MedservRegis plc - Interim Report
On 27 November, Medserv plc issued an Interim Directors’ Statement noting that the Group secured long term contracts with significant business activity across all its operating segments, namely Integrated Logistic Support Services (ILSS) and Oil Country Tubular Goods (OCTG). Furthermore, Medserv is also well positioned to secure new contracts some of which are expected to materialize in the first half of 2019 which further enhances the forecasted earnings for the coming years. The Directors also noted that the Group’s operational reach in the Middle East, South America and Africa is presenting new opportunities for both ILSS and OCTG business.
Integrated Logistic Support Services (ILSS)
This segment includes the Malta shore base which remains the appointed logistics base by the international oil companies (IOCs) and its subcontractors for the upcoming major projects offshore Libya. Apart from the exploratory drilling, such projects include the development of two new offshore structures by an IOC.
The shore base in Cyprus is also active, supporting a strategic offshore exploration drilling campaign for an American oil major. The announcement reiterated that the award of this contract coupled with the existing secured business from other IOCs in both Cyprus and Egypt has positioned the Group at the forefront of the significant developments in the Eastern Mediterranean.
With respect to the Group’s operations in Portugal, the client confirmed its intention to discontinue its project following the ruling by the Portuguese courts to suspend the Galp-Eni license. As a result, a decision has been taken by Medserv to close down the base in Portugal by the end of the year. The impact on the Group’s earnings before interest, tax, depreciation and amortisation (EBITDA) will be minimal as the contribution from this subsidiary amounted to less than 5%.
The recent contract awarded to Medserv, valued at USD30.6 million, in Suriname, South America for the provision of shore base services over a fifteen-month period commencing 1 January 2019 is in line with the Group’s strategy to expand both its client base and geographic reach. Medserv announced that it is forecasting healthy profit margins from this shore base project.
Oil Country Tubular Goods (OCTG)
This segment, which currently operates solely in the Middle East, remains a key contributor to the Group’s earnings and is expected to grow further in the coming years.
Oman and UAE continue to generate substantial earnings. Meanwhile, the Iraq business unit is being restructured and a business plan is currently in the process of being implemented to ensure this business unit generates positive earnings for the coming four years. The restructuring process is expected to be completed by the first quarter of 2019.
In the meantime, the Group is awaiting the adjudication of a tender for the provision of premium threading services in Uganda. A successful award of this tender would provide the Group with another long-term contract with consistent revenues.
The Group is also awaiting the adjudication of additional Supply Chain Management contracts in the Middle East in 2019, the volumes of which would be equivalent to those currently being managed by METS in Oman.
The Group is confident it will achieve the 2018 forecasted EBITDA of €6.8 million, a 54% increase over the amount generated in 2017.
The announcement also noted that the process initiated by the two major shareholders, that is, Malampaya Investments Limited (beneficially owned by Anthony J. Duncan) and Anthony S. Diacono who together hold 65.5% of the issued share capital, to source a strategic purchaser to acquire their shareholding is ongoing.