Medserv plc - Full-Year Results

Friday, March 28th, 2014

On 28 March, Medserv plc published its financial statements for the year ended 31 December 2013.

Performance Overview

During 2013, the Medserv Group generated €6.9 million in revenue. Although this is 2.8% higher than the previous year’s turnover figure, it is below the forecasted figure of €9.7 million. The Directors explained that the discrepancy mainly arises from the postponement of two projects for the provision of shore base activities to the offshore oil and gas industry that had to be carried out from the Malta base. Nonetheless, the Directors confirmed that these two projects will come on stream in 2014 and one of them will continue for the next three years.

On the other hand, cost of sales dropped by 17.6% to €4.9 million reflecting the cost savings achieved by the Group from the strategy of acquiring its own equipment as an alternative to leasing it. As a result, the gross profit more than doubled to €1.95 million (2012: €0.7 million). Similarly, the gross profit margin also improved to 28.3% (2012: 10.5%) which also reflects the provision of higher margin business, including logistic services in anticipation of upcoming drilling operations.

Administrative expenses dropped by 5.2% to €1.6 million leading to an operating profit of almost €0.4 million in contrast to the operating loss of €0.99 million incurred in the previous financial year.

Net finance costs increased by 62.3% to €0.27 million largely reflecting the increased debt levels following the issuance of €13 million in Notes (the first tranche of a €20 million debt issuance programme).

Overall, the Medserv Group reported a pre-tax profit of €0.13 million representing a turnaround from last year’s €1.2 million pre-tax loss. After accounting for a tax credit of €0.26 million and minority interests, the Group’s net profit for the year under review amounted to €0.39 million in contrast to the net loss of €0.25 million incurred in 2012. This translates into an earnings per share figure of €0.0155 (2012: €(0.01)).

The Statement of Financial Position shows a 69.6% increase in total assets to €22.5 million largely reflecting the 64.5% increase in property, plant, equipment to €8.3 million (mainly including the acquisition of equipment and the improvements to the Malta base) and a cash balance of €5.7 million (including some of the funds raised from the issuance of the Tranche 1 of Notes which have not yet been utilised). The issuance of €13 million in Notes led to a substantial increase in total liabilities to €14.3 million (2012: €5.3 million) and also increased the gearing ratio to 60.6% compared to 28.7% in 2012.

Total equity also increased by 2.6% to €8.2 million mainly due to the profit generated during the period under review.

Dividend

The Directors recommended a final net dividend of €0.024 per share subject to shareholders’ approval at the Group’s upcoming Annual General Meeting scheduled to be held on Thursday 15 May. The dividend cut-off date was not disclosed in the announcement.

Outlook 

The Directors explained that although Libya remains an important market for the Group, the current instability is hindering its operations in the country and will likely need time to improve. As  such, Medserv sought to diversify its operations with the setting up of a base (of which it owns 80%) in Cyprus. The Cypriot base has already been awarded its first contract by ENI (Cyprus) Limited which will be serviced out of the new base in Larnaca with effect from1 June 2014 and will be a major contributor to the Group’s revenues. Additionally, the Group also registered success in connection with its new maintenance unit which has secured significant business offshore Libya during 2013. In this respect, the Directors noted that it will continue to target this line of business. Both events are expected to contribute to the 2014 results in a material way.

Furthermore, the €5 million solar farm project is nearing completion and is expected to be commissioned in the third quarter of 2014 at which point it will generate constant returns over the next twenty years.

The Directors also noted that 2014 is expected to be a very active year for the Group with a number of offshore oil and gas projects coming on stream across the Mediterranean basin. This includes the Malta well for which Medserv has been appointed as the logistic support service provider. In view of the anticipated increase in business activity, the Group is investing in its human resources with the employment of highly qualified and experienced staff. Furthermore, the Group is required to undertake a number of other investments totalling €6.8 million including sourcing additional plant and equipment, open yard space, building a new floor on the administration block (to satisfy demand for office space by clients) as well as the construction of a new 8,000 square metre warehouse. In this regard, Medserv plc intends to issue the second and final tranche of €7 million 6% Notes.

Download

Medserv plc – Preliminary statement of results for the financial year ended 31 December 2013.

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