MedservRegis plc - Full-Year Results

On 22 March, Medserv plc published its financial results for the year ended 31 December 2015. It is important to highlight that in June 2015, Medserv sold its 60% shareholding previously held in Medserv Misurata FZC. Therefore, the comparative figures for 2014 have been restated to show the discontinued operation of the Misurata base separately from the continuing operations.

Performance Overview

During 2015, Medserv plc generated a record €42.2 million in turnover, representing a 31.0% uplift over the previous year’s comparable figure of €32.2 million. The improvement in turnover is attributable to the increase in the volume and portfolio of logistics services being provided to the international oil companies and their sub-contractors throughout their drilling programs. In particular, Medserv continued to benefit from the strong business flow at its Malta base in support of the ongoing operations offshore Libya. Furthermore, Medserv (Cyprus) Limited continued to service ENI out of its base in Larnaca, Cyprus. Medserv also registered growth across its engineering and maintenance services during the year under review.

Given the increased business activity, cost of sales increased by 20.5% to €29.8 million from €24.7 million in 2014. The latter also includes one-time costs related to the acquisition of the METS Group (concluded in February 2016) amounting to €0.38 million. Nonetheless, the larger increase in revenue led to a material improvement in gross profit to a record of €12.4 million (2014: €7.5 million) with a gross profit margin of 29.5% (2014: 23.3%). Similarly, administrative expenses amounted to €5.4 million compared to €3.5 million in 2014. After accounting for €0.45 million in net other operating income (2014: €0.23 million), the Medserv Group registered the highest operating profit figure ever of €7.5 million compared to €4.2 million in 2014.

Excluding a depreciation charge of €2.65 million (2014: €1.66 million), the Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) amounted to a record €10.2 million (2014: €5.8 million), with the EBITDA margin also improving to 24.1% from 18.3% in 2014.

Net interest costs amounted to €1.5 million compared to €1.1 million in the previous financial year.

Overall, the Medserv Group registered a pre-tax profit figure of just over €6.0 million, which is nearly twice as much as the comparable figure of €3.14 million for 2014. After accounting for a tax charge of €1.3 million (2014: €0.9 million), a post-tax loss of €0.22 million from discontinued operations pertaining to the Misurata base (2014: €0.1 million), as well as minority interests of €0.37 million (relating to the 20% shareholding of the Cypriot subsidiary owned by third parties), the Group’s net profit attributable to shareholders amounted to €4.12 million compared to €1.94 million in 2014. This translates in an earnings per share of €0.092 compared to €0.043 in 2014.

The Statement of Financial Position shows a marginal increase in total assets to €81.1 million (2014: €80.8 million) and a slight decrease in total liabilities to €70.0 million from €71.4 million the previous year. On the other hand, total shareholders’ funds grew by 20.6% to €11.1 million (2014: €9.2 million) largely reflecting the profit generated during the year under review. This translates into a net asset value per share of €0.247 (2014: €0.205).

Dividend

In December 2015, Medserv plc paid an interim cash dividend of €2.0 million. Meanwhile, no final dividend is being recommended by the Board of Directors in view of the Company’s substantial expansion programme.

Nonetheless, the Directors explained that the Board intends to maintain a strong but responsible dividend policy.

Outlook

In the Directors’ concluding remarks, Medserv explained that notwithstanding the prevailing challenges in the global oil and gas sectors, the Company has refocused and moved ahead with its investment plans to ensure it can continue to be of service to its growing list of blue chip customers in the Mediterranean and beyond. Medserv has recently concluded the acquisition of Middle East Tubular Services Limited (METS) for a total consideration of USD45 million. The METS Group comprises a number of subsidiaries which provide and operate a comprehensive threading, repair, inspection and storage service for oil country tubular goods (OCTG). The METS Group maintains three certified sites in Sharjah (UAE), Sohar (Oman) and Basra (Iraq) having a total area of 292,000 square metres. This investment allows Medserv to enter the developed market of the Middle East where the extraction cost of a barrel of oil is low and therefore can better withstand today’s downward pressure on oil prices. The METS acquisition also brings synergies to the Medserv Group.

Furthermore, Medserv will be participating in a tender for a second international oil company in support of its exploration activity offshore Cyprus. Whilst it is still uncertain out of which location this new activity will take place, Medserv (Cyprus) Limited is in a position to operate out of either of the two ports being considered. In addition to this, and in line with the Group’s development strategy, Medserv reported that work has already commenced on evaluating the potential of new markets which include amongst others Portugal, Iran, and Trinidad and Tobago. The latter three prospects are at different levels of development with Portugal being the most advanced as the Group awaits the adjudication of a tender already submitted. In respect of Trinidad and Tobago, the Group has been shortlisted by an international oil company to participate in a tender for the provision of supply base and pipe-yard services, whilst negotiations are at an early stage in the Group’s efforts to secure a base facility in Iran.

Commenting on the results, Medserv’s Chairman, Mr Anthony Diacono, said: “We look forward to 2016 with optimism. Our business pipeline is strong in all the geographical markets in which we operate. Our optimism is based on the knowledge that we have positioned the Group to continue servicing North Africa from Malta, the Eastern Mediterranean from Cyprus, and the Middle East from the UAE, Southern Iraq, and Oman.”

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Medserv plc – Preliminary Statement of Group Results for the financial year ended 31 December 2015.