Medserv plc - Full-Year Results

Medserv’s 2007 Preliminary Profit Statement was published on 28 March 2008. The Board of Directors did not recommend the payment of a dividend. Last year Medserv had paid a final dividend of €0.048 per share.  The date for the Company’s Annual General Meeting has been set for 30 April 2008.

The key highlights are:
• Turnover drops 32 per cent to €4.65 million;
• EBITDA of €54,901 (2006: €1.4 million);
• Profit after tax of €66,483.

Medserv’s turnover during the twelve months ended 31 December 2007 amounted to €4.65 million, 32 per cent lower than the revenue generated in the previous year and 59 per cent below the turnover projected by the Directors during the Initial Public Offering in October 2006. In the Preliminary Profit Statement the Directors explained that the lower turnover resulted from delays in the commencement of operations in the concessions offshore Libya. This delay was reportedly brought about by the lack of availability of explorations rigs due to the strong rise in the price of oil which increases the demand for exploration and production activities of which rigs form an indispensable component. Scarcity of steel and other equipment as a result of this increased demand was also instrumental in creating these delays. In a recent interview with Medserv’s Chairman Anthony Diacono and Operating Officer Godwin Borg published in the Times of Malta on 13 March 2008, it was noted that rigs that were scheduled to start work on the Libyan concessions in 2007 are still drilling in other locations.

The gross profit decreased by 42 per cent to €1.4 million, 60 per cent lower than the projected level for the year. Administrative and distribution expenses increased by 16 per cent to €1.5 million. In the Half-Yearly Report published in August 2007 the increase in expenditure during the first half of the year related to a rise in advertising and exhibition expenses as well as legal fees for the setting up of the subsidiary in Misurata.

EBITDA shrunk to only €54,901 during 2007 compared to €1.4 million the previous year. After accounting for depreciation of €251,067, Medserv incurred an operating loss of €196,000.

Net interest payable increased to €91,167 as a result of increased Group borrowings. Medserv incurred a pre-tax loss of €287,333 compared to profits of €1.2 million in 2006. After accounting for deferred tax income of €353,816, Medserv generated a minimal profit of €66,483 during 2007 (2006: €1.5 million). Earnings per share came out at €0.0066.

Total assets as at 31 December 2007 amounted to €10.4 million with shareholders’ funds of €5.9 million. Medserv’s total debt increased from €1.9 million in 2006 to €2.5 million in 2007. The Group’s gearing ratio stands at 38.5 per cent.

In February 2007 Medserv announced the setting up of a logistical base in the Misurata Free Zone. A new company, Medserv Misurata Free Zone Company (MMFZC), was formed with Medserv holding a 60 per cent shareholding and the balance in the hands of the Misurata Free Zone Authority. In the interview of 13 March 2008, Chairman Anthony Diacono was reported as having said that MMFZC generated a “healthy profit” during its first five months since operations commenced in July 2007. This joint-venture company was awarded a number of contracts and MMFZC has already applied for an additional 30,000m2 at its base in Misurata, in anticipation of a rapid increase in activity.

In the Preliminary Profit Statement there is no mention of any progress made “to maximise the return from the land and quay in Malta” which had been identified by the Directors as a primary objective in the August 2007 Half-Yearly Report. At the time of the IPO the Medserv base was independently valued at €41.9 million. Medserv has exclusive rights to the land by title of temporary emphyteusis that expires on 29 May 2045.