Final Results

RNS Number : 6344D

Plexus Holdings Plc

28 October 2015

 



Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil equipment & services

l 28 October 2015

Plexus Holdings plc ('Plexus' or 'the Group')

Preliminary Results for the year to 30 June 2015

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 2015.

Financial Results

·    Record revenue, EBITDA, profit before tax and profit after tax

·    18.8% increase in profit after tax to £5.43m (2014: £4.57m as restated)

·    5.6% increase in revenue to £28.53m (2014: £27.02m)

·    5.7% increase in EBITDA to £9.53m (2014: £9.02m)

·    10.5% increase in profit before tax to £5.94m (2014: £5.38m)

·    17.5% increase in basic earnings per share to 6.40p (2014: 5.44p as restated)

·    182.3% proposed increase in final dividend to 1.75p per share (2014: 0.62p)

Operational Highlights

·    Strong financial performance driven by core business of renting proprietary POS-GRIP® friction-grip exploration wellhead equipment particularly for High Pressure/High Temperature ('HP/HT') applications, resulting in repeat business and the winning of new major international oil and gas customers in new territories around the world

-    Contracts secured include: £0.6m from Centrica for North Sea; £0.9m from Det Norske Oljeselskap ASA in Norway; significant contract from BG Group for North Sea; £1.9m order from undisclosed customer for North Sea; £1.5m from Brunei Shell in Brunei; USD$0.8m from new customer Cardon IV in Venezuela; £1.0m from Premier Oil Norge AS for North Sea; £1.25m Maersk for North Sea; and £3.3m from new customer Total offshore Norway for an Ultra-HP/HT exploration well which is potentially the highest pressure well ever drilled in the North Sea

·    Acceleration of planned international expansion through strategic initiatives:

-    First major licence agreement signed post period end with major Yantai Jereh Oilfield Services Group Co., Ltd ('Jereh') in China to facilitate the rental, sale, and manufacture of Plexus' wellhead equipment to supply the major Chinese, wider Asian, Brazil, Indian and Middle East oil and gas markets

-    Formation of a new Malaysian company Plexus Products (Asia) Sdn Bhd ('PPA') in conjunction with a local Malaysian oil and gas partner, Integrated Petroleum Services Sdn Bhd ('IPS') to create a fully operational Plexus Asian business hub to increase the supply of POS-GRIP wellhead equipment and services to the Australian, Brunei, Indonesian, Malaysian, Thai, and Singaporean oil and gas exploration and production markets

-    Secured a local Petronas licence post period end to manufacture and supply Plexus' POS-GRIP wellhead equipment in Malaysia through PPA

·    Disposal of non-core investment interest in a private UK oil and gas equipment manufacturing and engineering company for £1.5m as Plexus focuses on its global expansion strategy of identifying new international manufacturing partners

·    Significant strategic progress made in relation to research and development and new product innovation:

-    Launched new Python^TM Subsea Wellhead post period end as a new best in class and safest standard for subsea wellheads - supported by BG, Royal Dutch Shell, Wintershall, Maersk, Total, Tullow Oil, eni, Senergy, and Oil States Industries Inc

-    Signed £0.8m agreement with Centrica for new POS-SET™ Connector ('POS-SET') product for the growing de-commissioning and abandonment market

-    Collaboration with Aquaterra post period end to develop HP/HT dual marine risers to provide a safer, technically superior and cost efficient solution for use on jack-up rigs

-    HP/HT Tie-Back connector product and its unique operational and cost saving advantages now beginning to be marketed to the industry

-    Capital investment in additional POS-GRIP rental wellhead assets for exploration was £2.53m, consistent with the prior year's level (2014: £2.32m)

-    Research and Development ('R&D') spend, excluding cost of building test fixtures, increased by 46.7% to £3.47m (2014: £2.37m)

Corporate Highlights

·    Growing global awareness of both Plexus and the safety and operational benefits of POS-GRIP technology among international oil and gas companies, not only in relation to organic exploration drilling activities, but also to production and subsea applications

-    Alongside the first major licencing agreement with Jereh a share subscription agreement was entered into with Jereh International (Hong Kong) Co. Ltd which subscribed in July post period end for 5% of the issued share capital of Plexus for a consideration of £8.04m

-    Size of Aberdeen operational headquarters doubled with the acquisition in September 2014 of a circa 36,000 sq.ft work shop and office facility from Baker Hughes for £2.4m

-    Presented on its POS-GRIP metal sealing in September 2014 at the "World Oil HP/HT Drilling and Completions Conference" in Houston, Texas, and in London at the Oil and Gas iQ "HP/HT Wells Summit 2014" and 2015 regarding pioneering techniques and technology in HP/HT drilling and completions

-    Won the "Commitment to Innovative Use of Research and Development" award at the 11th annual Northern Star Business Awards 2014, the flagship event for the Aberdeen & Grampian Chamber of Commerce in recognition of Plexus' long standing commitment to R&D

·    Strengthened Board with the appointment of Charles Jones as a non-executive director - with over 30 years of experience in the US energy sector he will advise and assist in building relationships in the important US wellhead equipment market

·    Bank facilities renewed post period end with Bank of Scotland, comprising an existing £5m revolving credit facility on a three year term with an additional £1m overdraft on a yearly term in October 2015 - also a five year £1.5m term loan was put in place in September 2014 to part fund the purchase of the additional Aberdeen facility

·    Proposing a 182.3% increased final dividend of 1.75p per share (2014: 0.62p), which will be subject to shareholder approval at the Annual General Meeting ('AGM') to be held on 10 December 2015 - this follows on from the 6.3% increase in the interim dividend (to 0.51p) making a total dividend for the financial year of 2.26p per share. If approved the final dividend will be paid on 16 December 2015 to all members appearing on the register of members on the record date 6 November 2015. The ex-dividend date for the shares is 5 November 2015

For further information please visit www.posgrip.com or contact:

Ben van Bilderbeek	Plexus Holdings PLC	Tel: [phone]
Graham Stevens	Plexus Holdings PLC	Tel: [phone]
Nick Tulloch	Cenkos Securities PLC	Tel: [phone]
Derrick Lee	Cenkos Securities PLC	Tel: [phone]
Felicity Winkles	St Brides Partners Ltd	Tel: [phone]
Frank Buhagair	St Brides Partners Ltd	Tel: [phone]

Chief Executive Ben van Bilderbeek said:

"I am delighted to report another set of record financial results in terms of revenues, margins, and profitability. This performance is all the more impressive as it has been achieved during what has been, and continues to be a difficult trading cycle for the global oil and gas sector, driven by the significant fall in the oil price and related geopolitical circumstances. Despite the challenging backdrop, the year under review has been a transformational one for Plexus in terms of new strategic and product developments. We continue to develop the Company into a leading international wellhead engineering company supplying the best in class and safest wellhead equipment across exploration, production and subsea arenas, utilising our proprietary patented POS-GRIP method of engineering. As such we remain as confident as ever in the superior nature of our technology and the important role it will play in the coming years, not only in our traditional European market, but globally as we look to continue to increase our international footprint. Following this strong performance, we are pleased to report a 182% increase in the final dividend to 1.75p per share which includes a special dividend payment to deliver an additional return to shareholders supported by our current strong cash position.

"Our proprietary POS-GRIP wellhead systems meet the critical safety and performance demands required of wellhead technology across all pressure spectrums. As exploration and production of oil and gas continues to pursue ever deeper and more complex formations, particularly for HP/HT environments, the need for innovative, safe and effective wellhead technology is being increasingly recognised by both regulators and operators. However conventional technology has known limitations and we maintain that for a variety of technical reasons wellheads have been, and continue to be the weak link in the well architecture chain which I believe needs addressing.

"Specifically there is a massive divide between qualification test standards to which wellheads and their casing hangers (the last connection of the casing pipe) and annular seals have historically been held by common industry test standards as compared to those required for premium casing couplings, (notwithstanding that both products effectively do the same job in a well). Further our design makes the casing hanger a much simpler object, which rather than being made up of as many as twenty parts is made from a single piece, significantly reducing the number of installation steps required by conventional systems. Therefore on the basis of current test standard levels, all subsea annular seals currently used in the market are a weak link, and one that in subsea applications is never truly tested after installation, and which furthermore has no means of monitoring for integrity and remedial intervention.

"For these reasons it is very pertinent and topical for us that the recent Volkswagen 'emissions rigging' scandal has thrown a spotlight on the veracity of laboratory test standards. This developing story supports what I have been saying for a long time and demonstrates to me that when test standards and operating conditions move beyond what technology can achieve, then managers and engineers will conspire to artificially meet such standards so that qualification tests can be passed with inferior solutions, or indeed industry then lobbies to have test standards set at levels to which they can comply, even if not applicable to 'real world' conditions.

"I maintain that in the oil and gas industry key standard setters have managed to do both where wellheads and wellhead seals are concerned. Firstly they managed to convince the regulator that casing hangers and their seals only need three temperature and pressure cycles to be proven suitable for use forever and a day. Conversely, as operating conditions have moved onto HP/HT conditions, casing coupling (under pressure of end users), have now advanced to more than 1,700 test cycles. Secondly, casing hangers and annular seals are tested in fixtures which have no connection to 'real world' conditions. Rather than testing the full assemblies as a system, annular seals are allowed to be qualified as a single component, in specially configured fixtures, which eliminates movement and without any axial and bending loads being applied during pressure cycle testing as happens in the field. It is therefore disappointing that operators are planning to rely on these absolutely critical seal systems in subsea applications that may in the future operate under 20,000 to 30,000 psi gas pressures. The importance of meaningful and realistic testing was underlined recently by Sir James Dyson who was quoted as saying, "It seems that industry is rife with manufacturers engineering to find their way around tests, rather than engineering better, more efficient technology. This behaviour is seriously misleading customers". This statement is of course in relation to a consumer product and its relative performance, whereas in our industry we should be placing safety and the environment first and foremost, which should lead to the genuine desire to only use the best and safest available technology.

"The significant time and cost savings that we can deliver are of course extremely relevant to a trading environment where operators are looking to drive down the costs of new projects by 20-30%. This means that at the surface and subsea, POS-GRIP technology simply sets a standard no other wellhead technology can match. Encouragingly it has been reported that following the Volkswagen incident European regulators want to bring in real world tests by 2018 that look at emissions from cars on the road, rather than in laboratories, and I believe that the oil and gas industry regulators should be taking a similar stance in relation to wellhead seal test standards and methodology. Perhaps the regulators are finally beginning to realise, as a journalist recently reported, that artificial outcomes often start in laboratories, and the gap between a well-designed test and reality need not be huge, but bright minds will soon find out how to arbitrage the two. To this end it is positive that standard setters are beginning to recognise that new standards are required to address the new more challenging drilling conditions and enhanced regulatory scrutiny, and we believe that we are already in a position to meet these in a way that conventional wellhead designs cannot.

"In tandem with positioning Plexus as the supplier of choice in the standard pressure and HP/HT exploration markets in Europe, we have also been highly active during the past year in beginning to more actively market our products into new operating regions in line with our strategy to significantly increase the global reach of our wellhead equipment, offering significant growth opportunities. In line with this and following the establishment of our Malaysian and Singaporean hubs, we have substantially built on our existing position in the Asian region where we have achieved a number of significant milestones throughout 2014 and 2015.

"Post-period end in July 2015 we had a flurry of activity starting with the signing of a pivotal licencing agreement with Yantai Jereh Oilfield Services Group Co., Ltd ('Jereh'), a leading Chinese oil services provider to facilitate the rental, sale, and manufacture of our wellhead equipment into the important Chinese, wider Asian, Brazilian, Indian and Middle Eastern oil and gas markets. I see this latest agreement as an important building block for the transition of Plexus from being a niche supplier of specialist rental exploration wellhead equipment into the main stream volume market, allowing us to engineer and manufacture our best in class high standards whilst capitalising on being able to reduce operator's costs. Alongside this first major licencing agreement a share subscription agreement was also entered into, and another entity in the Jereh Group subscribed in July post period end for 5% of the issued share capital of Plexus for a consideration of £8.04m.

"This was closely followed by a collaboration agreement with China Oilfield Services Limited ('COSL') a major integrated oilfield service solution provider which is majority owned by Chinese state owned company CNOOC Group, Red Sea Technologies Ltd, a leading oilfield design and services company in South East Asia, and Jereh. This will see all parties explore commercial opportunities for shallow water subsea and crossover wellhead production systems for oil and gas field activities in China.

"The importance of China and Chinese trading partners has of course been recently brought into sharp focus during the recent five day visit in September to China by George Osborne who declared that the UK should not be running away from China, that Britain should be "China's best partner in the West", and that we should "create a golden decade for both of our countries". I certainly echo those sentiments and this month's milestone state visit by the Chinese President Mr Xi Jinping further underlined the scale of these opportunities when the President said "As an old Chinese adage goes, opportunity may knock just once; grab it before it slips away", and that as "China-UK comprehensive strategic partnership enters the second decade this year, let us seize the opportunity, and work together to usher in an even brighter future for China-UK relationship". For such reasons I am very excited about our new relationship with Jereh which only commenced in July, and I am confident that Jereh's considerable manufacturing and commercial skills will blend well with our technology to create considerable value for both companies over the coming years.

"A third Asian development at the end of July 2015, was the announcement that we had secured in August 2014 a local Petronas licence to supply our POS-GRIP equipment in Malaysia through PPA. As a result of these three major strategic moves, and on-going relationship building initiatives in other areas of regional importance such as the Gulf of Mexico ('GOM') and Russia, (where in the coming years, and of course subject to sanctions the Arctic will become very important requiring the very best and most convenient wellhead sealing technology) I believe that we are ideally placed to continue to increase our global reach.

"I am especially proud to report on the launch of our new Python subsea wellhead at SPE Offshore Europe Conference & Exhibition 2015 ('OE2015'), Europe's biggest oil and gas trade show. This was the result of over four years of research and development supported by our Joint Industry Partners, BG, eni, Royal Dutch Shell, Maersk, Total, Wintershall, Tullow Oil, Senergy, and Oil States Industries Inc. The new Python Subsea Wellhead has been designed to address key technical issues and requirements highlighted by regulators following the GOM incident in April 2010 and to achieve a new best in class standard for subsea wellheads. Entering the global subsea market has always been part of our strategy to expand the Company's suite of POS-GRIP wellhead equipment into larger fast growing markets. Subsea exploration and production has grown rapidly since 2000 in terms of total expenditure from USD$7billion to approximately USD$45billion in 2014. According to a report by Rystad Energy in May 2014 this strong growth is expected to continue, with subsea expenditure forecast to grow by an annual rate of 15% to USD$115 billion by 2020, making it a highly attractive market, and one that demands new technology and engineering solutions. We anticipate that our ground-breaking technology, as it moves from prototype to product will be ready for offshore deployment in a trial well during the second half of 2016 and we look forward to updating the market further.

"Finally as a Company we pride ourselves on our management and engineering excellence. I would like to extend the Board's gratitude to our dedicated workforce which includes some of the most talented oil and gas engineers in the industry today. Without our team we would not be able to win milestone contracts where only the best equipment will suffice such as with the recently announced £3.3m contract with Total for the Solaris well offshore Norway for which our technology was specifically chosen, and which is thought will be the highest pressure well ever drilled in the North Sea at up to 17,000 to 19,000 psi. The future opportunities for Plexus, in both our core markets and with ancillary new POS-GRIP developments such as our POS-SET Connector for the decommissioning market, are clearly exponential and we believe that we will continue to attract new customers worldwide either directly or through licensees as the wider industry places increasing emphasis on the development of HP/HT reserves. I look forward to updating our valued shareholders on our latest organic and strategic developments throughout the rest of 2015 and beyond."

Summary of Results for the year ended 30 June 2015

	2015	2014
	£'000	£'000
Revenue	28,526	27,024
EBITDA - before the effect of IFRS 2	9,531	9,019
Profit before taxation	5,938	5,375
Basic earnings per share (pence)	6.40	5.44

Chairman's Statement

Business progress

I am pleased to report that despite challenging trading conditions the Group delivered an excellent set of results whilst making strong progress in terms of operational, financial, and strategic developments. This performance resulted in a 5.6% increase in revenue to £28.53m for the year to 30 June 2015 (2014: £27.02m) with the UK and European revenues increasing by 49.2%; a 5.7% increase in EBITDA to £9.53m (2014: £9.02m); a 10.5% increase in profit before tax to £5.94m (2014: £5.38m); and a 18.8% increase in profit after tax to £5.43m (2014: £4.57m) helped by a lower effective tax rate, delivering a 17.5% increase in basic earnings per share of 6.40p (2014: 5.44p). Such key financial performance indicators are of course only part of the progress made during the financial year and I am also delighted to say that this period and post period end were the most active since we were admitted to the London AIM market, and have laid firm foundations for our future expansion both geographically and in terms of new product development. It is clear to me that industry interest in our proprietary POS-GRIP friction-grip method of engineering is increasing in tangible ways beyond our traditional organic jack-up exploration rental wellhead business. Examples of such exciting initiatives which I will expand on include BG joining our Python subsea wellhead JIP; first contract for our new POS-SET Connector product to facilitate decommissioning and abandonment; securing of a major licensee in China (Jereh); a collaboration with COSL for the development and supply of a shallow subsea wellhead for China; the securing of a Petronas licence to enable the supply of equipment in Malaysia; entering into a collaboration with Aquaterra for the supply of HP/HT marine risers; and importantly the official launch of our new Python subsea wellhead at OE2015 last month in Aberdeen.

Overview

The 2015 financial year has seen Plexus achieve a number of significant milestones, not least, in terms of establishing strategic partnerships and investing time and resources into research and development for new product innovation, which we believe will help us further cement our position as the best in class supplier of wellhead equipment to the oil and gas industry, not just for jack-up exploration but in also in due course for surface production and subsea. This progress however cannot be considered in isolation, and it is important to note that the various macro and geopolitical negatives that we identified this time last year persist, not only in terms of the much reduced oil price but also in terms of reduced operators capex spend and consumer demand levels.

Since our admission to AIM at the end of 2005, Plexus has grown in terms of revenues and profitability through our POS-GRIP surface exploration jack-up wellhead rental business model. This growth has been supported by necessary on-going investment in R&D, personnel, rental wellhead inventory, and infrastructure both in the UK and increasingly worldwide where we are looking to grow sales beyond our traditional North Sea market. Our surface exploration offshore wellhead customer base continues to grow, and includes many of the world's largest global oil and gas companies to which we added new customers Total and Cardon IV (a 50:50 JV between Repsol and eni) during the year. Of these oil and gas companies we have serviced over 400 wells globally offering our customers standard pressure wellheads and HP/HT wellheads, and we estimate that we hold a c.10% market share of the c.USD$400m global jack-up exploration market, as compared to the vast majority of the markets in the North Sea which underlines the significant growth opportunity within this arena. Our recognition of the importance of investment, and in particular R&D, and the willingness to commit to it clearly demonstrates our confidence in the superior nature of our POS-GRIP technology and its ability to become a new global standard.

In terms of rental sales and revenues for the financial year, we have been focussed on expanding beyond our traditional UK North Sea market, winning more contracts in Europe and pursuing new business opportunities in Africa, Australia, North America and Asia. Our sales mix illustrates the continued importance of both the UKCS and the European Continental Shelf ('ECS') in the North Sea where sales to offshore Norway, the Netherlands and Denmark were particularly strong and increased by 53.1%, 89.3% and 1,217% respectively compared to the same period in the prior year. We believe that the tax structures for example in Norway encourage exploration drilling as a result of allowances available where 'dry' wells are concerned. With Brent Crude trading at circa USD$50 per barrel mark, following publication of the Wood Review, we hope that the latest tax incentive changes in the UKCS, as announced in the UK Government's 2015 Budget which outlined measures worth £1.3bn over five years aimed at boosting flagging North Sea oil production by 15% by the end of the decade, will have a similar positive impact which Plexus will benefit from. HP/HT equipment revenues continued to account for over 85% of all sales and, as such field conditions are the most technically challenging, demonstrates the technical advantages offered by our proprietary POS-GRIP friction-grip method of engineering and wellhead equipment design.

As well as the significant contract wins for our POS-GRIP surface exploration jack-up over the period, the two other areas where we have invested significant time and resources over the past year is our continued expansion into Asia, and on-going product innovation which saw us enter a new lucrative market post period end following the launch of our uniquely superior Python Subsea Wellhead which addresses a number of issues identified following the Gulf of Mexico incident in 2010. Our Asian expansion has been demonstrated over three significant news events which have been explained by our CEO Ben Van Bilderbeek in his CEO commentary. Most notably was the post period end signing of our first licencing agreement with a major Chinese oil and gas field services company Jereh in July 2015. Licencing has been central to Plexus' growth strategy as a way to penetrate the global market whist maintaining our best in class service, brand reputation and indeed strong patent protection where we have a growing patent suite in place to protect our POS-GRIP friction-grip technology.

Plexus and Jereh, a world-class supplier of oil and gas field equipment and services with a market cap of c.USD$4bn, operating in more than 60 countries, share the ambition of delivering oil and gas drilling equipment and services, which are best in class in terms of safety, performance and reliability. By incorporating our patented POS-GRIP technology, the licencing agreement will push the boundaries in terms of wellhead performance and safety standards to facilitate the rental, sale, and manufacture of Plexus' wellhead equipment into the major Chinese, wider Asian, Brazilian, Indian and Middle Eastern oil and gas markets. This relationship will be focused not just on rental wellhead exploration activities, but also on surface production and shallow water subsea, and connectors. In terms of positive market growth opportunities, according to Infield, the energy analysts, China and wider Asia is in the process of implementing the largest regional offshore capital expenditure programme for oil and gas activities which, from 2012 to 2018, has been estimated to amount to USD$146bn. Indeed not so long ago Infield indicated that operations in Asia are increasingly moving exploration and production into deeper waters in a bid to boost oil and gas production, and that as a result Malaysia, Indonesia, India, and China are becoming major subsea industry hotspots attracting a range of operators from national oil companies such as CNOOC and ONGC, to international oil companies such as Shell and Chevron. As such whilst we will continue to expand our global presence we believe this licence agreement can over time generate substantial revenues from the partnership with Jereh, who have an exceptional track record as licensees for major partners around the world.

In line with our Asian expansion we were also delighted to report the formation of a new Malaysian company PPA in conjunction with a local Malaysian oil and gas partner, IPS. PPA was formed to create a fully operational Plexus Asian business hub with the aim of supplying POS-GRIP wellhead equipment and services to the Australian, Brunei, Indonesian, Malaysian, Thai, and Singaporean oil and gas exploration and production markets. This was signed in August 2014 and as further progress have since been granted a local Petronas licence post period end to manufacture and supply Plexus' POS-GRIP wellhead equipment. The securing of such a licence has been viewed as a major milestone for our company and we believe this will position us well to secure additional business and contract wins in this region.

In addition to our international expansion plans a defining moment of Plexus' year was the launch of the Python Subsea Wellhead during Europe's biggest Oil and Gas trade show, OE2015, in September 2015. The Python launch was attended by Fergus Ewing, the Scottish Minister for Business, Energy and Tourism where he stated, 'this new technology will allow oil and gas companies around the world to increase the safety and reliability of their operations and it is a great testament to the skills and knowledge of Ben Van Bilderbeek and his team'. The Python Subsea launch had been supported by Plexus' joint industry partners which include BG, eni, Maersk, Royal Dutch Shell, Total, Wintershall, Senergy and Tullow Oil. Interestingly it was the industry that came to Plexus post the 2010 Macondo disaster to ask us to help design a safer, new best in class standard for subsea wellheads. The patented POS-GRIP friction-grip method of engineering offers 'instant casing hanger lockdown' and is used to secure hangers with HG Seals which provide direct, metal-to-metal, weld-quality, high integrity sealing. Many components used in competing conventional subsea wellhead designs such as lock rings and wear bushings are eliminated, resulting in enhanced reliability and fewer installation trips to the sea bed by seven to ten trips on a complex well which will likely save operators using the Python Subsea wellhead between USD$2-10m per wellhead. Python's formal launch marked the first commercial availability of our POS-GRIP enabled subsea wellhead system, and Plexus is confident that Python will be ready for offshore prototype deployment in a trial well during 2016, where the next steps will be finding an operator to secure this first deployment.

Further to the launch of our Python Subsea Wellhead and expansion into new target markets, we have also been working on the extension of POS-GRIP friction technology and other new product areas. These products include: a low cost wellhead system for the volume production market - WellTree™ which we are currently working on with Jereh; this is in addition to products such as the HP/HT Tie-Back connector where we previously signed a joint industry project with Maersk, which for the first time allows the reconnection of production casing to HP/HT exploration and production wells which is now being marketed; the new POS-SET Connector which is designed to enable operators to re-establish a connection onto rough conductor casing for the abandonment market, where the market for permanent plugging and abandonment of wells is increasing in the North Sea and beyond and could be an important new revenue stream for the Company; and the recent agreement with Aquaterra to jointly supply HP/HT dual barrier marine risers utilising Plexus' POS-GRIP technology to provide a safer, technically superior and cost efficient solution for the use on jack-up rigs. All of these product innovations are in line with Plexus' strategy to extend our POS-GRIP product reach into new and commercially attractive markets.

In tandem with securing strategic partnerships for future international growth and new product development, the continuing communication of our unique offering is equally as important to Plexus' future success. The Board, management team and dedicated engineers invest significant time into communicating and educating the wider oil and industry. Such activities included attending and presenting at the 'World Oil HP/HT Drilling and Completions Conference' in Houston, Texas, and in London at the 'Oil and Gas iQ "HP/HT Wells Summit 2014 and 2015', as well as important events such as the St Petersburg International Economic Forum in June, and the Beijing China International Offshore Oil & Gas Exhibition in March.

Staff

On behalf of the Board, I would like to thank all our employees for their dedication and hard work during another successful year. This has not only delivered another set of record financial results, but has importantly taken us into the subsea market with the launch of our new Python subsea wellhead at OE2015 in September 2015, and will in the near future accelerate our goal of also becoming a major supplier to the surface production wellhead market. Such efforts by all our staff contributed to Plexus achieving a significant milestone with the award, post period end, of the globally recognised OPITO approval for our Competency Management System ('CMS') known as Competency@Plexus. This is a qualification that our customers request during the tender and contract review process, especially in response to the findings from the Deepwater Horizon incident in 2010. Furthermore in September 2014 I was delighted to see that our team's efforts led to Plexus winning the "Commitment to Innovative Use of Research and Development" award at the Northern Star Business Awards 2014. Such work underpins the on-going development and application of our proprietary friction-grip method of engineering. I would also like to welcome as a non-executive director Charles Jones who joined the Board in September 2014 and who will be advising Plexus in respect of interacting with US oil and gas operators and service companies, industry bodies, and regulators, particularly in relation to the subsea arena.

Outlook

I remain confident about the major growth opportunities available to Plexus and our on-going ability to market our proprietary POS-GRIP based wellhead equipment as a new and superior standard for the industry. We are in no doubt that we can ultimately penetrate all wellhead markets from surface to subsea, both organically and in conjunction with partners and licensees around the world. Notwithstanding our year on year growth and indeed record FY 2015 financial results, FY 2016 trading conditions are more challenging given the significant reduction in the oil price and related on-going economic pressures which surround the oil and gas industry and the support services underpinning it, and this cannot be ignored. This is especially the case in the UK North Sea which traditionally has been an important market for us, and as recently as September 2015 Oil and Gas UK reported that "exploration for new resources has fallen to its lowest level since the 1970s" and that capital expenditure will probably decline by £2bn to £4bn annually to 2017. Looking forwards, the UK North Sea should not be written off just yet. Last year's Wood Review of the North Sea estimated that there were still between 12bn and 24bn barrels of oil that could still be pumped in UK territorial waters compared to 45bn barrels of crude extracted to date - logic dictates there is much drilling activity to come.

More encouragingly in recent weeks there has been a more positive sentiment with regards to oil price forecasts from a number of sources including UBS Wealth Management and Barclays. Only this month a Barclays analyst report argued that with prices at their current historic low levels, energy companies will not be sufficiently encouraged to continue to produce oil, and with "capex expected to fall 20% globally in 2015 and a further 5-10% in 2016, the stage is set for a supply crunch", meaning that after "some excess stocks are used up in 2016 and 2017, we believe the price appreciation seen thereafter is likely to be permanent". Such sentiment is further endorsed by the industry itself, with Shell CEO Ben van Beurden declaring recently that the world faces an energy crisis unless investment in fossil fuels production is maintained because of the dramatic increase in demand that will come from 3bn people emerging from poverty over the next few decades. Speaking to shareholders in The Hague Mr van Beurden said we "will need sustained and substantial (oil) investment to support economic growth" and that the world could face a catastrophic 70m barrel per day shortfall in crude by 2040. According to the International Energy Agency who said global energy demand will increase by 40% through to 2040, and an influential Exxon report further estimates that world population will increase by an estimated 30% from 2010 to 2040, with global GDP rising by circa 140%. The achievement of higher oil prices, alongside our international growth and new product development strategies would certainly be favourable in terms of the growth outlook for Plexus, and indeed the wider oil and gas sector as a whole as exploration drilling activity would inevitably increase.

Our vision is to become a leading international oil and gas wellhead and related equipment engineering company, supplying the best in class and safest POS-GRIP wellhead equipment for exploration, production and subsea applications around the world. In a global market dominated by a few large multi-national oil service and wellhead supply companies, Plexus reputation is growing, and the awareness of our ability to meet the demand for and provide critical innovative solutions required from wellhead technology, particularly for HP/HT applications is evidenced by a number of important collaborations that we entered into over the last twelve months. As extracting hard-to-reach oil and gas goes deeper and becomes more complex, innovative, safe and effective wellhead technology is ever more important, and indeed essential, particularly for locations such as the Arctic where safety is paramount, and where wellheads cannot afford to be the weak link in the system.

With this vision in mind, the expansion of the organic jack-up rental business is now being focused on Asia, Russia and potentially North America, including fostering licensing agreements with the likes of Jereh. Whilst our rental sales showed an increase during the last financial year in terms of European and Asian sales, our next areas of geographic focus will be Russia and the CIS countries where I believe significant opportunities exist for Plexus' equipment and technology, particularly in the Arctic where the selection of new, enabling and safer technology will be paramount. The scale of the Arctic opportunity is enormous, and this was clear to see from a recent report for the Secretary of Energy in Washington by the US National Petroleum Council in March 2015 titled "Arctic Potential - Realizing the Promise of U.S. Arctic Oil and Gas Resources" which highlighted two important statistics. Firstly that most of the Arctic offshore oil and gas potential lies in water depths of less than 100 metres, and that the Russian Arctic shelf is even shallower. Secondly, that when analysing the global arctic conventional oil and gas resource potential by country in terms of "billion barrels of oil gas equivalent", Russia towers above the other major players. In terms of ranked estimated billions of barrels Russia was estimated at a massive 287, USA 94, Greenland 39, Canada 34, and Norway 25. I believe the opportunity is additionally compelling given the high profile import replacement programme that is currently underway in Russia, and where last November Vladimir Markov, the head of gas giant Gazprom was quoted as saying that within the next two to three years "we can substitute up to 90% of all imports, considering the government has begun developing production of its own complex equipment".

In addition to setting our sights on Asian, Russian and CIS expansion in the near-term, we are also looking to the North American and GOM markets as part of our longer-term strategy for growth across exploration, production and subsea. This longer-term strategy will be boosted by our active presence in Houston where we have appointed a new USA non-executive director to the Board, Charles Jones, who has over 30 years of senior management and board experience in the US energy sector, and have also recently engaged the services of Mr Lawrence Rucinski, who previously held the position of Director, Sales and Marketing for the Global Subsea business of FMC Technologies Inc., and will actively promote our technology to American operators. Both Charles and Lawrence will be advising and assisting the Plexus team in relation to potential US commercial and licencing partners.

As well as expanding Plexus through new regional opportunities, as already stated new product innovation is just as central to our growth strategy. We therefore look forward to updating shareholders on these new product developments and marketing initiatives which include the launch of the new and superior Python subsea wellhead; our surface production wellhead WellTree; HP/HT Tie-Back JIP connector; and the new POS-SET Connector. To support such future initiatives, and as an indication of our confidence in the future we doubled the size of our Aberdeen operational headquarters with the acquisition in September 2014 of a circa 36,000 sq.ft work shop and facility from Baker Hughes for £2.4m.

For the reasons outlined in my statement, despite widely reported on-going challenges for the industry I am confident of Plexus' long term future prospects and our ability to deliver significant shareholder value from our patented POS-GRIP technology. I would like to extend my gratitude to my fellow Board members, Plexus management team, office support and our excellent engineers, without whom, our significant progress to date would not be possible.

J Jeffrey Thrall

Non-Executive Chairman

27 October 2015

Strategic Report

Principal Activity

The Group markets a patented method of engineering for oil and gas field wellheads and connectors, named POS-GRIP, which involves deforming one tubular member against another within the elastic range to effect gripping and sealing. This superior method of engineering for wellheads offers a number of important advantages to operators, particularly for HP/HT applications and can include improved technical performance, improved integrity of metal seals, significant installation time savings, reduced operating costs and enhanced safety. Revenues predominantly derive from the rental of POS-GRIP wellheads for jack-up exploration, although the range of commercial and safety benefits of POS-GRIP also apply to surface production and subsea wellheads which are significantly bigger market sectors which Plexus is now actively pursuing organically and with international partners such as Jereh, China. The Directors believe that the Company's proprietary technology has additional wide ranging applications both within and outside the oil and gas industry.

Financial Results

Revenue

Revenue for the year was £28.53m, up 5.6% from £27.02m in the previous year. The growth in sales was supported by a number of on-going and new contract wins both from existing and new customers around the world. Geographically, a particularly strong year on year performance was seen in Europe excluding the UK which grew 110% as compared to the UK North Sea which grew by 7% and accounted for 37.2% of total sales, an increase of 7.1% on the prior year. It is relevant to note that the UK North Sea has experienced a slowdown in activity, and as highlighted last year in the Wood Review there is a need for additional incentives to encourage the pursuit of remaining oil and gas reserves which last year the Office of Budget Responsibility estimated as up to 24bn barrels remaining equating to 30-40 years of production.

The rental of exploration wellhead and related equipment and services again accounted for approximately 95% of revenue reflecting the fact that the Company's organic business model is focused on the supply of jack-up rental surface exploration wellhead equipment and services. Looking to the future the Company's adopted strategy is to broaden its wellhead equipment product range to begin to address the surface production, subsea, and decommissioning markets both in the North Sea and internationally. Plexus' wellhead designs are already proven for production wells, a significantly larger market than jack-up rental exploration. The global jack-up drilling market is relatively small at c.USD$400m, whereas the global wellhead market is estimated at USD$4.5bn. Importantly we launched last month our new Python subsea wellhead following an extensive and successful test programme and where we anticipate having a prototype in the field some time in calendar year 2016. HP/HT rental equipment and related service continued to account for the majority of sales revenues, rising to £25.23m up from £23.30m last year, an increase of 8.3%, and accounted for 88.4% of total sales, compared to 86.2% in the prior year. The growth in HP/HT revenue resulted from contracts for a number of existing and new customers including Statoil, Maersk, GDF Suez, and ConocoPhillips. Standard pressure equipment sales increased by 13.3% to £1.94m from £1.71m in the prior year, and accounted for 6.8% of total sales. Sales relating to services provided to support existing production wellhead installations totalled £0.10m compared to £0.35m last year. This year revenues of £0.02m were generated by engineering and testing compared to £0.37m last year with the balance of revenues made up of £1.24m for rebillable expenses compared to £1.29m last year for items such as freight, shipping and equipment hire. Despite the widely reported cyclical downturn driven by the major fall in oil and gas prices, we continued to invest for the future and increased our capital expenditure on rental assets to £2.53m as compared to £2.32m in the prior year, a year on year increase of 9.1%.

Margin

Gross margins have slightly reduced at 69.9% (compared to 71.1% in the previous year) as a result of lower margin mudline equipment sales and contract mix. The majority of rental activity sales continued to be HP/HT which deliver higher margins than lower pressure equipment contracts.

Overhead expenses

In line with the increased level of sales activity and the incurring of increased overhead associated with the build out of an international growth strategy, particularly in relation to Asia where year on year revenues increased 22.4%, total overheads increased to £14.93m from £13.93m in the previous year. The additional overhead relates to additional infrastructure and personnel to support the organic business and the additional activities surrounding and supporting new product development and investment. Increased overhead spend was able to be controlled relative to sales and accounted for 52.3% of revenues compared to 51.5% for the prior year. Overhead staff costs reduced to £7.53m from £8.17m partly due to related R&D allocation and reduced bonus levels, whilst the employee headcount at the year-end was 157 compared to 144 for the prior year, an increase of 9.0%. Other items which increased year on year as a result of the increased activity levels, staff increases, and expansion of infrastructure were contract staff, training, health and safety, overseas base costs, advertising and marketing, professional fees, and travel and subsistence.

EBITDA

EBITDA for the year (before IFRS 2 share based payment charges of £0.02m) was £9.53m, compared to £9.02m (before IFRS 2 share based payment charges of £0.03m) the previous year, an increase of 5.7%. EBITDA margin for the year was consistent at 33.4% as compared to 33.4% last year. The EBITDA performance is the result of maintained operational efficiencies, coupled with the higher margins associated with HP/HT rental activity where the proprietary nature of the Plexus POS-GRIP friction-grip technology enables Plexus to deliver superior performance in terms of enhanced safety, time savings, and operational efficiencies. EBITDA is calculated as follows:

	2015 £'000	2014 £'000
Operating profit	5,020	5,279
Add back:
Depreciation	3,070	2,748
Amortisation	811	657
Loss on disposal	20	95
Share based payments charges	21	26
Share of profit of associate	236	215
Gain on disposal of associate	352	-
Rounding	1	(1)
EBITDA	9,531	9,019

Profit before tax

Profit before tax increased to a record £5.94m compared to a profit last year of £5.38m, an increase of 10.5%. This increase has been achieved after absorbing higher depreciation and amortisation charges of £3.88m, up from £3.40m last year, the largest component being depreciation of rental assets which increased by 2.2%, reflecting the continued investment in Plexus' wellhead rental inventory. Share of profit of associate contributed £0.24m and the disposal of the associate provided a gain of £0.35m while finance income includes a gain of £0.51m relating to the derecognition of a financial liability. The profit before tax is stated after an IFRS 2 charge for share based payments under reporting standard IFRS 2; the charge for the full year is £0.02m compared to £0.03m last year.

Tax

The Group shows an income tax expense of £0.51m for the year as compared to £0.80m for the prior year. The Group has an effective tax rate for the year of 9% (2014: 15%) which is below UK corporation tax rates. The effective rate of tax was lower due to a reduced tax charge arising as a result of SME enhanced R&D tax credits, which arise from the Group's significant R&D programme. Following the preparation of the prior year's financial statements Plexus engaged external consultants to assess the level of the R&D claim that could be made for the 2014 financial year. This resulted in a higher level of claim being made than anticipated. As a result a credit of £393k is recognised in these financial statements as an adjustment in respect of prior year's tax charge. Excluding this amount would have increased the effective tax rate to 15% (2014:11% measured after amending for adjustments in respect of prior year's tax charge).

It is currently anticipated that for the foreseeable future, the Group will continue to report an effective tax rate that is lower than the prevailing UK corporation tax rate. This lower effective rate will depend upon the continuing eligibility to claim enhanced R&D tax credits as part of the on-going R&D programme and the expected potential reductions in tax rates arising from the Patent Box tax regime.

The prior year tax charge has been restated by £475k relating to a tax credit arising on the exercise of share options. This credit was originally recognised in the Consolidated Statement of Comprehensive Income whereas, in accordance with IAS 12 Income Taxes, the amount should have more appropriately been recognised directly in Equity. Full details relating to the restatement are disclosed in note 1.

EPS

The Group reports basic earnings per share of 6.40p compared to 5.44p in the prior year, an increase of 17.5%.

Cash and Statement of Financial Position

The statement of financial position reflects the investment in operations during the year and in particular on-going capital expenditure. The net book value of property, plant and equipment including items in the course of construction increased to £17.15m compared to £13.28m last year. Capital expenditure on tangible assets increased to £7.02m compared to £3.02m last year including the acquisition of a 36,000 sq.ft work shop and office facility in Aberdeen in September 2015 for £2.40m. The net book value of intangible assets, including IP rights and R&D, increased by 26.1% to £13.17m compared to £10.44m last year. Capital expenditure on intangibles totalled £3.54m compared to £2.40m last year, an increase of 47.5%, of which importantly 68.3% related to additions in respect of the Python subsea wellhead JIP. Receivables increased to £7.30m compared to £6.46m last year. Net borrowings closed at £2.95m (bank loans of £6.28m less cash and cash equivalents of £3.33m) compared to net cash at bank of £2.35m last year (cash and cash equivalents of £6.35m less bank loans of £4.00m) reflecting net cash outflow for the year of £5.30m (net decrease in cash of £3.02m per Statement of Cash Flows plus net increase in bank borrowings of £2.28m). This closing cash position was after absorbing a near doubling of total capital expenditure of £10.56m (2014: £5.42m) of which £3.02m related to the additional work shop and office facility, and disposing in June a 25% shareholding interest in a private UK oil and gas equipment manufacturing and engineering company based in Scotland for £1.5m cash. The Group's cash position changed materially post period end with the subscription by Jereh for new ordinary shares representing 5% of the issued share capital of Plexus for circa £8m net of expenses as part of the terms of the Licencing Agreement transaction also entered into post period end with Jereh. Post period end, the Group's bank facilities have been renewed with Bank of Scotland Corporate and comprise £6m working capital lending facilities, and a £1.5m five year term loan which was entered into during the last financial year to part fund the acquisition of the additional Aberdeen facilities and which currently stands at £1.275m. These facilities combined with cash balances are anticipated to be adequate to meet on-going capital expenditure, R&D and related project commitments.

Intellectual Property ('IP')

The Group carries in its statement of financial position goodwill and intangible assets of £13.93m, an increase of 24.4% from £11.20m last year, reflecting the Group's on-going investment in and commitment to the development of its proprietary POS-GRIP technology, the most important elements of which continued to be in relation to the POS-GRIP friction-grip method of engineering and the new Python subsea wellhead development JIP. The Directors have considered whether there have been any indications of impairment of its IP and have concluded, following a detailed asset impairment review, that there have been no such indications. The Directors therefore consider the current carrying values to be appropriate. Indications of impairment are considered annually.

Research and Development

R&D expenditure continues to be an important and necessary investment in protecting, developing, and broadening the range of applications for our proprietary POS-GRIP friction-grip method of engineering and related IP. As Stephen Boyle the RBS Chief Economist recently said when addressing the oil and gas industry in Aberdeen, "Doubling down on innovation and productivity are becoming of greater importance than ever before", and we certainly subscribe to that sentiment. Indeed Plexus' R&D related activity prior to and during the year culminated in the achievement of a number of milestones and contracts which would not have been possible without such investment and related product developing and testing. Of particular note in relation to our organic business a new customer Total awarded a £3.3m contract for the supply of jack-up drilling wellhead equipment for a Ultra HP/HT (17,000 - 19,000psi) gas exploration well in the North Sea, offshore Norway where Plexus was identified as the most suitable supplier due to the unique ability to offer a through the BOP capability while supporting casing at the ocean floor on its proprietary mudline hanger system. As well as new and superior applications related to our organic jack-up exploration drilling business, we also gained traction with a number of new R&D driven product developments. One of these is our POS-SET Connector which is designed to re-establish a connection onto rough conductor casing previously cut above the seabed to facilitate tie-back or abandonment operations. Further proof of the unique advantages and capabilities of our friction-grip technology is the fact that full scale testing has shown that our connector can achieve 80% of the bending and tensile strength of the parent pipe, which is significantly better than conventional connector options can achieve. This could be a significant opportunity for Plexus, and Oil and Gas UK have stated that well plugging and abandonment expenditure could total £4.5bn from 2013 to 2022. This product follows on from our previously announced HP/HT Tie-Back connector which for the first time allows the reconnection of production casing to pre-drilled HP/HT exploration and production wells to the same standards as casing couplings. Full product development and qualification testing has been completed, and as this product can deliver significant time and cost savings to an operator interest continues to be shown by the industry. A second product extension is a post period end collaboration with Aquaterra to jointly supply HP/HT dual barrier marine risers utilising Plexus' POS-GRIP technology to provide a safer, technically superior and cost efficient solution for use on jack-up rigs, initially in the North Sea market. What is important here in terms of the uniquely enabling capabilities of POS-GRIP is that whilst marine risers exist for low pressure applications, as well as certain bespoke heavy wall higher pressure risers, the 'Dual Barrier High Pressure Riser' will be the first in the industry for HP/HT wells. The majority of our R&D expenditure has been related to the important subsea market and post period end we announced a collaboration agreement with CNOOC and RST to explore commercial opportunities for shallow water subsea and crossover wellhead production systems for oil and gas activities in China which fits well with our strategic focus on Asian opportunities. Finally our most significant R&D driven project, the new Python subsea wellhead JIP, not only gained BG as an additional and valuable JIP member, but the completed design was officially launched at OE2015, Europe's biggest oil and gas show last month. Python has been designed to a new best in class and safest standard for subsea wellheads, and is engineered to be simple, whilst offering a range of unique and superior technologically advanced features, including 'instant casing hanger lockdown', and secures hangers with HG seals which provide direct, metal-to-metal, weld-quality, high integrity sealing. Uniquely, many complex components used in competing conventional subsea wellhead designs such as lock rings, lockdown sleeves and wear bushings are eliminated, which results in greater reliability and fewer installation trips. R&D spend increased by 28.9%, including the cost of building new test fixtures, to £4.12m from £3.19m in the prior year, and will continue during the 2015/16 financial year as the Python subsea JIP nears completion and the POS-GRIP product expands into the surface production and connectors market sectors.

IFRS 2 (Share Based Payments)

IFRS 2 charges have been included in the accounts, in line with reporting standards. The fair value of share based payments has been computed independently by specialist consultants and is amortised evenly over the expected vesting period from the date of grant. The charge for the year was £0.02m which compares to £0.03m last year.

Dividends

The Company announced on 24 March 2015 the payment of an increased interim dividend of 0.51p per share which was approved for payment on 22 April 2015.

In further recognition of the Group's on-going progress and confidence in the future the Directors have decided to propose a 182.3% increase in the final dividend of 1.75p per share for the year ending 30 June 2015 compared to 0.62p last year, making a total dividend for the financial year of 2.26p. The final dividend has been enhanced this year in recognition of the Group's strong balance sheet and cash position, and will be recommended for formal approval at the Annual General Meeting to be held on 10 December 2015. Subject to this the dividend will be paid on 16 December 2015 to all members appearing on the register of members on the record date 6 November 2015. The ex-dividend date for the shares is 5 November 2015.

Operations

The main operational developments during the year were of both an organic and an international strategic nature. As the reputation of our proprietary POS-GRIP friction-grip method of engineering continues to grow and as our target market expands from our traditional jack-up exploration sector to surface production and subsea exploration and related new product developments, it is important that our operational capabilities across all disciplines, whether buildings, plant, and equipment or personnel are able to support such developments. Our ability to continue to invest in operations during the year was driven by our core jack-up drilling business and contracts awarded by existing and new customers the most significant of which were as follows:

·    July 2014 - £0.6m additional well order signed with Centrica to supply surface wellhead and mudline equipment services for Southern North Sea exploration

·    August 2014 - £1.0m order from Det Norske for the supply of HP/HT equipment for an oil and gas appraisal well offshore Norway with a value of £1.0m

·    October 2014 - significant order signed with BG Group to supply HP/HT surface wellhead and mudline equipment services for a standard pressure exploration well in the UKCS

·    November 2014 - £1.9m HP/HT wellhead equipment order for an exploration well in the UKCS from a major oil and gas operator

·    November 2014 - £0.9m Det Norske, Norway orders HP/HT equipment for an oil and gas appraisal well offshore Norway and is the seventh Det Norske well to use Plexus equipment since 2012

·    January 2015 - £1.6m contract with Shell Brunei under an existing four year contract which runs to 2016 for three additional exploration wells

·    April 2015 - USD$0.8m new customer contract Cardon IV in new territory Venezuela awarded for the supply of equipment for a development well offshore Venezuela

·    May 2015 - £1.0m Premier Oil Norge order HP/HT wellhead equipment for an exploration well in the Norwegian Central North Sea

·    May 2015 - £1.25m third well equipment order from Maersk Oil under a contract signed in 2014 for an offshore well in the Danish sector of the North Sea

·    June 2015 - £3.3m ultra HP/HT wellhead equipment order received from new customer Total for potentially the highest pressure well ever drilled in the North Sea estimated at 17,000 - 19,000psi, offshore Norway

To date our core organic jack-up exploration business, and associated on-going investment in wellhead rental inventory together with the infrastructure, systems, and processes needed to support it have continued to generate the majority of our revenues. However as the North Sea began to experience a significant and widely reported slowdown, it was essential that we increased our efforts to extend our international presence. As such, we secured a major licensing agreement with our new major trading partner Jereh for China and other important territories post period end. International growth continued with wells won in Brunei with Shell Brunei, and our first ventures into China with Shell China, and into Venezuela with Cardon IV (a 50:50 Joint Venture between Repsol, S.A. and eni S.p.A). The operational base in Singapore supported wells in South East Asia and investment in personnel and infrastructure positions Singapore as a hub to support anticipated growth in the region. Supply chain rationalisation and emphasis on forging partnerships with our suppliers has resulted in reduction of overall risk and costs in the critical areas of our supply chain.

Further emphasis was placed on Asia with the formation of a new Malaysian company PPA in conjunction with a local Malaysian oil and gas partner, IPS. The establishment of PPA is a key milestone in Plexus' strategy to create a fully operational Asian business presence to increase the supply of our pioneering POS-GRIP wellhead equipment and services to the important Australian, Brunei, Indonesian, Malaysian, Thai, and Singaporean oil and gas exploration and production markets. At the time of the establishment of PPA the key task was the necessity to obtain a local Petronas licence, and importantly post period end in July PPA was awarded the licence. The licence enables PPA to manufacture and supply Plexus' POS-GRIP wellhead technology into the Malaysian market and we hope over time will act as a springboard to becoming a major supplier of wellhead equipment in the region. To support these plans Plexus is slowly building the number of employees in the region, and will also be sending more personnel to China from Aberdeen to support the training and knowledge transfer process with Jereh at its headquarters in Yantai. It is anticipated that the Singapore business unit will in the future establish its ability to refurbish and inspect wellhead equipment for servicing the local market, which simplifies logistics from Aberdeen and reduces costs, whilst being able to offer customers a more responsive service.

In anticipation of future growth, not only internationally but also in Europe we doubled the size of our operational headquarters in Dyce, Aberdeen through the purchase of a circa 36,000 sq.ft work shop and office facility for £2.4m. The new facility is situated immediately adjacent to the existing 36,500 sq.ft site in Aberdeen, and was previously occupied by leading oil services company Baker Hughes. This major increase in Plexus' operational capacity is necessary not only for supporting our rental wellhead business, but also to ensure that we are able to support and respond to greater anticipated activity associated with our recently launched Python subsea wellhead, and other new product developments such as the POS-SET Connector. At a time when cost control and indeed cost savings are paramount within the industry, the additional space will also enable Plexus to consolidate its work facilities in Aberdeen, thereby significantly improving our logistical efficiencies especially due to the close proximity of our existing building.

As reviewed in the R&D section of our Strategic Report, as a proprietary technology led business investment, time and effort continually go into engineering improvements and new inventions. During the year a number of such product development initiatives came to fruition and have now either arrived at a point where active promotion to the wider global marketplace can begin, for example, our HP/HT Tie-Back product originally sponsored by Maersk as well as our POS-SET Connector to facilitate abandonment which has already been ordered by Centrica; or will be able to be marketed in the near future such as our new Python subsea wellhead. Such developments have to be properly supported, and our ability to respond to technical enquiries and the physical deployment and installation of equipment is key, and we therefore ensure that appropriate training, methods, procedures and systems are in place, and continually reviewed to meet our customer expectations and requirements. An interesting development that we have recently seen during the current cycle of low oil prices and focus on cost savings, and which is relevant to the unique nature of our technology and product designs, is one where operators' engineers are looking more closely at technology that can offer a range of technical benefits from features such as monitoring, together with simplicity and avoidance of 'in the field problems' caused by conventional wellhead equipment that can arise for example from the use of lock rings and lock down sleeves. The more complicated nature of conventional wellhead equipment designs can lead to significant cost penalties whether direct or indirect through delayed or lost production. We hope this will prove positive for Plexus in the long-term.

Staff and staff development is essential for our current and future success. During the year there was further focus on recruitment with year end total employee numbers increasing from 144 to 157. As we expand our business internationally and support the development of our operational base in Singapore, we have recruited a number of local personnel each of which have enjoyed a significant induction and training period in the UK to support an effective transition of established working practices in the region. Particular emphasis was placed on our sales and marketing capabilities and a new sales strategy based around more forward looking market data for forthcoming projects was implemented post period end. This initiative is already showing positive signs of enabling us to engage with customers at an early stage of their well planning and equipment specification and selection process. Legislative changes have featured heavily during this period and in particular, we met our pension auto enrolment targets as stipulated by government. The role of field service technicians within Plexus is one of the most pivotal roles within the organisation, being integral to the safe operation of our equipment and the direct interface with our customers. The focus on training and competence within this group remains a key target for the business, bolstered by a new assessment centre led recruitment process which successfully saw five new field service technicians being recruited. In recognition of the importance that we place on such initiatives at a time when safety is so key for the industry, we were also delighted to achieve a major milestone with the accreditation and approval by Offshore Petroleum Industry Training Organisation ('OPITO') for our competency management system ('CMS') known as Competency@Plexus. OPITO is globally recognised and the accreditation is continually requested during tender and contract reviews by customers.

Health and Safety is a key operational discipline and Plexus remains fully committed to delivering the highest safety standards. We continue to manage our safety risks through assessment, implementation of controls, continual monitoring, and hiring and developing staff to meet the competency levels required. We encourage our personnel to get involved, have confidence to intervene and to challenge any unsafe act or condition and to ensure transparent reporting of incidents that meets our desired safety culture. Recent audits by Lloyds Register Quality Assurance ('LRQA'), the world leading independent provider of Business Assurance services demonstrate that we are operating to the recognised industry and national standards, with our ISO 90001 and BS OHSA 18001 certification maintained. We recognise that the health and well-being of our employees is a crucial feature of our HSE and HR strategy, and building on our achievement of our Bronze and Silver Healthy Working Lives Awards presented in 2013, we received during the year our Healthy Working Lives Gold Award.

IT services and support are of course essential for any modern business and investment in IT has continued in both staff numbers and infrastructure. The IT infrastructure has undergone major networking and telecommunication upgrades to support the continued growth of Plexus internationally. These upgrades are required to ensure delivery of flexible and integrated business information systems. The bespoke nature of our in-house software development allows the IT department to quickly react to the ever changing demands of the business. It provides important information for decision making, providing managers access to accurate business data for planning and analysis. The recent updates to our sales system have given better visibility of worldwide sales opportunities to both the sales team and senior management. Plexus is committed to ensuring a safe and secure electronic environment and as a wide range of cyber risks are an ever evolving and on-going risk for all companies the IT department is working towards ISO 27001:2013 accreditation which will help ensure that both internal and external risks are minimised. Certification provides customers and key stakeholders with the confidence that security risks are taken and addressed seriously. The certification process is rigorous and is expected to be completed in financial quarter 4 2016.

Finally, Plexus has to date, chosen not to own its own manufacturing capacity but it had previously acquired a 25% interest in a private UK engineering company which manufactures specialist oil and gas equipment. As Plexus becomes more international, and with stronger relationships developing with partners such as Jereh in China and IPS in Malaysia it was decided that higher cost base UK manufacturing was non-core and this interest was disposed of in June 2015.

Strategy and Future Developments

Technology

Plexus' unique and patented POS-GRIP friction-grip technology has wide ranging applications both within and outside of the oil and gas industry. It is important to remember that POS-GRIP is a method of engineering and not a product in its own right, and where there is an opportunity for the technology to improve upon conventional products, we look to integrate POS-GRIP into the product so that the benefits together with HG sealing can be realised. In simple terms POS-GRIP technology is based on a very simple concept. A compressive force is applied on 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 fix the inner member (hanger) in place through friction between the two components. The Company's strategy is primarily focused on delivering the highest standard of wellhead design for the upstream oil and gas markets, which is already proven to be uniquely advantageous in terms of safety features, operational efficiency, and cost savings for jack-up drilling HP/HT applications where Plexus has the majority market share in the North Sea.

POS-GRIP wellhead designs deliver many advantages over conventional "slip and seal" and "mandrel hanger" wellhead technologies for surface exploration and production activities, and in due course for subsea operation with our new Python subsea wellhead. These include larger metal-to-metal seal 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 cost. In particular our subsea wellhead eliminates the need for wearbushings, pack-offs, lock-rings, and lockdown sleeves, whilst delivering instant rigid lock-down in all directions whilst being fully reversible for ease of workover, side-tracking or abandonment. At a time when unconventional HP/HT and deep-water reservoir developments are growing in importance, the oil and gas industry is facing increasing technical challenges to meet rigorous regulatory and health and safety requirements, while having to ensure the commerciality of operations during the current volatile oil price environment. POS-GRIP wellheads address many of these challenges, whilst also being able to deliver significant cost savings which in the case of our new subsea wellhead design have been independently estimated at up to USD$10m for a deep-water well. In our view, Plexus' equipment sets a new standard and, having secured a leading position in jack-up exploration drilling, is well placed to break into the significantly larger and more mainstream volume production wellhead and subsea markets, particularly in conjunction with partners such as our new licensee Jereh.

The superiority and potential of our POS-GRIP technology is being increasingly recognised by the industry, and the various initiatives and agreements that we entered into during the year with a range of industry partners such as Jereh, COSL, and Aquaterra clearly support our view that the POS-GRIP friction-grip method of engineering technology has many more applications beyond our traditional organic jack-up exploration activities. Of course as with any major 'game changing' technology that has the potential to become a new standard, there have to be sound and genuine reasons for customers selecting our equipment. Apart from our operational time saving and related safety benefits, at the engineering level we believe that our technology can uniquely raise the integrity of wellhead testing and sealing to that of premium couplings, which supports our claim that wellheads should not be, and indeed now do not need to be, the 'weak link' in the well architecture chain. In support of these important principles an in depth report commissioned by the Company from OTM Consulting Inc, ('OTM'), an international independent engineering consultancy, concluded that Plexus wellheads using its HG metal seals, offer the "best possible sealing performance through a metal-to-metal seal that none of the existing designs can match. Moreover, sealing performance is not affected by pressure/temperature cycles as there are no movable components". OTM concludes that after evaluating POS-GRIP sealing technology against existing competing technologies, "it is the best and safest technology due to its enhanced safety performance".

Business Model and Markets

Plexus' traditional market has been the supply of adjustable rental wellhead equipment and associated running tools for jack-up exploration drilling in the UKCS. The exploration wellhead contracts are supplied from a rental fleet inventory, the majority of which are HP/HT wellheads as these are increasingly demanded not just for HP/HT drilling but also for standard pressure wells where added benefits are appreciated. Initially this was only for standard pressure equipment of 10,000 psi or less, but with the development of POS-GRIP HP/HT equipment, Plexus has secured nearly 100% of the UKCS market, and commands a large share of the European North Sea thanks to the superior nature of its technology. The rental business has since expanded globally into other territories such as Australia, Brunei, Cameroon, China, Egypt, Malaysia, and Venezuela. Plexus also provides service technicians who install and maintain our equipment at various stages during the drilling of a well.

The Company's focus on rental exploration allows customers to experience for themselves the many benefits of POS-GRIP technology on temporary exploration wells, rather than those used for production where typically the wellhead equipment is in place for the life of the well. However with new partner Jereh we are working closely to develop a Plexus POS-GRIP surface production wellhead suitable for the volume Chinese land market. In addition renting out equipment from a growing inventory enables Plexus to outsource all of its wellhead manufacturing to a select number of third parties, and as a result avoid having to invest in and develop in-house manufacturing capabilities with attendant fixed overheads. Such a strategy led to the disposal of a 25% shareholding interest in a private UK oil and gas equipment manufacturing company.

The jack-up wellhead exploration market is estimated to be worth circa USD$400m per annum. By contrast the combined value of the global exploration and production wellhead market was estimated by OTM at USD$4.5bn in 2014. Clearly the size of the markets that Plexus is only now beginning to address is far in excess of its traditional organic business, and even with the well reported decline in capex by the operating companies the upside of moving into these market sectors is substantial. As a result, in tandem with continuing to grow the jack-up rental business in both its traditional and new market territories, Plexus is focused in particular on expanding into the mainstream volume production wellheads market, and the increasingly important subsea market. In the case of the subsea market Douglas-Westwood expects deep-water capex to rise post 2016, and sees expenditure growing by almost 69% compared with the preceding five year period, totalling USD$210bn between 2015 and 2019, driven by Africa and the Americas which account for 82% of capex.

In light of volatile oil markets which saw Brent Crude fall during the financial year from circa USD$112 on 1 July 2014 to circa USD$63 on 30 June 2015, operators are increasingly focused on securing significant cost savings across their operations, and there is an industry wide push for savings at all levels of drilling operations. With this in mind, it is compelling that Plexus' equipment generates material cost savings for the operator, while at the same time delivering a superior wellhead solution. Importantly, Plexus' surface jack-up wellheads can be supplied at a rental cost that equates to less than the time savings for the operator, thereby making them cost negative. Similarly, our new Python subsea wellhead will also deliver substantial cost savings benefits, and we hope to be able to run the first prototype in the second half of calendar year 2016. Cost saving and safety features such as these underpin the value of Plexus' IP and underpins Plexus' growth potential as it enters new international markets directly or through licensees.

Strategy and the Future

Plexus has pioneered a safer, more cost effective, reliable and technically superior wellhead utilising POS-GRIP technology which we rent to many leading oil and gas operators worldwide for surface exploration jack-up drilling activities. Having battled with incumbent suppliers which have dominated the industry for decades, (where for example just five companies account for over 90% of the subsea wellhead business), Plexus' wellhead equipment is gaining traction and major operators awareness of our wellhead systems is increasing. To date our equipment has been used in over 400 wells worldwide by the likes of BG, BHP Billiton, BP, ConocoPhillips, Maersk, Shell, Statoil, Petronas, Tullow Oil, and Wintershall, which we believe is a testament to the commercial strength of Plexus' offering.

Plexus' long-term goal is to develop POS-GRIP technology as a new industry standard for wellhead design, and to continue to develop additional new products, which will also offer multiple benefits and advantages in terms of improved safety, functionality, and cost and time savings. For example Plexus' connector technology is ideal for high integrity, low fatigue connector applications. Wellhead connectors, riser connectors, subsea jumper connectors, pipeline connectors, and even vessel mooring connectors can all benefit from the simplicity of POS-GRIP. A key factor in many of these commercial opportunities is our superior metal-to-metal sealing capability with unprecedented reliability, and true weld quality sealing, resulting from the huge amount of preload that we generate which prevents any possible movement at the seal interface over the life of the field.

We believe we have merely scratched the surface despite the excellent growth seen to date, and that despite the current industry wide slowdown we believe that we can still make inroads into the sizeable markets that to date we have not addressed. As a company we are implementing a strategy to expand from a dominant position in the North Sea into new geographical areas, as evidenced by the growth we have reported in FY 2015 in Europe and Asia.

In an effort to continue to grow international revenues as a proportion of sales, and in particular access the growth of the Asian HP/HT market, we have established an Asian hub with offices in Singapore and Malaysia as we seek to further position ourselves in a number of countries including Australia, Brunei, Indonesia, Malaysia, Singapore and Thailand. With this in mind, we are working to re-locate a proportion of our wellhead rental equipment to Singapore to support and strengthen our current regional relationships and broaden our customer base outside of the UK.

Importantly, as well as establishing new regional hubs, and pursuing licencing agreements and strategic partners as a key part of strategy to continue increasing our global footprint, post period end we secured Jereh as a licencing partner in China; and secured a Petronas Licence in Malaysia through our joint venture entity. We are also in active dialogue with regards expansion into Russia and CIS countries as part of our wider focus on becoming less reliant on the declining North Sea area and seizing a foothold in major and emerging oil and gas economies.

In addition to our future strategy to accelerate the adoption of our POS-GRIP technology by the wider oil and gas market through licencing agreements, we are also developing new product lines to generate new revenue streams for Plexus. The launch of our Python Subsea Wellhead marks such a step. As mentioned the formal launch marked the first commercial availability of our POS-GRIP enabled subsea wellhead system, where we are looking to deploy a prototype offshore during the second half of calendar year 2016. With over six majors, including the likes of BG, eni, Maersk, Shell, and Total, having supported the development of the wellhead and its launch at OE2015, we are actively working towards finding an operator to secure this first deployment by either one of the original JIP partners or another operator. In terms of market competitors there are five major suppliers of subsea wellheads, these are Aker, Cameron, DrillQuip, FMC, and GE who are all major multi-billion dollar corporations. However with a unique technology that is safer and more cost effective we have a powerful story to tell and the progress we have made to date demonstrates how large the potential is for future growth and value creation. The subsea systems market had been estimated to be valued at USD$41.6bn between 2009-2013, including subsea trees, manifolds, wellheads, pumps, chokes and valves. The subsea wellhead market is therefore a sub-sector of this market, which broking house Numis has estimated to be valued at c.USD$10-12bn between 2014-2017. If Python is successfully commercialised this would be a significant step towards achieving our strategy of increasing adoption and brand awareness of our POS-GRIP product given the market size at hand.

R&D spend is also central to our strategy of investing time and capital into new product development. Excluding the cost of building test fixtures R&D spend increased 46.7% to £3.47m during the last financial year. R&D has been spent on such products as WellTree, the HP/HT Tie-Back connector, the new POS-SET Connector and the Python subsea wellhead. All of these product innovations are in line with Plexus' strategy to extend our POS-GRIP product reach into new and commercially attractive markets. Successful R&D activity leads to new inventions, product designs, and IP. Plexus continues to pursue an active strategy of protecting existing and securing new IP and patents, and we have a number of exciting and we believe valuable patent applications registered or in the process of being applied for.

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 earnings per share. Non-financial indicators include Health and Safety statistics, equipment utilisation rate, geographical diversity of customer revenues, effectiveness of a range of research and development initiatives for example in relation to new patent and proprietary intellectual property activity, and employee headcount and turnover rates.

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 and environmental risks

        We participate in a global market where the oil and gas reserves and their extraction and oil and gas prices can be severely impacted by changes in the political, operational, and environmental landscape. The introduction of sanctions is one example of such a risk, and in extreme circumstances even regime change, and a volatile oil price is another where a severe fall in oil prices can have a significant adverse impact on customers' drilling activities and associated capital expenditure. As a supplier to the industry we in turn can be adversely affected by such events which can disrupt the markets, and affect our ability to execute work for customers and/or collect payment for services performed. To help address such risks, the Group has continued to broaden its geographic footprint and customer base and applies a stringent approach to credit control.

(b)   Technology

        The Group is still at a relatively early stage in the commercialisation, marketing and application of its POS-GRIP friction-grip technology beyond jack-up rental exploration wellhead equipment, both with regard to expanding into the surface production and subsea markets, as well as new product development. Current and future contracts may be adversely affected by technology related factors outside the Group's control. These may include unforeseen equipment design issues, test delays during a contract and final testing and delayed acceptances of deliveries, which could lead to possible abortive expenditure and write downs, reputational risk and potential customer claims or onerous contractual terms. Such risks may materially impact on the Group. To mitigate this risk the Group continues to invest in developing and proving the technology and has a policy of on-going training of our own personnel and where appropriate our customers.

(c)   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. Product innovation or technical advances by competitors could adversely affect the Group and lead to a slower take up of the Group's proprietary technology. To mitigate this risk Plexus maintains an extensive suite of patents and trademarks, and actively continues to develop and improve its IP to ensure that it continues to be able to offer unique superior wellhead design solutions.

(d)   Operational

        Shortage of experienced personnel in the oil and gas industry is widely recognised and could deprive Plexus of key personnel necessary for operational activities and research and development initiatives. To mitigate this risk Plexus has developed effective recruitment and training procedures, which combined with the appeal of working in a company with unique technology and engineering solutions has enabled us to continue to grow our staff numbers, and achieve to date a low rate of turnover of personnel.

(e)   Liquidity and finance requirements

        In an economic climate that remains volatile and unpredictable it has become increasingly possible for both existing and 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. Although this is a potential risk the Group took appropriate steps during the year to mitigate this risk by successfully renewing and extending its bank facilities with Bank of Scotland. The Group is required to meet certain financial criteria agreed as covenants in connection with its bank loans and monthly management accounts are prepared and reviewed against the covenant requirements to ensure that the Group's obligations can be met.

(f)    Credit

The main credit risk is attributable to trade receivables. As the majority of the Group's customers are large international oil companies the risk of non-payment is much reduced, and therefore is more likely to be related to client satisfaction and/or trade sanctions. Customer payments can involve extended period of times especially from countries where exchange control regulations can delay the transfer of funds outside those countries. The Group has credit risk management policies in place and exposure to credit risk is monitored continuously.

Risk assessment

The Board has established an on-going process for identifying, evaluating and managing the significant risks 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 on a regular basis and could be associated with a variety of internal and external sources including regulatory requirements, disruption to information systems, control breakdowns and social, ethical, environmental and health and safety issues.

Ben van Bilderbeek

Chief Executive

27 October 2015

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2015

		2015	2014
	Notes	£'000	£'000 As restated
Revenue	2	28,526	27,024
Cost of sales		(8,581)	(7,817)
Gross profit		19,945	19,207
Administrative expenses		(14,925)	(13,928)
Operating profit		5,020	5,279
Finance income		512	5
Finance costs		(182)	(124)
Share of profit of associate		236	215
Gain on disposal of associate		352	-
Profit before taxation		5,938	5,375
Income tax expense	4	(509)	(804)
Profit for the year attributable to the owners of the parent		5,429	4,571
Other comprehensive income		-	-
Total comprehensive income for the year attributable to the owners of the parent		5,429	4,571
Earnings per share	6
Basic		6.40p	5.44p
Diluted		6.16p	5.21p
All income arises from continuing operations.

Consolidated Statement of Financial Position

at 30 June 2015

		2015	2014
	Notes	£'000	£'000
Assets
Goodwill		767	760
Intangible assets	7	13,167	10,437
Investment in associate	8	-	941
Property, plant and equipment	9	17,154	13,284
Deferred tax asset		-	751
Total non-current assets		31,088	26,173
Inventories		6,551	5,256
Trade and other receivables		7,301	6,463
Cash and cash equivalents		3,328	6,353
Total current assets		17,180	18,072
Total Assets		48,268	44,245
Equity and Liabilities
Called up share capital	10	849	849
Share premium account		20,141	20,138
Share based payments reserve		1,862	2,476
Retained earnings		15,628	11,117
Total equity attributable to equity holders of the parent		38,480	34,580
Liabilities
Deferred tax liabilities		212	-
Bank loans		5,975	4,000
Total non-current liabilities		6,187	4,000
Trade and other payables		3,296	5,482
Current income tax liabilities		5	183
Bank loans		300	-
Total current liabilities		3,601	5,665
Total liabilities		9,788	9,665
Total Equity and Liabilities		48,268	44,245

Consolidated Statement of Changes in Equity

for the year ended 30 June 2015

	Called Up Share Capital £'000	Share Premium Account £'000	Share Based Payments Reserve £'000	Retained Earnings £'000 As restated	Total £'000 As restated
Balance as at 30 June 2013	828	17,288	2,741	6,335	27,192
Total comprehensive income for the year	-	-	-	4,571	4,571
Share based payments reserve charge	-	-	26	-	26
Transfer of share based payments reserve charge on exercise of options	-	-	(599)	599	-
Tax credit recognised directly in equity	-	-	-	475	475
Issue of ordinary shares (net of issue costs)	21	2,850	-	-	2,871
Net deferred tax movement on share options	-	-	308	-	308
Dividends	-	-	-	(863)	(863)
Balance as at 30 June 2014	849	20,138	2,476	11,117	34,580
Total comprehensive income for the year	-	-	-	5,429	5,429
Share based payments reserve charge	-	-	21	-	21
Transfer of share based payments reserve charge on exercise of options	-	-	(1)	1	-
Tax credit recognised directly in equity	-	-	-	2	2
Transfer of share based payments reserve charge on lapse of options	-	-	(38)	38	-
Issue of ordinary shares (net of issue costs)	-	3	-	-	3
Net deferred tax movement on share options	-	-	(596)	-	(596)
Dividends	-	-	-	(959)	(959)
Balance as at 30 June 2015	849	20,141	1,862	15,628	38,480

Consolidated Statement of Cash Flows

for the year ended 30 June 2015

	2015	2014
	£'000	£'000
Cash flows from operating activities
Profit before taxation	5,938	5,375
Adjustments for:
Depreciation, amortisation and impairment charges	3,881	3,405
Loss on disposal of property, plant and equipment	20	95
Charge for share based payments	21	26
Investment income	(512)	(5)
Interest expense	182	124
Share of result in associate	(236)	(215)
Gain on disposal of associate	(352)	-
Dividend received from associate	37	-
Changes in working capital:
(Increase)/decrease in inventories	(1,295)	776
Increase in trade and other receivables	(838)	(1,541)
(Decrease)/increase in trade and other payables	(1,678)	256
Cash generated from operating activities	5,168	8,296
Income taxes paid	(318)	(353)
Net cash generated from operating activities	4,850	7,943
Cash flows from investing activities
Acquisition of associate	-	(726)
Proceeds from disposal of associate	1,492	-
Acquisition of subsidiary	(7)	-
Purchase of intangible assets	(3,541)	(2,403)
Purchase of property, plant and equipment	(7,016)	(3,016)
Proceeds of sale of property, plant and equipment	56	57
Interest received	4	5
Net cash used in investing activities	(9,012)	(6,083)
Cash flows from financing activities
Drawdown of loans	2,500	-
Repayment of loans	(225)	-
Net proceeds from issue of new ordinary shares	-	2,330
Proceeds from share options exercised	3	541
Interest paid	(182)	(124)
Equity dividends paid	(959)	(863)
Net cash generated from financing activities	1,137	1,884
Net (decrease)/increase in cash and cash equivalents	(3,025)	3,744
Cash and cash equivalents at 1 July 2014	6,353	2,609
Cash and cash equivalents at 30 June 2015	3,328	6,353

Notes to the Consolidated Financial Statement

1.      Prior period adjustment

The comparatives for the year ended 30 June 2014 have been adjusted to correct the accounting treatment in relation to a tax credit received of £475k arising on the exercise of share options. This credit was originally recognised within 'Income Tax Expense' in the Consolidated Statement of Comprehensive Income whereas the amount should have been recognised directly in Equity in accordance with IAS 12 Income Taxes. This adjustment arose following a review of the Group's Annual Report and Accounts for the year ended 30 June 2014 by the Financial Reporting Council's Conduct Committee.

The effect of the restatement in the year to 30 June 2014 has been to increase the income tax expense within the Consolidated Statement of Comprehensive Income by £475k, thereby reducing profit after tax by the same amount. This has had the effect of decreasing basic and diluted earnings per share to 5.44p and 5.21p respectively (basic earnings per share: 6.01p; diluted earnings per share: 5.75p as originally reported).

This adjustment has had no impact on net assets, tax payable, or the cash flow statement of the prior year and no impact on opening reserves in either the current or the prior period.

2.      Revenue

	2015	2014
	£'000	£'000
By geography
UK	10,591	9,892
Europe	14,471	6,905
Rest of World	3,464	10,227
	28,526	27,024

The revenue information above is based on the location of the customer.

3.      Segment reporting

The Group derives revenue from the sale of its POS-GRIP technology and associated products, the rental of wellheads 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 revenue:

	2015	2014
	£'000	£'000
Customer 1	4,224	692
Customer 2	4,175	2,265
Customer 3	3,593	3,576
Customer 4	3,356	1,712
Customer 5	3,342	1,642

4.      Income tax expense

(i) The taxation charge for the year comprises:	2015	2014
	£'000	£'000
		As restated
UK Corporation tax:
Current tax on income for the year	353	958
Adjustment in respect of prior years	(483)	(350)
	(130)	608
Foreign tax:
Current tax on income for the year	263	81
Adjustment in respect of prior years	9	13
	272	94
Total current tax	142	702
Deferred tax:
Origination and reversal of timing differences including share options	286	(42)
Adjustment in respect of prior years	81	144
Total deferred tax	367	102
Total tax charge	509	804
The effective rate of tax is 9% (2014: 15%)
(ii) Factors affecting the tax charge for the year
Profit on ordinary activities before tax	5,938	5,375
Tax on profit at standard rate of UK corporation tax of 20.75% (2014: 22.5%)	1,232	1,209
Effects of:
Expenses not deductible for tax purposes	187	217
Income from and gain on sale of associate not subject to tax	(122)	(48)
Derecognition of financial liability not subject to tax	(105)	-
Effect of R&D tax credits	(521)	(279)
Effect of change in tax rate	(10)	(128)
Tax adjustments on share based payments	1	26
Foreign tax rates	240	-
Adjustments in respect of prior year	(393)	(193)
Total tax charge	509	804
(iii) Movement in deferred tax liability/(asset) balance
Deferred tax asset at beginning of year	(751)	(545)
Charge to Statement of Comprehensive Income	367	102
Deferred tax movement on share options recognised in equity	596	(308)
Deferred tax liability/(asset) at end of year	212	(751)
(iv) Deferred tax liability/(asset) balance
The deferred tax liability/(asset) balance is made up of the following items:
Difference between depreciation and capital allowances	1,600	1,232
Share based payments	(1,361)	(1,956)
Tax losses	(27)	(27)
Deferred tax liability/(asset) at end of year	212	(751)

5.      Dividends

	2015	2014
	£'000	£'000
Ordinary Shares
Interim paid for the period to 31 December 2014 of 0.48p (2014: 0.44p) per share	433	407
Ordinary Shares
Final dividend for the year ended 30 June 2015 of 1.75p (2014: 0.62p) per share	1,564	526

The proposed final dividend has not been accrued at the statement of financial position date in accordance with IFRS.

6.      Earnings per share

	2015	2014
	£'000	£'000 As restated
Profit attributable to shareholders	5,429	4,571
	Number	Number
Weighted average number of shares in issue	84,896,300	83,991,918
Dilution effects of share schemes	3,205,091	3,728,098
Diluted weighted average number of shares in issue	88,101,391	87,720,016
Basic earnings per share	6.40p	5.44p
Diluted earnings per share	6.16p	5.21p
Basic earnings 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 employee share schemes and share option schemes. The comparative year EPS has been restated in accordance with note 1.

7.      Intangible fixed assets

	Intellectual Property £'000	Patent and Other Development £'000	Computer Software £'000	Total £'000
Cost
As at 1 July 2013	6,440	5,353	190	11,983
Additions	-	2,367	36	2,403
As at 30 June 2014	6,440	7,720	226	14,386
Additions	-	3,473	68	3,541
As at 30 June 2015	6,440	11,193	294	17,927
Amortisation
As at 1 July 2013	2,362	781	149	3,292
Charge for the year	330	308	19	657
As at 30 June 2014	2,692	1,089	168	3,949
Charge for the year	329	454	28	811
As at 30 June 2015	3,021	1,543	196	4,760
Net Book Value As at 30 June 2015	3,419	9,650	98	13,167
As at 30 June 2014	3,748	6,631	58	10,437
Patent and other development costs are internally generated.

8.      Investment in associate

The summary financial information of the Group's associate, extracted on a 100% basis from the accounts prepared under IFRS for the year ended 30 June are as follows:

	11 Months to 31 May 2015 £'000	11 Months to 30 June 2014 £'000
Non-current Assets	N/A	5,223
Current Assets	N/A	3,241
Non-current Liabilities	N/A	2,561
Current Liabilities	N/A	2,476
Revenue	8,394	8,158
Profit and total comprehensive income	944	862
Value of associate investment		£'000
Investment in associate at 30 June 2014		941
Share of profit of associate in the year		236
Dividend received from associate		(37)
Gain on disposal of associate		352
Proceeds from disposal of associate		(1,492)
Investment in associate at 30 June 2015		-

The interest in associate was purchased on 22 July 2013 and disposed of on 25 June 2015, hence 11 months results are disclosed.

9.      Property, plant and equipment

	Buildings £'000	Tenant Improvements £'000	Equipment £'000	Assets under Construction £'000	Motor Vehicles £'000	Total £'000
Cost
As at 1 July 2013	972	353	22,594	659	42	24,620
Additions	2	77	430	2,505	2	3,016
Transfers	-	-	2,904	(2,904)	-	-
Disposals	-	-	(535)	-	-	(535)
As at 30 June 2014	974	430	25,393	260	44	27,101
Additions	3,405	2	1,544	2,054	11	7,016
Transfers	-	-	2,140	(2,140)	-	-
Disposals	-	-	(533)	-	(7)	(540)
As at 30 June 2015	4,379	432	28,544	174	48	33,577
Depreciation
As at 1 July 2013	325	76	11,028	-	23	11,452
Charge for the year	80	50	2,612	-	6	2,748
On disposals	-	-	(383)	-	-	(383)
As at 30 June 2014	405	126	13,257	-	29	13,817
Charge for the year	153	56	2,854	-	7	3,070
On disposals	-	-	(461)	-	(3)	(464)
As at 30 June 2015	558	182	15,650	-	33	16,423
Net book value As at 30 June 2015	3,821	250	12,894	174	15	17,154
As at 30 June 2014	569	304	12,136	260	15	13,284

10.   Share Capital

	2015	2014
	£'000	£'000
Authorised:
Equity: 110,000,000 (2014: 110,000,000) Ordinary shares of 1p each	1,100	1,100
Allotted, called up and fully paid:
Equity: 84,902,196 (2014: 84,892,673) Ordinary shares of 1p each	849	849

Share issue during the year:

	Number of shares	Share capital £'000	Share premium £'000	Total £'000
At 30 June 2014	84,892,673	849	20,138	20,987
On 12 February 2015	9,523	-	3	3
At 30 June 2015	84,902,196	849	20,141	20,990

During the period the Group issued new shares as a result of the following transactions:

			Aggregate	Total
	Number of	Price per	nominal	aggregate
	shares	share	value	value
			£	£
12 February 2015
- Share options	9,523	38.50p	95	3,666

The excess net proceeds have been credited to the share premium account.

11.    Reconciliation of net cash flow to movement in net cash/(debt)

	2015	2014
	£'000	£'000
(Decrease)/increase in cash in the year	(3,025)	3,744
Cash inflow from increase in net debt	(2,275)	-
Movement in net cash/(debt) in year	(5,300)	3,744
Net cash/(debt) at start of year	2,353	(1,391)
Net (debt)/cash at end of year	(2,947)	2,353

12.    Analysis of net cash/(debt)

	At beginning of year £'000	Cash flow £'000	At end of year £'000
Cash in hand and at bank	2,609	3,744	6,353
Bank loans	(4,000)	-	(4,000)
Total	(1,391)	3,744	2,353

13.    Post balance sheet events

Subsequent to the year end, the Company entered into a Subscription Agreement with Jereh International (Hong Kong) Co. Ltd. ("Jereh") dated 1st July 2015. Under the Subscription Agreement, Jereh subscribed for 5% of the enlarged share capital of the Company; the number of shares subscribed for was 4,468,537 at a price of 180p per share. The total number of shares in issue following this subscription, and as at the date of this report, is 89,370,733.

The financial information above does not constitute the company's statutory accounts for the year ended 30 June 2015 but is derived from those statements.

The statutory financial statements and this preliminary statement for the year ended 30 June 2015 were approved by the Board on 27 October 2015. On the same date the company's auditors, Crowe Clark Whitehill LLP 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 2014 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, 42-50 Hersham Road, Walton-on-Thames, Surrey, KT12 1RZ.

 

END

 

 

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