MedservRegis plc - Full-Year Results

On 23 March, Medserv plc published its financial results for the year ended 31 December 2014.  Certain comparative figures in the statement of financial position as at 31 December 2013 have been re-stated to reflect the change in the accounting policy with regards to the recognition and measurement of the emphyteutical grant over the base within the Malta Freeport.

Performance Overview

During 2014, Medserv plc generated a record €32.4 million in turnover representing a significant improvement over the previous year’s comparable figure of €6.9 million. The improvement in turnover was due to (i) the commencement of major oil drilling contracts during the year including the provision of support services to ENI Cyprus from the Group’s base in Larnaca as from 1 June 2014; (ii) the additional storage fees generated from Malta from the 43,000 square metre Hal Far site and a new 8,000 square metre warehouse; and (iii) the income generated from the solar farm at the Malta base which went live in July 2014. The preliminary statement of results also noted that the revenue figure includes €8 million in income relating to low margin business which had a lesser beneficial effect on profit margins.

Given the increased business activity, with both the Malta and Cyprus bases working at full capacity through the second half of 2014, cost of sales also increased considerably to €24.9 million from €4.9 million in 2013. Nonetheless, the larger increase in revenue led to a material improvement in gross profit to €7.5 million compared to just under €2 million in 2013. Similarly, administrative expenses amounted to €3.6 million compared to €1.6 million in 2013. After accounting for €0.24 million in net other operating income, the Medserv Group registered a record operating profit for the year under review of €4.1 million compared to €0.4 million in 2013.

Excluding the depreciation figure of €1.7 million, which increased from last year’s charge of €0.5 million in view of the significant investment made in property, plant and equipment to strengthen its facilities in Malta and set-up its base in Cyprus, the Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to a record €5.8 million (2013: €0.9 million) with the EBITDA margin also improving to 17.9% from 13.1% in 2013.

Net interest costs rose to almost €1.1 million compared to €0.27 million in 2013 reflecting the additional debt issued to finance the investments required for the Group’s growth strategy.

Overall, the Medserv Group registered a pre-tax profit figure of just over €3 million which is significantly higher than the €0.13 million comparable figure for 2013 as well as 34.6% higher than the forecasted €2.2 million (as per the Supplement dated 7 April 2014). After accounting for a tax charge of €0.9 million (2013: tax credit of €0.26 million) and minority interests of €0.25 million (relating to the 20% shareholding of the Cypriot subsidiary owned by third parties), the Group’s net profit attributable to shareholders amounted to €1.94 million compared to €0.39 million in 2013. This translates into an earnings per share of €0.0775 compared to €0.0155 in 2013.

The Statement of Financial Position shows a 37.2% increase in total assets to €80.8 million largely reflecting the additional assets acquired during the year with ‘property, plant and equipment’ reaching €23.3 million (2013: €8.3 million) as well as the considerable increase in trade receivables to €16.6 million (2013: €3.9 million) largely reflecting the Group’s improved business pipeline. On the other hand, total liabilities also increased by 40.6% to €71.4 million mainly reflecting the €13.5 million increase in borrowings to €26 million to finance the aforementioned acquisition and increased business activity. Overall, shareholders’ funds grew by 17% to €9.2 million largely reflecting the profit generated during the year under review. This translates into a net asset value per share of €0.369 (2013: €0.315).

Dividend

The Directors recommended a final net dividend of €0.056 per share (2013: €0.024 per share) to all shareholders as at the close of trading on Tuesday 26 May 2015. The dividend will be paid by not later than 23 June 2015 subject to shareholders approval at the upcoming Annual General Meeting scheduled to be held on 28 May 2015.

Outlook

In concluding remarks, the Directors explained that whilst Libya remains an important market for the Group, it continued with efforts to diversify into other geographical areas. In this respect, initial success was being achieved by the 36-month contract in Cyprus that started generating revenues from June 2014 and has met the Group’s best expectations. Moving forward, the Group will continue to pursue further expansion of its operations with a dedicated management team that has been appointed to specifically oversee this process.

Apart from the major oil contracts mentioned above, the Group has now also been awarded the long-awaited multi-million maintenance contract. As from the second quarter of 2015, Medserv has been contracted to undertake maintenance works on an offshore platform having an aggregate value of €4 million which is expected to take 10 months to complete.

The Directors also noted that all of the investments made during the last two years, including those financed by the bond issue, will enable the Group to better meet the increasing demands of its clients both as to physical facilities and services provided. In this respect, the Group is continuing to invest in human resources with the employment of new experience staff whilst also upgrading the standard and qualifications of its existing employees.

Overall, 2015 promises to be an extremely busy year for Medserv in view of the number of projects that have now commenced.

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Medserv plc – Preliminary Statement of Group Results for the financial year ended 31 December 2014.