Medserv plc - Full-Year Results

Thursday, May 3rd, 2018

On 30 April 2018, Medserv plc published the results for the financial year ended 31 December 2017.

Performance Overview

During 2017, Medserv plc generated €28.8 million in revenues, representing a decline of 12.3% from the €32.8 million figure for the previous comparable period. This reflects both lower demand for services (including delays in drilling projects) as well as external pressure on margins which, in turn, continue to demonstrate the challenging period for all type of oil and gas companies worldwide despite the recovery in commodity prices which took place during the course of last year.

Notwithstanding the lower level of business activity, total costs remained virtually unchanged at €32.9 million, reflecting the predominantly fixed cost nature of the company’s overheads as well as ongoing investments in HR in line with the Group’s growth aspirations. Moreover, depreciation and amortisation charges increased by €2.91 million year-on-year to €8.43 million (FY2016: €5.52 million), largely as a result of the reclassification and the revaluation of property rights held by the Group over the industrial areas forming part of the Malta Freeport Terminals and Hal-Far Industrial Estate to “right-of-use assets” from “prepaid operating lease”.

As a result, Medserv reported an operating loss of €4.1 million compared to an operating break-even position in 2016. Excluding depreciation and amortisation charges, EBITDA fell by 21.7% to €4.33 million from €5.53 million in the previous year.

The financial performance of Medserv was also dented by higher net finance charges amounting to €3.94 million compared to €2.46 million in 2016. This increase is related to costs on finance leases amounting to €1.51 million which were not similarly reported in the 2016 financial results.

Overall, Medserv posted a pre-tax loss of €8.04 million compared to a pre-tax loss of €2.45 million in FY2016. After accounting for a tax credit of €0.4 million (FY2016: €5.43 million) and a loss of €0.21 million attributable to minority interests (relating to the part of the Group’s business in Cyprus, Egypt and Iraq that is owned by third parties), the Group’s net loss attributable to shareholders amounted to €7.42 million compared to a profit €3.14 million in 2016.

The Statement of Financial Position shows total assets of €153.3 million as at 31 December 2017 compared to €121.5 million as at the end of 2016. This increase is largely attributable to the recognition of €75.9 million in “right-of-use assets” which also prompted a positive revaluation amounting to €42.5 million. Likewise, total liabilities increased to €125.2 million from €95 million as at 31 December 2016, largely reflecting the recognition of €25.1 million in lease liabilities as well as €6 million in deferred tax liabilities following the aforementioned reclassification and the revaluation of property rights held by the Group over the industrial areas forming part of the Malta Freeport Terminals and Hal-Far Industrial Estate. Overall, shareholders’ funds expanded by 7.2% to €28.3 million. This translates in a net asset value per share of €0.526 (31 December 2016: €0.49 per share).

Outlook

Looking ahead, the Directors explained that Medserv is actively positioning itself for growth in various new significant oil and gas markets. Projects in new territories arising primarily from organic growth are scheduled to come online before the end of 2018. Moreover, the company is awaiting adjudication on a long-term tender for the provision of machine shop services in Uganda.

The Directors also added that the oil and gas sector is expected to continue its slow recovery as upstream companies increase production. The first countries to recover from this downturn are the geographical regions in which Medserv operates given that the cost of producing oil and gas in these countries is relatively lower than in other regions. As a result, the outlook for the Group remains optimistic as Medserv anticipates better performance in all its operating segments.

Download

Medserv plc – Annual Report & Financial Statements for the year ended 31 December 2017.

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