On 5 April, Medserv plc (“Medserv” or the “Group”) published an updated Financial Analysis Summary (“FAS”) providing an overview of the 2016 results, a comparison of the 2016 actual results with the forecasts published in the previous FAS, as well as the forecasts for the current financial year ending 31 December 2017.
These are the main highlights of the 2017 forecasts of the Group:
Revenue is expected to rebound by 9.5% to €35.9 million largely reflecting the improved performance from METS (including the recently awarded contract with Sumitomo Group which is the largest contract ever won by the Group) and the resumption of drilling activity in both Portugal and Cyprus. On the other hand, the Group’s Malta base is expected to experience a slowdown in operations following a delay in the delivery of relevant equipment to be utilized in the Bahr Esslam Phase II project. This equipment is anticipated to start arriving at the Mala base towards the end of Q2 2017.
Total costs, net of other operating income, are expected to rise by 4.9% to €34.4 million. However, excluding forecasted depreciation and amortisation charges of €6 million, earnings before interest, tax, depreciation and amortisation (“EBITDA”) is anticipated to improve by 36.6% to €7.55 million which would translate in an EBITDA margin of 21% – up from 16.8% in FY2016. Operating profits are also expected to improve to €1.51 million from just above a break-even operating position in the financial year ended 31 December 2016.
Net finance costs are estimated to total €2.93 million in FY2017. Accordingly, Medserv is expected to report a pre-tax loss of €1.42 million – compared to a pre-tax loss of €2.45 million in FY2016. However, after taking into consideration a tax charge of €0.97 million as against a tax credit of €5.43 million in FY2016, the Group is anticipating to register a net loss of €2.38 million.
It is noteworthy to highlight that the Group is expected to close in a stronger cash position in 2017. In this respect, Medserv is expected to generate a net cash inflow from operations of €7.2 million by the end of 2017 whilst no further material investment is being envisaged during FY2017 which would require additional borrowings. This is expected to leave the Group with a cash balance of €9.8 million by the end 2017 which could become useful if and when the Group lands new contracts that would require initial capex for setup purposes, particularly in new geographical areas.