continuing activities for the year
GBP'000 GBP'000
Loss on ordinary activities before tax (5,784) (4,372)
Tax on (loss)/profit at standard rate
of UK
corporation tax of 19% (2021: 19%) (1,098) (831)
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 2022 2021
balance
GBP'000 GBP'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
GBP'000 GBP'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 GBP21.5m and have not recognised a potential deferred tax asset
in relation to these of GBP4.29m.
4. Discontinued Operations
On 1st 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.
The recognised profit on discontinued operations in the prior
year represented an increase in the expected deferred consideration
received.
2022 2021
GBP'000 GBP'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
GBP'000 GBP'000
Operating activities - -
Investing activities - -
Financing activities - -
----- -----
Net cash generated/(used) from discontinued - -
activities
----- -----
5. Loss per share
2022 2021
GBP'000 GBP'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
Intellectual and Other Computer
Property Development Software Total
GBP'000 GBP'000 GBP'000 GBP'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 Motor
Buildings Improvements Equipment under construction vehicles Total
GBP000 GBP000 GBP000 GBP000 GBP000 GBP000
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
GBP'000 GBP'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
GBP'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 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 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 GBP109k.
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
GBP'000 GBP'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
GBP'000 GBP'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
GBP513k (2021: GBP19k). 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
GBP'000 GBP'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
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.
13. Reconciliation of net cash flow to movement in net cash/debt
2021 2020
GBP'000 GBP'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
GBP'000 GBP'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 Cashflow At end of
of year year
GBP'000 GBP'000 GBP'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 Cashflow At end of
of year year
GBP'000 GBP'000 GBP'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.
This information is provided by RNS, the news service of the
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END
FR PPGRGGUPPGBC
(END) Dow Jones Newswires
November 25, 2022 02:00 ET (07:00 GMT)
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