MedservRegis plc - Full-Year Results

On 21 March, Medserv plc published its preliminary profit statement for the financial year ended 31 December 2012.

Performance Review

During 2012 the Group registered a 27.1% drop in revenue to €6.7 million reflecting the significantly lower business activity during the year under review as Libya, the Group’s main market, was still in the process of recovery following the unrest in the North African region. Meanwhile, cost of sales, which are predominantly fixed, only dropped by 13.1% to €6 million leading to a 69.2% contraction in gross profit to €0.7 million.

Moreover, the Group’s financials were hit by a 39.4% increase in administrative expenses reflecting the Group’s investment initiatives undertaken during 2012 to improve efficiency and competitive levels. In fact, Medserv strengthened its management team whilst increasing its marketing budget to finance new market and product developments. The Directors noted that although these investments have a short-term adverse effect on the financials, these will be outweighed by the long-term benefits that will accrue to the Group.

Overall, the Group reported an operating loss of €0.99 million compared to the operating profit of €1.1 million registered in the previous year.

Net interest expense also increased to €0.16 million reflecting the increased levels of debt funding. Nonetheless, the Group’s gearing ratio is still low.

The share of loss of the jointly-controlled entity amounted to €1,772 (2011: loss of €3,228).

As a result, the Medserv Group reported a pre-tax loss of €1.2 million compared to a pre-tax profit of €1 million in 2011. Similarly, after accounting for a tax credit of €0.8 million and minority interest of €0.13 million, the Group returned a net loss of €0.25 million in 2012 in contrast to the €0.76 million net profit recorded in the previous year.

Dividend

Given the loss-making position of the Group, the Directors did not recommend the payment of a  final dividend.

Outlook   

The Directors gave a detailed overview of the business pipeline which is summarised below:

i)                    Libya: Exploration operations are expected to gain momentum in 2013 as the Libyan authorities increased its focus in this regard especially with respect to offshore activity – the area in which Medserv operates.

ii)                   Maintenance Unit: In a bid to diversify both its product and market, the Group has set-up a new Maintenance Unit with the intention of offering maintenance works. The subsidiary completed its first contract with a leading International Oil Company in 2012 and has already been awarded similar work in the first quarter of 2013.

iii)                 Offshore drilling operations: Such activities in the Mediterranean rim countries are expected to pick-up in the third or fourth quarter of 2013 and Medserv is well placed to act as a logistics service provider to these projects.

iv)                 Photovoltaic Farm: The Group is investing €4 million in a new photovoltaic farm which is expected to create a new revenue stream for the next 20 years. The project should be completed and commissioned by the end of 2014.

v)                  Lease agreement: In December 2012, Medserv concluded a new lease agreement with the Malta Freeport which essentially extended its current lease up to 2060 thereby providing more long-term stability to the Group and its customers.

vi)                 Medserv Misurata: The Libyan subsidiary has resumed operations in Libya. However business is still largely limited to storage of equipment. This service is also being hindered by the fact that the authorities have not yet repaired the damaged warehouse.

vii)               Cyprus: The development works on the base in Limassol have just commenced and the Group is expected to secure its first business at the end of 2013 or in the beginning of 2014 in line with progress made in exploration activity offshore Cyprus.

viii)              Sicily: No major developments were registered in Sicily during 2012 as regional issues have delayed progress. Nonetheless, Medserv maintained its presence in the country.

ix)                 Medserv East Africa Limited: The Group has set up this subsidiary with its intention to source new business in East Africa. In this respect, the Group has already tendered for business in the region (through a joint-venture with a leading European firm). The successful bidder in connection with this tender is expected to be announced in the first half of 2013.

In conclusion, the Directors noted that the Group has registered a profit in the first quarter of 2013 given the increased business in the Malta operation.  Moreover, the investments undertaken in 2012 bode well for the future. In fact, the Group is confident that it has positioned itself both at strategic and operational levels to meet the coming challenges successfully.

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Medserv plc – Preliminary Profit Statement for the financial year ended 31 December 2012.