Investment in precision engineering business

RNS Number : 5871K

Plexus Holdings Plc

17 December 2018

 

Plexus Holdings PLC / Index: AIM / Epic: POS / Sector: Oil Equipment & Services

This announcement contains inside information

Plexus Holdings PLC ('Plexus' or 'the Company')

Investment in precision engineering business -

Kincardine Manufacturing Services Ltd

Highlights

·   Investment of £735,000 in cash to acquire a 49% interest in Kincardine Manufacturing Services Limited ('KMS'), a specialist precision engineering business with a blue-chip customer base, producing a variety of parts for the oil and gas sectors

·   KMS provides Plexus with future access to machining capability which can support R&D development projects to provide potential licensees with alternative applications of POS-GRIP® technology

·    Plexus' investment is by way of a subscription for new shares, and the proceeds will be used to fund expansion initiatives at KMS

·    KMS distribution/dividend policy expected to generate annual returns for Plexus

Plexus Holdings PLC, the AIM quoted oil and gas engineering services business and owner of the proprietary POS-GRIP® friction-grip method of wellhead engineering, is pleased to announce it has made an investment of £735,000 to acquire a 49% interest in KMS, an independent precision engineering business focused on the oil and gas industry ('the Transaction'). The Transaction is in line with management's strategy to position Plexus as an IP-led company based around its ground-breaking POS-GRIP friction grip method of engineering with a design, development and now a machining capability. 

KMS was founded in 2001 and has grown to become a specialist subcontracting manufacturer in precision engineering for the oil and gas industry, providing world-class engineering solutions and manufacturing services for complex components and assemblies.  KMS supplies a range of blue-chip international clients, including Schlumberger, Halliburton, GE Oil & Gas, NOV and Weatherford.

Post the sale of its niche wellhead exploration equipment services business for jack-up applications to TechnipFMC ('TFMC') in February 2018, Plexus is focused on commercialising and exploiting its existing IP as well as developing new POS-GRIP-enabled products either organically or with partners such as TFMC, with whom the Company has entered into a Collaboration Agreement.  As well as a best in class jack-up exploration wellhead that has been successfully used on over 350 wells worldwide, Plexus has developed a suite of POS-GRIP-enabled products for larger markets such as surface production, subsea production and exploration and well abandonment and decommissioning.  It is anticipated that KMS will provide Plexus with additional means by which to machine bespoke equipment for new applications and technologies as well as for R&D testing, and  will potentially enable Plexus to more effectively supply specific markets. 

Plexus is acquiring its 49% interest in KMS by means of a subscription for new shares in KMS.  KMS intends to use the proceeds from the Transaction to expand existing capacity and fund other growth initiatives.  For example, KMS has recently acquired a new large bore machine which has already resulted in a significant expansion in capacity.  KMS intends to use circa £310,000 of the proceeds arising from Plexus' investment, in settlement for this piece of machinery. Under the terms of the Transaction, Plexus will be entitled to future distributions/dividend payments which would provide an annual return on Plexus' investment, subject to KMS' profitability, in addition to any capital appreciation in the value of Plexus' 49% shareholding in KMS. An additional cash payment of up to £150,000 may be payable by Plexus to the current owners of KMS, subject to the future performance of KMS in the year to 31 December 2018.  

Plexus' CEO Ben Van Bilderbeek said, "As a highly experienced engineering company based in Aberdeenshire with a blue-chip customer base, KMS shares many similarities with Plexus.  We already have first rate IP in the form of our POS-GRIP technology, and now thanks to today's Transaction, we are further able to support our programme to expand the application of our proprietary technology throughout the oil and gas supply chain and beyond into areas such as geothermal and decommissioning. Having established our jack-up exploration wellhead business as the dominant supplier to the North Sea HP/HT market, we know the challenges companies operating in the sector face.  Therefore, we look forward to working with and supporting the KMS team going forward, as we look to grow our business substantially over the coming years.

Further Information on KMS

KMS manufactures parts used in harsh and demanding subsea environments within the oil and gas industry which range from 1mm to up to 1m in diameter by 3m long, in materials including plastics, carbon steels, alloy steels, stainless steels, and high temperature alloys.  The Company procures raw materials, sources components and fully assembles test electro-mechanical systems for inspection and QHSE (Quality, Health, Safety and Environment policy) standards and processes.

In the year to 31 December 2017, KMS generated revenues of £3.4m (2016:  £2.6m) and profit before tax of £323k (2016: loss £185k).  As at 31 December 2017, KMS had gross assets of £1.6m (2016: £1.4m).  

**ENDS**

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]
Derrick Lee	Cenkos Securities PLC	Tel: [phone]
Frank Buhagiar	St Brides Partners Ltd	Tel: [phone]
Isabel de Salis	St Brides Partners Ltd	Tel: [phone]

NOTES:

AIM-traded oil and gas engineering services company Plexus (AIM: POS) is an IP-led company that has developed a range of products and applications based on its patent-protected POS-GRIP friction-grip technology.  Having proved the superior qualities of POS-GRIP within the jack-up wellhead exploration market through the sale of this business to FMC Technologies Limited, a subsidiary of TechnipFMC (Paris:FTI, NYSE:FTI) (jointly "TFMC"), in early 2018, the Company is now focused on establishing its technology and equipment in other markets including surface production wellheads, subsea and de-commissioning. 

Its suite of ongoing products and applications include: "HG"™ Wellheads, which combine POS-GRIP Technology with Gas Tight metal sealing; the Python® Subsea Wellhead (a new standard for subsea wellheads - developed in a JIP supported by Royal Dutch Shell, BG (now owned by Shell), Wintershall, Total, Maersk (now owned by Total), Tullow Oil, eni, Senergy (now Lloyds register), and Oil States Industries Inc); the POS-SET™ Connector for the growing de-commissioning and abandonment market; and Tersus-PCT, an innovative HP/HT Tie-Back connector product.  Importantly, the Company also has a Collaboration Agreement with TFMC, which provides a platform to further develop and commercialise these and other applications based on its POS-GRIP technology.

 

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