Preliminary Results for the year to 30 June 2020

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

2 December 2020

 

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

Preliminary Results for the year to 30 June 2020

 

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 2020.

 

Financial and Corporate Overview

 

Following the completion on 1 February 2018 of the sale of Plexus' wellhead exploration equipment services business for Jack-up applications ('the Jack-up Business') to FMC Technologies Limited ('TFMC'), a subsidiary of one of the leading oil and gas service and equipment companies TechnipFMC (Paris:FTI) (NYSE:FTI), the year-end results and comparative prior year period have been reported as required on a continuing and a discontinued operations basis.

 

·    Continuing operations sales revenue £525k (2019: £3,611k)

o  Discontinued operations sales revenue £nil (2019: £nil)

·    Adjusted EBITDA on continuing activities £3.08m loss (2019: £2.27m loss)

·    Continuing operations operating loss £5,681k (2019: £4,010k)

o  Discontinued operations operating loss £2,432k (2019: £108k)

·    Continuing operations operating loss after tax £4,058k (2019: £3,227k)

o  Discontinued operations loss after tax £2,549k (2019: £88k loss)

·    Basic loss per share from continuing activities 3.92p (2019: 3.12p loss)

o  Basic loss per share from discontinued activities 2.47p (2019: 0.09p earning)

·    Net cash of £4.09m (2019: net cash £5.08m)

·    The Group has £3.0m invested in financial assets (2019: £2.84m)

 

Operational Overview

 

·    Full year revenues principally generated through sale of POS-GRIP^® equipment for production, abandonment, and royalties from Russian Jack-up exploration operations - a major departure from previous years when revenues were dependent on the rental of Jack-up exploration wellheads

 

·    March 2020 - Royalties earned from breakthrough order secured by Russian Licensee Gusar LLC with global energy giant Gazprom, for supply of POS-GRIP rental wellhead gas exploration equipment

 

·    Continued progress made towards establishing a diversified portfolio of revenue streams based on products empowered by Plexus' proprietary POS-GRIP^® Technology - follows 2018 sale of Plexus' wellhead exploration equipment services business for Jack-up applications to FMC Technologies Limited ('TFMC'), a subsidiary of top tier industry supplier TechnipFMC (Paris:FTI) (NYSE:FTI)

 

·    Focus on IP and R&D with industry-leading successful extreme temperature qualification of POS-GRIP "HG"® Metal Seal System for range of -75°to 400°F in November 2019

 

·    July 2020 - significant post year end production wellhead supply contract award from Spirit Energy

 

·    November 2020 - major post year end Licensing Agreement entered into with Cameron International Limited ('Cameron'), a Schlumberger group company, the world's leading oilfield services provider. The non-exclusive licence enables Cameron to use the Company's POS-GRIP and "HG" metal to metal seal method of engineering for the development of oil and gas surface wellheads.

 

Chief Executive Ben van Bilderbeek said:

 

"For the 12 months ended 30 June 2020, our focus has been to continue to develop our plans to promote POS-GRIP Technology and "HG" metal to metal sealing technology in the production wellhead and tree market, both by developing and selling our own products, and by continuing our strategy of licensing our technology to others for specific applications and territories. The Covid-19 pandemic and the consequential decline in the energy market and global economy in general has inevitably impacted on our progress, although I believe that we have weathered the storm well and are now well placed to return to growth as our industry begins to recover.

 

"Since we announced our results last year, we have announced a follow up order from Spirit Energy for POS-GRIP surface production wellhead equipment for a North Sea platform. We have also just announced the non-exclusive licensing arrangement with Cameron, a Schlumberger company, which is a key endorsement of our technology, and opens up the potential for rapid deployment of POS-GRIP in the commodity surface oil and gas wellhead market.

 

"Whilst oil and gas operators, together with service companies, have had to scale back their operations and lay off thousands of employees, we have been able to reduce our costs and survive the period without any layoffs. This means we are well prepared to benefit from the return to growth that the industry will undoubtedly see in 2021, as we continue to target direct equipment sales and support our licensees, in particular Cameron, to rapidly introduce POS-GRIP to their customers and markets.

 

"Our full year financial performance reflects the challenges of the period where a number of sales prospects were placed on hold , with sales revenues of £525k compared to £3,611k in 2019; and an EBITDA loss of £3.08m (from £2.27m loss in 2019). However, there have also been some positives, in particular the significant deal with Cameron, which further validates Plexus' technology and underpins the value of the Company's IP.

 

"Our goal is to fully capitalise on the potential of our technology within the oil and gas industry and beyond, to improve the performance of wellheads and other pressure containing equipment, and to develop a portfolio of POS-GRIP-based products and partners. As well as benefiting the environment and our customers, the Board believes this approach will in time lead to sustained and growing revenue streams and can ultimately deliver value for our shareholders.

 

"Another casualty of the Covid crisis was drilling activity in Russia. Whilst our licensee has an order from Gazprom for an exploration well, the program was postponed until further notice. We however continue to see good long-term potential in Russia and the CIS for our POS-GRIP production and subsea wellheads through the extension of existing deals, or the creation of new license arrangements.

 

"Last year we announced that Plexus had formed Plexus Pressure Control ('PPC') to enable us to supply valves and Xmas trees to complement our POS-GRIP production wellhead products, particularly to customers and markets which prefer a system package of equipment. Whilst we have not yet supplied any Plexus branded products through PPC, it remains an important element of our planned growth through direct sales.

 

"I feel very positive that the Spirit Energy order, achieved during the depths of lockdown, plus the Cameron license deal just announced have demonstrated the resilience of the Company and the continuing IP potential, and Plexus is well positioned to capitalise on the opportunities which will become available as market conditions improve."

 

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

Ben van Bilderbeek	Plexus Holdings PLC	Tel: 020 7795 6890
Graham Stevens	Plexus Holdings PLC	Tel: 020 7795 6890
Derrick Lee	Cenkos Securities PLC	Tel: 0131 220 9100
Pete Lynch	Cenkos Securities PLC	Tel: 0131 220 9772
Frank Buhagiar	St Brides Partners Ltd	Tel: 020 7236 1177
Isabel de Salis	St Brides Partners Ltd	Tel: 020 7236 1177

 

 

Summary of Results for the year ended 30 June 2020

	2020 £'000	2019 £'000
Revenue (continuing operations)	525	3,611
Adjusted EBITDA (continuing operations)	(3,076)	(2,266)
Operating Loss (continuing operations)	(5,681)	(4,010)
Loss after taxation (continuing operations)	(4,058)	(3,227)
Loss profit after taxation (discontinued operation)	(2,549)	(88)
Loss after taxation (combined)	(6,607)	(3,315)
Basic loss per share (pence) (continuing operations)	(3.92p)	(3.12p)
Basic (loss) / earning per share (pence) (discontinued operation)	(2.47p)	(0.09p)

 

 

Chairman's Statement

 

 

Business progress

 

As the news and global economy continues to be dominated by the Covid-19 pandemic, we have seen marked lower revenues in the 12 months to 30 June 2020 amounting to £525k (2019: £3,611k). However, we have been pleased to announce post year end some very positive developments, including progress with entering new and larger markets, which the Company is encouraged by. The Directors are extremely optimistic about the likelihood of a recovery of production wellhead sales, as well as the significant potential of the Company's licence deal with Cameron. Accordingly, the Board expects to see a pick-up in revenues throughout FY21 as a result of these initiatives.

 

The Company's goal is to add a diverse set of revenue streams to its portfolio, and the licence agreement with Cameron for the first time brings a focus to the US and Middle East markets, to build on the licenses already in place in Russia, and Plexus' local market in the UK and the North Sea.

 

The Board remains convinced that POS-GRIP Technology is a key enabler for the wellhead market, and that not only can it deliver the technically best solution, which makes it the safest and highest integrity solution - it can also become the most cost effective solution. When life cycle costs are taken into account (sometimes described as Totex, being Capex and Opex combined) Plexus' technology can be significantly better than conventional solutions. With a focus on greener, leak-free and more efficient operations, operators are increasingly looking to embrace the full potential of products they specify in their procurement strategies. The license deal with Cameron is expected to accelerate industry adoption of this approach.

 

This year saw the Company's first royalty income from Gusar, our licensee for Russia and the CIS following a successful POS-GRIP Wellhead deployment for a Gazprom offshore gas exploration well. While we see further potential from similar activities next year and beyond, it was disappointing that further activity in this period was postponed due to the Covid crisis.

 

Plexus' investment in Kincardine Manufacturing Services Limited ('KMS') is performing well, and although KMS' revenues were affected by the general industry downturn over the period, KMS faired significantly better than certain of its competitors, who have been forced to scale back or cease operations. After an asset impairment review Plexus has written down the carrying value of its investment in KMS, due to a reduction in dividend payments, but KMS has the infrastructure to allow a quick recovery, and the potential for significant growth as it picks up new work. Dividend payments from KMS are expected to continue and should increase in line with the recovery in local offshore energy business activity.

 

Plexus' primary and core strength is its POS-GRIP Intellectual Property ('IP'), together with the broad family of products and associated equipment which is enabled by this technology. Although individual product patents inevitably expire over time, it is the body of other registered IP, including new apparatus and method patents which we file, together with unregistered and confidential test results, know-how and experience which give us the ability to continue with uniquely different friction grip technology.

 

Overview

Plexus is primarily a wellhead business, but unlike all other wellhead companies, our value is underpinned by POS-GRIP IP, which is a unique and proprietary design. Where others compete on a volume manufacturing basis and fight for margins with very similar products, Plexus' POS-GRIP proposition is truly different and delivers enhanced value to customers. The Company has demonstrated that its products perform and can be profitable without a low-cost volume manufacturing base not only organically, but also by adopting a licensing model to reach markets that Plexus cannot naturally access.

 

As has been seen over the last 20 years, adoption of new or alternative technology can be frustratingly slow, but the Board believes there is a new momentum behind the Company's technology, as there is unprecedented pressure on energy companies to change their approach to how they operate, which is reinforced by Plexus' licence deal with  Cameron.

 

POS-GRIP Technology and HG Seals can offer a high integrity, metal to metal sealing, leak proof wellhead system solution which requires no significant maintenance. A combination of the best possible environmental and production performance, together with the lowest life of field Totex cost basis has never been more important or relevant.

 

Staff

On behalf of the Board I would once again like to thank all our employees both past and present for their dedication and hard work during an extremely challenging year , not only for Plexus but also for the wider oil and gas industry, especially as pressure continues to grow on hydrocarbons and their associated impact on climate change. The turmoil created by the Covid lockdown measures on family and work life has brought new day to day challenges for staff, in addition to the general pressure on the industry that we see around us. Our dedicated and experienced team have coped well with these challenges. We look forward to a period of stability as the worlds emerges from the Covid pandemic, and I am sure that the developments will be positive for our staff, and for future employment opportunities within Plexus.

 

Outlook

The challenges facing the oil and gas market have been exacerbated by the global Covid-19 pandemic, with significant declines in revenue, and corresponding reductions in capital expenditure by oil and gas majors. However, it is clear that there will continue to be demand for hydrocarbons for decades to come, and in particular for natural gas as a cleaner hydrocarbon energy source, with an increasingly important potential to generate hydrogen.

 

As the oil and gas market starts to show signs of recovery, and subsequent investment by operators begins to pick up, we should see sales prospects that are on hold beginning to progress again together with new opportunities arising in oil and gas as well as alternative energy markets, such as geothermal. Even if activity only partially returns, Plexus only requires a small percentage of market share to see significant growth in the specialised wellhead market, as well as the significant growth and market share potential from Cameron. We will also in due course pursue the option of licensing to Cameron technology for further applications, which if successful would bring additional royalty generating opportunities.

 

What is exciting to us is that challenging times like these can result in significant change, and we feel that now should be the time for POS-GRIP technology to come into its own. The combination of POS-GRIP's operational, environmental, and financial benefits ought to resonate strongly with companies operating across the energy sector. Our challenge is to ensure all operators are aware of POS-GRIP Technology, its multiple benefits, and its various applications. As the growing level of interest in POS-GRIP equipment by customers and partners demonstrates, progress is being made, although this will take time in what is a conservative industry. After a difficult year, the Board is confident that the signs of a recovery are real, and the substantial progress the Company has made with licensing will lead to growth and value for our shareholders.

 

 

J Jeffrey Thrall

Non-Executive Chairman

1 December 2020

 

 

Strategic Report

 

Principal Activity

The Group markets oil and gas industry equipment that utilises its patented friction grip method of engineering, including wellheads and connectors known as POS-GRIP. This involves deforming one tubular member against another within the elastic range to effect gripping and sealing. This superior method of engineering for wellheads offers several important advantages to operators, particularly for HP/HT applications, and can include improved technical performance, improved integrity of metal to metal seals, significant installation time savings, reduced operating and maintenance costs and enhanced safety.

 

Following the 2018 sale of the Company's Jack-up exploration wellhead rental operations to a division of leading oil and gas service and equipment provider TFMC, the year under review saw the Group continue to move towards an IP-led business model focused on designing, developing and rolling-out a wider range of products based on the POS-GRIP method of engineering. The Company retains the right to pursue Jack-up exploration related business in Russia and the CIS, the third largest hydrocarbon producing market in the world, and where it has existing licence agreements with LLC Gusar and CJSC Konar. In addition, Plexus continues to benefit from Jack-up exploration drilling activity via its three year earn-out arrangement with TFMC, which was part of the terms of the 2018 sale agreement.

 

The Company is now focused on pursuing other markets including surface production, abandonment, subsea and geothermal. In line with this strategy, in July 2020, the Company announced a purchase order for its POS-GRIP Surface Production Wellhead System from Spirit Energy. Revenues from this contract will primarily be earned in the fiscal year to June 2021.

 

The Directors believe that the Company's proprietary technology has additional wide-ranging applications both within and outside the oil and gas industry. Initiatives are currently underway to develop additional POS-GRIP-enabled applications for new markets, both independently and with partners, including TFMC with whom Plexus signed a Collaboration Agreement to develop new POS-GRIP products, and also with Cameron, with whom Plexus signed a non-exclusive licensing deal in November 2020.

 

Financial Results

 

Statement of Comprehensive Income

 

Revenue

Continuing revenue for the year was £525k, a decrease from £3,611k in the previous year. The decrease in continuing sales revenue is a result of customer project timing delays and the fact that the prior year revenue included a significant sale of equipment to our Russian licence partner, Gusar LLC.

 

Margin

Gross margin on continuing operations increased to 57.1% (compared to 48.4% in the previous year). The increase in margin is largely driven by a change in the sales mix, with a significant portion of current year revenue including royalty income which has no direct cost of sale attached.

 

Overhead expenses

Continuing activities administrative expenses have increased when compared to the prior year with expenditure of £5.98m (2019: £5.76m). Within this total the continuing salary component remained the largest at £2.90m compared to £2.69m in the prior year. Overhead expenses include an impairment charge of £134k following a review of the carrying value of the Group's KMS associate undertaking. Following the adoption of IFRS 16 overhead expenditure includes lease amortisation charges of £0.30m.

 

Adjusted EBITDA

The Directors use, amongst other things, Adjusted EBITDA on continuing operations as a non-GAAP measure to assess the Group's financial performance. The Directors consider Adjusted EBITDA on continuing operations, which approximates the operational cash generated by or used in the business, to be the most appropriate measure of the underlying financial performance of the Group in the period, given the continuing business will be the focus of the Group going forward.

 

Adjusted EBITDA on continuing operations for the year was a loss of £3.08m, compared to a loss of £2.27m in the previous year. Adjusted EBITDA on continuing operations is calculated as follows:

 

	2020 £'000	2019 £'000
Operating loss	(5,681)	(4,010)
Add back:
-Depreciation	680	718
-Amortisation	1,216	904
Share in profit of associate	265	122
Fair value adjustment on financial assets and investments	159	-
Other income	285	-
	-----	-----
Adjusted EBITDA on continuing operations	(3,076)	(2,266)
	-------	-------

 

Loss Before Tax

Loss before tax on continuing operations of £5.05m compared to a loss last year of £3.71m. The loss on discontinued operations was £2.55m compared to a loss of £0.09m in the prior year.

 

Tax

The Group shows a total income tax credit of £0.87m for the year compared to a tax credit of £0.50m for the prior year. The income tax credit has been split between continuing activities (£0.99m, 2019: £0.48m) and discontinued activities (£0.12m charge, 2019: £0.02m credit). The income tax credit for the year is driven by the loss incurred during the financial period.

 

Investments

In December 2018 Plexus acquired a 49% shareholding in Kincardine Manufacturing Services Limited ('KMS'), for a consideration of £735k plus associated legal fees of £50k. At the year-end a share in profit of associate of £265k (2019: £122k) has been recognised. Following an impairment of the investment overhead expenses include an impairment charge of £134k (2019: nil).

 

EPS

The Group reports basic loss per share on continuing activities of 3.92p compared to a loss per share of 3.12p in the prior year. The basic loss per share on discontinued activities of 2.47p, compared to a loss per share of 0.09p in the prior year.

 

Statement of Financial Position

 

Tangible Assets

The net book value of property, plant and equipment including items at the year-end was £3.27m compared to £3.80m last year. Capital expenditure on tangible assets decreased to £0.19m compared to £0.53m last year.

 

Intangible Assets and Intellectual Property ('IP')

The net book value of goodwill and intangible assets was £11.09m, a decrease of 4.7% from £11.64m last year. This movement represents investment of £0.36m less the annual amortisation charge of £0.91m.

 

Plexus owns an extensive range of IP which includes many registered patents and trademarks across a number of jurisdictions, and actively works to develop and protect new POS-GRIP methods and applications where deemed commercially advantageous to do so. In addition to registered IP, Plexus has developed over many years a vast body of specialist know-how in relation to the POS-GRIP friction grip method of engineering.

 

The Directors have considered whether there have been any indications of impairment of its IP and have concluded, following a detailed annual asset impairment review, that there is no evidence of impairment. Therefore, the Directors consider the current carrying values to be appropriate.

 

Research and Development ('R&D')

R&D expenditure including patents increased from £0.31m in 2019 to £0.36m in 2020. This increase demonstrates an investment in protecting, developing, and broadening the range of proprietary POS-GRIP friction-grip method of engineering applications and related IP. Following the sale of the Jack-up Business in 2018 it is likely that there will be a continued increase in R&D investment to widen the Group's product offering as it enters new target markets over the coming years.

 

Cash and Cash Equivalents

Net cash at the year end was £4.09m (cash and cash equivalents of £4.09m less bank loans of £nil) compared to net cash of £5.08m (cash and cash equivalents of £5.16m less bank loans of £0.08m) in the prior year reflecting a net cash outflow for the year of £0.98m (net decrease in cash of £1.06m per Statement of Cash Flows plus net decrease in bank borrowings of £0.08m).

 

The reduction in bank borrowing represents £0.08m of repayments on the property term loan, reducing the balance from £0.08m to £nil.

 

It should also be noted that the Group has financial asset investments with a value of £3.0m at the reporting date. These investments are included in non-current financial investments in the statement of financial position.

 

The expected future cash inflows and the cash balances held are anticipated to be adequate to meet current on-going working capital, capital expenditure, R&D and project related commitments.

 

Dividends

The Company has not paid any dividends in the year and does not propose to pay a final dividend at this time. Whilst the Company remains committed to distributing dividends to its shareholders when appropriate, the Directors believe that it is prudent to consider the payment of dividends in light of the ongoing capital and operational requirements of the business.

 

Operations

Progress has continued during the year with the Company's strategy to build a portfolio of revenue streams based on its POS-GRIP technology. In Jack-up exploration, activity was centred on supporting the efforts of Gusar, Plexus' licensing partner in Russia and CIS markets, in the execution of their first wellhead order, from Gazprom, in the Russian and CIS markets. Royalty income from this order was reflected in the accounts to June 2020. This followed the £1.4m sale to Gusar in the prior year of two POS-GRIP 18-3/4" rental wellhead sets and associated mudline equipment to provide the basis for Gusar's own POS-GRIP rental exploration wellhead inventory.

 

Outside Jack-up exploration, the Company's main focus continues to be the marketing of its POS-GRIP-enabled production and subsea wellheads, and its POS-SET Connector for abandonment operations. Following the sale of the Jack-up Business in 2018, the much larger production wellhead market is the key area of focus for the Company. The Company is currently tendering for a number of such contracts. Alongside this, the Company is actively pursuing geothermal orders for its POS-GRIP surface production equipment, which is ideally suited to that environment where wells can have a very long-life span. Licensing opportunities remain very firmly in focus for the Company and to this end, in November 2020, Plexus announced an exciting licensing deal with Cameron, a division of Schlumberger, for Cameron to use POS-GRIP technology in a specific range of conventional and unconventional oil and gas surface wellhead applications. 

 

Following the successful application of Plexus' POS-GRIP surface wellhead technology for Spirit Energy for its Chiswick well in 2019, Plexus was awarded a contract from Spirit in July 2020 for its next well, which is expected to be delivered in Q1 of 2021. Accordingly, revenues from this contract will be delivered in the 2020/2021 financial year.

 

Plexus continued to invest in R&D during the year. Of particular note was the successful completion of a testing programme in November 2019 which verified the performance of the POS-GRIP "HG" Metal Seal System to be qualified in accordance with API 6A standards at 10,000 psi pressure for an extreme  temperature range of -75° to +400° F. R&D remains an important operational activity and underpins and further develops the value of our IP and ability to extend the range of applications of POS-GRIP technology. Innovation in the oil and gas industry continues to be an essential part of developing both cost saving initiatives and ever safer drilling methods, and the Board is confident that Plexus can continue to play an important role in delivering such solutions whilst raising wellhead standards to a level that conventional technology cannot reach, such as passing test standards equivalent to those used for premium couplings.

 

Staff at the end of June 2020 comprised 33 employees, including 1 international employee, which compared to a weighted average total of 37 in both the current year and prior year.

 

The OPITO accredited competency system was updated in the previous year to better reflect production equipment and to enhance the robust assessment of employees in safety critical roles. A thorough review of all standards across the system took place which resulted in a complete restructure and rework for the workshop and field service technician scopes. The revised system underwent a monitoring audit in July 2019 and the Company has successfully maintained its OPITO approval. The next audit was delayed by COVID-19 but is now scheduled for Q4 of 2020.

 

As part of the continuing commitment to the health and wellbeing of employees, the Healthy Working Lives programme aims to encourage habits of wellbeing and inspires individuals to take responsibility for their own health. Plexus continues to hold the Gold Award.

 

Health and Safety continues to be a pivotal part of the business and remains at the centre of everything we do. Plexus remains fully committed to continually improving safety standards and the safety culture across the business, and this is reflected in the business being lost time injury ('LTI') free once again this year. Plexus has now passed the fifth anniversary of the milestone, in September 2020.

 

During the year, Plexus enhanced its Business Management System (BMS) in order to comply with the new ISO 45001 standard which replaces OHSAS 18001:2007 which will be discontinued in 2021. Plexus achieved accreditation under the new standard in May 2020. This followed the Quality Management System achieving API Q1 accreditation in February 2020. Plexus continues to hold Licences for both API 6A and 17D. These accreditations demonstrate Plexus' capability and determination to operate under the highest standards.

 

The IT Department provides technology leadership for Plexus, including governance, information security, software development and expertise in deploying modern information technologies to improve company efficiency. During these challenging times for all industries due to COVID-19, Plexus has continued to develop its in-house systems to ensure the Company is able to react swiftly to changing market requirements, and to enhance the capability of all office based employees to work from home as necessary, safely and securely.

 

 

Strategy and Future Developments

 

Technology

Plexus' proprietary POS-GRIP technology involves applying compressive force to the outside of a wellhead or pipe, to flex it inwards. As the bore of the vessel moves inwards, it makes contact with an inner pipe (or hanger) on the inside. Sufficient contact force is generated to hold the inner member in place through friction between the two components and creates a superior metal to metal seal. The Company's strategy is primarily focused on delivering the highest standard of wellhead design for the upstream oil and gas markets around the world, and one which has already proven to be uniquely advantageous in terms of safety features, operational efficiency, and cost savings for Jack-up drilling, especially HP/HT applications. The Company is now focused on replicating this past success in other wellhead markets including surface production, subsea and geothermal, as well as other initiatives such as a POS-GRIP Crown Plugs and POS-GRIP Lateral Trees.

 

POS-GRIP wellhead designs deliver many advantages over conventional "slip and seal" and "mandrel hanger" wellhead technologies for surface exploration and land and platform production applications. These include larger metal to metal seal contact areas, virtual elimination of movement between parts, fewer components, simplified design and assembly, enhanced corrosion resistance, simpler manufacture, long term integrity, annulus management, and reduced installation and maintenance costs.

 

Plexus' POS-GRIP enabled product suite also includes the innovative Python^® subsea wellhead as well as the POS-SET Connector^® for use in the growing decommissioning market. We believe the Python subsea wellhead is important as it can eliminate the need for wear bushings, pack-offs, lock-rings, and lockdown sleeves, whilst delivering instant rigid lock-down in all directions, and is fully reversible for ease of workover, side-tracking or abandonment. These design simplifications and features not only reduce the risk of installation problems and safety issues, they also significantly reduce installation time and the number of trips that are needed such that it has been independently estimated that over ten days of savings per well can be achieved in deep-water under certain conditions which, depending on water depth, Plexus estimates could result in a saving of over $10m for the operator. The POS-SET Connector, which is designed to re-connect to bare conductor pipe for well re-entry or permanent abandonment operations, creates a solid connection with reliable sealing directly against the pipe, and retains bend and load capabilities at 80% of pipe strength. The Directors believe that such features mean that Plexus' wellhead equipment sets and delivers a new and superior standard. Apart from the operational time savings and related safety benefits, at an engineering level the Company has demonstrated that its technology can raise and even exceed the integrity of wellhead testing and sealing to that of premium couplings, which supports its claim that wellheads no longer need to be the weak link in the well architecture chain.

 

POS-GRIP friction-grip technology has wide ranging applications both within and outside the oil and gas industry. As POS-GRIP is a method of engineering and not a product in its own right, where there is an opportunity for the technology to improve the performance of conventional products the Company will look to integrate POS-GRIP so that the benefits together with "HG" sealing can be realised organically or in conjunction with partners.

 

Business Model and Markets

The Company is proprietary technology driven and its extensive patent protected IP and many years' worth of specialist know-how has been successfully deployed in hundreds of wells around the world. Its superior performance, safety and operational advantages led to the Company becoming established initially as a leading equipment and services provider to the niche Jack-up exploration wellhead market. The Directors believe that this success can be replicated and extended to the wider and much larger energy sectors including surface production, subsea, geothermal and fracking applications based on its POS-GRIP technology.

 

Historically Plexus has focused on supplying adjustable exploration wellhead equipment and associated running tools on a rental basis for the niche Jack-up exploration drilling market in the UK Continental Shelf ('UKCS'), achieving a near 100% market share for HP/HT exploration wells. Over the years, Plexus' equipment has been deployed in the ECS (Norway, Netherlands and Denmark) as well as China, Russia, Egypt, Cameroon, Trinidad, Venezuela, and Morocco. The exploration wellhead contracts were supplied from a rental fleet of owned inventory of which the majority were for 15,000psi HP/HT; and the remainder for 10,000psi wellheads.

 

Following the sale of the Jack-up business to TFMC in 2018, the Directors believe Plexus is well placed to pursue its strategy of breaking into the significantly larger and more mainstream volume production wellhead and subsea markets both organically and in conjunction with partners, including licensees. The licensing deal agreed with Cameron in November 2020 is a further endorsement of this strategy.

 

Strategy

Plexus' long-term goal is to establish POS-GRIP technology as a new industry standard for wellhead and metal sealing designs, whilst continuing to develop new products, which can also offer multiple benefits and advantages to the industry in terms of improved safety, functionality, and cost and time savings. An example of such extensions for POS-GRIP technology is the Company's connector technology, which is ideal for high integrity, low fatigue applications. The Directors believe wellhead connectors, riser connectors, subsea jumper connectors, pipeline connectors, tether tensioners and even vessel mooring connectors can all benefit from the simplicity of POS-GRIP.

 

Following the sale of the Jack-up Business, Plexus is today an IP-led research and development business focused on extending its business activities into the volume land, platform and subsea sectors. This strategy will be pursued both organically and through licensees and partners. Evidence of the successful emergence of this strategy can be seen from both the contract award by Spirit Energy in July 2020 and from the non- exclusive licence deal with the Cameron division of Schlumberger in November 2020. Both of these important events have occurred post year end and set a sound foundation for future growth.

 

 

Key Performance Indicators

 

The Directors monitor the performance of the Group by reference to certain financial and non-financial key performance indicators. The financial indicators include revenue, EBITDA, profit and loss, earnings per share, cash balances, and working capital resources and requirements. The analysis of these is included in the financial results section of this report, and highlights the Group moving towards a supplier of production wellhead equipment. Non-financial indicators include Health and Safety statistics, equipment utilisation rates, geographical diversity of revenues and customers, the level of ongoing customer interest and support, geo-political considerations such as emissions concerns and awareness, effectiveness of various research and development initiatives; for example, in relation to new patent activity and inventions, and appropriate employee headcount numbers and turnover rates. The non-financial key performance indicators are included within the strategic report.

 

 

Principal Risks and Risk Management

 

There are a number of potential risks and uncertainties that could have an impact on the Group's performance which include the following.

 

(a)     Political, legal and environmental risks

Plexus participates in a global market where the exploration and production of oil and gas reserves, and even the access to those reserves can be adversely impacted by changes in political, operational, and environmental circumstances. The current global political and environmental landscape, particularly in relation to climate change concerns and the relentless move away from hydrocarbons to, for example renewables, continues to demonstrate how any combination of such factors can generate risks and uncertainties that can undermine stable trading conditions. A significant risk in the form of the global pandemic caused by COVID-19 has materialized this year and although Plexus has taken all reasonable steps to mitigate the effects of this risk, both economic and to the health and well-being of our employees, customers and suppliers, by complying with legislation and taking measures to ensure business continuity, the negative impact has clearly been felt. Such risks also extend to legal and regulatory issues and it is important to understand that these can change at short notice. To help address and balance such risks, the Group where possible seeks to broaden its geographic footprint and customer base, as well as actively looking to forge commercial relationships with large industry players.

 

The Company continues to closely monitor the potential impact and risks of the UK's pending exit ('Brexit') from the European Union ('EU') under various scenarios, including leaving the EU without a deal. This includes assessing the potential impact of the introduction of trade tariffs and the potential supply chain disruption that could result from increased customs checks at borders and related matters. Plexus has an IP-led business model which provides it with operational flexibility and the ability to respond to and mitigate some of the potential impacts of the different scenarios regarding the UK's exit from the EU. In the meantime, Plexus has amongst other activities obtained an Economic Operator Registration and Identification ('EORI') number to enable the Company to continue to import and export with the EU.

 

(b)     Oil and Gas Sector Trends

It is readily understood that the world continues to move away from coal as part of the COP21 and other climate change objectives in relation to the ongoing need to urgently reduce CO2 and CH4 (methane) emissions. However, the commercial and environmental dynamics between traditional hydrocarbons in terms of coal, oil and gas is not the only trend to consider. New technologies, particularly in relation to renewables such as wind and solar, alternative energies and developments such as the increasing use of electric vehicles and corresponding improvements in battery storage life, and wave energy, could all in the future prove very disruptive to the traditional oil and gas industry and the corresponding demand for exploration and production equipment and services. It is however also recognised that the world will continue to need hydrocarbons as an energy and materials source, and in particular gas for many years to come, and indeed currently global demand for hydrocarbons is forecast to continue to grow.

 

(c)     Technology

The Group is now focusing on the commercialisation, marketing and wider application of its POS-GRIP friction-grip technology beyond Jack-up rental exploration wellhead equipment, both with regard to expanding into the surface land and platform production market sector, as well as the target subsea market where the Plexus POS-GRIP Python subsea wellhead offers numerous operational, time savings and performance benefits. Current and future contract opportunities may be adversely affected by technology related factors outside the Group's control, especially where new product developments are concerned. These may include unforeseen equipment design issues, test delays during a contract and final testing, and delayed acceptances of deliveries, as well as the slow uptake by operators 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 performance of the Group. To help 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 partners and customers.

 

(d)   Competitive risk

The Group operates in highly competitive markets and often competes directly with large multi-national corporations who have greater resources and are more established, and who are more resilient to extended adverse trading conditions. This risk has become more concentrated over the past few years as the large oil service companies have merged. These major oil service and equipment company consolidations that have taken place over the last few years have therefore magnified such issues as competitors reduce in number but increase in size, influence, and reach. Unforeseen product innovation or technical advances by competitors could adversely affect the Group and lead to a slower take up of the Group's proprietary technology. To mitigate this risk Plexus maintains an extensive suite of patents and trademarks, and actively continues to develop and improve its IP to ensure that it continues to be able to offer unique superior wellhead design solutions.

 

(e)   Operational

Plexus, like many other oil service companies, has had to make significant reductions in its workforce numbers over the past few years as a result of a lower oil price and a corresponding reduction in drilling activity and related levels of capex spend. Therefore, with any upturn in drilling activity, it is possible that the industry and Plexus could experience difficulties in rehiring past or new employees and this could deprive Plexus of the key personnel necessary for expanding operational activities, as well as research and development initiatives, at the rate that may be required. To help 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 will hopefully minimise such risks.

 

(f)    Liquidity and finance requirements

In an economic climate that remains in many ways uncertain it has become increasingly possible for potential sources of finance to be closed to businesses for a variety of reasons that have not been an issue in the past. Some of these may even relate to the lender itself in terms of its own capital ratios and lending capacity. In addition, a growing number of financial institutions are actively divesting away from the oil and gas sector on the grounds of climate change concerns. Furthermore, the sustained period of record low interest rates is impacting on global finances in a number of ways and could have a negative impact on business activity.

 

(g)   Credit

The main credit risk is attributable to trade receivables. As the majority of the Group's customers are large international oil and gas companies the risk of non-payment is significantly reduced, and therefore is more likely to be related to client satisfaction and/or trade sanction issues. Customer payments can therefore potentially involve extended periods of time especially from countries where exchange control regulations can delay the transfer of funds outside those countries. As Plexus begins to establish international licensee relationships there may be instances whereby certain capital and royalty payments could be due some way into the future and as such greater credit risk than exists under normal payments terms could apply. The Group's exposure to credit risk is monitored continuously.

 

(h)    Risk assessment

The Board has established an on-going process for identifying, evaluating and managing the more significant risk areas faced by the Group. One of the Board's control documents is a detailed "Risks assessment & management document" which categorises risks in terms of - business (including IT), compliance, finance, cash, debtors, fixed assets, other debtors/prepayments, creditors, legal, and personnel. These risks are assessed and updated on a regular basis and can be associated with a variety of internal and external sources including regulatory requirements, disruption to information systems including cyber-crime, control breakdowns and social, ethical, environmental and health and safety issues.

 

(i)     COVID-19 outbreak

Plexus places the health and safety of its employees as its highest priority and in line with this has implemented various protocols in relation to the current COVID-19 outbreak. Accordingly, a business continuity programme has been put in place to protect employees whilst ensuring the safe operation of the Company.  Following consultations with, amongst others, relevant authorities, staff and contractors, strict protocols have been implemented to reduce the risk of transmission of COVID-19 at all the Company's operations. The situation in respect of COVID-19 is an evolving one and the Board will continue to review its potential impact on its staff and the business.

 

 

Section 172 Statement

 

This section serves as the section 172 statement and should be read in conjunction with the full Strategic Report and the Corporate Governance Report. Section 172 of the Companies Act 2006 requires directors to take into consideration the interests of stakeholders in their decision making. The Directors continue to have regard to the interests of the Company's employees and other stakeholders, including shareholders, customers and suppliers, Licence Partners and the community and environment, through positive engagement and when making decisions. Acting in good faith and fairly between members, the Directors consider what is most likely to promote the success of the Company for its members in the long term and to protect the reputation of the Company.

 

Shareholders

Plexus seeks to develop an investor base of long-term holders that are aligned to our strategy. By clearly communicating our strategy and objectives, we maintain continued support from our investor base. Important issues include maintaining financial stability and protecting and strengthening the value of our intellectual property. Engagement with shareholders is a key element to this objective and methods of engagement are detailed in the Corporate Governance Report. During the year, the Finance Director supported by other members of the executive team, the Company's broker, and the Investor Relations advisor, engaged directly with investors by email, presentations, direct conversations and ad-hoc meetings. In addition to this, in October 2019 the Company re-launched its website to provide investors and other stakeholders with an improved platform to access information about the Company.

 

Employees

The Group's UK staff are engaged by the Company's subsidiary Plexus Ocean Systems Limited based in Aberdeen, Scotland. Being a relatively small company with just over 30 employees largely operating in one location, there is a high level of visibility regarding employee engagement and satisfaction. During the year, the Board re-tendered the employee benefits adviser who are able to offer a comprehensive service to employees as well as to the Company. The Company proactively engages with employees on matters of competency, training, and health and safety as detailed in the Corporate Governance. During the year the Company successfully achieved five continuous years with no Lost Time Incidents (LTI's) and this successful safety culture has continued beyond that fifth anniversary to the date of writing. In the latter part of the year, the impact of COVID-19 and Government regulations caused a sudden migration of many staff to be required to work from home. The challenges of maintaining close contact with employees presented by this have been very successfully managed by use of appropriate software such as Microsoft Teams alongside the use of a secure VPN and other network security protocols.

 

Customers and Suppliers

The Company is committed to acting ethically and with integrity in all business dealings and relationships. Fostering good business relationships with key stakeholders including customers and suppliers is important to the Company's success. The Board seeks to implement and enforce effective systems and controls to ensure its supply chain is maintaining the highest standard of business conduct in line with best practice including in relation to anti-bribery and modern slavery.

 

Licence Partners

The Company engages with Licence Partners in a way that follows the same principles as those applied to relationships with other customers and suppliers. Additionally, the Company engages with its Licence Partners in order to support their efforts to achieve commercial success by holding technical workshops, technical training and data transfer. As part of the transaction with TFMC in 2018, a five-year Collaboration Agreement was signed between the two companies in order to explore areas where new products with commercial opportunities can be jointly developed. The Collaboration Steering Committee contains representatives from both companies and meets on a regular basis at each quarter.

 

Community and Environment

The Company has minimal environmental impact in the localities in which it operates. This clearly helps the Company meet its corporate objectives in this regard but is never taken for granted. In the year under review, the Company met its target for waste management and in general continues to operate in a manner that is open, honest and socially responsible.

 

 

G Stevens
Director

1 December 2020

 

 

 

Consolidated Statement of Comprehensive Income

for the year ended 30 June 2020

 

 

	Notes	2020 £'000	2019 £'000
Revenue	1	525	3,611
Cost of sales		(225)	(1,865)
		-------	-------
Gross profit		300	1,746
Administrative expenses		(5,981)	(5,756)
		-------	-------
Operating loss		(5,681)	(4,010)
Finance income		192	218
Finance costs		(111)	(41)
Share in profit of associate		265	122
Other income		285	-
		-------	-------
Loss before taxation		(5,050)	(3,711)
Income tax credit	3	992	484
		-------	-------
Loss after taxation from continuing operations		(4,058)	(3,227)
Loss after taxation from discontinued operations		(2,549)	(88)
		-------	-------
Loss for year		(6,607)	(3,315)
Other comprehensive income		-	-
		-------	-------
Total comprehensive income for the year attributable to the owners of the parent		(6,607)	(3,315)
		-------	-------
Loss per share	5
Basic from continuing operations		(3.92p)	(3.12p)
Diluted from continuing operations		(3.92p)	(3.12p)
Basic from discontinued operations		(2.47p)	(0.09p)
Diluted from discontinued operations		(2.47p)	(0.09p)

 

 

Consolidated Statement of Financial Position

at 30 June 2020

 

 

	Notes	2020 £'000	2019 £'000
Assets
Goodwill		767	767
Intangible assets	6	10,325	10,876
Property, plant and equipment	7	3,273	3,804
Non-current financial assets	9	2,995	2,835
Investment in associate	8	898	907
Deferred tax asset	3	2,130	1,259
Other receivables		-	4,515
Right of use asset		1,548	-
		-------	-------
Total non-current assets		21,936	24,963
		-------	-------
Inventories		870	698
Trade and other receivables		2,982	4,948
Current income tax asset		76	617
Cash and cash equivalents		4,087	5,152
		-------	-------
Total current assets		8,015	11,415
		-------	-------
Total Assets		29,951	36,378
		-------	-------
Equity and Liabilities
Called up share capital	10	1,054	1,054
Shares held in treasury	11	(2,500)	(2,500)
Share based payments reserve		674	674
Retained earnings		28,266	34,873
		-------	-------
Total equity attributable to equity holders of the parent		27,494	34,101
Liabilities
Lease liabilities		1,401	-
		-------	-------
Total non-current liabilities		1,401	-
		-------	-------
Trade and other payables		778	2,202
Lease liabilities		278	-
Bank loans		-	75
		-------	-------
Total current liabilities		1,056	2,277
		-------	-------
Total liabilities		2,457	2,277
		-------	-------
Total Equity and Liabilities		29,951	36,378
		-------	-------

 

 

Consolidated Statement of Changes in Equity

for the year ended 30 June 2020

 

 

 

	Called Up Share Capital	Shares Held in Treasury	Share Premium Account	Share Based Payments Reserve	Retained Earnings	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 June 2018	1,054	-	36,893	674	2,295	40,916
Total comprehensive income for the year	-	-	-	-	(3,315)	(3,315)
Cancellation of share premium		-	(36,893)	-	36,893
Buyback of shares	-	(2,500)	-	-	-	(2,500)
Dividend paid	-	-	-	-	(1,000)	(1,000)
	-------	-------	-------	-------	------	------
Balance as at 30 June 2019	1,054	(2,500)	-	674	34,873	34,101
Total comprehensive income for the year	-	-	-	-	(6,607)	(6,607)
	-------	-------	-------	-------	------	------
Balance as at 30 June 2020	1,054	(2,500)	-	674	28,266	27,494
	-------	-------	-------	-------	-------	-------

 

 

 

Consolidated Statement of Cash Flows

for the year ended 30 June 2020

 

 

	Notes	2020 £'000	2019 £'000
Cash flows from operating activities
Loss before taxation from continuing activities		(5,050)	(3,711)
Loss before taxation from discontinued activities		(2,432)	(108)
		-------	-------
Loss before tax		(7,482)	(3,819)
Adjustments for:
Depreciation and amortisation charges		1,896	1,625
Loss on disposal of property, plant and equipment		6	-
Share in profit of associate		(265)	(122)
Other income		(285)	-
Impairment of associate		134	-
Write-down of other receivable		2,432	-
Fair value adjustment on financial assets		24	3
Investment income		(192)	(218)
Interest expense		87	8
Changes in working capital:
(Increase) / decrease in inventories		(172)	1,173
(Increase) / decrease in trade and other receivables		(191)	1,762
Decrease in trade and other payables		(1,328)	(2,661)
		-------	-------
Cash used in operating activities		(5,336)	(2,249)
Income taxes refunded		545	26
		-------	-------
Net cash used from operating activities		(4,791)	(2,223)
		-------	-------
Cash flows from investing activities
Funds invested in financial instruments		(183)	(714)
Other income		285	-
Purchase of intangible assets		(361)	(311)
Investment in associate		-	(785)
Purchase of property, plant and equipment		(138)	(530)
Dividend income from associate		140	-
Deferred proceeds from sale of discontinued operation		4,240	-
Proceeds of sale of property, plant and equipment		6	9
Interest and investment income received		192	218
		-------	-------
Net cash generated / (used) in investing activities		4,181	(2,113)
		-------	-------
Cash flows from financing activities
Repayment of loans and banking facilities		(75)	(300)
Repayments of lease liabilities		(315)	-
Buyback of shares held in treasury		-	(2,500)
Dividend paid		-	(1,000)
Interest paid		(65)	(8)
		-------	-------
Net cash outflow from financing activities		(455)	(3,808)
		-------	-------
Net decrease in cash and cash equivalents		(1,065)	(8,144)
Cash and cash equivalents at 1 July 2019		5,152	13,296
		-------	-------
Cash and cash equivalents at 30 June 2020	13	4,087	5,152
		-------	------

 

 

 

Notes to the Consolidated Financial Statements

 

 

1.           Revenue

	2020	2019
	£'000	£'000
By geographical area
UK	13	1,511
Europe	489	2,086
Rest of World	23	14
	-----	-----
	525	3,611
	-----	-----

 

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

 

	2020	2019
	£'000	£'000
By revenue stream
Rental	-	531
Service	9	269
Sold Equipment	26	2,712
Royalty Fees	476	-
Rebillables	14	99
	-----	-----
	525	3,611
	-----	-----

 

Substantially all of the revenue in the current and previous periods derives from the sale, rental and the provision of services relating to the Group's patent protected equipment.

 

 

2.        Segment Reporting

The Group derives revenue from the sale of its POS-GRIP technology and associated products, the rental of equipment utilising the POS-GRIP technology and service income principally derived in assisting with the commissioning and on-going service requirements of our equipment. These income streams are all derived from the utilisation of the technology which the Group believes is its only segment.

 

Per IFRS 8, the operating segment is based on internal reports about components of the group, which are regularly reviewed and used by the board of directors being the Chief Operating Decision Maker ("CODM").

 

All of the Group's non-current assets are held in the UK.

 

The following customers each account for more than 10% of the Group's continuing revenue:

 

	2020	2019
	£'000	£'000
Customer 1	489	1,818
Customer 2	-	1,447

 

 

3.         Income tax credit

 

 

(i)   The taxation charge for the year comprises:	2020	2019
	£'000	£'000
UK Corporation tax:
Adjustment in respect of prior years	(76)	(620)
	-----	-----
	(76)	(620)
	-----	-----
Foreign tax
Current tax on income for the year	-	1
Adjustment in respect of prior years	72	391
	-----	-----
	72	392
	-----	-----
Total current tax credit	(4)	(228)
	-----	-----
Deferred tax:
Origination and reversal of timing differences	(648)	(426)
Adjustment in respect of prior years	(223)	150
	-----	-----
Total deferred tax	(871)	(276)
	-----	-----
Total tax credit	(875)	(504)
	-----	-----
The effective rate of tax is 19% (2019: 19%)
Tax credit on discontinued activities	117	(20)
Tax credit on continuing activities	(992)	(484)
	-----	-----
Total tax credit	(875)	(504)
	-----	-----

 

(ii)  Factors affecting the tax charge on continuing activities for the year	2020	2019
	£'000	£'000
Loss on ordinary activities before tax	(5,050)	(3,711)
Tax on (loss)/profit at standard rate of UK corporation tax of 19% (2019: 19%)	(960)	(705)
Effects of:
Expenses not deductible for tax purposes	163	223
Effect of change in tax rate	(153)	53
Tax adjustments on share-based payments	4	22
Adjustments in respect of prior year	(46)	(78)
Foreign tax rates	-	1
	-----	-----
Total tax credit on continuing activities	(992)	(484)
	-----	-----

 

(iii) Movement in deferred tax asset balance	2020	2019
	£'000	£'000
Deferred tax asset at beginning of year	(1,259)	(984)
Credit to Statement of Comprehensive Income	(871)	(275)
	-----	-----
Deferred asset at end of year	(2,130)	(1,259)
	-----	-----

 

 

(iv) Deferred tax asset balance	2020	2019
	£'000	£'000
The deferred tax asset balance is made up of the following items:
Difference between depreciation and capital allowances	902	842
Share based payments	-	(4)
Tax provisions	(2)	-
Tax losses	(3,030)	(2,097)
	-----	-----
Deferred tax asset at end of year	(2,130)	(1,259)
	-----	-----

The deferred tax asset is reviewed at the end of each reporting period. Following a review of the Group's financial models and taxable profitability in the future it is considered appropriate to recognise the deferred tax asset in full.

 

 

4.         Discontinued Operations

 

On 1^st February 2018 the Group sold its "Jack-up Business" to TFMC for an initial gross consideration of £15m, with an additional sum of up to £27.5m payable dependent on the future performance of the Jack-up Business during a three year earn-out period.

 

Based on current revenue forecasts provided by TFMC, the earnout was accrued at £8,839k. £2,167k of this balance is receivable in a period due within one year and has been included in current assets (2019: £4,515k due in a period greater than one year and included in non-current assets, £4,325k due within 1 year and included in current assets. The recognised loss on discontinued operations in the year represents the impairment of deferred consideration receivable presented in prepayments and other amounts.

 

	2020	2019
	£'000	£'000
Revenue	-	-
Expenses	(2,432)	(108)
Loss before tax of discontinued operations	(2,432)	(108)
Income tax (charge)/credit	(117)	20
Loss after tax of discontinued operations	(2,549)	(88)
	-----	-----
Profit/(Loss) after taxation from discontinued operations	(2,549)	(88)
	-----	-----

 

The Statement of cash flows includes the following amounts related to discontinued operations:

	2020 £'000	2019 £'000
Operating activities	-	-
Investing activities	-	-
Financing activities	-	-
	-----	-----
Net cash generated/(used) from discontinued activities	-	-
	-----	-----

 

 

5.         Loss per share

	2020	2019
	£'000	£'000
Loss attributable to shareholders - continuing operations	(4,058)	(3,227)
Loss attributable to shareholders - discontinued operations	(2,549)	(88)
	-----	-----
Loss attributable to shareholders	(6,607)	(3,315)
	------	------

 

	Number	Number
Weighted average number of shares in issue	103,406,041	103,406,041
Dilution effects of share schemes	-	-
	----------	----------
Diluted weighted average number of shares in issue	103,406,041	103,406,041
	----------	----------

 

Loss per share
Basic Loss per share for continuing operations	(3.92p)	(3.12p)
Diluted Loss per share for continuing operations	(3.92p)	(3.12p)
	------	------
Basic Loss per share for discontinued operations	(2.47p)	(0.09p)
Diluted loss per share for discontinued operations	(2.47p)	(0.09p)
	------	------

 

Basic loss per share is calculated on the results attributable to ordinary shares divided by the weighted average number of shares in issue during the year.

 

Diluted earnings per share calculations include additional shares to reflect the dilutive effect of share option schemes. As a loss was made on continuing operations for the current year the option schemes are considered to be anti-dilutive.

 

 

6.         Intangible Assets

 

	Intellectual Property	Patent and Other Development	Computer Software	Total
	£'000	£'000	£'000	£'000
Cost
As at 30 June 2018	4,600	12,824	331	17,755
Additions	-	310	1	311
Disposals	-	(38)	-	(38)
	-----	-----	-----	-----
As at 30 June 2019	4,600	13,096	332	18,028
Additions	-	359	2	361
Disposals	-	-	(73)	(73)
	-----	-----	-----	-----
As at 30 June 2020	4,600	13,455	261	18,316
	-----	-----	-----	-----
Amortisation
As at 30 June 2018	2,838	3,150	298	6,286
Charge for the year	238	646	20	904
On disposals	-	(38)	-	(38)
	-----	-----	-----	-----
As at 30 June 2019	3,076	3,758	318	7,152
Charge for the year	237	664	11	912
On disposals	-	-	(73)	(73)
	-----	-----	-----	-----
As at 30 June 2020	3,313	4,422	256	7,991
	-----	-----	-----	-----
Net Book Value
As at 30 June 2020	1,287	9,033	5	10,325
	-----	-----	-----	-----
As at 30 June 2019	1,524	9,338	14	10,876
	-----	-----	-----	-----

 

When assessing the valuation of the Group's assets the key assumptions on which the valuation is based are that:

 

·    Industry acceptance will result in continued growth of the business above long-term industry growth rates, Management consider this to be appropriate for a new technology gaining industry acceptance,

·    Prices will rise with inflation,

·    Costs, in particular direct costs and staff costs are based on past experiences, and management's knowledge of the industry,

·    Staff wage inflation will be higher than general inflation but will not rise in line with sales.

 

These assumptions were determined from the directors' knowledge and experience.

 

The value in use calculation is based on cash flow forecasts derived from the most recent financial model information available. Although the Group's technology is proven and has proven commercial value the exploitation of opportunities beyond the rental wellhead exploration equipment services market are at a relatively early stage and the commercialisation process is expected to be a long term one. The cash flow forecasts therefore extend to 2040 to ensure the full benefit of all current projects is realised. The rationale for using a timescale up to 2040 with growth projections which increase in the first five years and decline thereafter, is that as time

 

progresses, Plexus expects to gain an increasing foothold in the subsea and other equipment markets which are already well established. As the Group are starting from a base point of trading the growth rates are high in the initial years (varying from 50% to 400% depending on the model employed) then in later years where the technology becomes established the expected rate of growth declines (varying from 5% to 10 depending on the model employed).

 

The key assumptions used in these calculations include discount rate, revenue projections, growth rates, expected gross margins and the lifespan of the Group's technology. Management estimates the discount rates using pre-tax rates that reflect current market assessments of the time value of money and risks specific to the Group and the markets in which it operates. Revenue projections, growth rates, margins and technology lifespans are all estimated based on the latest business models and the most recent discussions with customers, suppliers and other business partners.

 

Management regularly assesses the sensitivity of the key assumptions and the probability that any of them would change to the degree that the carrying value would exceed the recoverable amount. It would require significant adjustments to key assumptions before the goodwill would be impaired.

 

Patent and other development costs are internally generated.

 

 

 

7.         Property plant and equipment

	Buildings £000	Tenant Improvements £000	Equipment £000	Assets under construction £000	Motor vehicles £000	Total £000
Cost
As at 30 June 2018	3,607	716	5,509	10	17	9,859
Additions	92	-	391	47	-	530
Transfers	-	-	57	(57)	-	-
Disposals	-	-	(525)	-	-	(525)
	-----	-----	-----	-----	-----	-----
As at 30 June 2019	3,699	716	5,432	-	17	9,864
Additions	41	-	144	-	-	185
Disposals	-	(2)	(183)	-	-	(185)
	-----	-----	-----	-----	-----	-----
As at 30 June 2020	3,740	714	5,393	-	17	9,864
	-----	-----	-----	-----	-----	-----
Depreciation
As at 30 June 2018	1,158	381	4,315	-	1	5,855
Charge for the year	180	85	450	-	3	718
On disposals	-	-	(513)	-		(513)
	-----	-----	-----	-----	-----	-----
As at 30 June 2019	1,338	466	4,252	-	4	6,060
Charge for the year	152	61	464	-	3	680
On disposals	-	(2)	(147)	-		(149)
	-----	-----	-----	-----	-----	-----
As at 30 June 2020	1,490	525	4,569	-	7	6,591
	-----	-----	-----	-----	-----	-----
Net book value
As at 30 June 2020	2,250	189	824	-	10	3,273
	-----	-----	-----	-----	-----	-----
As at 30 June 2019	2,361	250	1,180	-	13	3,804
	-----	-----	-----	-----	-----	-----

 

 

 

The value in use of property, plant and equipment is not materially different from the carrying value.

 

 

8.         Investment in associate

	£'000
Investment in associate during the year	735 50
Share of profit for the period	50
Dividends received	122
	-----
Investment in associate at 30 June 2019	907
	-----
Share of profit for the period	265
Dividends received	(140)
Impairment of investment	(134)
	-----
Investment in associate at 30 June 2020	898
	-----

 

On 14 December 2018 Plexus Ocean Systems Limited acquired a 49% interest in Kincardine Manufacturing Services Limited ('KMS') for a consideration of £735k plus associated legal fees. KMS are a precision engineering company which serves the oil and gas industry. This is viewed as a long-term strategic investment by Plexus.  KMS are based at Sky House, Spurryhillock Industrial Estate, Stonehaven, Aberdeenshire AB39 2NH.

 

Following the investment Graham Stevens PLC Finance Director was appointed to the board of KMS. The company remains under the control and influence of the 51% majority shareholders.

 

On 30 June 2020, an impairment review has been undertaken. The investment has been revalued using a profit after tax earnings model. This has resulted in an impairment charge of £134k.

 

The summary financial information of KMS, extracted on a 100% basis from the accounts for the 6 months to 30 June 2020 are as follows:

 

 

9.         Financial Asset

	2020	2019
	£'000	£'000
Financial instruments held at fair value	2.995	2,835
	-----	-----
	2.995	2,835
	-----	-----

 

The financial asset relates to cash invested in an investment portfolio, made up of high-yield bonds held at fair value in the statement of financial position. The portfolio can be divested to cash at any time. Included in the statement of comprehensive income is a write-down in the carrying value of the financial asset of £24k (2019: £3k). The fair value of the investment is evaluated by reviewing the portfolio on a quarterly basis, including the reporting date of 30 June 2020.

 

         

10.       Share Capital

	2020	2019
	£'000	£'000
Authorised:
Equity: 110,000,000 (2019: 110,000,000) Ordinary shares of 1p each	1,100	1,100
	-----	-----
Allotted, called up and fully paid:
Equity: 105,386,239 (2019: 105,386,239) Ordinary shares of 1p each	1,054	1,054
	-----	-----

 

Trade and other payables are held at amortised cost. The carrying value approximates fair value.

 

         

11.       Shares held in treasury

	2020	2019
	£'000	£'000
Buyback of shares	2,500	2,500
	-----	-----

 

On 1 February 2019 Plexus Holdings PLC completed the acquisition of 4,950,495 Ordinary Shares beneficially held by LLC Gusar. Following the above transaction, the Company's issued share capital comprises 105,386,239 Ordinary Shares, of which 4,950,495 Ordinary Shares are held in treasury. The Company now has a total of 100,435,744 Ordinary Shares in issue with voting rights. This figure, 100,435,744, should be used by shareholders as the denominator when determining whether they are required to notify their interest in, or a change to their interest in the Company under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules.

 

 

12.       Reconciliation of net cash flow to movement in net cash/debt

 

		2020	2019
		£'000	£'000
Movement in cash and cash equivalents		(1,065)	(8,144)
Repayment of bank loans		75	300
		-----	-----
(Decrease)/increase in net cash in year		(990)	(7,844)
Net cash at start of year		5,077	12,921
		-----	-----
Net cash at end of year		4,087	5,077
		-----	-----

 

 

13.       Analysis of net cash/(debt)

 

2020:	At beginning of year	Cashflow	At end of year
	£'000	£'000	£'000
Cash in hand and at bank	5,152	(1,065)	4,087
Bank loans	(75)	75	-
Lease Liability	(1,948)	269	(1,679)
	-----	-----	-----
Total	3,129	(721)	2,408
	-----	-----	-----

 

The lease liability has been recognised on day 1 of the financial year on inception of IFRS 16 and is therefore not present in the prior financial year.

 

 

2019:	At beginning of year	Cashflow	At end of year
	£'000	£'000	£'000
Cash in hand and at bank	13,296	(8,144)	5,152
Bank loans	(375)	300	(75)
	-----	-----	-----
Total	12,921	(7,844)	5,077
	-----	-----	-----

 

The financial information above does not constitute the company's statutory accounts for the year ended 30 June 2020 but is derived from those statements.

 

The statutory financial statements and this preliminary statement for the year ended 30 June 2020 were approved by the Board on 1 December 2020.  On the same date the company's auditors, Crowe U.K. L.L.P issued an unqualified report on those financial statements.  The audit report did not include reference to any matters to which the auditor drew attention by way of emphasis without qualifying the report or contain a statement under section 498(2) or (3) of the Companies Act 2006.  

 

The financial information for the year ended 30 June 2019 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, Elder House, St Georges Business Park Brooklands Road, Weybridge Surrey, KT13 0TS.