Preliminary Results for year

RNS Number : 5906U

Plexus Holdings Plc

19 October 2010

 



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

19 October 2010

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

Preliminary Results for the year to 30 June 2010

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 2010.

Results

·    Revenue of £13.1m (2009: £15.1m)

·    Profit before tax of £0.6m (2009: £1.8m)

·    EBITDA of £3.4m before IFRS 2 share based payment charges of £0.21m (2009: £4.3m before IFRS 2 share based payment charges of £0.19m)

·    Gross margin increase to 58.5% (2009: 57.9%)

·    Basic earnings per share of 0.88p (2009: 1.27p)

Highlights

·    EBITDA and profit before tax in line with market expectations; profit after tax ahead of market expectations

·    Increasing industry awareness of the benefits of POS-GRIP® friction grip technology wellhead equipment following recent events in the Gulf of Mexico

·    Initiation of Joint Industry Project ('JIP') inviting investment for the accelerated development of a POS-GRIP "HGSS"™ subsea wellhead

·    New assembly and test facility building in Aberdeen opened May 2010 to support anticipated future growth in High Pressure/High Temperature ('HP/HT') and Extreme High Pressure/High Temperature ('X-HP/HT') activities

·    HP/HT contract wins with GDF Suez Egypt for £0.6m, Maersk Oil North Sea UK Limited ('Maersk') for an estimated initial £3.0m, Sonangol Pesquisa e Producao ('Sonangol') for £0.7m, and new customer Senergy Limited at £0.7m

·    Expanding geographic reach - winning of business with new customers in three new territories; offshore Cameroon in West Africa with Bowleven plc, offshore Tunisia in North Africa with Cairn Energy PLC Group, and offshore Angola in South West Africa with Sonangol

·    Further contract wins with Dubai Petroleum Establishment, Transocean Drilling U.K. Limited and Wintershall Noordzee B.V.

·    Post period end Plexus is confident that it will be awarded its first contract win in Australia with another new customer

·    Continued capital investment of £3.3m (2009: £3.1m) including the addition of two more HP/HT wellhead equipment sets at a cost of circa £1.5m

·    Research and Development ('R&D') spend, excluding costs of building new test fixtures, increased by 114% to £0.75m (2009: £0.35m)

·    Strengthened the Board - appointed industry and wellhead equipment specialist Geoff Thompson as Non-Executive Director in June 2010

·    Post period end, renewal, increase, and extension of bank facilities in September 2010. New £5m credit facility on a three year revolving basis increased from £4m, with additional £1m overdraft on a yearly term

·    The Board is today proposing an increased final dividend of 0.39p per share (2009: 0.38p), which will be subject to shareholder approval at the Annual General Meeting ('AGM') to be held on 30 November 2010.  If approved the dividend will be paid on 10 December 2010 to all members appearing on the register of members on the record date 29 October 2010.  The ex-dividend date for the shares is 27 October 2010.

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]
Jon Fitzpatrick	Cenkos Securities PLC	Tel: [phone]
Ken Fleming	Cenkos Securities PLC	Tel: [phone]
Felicity Edwards	St Brides Media & Finance Ltd	Tel: [phone]
Susie Geliher	St Brides Media & Finance Ltd	Tel: [phone]

Results

Chief Executive Ben van Bilderbeek said:

"I am pleased to report that Plexus has maintained its level of key POS-GRIP HP/HT wellhead revenues and has also continued to win new customers in new territories around the world. This resulted in sales being wider spread than ever before with our UK and European sales in the year accounting for under half of revenues. This has been achieved despite the difficult trading conditions faced by the oil and gas industry and the world economy as a whole over the last financial year, from which Plexus was not immune. Continuing oil and gas price volatility, which by mid 2009 had taken prices close to levels last seen in 2005, combined with continuing bank funding constraints for smaller operators, inevitably meant that oil companies reduced investment plans, and the associated expenditure on oil services is only anticipated to strengthen in the second half of 2010 and beyond. In the meantime a number of large mergers and acquisitions have taken place between oil services companies, particularly in the USA, which further underlines the changing nature of the industry.

"Looking to the future it is inevitable that many of our current engineering initiatives, which form an important part of our growth strategy, have to be considered against the back-drop of the recent incident in the Gulf of Mexico earlier this year. Although it is still unclear what the definitive causes were as the official reports have not yet been published, or indeed what the full regulatory impact and industry responses will be over the coming months and years, what is clear is that there will be more scrutiny and assessment of current drilling practices and technologies than ever before.

"Plexus has consistently maintained that the unique advantages of its proprietary POS-GRIP technology in terms of safety, operational performance, and cost savings will result in its wider acceptance and deployment, not only for jack-up surface drilling but also for production wellheads and subsea wellhead applications, and we believe that the conditions for communicating this message are now more favourable than ever before.

"In view of these developments we make no apologies for repeating that we advocate, in the strongest possible terms, a number of basic engineering and common sense principles which POS-GRIP wellhead technology addresses. In simple terms these are that for all oil and gas drilling applications the blow out preventers ('BOP') should not be lifted from the well to enable the landing of casing and energising of seals; that all casing and tubing hangers should be locked down with sufficient capacity to withstand the forces that can manifest themselves in the well; that wellheads which have to provide effective sealing throughout and beyond the productive life of a well should be designed using seals which avoid the loss of integrity over time as is often the case with alternative sealing methods; and that wellhead equipment test standards need to reflect a system's ability to withstand 'true' field life conditions, and need to match the accepted higher standards of other critical performance items of equipment in the well such as casing and tubing couplings.

"For these reasons we remain confident that our organic business and relationships with key customers will continue to develop and grow, whilst at the same time we pursue commercial opportunities with potential licensees and alliance partners over the coming years. Finally, I am pleased to announce that the Directors propose an increased final dividend of 0.39p per share for the year ended 30 June 2010 which will be submitted for formal approval at the Annual General Meeting."

Summary of Results for the year ended 30 June 2010

	2010	2009
	£'000	£'000
Revenue	13,142	15,105
EBITDA - before the effect of IFRS 2	3,416	4,316
EBITDA - after the effect of IFRS 2	3,202	4,126
Profit before taxation	645	1,798
Basic earnings per share (pence)	0.88	1.27

Chairman's Statement

Business progress

I am pleased to report that the Group made strong progress in a number of strategic areas including the winning of new customers and expansion into new territories together with the ongoing development of key intellectual property and associated research and development. A stronger second half resulted in a full year EBITDA of £3.4m (before IFRS 2 share based payment charges of £0.21m) in line with market expectations, resulting in earnings per share of 0.88p.

Strategy

As Plexus continues to extend its geographic reach, which during the last financial year included for the first time offshore Cameroon, Tunisia, and Angola we are in no doubt that the industry is becoming increasingly aware of our proprietary and patented friction grip technology and the significant advantages that it can deliver in terms of safety, time savings, and operational performance throughout the field life of a well. We are committed to the growth of our organic exploration wellhead rental business and are continuing to invest in the necessary infrastructure, systems, and processes to support this strategy. At the same time we fully recognise that the POS-GRIP method of engineering also delivers particular advantages for production wellhead applications and for subsea wellheads, as well as related new product development opportunities such as our 15,000psi Tieback project which we hope will be of major benefit to the HP/HT jack-up drilling exploration sector, hence the 114% increase in our R&D spend (excluding costs of building new test fixtures) during the last financial year.

Our continued investment in a number of key areas has given strategic support to our day to day operations during the last financial year, and is an indicator of the continuing maturity of the business and our ability to play an important role in the oil services arena. These included the £0.6m investment in a new assembly and test building at our facility in Aberdeen which opened on time and on budget in May 2010, the initiation of a number of new patents which we believe will have considerable value over the coming years, and the successful certification of the Plexus management system for both ISO 9001:2008 and OHSAS 18001:2007. Such systems and health and safety initiatives are an increasingly important part of our customers' requirements and both standards are recognised throughout the industry as important operational and commercial milestones.

Turning to non organic strategic initiatives these inevitably centre on POS-GRIP friction grip technology and our ongoing drive and determination to gain the widest acceptance of our technology within the oil and gas industry. We believe that there are very good reasons for revisiting certain industry standards and practices surrounding wellhead equipment testing and design, some of which have been highlighted as a result of the Gulf of Mexico subsea incident in April 2010. For example the importance of casing being locked down in place in the seal assembly with sufficient force, and in a timely manner with the minimum opportunity for delays and failures as can happen with lock down rings has been cited by the USA Department of Interior. The simplicity and predictable nature of POS-GRIP technology addresses these issues in a uniquely beneficial way as inherent in the POS-GRIP design is anti-rotation and preloaded lockdown as friction works in all directions (i.e. tubular members are held radially and axially). Furthermore we believe that effective seals that provide protection beyond the productive life of a well and which do not rely on the use of elastomeric/resilient seals which lose integrity should be a basic requirement of well design. This is even more the case with subsea wellheads where unlike surface wellheads remedial solutions are not readily available, and where POS-GRIP can deliver true metal to metal seals with a large contact area activated by large external forces. To accelerate the possibility of developing a superior POS-GRIP subsea wellhead we have launched a JIP initiative that invites a number of key operators and oil service companies to participate in funding the development of a POS-GRIP HGSS subsea wellhead.

The subsea wellhead JIP is an exciting new development. We are proposing to develop and build a subsea wellhead system that will have fewer parts in the well bore than any other wellhead equipment available on the market, a system which seals and locks hangers down as soon as cementing is complete, and a system which is inherently resistant to contamination as our system has no moving parts exposed to well bore fluids.

Such Plexus initiatives to improve existing standards and practices extend also to surface wellheads where the chance of avoiding and controlling potential blow outs are clearly significantly increased by the use of "through the BOP" wellhead designs such as POS-GRIP, as opposed to spool type (often known as 'slip and seal') wellheads where the removal of the BOP is required to cut casing. Such established procedures cost time and generate unnecessary risk to personnel and the environment, and are related to the fact that such designs are based around generally accepted American Petroleum Institute ('API') standards for conventional and historical wellhead designs. These standards are in turn supported by test standards for wellheads that do not require multi-sample testing, and some seals are not tested at all. Such tests do not reflect real field conditions, and are much less stringent than those required for example for casing and tubing couplings. We believe that this is because unlike POS-GRIP designs these conventional wellhead designs have been unable to pass such higher standards due to seals moving during testing and because annular pockets are non concentric.

Alongside our strategic focus on leveraging the technical benefits of POS-GRIP technology we continue to address the funding of future projects. I am pleased therefore to confirm that we have further strengthened our relationship with Bank of Scotland Corporate and have agreed the renewal, increase, and extension of bank facilities for a new £5m (increased from £4m) three year revolving credit facility plus a £1m overdraft on a yearly term. We do not intend to utilise all of these facilities during the current financial year, but believe that it is sensible to have secured the ability to invest in the future growth of the business as the need arises.

Staff

On behalf of the Board, I would like to thank all our employees for their dedication and hard work during a year which has seen a continued broadening of our geographical areas of operation, further raising the awareness of the benefits of POS-GRIP friction grip technology. I would also like to welcome Geoff Thompson, a specialist in the design, testing, and specifications of oil industry well equipment, as a non-executive director to the Board.

Outlook

Plexus has continued to make strong progress during the year through a number of key strategic activities all of which centre around our patented proprietary POS-GRIP friction grip technology. We believe that we are able to offer the oil and gas industry a range of superior wellhead equipment not only for exploration, but also for production operations whether for surface or in due course subsea. The fact that we continue to win business from some of the largest operators for some of the most challenging conditions particularly for use in HP/HT wells, demonstrates that our technology has an increasingly important role to play at a time when access to innovative and enabling technology with clear safety advantages is so necessary, particularly as the incidence of blow outs is significantly higher in HP/HT versus normal pressured wells. Furthermore we believe these initiatives will also enable us to over time broaden our range of products to include for example valves and connectors. In the meantime our main goal is to address some of the technical and engineering issues that have been brought sharply into focus following the recent Gulf of Mexico incident. Of particular note is the importance of full metal to metal sealing capability for the life of a well together with the provision of effective and fast locking down of the casing, where we believe conventional technology and traditional methods have performance limitations which can be empirically proven. This is especially relevant where HP/HT conditions exist and which lead to axial and radial movement of tubular members which if not contained can be so damaging to the integrity of wellhead seals. This is why we have launched our JIP initiative inviting the industry to participate in the development of a new and we believe superior POS-GRIP HGSS subsea wellhead.

For these reasons I look forward to the future with confidence, and although global economic conditions remain volatile, and indeed in some areas fragile, Plexus is beginning to see signs of increased organic activity as energy prices stabilise and demand strengthens. At the same time a number of important dialogues are being maintained with a range of key industry entities. These include operators, oil services companies, regulators, standards organisations, and health and safety bodies which we hope will further move us towards a point where we will be able to secure the interest of potential licensees and alliance partners which will help accelerate the roll out of our technology which we believe will deliver significant value for our shareholders.

Robert Adair

Non-Executive Chairman

18 October 2010

Chief Executive's Review

Plexus as reported at the half year has been operating in challenging market conditions both in global economic terms and within an oil and gas industry where the prospects of oil service companies are unavoidably related to energy prices. At the beginning of the financial year continuing oil and gas price volatility had reduced oil prices to levels last seen in 2005 of c.$45USD per barrel which was approximately one third of peak levels that had been reached in mid-2009 of c.$140USD per barrel. The subsequent slow down and reduction in investment plans, combined in some instances with constraints on securing adequate capital funding, impacted on the sector as a whole.

I am pleased to report however that despite a difficult trading environment Plexus has continued to make strong progress in terms of increasing the awareness of POS-GRIP friction grip technology wellhead equipment. With the stabilising of the oil price at levels which ensures the viability of more projects, we are beginning to see an increasing level of activity as we move into 2011.

In particular our focus on winning new contracts both from existing customers and new customers in new regions around the world has continued to be successful, and resulted for FY2010 in our Rest of the World (non UK and non European) sales accounting for 56.3% of revenue. The most significant contract wins together with certain other notable commercial developments were as follows:-

·    In July 2009 Plexus signed a two year contract with a further two year option with Talisman Energy Inc. with an initial value of approximately £1.5m for the supply of HP/HT and standard pressure wellhead and mudline suspension equipment in the Norwegian North Sea.

·    In July 2009, and following on from a first agreement in 2007 with Gaz de France Britain Ltd to supply wellhead systems in the North Sea, Plexus won a contract to supply GDF Suez Egypt with its POS-GRIP 15,000psi HP/HT and standard 10,000psi wellhead equipment. This was not only a new customer win but also the addition of a third customer in the region to add to Shell Egypt and BP Egypt.

·    In December 2009 Maersk extended the working relationship with Plexus by awarding a three year contract with a further two year option for the supply of HP/HT wellhead equipment with an initial estimated value of £3m for the exploration of a minimum of two wells in the UK's central North Sea.

·    Over the three month period of January to March 2010 Plexus won a series of contracts with three new customers in West Africa, North Africa, and South West Africa. These were for supplying standard pressure equipment for exploration drilling to Bowleven plc in offshore Cameroon, Cairn Energy plc Group in offshore Tunisia, and for HP/HT wellhead equipment for Sonangol in offshore Angola. It is hoped that as our reputation grows in these important regions additional contract opportunities will follow.

·    In May 2010 Plexus won a further HP/HT contract in the North Sea from Senergy Limited, which is managing exploration activities for Valiant Petroleum plc, with an approximate value of £0.7m. This further underpins Plexus' strong presence in the North Sea where we are one of the leading suppliers for wellhead equipment for HP/HT drilling activities.

·    Post year end Plexus has been pursuing its first contract win opportunity in Australia with another new customer and is confident that this will be secured over the coming weeks and which will be announced in due course.

·    Since August 2009 as part of Plexus' ongoing expansion plans, £0.6m has been invested in the construction of a new assembly and test building at our main facility in Dyce Aberdeen. The building was completed on time at the end of April and officially opened in May and has been specially designed to allow more efficient handling, assembly, qualification and testing of our POS-GRIP HP/HT and X-HP/HT wellhead systems.

·    Continuing focus on the 15,000psi HP/HT Mudline Tieback project to demonstrate to the industry that tie back can for the first time be achieved for HP/HT exploration wells and pre-drilled production wells by using POS-GRIP set metal to metal "HG"® seals. The technical specification, detailed design of the system, and the test fixture for qualification testing of the prototype have now been completed, and the testing and manufacture of the prototype will begin shortly.

·    In response to the growing focus on subsea drilling standards and technology Plexus has initiated the call for a JIP to look at funding the accelerated development of a POS-GRIP "HGSS" subsea wellhead system. This product would have fewer parts in the well bore than conventional systems, reliable metal to metal system seals, and locks hangers down as soon as cementing is complete. The system has an inherent resistance to contamination as there would be no moving parts exposed to well bore fluids.

It can be clearly seen that Plexus has been able to combine important organic developments together with a number of strategic initiatives which have underpinned our financial performance during the year, which strengthened significantly at the EBITDA and PBT level in the second half. I believe this has resulted in Plexus significantly raising industry awareness of the unique advantages of POS-GRIP technology as we pursue our goal of improving current industry wellhead equipment standards, particularly for HP/HT applications where our superior and enabling POS-GRIP technology is increasingly being recognised as having safety, operational, and time saving benefits.

The results for the year as indicated at the interims stage reflect the fact that Plexus was not immune from a range of adverse trading conditions particularly during the first half of the year. It should be noted that the reduction in sales revenues of £13.1m from £15.1m the previous year was achieved after a £1.1m reduction in sales relating to the BP Shah Deniz contract as this winds down from its inception in 2004. Our HP/HT rental revenues held steady year on year at £9.4m and our confidence that our expertise and growing reputation in this arena will become a key element of future trading was demonstrated by the addition of two new HP/HT wellhead equipment sets at a capital expenditure cost of c.£1.5m.

Perhaps one of the most important components of the year's activities concerns the investment in and expenditure on research and development and engineering and testing. These activities focus on the ongoing development of our patented POS-GRIP friction grip method of engineering both through patent improvements and continuations, and the design and development of new products such as our 15,000psi Tieback initiative, and the launching of a JIP seeking to fast-track the development of a POS-GRIP HGSS subsea wellhead. Such investment comes at an important time as following the incident in the Gulf of Mexico earlier this year a greater amount of attention has been directed both by regulators and the industry itself at current drilling practices and technologies than ever before. Instead of what historically has been a gradually evolving process for the development of methods and standards, it may well be that a number of 'step changes' will be required and in this environment it is essential that Plexus continues to invest in its POS-GRIP technology. As a result research and development spending (excluding the costs of building new test fixtures used in development testing) increased by 114% to £0.75m from £0.35m last year.

In summary I am pleased with the progress made during the year in a difficult market, particularly with regard to the winning of new customers and the expansion of our geographic reach around the world. However, what is particularly exciting is the progress we are making on a number of technical and product development fronts including the ongoing 15,000psi Tieback equipment project and the product design work that is now being aimed at accelerating our future role in the increasingly important subsea exploration and production arena. These initiatives are taking place at a time when the sector is showing signs of growth due to a recovery in the oil price, oil majors' capex spend recovering, increased global demand for oil and gas as the world economy recovers, and the ongoing trend of extraction from challenging locations. Indeed some industry observers are saying that the North Sea is about to embark on a "renaissance", and that according to UK Oil & Gas 24bn of oil and gas equivalent have yet to be recovered. Such factors, combined with ever more stringent health and safety regulations, I believe place Plexus in an excellent position from which to capitalise on the safety, operational, and time saving advantages that our technology offers.

Ben van Bilderbeek

Chief Executive

18 October 2010

Financial Review

Revenue

Revenue for the year was £13.1m, compared to £15.1m in the previous year.

The rental of exploration wellhead equipment and related services accounted for over 95% of revenue which was a 10% increase from last year reflecting the fact that wellhead product sales associated with the historic BP Shah Deniz contract reduced to £0.2m compared to £1.3m in the prior year. Despite challenging market conditions the rental of HP/HT equipment remained stable at £9.4m and accounted for 71.6% of total sales revenues compared to 62.5% in the previous year. Revenue includes £0.2m of engineering and testing which is an increase from the prior year's level of £0.1m. This is a result of an increased level of development of the Company's proprietary POS-GRIP technology as part of the strategy to capitalise on the significantly increased levels of interest in new technologies and methods following the recent major incident in the Gulf of Mexico.

Margin

Gross margins have increased slightly to 58.5% from 57.9% in the previous year as HP/HT rental sales continue to dominate sales and generate higher margins than low pressure equipment contracts.

Overhead expenses

Overhead expenses were essentially unchanged year on year at £6.9m compared to £6.8m the prior year following a significant 31% increase in 2008/09 when it was necessary to provide a broader global operational support structure to service a growing number of customers across a wider range of territories and regions. In line with year on year total overhead expenses comparables, employee headcount as at the year end was also essentially unchanged at 88 compared to 89 for the prior year.

EBITDA

The EBITDA for the year (before IFRS2 share based payment charges of £0.21m) was £3.4m, down from £4.3m (before IFRS2 share based payment charges of £0.19m) the previous year, a decrease of 20.9%. This performance was in line with market expectations and was achieved during a twelve month period which continued to be volatile for the oil and gas industry and during which a number of major international oil services companies reported significantly reduced sales and earnings numbers. Furthermore oil and gas prices fell back in 2009 to levels which resulted in nearly all oil companies reducing investment plans in 2009/2010 which impacted Plexus during the year. EBITDA margin for the year was marginally lower at 26% as compared to 29% last year which demonstrates that the proprietary nature of the Plexus POS-GRP technology helps protect margins which bodes well for the future as sales revenues recover.

Profit before tax

Profit before tax of £0.65m compares to a profit last year of £1.8m, and again was in line with market expectations. It should be noted that profit before tax was in part adversely impacted as a result of absorbing a 14.7% increase in rental asset and other property, plant and equipment depreciation and amortisation totalling £2.43m, up from £2.1m last year. This once again reflects significant ongoing levels of capital expenditure and the higher level of depreciation of rental assets due to the steady increase in the size of the rental asset inventory. The profit before tax is stated after a higher IFRS2 charge for share based payments under reporting standard IFRS 2; the charge for the full year is £0.21m compared to £0.19m last year.

Tax

The Group UK Corporation Tax charge resulted in a tax credit of £0.06m for the year as compared to a tax charge of £0.78m for the prior year as a result of research and development related tax credit claims.

EPS

The Group reports basic earnings per share of 0.88p compared to 1.27p in the prior year.

Cash and Balance Sheet

The balance sheet reflects the development of the business during the year and ongoing capital expenditure with the net book value of property, plant and equipment including items in the course of construction increasing to £8.9m up from £8.3m last year. Capital expenditure on tangibles totalled £2.6m compared to £2.7m last year, of which £1.5m was for the addition of two more HP/HT wellhead equipment sets. Receivables increased to £6.6m as compared to £4.8m as a result of an increase in the level of business being generated from outside the UK and Europe leading to corresponding increases in debtor days but with no perceived increase in credit risk due to the 'blue chip' nature of existing and new customers. Net bank borrowings closed at £2.9m compared to £1.3m last year reflecting net cash outflow for the year of £1.6m, as compared to net cash inflow of £1.8m last year before the draw down on the bank loan of £4m. This movement is accounted for by a combination of debtor inflows reducing to £13m compared to £17.2m in the prior year, an increase of £0.6m in corporation tax payments totalling £1.1m as opposed to £0.5m in the prior year, and dividends paid of £0.6m which was a £0.3m increase over the prior year. In ongoing recognition of the unpredictable nature of the economy and capital markets, and the continued constraints on many banks' lending capacities the Group once again took the decision to review the level of its lending facilities with Bank of Scotland Corporate. As a result post period end in September 2010 Bank of Scotland Corporate agreed to increase the bank facilities available to the Group from £5m to £6m of which £5m of the credit facility is on a three year revolving basis, and £1m is an overdraft facility on a yearly term. This places Plexus in a strong position to fund ongoing R&D, capital expenditure, and associated development programmes.

Intellectual property

The Group carries in its balance sheet goodwill and intangible assets of £7.62m. The Directors have considered whether there have been any indications of impairment and have concluded 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

Ongoing R&D programme continues to be an important element of Plexus' future growth strategy and focuses on the further development of the proprietary POS-GRIP method of engineering both in terms of patent continuations and improvements to extend the life of its extensive patent suite, and also to design and develop new products that incorporate and benefit from the unique advantages of POS-GRIP technology. Examples of these include the 15,000psi Tieback initiative, and the initiation of a JIP for the fast track development of a POS-GRIP HGSS subsea wellhead system which addresses a number of concerns and issues that have arisen following the recent incident in the Gulf of Mexico. Consequently, and excluding this year's spend of £0.14m and last year's spend of £0.55m on the costs of building new test fixtures used in development testing, R&D spend increased by 114% to £0.75m from £0.35m in the prior year.

IFRS 2 (Share Based Payments)

IFRS2 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 £0.21m which compares to £0.19m for last year.

Dividends

The Company announced on 18 March 2010 the payment of an interim dividend of 0.33p per share which was approved for payment on 1 April 2010.

The Directors have further decided to propose an increased final dividend of 0.39p per share for the year ending 30 June 2010 compared to 0.38p last year, which will be recommended for formal approval at the Annual General Meeting to be held on 30 November 2010. Subject to this the dividend will be paid on 10 December 2010.

Graham Stevens

Finance Director

18 October 2010

Consolidated Income Statement

for the year ended 30 June 2010

		2010	2009
	Notes	£'000	£'000
Revenue	1	13,142	15,105
Cost of sales		(5,453)	(6,364)
Gross profit		7,689	8,741
Administrative expenses		(6,918)	(6,799)
Operating profit		771	1,942
Finance income		-	8
Finance costs		(127)	(197)
Share of profit of associate		1	45
Profit before taxation		645	1,798
Income tax expense		58	(780)
Profit after taxation and comprehensive income for the year attributable to the owners of the parent		703	1,018
Earnings per share	4
Profit for the year attributable to Plexus Holdings shareholders
Basic		0.88p	1.27p
Diluted		0.87p	1.27p

Consolidated Balance Sheet

at 30 June 2010

		2010	2009
	Notes	£'000	£'000
Assets
Goodwill		722	722
Intangible assets	5	6,897	6,618
Financial assets		60	60
Investment in associate		4	1
Property, plant and equipment	6	8,866	8,335
Total non-current assets		16,549	15,736
Inventories		3,332	3,794
Trade and other receivables		6,624	4,799
Current income tax assets		451	-
Cash and cash equivalents		1,470	2,655
Total current assets		11,877	11,248
Total Assets		28,426	26,984
Equity and Liabilities
Called up share capital	7	802	802
Share premium account		15,596	15,596
Share based payments reserve		764	550
Retained earnings		1,674	1,499
Total equity		18,836	18,447
Liabilities
Deferred tax liabilities		469	546
Bank loans		4,000	4,000
Total non-current liabilities		4,469	4,546
Trade and other payables		4,748	3,331
Current income tax liabilities		-	660
Borrowings		373	-
Total current liabilities		5,121	3,991
Total liabilities		9,590	8,537
Total Equity and Liabilities		28,426	26,984

These financial statements were approved and authorised for issue by the board of directors on 18 October 2010 and were signed on its behalf by:

B van Bilderbeek                  G Stevens

Director                                  Director

Consolidated Statement of Changes in Equity

for the year ended 30 June 2010

	Called Up Share Capital £'000	Share Premium Account £'000	Share Based Payments Reserve £'000	Retained Earnings £'000	Total £'000
Balance as at 1 July 2008	802	15,596	360	787	17,545
Total comprehensive income for the period	-	-	-	1,018	1,018
Share based payments reserve charge	-	-	190	-	190
Deferred tax movement on share options	-	-	-	(56)	(56)
Dividends	-	-	-	(250)	(250)
Balance as at 30 June 2009	802	15,596	550	1,499	18,447
Total comprehensive income for the period	-	-	-	703	703
Share based payments reserve charge	-	-	214	-	214
Deferred tax movement on share options	-	-	-	41	41
Dividends	-	-	-	(569)	(569)
Balance as at 30 June 2010	802	15,596	764	1,674	18,836

Consolidated Cash Flow Statement

for the year ended 30 June 2010

		2010	2009
		£'000	£'000
Cash flows from operating activities
Profit before taxation		645	1,798
Adjustments for:
Depreciation, amortisation and impairment charges		2,430	2,139
Loss on disposal of property, plant and equipment		19	24
Charge for share based payments		214	190
Investment income		-	(8)
Interest expense		127	197
Changes in working capital:
Decrease/(increase) in inventories		462	(316)
(Increase)/decrease in trade and other receivables		(1,825)	2,084
Increase/(decrease) in trade and other payables		1,417	(29)
Cash generated from operations		3,489	6,079
Income taxes paid		(1,089)	(517)
Net cash generated from operations		2,400	5,562
Cash flows from investing activities
Deferred consideration in respect of acquisition of subsidiary entity		-	(151)
Acquisition of financial asset		-	(80)
Adjustment to value of associate undertaking		(3)	(1)
Purchase of intangible assets		(707)	(370)
Purchase of property, plant and equipment		(2,560)	(2,736)
Proceeds of sale of property, plant and equipment		8	-
Net cash used in investing activities		(3,262)	(3,338)
Cash flows from financing activities
Loans drawn down		-	4,000
Interest paid		(127)	(207)
Interest received		-	32
Equity dividends paid		(569)	(250)
Net cash (used in)/generated from financing activities		(696)	3,575
Net (decrease)/increase in cash and cash equivalents		(1,558)	5,799
Cash and cash equivalents at 1 July 2009		2,655	(3,144)
Cash and cash equivalents at 30 June 2010		1,097	2,655

Notes to the Consolidated Financial Statement

1.       Revenue

	2010	2009
	£'000	£'000
By geography
UK	1,341	5,314
Europe	4,427	4,933
Rest of World	7,374	4,858
	13,142	15,105

Revenue is shown by destination as the origin of revenues is all from the UK.

By type
Sale of goods	2,096	2,193
Services	10,859	11,613
Construction contract	187	1,299
	13,142	15,105

2. 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 ongoing 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.

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:

	2010	2009
	£'000	£'000
Customer 1	2,098	-
Customer 2	1,840	905
Customer 3	1,759	3,249
Customer 4	1,536	203
Customer 5	1,383	1,025

3. Dividends

	2010	2009
	£'000	£'000
Ordinary Shares
Interim paid of 0.33p (2009: 0.3118p) per share for the year ended 30 June 2010	265	250
Ordinary Shares
Final dividend after the year end of 0.39p (2009: 0.38p) per share	313	305
The proposed final dividend has not been accrued at the balance sheet date.

4.       Earnings per share

	2010	2009
	£'000	£'000
Profit attributable to shareholders	703	1,018
	Number	Number
Weighted average number of shares in issue	80,182,569	80,182,569
Dilution effects of share schemes	47,294	205,301
Diluted weighted average number of shares in issue	80,229,863	80,387,870
Basic earnings per share	0.88p	1.27p
Diluted earnings per share	0.87p	1.27p
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.

5. Intangible fixed assets

	Intellectual Property £'000	Patent and Other Development £'000	Computer Software £'000	Total £'000
Cost
As at 1 July 2008	6,440	1,052	74	7,566
Additions	-	331	39	370
As at 1 July 2009	6,440	1,383	113	7,936
Additions	-	701	6	707
As at 30 June 2010	6,440	2,084	119	8,643
Amortisation
As at 1 July 2008	713	131	61	905
Charge for the year	330	61	22	413
As at 1 July 2009	1,043	192	83	1,318
Charge for the year	329	85	14	428
As at 30 June 2010	1,372	277	97	1,746
Net Book Value As at 30 June 2010	5,068	1,807	22	6,897
As at 30 June 2009	5,397	1,191	30	6,618
As at 30 June 2008	5,727	921	13	6,661
Patent and other development costs are internally generated.

6.       Property, plant and equipment

	Buildings £'000	Equipment £'000	Assets under Construction £'000	Motor Vehicles £'000	Total £'000
Cost
As at 1 July 2008	-	9,694	222	22	9,938
Additions	-	189	2,547	-	2,736
Transfers	-	2,631	(2,631)	-	-
Disposals	-	(63)	-	-	(63)
As at 1 July 2009	-	12,451	138	22	12,611
Additions	661	213	1,684	2	2,560
Transfers	-	1,646	(1,646)	-	-
Disposals	-	(64)	-	(10)	(74)
As at 30 June 2010	661	14,246	176	14	15,097
Depreciation
As at 1 July 2008	-	2,595	-	14	2,609
Charge for the year	-	1,702	-	4	1,706
On disposals	-	(39)	-	-	(39)
As at 1 July 2009	-	4,258	-	18	4,276
Charge for the year	10	1,990	-	2	2,002
On disposals	-	(39)	-	(8)	(47)
As at 30 June 2010	10	6,209	-	12	6,231
Net book value
As at 30 June 2010	651	8,037	176	2	8,866
As at 30 June 2009	-	8,193	138	4	8,335
As at 30 June 2008	-	7,099	222	8	7,329

7.       Share Capital

	2010	2009
	£'000	£'000
Authorised:
Equity: 110,000,000 Ordinary shares of 1p each	1,100	1,100
Allotted, called up and fully paid:
Equity: 80,182,569 (2009: 80,182,569) Ordinary shares of 1p each	802	802

8.       Reconciliation of net cash flow to movement in net debt

	2010	2009
	£'000	£'000
(Decrease)/increase in cash in the year	(1,558)	5,799
Cash inflow from increase in net debt	-	(4,000)
Movement in net debt in year	(1,558)	1,799
Net debt at start of year	(1,345)	(3,144)
Net debt at end of year	(2,903)	(1,345)

9.       Analysis of net debt

	At beginning of year £'000	Cash flow £'000	At end of year £'000
Cash in hand and at bank	2,655	(1,185)	1,470
Overdrafts	-	(373)	(373)
	2,655	(1,558)	1,097
Bank loans	(4,000)	-	(4,000)
Total	(1,345)	(1,558)	(2,903)

The financial information above does not constitute the company's statutory accounts for the year ended 30 June 2010 but is derived from those statements.

The statutory financial statements and this preliminary statement for the year ended 30 June 2010 were approved by the Board on 18 October 2010. 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 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, Thames House, Portsmouth Road, Esher, Surrey, KT10 9AD.

 

END

 

 

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