Medserv plc - Interim Results

Monday, July 15th, 2013

On 15 July, Medserv plc published its interim results covering the first six months of 2013.

Performance Overview

During the period under review, turnover grew by 45.5% to €3.7 million reflecting the continuing resurgence in turnover which commenced in the second half of 2012. The announcement further explained that the Malta base has been busy with a number of new types of engineering operations in addition to the more normal activities found on the base tied to continued preparation by oil companies for upcoming projects in the Mediterranean particularly offshore Libya. The recently set-up maintenance unit has now successfully completed its second major maintenance contract in Libya.

Despite the increased turnover, cost of sales dropped by 10.2% to €2.2 million resulting in a gross profit of €1.5 million representing a 19.2% increase over the comparable figure registered in the first six months of 2012.

Meanwhile, administrative expenses increased by 19.2% to €0.9 million leading to an operating profit of €0.64 million compared to the €0.6 million loss registered in the first half of 2012.

Net finance costs increased by 21.6% to €0.07 million reflecting the increased borrowing in the previous financial year to support the Group’s business pipeline.

The financial statements for the period under review also account for a minimal share of loss of the jointly-controlled entity relating to the 50% stake in Medserv Italia srl as drilling operations offshore Sicily have not yet started.

Overall, the pre-tax profits of the Medserv Group for the six months ended 30 June 2013 amounted to €0.57 million compared to a pre-tax loss of €0.68 million in the first half of 2012. After accounting for a tax charge of €62,035 and minority interest of €5,203 (representing the 40% shareholding in Medserv Misurata F.Z.C. and the 45% shareholding in Medserv Cyprus Limited owned by third parties), the Group’s net profit for the period under review amounted to €0.51 million (June 2012: €32,222) translating into an earnings per share of €0.051.

The balance sheet as at 30 June 2013 shows that total assets dropped by 2.7% during the first six months to €12.9 million reflecting a decline in trade receivables and cash balances. Total equity grew by 6.3% to €8.5 million. Compared to total debt of €3.17 million, the gearing ratio of the Medserv Group equates to 27.3% (June 2012: 28.3%).

Outlook  

Looking ahead, the Directors noted that the Malta base has obtained further maintenance works for the second half of the current financial year. Furthermore, the specialised procurement team has also obtained substantial business from new customers and this is expected to increase.

The Misurata base is showing gradual signs of returning to operations. In this respect, the Directors noted that the Libyan subsidiary has tendered for an offshore drilling operation for a French company, the results of which are still pending. Although this reflects the potential business operation from offshore Libya, the Directors remain cautious on the future operations of Misurata.

In Cyprus, the Group (through its 55% shareholding in Medserv Cyprus) obtained a second licence to operate from the port of Larnaca following the operational licence from the port of Limassol. The Directors explained that given the infrastructure (namely a deep water quay and warehouse facilities)  at Larnaca, the Group will prefer to operate from this port as it would enable it to service its existing clients . Furthermore, Cyprus is being considered as a regional centre to serve other offshore operations in nearby countries. The Medserv Group has also entered into discussions for the setting up of a logistics base in two ports of Lebanon which are situated directly opposite the areas set to be explored and on which the proposed Lebanese partner already owns quays and warehouses.

The Medserv Group is also following other business leads. The Group is still awaiting the adjudication results of the tender for a contract in Tanzania for which it has been shortlisted. Furthermore, Medserv has been invited by a UK based oil company to tender for the operation of an existing logistic supply base in India and separately by a US based company to set up a similar base in Ghana.

The Directors explained that such requests reflect management’s vision to expand the Group not only in its local region but also overseas, particularly in areas where exploration for fossil fuels is growing. Such invitations also confirm the recognition of the Group’s expertise and brand name in the industry in which it operates.

In Sicily, offshore operations are expected to be allowed to commence soon which should benefit the Group’s investment in Medserv Italia.

The announcement also made reference to the €4 million investment in a photovoltaic farm. The Directors noted that the investment is on track and all the necessary permits have been obtained enabling Medserv to confidently predict that the entire unit will be on stream by the second quarter of 2014.

In conclusion, the Board also stated that it is actively considering ways in which the Group may ensure sufficient funding to support the opportunities mentioned above.

Download

Medserv plc – Half-Year Report for the period ended 30 June 2013.

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