MedservRegis plc - Interim Results

On 28 August, Medserv plc published its interim results covering the six months ended 30 June 2014.

Performance Overview

During the first six months of 2014 the Medserv Group generated €9.6 million in revenue which is significantly higher than the €3.7 million turnover reported for the previous comparable period. However, it is noteworthy to highlight that the business undertaken during the period under review was of a low margin nature. In fact, cost of sales also increased significantly to €7.8 million compared to €2.2 million in the first six months of 2013 leading to only a 19.9% increase in gross profit to €1.8 million. The gross profit margin dropped to 19.1% from 41.4% in the first half of 2013. Likewise, administrative costs increased by 8.2% to €0.97 million resulting into an operating profit of €0.89 million representing a 38.1% increase over the previous comparable figure. It is noteworthy to highlight that part of the rise in operating expenses was due to the 71.4% increase in depreciation to €0.45 million reflecting the substantial investment undertaken by the Group particularly at its Malta and Cyprus bases in view of the envisaged business pipeline.

These investments were funded by the issuance of a €20 million bond (split into two tranches) which led to a significant increase in interest costs to €0.35 million compared to just €0.08 million in the first half of 2013.

Overall, the Group registered a pre-tax profit of €0.54 million representing a 4.2% drop from the previous comparable period. After accounting for a tax charge of €0.1 million and minority interest (relating to the 20% of the Cypriot operation owned by third parties) of €0.05 million, the Group’s net profit for the period under review amounted to €0.4 million compared to €0.51 million in the previous comparable period.

Segmental Analysis 

The Malta base generated €8.6 million in revenue (H1 2013: €3.5 million). However this mostly consisted of low margin business leading to a pre-tax profit of €0.43 million representing a 25.3% drop from the previous comparable period. In the half-year report, the Directors noted that one of the two contracts announced earlier this year in relation to offshore drilling in Libya commenced during the second half of the year whilst the other is expected to start in the fourth quarter of 2014. Moreover, the day to day business of cutting bulk products and loading of tubulars on board supply vessels has also commenced whilst a number of foreign sub-contracts involved in this work have already been signed. Furthermore, the additional 30,000 square metres of additional storage area outside the Malta base and the 8,000 square metre warehouse within the base are almost fully occupied. The additional floor of office space at the Malta base, comprising 525 square metres, has also been fully leased out.

The Directors also confirmed that the solar farm has been providing electricity to the grid since 8 July 2014.

Meanwhile, the maintenance contract referred to in the 2013 Annual Report has not yet been awarded given the difficulty in obtaining all the necessary signatures due to the present developments in Libya. Nonetheless, the Directors remain confident that the contract will be awarded to Medserv.

The base in Misurata (Libya) remains operational albeit handling very low levels of business given the unstable situation in the North African country. As such, the Libyan base only generated €0.12 million in revenue and reported a marginal loss of €0.05 million.

The base in Larnaca (Cyprus) commenced operations as scheduled on 1 June 2014 and during its first month of operations generated €0.95 million revenue and a pre-tax profit of €0.33 million representing a 35% margin.

Outlook

The Directors confirmed that the Group’s results for 2014 are still expected to be in line with the forecasts presented in the Supplement dated 7 April 2014 which indicated a pre-tax profit of around €2 million for the 2014 financial year. In fact, the directors confirmed that the results will be skewed towards the second half of the year.

Dividend

No interim dividend was declared.

Download

Medserv plc – Half-Year Report covering the six months ended 30 June 2014.